Marathon Petroleum Corporation · NYSE:MPC
Marathon Petroleum — Investor Presentation (May 2019)
59 slides from Marathon Petroleum's investor presentation, May 2019
Slide 1: Investor Presentation
Investor Presentation May 2019
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), MPLX LP (MPLX) and Andeavor Logistics LP (ANDX). These forward-looking statements relate to, among other things, MPC’s acquis
Slide 3: Additional Information
Additional Information Non-GAAP Financial Measures This presentation contains certain non-GAAP financial measures. Reconciliations to the nearest historical GAAP financial measures are included in the Appendix to this presentation. These non-GAAP financial measures are not defined by GAAP and should
Slide 4: MPLX Agreement to Acquire ANDX – Transaction Highlights
MPLX Agreement to Acquire ANDX – Transaction Highlights Simplified Structure. Broader Footprint. Enhancing Returns. ● MPLX to acquire all common units of ANDX at 1.07x blended exchange ratio representing a 1% premium to market1 ● 1.1350x exchange ratio to ANDX public unitholders, representing a 7.3%
Slide 5: Simplified Organizational Structure
Simplified Organizational Structure Current1 Pro Forma1 Marathon Petroleum Corporation Marathon Petroleum Corporation (NYSE:MPC) (NYSE:MPC) Non-economic 100% GP interest Non-economic 100% GP interest Non-economic 100% GP interest Tesoro MPLX MPLX 63.0% of Logistics GP Common GP LLC GP LLC Units LLC
Slide 6: MPC – A Leading Energy Company
MPC – A Leading Energy Company Refining Midstream Marketing & Retail Superior Operations Expanding Platform Across: Retail, Significant Growth Opportunities Wholesale, and Brand Strategic Investment to Capture Value Strategic Alignment with Refining Invest in Technology to Improve New Technology to
Slide 7: Built For Change: Our Strategic Vision
Built For Change: Our Strategic Vision Core Values and Integrated Strategic & Financial Operational Business Model Disciplined Strength Excellence Investments Core values underpin Enhances value Creates competitive Provides through-cycle our commitment to capture and ability to advantages protection
Slide 8: Responsible Corporate Leadership
Responsible Corporate Leadership MPC has earned 13 19 MPC 21 72% Environmental manages achievement certified wildlife awards habitats consisting of of the EPA’s Energy Star earned from state 1,352 environmental agencies Facilities earned recognitions awarded to OSHA’s highest status acres refineries
Slide 9: Leveraging a Larger System: Unprecedented Opportunities
Leveraging a Larger System: Unprecedented Opportunities Feedstock Acquisition Inbound Logistics Refining & Processing Outbound Logistics Marketing & Retail Additional access to advantaged feedstocks Expanded logistics system lowers crude acquisition costs + increases speed to market Broader ma
Slide 10: Integration: Further Opportunities for Value Chain Capture
Integration: Further Opportunities for Value Chain Capture Kenai Nationwide footprint enables connectivity to key supply Anacortes sources and demand hubs Mandan Portland Dickinson Broader, integrated system St. Paul Detroit Park Canton Salt Lake City increases capability to Martinez Chicago Pit
Slide 11: Increasing Synergy Potential
Increasing Synergy Potential Synergy Outlook 1 Estimated Annual Run-Rate ($ millions) ($ millions) 380 1,400 1,400 110 270 400 450 300 55 1,000 90 290 665 210 600 200 120 1,000 950 710 465 480 Refining & Retail Midstream Corporate Total YE2019 YE2020 YE2021 Marketing 2 Initial Synergy Estimates Upda
Slide 12: Growing Profitability: Attractive Profile for Investors
Growing Profitability: Attractive Profile for Investors MPC has significantly diversified, and non-refining segments now contribute ~50% of EBITDA. Our strategic and disciplined investments have grown our business, creating an attractive opportunity for investors especially relative to energy and th
Slide 13: Global Refining Capacity Relatively Balanced
