Marathon Petroleum Corporation · NYSE:MPC
Marathon Petroleum — Investor Presentation (November 2014)
68 slides from Marathon Petroleum's investor presentation, November 2014
Slide 1: Investor Presentation
Investor Presentation November 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
Slide 3: Macro Outlook
Macro Outlook 3
Slide 4: Current Market Trends
Current Market Trends Positive domestic outlook Sustainable U.S. refining advantages Product exports growth Significant infrastructure investments in U.S. 4
Slide 5: 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 6: Our Priorities for Our Investors
Our Priorities for Our Investors Maintain top-tier safety and environmental performance Substantially accelerate the growth of MPLX Sustain our focus on shareholder returns Balance capital returns with value-enhancing investments Grow higher valued and stable cash flow businesses Midstre
Slide 7: Substantial Acceleration of MPLX Growth
Substantial Acceleration of MPLX Growth Grow MPLX to ~$450 MM of run- rate EBITDA (December 2015 Adjusted EBITDA attributable to MPLX 500 annualized), from current ~$160 450 MM run-rate (3Q 2014 annualized) 400 Accelerate MPLX’s annual LP ~3x 3Q 2014 annualized distribution growth rate to averag
Slide 8: Substantial Acceleration of MPLX Growth
Substantial Acceleration of MPLX Growth Rapidly changing midstream business environment creates multiple opportunities where size matters Hess retail acquisition has expanded MPC’s opportunity set and strategic options Identified fuels distribution EBITDA source Expands retained MLP-qualifyi
Slide 9: Illustrative Value of MPC Ownership in MPLX
Illustrative Value of MPC Ownership in MPLX* Illustrative Value of MPC Ownership Total Distributions to MPC based on 2019E Distributions** 25 24.8 600 557 500 20.4 20 389 GP Distributions 16.0 400 GP 15 $MM @ 55x GP $B 300 267 10 @ 45x GP 187 200 @ 35x 124 LP Distributions 82 CAGR 25% 5 LP 100 LP LP
Slide 10: MPC's Currently Identified Eligible MLP EBITDA
MPC’s Currently Identified Eligible MLP EBITDA Sources of ~ $1.7 B Retained by MPC ~ 5,400 miles of additional crude and products pipelines Pipelines – Owns, leases or has an ownership interest in these pipelines – 31% of MPLX Pipe Line Holdings LP Southern Access Extension, Sandpiper and Utica
Slide 11: Delivering Peer Leading Return of Capital
Delivering Peer Leading Return of Capital Last twelve months* 16.0% 14.0% 13.5% 12.0% 10.0% 8.8% 8.0% 7.8% 11.4% 7.4% 0.5% 6.0% 6.5% 4.9% 5.9% 4.3% 4.0% 2.8% 2.0% 2.1% 2.3% 1.9% 2.6% 2.1% 0.0% MPC PSX TSO HFC VLO Dividend Yield Special Dividend Yield Share Repurchase/Share Yield * Total Capital Retu
Slide 12: 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 4 5 2 7 3 3 3 3 1 2 0 -5 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2
Slide 13: Grow Higher Valued and Stable Cash Flow Businesses
Grow Higher Valued and Stable Cash Flow Businesses Future Mid-Cycle EBITDA Midstream Speedway Historical Mid-Cycle EBITDA* Pipeline Transportation Speedway R&M R&M *2007-2013 average. Non-GAAP disclosure, see appendix for reconciliation to net income attributable to MPC 13
Slide 14: Growth Opportunities
Growth Opportunities 14
Slide 15: 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 Pipeline Transportation segment spend and midstream investments included in the
Slide 16: Investing in Significant Growth Projects
Investing in Significant Growth Projects Sandpiper Youngstown Canton Pa. MPC Investment: $1.0 B - $1.2 B Canadian MPC Equity: 27% - 30% Midland Wellsville 2017 completion Bakken Steubenville M3, Leesville Southern Access Extension (SAX) M3, Scio MarkWest, Cadiz Superior, WI Ohio MPC Inve
Slide 17: Acquisition of Hess Retail - Transaction Overview
