Summary

• Marathon Petroleum Corporation (MPC) is the largest downstream energy company in the USA. It refines and supplies gasoline and distillates to resellers in the United States, as well as exports them to the international market
• MPC can be traced back to 1887. On July 1, 2011, Marathon Petroleum Corporation (MPC) became a stand-alone refining, marketing and transportation company through a spin off from Marathon Oil Company, headquartered in Findlay, Ohio, U.S.
• The company has two reportable segments: Refining & Marketing, and Midstream.
• Sales in 2022 is $177,453 million and in 2021 it was $119,983 million. The percentage increase in sales is approximately 47.89%. Gross profit in 2022 is $25,782 million and in 2021 it was $9,975 million. Approximately 158.56% increased from 2021.
• Operating income in 2022 is $21,469 million and in 2021 it was $4,300 million. Therefore, the percentage increase in operating income is approximately 399.5%.
• Net income in 2022 is $14,516 million and in 2021 it was $9,738 million. The percentage increase in net income is approximately 49.05%.

Brief Company Overview

Marathon Petroleum Corporation (NYSE:MPC) is the largest downstream energy company in the USA. Together with its subsidiaries and multiple joint ventures, it refines and supplies gasoline and distillates to resellers in the United States, as well as exports them to the international market, mostly under the ARCO brand. It also facilitates its business using its midstream infrastructure to transport, store, distribute, and market crude oil and refined products under MPLX. The company also provides renewable fuels under the Virent Inc., The Andersons, Inc., and ADM brands. Its operations started in 1887 and it was incorporated on November 9, 2009, through a spin off from Marathon Oil Corporation.

The company supplies refined products to independent retailers, wholesale customers, brand jobbers, and direct dealers. In addition, it sells refined products for export to international customers. As of December 31, 2022, there were 7,209 brand jobber outlets in 38 states, where independent entrepreneurs primarily maintain Marathon-branded outlets. They also have long-term supply contracts for 1,172 direct dealer locations, primarily in Southern California, largely under the ARCO brand.

Marathon Petroleum Corporation currently owns and operates refineries in the Gulf Coast, Mid-Continent, and West Coast regions of the United States, with a combined crude oil refining capacity of 2,898 thousand barrels per calendar day (mbpcd). In 2022, their refineries processed 2,761 thousand barrels per day (mbpd) of crude oil and 190 mbpd of other charge and blendstocks. In comparison, in 2021, the refineries processed 2,621 mbpd of crude oil and 178 mbpd of other charge and blendstocks.

As of June 2023, the company had a 52-week share price range of $138.63.42 to $77.62. The company's financial performance is reflected in its trailing P/E ratio of 3.44 times, price-to-sales ratio (ttm) of 0.33 times, profit margin of 9.37%, operating margin of 12.63% (ttm), return on assets (ttm) of 15.51%, return on equity of 55.08%, and diluted earnings per share (ttm) of $32.58. The aggregate market value of Common Stock held by non-affiliates as of June 30, 2022 was approximately $42.1 billion. This amount is based on the closing price of the registrant’s Common Stock on the New York Stock Exchange on June 30, 2022. There were 424,282,812 shares of Marathon Petroleum Corporation Common Stock outstanding as of April 26, 2023.

MPLX LP

MPLX is a diversified, large-cap master limited partnership (“MLP”) formed in 2012 by Marathon Petroleum Corporation (MPC) that owns and operates midstream energy infrastructure and logistics assets and provides fuels distribution services. As of December 31, 2022, MPC owned approximately 65 percent of the outstanding MPLX common units. MPLX owns and operates a network of crude oil, natural gas and refined product pipelines and has joint ownership interests in crude oil, refined products and other pipelines. MPLX also owns and operates light products terminals, storage assets and maintains a fleet of owned and leased towboats and barges in support of fuels distribution on behalf of MPC. MPLX’s assets also include natural gas gathering systems and natural gas processing and NGL fractionation complexes. It holds a 9.19 percent indirect interest in a joint venture (“Dakota Access”) that owns and operates the Dakota Access Pipeline and Energy Transfer Crude Oil Pipeline projects. During 2022, MPLX issued $2.5 billion of senior notes, redeemed $1.0 billion of senior notes and had net payments of $300 million under its revolving credit facility.