Global Refining Capacity Relatively Balanced Net worldwide refining capacity growth appears relatively balanced with new capacity in Asia and the Middle East, primarily to support domestic demand. Global Crude Distillation Capacity US Refinery Utilization 2.5 and Demand Growth 100% 2.0 Refinery Util
Slide 14: Global and U.S. Inventories Support Refining Margins
Global and U.S. Inventories Support Refining Margins Global Gasoline Inventories Global Distillate Inventories 425 650 MMB MMB 375 550 325 450 U.S. Gasoline Days of Supply U.S. Distillate Days of Supply 28 35 26 30 Days Days 24 25 22 20 20 J F M A M J J A S O N D J F M A M J J A S O N D 5-year Range
Slide 15: Near-Term Gasoline Weakness, Offset by Long-Term Distillate Strength
Near-Term Gasoline Weakness, Offset by Long-Term Distillate Strength Rise in oil prices this year slowed global gasoline demand growth and strong margins have incentivized high refinery utilization pressuring gasoline margins; expect this to normalize in later part of 2019. Gulf Coast Gasoline & Die
Slide 16: Sensitivities to Potential IMO Factors
Sensitivities to Potential IMO Factors EBITDA Impact Key Metric Potential Impacts from $1/BBL change Higher crack required to support increased refinery Blended 321 Crack production and meet elevated demand for low sulfur fuels ~ $1,150 MM - Refining yield shift to max distillate production and - Ga
Slide 17: MPC Well-Positioned Among U.S. Refiners
MPC Well-Positioned Among U.S. Refiners MPC well-positioned to produce high value fuels and capture benefits from the adoption of low sulfur fuels regulations – given investments over past decade to enhance upgrading capabilities. Resid Upgrading & Residual Fuel Oil Production Distillate Hydrotreati
Slide 18: MPC: Formula for Creating Exceptional Value
MPC: Formula for Creating Exceptional Value Leading assets & Strategic vision to Exceptional opportunity capabilities grow value for investors Core values and operational Through-cycle excellence resilience Premier asset base Integrated Competitive business model advantages Experienced management te
Slide 19: Roadmap to Creating Superior Value – Refining
Roadmap to Creating Superior Value – Refining Operational Product Supply Investments to Excellence & Placement Optionality Enhance Margin Optimization Flexibility Leverage broader Enhance reliability + Focus on upgrading Enhance domestic scale + logistics availability of assets capabilities (yield p
Slide 20: MPC Refining Footprint and Regions
MPC Refining Footprint and Regions Refining Locations 1 4 refineries: 711 MBPD West Coast Anacortes Mandan Dickinson St. Paul Park Pricing indicator: WC ANS 321 Detroit Salt Lake City Canton Robinson 1 10 refineries: 1,161 MBPD Mid- Con Catlettsburg Martinez Gallup Pricing indicator: Chicago
Slide 21: Broader Scale Expands Supply Optionality
Broader Scale Expands Supply Optionality ANS Canadian Larger footprint expands access to advantaged supply: 1 Bakken 2 1. 1 Canadian 2. 2 Bakken 3. 3 Permian New logistics assets lower crude acquisition costs WTI Other Crudes (Global Heavy, Arab, Crude processing flexibility California, other)
Slide 22: Canadian Crude Flexibility
1 Canadian Crude Flexibility Broader system Clearbrook increases access to Anacortes Canadian crudes enhancing margin Portland St. Paul capture Park Detroit SAX/ Mustang Over 500 MBPD of Canton Canadian crude Martinez Robinson purchases Catlettsburg Cushing, OK Approximately 67% heavy Los Ange
Slide 23: Bakken Strategy Optimization
2 Bakken Strategy Optimization New logistics assets increase Bakken crude Johnson’s Corner Clearbrook access, providing more Anacortes Mandan options to capture margin Connectivity and secured St. Paul Park space on long-haul pipelines Detroit provide flexibility to our Flanagan Chicago Canton M
Slide 24: Permian Strategy Optimization
