Marathon Petroleum Corporation · NYSE:MPC
Marathon Petroleum — 2017 Citi Global Energy & Utilities Conference
62 slides from Marathon Petroleum's conference presentation, May 10, 2017
Slide 1: 2017 Citi Global Energy & Utilities Conference
2017 Citi Global Energy & Utilities Conference Tim Griffith, Senior Vice President and CFO May 10, 2017
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
Slide 3: First-Quarter Highlights
First-Quarter Highlights Reported first-quarter earnings of $30 MM, or $0.06 per diluted share Completed the largest slate of quarterly turnaround activity in MPC history Executed first dropdown of strategic plan with contribution of terminal, pipeline and storage assets to MPLX – On schedule
Slide 4: 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
Slide 5: Completed First-Quarter Dropdown to MPLX
Completed First-Quarter Dropdown to MPLX Terminal, pipeline and storage assets Total consideration of $2.015 B – 62 light product terminals with ~24 million barrels of – $1.511 B in cash and $504 MM in MPLX storage capacity equity – 11 pipeline systems consisting of 604 pipeline miles – Represen
Slide 6: Delivering Significant Returns for Our Shareholders
Delivering Significant Returns for Our Shareholders Since becoming an independent Commitment to Ongoing Return company on July 1, 2011 of Capital to Shareholders MPC Has Returned Nearly Repurchased $ 11 ~30 % Dividends Consistently growing dividend 25% CAGR since spin BILLION of Outstanding Common S
Slide 7: Strategic Plan to Enhance Shareholder Value
Strategic Plan to Enhance Shareholder Value (1)(2) (1)(3)(4) 2018E LP & GP distributions MPC receives from MPLX Total Midstream Value to MPC after Strategic Plan (6) (4) (4)(7) (7) MPLX Cost of Equity (5) Illustrative gross value per MPC share 2016: 8.3% 2018E Pro Forma: 6.0% ~$7 + ~$2 + ~$14 - $18
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 and February – Distillate demand expected to benefit from increased commercial activity OPEC’s resolve to reduce inventory levels – Balanced supply and demand envi
Slide 9: Gasoline Exports Enhance Utilization
Gasoline Exports Enhance Utilization U.S. Total Gross Gasoline Exports Gasoline exports have expanded 1100 opportunity set for U.S. refiners 900 2014 MBPD – Summer exports tend to fall as more 700 2015 product is consumed domestically 500 2016 2017 300 U.S. refinery utilization is less subject t
Slide 10: Export Market Remains Robust
Export Market Remains Robust Expect MPC exports to resume to MPC Export Capacity 600 typical levels in 2Q 2017 of ~300 510 MBPD 500 115 Demand from Latin America remains 395 400 365 strong for both diesel and gasoline 320 345 MBPD While arbitrage to Europe for diesel is 300 not always open, oc
Slide 11: 2017 Capital Outlook
2017 Capital Outlook Excluding Acquisitions 10% 3% Speedway Corporate & Other MPC excluding MPLX ~$1.6 B Refining & Marketing (R&M) – $1,085 MM Midstream – $65 MM 22% Speedway – $380 MM R&M Sustaining Corporate & Other – $100 MM 56% Capital MPLX MPLX ~$2.1 B 7% R&M Margin Growth – $1,900 M
Slide 12: 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 – ~30% IRR, 2021 est. completion Garyville ULSD proje
Slide 13: MPLX First-Quarter Highlights
MPLX First-Quarter Highlights Reported first-quarter adjusted EBITDA of $423 MM and distributable cash flow of $354 MM with a strong coverage ratio of 1.29x Declared distribution of $0.54 per common unit Completed dropdown from MPC for $2.0 B, 75% debt funded Purchased Ozark Pipeline Acqui
Slide 14: MPLX Strengthens Leading Position in Northeast
MPLX Strengthens Leading Position in Northeast Recently announced 50/50 joint venture with Antero Midstream Supports Antero Resources’ significant production growth profile in the Marcellus PENNSYLVANIA Shale OHIO – Long-term, fee-based agreement and significant acreage dedication HOPEDALE Comme
