Marathon Petroleum Corporation · NYSE:MPC
Marathon Petroleum — Investor Presentation (May 2014)
68 slides from Marathon Petroleum's investor presentation, May 2014
Slide 1: Investor Presentation May 2014
Investor Presentation May 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 Honesty and Integrity Corporate Citizenship Diversity and Inclusion 4
Slide 5: Focused Return of Capital to Shareholders
Focused Return of Capital to Shareholders 6.4x free cash flow LTM LTM Ended 3/31/14 6,000 5,000 Dividends and share repurchases* 4,000 ~6.4x of Cash capital expenditures, 3,542 Free Cash $MM acquisitions and 3,000 Flow** investments Net cash provided by 2,000 Free Cash operations Flow** $550 1,000 2
Slide 6: Delivering Peer Leading Return of Capital
Delivering Peer Leading Return of Capital Twelve months ended 12/31/13 16% 14.6% 14% 12% 10% 8.9% 8.3% 8.0% 8% 12.6% 2.1% 6% 5.6% 6.1% 4.2% 6.3% 4% 3.4% 2% 2.0% 2.6% 2.2% 2.2% 1.7% 0% MPC HFC PSX TSO VLO Dividend Yield Special Dividend Yield 2013 Share Repurchase/Share Yield Total Capital Return Yie
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 2014E 2007 2008 2009 2010 2011 2012 2013 2014 LTM*** Pipe
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 Increas
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
Slide 14: Cushing Inventory vs. PADD 3 Inventory
Cushing Inventory vs. PADD 3 Inventory 60 2Q13 3Q13 4Q13 1Q14 275 55 250 50 225 MMB, Cushing MMB, PADD 3 45 200 40 175 35 150 30 125 25 100 Jul-12 Jul-13 Jun-12 Jun-13 Nov-12 Nov-13 Apr-12 May-12 Apr-13 May-13 Aug-12 Dec-12 Aug-13 Dec-13 Mar-12 Sep-12 Jan-13 Feb-13 Mar-13 Sep-13 Jan-14 Feb-14 Mar-14
Slide 15: Growth Opportunities
Growth Opportunities 15
Slide 16: Increasing Midstream Growth Investments
Increasing Midstream Growth Investments 1,200 Southern Access Extension 1,000 Sandpiper Condensate Splitters 800 Midstream Infrastructure* $MM 600 400 200 0 2007 2008 2009 2010 2011 2012 2013 2014E 2015E 2016E *Includes MPLX spend and midstream investments included in the R&M segment. Excludes maint
Slide 17: 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 18: 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 19: MPLX Developing a Comprehensive Utica System
MPLX 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 EBIT
Slide 20: Retained Midstream EBITDA of ~$800 MM
Retained Midstream EBITDA of ~$800 MM Additional Midstream Assets Retained by MPC ~5,400 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 184 owned and 16 leased inland barges; 4.9 MMBBL
Slide 21: 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 22: 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 23: 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 24: 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 24
Slide 25: Enhance Refining Margins
Enhance Refining Margins 25
Slide 26: 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 27: 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: 2014 Oil & Gas J
Slide 28: 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 29: 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 fro
Slide 30: 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 31: Appendix
Appendix 31
Slide 32: 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 33: 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 34: 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 35: Sustaining Capital Returns Since Spin
Sustaining Capital Returns Since Spin Cumulative Return of Capital Since July 1, 2011 7,000 $6 B 6,000 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 Q1 2014 Dividends Share repurchases 35
Slide 36: Growing Global Product Demand
Growing Global Product Demand Compounded Annual Growth Rates 2030 vs. 2013 2013 Distillate and gasoline 120 Actual Forecast demand continues to 100 rise +1.2% Other Fuel oil continues 80 -1.6% to be phased out due Fuel Oil MMBD to tightening sulfur 60 +1.4% specs Distillate 40 20 +0.9% Gasoline
Slide 37: Growing U.S. Distillate Demand
Growing U.S. Distillate Demand Overall U.S. demand remains flat 2013 Compounded 10 Annual Distillate demand Actual Forecast Growth Rates 2030 vs. 2013 growth outpaces other 9 Gasoline -0.3% products 8 Gasoline ex ethanol -0.4% 7 Gasoline will be 6 constrained by CAFE standards and biofuels MMBD
Slide 38: Rising North American Production
Rising North American Production 2013 25 Actual Forecast 20 Canada 15 MMBD 10 U.S. 5 0 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 Sources: EIA, CAPP, MPC 38
Slide 39: Growing Crude Oil/Condensate Supply
Growing Crude Oil/Condensate Supply North Dakota 2013 1,800 1,600 1,400 1,200 MBD 1,000 800 600 Total Growth 400 Canada 2013 – 2025 200 +6,055 MBD 0 ← Actual Forecast → +2,549 MBD Actual Forecast 1990 1995 2000 2005 2010 2015 2020 2025 2030 Texas 2013 Bakken 4,500 4,000 +829 MBD 3,500 Utica 3,00
Slide 40: Refining Capacity in Advantaged Regions
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 Source
Slide 41: Refinery Capacity
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 the i
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 Portland Estimated Sarnia MBPD Pipeline Completion 540 Keystone Current 215 Ozark Current Casper Flanagan Chicago 170 Platte Current SAX Mustang 190 Spearhead
Slide 44: Key Strengths
Key Strengths Balanced Operations Crude Oil Refining Capacity Crude Slate 62% PADD II 51% Sour Crude PADD III 49% Sweet Crude 38% As of March 31, 2014 As of March 31 , 2014 Assured Sales of Gasoline Production (Speedway + Brand + Wholesale Contract Sales) Assured Sales ~42% Wholesale and ~58% Other
