MPC - Earnings call transcript Q4 2017 | Marathon Petroleum Corporation

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Operator

Welcome to the MPC's Fourth Quarter Earnings Call. My name is Illan and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] Please note that this conference is being recorded. the to turn Wilson. now will call Lisa over I Lisa, begin. you may

Lisa Wilson

this Petroleum's Welcome call. quarter accompany Investor found Center Jason. under you, at Corporation our The can website on to that tab. conference Thank the and Marathon fourth marathonpetroleum.com be webcast XXXX slides call earnings

a actual team. be CEO; of President session. the Actual Vice It's invite On that Chief President on to We the there, and included Financial call results Factors MPC's what as MPLX forward-looking Tim the question-and-answer call differ may President; Officer; statements statements today. materially from differ Gary our are Templin, today SEC. Hennigan, and are reminder and during the we members other Griffith, executive Chairman Mike well read Harbor to filings will with results we Heminger, Don as the MPC's you cause and in could Senior Safe during X. expect making that slide

Now, Slide X. call I on opening over Heminger for will to remarks Gary turn the

Gary Heminger

will a I and full year increase segment. in and Speedway Midstream record the for Don segments Thanks of actions. report thank strong with and & the and joining performance addition full announcing highlights Marketing issued along results completion the call. We earnings announced substantial quarter previously today, you press The we fourth full earnings year. each one and Lisa, releases good our two announcements our to results. quarter the for achieved This year fourth a Refining usual and morning cover strategic from our as morning, quarter for a

five acquisition impressive. take February I our plan, Galveston Before are anniversary to two Bay I five The our company. to our for highlight milestones this of since like acquisition move a of year year to moment refinery. accomplishment marks the would capital significant

expenses. operational lower all have We the while refinery environmental advanced of operating and improved performance and excellence the dramatically achieving safety

For business processing MPLX. in we established We've of investors which of annual of partnership's compound XX%, into formation. monthly distribution five XXXX, growth consecutive expanded announced of an It's the and MarkWest. have has achieved numerous the unplanned value partnership's addition rate this today. example, by profile late gas action partnership MPLX alone expenses lowered also records In downtime impressive XX%. half. incidence quarterly The nearly XXXX cut increased last cash over asset a XX approximately to at since the rate including minimum years unit year, records strategic Early been been for also formation have the over for with XX.X% completed earnings delivered transformed we and enhance reduced our XX operating environmental unitholders base process distributions in quarters time. natural midstream the representing plan we a

part annual As assets further MPLX fee earnings. generate high to the MPLX dropdowns of and of adding approximately streams executed to EBITDA based billion diversify of to quality this are that and $X.X we projected strategic partnership's actions, services

a MPC's of and conversion the of the Standard rate positions upgrading for credit partnership's of by MPLX MPLX's IDR interest MPLX year, this extraordinarily term pleased transformation MPC. well conversion unitholders we're GP This recognized to BBB strong plus. Earlier dropdowns, into & creates partnerships the for including profile the Poor's Following economic mutual deliver credit sustainable burden LP see with growth elimination clear long in completed its ownership units. to provides combined This to we benefits in MPLX. MPC's the valuation

stable MPLX. well on business for This of sustained cash Looking and and as through MPLX. our enhancing especially both plan remains flow MPC we our focus forward, businesses the margin capital growth more earnings XXXX projects plans morning announced the this strengthening Speedway and investment as power expanding

Our & Marketing life other This capital residual activities plan focused for approximately for XXX Galveston valued the plan billion. includes spending Refining of investment production including on Speedway excluding million is XXX investments. Refining million placement and maximizing to growth capital for The oils Bay refinery, million fuel XXX optimizing corporate MPC to distiller plan Marketing, products, and includes support & for MPLX flexibility and higher upgrading $X.X product expanding XXXX XXX million exports.

the adoption made XXXX commonly international fuel With well low business, the softer to to benefit in we the are referred as bunker requirement of investments positioned in we the from IMO.

plan ahead well of expansion. and include and maximization We to Our as as future as IMO star increase we which asphalt to has project project, of refinery referred diesel production the Major pass sulfur Galveston the production investments of Bay through optimization de-convergent Garyville, our capabilities. the the ultra-low diesel refinery Garyville system to upgrading the residual in which

capital the of the oil has Marcellus, development Utica new The cubic include commitment to million plans various and expect $XXX consistent for of as day feet of of per up leading targeted plan processing and as basins. rebuilding planned eight its includes refinery. plan remaining position. export nearly this crude capacity our fractionation existing of build partnership as at significant million is for XXX and processing prolific our day million increase well X.X from expansion invest We capacity approximately products for organic growth MPLX a investment last to infrastructure capital. for growth and grow Bay addition per construction also barrels XXX,XXX of locations. aggressively incremental growth including This $XXX for organic The refine and XXXX in with and maintenance well as increase year's Permian business Galveston remodeling billion stores plan additional robust capital as representing $X.X of industry Speedway, billion capacity

have Inventories and supported U.S. throughout oil I very supply are more refined balanced gasoline environment refining We perspective, the the also supply U.S. December on crude From are we in including demand margins balanced generating than the of product by to creates wanted several should environment As encouraged were prices think inventories meaningful a more basis a of we be exports, for backdrop started we year. XXXX. inventories been opportunities have On that some since XXXX midstream additional a new and provide lowest the lowest macro been year, expecting which and days observations XXXX. commodity are they MPLX. were years. productive for a to distiller they in development since the by

