Marathon Petroleum Corporation · NYSE:MPC
Marathon Petroleum — Simmons Energy Conference 2014
66 slides from Marathon Petroleum's conference presentation, Feb 27, 2014
Slide 1: Simmons Energy Conference
Simmons Energy Conference February 27, 2014
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation contains forward-looking statements within the meaning of federal securities laws regarding both MPC and MPLX. These forward-looking statements relate to, among other things, expectations, estimates and projections concerning the business and operations o
Slide 3: Our Priorities for Our Investors
Our Priorities for Our Investors Maintain top tier safety and environmental performance Sustain our focus on shareholder returns Balance capital returns with value-enhancing investments Grow higher valued and stable cash flow businesses Midstream/MPLX Speedway Enhance the margins in ou
Slide 4: Demonstrating Our Corporate Values
Demonstrating Our Corporate Values The foundation for all that we do Health and Safety Environmental Stewardship Product Stewardship Honesty and Integrity Corporate Citizenship Diversity and Inclusion 4
Slide 5: Focused Return of Capital to Shareholders
Focused Return of Capital to Shareholders 5.9x free cash flow LTM LTM Ended 12/31/13 7,000 6,000 Dividends and share 5,000 repurchases* ~5.9x of 3,277 Free Cash Flow** 4,000 Cash capital expenditures, $MM acquisitions and investments 3,000 Free Cash Flow** Net cash provided by $560 operations 2,000
Slide 6: Delivering Peer Leading Return of Capital
Delivering Peer Leading Return of Capital Last twelve months 16 14.7 14 12 10 9.1 8.7 Percent 12.3 7.9 8 2.2 6.4 6 6.7 5.2 4.3 3.8 4 2 2.4 2.6 2.0 2.7 2.6 0 MPC HFC TSO PSX VLO Dividend Yield Special Dividend Yield LTM Share Repurchase/Share Yield Total Capital Return Yield: Annualized Dividend/shar
Slide 7: Performing Consistently in the Top Tier
Performing Consistently in the Top Tier Engine behind MPC’s focus on capital returns Operating Income Per Barrel of Crude Throughput** 20 MPC’s Rank 15 Competitor Range 1 2 10 $/BBL 2 5 1 1 3 2 5 2 7 3 3 1 3 3 2 0 -5 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Com
Slide 8: Allocating Capital in the Past
Allocating Capital in the Past Predominately focused on refining Segment Capital Expenditures* Segment EBITDA** 7,000 7,000 6,000 6,000 5,000 5,000 4,000 4,000 $MM $MM 3,000 3,000 2,000 2,000 1,000 1,000 0 0 2007 2008 2009 2010 2011 2012 2013 2007 2008 2009 2010 2011 2012 2013 Pipeline Transportatio
Slide 9: Allocating Capital in the Future
Allocating Capital in the Future Drive growth in more stable cash flow and higher value businesses Sandpiper Pipeline Midstream/MPLX Southern Access Extension Aggressive growth Pipeline Utica Speedway Organic growth Growth in existing and contiguous markets Selective acquisitions Light c
Slide 10: Allocating Capital to Higher Valued Businesses
Allocating Capital to Higher Valued Businesses 2012 – 2016 Capital Investment Profile 4,000 3,500 3,000 2,500 $MM 2,000 1,500 1,000 500 0 2012 2013 2014E 2015E 2016E Refining and Marketing, excluding Midstream Midstream Pipeline Transportation Speedway Other Garyville resid upgrade project committed
Slide 11: Macro Outlook
Macro Outlook 11
Slide 12: Growing Gulf Coast Export Capabilities
Growing Gulf Coast Export Capabilities Added new 500,000 barrel export Export Capacity 500 475 tank at Garyville in 2013 450 400 350 Low cost, high return dock 350 320 expansions at Garyville and 300 Galveston Bay in design phase MBD 250 200 150 150 Potential for 120 MBD 100 incremental gasoli
