FINDLAY, Ohio -- The industry will have to wait until September to learn Marathon Petroleum Corp.’s long-awaited decision on whether it will keep, spin off or sell Speedway LLC, its retail arm.
Enon, Ohio-based Speedway owns and operates approximately 2,730 convenience stores in 21 states.
Marathon Petroleum Corp. (MPC) said in January that at the urging of a group of investors, a special committee of the board will conduct a review of Speedway with the assistance of an independent financial adviser. The review will look at the possibility of “a tax-free separation of Speedway … and other strategic and financial alternatives,” the company said.
Here's a look at details of the review so far and the company's financial results for the second quarter …
MPC said in January it expected to provide an update on the strategic review of Speedway by “mid-2017.”
“Sometime summer or late summer, we will have a conclusion of the direction we're going. So, we continue to move along rapidly in this study,” MPC Chairman and CEO Gary Heminger, above, said in April.
In reporting its second-quarter 2017 earnings on July 27, the company said that it “expects to complete the ongoing review of Speedway by the end of the third quarter.”
During the earnings call, Heminger said, “This is not just a simple question. … The analysis goes much, much deeper than [an] IRS question and a supply agreement. We continue to make very good progress and a very detailed analysis, but you have to have a vision for how the company will compete and what its balance sheet would look like with further steps down the road. We’re being very methodical in our review, and we believe that, combined with our board’s strategic session in September, really will be the culmination of that analysis and we’ll report then. … We’ll call a special meeting and announce to the market what our decision is.”
With this review, MPC will "show to the market how we see the value of Speedway, inside the company or not," Heminger said in January. The review will be "robust," he said.
Shareholder Elliott Management Corp. has been pushing Marathon Petroleum to spin off the retail network. Heminger has said that he disagrees with Elliott Management’s conclusions and has expressed previously that the company continues to value an integrated supply chain.
Speedway reported record second-quarter 2017 segment income from operations of $239 million, $46 million higher than the previous record of $193 million set in second-quarter 2016. The results were driven by higher light-product and merchandise gross margins in the quarter.
“Speedway delivered another exceptional quarter,” Heminger said. “We expect to continue driving marketing enhancement opportunities as we build new stores, remodel stores and rebuild existing locations across our network.”
Segment results also benefited from Speedway’s joint venture with Knoxville, Tenn.-based Pilot Flying J, which started in fourth-quarter 2016. Speedway’s light-product margin increased to 18.35 cents per gallon in second-quarter 2017 from 15.49 cents per gallon in second-quarter 2016.
“We continue to focus on high-growth, high-margin opportunities in the store like foodservice, like a lot of our general merchandise categories, things that you’d buy in the cold vault,” Tony Kenney, president of Speedway, said on the call. “That definitely has had a positive effect as we grow sales, growing our merchandise margin right along with it.”
Overall, MPC reported second-quarter 2017 earnings of $515 million, compared to $801 million in second-quarter 2016.
“We delivered strong operational and financial performance for our shareholders in the second quarter,” said Heminger. “MPC continues to focus on driving results while delivering on the strategic actions designed to further enhance shareholder value.”
MPC’s refining and marketing segment reported second-quarter income from operations of $562 million, compared with $1.03 billion in the same quarter of 2016.
“Looking forward, we believe the U.S. and global macroeconomic picture remains favorable and we expect good underlying economic growth will continue to support strong demand for our products,” Heminger said. “With top-tier, strategically located assets with export access, MPC is well-positioned to meet the energy needs of the markets and to continue to drive long-term value for shareholders.”
Findlay, Ohio-based MPC is the nation’s third-largest refiner. It sells Marathon-brand gasoline through approximately 5,600 independently owned gas stations in 19 states.