Marathon Strikes a Balance

MPC CEO highlights refining flexibility, synergies with downstream

Samantha Oller, Senior Editor/Fuels, CSP

Gary Heminger

MIAMI -- More than four months after completing its spinoff from parent company Marathon Oil Corp., the downstream entity Marathon Petroleum Corp. (MPC) has found its balance, according to president and CEO Gary Heminger, who gave investors a preview of the company's 2012 strategy at the Bank of America Merrill Lynch 2011 Global Energy Conference in Miami earlier this week.

Heminger discussed how the company has struck a balance between its upstream and downstream businesses. In this first of two reports, CSP Daily News will look at crude oil and refining. In the second report, it will look at the downstream segment.

"We're balanced as far as sweet and sour crude, and we're balanced as far as Midwest and Gulf Coast refining," said Heminger. "Beyond the balance of our refining slate, we have, we believe, the top logistics business in the country, as well as one of the top retail convenience store businesses through our Speedway chain."

Heminger highlighted the fact that Findlay, Ohio-based MPC is in the middle of the pack among independent refiners in several measures, including relative refining position, number of refineries, crude capacity and its Nelson complexity index, which measures the complexity of refineries. While some may argue that this latter figure is a "proxy for profitability," MPC is not one of them.

"It's how you're able to trade off the crude availability, the alternative crudes, move those crudes cheaper into the marketplace than anyone else, quicker than anyone else, and then how distribute your products to the marketplace ends up being the determination of your profitability," said Heminger.

MPC's earnings before interest, taxes, depreciation and amortization (EBITDA) for the first nine months of 2011 was more than $4.5 billion, with income from operations of $3.9 billion and net income of nearly $2.5 billion.

With six refineries and 1.1 million barrels per day (bpd) in refining capacity, MPC is one of the largest wholesale suppliers of gasoline and producers of asphalt, which Heminger said allows the company to move in and out of heavier crudes. "Flexibility becomes the state of mind and the art we have within our system."

MPC handles a total of 1.6 million bpd of feedstock, 13% of which it sells through Speedway, 17% through the Marathon wholesale network, 56% through wholesale and the spot market and 14% for asphalt and other uses. The company is one of largest U.S. users of heavy Canadian crude.