Slide 15: 2017 MPLX Organic Growth Capital Investment
2017 MPLX Organic Growth Capital Investment Forecast range of $1.8 B to $2.0 B* ~$1.3 B to $1.5 B - natural gas and gas liquids infrastructure – Completed Sherwood VII gas processing plant and third fractionation train at Hopedale in the first quarter – Began construction of Argo I gas processing
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 Couche-Tard CST Murph
Slide 17: 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
Slide 18: Speedway Exceeding Expected Acquisition-Related Synergies
Speedway Exceeding Expected Acquisition-Related Synergies Continuing to focus on marketing enhancements opportunities 2016 actual synergies of $180 MM exceeded prior projection Synergies and Marketing Enhancements 250 225 200 190 180 149 $MM 150 120 100 75 47 50 20 0 2014E 2014 2015E 2015 2016E
Slide 19: Strong Liquidity and Capitalization
Strong Liquidity and Capitalization Committed to maintaining investment As of March 31, 2017 MPC MPLX MPC Excluding grade credit profiles at MPC and ($MM except ratio data) Consolidated Adjustments(a) MPLX MPLX Debt 12,598 6,655 5,943 Substantial available liquidity at MPC Mezzanine equity 1,000
Slide 20: 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 20
Slide 21: Appendix
Appendix 21
Slide 22: Strong Operational Performance and Responsible Corporate Leadership
Strong Operational Performance and Responsible Corporate Leadership 22
Slide 23: Distillate Leading World Liquids Demand
Distillate Leading World Liquids Demand Average Annual 120 Volumetric Growth (MBPD) Actual Forecast 2015 vs. 2025 Average product 100 demand growth +440 80 of 1.6 MMBD in Other 2016-2017 -125 MMBPD 60 Resid Distillate remains +550 the growth leader 40 Middle Distillate through 2025 20 Global g
Slide 24: 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 European Natural
Slide 25: Distillate Leads U.S. Domestic Petroleum Fuels Demand
Distillate Leads U.S. Domestic Petroleum Fuels Demand 10 Compounded Annual Gasoline Actual Forecast Growth Rates Distillate expected to lead 9 2016 vs. 2030 U.S. domestic fuels demand 8 Gasoline ex ethanol -0.8% growth 7 -0.8% – Primarily due to growth in 6 freight transportation and MMBPD 5 subst
Slide 26: 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
Slide 27: 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
Slide 28: Key Strengths
Key Strengths Balanced Operations Crude Oil Refining Capacity Crude Slate 67% 60% PADD II Sour Crude 40% PADD III 33% Sweet Crude As of March 31, 2017 1Q 2017 Assured Sales of Gasoline Production (Speedway + Brand + Wholesale Contract Sales) Assured Sales ~70% ~30% Wholesale and Other Sales 1Q 2017
Slide 29: Refining and Marketing - Market Data Update
Refining and Marketing - Market Data Update Effective March 1, 2017 RIN/CBOB crack adjustment included in R&M Gross Margin Indicator – Previously part of Other Gross Margin – Adjusts the LLS 6-3-2-1 crack spread to an ex-RIN basis – Adjusts the LLS 6-3-2-1 crack spread to an 84 octane CBOB basis (
Slide 30: Market Data Update
Market Data Update Refining and Marketing Indicative Gross Margin Reporting 2,000 619 32 1 89 1,791 1,500 1,188 (138) $MM 1,000 500 0 (1,453) (408) (70) -500 *LLS *Sweet/ *LLS/WTI *LLS *Market Other R&M Direct Other R&M 6-3-2-1 Sour Diff. Diff. Prompt vs. Structure Gross Gross Operating Segment Crac
Slide 31: Refining and Marketing - Other Gross Margin
Refining and Marketing - Other Gross Margin Crude, Product and Volumetric Gain Examples* Crude – Actual crude and other feedstocks versus the seven crudes included in market data – Hedging gains and losses – Crude transportation to refinery, historically ~$2 per barrel of crude throughput Produc
