Marathon Petroleum Corporation · NYSE:MPC
Marathon Petroleum — Corporate Update (December 2012)
66 slides from Marathon Petroleum's corporate update, December 2012
Slide 1: Business Update
Business Update December, 2012 1
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation contains forward-looking statements within the meaning of the federal securities laws. These forward- looking statements relate to, among other things, MPC’s current expectations, estimates and projections concerning MPC business and operations and the bu
Slide 3: MPC Investment Highlights
MPC Investment Highlights Delivering strong financial results - investment grade credit profile Maintaining a balance between value accretive investments in the business and returning capital to shareholders Through-cycle earnings and cash flow expected to be enhanced by investments $3.9 B G
Slide 4: Strong Earnings and Cash Flow, Investment Grade Credit Profile
Strong MPC has Strong Earnings and Cash Flow, Profile Investment Grade Credit Profile Financial Policies Historical Financial Summary Committed to Investment Grade profile 6,000 Rating Current Agency MPC Rating 4,870 S&P BBB/A-2 (Stable) 5,000 4,636 Moody’s Baa2/P2 (Stable) 4,158 Maintain strong
Slide 5: Balanced Return: Commitment to Total Shareholder Return
Balanced Return Executing on Commitment to Total Shareholder Return Base dividend increased 75% since July 1, 2011 $1,350 MM accelerated share repurchase programs, $650 MM remains under existing $2 B share repurchase authorization Share price increased ~79% YTD* Cumulative Return of Capital 2,
Slide 6: Focused on Return of Capital to Shareholders
Balanced Return Focused on Return of Capital to Shareholders 3,500 Net cash provided by operations $3,087 3,000 77% of Dividends and share 2,500 Free Cash $1,230 Free Cash repurchases* Flow** Flow** $1,590 2,000 MM$ Change in cash and all $360 other 1,500 1,000 Cash capital expenditures $1,497 and a
Slide 7: Through Cycle Earnings – MPC vs. Competitors
Enhancing Earnings Through Cycle Earnings – MPC vs. Competitors (Pre-Tax Adjusted Domestic Operating Income per Barrel of Crude Oil Throughput) 20 MPC Group Range 15 10 $/BBL 5 0 -5 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 September YTD Preliminary MPC’s Rank 3 3 2
Slide 8: Detroit Heavy Oil Upgrade Project
Enhancing Detroit Heavy Oil Earnings Upgrade Project Scope – Increased heavy oil capacity from 20,000 BPCD to 100,000 BPCD; including “difficult to process” Canadian crudes 28,000 BPCD delayed Coker 36,000 BPCD Distillate Hydrotreater (DHT) Crude capacity increased ~15,000 BPCD Strategic F
Slide 9: Announced Acquisition of BP Texas City Assets
Enhancing Announced Acquisition of BP Texas City Assets Earnings Transaction Highlights 451 MBPCD (475 MBPSD) high complexity refinery, Nelson Complexity Index of 15.3 Attractive base cash purchase price of $598 million or ~ $21 per complexity BBL, $328 per capacity BBL for net refining asset pu
Slide 10: Diversification and Balance in MPC's Refining Network
Enhancing Announced Acquisition of BP Texas City Refinery Earnings Diversification and Balance in MPC’s Refining Network Canton, OH 78,000 Catlettsburg, KY 233,000 Detroit, MI 106,000 Midwest Capacity 623,000 BPCD Robinson, IL 206,000 BP Texas City, TX 451,000 MPC Texas City, TX 80,000 Garyville, LA
Slide 11: Transaction Complements MPC's Integrated System
Enhancing Announced Transaction Complements Earnings MPC’s Integrated System Refinery 451,000 BPCD (475,000 BPSD) refinery Nelson Complexity Index: 15.3 Significant recent investments Excellent crude optionality Substantial products logistics opportunities Advantageous petrochemical conf
