Marathon Petroleum Corporation · NYSE:MPC

Marathon Petroleum — Credit Suisse Energy Summit 2017

65 slides from Marathon Petroleum's conference presentation, Feb 14, 2017

  1. Slide 1: Credit Suisse Energy Summit

    Credit Suisse Energy Summit Gary Heminger, Chairman, President and CEO February 14, 2017

  2. Slide 2: Forward-Looking Statements

    Forward‐Looking Statements This presentation contains forward-looking statements within the meaning of federal securities laws regarding Marathon Petroleum Corporation ("MPC") and MPLX LP ("MPLX"). These forward-looking statements relate to, among other things, expectations, estimates and projection

  3. Slide 3: Our Priorities for Value Creation

    Our Priorities for Value Creation Maintain Top Tier Safety and Environmental performance Execute Strategic Actions to Enhance Value for Investors Increase Capital Return to Shareholders Grow Higher Valued and Stable Cash-flow businesses Enhance Margins for our Refining operations 3

  4. Slide 4: 2016 Refining Margin-Enhancing Accomplishments

    2016 Refining Margin-Enhancing Accomplishment STAR Garyville Robinson Galveston Project FCC/Alky Revamp Commissioned Light Bay Completed Crude Upgrade Completed First Phase Export Capacity Expansion Expanded Galveston Bay resid Increased production capacity Increased light crude 30,000 BPD dock expa

  5. Slide 5: Speedway Sets Multiple All-time Highs in 2016

    Speedway Sets Multiple All-time Highs in 2016 EBITDA gallons Merchandise Margin Merchandise Margin Light Product Sales 5

  6. Slide 6: 2016 MPLX Accomplishments

    2016 MPLX Accomplishments One-year anniversary of Commenced Operations Start-up of 3rd Entered Delaware Basin at Hopedale with MarkWest Complex Increased natural gas processed volumes by Increased fractionated volumes by Distribution growth in Marcellus & Utica in Marcellus of and Southwest & Utica

  7. Slide 7: Focus on Improving Safety and Environmental Performance

    Focus on Improving Safety and Environmental Performance Safety OSHA Recordable Incident Rate and Days Away Rate 0.80 (Employee and Contractor History) 0.61 0.60 0.50 0.45 0.45 ORIR 0.41 0.41 0.40 0.32 0.33 DAR 0.24 0.20 0.1 0.08 0.12 0.03 0.03 0.06 0.07 0.08 Industry Avg. ORIR 0.03 0.00 Industry Avg

  8. Slide 8: 2017 Macro Outlook

    2017 Macro Outlook  U.S. macro picture remains solid – Expect good underlying demand for refined products despite a difficult January – Distillate demand expected to benefit from increased commercial activity  OPEC’s resolve to reduce production levels – Balanced supply and demand environment supp

  9. Slide 9: Executing Strategic Plan to Enhance Value

    Executing Strategic Plan to Enhance Value Asset Dropdowns Exchange for Evaluation Underway MLP-Qualifying EBITDA Benefits  Expected ~$4.5 B after-tax cash proceeds from  Simplifies structure dropdowns and ~$1.2 B - $1.4 B annual distributions after IDR exchange  Expected to lower cost of capital

  10. Slide 10: 2017 Capital Outlook

    2017 Capital Outlook Excluding Acquisitions and Dropdowns 11% 3% Speedway Corporate & Other MPC excluding MPLX ~$1.7 B  Refining & Marketing (R&M) – $1,165 MM  Midstream – $90 MM 25%  Speedway – $380 MM R&M Sustaining  Corporate & Other – $100 MM 49% Capital MPLX MPLX ~$1.7 B 9%  Growth – $1,55

  11. Slide 11: Marcellus/Utica Leading U.S. Natural Gas Growth Play

    The Marcellus/Utica Resource Play is the Leading U.S. Natural Gas Growth Play 87 35 Marcellus & Utica account for over 25% of Rest of U.S. – Billion Cubic Feet per Day (Bcf/d) Marcellus & Utica Marcellus & Utica – Billion Cubic Feet per Day 83 total U.S. Gas Supply today and is expected 31 to grow t