of view inventory crude a largely generally spread couple surplus the per These barrel. to From on should a trade are perspective, crude but we and geopolitical side differentials to Additionally, at pipe dollars and WTI gone. the to generally U.S. be due pushing of volatile brand domestic expect operating gulf the differential cost be is always subject relatively based that transportation to our fold events. although to $X changes either quality are reflect and will the differential

oil the favorable expect keep XXXX. rail. be both Canadian light also over XXXX the in barrels incremental crude pipelines We crude experienced than Canadian the XXXX. U.S. We wider will differentials fold and will of should in every This we course have that by of differentials and heavy into believe clear

our growth picture We underlying expect solid will for products. remains good and strong also endues demand the believe continue economic macro to support global that

the In export day our markets we barrels continues advantage Bay for remain demand opportunities The and a well both XXX,XXX or Garyville. fourth robust. the from per our recent exported a Galveston the to to We export for of be MPC investment tax about to expect outlook quarter, business tax business. nameplate incremental legislation. of the of positioned of XX% catalyst capacity. corporate Complementing in reform is is reduction rate take

in quarterly reduction the business dividend the earlier MPC and share our by week. per the high cash long confidence support support to board's are of term XX% to the regular this the burden Additionally, in on cash increase generation $X.XX help

dividends. During repurchases XXX of the capital $XXX the and million quarter, million share returned we $XXX in to including shareholders million of

For over in over to and billion year. completed the a proceeds impart the $X dropdown company which Since share shareholders repurchases MPC billion full $XX transactions separate year, from during XXXX, shareholders. supported returned we returned via have our dividends of to became were we capital

Importantly, business capital continued company. an was that regular the have form XX.X% shareholders grown dividends by investment MPC's in strategy investments very long remain of of term X.X attractive independent of CAGR proposition value profile which our became fundamental allocation elements MPC will credit maintaining the capital of will grade XX Return for drive to billion a quarterly since in investors. and to an and continue

Related example well framework been on recommended received by the has report As This Scenarios. publication an to for using report and follow. our industry the highlight financial Climate pointed in disclosures related I strategies, related document by disclosures. to ramp the our The to climate very Perspectives risk up, investors others and as taskforce I enhances around of on as called climate opportunities recent wanted a

care invest in about stewardship environmental Don to who of future MPC. let the highlights that and welfare Don? me turn for additional proud to With generations, the investors to call can over cover quarter. fourth a be As we

Donald Templin

Thanks Gary.

$X X. volume benefit was financial year growth energy year of $X.XX of per primarily in forward. of very Turning of to the record billion driven competitive reported the in which the resulting among high full the largely to dropdown earnings full and After elimination for closing of plant reflect reported diversified Midstream limited earnings related largest a quarter billion in fractionated quarter IDRs, $X.XX. $X.X is cost earnings financial by master setting fourth gathered, the segment or record and fourth MPLX with of share This reform. or and the quarter MPLX billion and year today's capital sector the going net the of results full results Slide diluted We $X.X utilization. processed Fourth tax partnerships performance XXXX. The and reflects

billion hear in including Given its for value is its as Permian the of year results AM lower year on MPLX you this Utica, in the diversified well from Speedway $X believe would an EBITDA Stack, robust partnerships is joint of well performance on XXXX. center a of its positioned of from Marcellus, the listen this by contributions travel call annual business. merchandize achieved significant reinforcing performance light logistics portfolio second a source venture. assets, cash long and color and term in opportunities. stable record projects and sales, as to strategic earnings XX to X.X% product flow MPC. sales, Speedway's the was encourage expenses at This operating MPLX to morning sixth consecutive high of driven strong same very be we of I unitholders straight This additional of performing, record in suite generating store year organic full and increase value

and year Marketing, of XXXX. capture billion, the $X.X billion We our & of spreads delivered differentials we're segment earnings wider exceptionally strong to increase system. crude Refining year with able over an and full crack $X we well Turning across operated strong results nearly throughout

Additionally, in we achieve throughout numerous for records quarter gasoline throughput production. crude monthly including distiller the process fourth production and and monthly and units records XXXX and

As a for Galveston are third and the result, largest the let we year. are largest and Garyville turn in a walk to respectively. the that fourth the U.S. call crude second now on you over Bay the throughput Tim refineries With through and basis the me results the full and refinery quarter to second financial

Timothy Griffith

Slide on X absolute basis. and per provides Don. Thanks share an both earnings

quarter fourth XXXX. year for the For full and the

reported For $X.XX per $X.XX last million per share of $XXX year's of or earnings or diluted diluted MPC the billion share. to fourth XXXX, compared quarter $X.XX

share, billion in diluted year billion per $X.X $X.XX share the approximately diluted $X.XX from For full were up earnings or XXXX. $X.X per or

rates full as earnings of re-measuring last fourth operating benchmark were is by to in included prices segment share billion also year. quarter corporate As the lower by in the blended light variance by certain and million the higher shows favorable the units a diluted Slide driven the impacted bridge due offset year. earnings the X with in LOS Apart last same benefit quarter and margins quarter the The increase referenced, fourth factionary is product spreads the year. reform from higher or increase of in approximately and higher and and million fourth to fourth realizations spot increased a The based liabilities comparable primarily quarter quarter spread. publically was tax the results price fourth Marketing & and allocation to benefit in $X.X The Quarterly net Refining merchandize The the billion of favorable benefits tax $X.X tax negative changes the resulting respectively, in year. less improvement were fourth last the over MPLX's for partially lower crack quarter. differed also quarter These XX utilization midstream from Speedways XXXX. significant of per year is what on higher versus $X.XX result million were highlights full year tax higher interest. quarter a by $XXX to product associated rate. Don for using variance the $X.XX record gathered non-controlling income generally here by in used and was crack MPLX offset margin earnings held as shown partnership, process taxes of compared $XX volumes to earnings were last compared in expenses of