Slide 12: Indicative Purchase Price Comparison
Enhancing Announced BP Transaction Earnings Indicative Purchase Price Comparison TSO-Carson (8/2012) $16 MPC-BP Texas City without earnout $21 Alon-Bakersfield (6/2010) $66 PBF- Del City (6/2010) $109 Delta-Trainer (4/2012) $122 MPC-BP Texas City with earnout* $123 PBF-Paulsboro (12/2010) $151 VLO-M
Slide 13: Projected Synergies and Capital Investments
Enhancing Announced BP Transaction Earnings Projected Synergies and Capital Investments (Millions) Projected Incremental Synergies EBITDA Projected Synergy Capital Investments $160 $160 $120 $120 $80 $80 $40 $40 $0 $0 2013E 2014E 2015E 2016E 2017E+ 2013E 2014E 2015E 2016E EBITDA Synergies of ~$440 M
Slide 14: MPLX Offering Summary
Creating Value MPLX Offering Summary Issuer MPLX LP Sponsor Marathon Petroleum Corporation Exchange / Ticker NYSE / MPLX Estimated Distribution Coverage 1.10x Expected Tax Shield 80% for the period from the IPO until December 31, 2015 $203 million to MPC $192 million to pre-fund certain expansio
Slide 15: MPC has Created an Industry-Leading MLP
Creating Value MPC has Created an Industry-Leading MLP MPLX’s Primary Business Strategies Generate stable cash flows by providing primarily fee-based midstream Focus on Fee-Based services to MPC and third parties Businesses Mitigate volatility in cash flows by entering into long-term transportat
Slide 16: Significant Growth in Central Corridor of North America
Positive Fundamentals Significant Growth in Central Corridor of North America 2012-2020 Canadian +1,800 MBD Bakken +475 MBD Detroit Total Canton Growth Utica 2012 – 2020 +140 MBD +3,925 MBD Robinson Catlettsburg Permian Basin +740 MBD MPC Refinery Texas City Eagle Ford Garyville +770 MBD Sources: CA
Slide 17: U.S. Gulf Coast Foreign Imports
Positive Fundamentals U.S. Gulf Coast Foreign Imports Domestic crude oil cannot be exported, therefore domestic crude oil must be priced to back out imports Virtually all of the light sweet imports will be displaced in 2013 Other imports will be displaced as U.S. crude oil production increases
Slide 18: CAPP Western Canada Crude Supply Forecast
Positive Fundamentals CAPP Western Canada Crude Supply Forecast Annual Growth from 2011 - 2030 MBPD Light Supply 24 8,000 Heavy Supply 184 7,000 6,000 5,000 MBPD 4,000 3,000 2,000 1,000 0 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 *Oil Sands Heavy includes some volumes of upgraded heavy
Slide 19: Midwest Refineries' Opportunity
Positive Fundamentals Midwest Refineries’ Opportunity North Dakota Production: ~700 MBPD 2011 Year-end: 535 MBPD Canada 2010 Year-end: 344 MBPD 2009 Year-end: 242 MBPD 2008 Year-end: 202 MBPD 2005 Year-end: 104 MBPD North Dakota 2015 Production Forecast: Up to 1,200 MBPD Montana Pipe
Slide 20: MPC Well Positioned to Capture Oil Sands Economics
Positive Fundamentals MPC Well Positioned to Capture Oil Sands Economics Hardisty ~$5.50/BBL Hardisty to ~$7.35/BBL Detroit Hardisty to USGC Detroit Value vs. USGC Refineries Chicago for Canadian Heavy Processing Wood Patoka $BBL River Laid-In Crude Cost 1.85 Cushing ~$1.95/BBL Houston to Chicago Hi
Slide 21: Utica Shale Crude Oil Options
Positive Fundamentals Utica Shale Crude Oil Options Multiple Transportation Options Truck, Barge, Pipeline Canton Refinery - 78 MBD Condensate Capacity: 10-15 MBD Canton Light Crude Oil Capacity: ~40 MBD Wellsville Catlettsburg Refinery - 233 MBD Condensate Capacity: 10-15 MBD Crude Oi
Slide 22: U.S. Distillate Exports Continue to Grow
