FINDLAY, Ohio -- All segments of Marathon Petroleum Corp. (MPC) “performed well,” said Gary R. Heminger, Marathon Petroleum Corp. chairman, president and CEO, in reporting MPC’s second-quarter 2016 earnings. But Speedway was the standout.
MPC saw earnings of $801 million for the period, a decrease compared with $826 million in second-quarter 2015. Total income from operations was $1.32 billion in second-quarter 2016, compared with $1.34 billion in second-quarter 2015. Speedway, however, continued its “outstanding” performance with second-quarter segment income of $193 million vs. second-quarter 2015 income of $127 million, a second-quarter record.
Light-product margin was a significant contributor to this increase along with higher merchandise gross margin. Gasoline and distillate margins were about 2 cents higher than in the second quarter last year at 15.5 cents per gallon, while volumes were up 33 million gallons quarter over quarter. On a same-store basis, gasoline sales volumes increased three-tenths of a percent over the same period last year.
Merchandise gross margin was $10 million higher than the second quarter last year due to overall higher merchandise sales and the higher margins realized on those sales. Merchandise sales in the quarter, excluding cigarettes, increased 2% on a same-store year-over-year basis, “reflecting some of the progress we're making on enhancing our merchandise model across the entire business,” senior vice president and CFO Tim Griffith said on the company's latest earnings call.
In July, the company saw a decrease in gasoline demand, with approximately 1% decrease in same-store gasoline sales volumes compared to last July. Speedway same-store gasoline sales growth was lower than estimated U.S. demand growth. “We continually strive to optimize total gasoline contributions between volume and margin to ensure fuel margins remain adequate,” he said.
“This improvement is consistent with a strategy to drive marketing enhancement opportunities,” Heminger said. “We are pleased with our progress to realize synergies across the Speedway network earlier than originally planned and believe this will be a continuing source of value to the business."
Speedway provides significant and growing stable cash flow, complementing MPC's integrated refining and distribution network. “Speedway is MPC's most ratable distribution channel, provides a solid base to enhance overall supply reliability and allows us to optimize our entire refining, pipeline and terminal operations,” said Heminger.
Refining and marketing segment income from operations was $1.08 billion in the quarter, compared with $1.18 billion in the same quarter of 2015.
"Earnings benefited from improving crack spreads, robust product demand entering the summer driving and asphalt season, strong retail margins and the inclusion of [the MarkWest natural gas company] in our consolidated results. The efficiency and flexibility of our integrated retail, logistics and refining system drives the diversified earnings power of the business, and we remain confident in our ability to deliver long-term value for our shareholders,” Heminger said.
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.
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.