MPC control MPLX through its ownership of the general partner; however, the creditors of MPLX do not have recourse to MPC’s general credit through guarantees or other financial arrangements, except some. MPC’s control of the general partner of MPLX may increase the possibility of claims of breach of fiduciary duties, including claims of conflicts of interest. Any liability resulting from such claims could have a material adverse effect on our future business, financial condition, results of operations and cash flows.

Recent Development

• On December 1, 2022, MPC purchased all of Crowley Coastal Partner’s interest in Crowley Ocean Partners and its four subsidiaries for approximately $485 million, which included $196 million to pay off the debt associated with the four tankers.
• On September 21, 2022, MPC closed on the formation of the Martinez Renewable joint venture. MPC contributed property, plant and equipment, inventory, and working capital with an estimated fair value of $1.47 billion and Neste contributed $728 million in cash.¹
• On June 1, 2022, MPC purchased the remaining 49 percent interest in Watson Cogeneration Company from NRG Energy, Inc. for approximately $59 million.

Recent Financing Activities

• On March 14, 2022, MPLX issued $1.5 billion aggregate principal amount of 4.950% senior notes due March 2052 in an underwritten public offering. The net proceeds were used to repay amounts outstanding under the MPC intercompany loan agreement and under the previous MPLX credit agreement.
• On August 11, 2022, MPLX issued $1.0 billion aggregate principal amount of 4.950% senior notes due September 2032 in an underwritten public offering. The net proceeds were used to redeem all of the $500 million aggregate principal amount of 3.500% senior notes due December 2022, $14 million of which was issued by Andeavor Logistics LP, and to redeem all of the $500 million aggregate principal amount of 3.375% senior notes due March 2023.

Financial Performance Highlights

Q1 2023 Highlights

The sales figures for the first quarter of 2023 and the first quarter of 2022 indicate a decline in sales. In the first quarter of 2023, sales amounted to $34,864 million, while in the first quarter of 2022, they stood at $38,058 million. This represents a percentage change of approximately -9.16%, reflecting a decline in sales. Similarly, the gross profit for the first quarter of 2023 reached $4,770 million, contrasting with the figure of $2,185 million recorded in the first quarter of 2022. The percentage change in gross profit between these two periods is approximately 57.83%. In the first quarter of 2023, the basic EPS was reported at $6.13, while in the first quarter of 2022, it amounted to $1.50..

Annual Performance Highlights

Sales in 2022 is $177,453 million and in 2021 it was $119,983 million. The percentage increase in sales from 2021 to 2022 is approximately 47.89%. Gross profit in 2022 is $25,782 million and in 2021 it was $9,975 million. Therefore, the percentage increase in gross profit from 2021 to 2022 is approximately 158.56%. Operating income in 2022 is $21,469 million and in 2021 it was $4,300 million. Therefore, the percentage increase in operating income from 2021 to 2022 is approximately 399.5%. Net income in 2022 is $14,516 million and in 2021 it was $9,738 million. The percentage increase in net income from 2021 to 2022 is approximately 49.05%. EPS as of 31 December 2022 is 28.31$.

Net income attributable to MPC increased $4.78 billion, or $12.88 per diluted share, in 2022 compared to 2021 primarily due to increased average refined product sales prices and volumes and non-cash net gains on the disposal of assets, partially offset by increased operating costs and the absence of a gain on the sale of Speedway and a partial period of income from discontinued operations due to the sale of the Speedway business on May 14, 2021.

Refining & Marketing segment sales has increased from $115,494 million in fiscal 2021 to $172,205 million in fiscal year 2022. Operating profit in this segment increased from $3,518 million in 2021 to $19,261 million in 2022. Refining & Marketing segment revenues increased $56.71 billion primarily due to increased average refined product sales prices of $0.96 per gallon and higher refined product sales volumes, which increased 83 mbpd. Refinery crude oil capacity utilization was 96 percent during 2022 and net refinery throughputs increased 152 mbpd primarily due to continuing recovery in demand for the products across all the regions. Refining & Marketing segment adjusted EBITDA increased $15.74 billion primarily driven by higher per barrel margins, partially offset by increased refining operating costs and distribution costs, both excluding depreciation and amortization, and turnaround costs.