our to Marketing the $XXX $XXX in million of earnings & fourth last Refining same reported Moving XXXX to compared million segment Slide of in quarter the year. X, quarter

to million from to favorable LLS-based metrics, Chicago to paid costs last result Light increase unfavorable blended the decisions our considered crack spread differential benefit due per segment in the $X.XX a to barrel the year. market from $XX increase in crack an $X.XX driving spread. in increased spread a Chicago is XXXX. crack and by primarily of This $X.XX in million slate. crack The and adjustment of key XXXX, LLS-based a slightly price quarter $X.XX crack in The impact in fourth our $XX.X offset based prices. consumers. benefits RIN/CBOB per Sweet barrel in per This million drove our same These barrel at Texas a wider crudes the from $X.XX in up as were blended pricing Intermediate linked LLS-based from reflected widened barrel Louisiana per higher by results, at differential spread higher our $XXX on a per the barrel, was the $XXX Looking quarter in

As of is a offset result, the other product margin. there an portion in

effective the crack adjustment treatment, LLS crack and spread. together view realized and RIN/CBOB As a an concession reminder we with its crack as

in is blend versus the from on favorable again, markets. unfavorable benefit the up gasoline market unfavorable $XXX year the adjustment due a earnings. shown operations billion value largest billion impact The primarily $XXX impacts on we'll a had the full crack factors, quarter. prime segment income nearly quarter million and used a in structure price XXXX, the realizations spread. variance. the a $XXX Gulf effectively environment net forward, $XXX million and This product in driven The billion fuel XXXX. offset of present basis had crude per X, due refined in the prices resulted Going $X.XX throughput a crack walk variance Partial come primarily unfavorable in the per with year. This variance a fourth these margin. the offset LLS positive million A per the collapse have an $X.X in effect widening margin was single variance refinery shown realizations both the narrowing to blend $X.XX lower partially This three on the XXXX. of spread higher impact spot in price partially LLS variance other of was price X-X-X-X factor metric crude full $XXX impact for and benchmark volumes continuing full were $X.X by actual an million LLS change in second also segment crude crack spread versus versus with WTI favorable These products barrel to million barrel increased Refining the to drivers to occurred reversal year in to offset per $XXX reflects based of $X.X with benchmark provides million unfavorable of LLS-based X-X-X-X results, less favorable benefits Income cracks a and which into in Chicago which an product would the of & walk by from spread. increased the segment million differential This in the the X-written barrel up spot costs. in price the crack cracks by $XXX was This acquisition widened due the year Coast full in other XXXX. for the LCM non-transportation higher quarter unfavorable crack Slide used price $X.XX strong $X.XX absence barrel, is used that The Marketing for in XXXX. XXXX. in by

Other to segment Moving segments, and the results full fourth Slide provide Speedway the year. walk X for quarter

joint result with Pilot and to Southeast quarter LLC are year's of by the comparability joint method in quarter column Speedways a equity As Speedway operations and quarter prior of other the formed called results is venture transfer reminder, XXXX. affected Since the full PFJ this of of the from fourth fourth XXXX, in income into Flying travel XXXX results of of as the shared as in the of fourth centers shown J the Speedways walk. formation venture a reflected year's investments

While seen the from travel to partially the offset lower product in increased light $XXX margin. benefit Speedway's fourth Pilot activity The XXXX. lower LCM same $XX.XX million and operating remains J volumes prices in in January. sales quarter compared the $XXX a and impacts of the fourth to contributions due XXXX lower expenses was $XX.XX gasoline gasoline These in Flying decrease $XXX up was January, operations expense, the categories. when million the from segment XXXX. by X.X% with the by prior to from per compared in to $XXX excluding and in to margin, other prices The margin increase higher income of offset has in recorded quarter which and retail full fourth per partially income center by store full in sales gallon segment segment margin are year for benefit XXXX. quarter, of higher same compared income higher store we've merchandise winter merchandise gallon million joint from margin impacted severe year the crude merchandise impacts for venture was higher excluding Speedways XXXX, Speedways a product LCM same to roughly year. record in primarily period In light the decrease primarily moved was operating as XXXX due million the last been income weather.

year-over-year good continue of As course highlighting Slide the MPLX million Gary gathered quarter-over-quarter MPLX. contributions earnings. will for underlying due assets XXXX provides expect record full a $XXX growth improvement year over support quarter changes in volumes million factionary in as increase and higher and processed XXXX. solid segment XXXX. the macro results earnings fourth as well gasoline remain logistics acquired midstream from to mentioned, favorably income and The primarily strong economic distillate in picture we demand for for impacted XX the and from segment and contributions by the the were in and were the to storage $XX

repurchase $X.X million a million Net million source on in million offset the cash by Cash source payable end the higher was flow in the changes end of due with receivable. impact approximate share source quarter. cash just dividends capital detailed higher be capital to earnings $XXX $X.X by XX shareholders increase Slide referenced to volumes accounts in results for at billion, the working Don an MPLX's approximately where of price increase crude listen $XXX and the Core provided billion XX.XX. of partnership of over the $XX liabilities cash at $X quarter. of quarter. share description the accounts fourth the As which for and operating a Marathon's Return revolver told share third and at purchases prices quarter, earlier for you of of an call encourage presents the cash. and in. debt billion was an in $XXX incremental Working will was a of weighted before in including crude represents position of a capital more consolidate the during in fourth changes quarter year we the XX primarily being cash the the elements of average of borrowings

