Marathon Petroleum Corp. Reports Third-Quarter 2021 Results

Source: www.gulfoilandgas.com 11/2/2021, Location: North America

- Reported third-quarter net income of $694 million, or $1.09 per diluted share; reported adjusted net income of $464 million, or $0.73 per diluted share

• Progressing portfolio optimization by pursuing strategic alternatives for the Kenai refinery and related operations, which could include a sale; and continuing focus on lowering the cost structure

• Completed ~25% of $10 billion capital return program through Oct 31; committed to complete remaining $7.5 billion by year-end 2022

• Exceptionally strong year-to-date cash flow at MPLX supports a third quarter distribution consisting of a 2.5% increase to the base distribution amount and a special distribution amount; MPC expects to receive a total of $829 million

Marathon Petroleum Corp. (MPC) reported net income of $694 million, or $1.09 per diluted share, for the third quarter of 2021, compared with a net loss of $886 million, or $(1.36) per diluted share, for the third quarter of 2020. Adjusted net income was $464 million, or $0.73 per diluted share, for the third quarter of 2021. This compares to an adjusted net loss of $649 million, or $(1.00) per diluted share, for the third quarter of 2020. For the third quarter of 2021, the adjustments exclude $48 million of pre-tax charges and include an incremental $272 million of tax expense to adjust all results to a 24% rate. The pre-tax charges were primarily related to Hurricane Ida, impairments, and idling costs.

"This quarter we advanced several key initiatives while remaining committed to improving the aspects of the business within our control,” said President and Chief Executive Officer Michael J. Hennigan. “We are pursuing a strategic transaction for the Kenai refinery, have added a new strategic partnership to progress our access to advantaged feedstocks across our renewables operations, achieved another project milestone for our Martinez renewable diesel conversion, and demonstrated the sustainability of our cost reduction initiatives.

“The year-to-date cash flow across the midstream business supported MPLX’s decision to increase its base distribution amount and include a special distribution amount for the third quarter.

“Through today, we have completed 25% of our Speedway proceeds capital return program, which puts us well on track to meet our commitment of returning the full $10 billion by the end of 2022.”

Results from Operations
Income from operations was $1.3 billion in the third quarter of 2021, compared to a loss of $619 million in the third quarter of 2020.

Adjusted earnings before interest, taxes, depreciation, and amortization (adjusted EBITDA) was $2.4 billion in the third quarter of 2021, compared with $1.0 billion for the third quarter of 2020. As detailed in the table below, adjusted EBITDA is shown for both continuing and discontinued operations. Adjusted EBITDA from continuing operations excludes refining planned turnaround costs.

Refining & Marketing (R&M)
R&M segment income from operations was $509 million in the third quarter of 2021, compared with a loss of $1.6 billion for the third quarter of 2020. Segment results include a LIFO liquidation charge of $256 million in the third quarter of 2020.

Segment adjusted EBITDA was $1.2 billion in the third quarter of 2021, versus a loss of $623 million for the third quarter of 2020. Segment adjusted EBITDA excludes refining planned turnaround costs, which totaled $205 million in the third quarter of 2021 and $234 million in the third quarter of 2020. It also excludes storm impacts of $19 million in the third quarter of 2021 and a non-cash LIFO liquidation charge of $256 million in the third quarter of 2020. The increase in R&M earnings was primarily due to higher crack spreads in all regions, wider differentials and higher throughput.

R&M margin was $14.51 per barrel for the third quarter of 2021, versus $8.28 per barrel, excluding the LIFO liquidation charge, for the third quarter of 2020. Crude capacity utilization was 93%, resulting in total throughput of 2.8 million barrels per day. If adjusted to include capacity idled in 2020, utilization would have been approximately 88%.

Midstream
Midstream segment income from operations, which primarily reflects the results of MPLX LP (MPLX), was $1.0 billion in the third quarter of 2021, compared with $960 million for the third quarter of 2020.

Segment adjusted EBITDA was $1.4 billion in the third quarter of 2021, versus $1.3 billion for the third quarter of 2020. Third-quarter 2021 segment adjusted EBITDA excludes storm impacts of $4 million. Results for the quarter benefited from higher revenue and lower operating expenses.