Acquisition of Hess Retail - Transaction Overview Hess Retail acquisition included: 1,245 company operated locations Transport fleet with capacity to transport ~1 B gal/yr Pipeline shipper history in various pipelines, including ~40 MBPD on Colonial Pipeline Prime undeveloped real estate b
Slide 18: Transformative Transaction for MPC and Speedway
Transformative Transaction for MPC and Speedway Accelerates strategy to grow higher valued and stable cash flow businesses Provides larger integrated platform for growth in new markets Meaningfully expands scale and provides multiple levels of strategic optionality Continued commitment to ba
Slide 19: Enhances Strategic Value for Integrated System
Enhances Strategic Value for Integrated System Refined Product Placement Opportunities Incremental 200 MBPD of refined products placement capacity, increases assured gasoline sales to ~75% of production Incremental supply of MPC Gulf Coast refined products to Northeast and Southeast markets Logi
Slide 20: Speedway – Earnings growth through Margin Capture
Speedway – Earnings growth through Margin Capture Top tier performance in the convenience store industry Scalable technology and organizational infrastructure Disciplined expense control Industry leading consumer loyalty program Leverage integration value within MPC’s infrastructure Total
Slide 21: Synergies and Marketing Enhancements will Drive Value
Synergies and Marketing Enhancements will Drive Value Operating and G&A expense synergies of $75 MM Integrated light product supply savings of $45 MM Additional sales uplift and merchandise margin enhancement of $70 MM Expedited integration and transition process due to spin-off preparation
Slide 22: Focus on Improving Light Product Breakeven
Focus on Improving Light Product Breakeven 13 12.39 11 Each 1.00 cent per Total Expenses – Merchandise Margin gallon improvement LPBE = 9 Light Product Volume = ~$30 MM annual Light Product Break Even (cpg) pretax earnings 7.13 7 Measure of operating efficiency 5 and merchandise contribution to to
Slide 23: Enhance Refining Margins
Enhance Refining Margins 23
Slide 24: 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 25: Growing Gulf Coast Export Capabilities
Growing Gulf Coast Export Capabilities Added new 500,000 barrel export 550 Export Capacity 510 tank at Garyville in 2013 500 450 Galveston Bay in 2015 395 400 +30 MBD ULSD 350 320 ~40% ROI 300 MBD Garyville in 2015 250 200 +20 MBD Gasoline 150 150 ~30% ROI 100 Galveston Bay in 2016-1
Slide 26: 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 MBD 500 ~45% ROI 400 Galveston Bay +9 MBD ULSD in 2015 300 2012 2013 2014E 2015E 2016E $18 MM Distillate Production Percent of Crude Capaci
Slide 27: 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 28: 2014 Value Drivers
2014 Value Drivers Top-tier safety and environmental performance Accelerate growth of Midstream/MPLX Capital return to shareholders Strong and growing dividend Share repurchase program 2014 $2.4 B capital investments* Speedway growth Increasing light crude processing and export capab
Slide 29: Appendix
Appendix 29
Slide 30: MPLX LP and GP Illustrative Valuation
MPLX LP and GP Illustrative Valuation MPC Distributions & Asset Sales Proceeds from MPLX ($MM) 3Q 2013 YTD 3Q 2014 YTD GP Distributions, including IDRs 1 3 LP Distributions 40 53 Total Cash Distribution Received from MPLX 41 56 Asset Sales Proceeds from MPLX 100 310 Illustrative MPLX Value to MPC* 2
Slide 31: Focused Return of Capital to Shareholders
Focused Return of Capital to Shareholders LTM Ended 9/30/14 8,000 7,000 6,000 2,785 Hess Retail Acquisition 5,000 Dividends and share $MM repurchases* 4,000 ~1.2x of 2,413 $2,055 Free Investments, Excluding Hess Free Cash Cash Flow, Acquisition** 3,000 Flow*** Excluding Hess Net cash provided by Acq
Slide 32: Fully Integrated Downstream System
Fully Integrated Downstream System Refining and Marketing Seven-plant refining system with ~1.7 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. ~5,4