3 Permian Strategy Optimization Increasing integrated footprint in the TX AR Permian creates multiple benefits NM across our platform El Paso LA MS Wink LA Gathering systems create direct Orla crude sourcing of advantaged TX crude for our refineries (est. 300 MBPD total) Freeport Galveston Bay Gar
Slide 25: Key Strategic Investments: Grow EBITDA
Key Strategic Investments: Grow EBITDA Expected Annualized Average EBITDA 1 Investments focused on ($ in millions) upgrading capabilities, yield +$350 $950 flexibility, and conversion capacity GBR STAR1 Track record of executing on- +$270 DKR Renewable schedule and exceeding return +$250 CBG Cru
Slide 26: Galveston Bay STAR Program
Galveston Bay STAR Program Creates a world-class refining complex with 40 MBPD increased crude unit capacity Increases resid processing and improves gasoil recovery Optimizes operations and reduces costs Project details and estimates: – Staged investment - on schedule and on budget – Planned com
Slide 27: Dickinson Renewable Diesel
Dickinson Renewable Diesel Produce renewable diesel to capture economic opportunity created by California Low Carbon Fuel Standard and Federal Renewable Fuel Standard Convert refinery to process soybean and corn oil to make 12 MBPD of renewable diesel Local feedstock supply advantage Leverages
Slide 28: Los Angeles LARIC Project
Los Angeles LARIC Project Increases the flexibility to produce distillates and significantly lowers emissions 30–40 MBPD of gasoline and distillate yield flexibility Physical integration of the Los Angeles refinery complex enhances optimization Reduces NOx, SOx and CO2 emissions Project detail
Slide 29: Unprecedented Opportunities for Light Product Optimization
Unprecedented Opportunities for Light Product Optimization Kenai Nationwide footprint Anacortes enables connectivity to all Mandan US markets Portland Dickinson St. Paul Detroit Park Canton Salt Lake City Chicago Pittsburgh Multiple pathways cost- Martinez Robinson effectively balance Catlettsbu
Slide 30: Mexico Strategy Optimization
Mexico Strategy Optimization 1. 1 Utilizing ARCO brand at 142 stations in MPC Refineries Western Mexico, expanded ARCO to Chihuahua Martinez ARCO Operations and Baja Sur in early 2019 Rail Facility Terminal 2. 2 Developing Mexico supply capabilities and Los Angeles efficiency with new Rosarito light
Slide 31: Operational Excellence: Delivers Significant Value
Operational Excellence: Delivers Significant Value Cash Operating Expense1 Improve operating costs Galveston Bay '14 2016 U.S. Average Best-in-class energy efficiency and turnaround Cash Operating Expense Index 4th Quartile performance ANDV '16 Galveston Bay '16 3rd Quartile MPC '16 Supply cha
Slide 32: R&M Segment Synergies
R&M Segment Synergies Estimated Annual Run-Rate 1 Synergy Projections by Sub-Category ($ millions) ($ millions) 665 665 95 200 140 420 100 160 250 70 465 100 100 260 150 160 YE2019 YE2020 YE2021 Refining Refining Turnaround / Marketing Supply and Procurement Total Optimization Business Maintenance T
Slide 33: Roadmap to Creating Superior Value – Midstream
Roadmap to Creating Superior Value – Midstream Capture Full Enhance Grow in Leverage Financial Midstream Cash Flow Premier MPC Discipline Value Chain Stability Basins Relationship Participate across Long-haul pipelines Permian: Fosters further Self-funding equity value chain to to add further stable
Slide 34: U.S. Production Growth Creates Midstream Opportunities
U.S. Production Growth Creates Midstream Opportunities Strong production growth in crude, natural gas, and natural gas liquids will require additional infrastructure to link supply to global demand markets. Pipelines, processing, fractionation and export facilities will be needed to allow producers
Slide 35: Capturing Permian Opportunities
Capturing Permian Opportunities Creating an integrated footprint from Legend Crude the Permian to the Gulf Coast NGL Natural Gas 1 Gathering and processing Delaware & Midland Basins TEXAS 2 Long-haul pipelines 1 3 Fractionation 2 3 4 4 Export terminals 35
Slide 36: Permian G&P Feeds Downstream Opportunities