  12. Slide 12: 2017 MPLX Organic Growth Capital Investment

    2017 MPLX Organic Growth Capital Investment Forecast range of $1.4 B to $1.7B*  ~$1 B to $1.3 B - natural gas and gas liquids infrastructure – 3rd fractionation train at Hopedale completed in January – Numerous projects supporting producer customers’ growth primarily in the prolific Marcellus shale

  13. Slide 13: Recent MPLX Strategic Announcements

    Recent MPLX Strategic Announcements Strategic Joint Venture with Antero Midstream Ozark Pipeline Acquisition – 50/50 joint venture to support Antero Resources’ – ~$220 MM investment significant production growth profile in the Marcellus – 433 mile, 22” crude pipeline running from Cushing, shale, inc

  14. Slide 14: 2017 Speedway Capital Investment Plan

    2017 Speedway Capital Investment Plan  Planned investments of ~$380 MM – Build new stores and remodel and rebuild existing retail locations in core markets  Delivered on goals for acquired locations – Expect to complete remodel plan in 2017 – Planned investments achieved under budget and ahead of

  15. Slide 15: Speedway Exceeding Expected Acquisition-Related Synergies

    Speedway Exceeding Expected Acquisition-Related Synergies  Continuing to focus on marketing enhancements opportunities  2016 actual synergies exceeded revised projection of $155 MM  Reduced overall light product breakeven by ~30% in 4Q 2016 compared to 4Q 2015* Synergies and Marketing Enhancement

  16. Slide 16: Speedway – Top-tier Performer

    Speedway – Top-tier Performer  Generates predictable, stable cash flows  #1 in EBITDA/store/month vs. public peers 30 EBITDA* 20 10 $M/store/month - Speedway Murphy USA Casey's Couche-Tard Sunoco CST Alon USA Western Refining 100 Total Margin* 75 50 25 - Sunoco Speedway Casey's CST Couche-Tard Mur

  17. Slide 17: 2017 Refining and Marketing Capital Investment Plan

    2017 Refining and Marketing Capital Investment Plan ~$325 MM Growth and Margin Enhancing Investments  STAR Program – $1.5 B multi-year staged investment – ~$85 MM investment in 2017 – Full integration of Galveston Bay and Texas City refineries – Project scope substantially preserved with attractive

  18. Slide 18: Galveston Bay Refinery Performance Improvements

    Galveston Bay Refinery Performance Improvements 50+% TOP- 50+% TIER 25 ~20% Environmental Unplanned Unit Processing Reduced OPEX Incident OSHA Downtime Rate Records To Date Reduction Recordable Reduction Injury Rate Period of 2013-2016 18

  19. Slide 19: Top-tier Refining Turnaround Execution

    Top-tier Refining Turnaround Execution Lower Turnaround Costs(1) Longer Turnaround Intervals (1,2) MPC approx. 25% below Merchant Group and 5% below U.S. Avg. MPC approx. 15% longer than U.S. Avg. DHT ($/unit of capacity) Lower Cost NHT Alky MPC Reformer U.S. Avg. FCC Crude 2014 Longer Span between

  20. Slide 20: Strong Liquidity and Capitalization

    Strong Liquidity and Capitalization As of December 31, 2016 MPC MPC MPLX  Committed to maintaining investment grade Consolidated Adjustments(a) Excluding MPLX credit profiles at MPC and MPLX ($MM except ratio data) Debt 10,572 4,423 6,149  Substantial available liquidity at MPC and Mezzanine equit

  21. Slide 21: Strategic Plan to Enhance Shareholder Value

    Strategic Plan to Enhance Shareholder Value (1)(2) (1)(3) 2018E LP & GP distributions MPC receives from MPLX Total Midstream Value to MPC after Strategic Plan ~$9 - $12 B ~$26 B ~$21 B ~$5 - $6 B Illustrative $12 B Illustrative GP/IDR ~$4 - $5 B $9 B Buy-In GP/IDR Buy-In ~$3 B (2) 2018E Pro Forma Ac

