Marathon Petroleum Corporation

Welcome to the MPC Fourth Quarter Earnings Call. My name is Ilan, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Press star 1 on your touch-tone phone to enter the queue. Please note that this conference is being recorded. I will now turn the call over to Christina Kazarian. Christina, you may begin.

Welcome to the Marathon Petroleum Corps' Fourth Quarter 2018 Earnings Conference Call. The slides that accompany this call can be found on our website at marathonpetroleum.com under the Investor Center tab. On the call today are Gary Heminger, Chairman and CEO, Greg Goff, Executive Vice Chairman, Tim Griffith, CFO, Don Templin, President of Refining Marketing and Supply, Mike Hennigan, President of MPLX, as well as other members of the Executive Team. We invite you to read the Safe Harbor Statements on slide two. It's a reminder that we will be making forward-looking statements during the call and during the question and answer session. Actual results may differ materially from what we expect today. Factors that could cause actual results to differ are included there, as well as in our filings with the SEC. I will now turn the call over to Gary Heminger for opening remarks on slide three.

Gary Heminger Thanks, Christina. Good morning, and thank you for joining our call. Earlier today, we reported an extraordinary first financial update as a combined company, and we believe these results are an early indication of the tremendous value potential of this powerful combination. Earnings for the quarter were $951 million, or $1.35 per diluted share. Results included costs of $1.06 per diluted share, primarily from transaction-related items. Tim will walk through these costs in detail later on the call. As we review our performance for 2018, it is important to highlight that we have built a culture focused on operational excellence and safety. We received multiple awards and accolades over the last year, including an EPA Energy Star Partner of the Year Award and VPP recognition at multiple facilities. We remain committed to a culture of continuous improvement that positions our company as to safely grow our earnings and create long-term value for our shareholders. This quarter, we were pleased to report over $2 billion in income from operations and adjusted consolidated EBITDA of approximately $4.1 billion, with our segments performing well. Our expanded, integrated business model created significant opportunities for us to capture value. We optimized crude purchases and utilized our larger logistics and diversified marketing footprint to place over 70% of our gasoline volume on a daily basis. Refining throughput was strong during the quarter at 3.1 million barrels per day. This exceeded our expectations and was impressive considering our Detroit, St. Paul Park, and Martinez turnarounds during the quarter, all of which were completed on time and under budget. Our midstream businesses both performed well this quarter. ANDX reported 2018 EBITDA of $1.2 billion, which increased $250 million year-over-year. For MPLX, 2018 marked the single largest increase in annual EBITDA since it became a public company. MPLX reported 2018 adjusted EBITDA of $3.5 billion, which increased $1.5 billion over the prior year, and nearly $400 million of this increase was driven by organic growth. We have announced a number of compelling new projects within Midstream that generate third-party revenue. One of the largest projects is the Gray Oak Pipeline and Export Terminal, and we have had inquiries of where this may reside. This project is being funded at the MPC level, and therefore we do not plan to drop these assets into ANDX. As the opportunity set for new infrastructure remains robust, we remain committed to high-grading the project backlog toward mid-teen returns and self-funding capital spend at the MLP level. Lastly, our retail segment had a particularly strong fourth quarter. This included record quarterly earnings for MPC's former Speedway segment. While 2018 started slowly for the legacy Speedway business, it ended the year with record EBITDA driven by strong merchandise sales and fuel margins. The retail business continues to add significant stability to our overall sales cash flow profile. It provides an important placement option for our refining volumes and creates a counter-cyclical balance to our overall business. Continuing the highlights on slide four, we reported approximately $160 million of realized synergies in just three months and continue to expect total annual gross run rate synergies of up to $600 million by year-end 2019. and up to $1.4 billion by the end of 2021. Don will provide a detailed update on our plan in just a few minutes. It was an impressive year with many milestones for Marathon, and our integrated business model allowed us to return $4.2 billion of capital to our shareholders, which included $675 million of share repurchases in the fourth quarter. Additionally, last week, we announced a 15% increase increase in the quarterly dividend, underscoring our confidence in our cash generation potential. As we look into 2019, we remain optimistic about the prospects for our business and our ability to deliver compelling financial results. Now let me briefly address the current macro environment. At this time of year, there's always a lot of focus on gasoline markets. Despite what we view as normal seasonal trends, We are optimistic about the opportunities for our business this year. Demand remains strong, global economic growth continues, and even with recent high refinery utilization, distal inventories remain below five-year averages. MPC's refining system remains one of the most dynamic in the world. We have significant flexibility in terms of switching our crude slates and optimizing our production yields. Our expanded logistics footprint creates opportunities to access export markets, and in December alone, we exported 485,000 barrels per day of refined products. With limited turnarounds in 2019, our system is poised to execute in any market environment. These trends, coupled with our expected synergy capture and the potentially changing dynamics of the low-sulfur fuel market, all set the stage to create meaningful benefits across MPC's integrated, and diversified business model. Lastly, we continue to make progress on evaluating all options for the two MLPs. Each of the parties involved have retained advisors, and our comments will be limited as we walk through a thorough evaluation process. We will provide an update to investors at the appropriate time. Now let me turn the call over to Don for an update on synergies.