Permian G&P Feeds Downstream Opportunities Gathering systems create significant growth opportunities in the Permian TexNew Conan Mex Gathering Preakness Torñado System System Argo Apollo 1 Legend Crude pipeline To Texas City area Hidalgo Natural gas pipeline NGL pipeline To Houston and To Agua Dulce
Slide 37: Permian Crude Pipelines
Permian Crude Pipelines Investments in long-haul pipelines generate stable, fee-based midstream income and also help lower feedstock costs tor MPC refineries Gray Oak Pipeline – MPC, Diamondback Energy, PSXP – ~850 mile, 30-inch diameter TEXAS Wink – Anticipate in-service 4Q19 Orla Crane Wink-to
Slide 38: Permian Natural Gas and NGL Pipelines and Fractionation
Permian Natural Gas and NGL Pipelines and Fractionation Whistler Residue Gas Pipeline – JV with White Water Midstream and others – 42” pipeline with ~2.0 Bcf/d capacity – Anticipate in-service early 2021 TEXAS Orla BANGL Pipeline (Belvieu Alternative NGL) Waha – JV with White Water Midstream and
Slide 39: Expanding Export Capabilities
Expanding Export Capabilities Export facilities create ability to generate third party revenue and meet global demand for crude, refined products, and NGLs Currently in service – Mt. Airy, LA: acquired in 3Q18 – LOOP: expansion with planned Capline reversal and Swordfish Pipeline TEXAS Planned p
Slide 40: Capline Reversal – Swordfish - LOOP
Capline Reversal – Swordfish - LOOP Competitive full-service solution Capline – 40” crude oil pipeline from Patoka, IL, to St. James, LA – Reversed service planned for September 2020 Swordfish Pipeline – Proposed crude oil pipeline from St. James to Clovelly in Louisiana – Expected in service first
Slide 41: Marcellus/Utica: Footprint Continues to Deliver
Marcellus/Utica: Footprint Continues to Deliver Marcellus/Utica continues to be the largest natural OH PA gas basin in the U.S. Current producer demand Bluestone supports our buildout of incremental infrastructure: Hopedale Harmon Creek Volumes 2018 2020E Cadiz Houston Ohio Condensate Gathered 3.0 B
Slide 42: Roadmap to Creating Superior Value – Marketing & Retail
Roadmap to Creating Superior Value – Marketing & Retail Leverage Scale Capture Enhance High-Value to Drive Value Integration Customer Growth Creation Opportunities Experience Strong brand portfolio Optimize channel Focus on key markets Embrace changing and loyalty program participation and real cons
Slide 43: Unparalleled Nationwide Marketing & Retail Footprint
Unparalleled Nationwide Marketing & Retail Footprint Terminal Sales Location Note: Based on combined estimates for 2018 1 Across Retail segment and Brand Marketing 43
Slide 44: Multi-Channel Platform Creates Unrivaled Flexibility
Multi-Channel Platform Creates Unrivaled Flexibility Retail Segment R&M Segment Retail 1 Direct Dealer Brand Wholesale Channel diversity 7.8 billion GPY 2.6 billion GPY 5.3 billion GPY 16.9 billion GPY maximizes value capture Terminal Terminal Integrated platform provides assured product placeme
Slide 45: Strong and Diversified Fuel Branding Platform
Strong and Diversified Fuel Branding Platform Enhanced dual proprietary Brand marketing platform (Marathon + ARCO) 1 Leverage regional brand strengths and 267 related consumer preferences 85 69 Tremendous growth opportunities in Other 345 Western states 1,101 Multi branded platform enhances
Slide 46: Retail Segment: MPC’s Unique Competitive Advantage
Retail Segment: MPC’s Unique Competitive Advantage Two complimentary retail platforms that Speedway #1 in Peer Group Performance generate stable and growing cash flow with $30 ($M EBITDA/Store/Month) unparalleled integration value. Retail EBITDA Illustration $20 ($ millions) > 2,000 ANDV Retail $10
Slide 47: Retail Segment Synergies
Retail Segment Synergies 1 Estimated Annual Run-Rate Synergy Projections by Sub-Category ($ millions) ($ millions) 300 300 35 90 20 200 115 50 90 210 20 150 130 70 YE2019 YE2020 YE2021 Profit Reduce Operating Reduce G&A Economies of Total Enhancement Expenses Expenses Scale on Capital Initial Synerg