Slide 13: Expecting Attractive Crude Spreads
Expecting Attractive Crude Spreads MPC Outlook Brent/WTI Spread $7-$12/BBL, wider at times LLS/WTI Spread $5-$10/BBL, transportation/quality based $3-$5/BBL, domestic light sweet crude Brent/LLS surplus Competes with WTI and LLS, North Dakota Light prices accordingly Attractive, but narrowing with C
Slide 14: Growth Opportunities
Growth Opportunities 14
Slide 15: Increasing Midstream Growth Investments
Increasing Midstream Growth Investments 1,200 Midstream Infrastructure* 1,000 Condensate Splitters 800 $MM 600 400 200 0 2007 2008 2009 2010 2011 2012 2013 2014E 2015E 2016E *Includes MPLX spend, midstream investments included in the R&M segment, Southern Access Extension Pipeline and Sandpiper Pipe
Slide 16: Investing in Significant Growth Projects
Investing in Significant Growth Projects North Dakota System (Sandpiper) Logistics equity opportunity – MPC – Length, size: 610 Mile, 24”/30” + North Dakota Classic System and Bakken Pipeline U.S. Canadian – Capacity: 580 MBD – In-Service: 1Q 2016 Bakken – MPC Investment: $1.0 B - $1.2 B – MPC Equ
Slide 17: Investing in Significant Growth Projects
Investing in Significant Growth Projects Southern Access Extension (SAX) Logistics equity opportunity – MPC – Length, size: 165 Mile, 24” – Capacity: 300 MBD Canadian – In-Service: 2Q 2015 – MPC Investment: ~$250 MM – MPC Equity: 35% Bakken – Future potential drop to MPLX Superior, WI Flanagan, IL
Slide 18: Developing a Comprehensive Utica System
Developing a Comprehensive Utica System Proposed MPLX To Toledo, Detroit, Chicago and Canada Cornerstone Pipeline Pa. investment Youngstown $140 MM Canton Capacity Midland 25+ MBD Lima Wellsville Steubenville M3, Leesville Timing M3, Scio MarkWest, Cadiz Late 2016 Ohio $20 MM EBITDA MP
Slide 19: Current Retained Midstream EBITDA of ~$800 MM
Current Retained Midstream EBITDA of ~$800 MM Additional Midstream Assets Retained by MPC More than 5,000 miles of additional crude and products pipelines Pipelines – Owns, leases or has an ownership interest in these pipelines – 44% of MPLX Pipe Line Holdings LP 191 inland barges; 4.6 MMBBL cap
Slide 20: MPLX Summary
MPLX Summary MPLX will be MPC’s primary midstream growth vehicle Large portfolio of fee-based growth projects that will be immediately accretive to distributable cash flow Clear line of sight to MPC midstream asset portfolio to support growth Pursuing numerous projects to continue to grow po
Slide 21: Growing More Predictable Merchandise Margin
Growing More Predictable Merchandise Margin Speedway Total Light Product Volume and Margin Total Merchandise Sales and Margin 3,200 600 3,200 1,000 3,000 3,000 900 MM Gallons $MM Margin $MM Margin 500 $MM Sales 2,800 2,800 800 400 2,600 2,600 700 2,400 300 2,400 600 2011 2012 2013 2011 2012 2013 Vol
Slide 22: Executing Significant Organic Growth Opportunities
Executing Significant Organic Growth Opportunities Speedway Capex 350 340 327 296 300 300 300 250 $MM 200 150 103 100 50 0 2007-2011 2012 2013 2014E 2015E 2016E Average Store Construction Acquisitions All Other # of Stores 150 100 99 9 50 5 38 60 65 65 0 18 18 2007-2011 2012 2013 2014E 2015E 2016E A
Slide 23: Growing Cash Flow Through All Cycles
Growing Cash Flow Through All Cycles Speedway Segment EBITDA* 650 630 550 560 500 $MM 450 487 404 424 350 381 250 2010 2011 2012 2013 2014E 2015E 2016E *Non-GAAP disclosure, see appendix for reconciliation to Speedway segment income from operations 23
