5 Highlights of Marathon Petroleum's 4th Quarter

By 
Steve Holtz, Editor in Chief, CSP Daily News

marathon logo

ENON, Ohio -- Marathon Petroleum Corp. is crediting changes to the U.S. tax code for substantially increasing company earnings during the fourth quarter of 2017 and for the full year.

The company reported fourth-quarter earnings of $2.02 billion vs. $227 million in fourth-quarter 2016. For the full year, earnings were $3.43 billion, compared with $1.17 billion in 2016.

During the fourth quarter, the Tax Cuts and Jobs Act significantly revised U.S. corporate income-tax law by, among other things, reducing the corporate income tax rate to 21%. Earnings for the fourth-quarter and full year include a tax benefit of about $1.5 billion as a result of remeasuring certain net deferred tax liabilities using the lower corporate tax rate.

Here's a look at four other highlights of the earnings period ...

Speedway capital plan

speedway

CEO Gary Heminger said Marathon will invest $530 million in growing the Speedway convenience-store chain this year. That's a "$150 million increase from last year's plan and consistent with our commitment to aggressively grow this business and build [our] industry-leading position," he said. "The significant increase is targeted for construction of new stores, as well as remodeling and rebuilding existing locations.

Specifically, Speedway hopes to:

  • Build in its competitive position to grow fuel and merchandise sales.
  • Focus on expanding foodservice sales and margin on remodels and rebuilds.
  • Target growth opportunities in existing and contiguous markets.

"The Midwest and some of the new markets we have [in the East], those are really good Marathon [fuel] supply areas, and therefore we want to take advantage of those synergies by investing in stores where we can take advantage of the synergies with supply," Heminger said. "I think there's going to be opportunities in the future to look at some acquisitions in our primary footprint."

Record performance

ice storm

Despite rough foot-traffic numbers in the first half of the year, Speedway achieved record full-year performance in 2017. "We faced tremendous weather concerns across the Southeast and into New York, the entire Ohio Valley, [with] two or three major ice storms where things were just shutdown," Heminger said.

Still, the company finished the year with fourth-quarter income of $732 million vs. $166 million in fourth-quarter 2016, according to the company. Full year income reached $2.3 billion, compared with $1.3 billion in 2016.

"This was driven by strong earnings from light-product [fuel] sales, an increase of 1.2% in same-store merchandise sales, lower operating expenses and contributions from our travel-center joint venture [with Pilot Flying J]," said Donald Templin, president of Marathon Petroleum. "This is Speedway's sixth straight year of record results and second consecutive year generating $1 billion of annual EBITDA, reinforcing the strategic value of this high performing, stable cash-flow business."

January sting

gas pump

Gasoline sales volumes suffered again in January 2018, but Marathon executives remain bullish.

"In January, we've seen a roughly 1.7% decrease in same-store gasoline sales volumes compared to last January," said Timothy Griffith, senior vice president and CFO. "Speedway's same-store gasoline sales have been impacted by higher retail prices as crude prices moved higher and [from the effects of] severe winter weather.

"As Gary mentioned, the macro picture for 2018 remains solid, and we expect a good underlying economic growth will continue to support strong demand for gasoline and distillate over the course of 2018."

MPLX anniversary

mplx logo

Finally, Heminger took time to call out the five-year anniversary of Marathon's spinoff of MPLX.

MPLX is a master limited partnership (MLP) that MPC formed in 2012 to own, operate, develop and acquire midstream energy infrastructure assets.

"MPLX has delivered an impressive 20 consecutive quarters of increased cash distributions for unitholders representing a compound annual growth rate of 18.3% over the minimum quarterly distribution established at the partnership's formation," Heminger said.

Earlier this year, Standard & Poor's recognized MPLX's strong credit profile by upgrading the partnership's credit rate to BBB plus.

Enon, Ohio-based Marathon Petroleum Corp. (MPC) is the nation's second-largest refiner, with a crude-oil refining capacity of about 1.9 million barrels per calendar day in its six-refinery system. Marathon brand gasoline is sold through about 5,600 independently owned retail outlets across 20 states and the District of Columbia. Speedway LLC, an MPC subsidiary, operates about 2,740 convenience stores in 21 states and ranked No. 3 on CSP's Top 202 list of the largest c-store chains in the United States.