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11/12/2021

Marathon Petroleum Marks Its First Post-Speedway Quarter

The company reported net income of $694M for Q3 2021 as it focused on portfolio improvement and renewable fuel Initiatives.
Angela Hanson
Senior Editor
Angela Hanson profile picture
Marathon Petroleum Corp. President & CEO Michael Hennigan
Marathon Petroleum Corp. President & CEO Michael Hennigan

FINDLAY, Ohio — Marathon Petroleum Corp. (MPC) made progress on overall company improvements and multiple renewable fuel initiatives during the third quarter of 2021, its first full quarter following the sale of Speedway LLC.

The renewable fuel initiatives include a joint venture with Chicago-based ADM that will own and operate ADM's soybean processing complex in Spiritwood, N.D., the second-largest renewable diesel facility in the United States. MPC's conversion of its Martinez, Calif., refinery into a renewable fuels manufacturing facility also hit a new project milestone when the company released its environmental impact report for public comment in October.

During the quarter, MPC also partnered with United Airlines and other entities to conduct a successful test slate of a 737 aircraft that flew for 90 minutes using drop-in sustainable aviation fuel (SAF). The SAF was 100 percent renewable fuel from an MPC subsidiary.

Company President and CEO Michael Hennigan shared during a Nov. 2 earnings call how MPC is challenging itself to lead in sustainable energy with an approach that invests in environmental, social and governance (ESG).

MPC has three companywide targets for sustainability:

  • A 30-percent reduction in scope 1 and scope 1 greenhouse gas (GHG) emissions intensity by 2030;
  • A 50-percent reduction in midstream methane intensity by 2025; and
  • A 20-percent reduction in freshwater withdrawal intensity by 2030.

"The evolving energy landscape presents us with meaningful opportunities for innovation," Hennigan said, noting that the company allocated 40 percent of its growth capital in 2021 to help advance its Dickinson and Martinez refineries.

Overall, MPC plans to embrace sustainability in its decision-making, in how it engages its people, and in how it creates value with its stakeholders. Twenty percent of the company's annual bonus program is linked to the ESG metric, with the factors including GHG intensity; diversity, equity and inclusion; and environmental and safety metrics.

Portfolio Improvement 

MPC's latest quarter also saw the company working to strengthen its portfolio. 

Findlay-based MPC operates the nation's largest refining system. Its marketing system includes branded locations across the U.S., including Marathon brand retail outlets. MPC also owns the general partner and majority limited partner interest in MPLX LP, a midstream company.

Since the Speedway sale closed, it has completed 25 percent of its Speedway proceeds capital return program, and expects to meet its commitment of returning the full $10 billion by the end of next year, according to Hennigan.

The chief executive also announced that MPC intends to redeem an additional $2.1 billion of debt, including two tranches of notes that mature in 2023. This is expected to result in $20 million in savings due to the current interest rate environment and MPC's cash position.

Looking ahead, the company is pursuing strategic alternatives for its refinery in Kenai, Alaska, including a potential sale of the facility.

"This quarter, we advanced several key initiatives while remaining committed to improving the aspects of the business within our control," Hennigan said. "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." 

Q3 2021 Results

For the three-month period of Q3 2021, MPC reported net income of $694 million, compared to a net loss of $886 million for Q3 2020. Adjusted net income was $464 million, compared to an adjusted net loss of $649 million for the same quarter one year ago.

In its refining and marketing segment, income from operations was $509 million, compared to a loss of $1.6 billion for the third quarter of 2020. Segment adjusted EBITDA was $1.2 billion, compared to 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, as well as 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.

MPC reported that it is seeing gasoline demand at 2 percent to 3 percent below 2019 levels, with the West Coast lagging behind at approximately 8 percent below. Diesel demand is slightly above 2019 levels.

Midstream segment income from operations, which primarily reflects MPLX LP, was $1 billion during Q3 2021, compared to $960 million for the third quarter of 2020. Segment adjusted EBITDA was $1.4 billion in the third quarter of 2021 vs. $1.3 billion for the third quarter of 2020. Third-quarter 2021 segment adjusted EBITDA excludes storm impacts of $4 million. MPC cited higher revenue and lower operating expenses as factors.

Corporate expenses totaled $186 million in the third quarter of 2021, compared to $197 million in the third quarter of 2020.

About the Author

Angela Hanson is Senior Editor of Convenience Store News. Read More