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 2009 2010 2011 2012 2013 2009 thru 2013 Mid Cycle Pipeline Transportation Speedway Depr. & Amort. less corporate expense Ref
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 8,000 $7.0 B 7,000 6,000 5,000 $MM 4,000 3,000 2,000 1,000 0 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 decline on Fuel Oil MMBD economics and 60 +1.4% emissions issues Distillate 40 20 +0.9% Gasoline 0 “
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 modest MMBD 5
Slide 38: Rising North American Crude & NGLs Production
Rising North American Crude & NGLs 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 Supply
Growing Crude Oil Supply North Dakota 2013 1,800 1,600 1,400 1,200 1,000 MBD 800 600 Total Growth 400 Canada 2013 – 2025 200 ← Actual Forecast → +2,549 MBD +6,055 MBD 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 Texas 2013 Bakken 4,500 +829 MBD 4,000 3,500 Utica 3,000 +106 MBD 2,500 Niobrara MBD 2
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 Northern Edmonton Gateway Hardisty Trans Mountain Burnaby Anacortes Estimated MBPD Pipeline Completion Clearbrook Superior Montreal Portland 540 Keystone Current 190 Spearhead Current Sarnia 360 Ho-Ho Reversal Current Guernsey 700 Keystone Gulf Coast Cu
Slide 44: Key Strengths
Key Strengths Balanced Operations Crude Oil Refining Capacity Crude Slate 62% PADD II Sour Crude 52% 48% PADD III Sweet Crude 38% As of September 30, 2014 September 30, 2014 YTD Assured Sales of Gasoline Production (Speedway + Brand + Wholesale Contract Sales)* Assured Sales ~38% ~62% Wholesale and
Slide 45: Compelling Advantage for Pipeline and Marine
Compelling Advantage for Pipeline and Marine Canadian $10-12 Bakken $4 $14-16 $15-16 $2 $6 $12-14 Chicago, IL Utica $5-6 Patoka, IL $6-7 $13-15 $5 $5-6 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 tran
Slide 46: Creating Crude/Condensate Advantage
Creating Crude/Condensate Advantage Canada Cornerstone Pipeline Bakken Condensate Splitter Truck Unload Expansion Sandpiper Utica Southern Access Extension Patoka, IL Wellsville Barge Condensate Splitter Robinson Light Crude Enhancements Permian MPC Refinery Eagle Ford Connectivity Enhancements Addi
Slide 47: 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 48: Capital Spending Plan/Hess Conversion Costs
Capital Spending Plan/Hess Conversion Costs 2014 2015 2016 2017 450 420 400 50 390 350 50 350 327 10 20 300 300 300 300 170 250 190 225 $MM 200 40 30 150 100 50 0 2014 2015 2016 2017 Speedway Original Speedway Revised Hess Conversion Hess Other Capital investment plan includes: Conversion, IT an
Slide 49: Galveston Bay
Galveston Bay Long-term opportunities Revamp crude and vacuum units Optimize for future crude availability Improve distillate recovery Add hydrotreating capacity Move to 100% ULSD Idle the smallest and oldest FCC Expand export capabilities 49
Slide 50: Rising MPC Finished Product Exports
Rising MPC Finished Product Exports 300 250 200 MBD 150 100 50 0 2010 2011 2012 2013 Sept 30 YTD 50
Slide 51: Leveraging Existing Capacity to Run Light Sweet Crude
Leveraging Existing Capacity to Run Light Sweet Crude 48% sweet crude oil throughput Sept Reforming Capacity 2014 YTD versus 65% sweet crude oil 30 25 Percent of Crude Capacity capacity 20 Industry Reformer capacity captures full 15 Average value of light crude processing 10 Additional value a
Slide 52: Renewable Fuels
Renewable Fuels Corn Ethanol Plants 67% equity interest* in Greenville, Ohio – 110 MM gallon/year capacity 60% equity interest in Clymers, Indiana – 110 MM gallon/year capacity 43% equity interest in Albion, Michigan – 55 MM gallon/year capacity The Andersons operates the plants and provid
Slide 53: 2014 Significant Capital Projects