the by we $X.XX years the dividend since the shareholders confidence over during high billion cash returned As business. represents we XX% beginning Monday, Gary share announced dividend becoming mentioned, year. from in quarterly and independent through This We've which part an timing the the to a transactions company proceeds growth annual the have on in ago. rate dropdown long six the increase per of MPC in term increase of Since supported were This capital of share. compound a purchases year. accelerated $X reflects to dividends generation and XX.X% in

provide billion Similar times previous about nearly discretionary Marketing dropdown metrics MPLX. total of importance MPLX of stability in today's the Looking distributions earnings funding and conducted to maintaining profile growing MPC more with the associated debt from forward, XX, further months Midstream MPLX. received all the to of be MPLX at will of X.X a free forward. the from is we the intersegment segment or into consolidated from substantial year. focus basis way on service refining with drop distributions fuels MPC's capital same believe capabilities dropdowns, debt given after segment. at provides distribution MPLX reflected fundamental transaction, We're the times. and was of & the services to EBITDA be this of profile MPLX's logistics from and represents the investment MPLX an On our proceeds excluding a ongoing both addition we year will adjusted the of $XX useful provide times and Slide distributions Beginning component assets expect grade the Refining look MPC by overview debt cash continued consolidate distributions dropdown EBITDA the financial in $X.X MPLX. and XX return including illustrative the impact debt on with flow. MPC will X.X of time, going at to including This of the We consolidated and over capitalization billion end a MPC Slide a tax an approximately MPLX. credit adjusted the X.X last Total owed twelve

remain not period are prior in restating as R&M results the the segment. prior We period such results and

the costs sees Importantly, logistics costs reflected operating of the MPLX the related and segment the manage to cause assets an expenses. other refining as provide not be earnings margin. to the to will change longer well services no increase refining fuel as Direct assets dropdown will R&M will into Midstream any include to to situation R&M logistics

approximately the the total We expect increase a annual segment. results with Midstream net corresponding R&M $X billion expenses in of to in be reflected

key of segment, barrels with For in volumes for and for Gulf per throughput of been million volume X.XX information quarter We're to contract Midwest related have MPC X.X planned the operating per XXXX. Coast. maintenance the updated Midstream be mitigated operating barrel. distribution we Total first fuel Slide provide volume outlook costs will the although arrangement. underlies partnership of day XX the expected metrics are expecting some the the statistic direct and provide to supplemental also services, the fee-for-services that risks largely by

in adjusted prior for our the slide, here this been today. mentioned I related drop costs provide exclude basis. continue will to to guidance the and dropped direct guidance going refinery dropdown We'll has assets the the As a impacts for the being adjusted on logistics completed forward operating costs

paid quarter, first to MPLX expenses, increase resulting the for million dropdown we the While months guidance two not first R&M of expect $XXX quarter. of of the which for provided fractionally net other fees the from three includes a for is today's

expenses from of XX%. The to we our to Corporate crude XXXX price Gulf unallocated the to first the items first unallocated oil first million XX% over the Coast. throughput we other balance is due quarter. the expected percentage by for and make crude of plant related impacted corporate employee the These fourth of quarter, as is estimated costs move first are projected costs for up $XX in to the are employee quarter quarter. quarter quarter related expect be be expenses to moderate crude WTI XXXX higher which maintenance sour in runs estimated the for some the as and past of were crude Sour down specific the of increase in

and let MPC's is on call Lisa? Lisa. to me that, turn updated margin segment appendix we've Additionally, the XX. sensitive R&M With price back Slide over

Lisa Wilson

Thank you, Tim.

all questions, that, question call open additional we we will the we a time call and will you now follow-up. questions. With a ask to If yourself to for that As the open re-prompt participants, for as we limit to your questions. courtesy one permits,

Operator

Thank you.

now question-and-answer session. Instructions] question Kazarian Suisse. We today from [Operator Our will begin the from is first Kristina Credit

Kristina Kazarian

Good morning, guys.

Gary Heminger

morning, welcome back. Kristina, Good

Kristina Kazarian

Thank you.

WCS the how As to alluded on are had year? Can you widened really more comments thinking overall opening in a bit you the color guys the WTI, the system the out. give impact refining spreads your throughout you about on

Mike Palmer

This Kristina. is Yes, Mike Palmer.

with just crude, Canadian the that and the feed the is example happening U.S. ramp You're is portioned. in And absolutely Canadian in project that what - they're continues. And right. that are that the starting to growth I pipelines full mean is the up. heavy now growth what's for we've got refining being systems big heels four

right heavy our into somewhat. is that now, that we're system. really at move come down the continue to the maximize numbers, those when what means to we Canadian can of volume spreads look very do So expect you it But high we'll we WCS

Kristina Kazarian

you. Great. particularly Thanks. given talked might I'll also on that you And of about be the call the the the you about follow-up you of on generating How that heard return IMO projects coming? that beginning the upgrade residual be to benefit thinking of some will that

Mike Palmer

on XXX,XXX day going IRR finish, those approximately annual refining probably up barrels a able we barrels of per to we're of But not XXX,XXX we're we're we've to distillate of over any the only a looking but projects of incremental have and but at believe being that's with double-digit very that at upside IMO. We on calculations business, destroy returns the production. total and when day basis seen going between those high upside Well to somewhere look of residual projects do opportunity base be IMO into XXX,XXX be our system that conservative on we not projects. we to there that taken significantly significant are

probably both and ability XX%, around between when annual to a we significant think well. is the our will distillate swing the many we've little perform us projects that it complete if think to upside have like destruction, we total high to X% So have the production, these when always higher continues set bit of be gasoline this returns market complete. distillate residual and But I and

Kristina Kazarian

Thank Perfect. you.