Slide 32: Other Components of R&M Segment Income
Other Components of R&M Segment Income Direct Operating Costs – Guidance provided at earnings call for upcoming quarter – Comprised of three expense classes • Major maintenance and turnaround • Depreciation and amortization • Other Manufacturing Other – Guidance not provided – Includes terminali
Slide 33: 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
Slide 34: 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
Slide 35: 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, storage and distribution of crude oil, refined petroleum products and other hydrocarbon-based products
Slide 36: The Marcellus/Utica Resource Play is the 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 are 31 expected to grow
Slide 37: 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 MPLX GP LLC MPC owns 24% LP
Slide 38: MPC Assets Expected to be Acquired by MPLX
MPC Assets Expected to be Acquired by MPLX ~$1.4 B of Estimated Annual EBITDA Refinery Fuels Terminals Pipelines Marine Logistics Distribution ● ~60 light product; ● Private carrier crude ● Equity in 50/50 blue ● ~55 MMBBL storage ● Fixed service fee per ~20 MMBBL storage; oil and refined product wa
Slide 39: 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
Slide 40: MPLX - 2017 Forecast
MPLX - 2017 Forecast Financial forecast revised in first quarter to reflect dropdown from MPC and acquisitions of the Ozark Pipeline and Bakken Pipeline system – Bakken Pipeline system is accounted for as an equity-method investment – EBITDA and DCF contributions will not be recognized until first
Slide 41: MPLX - Organic Growth Capital Investments (2017)
MPLX - Organic Growth Capital Investments Projects expected to be completed in 2017 Est. Completion Est. Gathering & Processing Projects Shale Resource Capacity Date Logistics & Storage Projects Completion Date Rich- and Dry-Gas Gathering(a) Marcellus & Utica N/A Ongoing Harpster-to-Lima pipeline an
Slide 42: MPLX - Organic Growth Capital Investments (2018)
MPLX - Organic Growth Capital Investments Projects expected to be completed in 2018 Est. Completion Est. Gathering & Processing Projects Shale Resource Capacity Date Logistics & Storage Projects Completion Date Houston I Processing Plant(a) Marcellus 200 MMcf/d 1Q18 Ozark Pipeline Expansion 2Q18 She
Slide 43: MPLX - Recent Strategic Acquisitions
MPLX - Recent Strategic Acquisitions OzarkBakken PipelinePipeline Acquisition – $500 MM investment – ~9.2% equity interest in the Dakota Access Pipeline (DAPL) and the Energy Transfer Crude Oil Pipeline (ETCOP) projects – Expected to deliver ~470 MBPD from the Bakken/Three Forks production area to t
Slide 44: MPLX – Executing a Comprehensive Utica Strategy
MPLX – Executing a Comprehensive Utica Strategy Phased infrastructure investment Cornerstone Pipeline commenced operations in October 2016 Hopedale pipeline connection completed December 2016 Continued construction of Harpster- to-Lima pipeline and related expansions in 1Q 2017 Mid-2017 esti
Slide 45: MPLX - Attractive Portfolio of Organic Growth Capital
MPLX - Attractive Portfolio of Organic Growth Capital Logistics & Storage Segment Midwest Pipeline Infrastructure Build-out Industry solution for Marcellus and Utica liquids Mid-2017 estimated completion Ozark Pipeline Expansion Crude sourcing optionality to Midwest refineries Mid-2018 estim
Slide 46: MPLX - Logistics & Storage Contract Structure
MPLX - Logistics & Storage Contract Structure Fee-based assets with minimal commodity 2016 Revenue – Customer Mix exposure(c) 6% MPC has historically accounted for $51 – over 85% of the volumes shipped on MPLX’s 20% MM crude and product pipelines – 100% of the volumes transported via MPLX’s $171