Midstream segment sales has increased from $9,619 million in fiscal 2021 to $10,590 million in fiscal year 2022. Operating profit in this segment increased from $5,410 million in 2021 to $5,772 million in 2022. Midstream segment revenue and segment adjusted EBITDA increased $971 million and $362 million, respectively. Results largely benefited from higher product pricing, mainly due to increased average C2 + NGL prices of $0.16 per gallon. These price increases resulted in higher revenues of approximately $380 million, as well as higher cost of sales of $315 million. The Midstream segment also benefited from higher gathering system throughputs, resulting in increased revenue of $356 million, in addition to higher pipeline and terminal throughputs.

Net cash provided by operating activities in 2022 is $16,361 million it was $4,360 million in earlier period.  Net cash used in investing activities in 2022 is $(623) million which was $(14,797) million in 2021. Net cash used in financing activities in 2022 is $(13,647) which was $(14,419) in 2021.

Business Overview

Marathon Petroleum Company is a manufacturer and refiners of products from crude oil and petroleum. The company operates in the U.S as well as international market. The brands of the company include ARCO, MPLX, Virent, Andersons, and ADM. The business of the company is conducted through wholly owned subsidiaries, a variety of joint ventures, and other entities. Marathon has two reportable segments: Refining & Marketing and Midstream.

Refining & Marketing Segment 

MPC obtains crude oil through negotiated term contracts and purchases or exchanges on the spot market. Their contracts generally have market-related pricing provisions. In 2022, it sourced 2761 mbpd of crude oil from the USA, Canada, and the Middle East, with the USA providing 1895 mbpd. The crude oil sourced outside of North America was acquired from various foreign national oil companies, production companies, and trading companies. The refineries process a wide variety of condensate, light, and heavy crude oils purchased from various domestic and foreign suppliers. MPC produces numerous refined products, ranging from transportation fuels such as reformulated gasolines and blend-grade gasolines intended for blending with ethanol and ULSD fuel, to heavy fuel oil and asphalt. Additionally, it manufactures NGLs, petrochemicals, and propane. It also refines crude oil and other feedstocks, including renewable feedstocks, at their refineries located throughout the United States. The renewable facility has the capacity to produce approximately 1,900 million gallons per year of renewable diesel from corn oil, soybean oil, fats, and greases as of June 2023. They also purchase refined products and ethanol for resale and distribute refined products, including renewable diesel. MPC sells refined products to wholesale marketing customers domestically and internationally, to buyers on the spot market, to independent entrepreneurs who primarily operate Marathon-branded outlets, and through long-term supply contracts with direct dealers who mainly operate locations under the ARCO brand.

Midstream Segment 

Midstream is a term used to describe one of the three major stages of the oil and gas industry operations. It encompasses activities such as processing, storing, transporting, and marketing of oil, natural gas, and natural gas liquids. The Midstream segment of MPC primarily includes the operations of MPLX, a sponsored MLP, and certain related operations retained by MPC. This segment primarily reflects the results of MPLX LP ("MPLX"), which is a diversified, large-cap master limited partnership formed in 2012. MPLX owns and operates midstream energy infrastructure and logistics, including the largest terminal operations in the United States and one of the largest private domestic fleets of inland petroleum product barges. As of December 31, 2022, MPC owned the general partner of MPLX and approximately 65 percent of the outstanding MPLX common units.

MPLX owns and operates a network of crude oil, natural gas, and refined product pipelines. It also has joint ownership interests in crude oil, refined products, and other pipelines. Additionally, MPLX owns and operates light products terminals, storage assets, and maintains a fleet of owned and leased towboats and barges to support fuels distribution on behalf of MPC. MPLX's assets further include natural gas gathering systems and natural gas processing and NGL fractionation complexes.