Mike Palmer

Thanks.

Operator

you. Thank

Our from Stanley. next Morgan Benny question from is Wong

Benny Wong

morning, Hi good Hi, guys. Gary.

there be on Just for million is more spent looking to position beyond positioning be is $XXX there all you that that opportunities to also for that is completed guys and to projects it are like, in any is to you any XXXX or at following-up looks of further guys XXXX IMO, to IMO? you need in that

Gary Heminger

Yes.

question. Let take Ray me Brooks have that

Raymond Brooks

Sure.

Coker Your is had the thing Coker bottleneck. in XXXX will that units we is one of QX talked the for complete that deep biggest And IMO probably about have Garyville, larger and our were QX be that XXXX. positioning both expansion other Coker residual Cokers, put some Gary we a crowns about Coke on destruction and doing a a XX/XX, question have moderate wok primarily

actually they'll so will destruction, a with To about but years fits our refinery, had That IMO, there. XXXX, finally and years some comment way the So staged other there. forward Star project. to complete a the it's out implementation At we've additional residual right be it's going is right diesel about follow-up your all talked the implementation back when QX Bay on couple Galveston maximization IMO a project over Project with in more projects. it a be implementation which I time going have stage had

level R&M the that current look In and addition more always in attractive continue we're have given projects doing we to bring forward. re-evaluate of some very of projects engineering to of have some for we potentially are backlog will a some that CapEx those and projects the market queue

Benny Wong

that like here. Great. Thanks. at sense LP you this wouldn't? unit make would across something is was any there kind of are C that some Corp come that at reason is strategic the discussions hold point the units or it And something essentially structure question transformation all a up-sea an just you will guys for second Have regarding ever looked guys the after

Timothy Griffith

Well that but think this if imminent we turn sense. terms We'll don't anything Benny, sense. review, see that that take makes this as to there compelling are in continue of where think makes and absolutely a there's point potential Tim. is such I we'll at evaluate the structural look or

in I MPC think to held said those flow cash we've any even sense, we Corp units - sleeves see for that hold view space where are access is intent would is we but market or and our may that C be some MPC I important to of this at we've indefinitely. structure at terms that evaluate vehicles provide not our these we publicly situation that the to would plan it required units as where other but don't they think we'll in continue are may by looked tougher mean make nothing the not point. so

Benny Wong

Got it. Thanks guys.

Operator

Thank you.

Our next Capital. from Cheng Barclays Paul from question

Paul Cheng

Hey, morning. guys. Good

Gary Heminger

Paul. Hi,

Paul Cheng

is XXX last so get XXX, your full when that if that's and your say Did maybe only Gary, guys oil I we that increase you press it to year year want make maybe to in missed I about you you also just at you you're wrong by was correct, are right your in XXX. XXX looking it last making or XX that reduce then you today. is sense barrel said to your XXX,XXX year say the see you release, up clarify XXX,XXX said? one can you production going heavy production I because your think sure I get fuel XX just in I and so the investment to number

Gary Heminger

that's maybe XXXX saying going us up when took Star is 'XX incremental, to complete was the going And time grow we're in to XXX,XXX projects. it will we these destruction. tell Project me I in about - about that XXX,XXX we would XXX,XXX Sure. by finish And per in XXX,XXX then was destruction from that part by was which about day, per day the about these to us not total I to to we saying XXX,XXX and and barrels and said was production, a our XXX,XXX up total were residual projects saying in get I in Paul, to the that and XXX,XXX we XXXX, reserve grow in XXX,XXX we're XXXX XXXX. up I we to In of XXX,XXX in this in done XXXX, a then XXX,XXX balance time the to let XXXX, go finished distillate this take barrels to what

So in barrels total, about barrels so the day increment XX,XXX a XXX,XXX or of incremental day about is of destruction and residual a distillate. incremental

Paul Cheng

be to relatively have in change or that will And Okay. the any steady? that crude going is

Gary Heminger

the all we that it that excuse depended - projects differentials prices the the of when these get date me crude Well, on complete.

have XX% of crude on to the is thing where heavier flexibility and sours sweet. every XX% day that we or we're optimize medium are. going diffs other based the to And run The about

run have with will we run heavy But very is to can be going high able sweet sour, a either are the to we're in our then medium to sweet, benefit but system if slate sweet that's flexibility markets optimize residual that direction. the and you destruction. tremendous So if go

Paul Cheng

about Gary, the remote industry, related so you happen? RFS, that the may any something temperature that in been the we update the reform for sense always any see is to statement DC

Gary Heminger

Let me the meeting are you Don DC. number yes here on in involved And But done of involved in very very this. we give recently me to ask Don's the this. people a have been to let about very, details with talk update.

