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What Speedway Means to Marathon

Second-quarter record shows why MPC likes to keep its convenience stores close

FINDLAY, Ohio -- Speedway LLC’s convenience stores “will be a continuing source of value” to Marathon Petroleum Corp., said Gary Heminger, chairman, president and CEO of MPC, during the company’s latest earnings call. He reiterated that the company has no intention of spinning off Speedway, as some industry observers have suggested.

The Speedway convenience-store network continued its “outstanding performance” in its fiscal second-quarter 2016, turning in record second-quarter segment income, and helping buoy Marathon Petroleum Corp.’s overall performance, said Heminger. Speedway had second-quarter earnings of $193 million, which were $66 million higher than second-quarter 2015.

  • Click here for more details on MPC’s quarterly performance.

And the company is “pleased” with Speedway’s progress in realizing synergies across its now larger, unified Speedway retail network earlier than planned following the integration of the Hess retail network, Heminger said.

“Speedway provides significant and growing stable cash flow, complementing MPC's integrated refining and distribution network,” said Heminger. “Speedway is MPC's most ratable distribution channel, provides a solid base to enhanced overall supply reliability and allows us to optimize our entire refining, pipeline and terminal operations.”

The company is “happy” with the way the company is set up and is not entertaining a spinoff. “When you have a down market like the refining sector has been in the last couple quarters, [it illustrates] how important having a diversified portfolio and a diversified value chain is to a business like ours. It is not only the most ratable customer within our portfolio, it's also this and our long-term strategy to grow the midstream business as well as the retail business.”

The company will “continue to analyze—and analyze very critically”—the possibility of separating MPC and Speedway. But, Heminger said, “You also need to understand what the integration value is." He said he would not quantify that value, but said it is “very significant.”

Although MPC and Speedway are among several major companies rumored to be eyeing a purchase of San Antonio-based CST Brands Inc.—others include Alimentation Couche-Tard Inc. and 7-Eleven Inc.—Heminger was mum on acquisitions.

While he would not discuss impending deals or speculation, Heminger said, “On the retail and midstream side, of course, we're very interested in continuing to build out within our footprint. The retail side—we have the platform, the ability and … the expertise to be able to step outside of our footprint and perform very well. So we will continue to be interested in retail. I think retail and midstream probably give us higher returns. But I would say where our share prices are … buying back shares will be the top of mind as well."

MPC, Findlay, Ohio, is the nation's third-largest refiner, with a crude oil refining capacity of approximately 1.8 million barrels per day in its seven-refinery system. Marathon brand gasoline is sold through approximately 5,400 independently owned retail outlets across 19 states. In addition, Enon, Ohio-based Speedway LLC, an MPC subsidiary, owns and operates the nation's second-largest convenience-store chain, with approximately 2,770 stores in 22 states.

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