Slide 24: Enhance Refining Margins
Enhance Refining Margins 24
Slide 25: Increasing Light Sweet Crude and Condensate Capacity
Increasing Light Sweet Crude and Condensate Capacity Condensate splitters Canton: 25 MBD – 4Q 2014 completion Condensate Processing Opportunity Catlettsburg: 35 MBD Ultra- New Light Naphtha to Gasoline Blending Sweet Fractionator Heavy Naphtha to Reforming – 2Q 2015 completion Condensate Disti
Slide 26: Leveraging Existing Capacity to Run Light Sweet Crude
Leveraging Existing Capacity to Run Light Sweet Crude Reforming Capacity Reformer capacity captures full 30 value of light crude processing 25 Percent of Crude Capacity 20 Industry Average 15 Additional value added through 10 aromatics production 5 0 MPC MPC Midwest USGC Source: 2013 Oil & Gas J
Slide 27: Capitalizing on Global Growth in Diesel Demand
Capitalizing on Global Growth in Diesel Demand Hydrocracker expansions/revamps Distillate Production 700 Garyville +25 MBD ULSD in 2014-15 600 $225 MM 500 MBD ~45% ROI 400 Galveston Bay +9 MBD ULSD in 2015 300 $18 MM 2012 2013 2014E 2015E 2016E ~70% ROI Distillate Production Percent of C
Slide 28: Evaluating Garyville Resid Hydrocracker Project
Evaluating Garyville Resid Hydrocracker Project Conversion opportunity - leverages favorable market dynamics $130 MM sanctioned for front end engineering and design Increases ULSD production by 28 MBD and decreases gas oil purchases Converts low value resid to ULSD using hydrogen produced from
Slide 29: 2014 Value Drivers
2014 Value Drivers Top tier safety and environmental performance Capital return to shareholders Strong and growing dividend Share repurchase program 2014 $2.4 B capital investments Growth of Midstream/MPLX Speedway growth Increasing light crude processing and export capabilities En
Slide 30: Appendix
Appendix 30
Slide 31: Fully Integrated Downstream System
Fully Integrated Downstream System Refining and Marketing Seven-plant refining system with ~1.7 MMBPCD capacity One of the largest wholesale suppliers in our market area One of the largest producers of asphalt in the U.S. ~5,200 Marathon Brand retail outlets across 18 states ~1,000 retail
Slide 32: Generating Significant Cash Flow Through All Cycles
Generating Significant Cash Flow Through All Cycles Pro forma EBITDA adjusted for current configuration Pro forma EBITDA 8,000 7,000 6,000 5,000 $MM 4,000 3,000 2,000 1,000 0 2008 2009 2010 2011 2012 2008 thru 2012 Mid Cycle Pipeline Transportation Speedway Depr. & Amort. less corporate expense Refi
Slide 33: Sustaining Core Liquidity Needs
Sustaining Core Liquidity Needs Minimum cash balance of $500 MM - $1.5 B Requirements Ongoing Operating Cash Flow Requirements – Maintenance/Sustaining Capital – Interest Payments – Dividend Payments Contingent Calls on Corporate Liquidity - Probability Adjusted – Contingent and Uncommitted Lett
Slide 34: Sustaining Capital Returns Since Spin
Sustaining Capital Returns Since Spin Cumulative Return of Capital Since July 1, 2011 6,000 $5.2 B 5,000 4,000 $MM 3,000 2,000 1,000 0 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Dividends Share repurchases 34
Slide 35: Growing Global Product Demand
Growing Global Product Demand Distillate and gasoline demand 2012 120 Actual Forecast continues to rise Compounded Annual Growth Rates 100 Fuel oil continues to 2025 vs. 2012 +1.4% be phased out due 80 to tightening sulfur Other -2.4% specs MMBD 60 Fuel Oil +1.2% 40 Distillate 20 +1.1% Gasol