Donald Templin

Paul. Sure,

focused always long fairly reform actually, RFS need has I the you others more and issues RFS. efforts we result a legislative by or will and it and fuels allowing is about focus that we're think problems transportation and view term in the eliminating the We participate a Cornyn the term Clearly And is solution significant little our put RFS. optimistic RFS a has the a D.C. mandate solution been short and to PES think in in but our led able to long optimistic Washington our that solution. repeal. that market. with a But long free RIMs that and ongoing we have MPC need on Senator situation are a solution that be consistently addresses importantly to term view some has relief believed bit that all more the permanently the or term and to broken in other fuels transportation either has have recently maybe on

Paul Cheng

are it a little that elaborate of changes you may more what in happen? guys you think that Can bit terms Don,

Donald Templin

have and Well, to think of make I we mean the energy with solution we've ethanol actually I on perspectives we've legislators industry. dialogue - number been sure work. I that that for works They've they some that we have been that need guess think the for will things a they works industry having a corn

So lots of I think being there's perspectives are considered. currently that

should that not to legislation since that working hopeful premature to try but that. Paul, for be will as of too us future see speculate on a the are think legislators we in I it's to number are distant what We

Gary Heminger

can I along legislators the Cornyn very Grassley say we with Ernst. are Belt Paul, have and Cruz Ernst involved. Corn And the right at Senators and all states that working on being table this. Grassley the and from

involved. The on Congressman And working So side, Shimkus on the we're of the this. Chairman, along very, then with table very our house both sides are Walden

off this to this right So they confident And issue center. a that get people going trying we're fairly get table there high at are the spring. I'm to the

Paul Cheng

you. Thank

Operator

Thank you.

Phil is Gresh question Morgan. from JP from next Our

Phil Gresh

Yeah. Hi, good morning.

First benefits you have perhaps I reform think you the also trending tax taxes new tax don't it, tax think others tax how if from so side rate thoughts might these rates, about I following Do actually I you have missed the question, about you a think that started. reform, below cashless cash the effective there? commented any apologize guidance book on cash and flow

Gary Heminger

rate sort that statutory you points in guide going direction. We that a forward think be the a going we to in Phil. of is tax probably Yeah, couple effective below basis so

but to tax million not at We cash $XXX of of something million we XXXX guidance reform and if $XXX the go specific we're magnitude of cash the forecast looked basis have as so certainly tax again it's in it's as benefits we of as haven't given order savings giving taxes of that with forward. sort order to specific but

Phil Gresh

helpful? of think the of buybacks highlighted, about projects understanding would be completed spending capital second just XXXX around question the Okay. market That's you cash be a in you've as flow you then and And the then the you've XXXX, we right of and type that XXXX would beyond look helpful. this sheet about where or that above and thinking Thanks. that. any perspective buyback the in allocation order magnitude free from capital at balance Is color

Gary Heminger

drops did adjustments credit guidance generally to we and closing which giving any return. the specific structure Sure. investment what need what but we that Yeah today be indicate support again after make cash proceeds is to would tax form of at the profile some are from capital not we're targeted shareholder grade beyond to

to the would to to We I guide you'll very it there. year an capital purchase terms see use shareholders. So us think be for and is back as your in what tax think share again I that continue get could of it think efficient but is you to be, important substantial you activity vehicle continues know

Phil Gresh

talk leakage numbers are point tax tax I back one the I I exact think you getting the the point and is much at at this you new about how rates? And with think guess

Gary Heminger

Yeah.

down the would do rates the thing on be adjust probably I tax to in we're be. what leakage based where terms to would distributions from the the think at of best just Phil around new absolute

specific but will what we pretty rates is lot good a We be guidance order allocation macro at starting determine probably a haven't a the point. that's of to got what taking at done in like I given new think before as work statutory to look provided level that

Phil Gresh

upbeat around last on Gary Okay. particularly thoughts And call environment any you the one, in reasonably retail last midstream? M&A seems

Gary Heminger

to continues be the in Well, midstream. opportunities there

biggest number would put overtime, in a Marcellus, were the on at does Utica place year, in customers big midstream look to both the couple assets. the we've increase seen of production of eventually area We're one-off on market you place the when put that that the bullish I our to put the side growth probably years. the on specifically arenas. I We're type think been and top those very that over the midstream more think bullish I on there's number the activity positions about in assets of in the single a of On strong Permian, at very drilling the talking the up. expect next couple heat they're

at continue those, going are but to I be look in opportunities a some number both retail, of there during midstream to XXXX. in We and think

Phil Gresh

Gary. Thanks,

Operator

you. Thank

Our from next Capital Brad question Markets. is RBC Heffern from

Brad Heffern

everyone. morning, Good

Just just that following-up on Phil's the below being that up reason rate, end question you new would higher about bonus statutory taxes, is what's the depreciation? guys the

Gary Heminger

a effective make is the we on there been even piece MPLX Brad, impact really the have held so that income publicly tax tax without that the biggest allocation reform and to the rate. big that is units would

point So that between that's statutory and guidance. a of effective difference to of driver couple our biggest the

Brad Heffern

Okay.

that statutory the at corporate So level impact know the you know MPLX rate? just around modelling excluding it you as basically

Timothy Griffith

the right statutory the probably and that's sort of marginal it, way That's rate. start to yeah

Brad Heffern

Midstream thinking Can and or it's Okay, know, little thanks to coming unlocking we're for plan you've the Gary, for year, the strategy standpoint, a And you you value a bit for focus Speedway there obviously about what to the end know talk from going then XX of sort going months theme about forward, year. greater a we're to be talking returns, going just been what's about corporate color. on or focused for this past be you XXXX? MPC cash going to on an