Slide 48: Financial Principles and Policy
Financial Principles and Policy Disciplined investment in growth opportunities Through-cycle dividend growth Support our investment grade credit rating Return cash to shareholders through repurchases Maintain the safety, integrity and reliability of our assets Balance Sheet Capital Investm
Slide 49: Balance Sheet: Foundation for Strategy Execution
Balance Sheet: Foundation for Strategy Execution MPC Liquidity Minimum cash balance $1 – 2 billion Revolving credit facilities $6 billion Trade receivables facility $750 million Target Leverage Debt to EBITDA MPC (excluding MLP’s) ≤ 2.0x MPLX ≤ 4.0x ANDX ≤ 4.0x Corporate Credit Rating Moody’s S&P Fi
Slide 50: Disciplined Capital Allocation Policy Across the Enterprise
Disciplined Capital Allocation Policy Across the Enterprise Consolidated capital return target: ≥ 50% of Dividends & Distributions discretionary free cash flow 1 Growth – Annual dividend target: ≥ 10% growth Capital Expenditures – MLP distributions as guided Share Repurchases – Share repurchases 1
Slide 51: Stable and Growing Dividend
Stable and Growing Dividend 1 $2.12 Secure throughout business cycles Annual Dividends ($ per share) $1.84 Growth commensurate with the business $1.52 $1.36 Targeting ≥ 10% long-term growth rate $1.14 $0.92 $0.77 $0.60 2012 2013 2014 2015 2016 2017 2018 2019E 1 2019E based on annualized $0.53
Slide 52: Consistent Return of Capital Through Share Repurchases
Consistent Return of Capital Through Share Repurchases Share Repurchases ($ billions) 7.5 1st quarter of 2019: $885 million of repurchases 3.3 Consolidated capital return target: 2.4 ≥ 50% of discretionary free cash flow1 Existing authorization 2: $4.9 billion, potentially completed by year en
Slide 53: Appendix
Appendix 53
Slide 54: Commodity Price Assumptions and Long-Term Outlook
Commodity Price Assumptions and Long-Term Outlook Commodity / Spread 2018 2019 Long-Term ($/BBL, unless noted) Average 1 Business Plan 2 Outlook2 WTI $65.00 $64 $50 - $80 Brent-WTI $6.75 $3.60 $3 - $12 Brent-ANS $(0.25) $0.10 $(1) - $2 Brent-ASCI $5.00 $6.50 $3 - $9 LLS-WTI $5.00 $3.25 $4 - $9 WTI-B
Slide 55: Second-Quarter 2019 Outlook
Second-Quarter 2019 Outlook Other Corporate Turnaround Depreciation Other Total Crude Charge/ Total Sweet Sour and Other and Major and Manufacturing Direct Throughput 1 Feedstocks Throughput 1 Crude Crude Unallocated Maintenance Amortization Cost 2 Operating Costs Throughput 1 Items 3 in MBPD Percen
Slide 56: Market Data Terminologies
Market Data Terminologies Metric Formula Mid-Con Crack Spread* • ((2xChicago CBOB Gasoline + Chicago ULSD)/3) x 42 – WTI Prompt West Coast Crack Spread* • ((2xLA CARBOB + LA CARB Diesel)/3) x 42 – ANS Prompt USGC Crack Spread* • ((2xUSGC CBOB Gasoline +USGC ULSD)/3) x 42 – LLS Prompt • Weighted 38%/
Slide 57: MPLX 2019 Outlook – Reconciliation
MPLX 2019 Outlook – Reconciliation Adjusted EBITDA and Distributable Cash Flow from Net Income ($ billion) 2019E Net income 2.2 Depreciation and amortization 0.9 Net interest and other financial costs 0.7 Adjustment for equity investment earnings & distributions 0.2 Other 0.0 Adjusted EBITDA 4.0 Adj
Slide 58: ANDX 2019 Outlook – Reconciliation
ANDX 2019 Outlook – Reconciliation EBITDA and Distributable Cash Flow from Net Earnings ($ billion) 2019E Net earnings 0.8 Depreciation and amortization 0.4 Net interest and other financial costs 0.2 EBITDA 1.4 Adjustment for equity investment earnings & distributions 0.0 Deferred revenue impacts 0.
Slide 59: Speedway EBITDA Reconciliation
Speedway EBITDA Reconciliation Segment EBITDA to Segment Income from Operations ($ million) 2017 2018 Q3 Q4 Q1 Q2 LTM Speedway Segment Income from Operations 208 148 95 159 610 Plus: Depreciation and Amortization 68 78 79 73 298 Speedway Segment EBITDA 276 226 174 232 908 59
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