Slide 36: Growing U.S. Distillate Demand
Growing U.S. Distillate Demand Overall U.S. demand remains flat Distillate demand 12 2012 Actual Forecast growth outpaces other Compounded Annual Growth Rates products 10 2025 vs. 2012 Gasoline Gasoline will be 8 -0.3% Gasoline constrained by CAFE Ex Ethanol -0.7% MMBD standards and biofuels
Slide 37: Shuttering Vulnerable Refining Capacity
Shuttering Vulnerable Refining Capacity Offsets a portion of capacity expansion Net Change Expansions Vulnerable Capacity 7 6 5 4 3 MMBD 2 +4.10 +4.10 +2.85 +2.85 1 +0.78 +0.78 +0.92 +0.92 +1.04 +1.04 +0.61 0 +0.61 -1.14 -1.14 -1 -2 -3 North Latin Europe Former Asia Middle East Africa America Americ
Slide 38: Rising North American Production
Rising North American Production 2012 16 ← Actual Forecast → 14 12 10 MMBD 8 Canada 6 4 United States 2 0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 Sources: EIA, CAPP, MPC 38
Slide 39: Growing Crude Oil/Condensate Supply
Growing Crude Oil/Condensate Supply North Dakota 2012 1,600 1,400 1,200 1,000 MBD 800 600 400 Canada 200 Total Growth 0 Actual Forecast +3,575 MBD 2012 – 2025 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 +5,860 MBD Bakken Texas 4,000 2012 +840 MBD 3,500 Utica 3,000 +135 MBD 2,500 MBD 2,000
Slide 40: MPC Refining Capacity in Advantaged Regions
MPC Refining Capacity in Advantaged Regions 100% in PADDs II and III Canadian Bakken 100% Utica 80% PADD IV PADD II 60% PADD V 40% PADD I 20% PADD III 0% Permian Basin Eagle Ford MPC VLO HFC PSX TSO Gulf of Mexico PADD PADDI II PADD II PADD III PADDI III PADD PADD PADD IV IVPADD PADD V V Canadian So
Slide 41: MPC Refinery Capacity
MPC Refinery Capacity BPCD NCI* Garyville 522,000 11.0 Galveston Bay 451,000 13.1 Catlettsburg 242,000 10.2 Robinson 212,000 10.0 Detroit 123,000 9.9 Texas City 84,000 8.0 Canton 80,000 8.8 Total 1,714,000 11.0** The Nelson Complexity Index is a construction cost-based measurement used to describe t
Slide 42: Balance in Refining Network
Balance in Refining Network Canton (Ohio) 80,000 Catlettsburg (Ky.) 242,000 Detroit (Mich.) 123,000 Midwest Capacity 657,000 BPCD Robinson (Ill.) 212,000 Galveston Bay (Texas) 451,000 Texas City (Texas) 84,000 Garyville (La.) 522,000 Total 1,714,000 Texas Capacity 535,000 BPCD Louisiana Capacity 522
Slide 43: U.S./Canada Key Existing and Planned Pipelines
U.S./Canada Key Existing and Planned Pipelines Edmonton Trans Hardisty Mountain Burnaby Anacortes Regina Cromer Clearbrook Montreal Superior Estimated Portland MBPD Pipeline Completion Sarnia 540 Keystone Current 215 Ozark Current 170 Platte Current Casper Flanagan Chicago 190 Spearhead Current SAX
Slide 44: Compelling Advantage for Pipeline and Marine
Compelling Advantage for Pipeline and Marine Canadian $10-12 Bakken $4 $14-16 $15-16 $2 $5 $12-14 Chicago, IL $5-6 Patoka, IL $6-7 $5 $13-15 WTI Cushing, OK Legend Rail $10 Pipeline Marine $2 St. James, LA Houston, TX LLS All costs shown as $/BBL Pipeline costs exclude any storage or transfer fees a
Slide 45: MPC Creating Crude/Condensate Advantage
MPC Creating Crude/Condensate Advantage Canada +3,575 MBD Cornerstone Pipeline Bakken Condensate Splitter +840 MBD Truck Unload Expansion Sandpiper Utica +135 MBD Southern Access Extension Patoka, IL Wellsville Barge Condensate Splitter Robinson Light Crude Enhancements Permian +620 MBD MPC Refinery
Slide 46: Garyville Resid Hydrocracker Project