MPC as a whole, on the other hand, engages in the transportation, storage, distribution, and marketing of crude oil and refined products, primarily for the Refining & Marketing segment. This is done through a network of refining logistics assets, pipelines, terminals, towboats, and barges. MPC also gathers, processes, and transports natural gas, as well as gathers, transports, fractionates, stores, and markets NGLs. The Midstream segment can be influenced by seasonal fluctuations in the demand for natural gas and NGLs, as well as fluctuations in commodity prices caused by various factors, including changes in transportation and travel patterns, and variations in weather patterns from year to year.

Other Business Information

MPC's cogeneration facility, which supplies the Galveston Bay refinery, currently has a capacity of 1,055 megawatts for electrical production and can produce 4.3 million pounds of steam per hour. In 2022, approximately 48 percent of the power generated was used at the refinery, while the remaining electricity was sold into the grid.

There is seasonality in demand for certain products of MPC. Gasoline, diesel fuel, and asphalt experience higher demand during the spring and summer months compared to the winter months in most markets. This increase is primarily due to seasonal rises in highway traffic and construction activities. As a result, the operating results for MPC's Refining & Marketing segment may be lower in the first and fourth quarters compared to the second and third quarters of each calendar year.

Company History

Marathon Petroleum Corporation, has evolved and grown through acquisitions, expansions, and ventures in the oil and gas industry. Its operation started with Ohio Oil. The Ohio Oil Company was founded in Lima, Ohio, United States in 1887. In 1889, John D. Rockefeller's Standard Oil purchased Ohio Oil and moved its headquarters to Findlay, Ohio. Over the years, Ohio Oil underwent various changes and acquisitions. In 1911, following the breakup of the Standard Oil trust by the Supreme Court, Ohio Oil became an independent company. In 1924, it purchased the Lincoln Oil Refining Company, including the Robinson refinery in Illinois. In 1930, Ohio Oil acquired Transcontinental Oil, which brought oil and gas wells, refineries, and filling stations, along with the Marathon product name and trademark. The company's stock was publicly traded on the New York Stock Exchange for the first time.

In the 1940s, Ohio Oil introduced catalytic cracking, increasing refinery yield, and launched a successful campaign for Marathon "Cat" gasoline. In 1946, Marathon service stations expanded their offerings to include tires, batteries, and auto maintenance. In 1953, Ohio Oil was the first to introduce the metal credit plate, a precursor to credit cards, to build customer loyalty. In 1959, the company purchased the Aurora Gasoline Company, which included Speedway 79 Stratofuel service stations.

In 1960, Marathon Pipe Line Company was established as a subsidiary, and in 1962, the company officially changed its name to Marathon Oil Company. Throughout the following decades, Marathon Oil expanded through acquisitions and ventures. In 1976, EMPC Marketing was incorporated to oversee company-operated service stations. In 1982, Marathon resisted a hostile takeover attempt and was later sold to U.S. Steel Corporation. In 1990, the corporate headquarters moved to Houston, Texas.

In 1998, Marathon Oil formed a joint venture named Marathon Ashland Petroleum LLC with Ashland Inc., adding refineries and a private inland barge fleet. In 2011, Marathon Petroleum Corporation became a stand-alone refining, marketing, and transportation company headquartered in Findlay, Ohio, United States. Subsequent years saw the completion of major projects, acquisitions, and expansions, including the acquisition of Andeavor in 2018, which extended operations nationwide.²

In 2019, MPLX LP, the master limited partnership company formed by MPC in 2012, acquired Andeavor Logistics LP, creating a diversified midstream company. In recent years, there have been developments in renewable fuels and sustainable practices. MPC started production at a renewable diesel facility in North Dakota, sold Speedway, and participated in the creation of sustainable aviation fuel. MPLX completed several takeaway projects in the Permian Basin of West Texas.

1. ^ https://www.prnewswire.com/news-releases/marathon-petroleum-corp-announces-closing-of-martinez-renewables-jv-with-neste-301629533.html
2. ^ https://www.cnbc.com/2018/04/30/marathon-petroleum-to-acquire-andeavor.html