Positive Fundamentals U.S. Distillate Exports Continue to Grow Total U.S. distillate exports were 854 U.S. Distillate Exports MBPD in 2011 compared to 138 MBPD 1200 in 2005. Through August of this year, Central & South America exports increased to about 1 MMBPD 1000 Mexico U.S. distillate export
Slide 23: Garyville Diesel Export Success
Capturing Value MPC Well Positioned – Garyville Diesel Export Success Garyville Diesel Exports Currently selling export diesel via 120 100 term deals and spot bid process 100 76 80 Waterborne premium MBPD 60 Product quality premium 40 35 20 No RIN obligation 0 2010 2011 2012* * Thru Septembe
Slide 24: Extensive Retail Network
Capturing Value Extensive Retail Network Speedway 84 63 Fourth largest U.S.-owned/ 72 300 777 operated c-store chain ~1,460 stores 107 310 484 43 Speedway 865 ~2 million customers/day 411 648 60 1 Brand 139 114 Located in seven states 580 136 172 312 128 139 259 1 Marathon brand ~1,200 B
Slide 25: Benefits of Retail Integration
Capturing Value MPC Well Positioned – Benefits of Retail Integration Ratable sales Optimized operations Refining Pipeline Terminal Biofuels blending base load Supply dislocation flexibility Reduced credit risk (Speedway) Speedway Connecting Pipelines Marketing Area Refineries Fully I
Slide 26: Brand Overview
Capturing Value MPC Well Positioned – Brand Overview Consistent Growth Vehicle Light Product Sales 5,000 4,000 Millions of Gallons 13 million* net new gallons in 2012 3,000 2012 gasoline sales volume up 1.2%* 2,000 1,000 *Estimated 0 '98'99'00'01'02'03'04'05'06'07'08'09'10'11'12E 26
Slide 27: Speedway Sales and Margin
Capturing Value MPC Well Positioned – Speedway Sales and Margin Light Product Volume Merchandise Sales 4 3.30 4 3.23 2.94 3.11 3.19 2.92 B Gallons 3 2.24 3 2.30 $ Billions 2 2 1 1.0 3.7 (1.2) (1.2) 1 11.4 4.4 1.1 1.0 0 0 2009 2010 2011 2012* 2009 2010 2011 2012* (Same Store % inside bars) (Same Stor
Slide 28: Key Strengths
Capturing Value MPC Well Positioned – Key Strengths Well Positioned Organic Growth Projects Quality assets Detroit Heavy Oil Upgrade Project (DHOUP) Attractive Midwest market Increasing distillate yield Access to favorable export markets Investing in midstream Integration through logis
Slide 29: Strategic Direction – 2012
Capturing Value Strategic Direction – 2012 Complete Detroit Heavy Oil Upgrade Project Continue to optimize Garyville Pursue price-advantaged crude projects Initiate organic value-adding projects Grow Speedway and Brand sales volume Consider selective acquisitions to leverage existing por
Slide 30: Strategic Direction – 2013
Capturing Value Strategic Direction – 2013 Achieve top quartile total shareholder return among peers Complete acquisition of BP’s Texas City refinery and related assets Optimize Detroit Heavy Oil Upgrade Project Continue to optimize Garyville Grow midstream through MPLX Initiate organic
Slide 31: Appendix
Appendix 31
Slide 32: BP Texas City Announced Transaction Highlights
BP Texas City Announced Transaction Highlights Supports MPC strategy to grow in existing and contiguous markets and expand integrated model One of the largest and most complex refineries in the U.S. Well connected to crude and products markets, including exports Attractive base cash purchase
Slide 33: BP Marketing Assets and Integration
BP Marketing Assets and Integration Integrated acquisition includes Assignment of branded-jobber contracts representing ~1,200 BP retail sites ~64 MBPD of gasoline sales Locations primarily in FL, MS, TN and AL BP trademark to be used during transition process Strategic step in retail gr
Slide 34: Product Logistics Opportunities