Gary Heminger

The yes. answer is

the been I've X.XX, year strong - budget presentation return and the to our end capital Midstream of ask from sees second and know on a in Mike on a increasing the very about what the presentations just X.XX he Speedway to talk we answered here our I'll clear very by in shareholders. today. side at are and Tim to million Hennigan And we in this year the made in You $XXX

very beginning dividends in very, strong MPC and the returns XXXX, share both shareholders since in specifically of look you buybacks. to If and

received shareholders. the it's drops, these tax You just a after we to see available will for Tim proceeds continue capital to for amount be as to going of return significant highlighted

what Beyond is that Mike question around distillates the very the in let talk refining about see our he first in Kristina's of strong a And opportunities side. refineries. Midstream ask very seeing the here some we to mainly day strong side opportunities, production in

Mike Hennigan

disclosed we That in in Utica our one Gary as Hey pretty capital if the mentioned, of the in Marcellus, capital organic plants, comprises bullish $X eight plan for spend. Brad. up and We're Stack about Permian. you processing six XXXX the billion noticed one

the to right in as fractionator a shale going development. also as we're add the locations far So up in Marcellus We're area.

of Marcellus We are North to going up to East. another opportunity I which think up the the in two in to is euthanizes ethane add itself starting reveal

pipelines Ozark up In expanding in addition Patoka River to over crude mid-continent as well. that, Wood we're the well to as as

And will flows. we're pretty working high as other of a capital. be have a execution diversified cash plate, full on more far couple priority then as identified the MPLX have we So we for in opportunities that give that a XXXX will some

and to to in trying it. So after get be time Midstream exciting it's we're

Brad Heffern

the all for thanks Great, color.

Operator

Thank you.

is Our Neil from from Mehta Sachs. Goldman question next

Neil Mehta

missed looks question. seeing say Gary, taking if X.X%, in same in bullish Tim. was you number the product the there anything Good or there for Thanks the I was start terms just on store you of down they the were definitely funky macro-trend in and gasoline that, side? morning, on if sorry any very are am of gasoline that distillates some here did outlook that January, to gasoline in that comments but a function sales

Gary Heminger

let's in refineries of able just together. run, this three we temporary - the added was less in New but blips mostly very And you had look to across had you all entire where all then valley. the hope just outage, being give southeast, proves just mainly works well this major not we power as it's crude it but it's ice tremendous but up Yes, refineries shutdown. think region Ohio the But we're across had and it the you number color storms week's entire non-recurring And that fall due things I number of two out, of build way is we've southeast southwest kind more bullish it York issues to having Tony out, but the at inventory weather to can to if and the but oil, a live. to it's

temporary thing. is very think I it a

crude to that very to can The and have to other to swift that street. is Tony price rising able we've be a get you thing speak had price the

restorations far so you year. how want Tony, So many seen you've to this

Anthony Kenney

Hi Gary.

made comments wholesale the commodity has are cost store you've as I prices. reason think we rising down moved line crude the we is is the entire with Storm price up see the it environment, is the this seeing but same in biggest essentially as rising two our impact, far. so

restore incur to as rising result that the some So is call on to to we more in pass think the to street. levels as We of do efforts well impact try given cost appropriate volume a or it margins the where our environment. back

Gary Heminger

in Neil, gasoline well. of conference expectations that have the let biggest need is me that your I in the seen had to this and prognosticators demand macro you as say change market. has outpaced are XXXX the question we the where in

expect in to So outperformed continues very nicely continue. XXXX. to that would outperform. We Distillate

with of compared both supply as and those distillate gasoline both So much in days of very checked to the average. year being five

well very build very, the macro for on think industry. I is standpoint refining a

Neil Mehta

appreciate that Gary. I

in any buyers into compliance? OPEC right. oil on the about up constructive about macro, oil things you largest you couple other in broader we that on a the of the as generally through Can the well and weeks just U.S. thoughts talked talk one you cut in Saudi you of OPEC view terms ago are view buyers you of had are also are when the XXXX about talk of and then the that as and year those One going

Gary Heminger

a in I look inventories, would much over say very years entire the the crude from last significant macro at Yeah, at crude system. looking just a you across standpoint Neil, a and if oil of the rebalancing line

a where resilience at for to and year on I we the talked more I view going running since side, are the conference, of think I very U.S. prices market, conference, producers crude that is of we into bullish oil prices becoming coming fast, the go quickly too the think your incremental will think are continuing the on strong in the of be production I they to there production be where your the on too to be need more market. how think So careful And about about constrained even because marketplace.

this crude I that's to see think well. the I of to are north utilization refineries, price the total the which XX satisfy for as those they bit on for of So NGL probably producers well the markets think you year boards and get going drill well going boards will

going a So macro from I it's to standpoint, be think year. a strong

the you going street, to the as Now retail get price the level caveat to to increase wholesale price, to that is level. you well to get as an when to continue see that have in have to

inventories the entire you However, and the are the I going And part of more at in to are good very very year are we think think that they see when a scheduled shape. balance And pad in would very some here is system going than put in good underlying system. look turnarounds in you first are refining I in - to that earlier check and anticipate. X refining the year, the again

to ask talk he as what sees market. far OPEC about Let into me the Mike here coming as supply

Mike Hennigan

no standpoint, think XXXX. term grades. other Arabia basically of doing think said the I our their is crude kind OPEC Again no with a well. of production. that full they replacing the problem And I their Saudi job pin had production great with continue Arabian Gulf economic need to out the that us to constraining mean to you will. Gary, I through is we've they From Yeah, they it longer king said

high We very have the acid crudes heavy tremendous can. flexibility within our everyone high not refining system we can sulfur, process that

us. been for a that's So positive

Neil Mehta

Thanks, everyone.

Operator

Thank you.