Garyville Resid Hydrocracker Project Increase production of ULSD and refinery intermediates Feeds MBPD Vacuum Resid 63 FCC Slurry 7 Hydrogen LPG to Sales Hydrogen (mmscfd) 110 Naphtha to Reformer Slurry Resid Products MBPD EBHydrocracker Hydrocracker ULSD to Sales LPG 2 Vacuum Resid Gas oil to FCC
Slide 47: Increasing Throughputs and Lowering Costs
Increasing Throughputs and Lowering Costs Galveston Bay’s first year Excellent HES record Higher refinery throughputs and lower operating costs Focused on reliability and yield improvements >$38 MM margin improvements captured Implementing MPC’s Refining Standards 47
Slide 48: Processing More Price Advantaged Crude Oil
Processing More Price Advantaged Crude Oil Galveston Bay’s first year Canadian/ Bakken Eliminated foreign sweets and increased Canadian Heavy Permian Seaway Basin Keystone XL imports Longhorn BridgeTex Permian Express Galveston Foreign Kilgore North American crudes increased Bay Tanker from 63%
Slide 49: Increasing Profitability
Increasing Profitability Galveston Bay: significant and low cost opportunities More than $110 MM of synergies 160 Annual Projected Synergies in 2013 120 Synergy projects $MM 80 Building inter-refinery 40 connections to Texas City refinery 0 2013 2014E 2015E 2016E Expanding dock capacity and
Slide 50: Galveston Bay
Galveston Bay Sustaining expenditures trending lower 1,000 800 600 $MM 400 200 0 2013 2013E 2014E 2014E 2015E 2015E 2016E 2016E Original Capital Original Major Maintenance Current Capital Current Major Maintenance Note: Excludes synergy and other value accretive investments, excludes Tier 3 investme
Slide 51: Galveston Bay
Galveston Bay Long-term opportunities Revamp crude and vacuum units Optimize for future crude availability Improve distillate recovery Add hydrotreating capacity Move to 100% ULSD Evaluate gas oil hydrocracker options Idle the smallest and oldest FCC Increase ULSD yields Expand exp
Slide 52: 2014 Significant Capital Projects
2014 Significant Capital Projects Sandpiper investment Southern Access Extension investment Utica Shale projects Condensate splitters Utica system Speedway expansion Robinson hydrocracker revamp Garyville resid hydrotreater project engineering Garyville gasoline and diesel export 5
Slide 53: Capital Expenditures & Investments
Capital Expenditures & Investments ($MM) 2014 MPC Budget Refining & Marketing (R&M) 864 Midstream included in R&M 348 Speedway 327 Pipeline Transportation* 760 Corporate and Other 133 Total Capital Expenditures & Investments 2,432 *Including MPLX (100% basis) Note: Excludes capitalized interest ($MM
Slide 54: Annual Price and Margin Sensitivities
Annual Price and Margin Sensitivities $ Millions (After Tax) LLS 6-3-2-1 Crack Spread* Sensitivity ~$450 (per $1.00/barrel change) Sweet/Sour Differential** Sensitivity ~$200 (per $1.00/barrel change) LLS-WTI Spread*** Sensitivity ~$85 (per $1.00/barrel change) Natural Gas Price Sensitivity ~125 (pe
Slide 55: MPLX Industry Leading MLP
MPLX Industry Leading MLP $50 Focus on Fee-Based Businesses $45 Unit Price $40 Pursue Organic Growth Opportunities $35 Grow Through Acquisitions $30 and Drop-downs $25 IPO Maintain Safe and Reliable $20 Operations 10/25/12 11/25/12 12/25/12 01/25/13 02/25/13 03/25/13 04/25/13 05/25/13 06/25/13 07/25
Slide 56: MPLX and MPC are Aligned
MPLX and MPC are Aligned MPLX Organizational Structure Marathon Petroleum MPC views MPLX as integral to Corporation and Affiliates (NYSE: MPC) its operations and is aligned with its success and 100.0% 71.6% incentivized to grow MPLX ownership interest Public LP interest MPLX GP LLC MPLX assets c