Announced BP Transaction Product Logistics Opportunities Flexible product placement Domestic and export Southeast opportunities Midwest Synergies with MPC’s Texas City and Garyville refineries and MPC logistics Zachary Pasadena Garyville Texas City Exports to Florida Mexico/SA/Europe 34 34
Slide 35: Expected Accretive Transaction
BP Texas City Refinery & Related Assets Expected Accretive Transaction (MM unless otherwise indicated) MPC Base EBITDA - analyst 2013 consensus estimates(1) $ 4,759 $ 4,759 Assets to be acquired EBITDA using 2006-2010 pricing(2)(4) 1,200 Assets to be acquired EBITDA using 2011 pricing(2)(5) 700 Tota
Slide 36: Cash Purchase Price Including Full Earnout
Announced BP Transaction Cash Purchase Price Including Full Earnout Base cash purchase price (millions) $ 598 Full earnout 700 Total purchase price with full earnout $ 1,298 Less: Cogen facility (290) Less: Terminals and other logistics assets (120) Less: Retail marketing (40) Estimated Net Refining
Slide 37: BP Texas City Refinery Projected Sustaining Capital
BP Texas City Refinery Projected Sustaining Capital 500 400 300 MM$ 200 100 0 2013E 2014E 2015E 2016E 2017E 2018E 2019E Refinery All Other * Excludes synergy and other value accretive investments 37
Slide 38: MPC Key Strengths Adjusted for Pending Acquisition
MPC Key Strengths Adjusted for Pending BP Texas City Acquisition Balanced Operations Crude Oil Refining Capacity Crude Slate 62% PADD II Sour Crude 52% 48% PADD III Sweet Crude 38% 1/1/12* YTD Sept 2012* Assured Sales of Gasoline Production (Speedway + Brand + Wholesale Contract Sales) Assured Sales
Slide 39: MPC Relative Refining Position
MPC Relative Refining Position Adjusted for Pending BP Texas City Acquisition (MBCD) U.S. Crude Refining Capacity (1) (#) # of U.S. Refineries (1) 3,000 15 2,097 12 11 1,950 2,000 1,826 10 1,644 7 7 7 6 958 955 5 5 5 1,000 843 755 665 5 3 439 0 0 Shell HFC BP Chevron Tesoro Exxon MPC Citgo Valero Ph
Slide 40: MPLX Summary of Key Investment Highlights
MPLX Summary of Key Investment Highlights Robust Growth Opportunities Attractive organic growth prospects augmented with tariff and volume increases Potential for significant growth through acquisitions alongside, and/or from, MPC; MPC has a very substantial portfolio of logistics assets, includ
Slide 41: MPC and MPLX are Aligned
MPC and MPLX 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 Initial MPLX
Slide 42: MPLX's Assets are Integral to MPC
MPLX’s Assets are Integral to MPC Marathon Pipe Line LLC (MPL) and Ohio River Pipe Line LLC (ORPL) comprise one of the largest networks of pipeline systems in the U.S. based on total volume delivered 962 miles of common carrier crude oil pipelines 1,819 miles of common carrier products pipelin
Slide 43: MPC Relationship Provides Robust Growth Opportunities for MPLX
MPC Relationship Provides Robust Growth Opportunities for MPLX Logistics infrastructure is extremely important to MPC's success MPC intends to use MPLX as the primary growth vehicle for its midstream logistics business MPLX can pursue acquisitions directly from MPC MPLX can pursue third-part
Slide 44: MPLX Stable and Predictable Cash Flows
MPLX Stable and Predictable Cash Flows Revenue – Customer Mix1 MPLX’s assets consist of fee-based pipeline 11% systems and storage assets $55 MM MPC has historically accounted for 85%+ of 16% the volumes shipped on MPLX’s pipelines $81 MM $364 MM MPC has entered into multiple long-term transpo
Slide 45: MPLX: Ideal Assets for an MLP
MPLX: Ideal Assets for an MLP Historical crude and product volumes have been extremely stable with low variability despite material changes in the broader commodity price environment Butane cavern and storage facilities generate stable and ratable (capacity based) fees Throughput and storage a