  22. Slide 22: Appendix

    Appendix 22

  23. Slide 23: Update on Strategic Actions to Enhance Shareholder Value

    Update on Strategic Actions to Enhance Shareholder Value 1 Significantly accelerated dropdowns, to be done as soon as practicable (expected in 2017), subject to requisite approvals 1) and regulatory clearances, including tax  MPC expects to dropdown assets generating ~$1.4 B of EBITDA to MPLX in 20

  24. Slide 24: Strategic Actions to Enhance Shareholder Value

    1 2 Strategic Actions to Enhance Shareholder Value Significant Cash to MPC for Return to Shareholders and Debt Paydown  Dropdown transactions will result in a substantial amount of cash to MPC at close; additional cash would be generated through ongoing distributions from MPLX – Dropdowns are expec

  25. Slide 25: Strategic Actions to Enhance Shareholder Value

    1 2 Strategic Actions to Enhance Shareholder Value Significant Value to MPLX  The combination of dropdowns and GP/IDR buy-in is anticipated to lower MPLX’s cost of capital going forward – Dropdowns enhance distribution growth – GP/IDR buy-in removes IDR burden and lowers equity cost of capital  Th

  26. Slide 26: MPC Continues Its Focus on Long-Term Value Creation

    Consistent with Its Demonstrated Track Record, MPC Continues Its Focus on Long-Term Value Creation MPC and its Board of Directors continually analyze opportunities to enhance value and are confident that the MPC plan is the right course – 2011 spinoff from Marathon Oil Proven – Creation of MPLX Comm

  27. Slide 27: MPC Assets Expected to be Acquired by MPLX

    MPC Assets Expected to be Acquired by MPLX ~$1.4 B of Estimated Annual EBITDA Pipelines Marine Terminals Refinery Fuels Logistics Distribution ● ~5,400 miles of ● Equity in 50/50 blue ● ~60 light product; ● ~55 MMBBL storage ● Receives fixed service additional pipelines water JVs with ~20 MMBBL stor

  28. Slide 28: Fuels Distribution Business Model

    Fuels Distribution Business Model Marketing Model Marketing Model Services Model (Wholesale Distribution) (Rack-to-Retail) – MPC outsources fuels marketing – Purchase MPC’s marketing – Precedents models purchase, services to MPLX for those same businesses market, and transport fuel from services cur

  29. Slide 29: Distillate Leading World Liquids Demand

    Distillate Leading World Liquids Demand Average Annual 120 Volumetric Growth (MBD) Actual Forecast 2015 vs. 2025  Average product 100 demand growth +445 80 of 1.6 MMBD in Other 2016-2017 -19 MMBD 60 Resid  Distillate remains +623 the growth leader 40 Middle Distillate through 2025 20  Heavy fuel

  30. Slide 30: Distillate Leads U.S. Domestic Petroleum Fuels Demand

    Distillate Leads U.S. Domestic Petroleum Fuels Demand Compounded 10 Annual Actual Forecast Growth Rates 9 Gasoline 2015 vs. 2030  Gasoline demand 8 -1.1% declines due to corporate Gasoline ex ethanol 7 -1.1% average fuel economy 6 (CAFE) standards despite MMBD 5 Distillate increased travel +1.4% 4

  31. Slide 31: U.S. Refiners Have Sustained Export Advantages

    U.S. Refiners Have Sustained Export Advantages  Lower-cost natural gas  Large, complex refineries 2015 Region Utilization  Access to lower-cost feedstocks Rate  High-utilization rates North America 88%  Sophisticated workforce MPC 99% Natural Gas Price Comparison Europe 86% 18 Actual Forecast 1

  32. Slide 32: Strong Operational Performance and Responsible Corporate Leadership

    Strong Operational Performance and Responsible Corporate Leadership 32

  33. Slide 33: ENERGY STAR Program

    ENERGY STAR Program  ENERGY STAR labels for refining EPA ENERGY STAR History as of 6-15-16 industry began in 2006 Operating Year ---> EPA Certification Year ---> 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 2016  47 labels awarded during

  34. Slide 34: Balance in Refining Network

    Balance in Refining Network BPCD NCI Canton (Ohio) 93,000 7.8 Catlettsburg (Ky.) 273,000 9.3 Detroit (Mich.) 132,000 9.9 Midwest Capacity 729,000 BPCD Robinson (Ill.) 231,000 9.8 Galveston Bay (Texas) 459,000 13.0 Texas City (Texas) 86,000 7.8 Garyville (La.) 543,000 11.2 Total 1,817,000 10.7* The N

