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Marathon Petroleum reports first quarter results

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Hydrocarbon Engineering,

Marathon Petroleum Corporation has reported 1Q15 earnings of US$891 million, or US$3.24 per diluted share, compared with US$199 million, or US$0.67 per diluted share, for 1Q14. 1Q15 earnings included pretax pension settlement expenses of US$1 million, compared with US$64 million for 1Q14.

"Our record first quarter earnings highlight Marathon Petroleum's ability to take full advantage of favourable market conditions," said Gary R. Heminger, President and CEO. "Our extensive logistics and retail networks give us tremendous flexibility in feedstock acquisition and the ability to optimise refining operations and product distribution throughout our marketing footprint."

Heminger noted that MPC's integrated refining system made a significant contribution to the quarter's earnings. "Our refineries operated very well during the first quarter, and we were able to capture the strong Gulf Coast and Midwest crack spreads," he said, noting that the facilities also benefited from lower maintenance activity relative to the prior year. "I am particularly proud of the dedicated employees at both our Catlettsburg and Galveston Bay refineries for operating our facilities safely, efficiently, and without production impact during the recent work stoppage."

Heminger said MPC had finalised labour agreements at its Catlettsburg, Ky., Texas City, Texas, and Canton, Ohio, refineries. "We are pleased that we were able to reach these agreements, and we look forward to an equally successful outcome at our Galveston Bay refinery complex in Texas," he added.

Speedway, MPC's retail segment, performed very well, achieving record first quarter earnings even before the contribution from its newly acquired locations. "Speedway continues to make excellent progress converting its new retail locations to the Speedway brand," Heminger said. "As of today, we have rebranded more than 400 stores, including 260 completed during the first quarter. The rapid pace of store conversions contributes to our confidence that we will achieve the synergies and marketing enhancements we expect as we integrate this business."

In the midstream, Heminger announced that the MPC board of directors authorised the sale of its marine business to MPLX LP, a master limited partnership (MLP) sponsored by MPC. The marine operations are a fully integrated waterborne transportation service provider, capable of moving light products, heavy oils, crude oil, renewable fuels, chemicals and feedstocks throughout the Midwest and Gulf Coast regions of the U.S. Its assets include 18 towboats and 203 tank barges, among other related assets.

Heminger also noted that MPLX completed a binding open season for its Cornerstone Pipeline project, which he said is being increased in size to 16 in. to provide an industry logistics solution in the region. "This type of organic growth, in addition to both third party acquisitions and MPC sponsored drop downs, demonstrates our commitment to grow MPLX into a large cap, diversified MLP with an attractive distribution profile," Heminger said. "It is our intent to grow the partnership substantially and increase its limited partner distributions by 29% this calendar year, which further supports the value proposition for MPC shareholders."

Heminger added that MPC continued its commitment to capital returns in the quarter, with US$209 million of its shares repurchased, in addition to US$136 million in dividends. A total of US$1.5 billion remains on the existing share repurchase authorisation.

MPC also announced yesterday that its board of directors declared a two for one stock split in the form of a stock dividend, to be distributed to MPC shareholders on 10 June. The shares are expected to begin trading on a split basis 11 June. "MPC has performed very well for its owners since we became an independent company in mid 2011," said Heminger. "Our share price has increased substantially since the spinoff, and we believe the stock split will make our shares attractive and affordable for a wider range of investors, and reflects our confidence in MPC's continued value creation."

MPC's geographic footprint and integrated system, coupled with favourable market conditions, create a positive outlook for the business, Heminger concluded. "Our large, integrated platform provides us excellent access to price advantaged domestic crude oil and low cost natural gas, and the significant planned maintenance activity performed in 2014 has positioned us to run at high utilisation through the balance of the year," he said. "Our efforts to accelerate the pace of growth at MPLX, grow our retail segment and enhance refining margins support the diversified earnings power of the business, and we remain confident in our ability to deliver long term value for our shareholders."

Refining & Marketing

The Refining & Marketing segment income from operations was US$1.32 billion in 1Q15, compared with US$362 million in 1Q14. The increase was primarily due to higher US Gulf Coast and Chicago crack spreads and lower turnaround and other direct operating costs. The Gulf Coast and Chicago Light Louisiana Sweet 6-3-2-1 blended crack spread increased to US$9.69/bbl in 1Q15 from US$7.85/bbl in 1Q14. Compared to the heavy turnaround activity during 1Q14, turnaround and major maintenance costs decreased to US$0.79/bbl in 1Q15 from US$3.15/bbl in 2014. During the quarter, MPC recorded a pre tax charge of approximately US$30 million from valuing its inventory using the last in, first out (LIFO) method of accounting.

Pipeline Transportation

The Pipeline Transportation segment income from operations, which includes 100% of MPLX's operations, was US$67 million in 1Q15, compared with US$72 million for 1Q14. The decrease was primarily due to an increase in various operating expenses.

Adapted from press release by Rosalie Starling

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