Slide 46: MPLX Strategically Located Assets
MPLX Strategically Located Assets MPLX operates all of its assets Assets are primarily located throughout the Midwest and U.S. Gulf Coast In 2011, these regions collectively comprised ~72% and ~48% of total U.S. crude distillation capacity and finished products demand, respectively Existing
Slide 47: MPLX Strategically Located Assets (Continued)
MPLX Strategically Located Assets (Continued) MPLX’s assets and a large number Bakken of MPC's retained assets are in the Williston Basin “heart” of the Midwest Appalachian infrastructure build-out Basin Michigan Antrim Basin Strategically located near emerging Devonian (Ohio) Excello-Mulky Fore
Slide 48: MPLX High Quality, Well Maintained Asset Base
MPLX High Quality, Well Maintained Asset Base MPLX continually invests in the maintenance and integrity of its assets Uses a patented integrity management program to enhance pipeline safety and reliability Top-tier reputation and active industry involvement 2013E Capex Budget¹ Certifications,
Slide 49: MPLX Operations Deliver Top Tier Safety Performance
MPLX Operations Deliver Top Tier Safety Performance Patented integrity management program fully compliant with DOT regulations State of the art in-line assessment practices Leading control room management practices Industry leader in helping to improve Damage Prevention practices 49
Slide 50: MPLX: Strong Financial Flexibility
MPLX: Strong Financial Flexibility to Manage and Grow Asset Base MPLX has no borrowings outstanding MPLX’s undrawn $500 MM revolver provides significant liquidity to grow its business As of June 30, 2012 ($MM) Uses for IPO Proceeds ($MM) Capital Structure Historical Pro Forma Cash and Cash Equiv
Slide 51: MPLX Conservative Coverage with Predictable and Growing Distributions
MPLX Conservative Coverage with Predictable and Growing Distributions Estimated Twelve Months Ending 12/31/2013 ($ in millions, unless otherwise noted) Stable historical results and strong growth going forward Adj. EBITDA $197.0 Predictable cash flows underpinned by MPC throughput Less: and stor
Slide 52: MPLX Adjusted EBITDA Bridge Analysis
MPLX Adjusted EBITDA Bridge Analysis ($MM) 300 14.6 (49.9) 35.7 250 98.4 (13.5) (10.8) (1.3 ) 197.0 (92.2) 200 168.3 (44.5) 150 123.8 104.8 100 50 (44.5) 73.2 -- 2011 2011 PF Pro Forma 2011 Tariffs Volumes Other Revenue Cost of Purchases G&A Other Taxes Total MPC Retained Estimated Adjustments ¹ and
Slide 53: MPLX Historical and Pro Forma Results
MPLX Historical and Pro Forma Results As presented in the MPLX Prospectus A B C D E Year Ended December 31, Pro Forma (Dollars in millions) Six Months 2009 2010 2011 FY 2011 Ended 6/30/12 1 Revenues and other income: 2 Sales and other operating revenues $ 43.3 $ 49.7 $ 62.1 $ 62.1 $ 33.9 3 Sales to
Slide 54: MPLX Pipeline Throughput Agreements
MPLX Pipeline Throughput Agreements Initial MPC Min. 2011 MPC Est. 12 Mo. Ended 12/31/13 Term Diameter Commitment Thoughput Weighted Average MPC Min. Asset (Years) (Inches) (MBPD) (MBPD) Tariff ($ / Bbl) Revenue ($MM) Crude Systems Patoka to Lima 10 20" / 22" 40 132 $0.52 $7.6 Catlettsburg and Robin
Slide 55: Experienced MPLX Management Team
Experienced MPLX Management Team Management team includes MPC executive officers with an average 25 years of experience with MPLX's assets Years Experience Position at MPC Position at MPLX Industry With MPC Gary R. Heminger President and Chairman of the Board and 37 37 Chief Executive Officer Chief
Slide 56: Positive Industry Trends – Growing North American Production