  35. Slide 35: Key Strengths

    Key Strengths Balanced Operations Crude Oil Refining Capacity Crude Slate PADD II 61% 60% Sour Crude 40% PADD III Sweet Crude 39% As of December 31, 2016 4Q 2016 Assured Sales of Gasoline Production (Speedway + Brand + Wholesale Contract Sales) Assured Sales ~70% ~30% Wholesale and Other Sales 4Q 20

  36. Slide 36: Galveston Bay-Texas City World-Class Refining Complex

    Galveston Bay-Texas City World-Class Refining Complex Galveston Bay and Texas City refineries consolidating operations in mid-2017 Galveston Bay-Texas City BPCD* Crude 585,000 Resid Processing 142,100 Catalytic Cracking/Hydrocracking 258,400 Alkylation 52,800 Aromatics 33,800 *MPC estimates post-STA

  37. Slide 37: Speedway Strong and Consistent Growth

    Speedway Strong and Consistent Growth Gasoline and Distillate Sales Volume 8,000 Merchandise Sales/Gross Margin MM Gallons 6,000 30 6,000 6,038 6,094 5,007 4,879 29 4,000 3,942 2,000 3,027 3,146 4,000 28 3,611 Percent 0 3,058 3,135 $MM 27 2012 2013 2014 2015 2016 2,000 26 Gasoline and Distillate Gro

  38. Slide 38: Following Through on Goals for Acquired Locations

    Following Through on Goals for Acquired Locations Earnings Opportunities (Original Guidance)  Invest ~$570 MM in conversions, 400 70 remodels and maintenance 300 45 40 $MM 200 35  Converted stores to Speedway brand 365 100 and technology platforms 175 0  Remodel approximately 2013 Form 10 Operati

  39. Slide 39: Focus on Improving Light Product Breakeven

    Focus on Improving Light Product Breakeven 14 12 12.39 Each 1.00 cent per 10 gallon improvement = ~$30 MM annual Light Product Breakeven (cpg) pretax earnings Total Expenses – 8 7.13 LPBE = Merchandise Margin Light Product Volume 6 4  Measure of operating efficiency and merchandise contribution to

  40. Slide 40: Speedway and Hess Side-by-Side Comparison

    Speedway and Hess Side-by-Side Comparison Hess(a) Speedway(b) Company-operated Sites 1,255 1,478 Fuel Sales  Speedway generates an incremental 198,500 177,400 (gallons/store/month) $17,300 of merchandise margin per Fuel Margin $0.137 $0.144 store per month ($/gallon)  ~$250 MM of additional annual

  41. Slide 41: About MPLX

    About MPLX  Growth-oriented, diversified MLP with high-quality, strategically located assets with leading midstream position  Two primary businesses – Logistics & Storage includes transportation and storage of crude oil, refined products and other hydrocarbon-based products – Gathering & Processin

  42. Slide 42: MPLX and MPC are Aligned

    MPLX and MPC are Aligned MPLX Organizational Structure  MPC views MPLX as integral to its Marathon Petroleum Corporation and Affiliates operations and is aligned with its (NYSE: MPC) success and incentivized to grow 100% interest 24% LP interest Public MPLX Preferred  MPC owns 24% LP interest and

  43. Slide 43: MPLX's Forecast

    MPLX’s Forecast  12-15% distribution growth in 2017; double-digit distribution growth in 2018  Forecast, excluding acquisitions and dropdowns: Financial Measure 2017 Forecast Net Income $500 MM - $650 MM Adjusted EBITDA(a) $1.5 B - $1.65 B Net cash provided by operating activities $1.25 B - $1.4 B

  44. Slide 44: MPLX Organic Growth Capital Investments

    MPLX Organic Growth Capital Investments 2017 forecast $1.4 B - $1.7 B Est. Completion Est. Gathering & Processing Projects Shale Resource Capacity Date Logistics & Storage Projects Completion Date Rich- & Dry-Gas Gathering(a) Marcellus & Utica N/A Ongoing Utica Infrastructure Build-out Mid-2017 West