Slide 45: 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 46: Creating Crude/Condensate Advantage
Creating Crude/Condensate Advantage Canada +2,549 MBD Cornerstone Pipeline Bakken Condensate Splitter +829 MBD Truck Unload Expansion Sandpiper Utica +106 MBD Southern Access Extension Patoka, IL Wellsville Barge Condensate Splitter Robinson Light Crude Enhancements Permian +826 MBD MPC Refinery Eag
Slide 47: 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 48: 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 48
Slide 49: 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 50: Galveston Bay
Galveston Bay Sustaining expenditures trending lower 1,000 800 600 $MM 400 200 0 2013 2013E 2014E 2014E 2015E 2015E 2016E 2016E Original Capital Original Major Maintenance Current Capital Current Major Maintenance Note: Excludes synergy and other value accretive investments, excludes Tier 3 investme
Slide 51: Galveston Bay
Galveston Bay Long-term opportunities Revamp crude and vacuum units Optimize for future crude availability Improve distillate recovery Add hydrotreating capacity Move to 100% ULSD Idle the smallest and oldest FCC Expand export capabilities 51
Slide 52: Rising MPC Finished Product Exports
Rising MPC Finished Product Exports 250 200 150 MBD 100 50 0 2010 2011 2012 2013 1Q 2014 52
Slide 53: MPC and Corn Ethanol
MPC and Corn Ethanol 67% equity interest* in Greenville, Ohio, ethanol plant (110 MM gal/year capacity) 60% equity interest in Clymers, Indiana, ethanol plant (110 MM gal/year capacity) 43% equity interest in Albion, Michigan, ethanol plant (55 MM gal/year capacity) The Andersons operates th
Slide 54: 2014 Significant Capital Projects
2014 Significant Capital Projects Sandpiper investment Southern Access Extension investment Utica Shale projects Condensate splitters Utica system Speedway expansion Robinson hydrocracker revamp Garyville resid hydrocracker engineering design and study Garyville and Galveston Bay g
Slide 55: Capital Expenditures & Investments
Capital Expenditures & Investments ($MM) 2014 MPC Budget 1Q 2014 Refining & Marketing (R&M) 864 143 Midstream included in R&M 348 35 Speedway 327 32 Pipeline Transportation* 760 130 Corporate and Other 133 25 Total Capital Expenditures & 2,432 365 Investments *Includes MPLX (100% basis) Note: Exclud
Slide 56: 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 57: Our Priorities for Our Investors
Our Priorities for Our Investors $60 Maintain Safe and Reliable Operations $55 Unit Price $50 Sustain Long-term Distribution Growth $45 $40 Focus on Fee-Based Businesses $35 Pursue Organic Growth $30 Opportunities $25 IPO Grow Through Acquisitions $20 10/25/12 12/25/12 02/25/13 04/25/13 06/25/13 08/
Slide 58: 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 59: 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 $30 O
Slide 60: Leveraging Existing MPC Assets
Leveraging Existing MPC Assets Utica Shale Strategy Expand refinery processing capacity to leverage geographic advantage Condensate splitters at Canton and Catlettsburg – Increases total crude plus condensate processing capacity to 60 MBD from ~25 MBD Phased infrastructure investment Truck 2
Slide 61: Drop-down Strategy Considerations
Drop-down Strategy Considerations MPC created MPLX to grow midstream business and create a funding mechanism for strategic opportunities MPLX investors highly value a consistent, long-term growth strategy Ratable drops maximize value creation and retain flexibility for MPC Committed to maint
Slide 62: MPLX Deficiency Payment Effect Example
MPLX Deficiency Payment Effect Example for illustrative purposes only Quarter Quarter Quarter Quarter Quarter Quarter Quarter ($MM) 1 2 3 4 5 6 7 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 Distribut
Slide 63: Incentive Distribution Rights
Incentive Distribution Rights Marginal Percentage Total Quarterly Distribution Interest in Distributions Per Unit Target Amount Unitholders General Partner Minimum Quarterly Distribution $0.2625 98.0% 2.0% First Target Distribution above $0.2625 up to $0.301875 98.0% 2.0% Second Target Distribution
Slide 64: EBITDA Reconciliation to Net Income Attributable to MPC
EBITDA Reconciliation to Net Income Attributable to MPC ($MM) 2007 2008 2009 2010 2011 2012 2013 2014 1Q 2Q 3Q 4Q 1Q Net income attributable to MPC 2,262 1,215 449 623 2,389 3,389 725 593 168 626 199 Less: Net interest and other financial income (costs) 165 30 31 12 (26) (109) (48) (45) (47) (39) (4
Slide 65: Reconciliation
Reconciliation Free Cash Flow to Net Cash Provided by (Used in) Operations ($MM) 2013 2014 (Quarter to date) 2Q 3Q 4Q 1Q Net cash provided by (used in) operating activities (436) 407 1,355 766 Additions to property, plant and equipment (229) (309) (473) (267) Acquisitions* (22) - - - Investments (6)
Slide 66: Reconciliation
Reconciliation Speedway Segment EBITDA to Speedway Segment Income from Operations ($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 67: 2Q 2014 Outlook
2Q 2014 Outlook Other Total Corporate Percent of Turnaround Depreciation Other Crude Charge/ Total Direct and Other WTI-priced and Major and Manufacturing Throughput* Feedstocks Throughput* Operating Unallocated Crude Maintenance Amortization Cost** Throughput* Costs Items*** in MMBD Refinery Direct
Slide 68: 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 68
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