Marathon Petroleum Corporation

Welcome to the MPC fourth quarter 2019 earnings call. My name is Jacqueline, and I will be your operator for today's call. At this time, all participants are in 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 Doug Wendt. Doug, you may begin.

Thank you, Jacqueline. Welcome to Marathon Petroleum Corporation's fourth quarter 2019 earnings conference call. The slides that accompany this call can be found on our website at MarathonPetroleum.com under the Investors tab. On the call today are Gary Heminger, Chairman and CEO, Don Templin, CFO, Mike Hennigan, CEO of MPLX, as well as other members of the executive team. As you know, Christina Kazarian typically hosts this call. I am doing that today because Christina is celebrating the arrival of a baby girl a week and a half ago. Both Christina and baby Agnes are doing well. 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. Now I will turn the call over to Gary Heminger for some opening remarks and highlights on slide three.

Thanks, Doug, and good morning, and thank you, everyone, for joining us. I, too, would like to congratulate Christina and look forward to her return in a few weeks. If you'll please return to slide number three. Earlier today, we reported adjusted net income of $1 billion, or $1.56 per diluted share. This quarter's performance demonstrates our continued ability to execute across all aspects of our business and capture incremental synergies at an accelerated pace. In refining and marketing, the team's commercial acumen coupled with our geographically diverse footprint drove tremendous capture results of 105%. Key drivers of capture for the quarter included strong gasoline price realizations, leveraging our integrated assets and scale to capture geographic base prices dislocations, compared to broader market benchmarks and the impact of our strong synergy delivery. Our refining team executed turnarounds, performed engineering projects, and completed major maintenance at multiple refineries. At Garryville, the crude revamp project and the first phase of the coker expansion project were commissioned, allowing us to realize higher coker unit rates from the expanded drum size. The second phase of the COCR project is on schedule to be completed in the first quarter of 2020. Early operating results on the first quarter COCR have been very positive, and we have been able to achieve a 17% capacity increase, exceeding our original project expectations. We anticipate the second phase of the project to achieve a similar rate increase. Our Speedway team also executed well this quarter. They delivered strong results while also exceeding our cumulative store conversion target, with over 700 stores converted to the Speedway platform since the combination. In the midstream segment, we progressed strategic long-haul pipeline projects that are key to the development of our integrated Permian to Gulf Coast logistics system. Additionally, Northeast gathered, processed, and fractionated volumes were up 18%, 14%, and 12% respectively. in 2019 versus 2018, demonstrating continued growth and strong performance in this region. Our team's execution this quarter continued the trend of a very impressive synergy capture. We realized over $420 million of synergies in the fourth quarter. It has been over a year since the combination with an endeavor. As a result of our focus on integration and outstanding execution over that period, Our full-year realized synergies now have totaled $1.1 billion. We believe MPC will build upon this platform and continue to capture substantial incremental value in 2020 and beyond. Don will provide more details around our synergy capture later on the call. Now let me briefly share some thoughts on the macro environment. While current U.S. gasoline inventory levels have been high in the first few weeks of the year, We believe this is a function of healthy supply and high utilization in the fourth quarter. We anticipate inventory levels to moderate with the upcoming seasonal RVP transition. We expect U.S. gasoline demand to remain similar to last year's levels, supported by a steady economic outlook and stable labor market. Overall, U.S. diesel inventory levels remain relatively constructive, trending slightly below the midpoint of the five-year average. Warmer than normal temperatures in the Northeast have recently weakened distillate demand, but we do not expect this near-term weakness to persist, as underlying fundamentals for light products remain supportive. Continuing to support this constructive outlook, spring turnaround activity globally is expected to be close to last year's record levels, peaking at 8 to 9 million barrels per day of crude capacity offline in March and April. Furthermore, we believe the impact of additional global refining capacity will be moderated by lower utilization for less complex foreign refineries due to the collapse of high sulfur fuel oil prices. Turning to crude, we have seen the WCS differential widen since October, partly supported by easing of mandated production cuts and incremental rail loadings. On the light sweet side, we anticipate a slight narrowing of the WTI breadth spread through the rest of the year as new pipeline takeaway and Gulf Coast export capacity comes online. Prompt medium and heavy sour differentials are currently narrower than expected in a post-IMO world, primarily due to supply constraints, geopolitical instability, and strong U.S. and Asian demand. However, we anticipate heavy sour prices to weaken as HSFO continues to become a discounted alternative feedstock. We are focused on minimizing our exposure to weak HSFO product pricing by destroying the vast majority of internally produced resid in our own system, aided by the successful expansion at our Garyville coker. We are also importing third-party HSFO into our West Coast facilities as an advantage feedstock for our cokers. With low sulfur fuel oil prices, meaningfully elevated relative to gasoline and diesel, We are also utilizing our robust coastal logistics systems to opportunistically export low sulfur VGO and other components into the bunker market at a premium. We expect refining margins to strengthen throughout the first quarter from seasonal factors in transportation markets and the industry's continued response to IMO implementation. We are optimistic about the prospects for our business, With continuous progress of migrating our midstream project backlog, we are targeting positive free cash flow generation across the MPLX business in 2021. In retail, our team is making good progress on the Speedway separation, while continuing to identify opportunities to grow merchandise margin through store conversions and remodels. In refining, we have made significant enhancements in the operations and reliability of the assets we acquired, And we continue to believe that the configuration and upgrading capacity at our coastal refineries positions us well to capture the market opportunities that are expected to arise from the implementation of IMO 2020 regulations. Coupled with our impressive synergy capture so far and the opportunities we have before us, we are confident in our ability to continue delivering compelling financial results and maximizing shareholder value. Let me conclude my comments providing an update on some of our recent strategic actions. Our work on Speedway is progressing as planned, and we are targeting early fourth quarter for completion of the separation. The Midstream Special Committee is advancing its work as we continue to expect, provide, and update during the first quarter. And the CEO Search Committee is also progressing their work on schedule with expectations to be complete the latter part of the first quarter. Now let me turn the call over to Mike, who will provide an update on our midstream segment. Mike?