  45. Slide 45: Executing a Comprehensive Utica Strategy

    Executing a Comprehensive Utica Strategy Phased infrastructure investment  Cornerstone Pipeline commenced operations on time and under budget  Hopedale pipeline connection completed December 2016  Utica build-out mid-2017 estimated completion – Links Marcellus and Utica condensate and natural gas

  46. Slide 46: MPLX - Attractive Portfolio of Organic Growth Capital

    MPLX - Attractive Portfolio of Organic Growth Capital Logistics & Storage Segment Utica Infrastructure Build-out  Industry solution for Marcellus and Utica liquids  Mid-2017 estimated completion Texas City Tank Farm  MPC and third-party logistics solutions  2018 estimated completion Robinson But

  47. Slide 47: Equity Participation in Bakken Pipeline System

    Equity Participation in Bakken Pipeline System  Announced agreement to participate in the Dakota Access Pipeline (DAPL) and the Energy Transfer Crude Oil Pipeline (ETCOP) projects, collectively referred to as the Bakken Pipeline System – Expected MPLX investment of $500 MM, subject to closing condi

  48. Slide 48: MPLX - Logistics & Storage Contract Structure

    MPLX - Logistics & Storage Contract Structure  Fee-based assets with minimal commodity 2015 Revenue – Customer Mix exposure(c) 8%  MPC has historically accounted for $47 – over 85% of the volumes shipped on MPLX’s MM crude and product pipelines 23% – 100% of the volumes transported via MPLX’s $130

  49. Slide 49: MPLX Gathering & Processing

    MPLX Gathering & Processing • Ethane Raw Gathering • Propane Processing Mixed Fractionation NGL Natural Gas and • Normal Butane Plants NGLs Facilities Products • Isobutane Production Compression • Natural Gasoline  One of the largest NGL and natural gas midstream service providers – Gathering capac

  50. Slide 50: MPLX - Focus on Solutions to Enhance Northeast NGL Market

    MPLX - Focus on Solutions to Enhance Northeast NGL Market Lead the development of infrastructure to link supply of Northeast NGLs with market demand and enhance value for producer customers  Largest fully integrated de-ethanization system in Marcellus and Utica shales Ethane  Access to all major t

  51. Slide 51: MPLX Northeast Operations Well-Positioned in Ethane Market

    MPLX Northeast Operations Well-Positioned in Ethane Market  Ethane demand growing as exports Ohio and steam cracker development Pennsylvania continues in Gulf Coast and Northeast Keystone  MPLX well-positioned to support producer customers’ rich-gas Harmon Creek development with extensive distribu

  52. Slide 52: MPLX - Gathering & Processing Contract Structure

    MPLX - Gathering & Processing Contract Structure Durable long-term partnerships across leading basins Marcellus Utica Southwest Resource Play Marcellus, Upper Devonian Utica Haynesville, Cotton Valley, Woodford, Anadarko Basin, Granite Wash, Cana-Woodford, Permian, Eagle Ford Producers 14 – includin

  53. Slide 53: MPLX - Gathering & Processing

    MPLX - Gathering & Processing Marcellus & Utica Operations 2.9 Houston Complex Sherwood Complex Hopedale Complex 0 Bcf/d Gathering capacity 5.5 Bcf/d Processing capacity 471 MBPD C2+ Fractionation capacity 25 MBPD Cond. Stabilization capacity 53

  54. Slide 54: MPLX - Gathering & Processing

    MPLX - Gathering & Processing Marcellus & Utica Operations 2016: Processed Volumes  Processed volumes increased Available Average Utilization Area Capacity Volume ~14% over full-year 2015 (MMcf/d)(a) (MMcf/d) (%)  Gathered volumes increased Marcellus 4,155 3,341 80% ~20% over full-year 2015 Housto

  55. Slide 55: MPLX - Gathering & Processing

    MPLX - Gathering & Processing Marcellus & Utica Fractionation  2016 fractionated volumes Fractionated Volumes increased ~29% over full-year 2015 Available Average Utilization Area Capacity Volume  2017 fractionated volumes (MBPD)(a)(b) (MBPD) (%) expected to increase ~15% to ~20% over 2016 4Q16 To

