No Spinoff for Speedway

FINDLAY, Ohio — Marathon Petroleum Corp. (MPC) will not spin off its Speedway LLC retail division, MPC President and CEO Gary R. Heminger stated Thursday during the corportation's 2016 fiscal first-quarter earnings call.

The chief executive has made this statement in the past, but this time, he provided more details regarding why a spinoff — something Murphy Oil Corp. did with its Murphy USA Inc. division and Valero Energy Corp. did with its CST Brands Inc. division — does not make sense for Marathon Petroleum at this time.

“With a retail spinoff, we have to look at how shareholders are valuing Speedway. We’ve done a lot of work on other companies who have completed [retail] spinoffs. We’ve found it has only provided a small bump in shareholder value," he said. "The long-term value of having Speedway inside Marathon is large.”

He did stress, though, that Marathon Petroleum will not abandon the possibility of a retail spinoff in the future.

“We will continue to look at it,” said Heminger. “We will continue to analyze this as we go down the road.”


For now, optimizing the performance of its assets is the main focus of the Speedway team.

With all of its acquired Hess retail locations having been converted to the Speedway network, Marathon Petroleum has shifted its focus to optimizing the performance of these locations, Heminger reported Thursday. The conversion of all 1,245 former Hess locations along the East Coast and in the Southeast was completed by February, ahead of schedule, as CSNews Online previously reported

In the time since, these newly converted Speedway locations have performed admirably, contributing to a strong first quarter for the period ended March 31, according to Heminger.

“We had strong results from Speedway,” he relayed. “We had continued exceptional performance in the first quarter.”

Speedway earned $167 million for the three-month period ended March 31, a $1-million decline compared to 2015’s first quarter, which was a record for the company. Gasoline and distillate gross margins were the reason for the drop, decreasing to 16.8 cents per gallon in the latest quarter vs. 19.7 cents per gallon in the year-ago period.

Speedway's results were stronger year over year in every other facet of the business, though. Gasoline and distillate sales increased by 51 million gallons to 1.483 billion gallons. Same-store gasoline sales volumes rose by 1 percent.

On the merchandise side, sales reached $1.152 billion in Speedway’s latest quarter, vs. $1.1 billion a year ago. Merchandise gross margins improved by nearly $20 million year over year to $330 million. Meanwhile, merchandise gross margin percentage increased by one percentage point to 20 percent. On a same-store basis, merchandise sales improved by 3.1 percent vs. a year ago. 

As of March 31, Speedway operated 2,771 convenience stores, an 18-store increase compared to the same date in 2015.

Overall, Findlay-based Marathon Petroleum earned $1 million in its 2016 first quarter, a sizeable decline compared to the $891 million it posted in 2015’s first quarter. Heminger stated that the overall corporation's earnings drop was largely attributable to weak crack spreads. He stressed, however, that he remains bullish about the company moving forward.

This ad will auto-close in 10 seconds