Slide 57: MPLX Distribution Growth
MPLX Distribution Growth Annual distribution growth is targeted at 15-20% for the next Organic several years Growth Acquisitions MPLX could enter the 50% high IDR tier in 2015 2014-2016 ~$700 million to Drop- ~$1.2 billion of capital Downs investment required to hit targeted distribution growt
Slide 58: Investing in Significant Growth Projects
Investing in Significant Growth Projects ~$2.2 B investment with potential annual EBITDA of up to $300 MM MPC Projects Timing Investment $MM North Dakota Pipelines Equity Option 2016 $1,200 Condensate Splitters 2013-2015 $250 SAX Equity Option 2015 $250 Wellsville Truck to Barge Operation 2013 $30 O
Slide 59: Leveraging Existing MPC Assets
Leveraging Existing MPC Assets Utica Shale Strategy Expand refinery processing capacity to leverage geographic advantage Condensate splitters at Canton and Catlettsburg – Increases total crude plus condensate processing capacity to 60 MBD from ~25 MBD Phased infrastructure investment Truck 2
Slide 60: Drop-down Strategy Considerations
Drop-down Strategy Considerations MPC created MPLX to grow midstream business and create a funding mechanism for strategic opportunities MPLX investors highly value a consistent, long-term growth strategy Ratable drops maximize value creation and retain flexibility for MPC Committed to 15-20
Slide 61: MPLX Pipeline Throughput Agreements
MPLX Pipeline Throughput Agreements Initial MPC Min. 2011 MPC Est. 12 Mo. Ended 12/31/132 Term Diameter Commitment3 Throughput4 Weighted Average MPC Min. Asset (Years) (Inches) (MBPD) (MBPD) Tariff ($ / BBL) Revenue ($MM) Crude Systems Patoka to Lima 10 20" / 22" 40 117 $0.52 $7.6 Catlettsburg and R
Slide 62: MPLX Deficiency Payment Effect Example
MPLX Deficiency Payment Effect Example to be used for illustration purposes only ($MM) 4Q 2012 1Q 2013 2Q 2013 3Q 2013 4Q 2013 1Q 2014 2Q 2014 Quarterly Deficiency payment 2 5 3 5 - - - Use or expiration of credit (on or before) - - - - 2 5 3 Cumulative Deferred Revenue 2 7 10 15 13 8 5 Distributabl
Slide 63: EBITDA Reconciliation to Net Income Attributable to MPC
EBITDA Reconciliation to Net Income Attributable to MPC ($MM) 2007 2008 2009 2010 2011 2012 2013 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Net income attributable to MPC 2,262 1,215 449 623 2,389 596 814 1,224 755 725 593 168 626 Less: Net interest and other financial income (costs) 165 30 31 12 (26) (22) (17) (25) (
Slide 64: Reconciliation
Reconciliation Free Cash Flow to Net Cash Provided by (Used in) Operations ($MM) 2013 (Quarter to date) 1Q 2Q 3Q 4Q Net cash provided by (used in) operating activities 2,079 (436) 407 1,355 Additions to property, plant and equipment (195) (229) (309) (473) Acquisitions* (1,493) (22) - - Investments
Slide 65: Reconciliation
Reconciliation Speedway Segment EBITDA to Speedway Segment Income from Operations ($MM) 2010 2011 2012 2013 2014E 2015E 2016E Speedway Segment Income from Operations 293 271 310 375 380 431 493 Plus: Depreciation and Amortization 111 110 114 112 120 129 137 Speedway Segment EBITDA 404 381 424 487 50
Slide 66: Market Indicators Used in Project EBITDA Calculations
Market Indicators Used in Project EBITDA Calculations 2012 2014-2020 ULSD (USGC; $/BBL) $128.14 $136.33 No. 6, 3.0% S Fuel Oil (USGC; $/BBL) $99.32 $94.48 LLS (St. James, LA; $/BBL) $111.67 $114.82 Natural Gas (Henry Hub, LA; $/MMBTU) $2.79 $4.75 66