  56. Slide 56: MPLX - Gathering & Processing

    MPLX - Gathering & Processing Southwest Operations 2.6 Carthage Complex Hidalgo Buffalo Creek Complex Javelina Complex Complex 0 Bcf/d Gathering capacity 1.5 Bcf/d* Processing capacity 29 MBPD C2+ Fractionation capacity *Includes 40% of processing capacity through the Partnership’s Centrahoma Joint

  57. Slide 57: MPLX - Gathering & Processing

    MPLX - Gathering & Processing Southwest Operations Processed Volumes 2016:  Processed volumes increased Available Average Utilization ~14% over full-year 2015 Area Capacity Volume (%) (MMcf/d)(a) (MMcf/d)  Gathered volumes increased ~1% over full-year 2015 West Texas(b) 200 179 90% East Texas 600

  58. Slide 58: MPLX - Strong Financial Flexibility to Manage and Grow Asset Base

    MPLX - Strong Financial Flexibility to Manage and Grow Asset Base  Committed to maintaining As of ($MM except ratio data) 12/31/16 investment grade credit profile Cash and cash equivalents 234  Completed a $1 B private Total assets 16,646 placement of convertible Total debt 4,423 preferred securit

  59. Slide 59: MPLX's Commodity Price Sensitivities

    MPLX’s Commodity Price Sensitivities  92% fee-based net operating margin, 8% commodity exposure for 2017  Maintain active hedging program with ~35% of our 2017 commodity exposure currently hedged  Annual 2017 sensitivities to commodity price changes (assumes no hedges): Product Commodity Price Ch

  60. Slide 60: MPLX's 2017 Forecast - Reconciliation

    MPLX’s 2017 Forecast - Reconciliation Adjusted EBITDA and Distributable Cash Flow from Net Income ($MM) Low High Net income 500 650 Depreciation and amortization 595 595 Net interest and other financial costs 265 265 Adjustment for equity investment earnings & distributions 90 90 Unrealized derivati

  61. Slide 61: Reconciliations - Speedway

    Reconciliations - Speedway Speedway Segment EBITDA to Segment Income from Operations ($MM) 2016 Speedway Segment Income from Operations 734 Plus: Depreciation and Amortization 273 Speedway Segment EBITDA 1,007 EBITDA to Net Income for Acquired Locations ($MM) 2013* 2017E** Net Income 47 138 Less: Ne

  62. Slide 62: Reconciliation

    Reconciliation Adjusted EBITDA to Net Income Attributable to MPC ($MM) 2016 LTM 1Q 2Q 3Q 4Q Net Income attributable to MPC 1 801 145 227 1,174 Less: Net interest and other financial income (costs) (142) (137) (141) (136) (556) Add: Net income (loss) attributable to inco noncontrolling interests (79)

  63. Slide 63: Reconciliation

    Reconciliation MPC Adjusted EBITDA Related to MPLX to MPLX Net Income ($MM) 2016 LTM 1Q 2Q 3Q 4Q MPLX Net Income (37) 20 143 132 258 Less: Net interest and other financial income (costs) (68) (64) (64) (65) (261) Add: Provision for income taxes (4) (8) - - (12) Depreciation and amortization 132 137

  64. Slide 64: MPC Annual Price and Margin Sensitivities

    MPC Annual Price and Margin Sensitivities Refining and Marketing Segment $MM (After Tax) LLS 6-3-2-1 Crack Spread* Sensitivity ~$450 (per $1.00/barrel change) Sweet/Sour Differential** Sensitivity ~$225 (per $1.00/barrel change) LLS-WTI Spread*** Sensitivity ~$80 (per $1.00/barrel change) Natural Ga

  65. Slide 65: MPC's Fully Integrated Downstream System

    MPC’s Fully Integrated Downstream System Refining and Marketing  Seven-plant refining system with ~1.8 MMBPCD capacity  One biodiesel facility and interest in three ethanol facilities  One of the largest wholesale suppliers in our market area  One of the largest producers of asphalt in the U.S.

Marathon Petroleum — Credit Suisse Energy Summit 2017 on 6ix