Corporate and Items Not Allocated
Corporate expenses totaled $186 million in the third quarter of 2021, compared with $197 million in the third quarter of 2020.

Items not allocated to segments included net charges of $25 million in the third quarter of 2021 for facility idling costs and non-cash impairments. This is compared with net charges of $251 million in the third quarter of 2020.

Speedway
This business was sold on May 14, 2021. Historic results are reported as discontinued operations.

Financial Position and Liquidity
As of Sept. 30, 2021, MPC had $13.2 billion of cash, cash equivalents, and short-term investments. There are no borrowings outstanding under the company’s $5 billion five-year bank revolving credit facility.

MPC debt at the end of the third quarter of 2021 totaled $9.1 billion, excluding MPLX debt. MPC’s debt-tocapital ratio, excluding MPLX, was 24% at the end of the third quarter of 2021.

MPC intends to redeem all of the $1.25 billion outstanding aggregate principal amount of MPC's 4.5% senior notes due May 1, 2023, and the $850 million outstanding aggregate principal amount of MPC’s 4.75% senior notes due December 15, 2023, including the portion of such notes for which Andeavor LLC, a wholly-owned subsidiary of MPC, is the obligor. The notes are expected to be redeemed on December 2, 2021, at a price equal to par, plus a make-whole premium calculated in accordance with the terms of the senior notes and accrued and unpaid interest to, but not including, the redemption date. MPC expects to fund the redemption amount with cash on hand.

Strategic and Operations Update

MPC continues to progress its portfolio optimization by pursuing strategic alternatives for the Kenai refinery, including a potential sale.

Since the end of the second quarter of 2021 through October 31, MPC repurchased approximately $1.5 billion of shares. The company has now completed approximately 25% of its $10 billion capital return program and reiterated its commitment to repurchase the remaining $7.5 billion of shares by the end of 2022.

MPC may utilize various methods to effect the repurchases, which could include open market repurchases, negotiated block transactions, accelerated share repurchases, tender offers or open market solicitations for shares, some of which may be effected through Rule 10b5-1 plans. The timing of repurchases will depend upon several factors, including market and business conditions, and repurchases may be discontinued at any time.

The company progressed its renewables initiatives. On October 15, 2021, the draft environmental impact report for the Martinez renewables fuels project was published by Contra Costa County in California. The Martinez facility is expected to produce 260 million gallons per year of renewable diesel by the second half of 2022, with pretreatment capabilities coming online in 2023. The facility is expected to be capable of producing 730 million gallons per year by the end of 2023.

During the quarter, the Dickinson renewable diesel facility has been running above its design charge rate, continues to increase its use of advantaged feedstocks, and continues to focus on actions to lower its carbon intensity.

In August, MPC announced an agreement to form a joint venture with Archer-Daniels-Midland Company (“ADM”) for the production of soybean oil to supply rapidly growing demand for renewable diesel fuel. Under the terms of the agreement, the joint venture will own and operate ADM’s previously announced soybean processing complex in Spiritwood, North Dakota, with ADM owning 75% of the joint venture and MPC owning 25 percent. When complete in 2023, the Spiritwood facility will source and process local soybeans and supply the resulting soybean oil exclusively to MPC. The Spiritwood complex is expected to produce approximately 600 million pounds of refined soybean oil annually, enough feedstock for approximately 75 million gallons of renewable diesel per year.

The Midstream segment remains focused on executing the strategic priorities of strict capital discipline, lowering the cost structure, and portfolio optimization. Several projects advanced during the quarter, including the Wink to Webster crude oil pipeline, the Whistler natural gas pipeline, and the reversal of the Capline crude pipeline. MPLX continues to evaluate opportunities to expand its logistics to meet the needs of today and participate in an energy-diverse future.

Today, MPLX declared a quarterly cash distribution of $1.28 per common unit for the third quarter of 2021, including a base distribution amount of $0.705 per common unit and a special distribution amount of $0.575 per common unit. The base distribution amount represents a 2.5% increase over the second quarter 2021 distribution. MPC expects to receive a total of $829 million.


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