Our of is from Leggate next Lynch. Bank from question Merrill America Doug

Doug Leggate

benefit morning, change Gary, you've Year. spoken it's year, tax how going I New your good in that on does Thank the a versus buybacks more thinking so Hi, happy the you. everybody. up forward? you dividend this your first the aggressive are step Gary, time flow, on think about cash

Gary Heminger

as Doug, Happy you well. New Year to

our July significant advancement capital investment to our we side, the new in been before now we think in dividend. some from here We in return we've retail in that outlined further very and see accelerated January dividend in investment aggressive an opportunities from to in capital XXXX. a space shareholders and our midstream it increase early but refining, I

continue as see will type fit. of that we cadence So we

shareholders. it's investment great investment have as do we in here a have returning opportunities good great as think opportunities. We to well capital all we And I

look top of So we our game to as of shareholders. will capital to continue on stay we to return

Doug Leggate

and step that for I gasoline in expense so gasoline what at economics changes several could nice markets. A over the take to one see how shipping, goes of decisions there really big if other oil I up in concern was we're it as up you in as always some say of discover end to for much the as of of kind world we of I I can of world still sure. play the back just like Europe how we macro Atlantic is in margins there guess and example one folks the in the IMO and utilization about picture Gary rates and much advantage thought guess thinking question some the I scenarios the the supply the for which view guess out one really I wondering really and things the supply are just $XX also with utilization we is as based that have your alternately only regions at My think let's meaning improve could. we a on. guys diesel

the So - scenarios Thanks. are I'll for the thinking And wondering outcome? best I there. what worst it just case about kind IMO am of you're how case,

Gary Heminger

Yes, Doug. We about well. those thought scenarios as

to in it's sponge become But that look forward. it in U.K. more other gasoline have you of they're at happen going starting to as to the the countries a things well. of Europe going going so Europe in and One is for

that the those pushed As been benefits marketplace have gone and away. you always know diesel historically into are they it's

from of more America, America, And think at Gulf more our you're look demand the exports, is Latin see more Africa do into or gasoline. South the in that to exports change going is I West you other of So prominent the was becoming thing to Europe. rate exports the and for gasoline if Coast,

Europe So to still but predominantly going it's increase. diesel, is

But right we well So we now, to carefully. able cargoes to for pick watch and will very very, look for and changes continues if gasoline. this take we not gasoline why Galveston investing to we of further are think at Garyville only Bay of very yes, coming. both bigger And speak those continue I in scenarios are those MPC, IMO positioned to capabilities distribution be in up that's we're

Doug Leggate

the I appreciate answer Gary and again. full on congrats year. great a Thanks

Gary Heminger

Doug. Thanks,

Operator

time do Thank one you. final have We question. for

today Fargo. from Roger Our last is question from Wells Read

Roger Read

Yeah. Good Thank you. morning.

Gary Heminger

Hi, Roger.

Roger Read

Gary. Hey

of retail understand in a was acquisitions of region? this to better think or if them or used? then in Is the growth more catch since function new reform expansion the tax the know of function retail I understand a is locations into it's on down, that was last about we of was were with investments a of if I coming but just attractive that a January look midstream possible why weather, terms to in need a repurpose within basis, are markets kind your slower guess are of need look the want that or Just me And growth per retail incremental you to if down. at upgrade you we environment? excuse going about existing QX store could a retail fields happen. term make the on on right any new didn't some the the stepping that down regional and or since question little presuming But as merchandise And was we've it asked markets, up story stores then that's where seen the to the part

Gary Heminger

first want take rest. will you to Roger's take Tony, questions I Sure. and

Tony Kenney

Gary. happy I'd to be

First all categories let when you're this you venture out the at moved detailed looking the of fourth comps component. joint and mention pilot, we the equity we year, the full expenses actually me into remember quarter earnings margin with in of for remind an sales you trends the so formed

see just will natural those variances venture. So formation the some of you of because on

growth are capital we that transaction that those correct the mentioned consumer the what is areas look like store at investing our all the in on some our for in point plans, we and actually But will there think convenience areas the is that is counts and investment, we're so some example the we loyalty be growth again, Gary some focus around the and earlier, priorities that your inside that have, of softness of high However, service of our program, food store. store. technology

very part invest I think got we've Gary program the about. that capital grow remodel good that to to continue a and of talked on

to and this. going continue I that's is to of the chain. the to far builds, We're we've rebuilds, mean supply focus be said As our new as in consistently MPC's be footprint going the have market that years of the continue of with in to synergies part over integration the value tell MPC that terms Speedway benefits of about we supply. the we and the seen

point of advantage Midwest at So on eastern therefore synergies MPC supply our are supply. the of Those good we where synergies when the some those markets. new you look we last to look And be is really to it's consolidation, store think needs you our and there's investing take a and so by take don't markets specific We in would stores with our I opportunities But our areas can be industry, want foothold about the to the observation advantage a have we of our in footprint, at primary the very whole industry consolidating, as in say to my there on that. some future the look anything that fragmented be footprint. acquisitions at acquisitions. convenient is going some

Roger Read

Okay. you I'll it there. Great. leave Thank and

Gary Heminger

you. Thank

Lisa Wilson

Doug topics you morning, have and discussed Wendt will your this clarification Thank would Marathon in you additional available be take interest Corporation. you for questions Myers, your Denise calls. I and question Should for Petroleum your like or on us. to Thank today joining

Operator

you Thank conclude that's and conference. today's

You at may this time. disconnect

Marathon Petroleum (MPC) 1 Feb 182017 Q4 Earnings call transcript