Marathon Petroleum Corporation

Welcome to the MPC First Quarter 2019 Earnings Call. My name is Sheila, 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 Corporation's first quarter 2019 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. Slide two also contains additional information related to the proposed MPLX transaction. Investors and security holders are encouraged to read the consent statement and registration statement to be filed with the SEC, as well as other relevant documents filed with the SEC. Now, I will turn the call over to Gary Hemminger for some opening remarks and highlights on slide three.

Gary Hemminger Thanks, Christina. Good morning and welcome and thank you for joining our call. Our integrated business generated approximately $1.5 billion of adjusted EBITDA during the first quarter. as the stability of our midstream and retail segments helped offset challenging refining market conditions. The diversification of our business model and flexibility of our refining system enabled us to generate through-cycle cash flow, and despite this being a weaker quarter, we generated nearly $1.2 billion of operating cash flow before working capital. In the quarter, we returned over $1.2 billion of capital to MPC shareholders, including $885 million in share repurchases. Over the long term, we remain committed to returning at least 50% of discretionary free cash flow to investors. Beginning of the year was difficult for the entire U.S. refining industry. Inventory levels were high as the industry came off a strong fourth quarter, and a seasonal lack of demand, as well as several weather disruptions, led to challenging gasoline margins. At the same time, medium and heavy sour crude differentials compressed substantially and given geopolitical and policy changes. As the quarter progressed, though, funds improved. Supply reductions helped rebalance the market, and gasoline and distillate inventories are now below their five-year averages. For April, our blended crack spread of $18.80 was more than double the first quarter average. With the sweet-sour crude spreads inside $3 per barrel, we have moved towards max-sweet mode. but also continue to see the incentives to keep our cokers full. With our midstream business, we continue to see a tremendous opportunity set. Earlier this morning, MPLX announced it had entered into a definitive merger agreement to acquire ANDX. Details on the transaction were provided this morning, and we encourage you to read the deal announcement press release for more information. Looking forward, the U.S. has become the largest producer of crude oil in the world, and natural gas and NGL volumes continue to grow as well. With this increase in production, we believe that our midstream business is well positioned to participate in infrastructure build-out opportunities. Mike Hennigan will speak through some of the key project updates later in the call. On the retail side, the strong same-store merchandise sales and legacy Speedway markets that we have seen over the last nine months continued into April. We expect this trend to continue as we move into the prime driving season. As we look to the remainder of 2019, our positive outlook is also supported by solid economic growth and expected contributions from the 700 store conversions. And in fact, we finished our 300th conversion yesterday. Lastly, we see opportunities to drive value creation using our technology platform And inside the store, we continue to pursue opportunities to enhance customer interaction and drive sales. We expect the positive dynamics across all three of our business segments to support growing cash flows throughout the remainder of 2019. One of our core objectives is to grow profitably and create competitive advantages through strategic and disciplined investments. On that front, we also continuously assess our project portfolio investments to ensure our investments will generate strong project returns. Based on our internal forecast, the Garyville-Coker III project no longer comfortably exceeds the 20% hurdle rate we typically use for refining projects. As such, we have decided to stop the Garyville-Coker III project after completing definition engineering and remove it from our capital spending plans. The change in the project return is primarily driven by our long-term outlook for heavy crude differentials. Geopolitical events have caused lower production of heavy crude, including lower Venezuelan production, slower Canadian pipeline development, and Iranian sanctions. In addition, more light crude is being produced as a result of continued U.S. shale growth. Having said this, our Garyville-Coker MAX project remains on schedule to complete the first phase in the fourth quarter of 2019, and the second phase in the first quarter of 2020 to take advantage of the new IMO bunker fuel requirements. Recall, this project expands our capacity of the two existing cokers by about 14% by replacing the four existing 30-foot diameter drums with 32-foot diameter drums. The Lyric project at our Los Angeles refinery remains on track to be completed in early 2020 and will increase our ability to produce higher value distillates. We're also pleased to announce that for the second year in a row, Marathon was awarded the EPA Energy Star Partner of the Year. This is an impressive accomplishment and tangible evidence of our commitment to driving energy efficiency through everything we do. As we look forward to the remainder of 2019, we expect improving industry dynamics of our past investments to support our growing cash flow outlook, and our team remains focused on operational excellence achieving synergies, and creating long-term shareholder value. Now let me turn the call over to Greg, who will provide some comments on our integration process, strategy development, and commercial opportunities. Thank you, Gary.