Positive Industry Trends – Growing North American Production “Resource plays” dominate U.S. 3.0 output growth. Conventional 2000 - 2011 2011 - 2025 production (Alaska, offshore, 2.5 California, other legacy production) 2.0 struggles to sustain output 1.5 NGL output growth is mostly MMBD associat
Slide 57: Texas City Refinery Opportunity
Eagle Ford Shale Texas City Refinery Opportunity Eagle Ford is a very light (40-50 API), sweet crude (0.2% sulfur) Currently being trucked to markets Pipelines are being built Dock facilities are in operation and continue to be built to make it a “waterborne” crude to capture Brent/ LLS pric
Slide 58: 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 Sarnia Salt Lake City Casper Flanagan Chicago Chicap Mustang Estimated Steele City MBPD Pipeline Completion Patoka Gulf Coast Access 540 Keystone Curr
Slide 59: Indicative Transportation Costs
Indicative Transportation Costs Indicative Pipeline Costs Indicative Rail Costs Bakken to Patoka $/BBL Bakken to East Coast $/BBL Gathering 2.25 Gathering 2.25 Truck Transport 3.00 Truck Transport 3.00 Bakken Pipeline to Patoka 3.60 Railcar Loading 1.50 *Pipeline to MPC Rail Transportation 10.00 1.0
Slide 60: Options… Detroit Logistics
Options… #2 #1 Detroit Logistics 2 Enbridge Enbridge Canadian crude via multiple routes Stockbridge Virtually all world Detroit crudes available via Chicago Samaria pipelines from USGC Lima All gasoline production sold in regional market #3 Platte/Keystone Patoka Wood River #4 #5 Capline Mid V
Slide 61: Attractive Midwest/PADD II
Attractive Midwest/PADD II Demand exceeds refining capacity in PADD II PADD IV Net imported ~13% of petroleum PADD V PADD II PADD I demand into PADD II, primarily from PADD III in 2011 Enhances margin opportunities PADD III Transportation premium embedded in PADD II product prices Percentage
Slide 62: Annual Price and Margin Sensitivities
Annual Price and Margin Sensitivities $ Millions (After Tax) LLS 6-3-2-1 Crack Spread* Sensitivity ~$300 (per $1.00/barrel change) Sweet/Sour Differential** Sensitivity ~$150 (per $1.00/barrel change) LLS-WTI Spread*** Sensitivity ~$65 (per $1.00/barrel change) Refined Product Wholesale Margin Sensi
Slide 63: Speedway vs. Public Peers – 2011
Speedway vs. Public Peers – 2011 300 Light Product Sales Independent Refiners Average 157.1 M Gal/Store/Month 250 200 179.4 Public C-Store 150 Average 97.8 100 50 0 Casey's Couche-Tard Pantry Susser Speedway Valero Murphy Sunoco Tesoro Delek Western Refining 50 Light Product Margin Independent Refin
Slide 64: Speedway vs. Public Peers – 2011
Speedway vs. Public Peers – 2011 Merchandise Sales 200 178.5 Independent Refiners Public C-Store Average 95.4 $M/Store/Month 150 Average 110.7 100 50 0 Casey's Couche-Tard Pantry Susser Speedway Valero Murphy Sunoco Tesoro Delek Western Refining Public C-Store Merchandise Margin 50 43.9 Average 38.7
Slide 65: Reconciliation
Reconciliation Free Cash Flow to Net Cash Provided from Operations ($MM) 2011 2012 (Quarter to date) 4Q 1Q 2Q 3Q Net cash provided from operating activities 638 347 269 1,833 Additions to property, plant and equipment (341) (309) (326) (331) Acquisitions - - (163) (27) Free cash flow 297 38 (220) 1,
Slide 66: EBITDA Reconciliation to Net Income
EBITDA Reconciliation to Net Income ($MM) 2009 2010 2011 2012 1Q 2Q 3Q 4Q 1Q 2Q 3Q Net Income (Loss) 449 623 529 802 1,133 (75) 596 814 1,224 Less: Related party net interest and other financial income 45 24 17 18 - - - - 1 Less: Net interest and other financial income (costs) (14) (12) (14) (10) (1
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