2014 Significant Capital Projects Sandpiper investment Southern Access Extension investment Utica Shale projects Condensate splitters Utica system Speedway expansion Robinson hydrocracker revamp Garyville resid hydrocracker engineering design and study Garyville and Galveston Bay g
Slide 54: Capital Expenditures & Investments
Capital Expenditures & Investments ($MM) 2014 MPC Budget 3Q 2014 YTD Refining & Marketing (R&M) 864 445 Midstream included in R&M 348 232 Speedway 327 153 Pipeline Transportation* 760 418 Corporate and Other 133 60 Total Capital Expenditures & 2,432 1,308 Investments *Includes MPLX (100% basis) Note
Slide 55: 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 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: MPLX's Priorities for Investors
MPLX’s Priorities for Investors $70 Maintain Safe and Reliable $65 Operations Unit Price $60 Sustain Long-term $55 Distribution Growth; Mid 20% for the Next Five Years $50 $45 Focus on Fee-Based Businesses $40 $35 Pursue Organic Growth Opportunities $30 IPO $25 Grow Through Acquisitions $20 10/25/12
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 ~$2.3 B investment with potential annual EBITDA of up to $300 MM MPC Projects Timing Investment $MM North Dakota System Equity 2017 $1,200 Condensate Splitters 2013-2015 $250 Southern Access Extension Equity 2015 $305 Wellsville Truck to Barge Operation 2013
Slide 60: Leveraging Existing MPC Assets
Leveraging Existing MPC Assets Utica Shale Strategy Expand refinery processing capacity to leverage geographic advantage Condensate splitters at Canton and Catlettsburg – Increases total condensate processing capacity to 60 MBD from ~25 MBD Phased infrastructure investment Truck 2012-2016 Pr
Slide 61: MPLX Deficiency Payment Effect Example
MPLX Deficiency Payment Effect Example for illustrative purposes only Quarter Quarter Quarter Quarter Quarter Quarter Quarter ($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 62: 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 $0.301875 98.0% 2.0% Second Target Distribution
Slide 63: EBITDA Reconciliation to Net Income Attributable to MPC
EBITDA Reconciliation to Net Income Attributable to MPC ($MM) 2007 2008 2009 2010 2011 2012 2013 2014 1Q 2Q 3Q 4Q 1Q 2Q 3Q Net income attributable to MPC 2,262 1,215 449 623 2,389 3,389 725 593 168 626 199 855 672 Less: Net interest and other financial income (costs) 165 30 31 12 (26) (109) (48) (45
Slide 64: Reconciliation
Reconciliation Free Cash Flow to Net Cash Provided by Operations ($MM) 2013 2014 (For the Quarter) 4Q 1Q 2Q 3Q Net cash provided by operating activities 1,355 766 878 1,078 Additions to property, plant and equipment (473) (267) (302) (383) Acquisitions* - - (42) (4) Investments (38) (123) (41) (177)
Slide 65: 4Q 2014 Outlook
4Q 2014 Outlook Other Total Corporate Percent of Turnaround Depreciation Other Crude Charge/ Total Direct and Other WTI-priced and Major and Manufacturing Throughput* Feedstocks Throughput* Operating Unallocated Crude Maintenance Amortization Cost** Throughput* Costs Items*** in MBD Refinery Direct
Slide 66: EBITDA Reconciliation to Net Income for Hess
EBITDA Reconciliation to Net Income for Hess ($MM) 2013* 2017E Net Income 47 138 Less: Net interest and other financial income (costs) (12) - Add: Provision for income taxes 22 78 Add: Depreciation and amortization 94 149 EBITDA 175 365 *Based on Hess Sept. 30, 2013 Form 10 data annualized 66
Slide 67: MPLX Adjusted EBITDA Reconciliation from Net Income
MPLX Adjusted EBITDA Reconciliation from Net Income 3Q 2014 Dec. 2015 ($MM) 2013 Annualized Annualized Net income 146 172 304 Less: Net income attributable to MPC- 68 56 - retained interest Net income attributable to MPLX LP 78 116 304 Plus: Net income attributable to MPC- retained interest 68 56 -
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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