Speedway Parent Geared Up for Summer Driving Season
FINDLAY, Ohio — Even though Speedway LLC's first-quarter results were down vs. the comparable period in 2016, parent company Marathon Petroleum Corp. (MPC) is looking forward to improvements in the coming months.
Despite experiencing a slight decline in year-over-year operating results for Speedway, MPC is encouraged by improving market conditions seen late in the quarter, with strengthening gasoline and distillate demand. The organization "remains optimistic as we enter the summer driving season," Gary R. Heminger, chairman, president and CEO of Marathon Petroleum, said Thursday during the company's first-quarter earnings call.
Also on the agenda in the coming months is the completion of an ongoing review of the Speedway business by a special committee of the company's board of directors and independent advisors. The review is expected to be completed by midyear.
"It continues to clip along at a very good pace. The special committee is very engaged; our outside advisors are engaged; and by midyear — the definition of midyear will be sometime summer or late summer — we will have a conclusion of the direction we are going," Heminger reported.
Q1 2017 FINANCIAL RESULTS
Speedway segment income was $135 million for the first quarter, compared to $167 million in the same period last year, according to Tim Griffith, senior vice president and chief financial officer.
Comparability of the convenience store chain's results year over year was affected by the transfer of Speedway's travel centers into its newly formed joint venture with Knoxville, Tenn.-based Pilot Flying J. The venture, known as PFJ Southeast LLC, was announced in June and the transfer of assets occurred in the fourth quarter of 2016, Griffith explained.
The decrease in Speedway segment income was primarily due to the absence of a $24-million gain from the sale of a retail location in the first quarter of 2016, and lower light product and merchandise gross margin. This was partially offset by lower operating expenses.
Speedway's light product margin decreased to 15.66 cents per gallon in the first quarter of 2017 from 16.82 cents per gallon in the first quarter of 2016.
In its midstream segment, MPC completed the dropdown of certain terminal, pipeline and storage assets to MPLX LP for a total consideration of approximately $2 billion — the first of several dropdowns outlined in the company's strategic plan, and began funding a "substantial return of capital to our shareholders," Heminger said.
"I'm pleased to report, work is on schedule to prepare the remaining assets slated for dropdown to MPLX," the chief executive added.
In all, MPC reported first-quarter 2017 earnings of $30 million. The results reflected substantial turnaround activity at the company's three Gulf Coast refineries. MPC completed the turnaround activity in April, "ahead of schedule, under budget and with exemplary environmental and safety performance," Heminger said.
Marketing conditions in the first quarter were challenging for the refining and marketing segment. Market dynamics, including higher inventory levels and seasonal weak demand, were factors in product price weakness. That being said, Heminger added, "We have seen notable signs of improvement, including declining U.S. petroleum inventories and strong underlying economic activity."
Findlay-based MPC is the nation's third-largest refiner, with a crude oil refining capacity of approximately 1.8 million barrels per calendar day in its seven-refinery system. Marathon brand gasoline is sold through approximately 5,500 independently owned retail outlets across 19 states. In addition, Enon-based Speedway LLC, an MPC subsidiary, owns and operates the nation's second-largest convenience store chain, with approximately 2,730 convenience stores in 21 states.