Slide 47: 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 cap
Slide 48: 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 distri
Slide 49: 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
Slide 50: MPLX - Gathering & Processing: Marcellus & Utica Operations
MPLX - Gathering & Processing Marcellus & Utica Operations 2.9 Houston Complex Sherwood Complex Hopedale Complex 0 Bcf/d Gathering capacity 5.7 Bcf/d Processing capacity 471 MBPD C2+ Fractionation capacity 25 MBPD Cond. Stabilization capacity 50
Slide 51: MPLX - Gathering & Processing: Processed Volumes
MPLX - Gathering & Processing Marcellus & Utica Operations Processed Volumes Commenced operations of Sherwood VII plant in March 2017 Available Average Utilization which increases the total capacity of Area Capacity Volume (%) (MMcf/d)(a) (MMcf/d) this complex to 1.4 Bcf/d Marcellus 4,199 3,532 84
Slide 52: MPLX - Gathering & Processing: Fractionation
MPLX - Gathering & Processing Marcellus & Utica Fractionation 2017 fractionated volumes Fractionated Volumes expected to increase ~15% Available Average Utilization to ~20% over prior year Area Capacity Volume (%) (MBPD)(a)(b) (MBPD) Commenced third fractionation train at Hopedale complex, incre
Slide 53: MPLX - Gathering & Processing: Southwest Operations
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
Slide 54: MPLX - Gathering & Processing: Southwest Processed Volumes
MPLX - Gathering & Processing Southwest Operations Processed Volumes 2017 processed volumes expected to increase ~3% to ~8% over 2016 Available Average Utilization Area Capacity Volume (%) – West Texas (Delaware Basin) (MMcf/d)(a) (MMcf/d) and Western Oklahoma (STACK) West Texas(b) 200 192 96% to
Slide 55: 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) 3/31/17 investment grade credit profile Cash and cash equivalents 265 $2.25 B senior notes issued Total assets 18,285 1Q 2017 Total debt 6,655 Completed $148 MM of Redeemabl
Slide 56: MPLX - Commodity Price Sensitivities
MPLX - Commodity Price Sensitivities 95% fee-based net operating margin, 5% commodity exposure for 2017 Maintain active hedging program with ~40% of our 2017 commodity exposure currently hedged Annual 2017 sensitivities to commodity price changes (assumes no hedges): Product Commodity Price Ch
Slide 57: MPLX Reconciliation – 2017 Forecast
MPLX Reconciliation – 2017 Forecast Adjusted EBITDA and Distributable Cash Flow from Net Income ($MM) Low High Net income 550 700 Depreciation and amortization 680 680 Net interest and other financial costs 330 330 Adjustment for equity investment earnings & distributions 100 100 Unrealized derivati
Slide 58: MPC Reconciliation
MPC Reconciliation Adjusted EBITDA to Net Income Attributable to MPC ($MM) 2016 2017 LTM 2Q 3Q 4Q 1Q Net Income attributable to MPC 801 145 227 30 1,203 Less: Net interest and other financial income (costs) (137) (141) (136) (150) (564) Add: Net income (loss) attributable to inco noncontrolling inte
Slide 59: Reconciliation
Reconciliation MPC Adjusted EBITDA Related to MPLX to MPLX Net Income(a) ($MM) 2016 2017 LTM 2Q 3Q 4Q 1Q MPLX Net Income 72 194 182 187 635 Less: Net interest and other financial income (costs) (64) (64) (65) (78) (271) Add: Provision for income taxes (8) - - - (8) Depreciation and amortization 151
Slide 60: Speedway Reconciliation
Speedway Reconciliation 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 60
Slide 61: 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
Slide 62: 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.
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