FINDLAY, Ohio — As the convenience and fuel retailing industry grapples with the lingering effects of the COVID-19 pandemic, Marathon Petroleum Corp. (MPC) continues to focus on three strategic areas for the near-term.
"Building and executing on these three pillars will enable us to position the company for long-term success and through-cycle resiliency," President and CEO Michael Hennigan said during MPC's third-quarter 2020 earnings call on Nov. 2. "As we continue to navigate the challenges created by COVID-19, for both our company and the industry, we remain focused on the aspects of our business within our control."
According to Hennigan, the three pillars include strengthening the competitive positions of MPC's assets; improving on its commercial performance; and lowering the company's cost structure. He initially laid out the strategic plan in May, as Convenience Store News previously reported.
With these three pillars in mind, MPC made "good progress" during the third quarter with its pending sale of Speedway LLC to Irving, Texas-based 7-Eleven Inc., Hennigan said. The $21-billion deal is on target to close in the first quarter of 2021.
The sale includes 3,900 convenience stores in the United States and comes with a 15-year fuel supply agreement for approximately 7.7 billion gallons per year associated with the Enon, Ohio-based Speedway business.
"The Speedway and 7-Eleven teams are very focused on completing the activities required to successfully close the transaction," Hennigan explained. "Additionally, our interactions with the FTC [Federal Trade Commission] have been constructive."
MPC will use the proceeds from the sale of the Speedway convenience store chain to strengthen its balance sheet and return capital to the company's shareholders.
MPC is also continuing to invest in its renewables business, according to Hennigan, and is in the process of starting up its Dickinson, N.D., renewable fuels facility and advancing the conversion of its Martinez, Calif., refinery into a renewable diesel facility.
In addition, MPC is focusing on cost reductions. The company is on track to exceed the targeted reductions of $1.4 billion of capital spending it announced earlier this year.
"We are also maintaining our focus on structurally lowering costs in all aspects of our business," Hennigan said. "As a result of this focus, we expect to exceed our 2020 forecasted operating expense reductions of $950 million."
During the third quarter, MPC took further steps to reduce its long-term cost structure, including a workforce reduction plan.
"The difficult decision to reduce our workforce by more than 2,000 people was not made lightly," the chief executive said. "We are committed to treating our employees with integrity and respect as we take these necessary steps to position the company for through-cycle resiliency and enhance our long-term financial prospects."
Q3 2020 Financial Results
As for the financials, MPC reported a net loss of $1 billion for the third quarter of 2020, compared with net income of $1.1 billion for the third quarter of 2019. Third-quarter 2020 results included net pretax charges of $525 million. Adjusted net loss was $649 million for the quarter, compared to adjusted net income of $1.1 billion for the year-ago period. Adjusted EBITDA was $1 billion, compared to $3.1 billion a year ago.
COVID-19 related challenges continued into the third quarter and despite some recovery, global demand for MPC's products and services remains significantly below historical levels, which continues to pressure profitability for the company and the industry at large, according to the company's latest earnings release.
"No matter what lies ahead, I believe we are uniquely positioned. With the Speedway sale, we will have the ability to strengthen our balance sheet and make substantial capital returns to our shareholders simultaneously," Hennigan concluded.
Findlay-based MPC is an integrated downstream energy company. The company operates the nation's largest refining system and its marketing system includes branded locations across the U.S., including Marathon brand retail outlets. Speedway LLC, an MPC subsidiary, owns and operates retail convenience stores. MPC also owns the general partner and majority limited partner interest in MPLX LP, a midstream company that owns and operates gathering, processing, and fractionation assets, as well as crude oil and light product transportation and logistics infrastructure.