Marathon Petroleum Corporation

Welcome to the MPC fourth quarter 2020 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 one 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 Marathon Petroleum's fourth quarter 2020 earnings conference call. The slides that accompany this call can be found on our website at marathonpetroleum.com under the investor tab. Joining me on the call today are Mike Hennigan, CEO, Mary Manin, CFO, and other members of the executive team. We invite you to read the safe harbor statements on slide two. We will be making forward-looking statements today. Actual results may differ. Factors that could cause actual results to differ are included there as well as in our filings with the SEC. With that, I'll turn the call over to Mike.

Thanks, Christina. Good morning, everyone. I want to start by welcoming a couple new members to our executive team. First, in January, we announced the appointment of Marian Mannion as our new CFO. She joins us having spent nearly a decade as a CFO in the energy services and manufacturing sectors. Marian brings the financial acumen and strategic leadership expertise critical for delivering our business transformation objectives, including strict capital discipline, and overall expense management to lower our cost structure. I'm excited for the perspective and business insights you will add to our executive team as we work together to continue strengthening our financial and competitive positions. Yesterday, we announced Brian Davis is joining the company in our newly created role of Chief Commercial Officer. Brian has spent over three decades in the industry. His extensive commercial experience, his recent deep background in renewables and alternative energy, and a track record of developing and enhancing capabilities is highly complementary to our strategic focus on improving our commercial performance. We look forward to his leadership in developing and implementing a holistic and integrated strategy for MPC's commercial business. These additions will be integral in supporting our strategic initiatives as we progress through 2021 and beyond. Before we get into our results for the quarter, we wanted to provide a brief business update. The unprecedented challenges this year created by the COVID pandemic accelerated the need for us to act swiftly and decisively to change how we conduct our business. The three initiatives highlighted on the slide focus on the aspects of our business within our control, strengthening the competitive position of our assets, improving our commercial performance, and lowering our cost structure. During the year, we've been faced with many tough decisions, but our team continues to make tangible progress on all three initiatives in ways we believe will drive stronger through-cycle earnings and position the company for long-term success. Slide number five highlights some of our actions taken around our strategic priorities this quarter. First, we continued progressing the sale of the Speedway business. During the quarter, we responded to the second request from the FTC and continued to support 7-Eleven in its efforts to secure antitrust clearance. Our interactions with 7-11 and our interactions with the FTC have gone well. As everyone is aware, the timing of the close is dependent on the FTC process, and we continue to target closing by the end of the first quarter of 2021. Within the scope of what we can control, we're finalizing transition services agreements with 7-11 and expect to have them completed by the end of February. Moving on to other actions to reposition our portfolio, We continue to advance our investments in renewables. During the quarter, we worked through startup issues and our ramping production at our Dickinson North Dakota Renewable Fuels Facility. This facility is now the second largest renewable diesel facility in the United States. Consistent with the timeline we discussed last quarter, we have begun to load trains and ship renewable diesel out of the facility. We remain on track to reach full production by the end of the quarter. Since the last time we reported to you, we've also made excellent progress on our plans to convert our Martinez Refinery into a renewable fuels facility. We've continued to progress engineering and permitting activities. We expect commissioning in the second half of 2022 with approximately 17,000 barrels per day of capacity. Further, we expect the pretreatment system to be online in 2023 and to reach full capacity of approximately 48,000 barrels per day by the end of 2023. Finally, we continue to exercise strict discipline on how capital and expense dollars are spent. This year, we accomplished our goal of significantly reducing our capital spending levels by over $1.4 billion from the initial 2021 plans. We also reduced our 2020 forecasted operating expenses by more than our target of $950 million. I started off my comments by saying that we're focused on the things we can control, No matter what lies ahead, we're setting the company on a path to drive stronger through-cycle earnings and position the company for longer-term success. I'd like to take a moment on slide six to reinforce comments made on our last earnings call around priorities for the proceeds from the sale of our Speedway business. We continue to receive questions on our use of proceeds framework, so I wanted to reiterate that our plans have not changed. We remain committed to using the sale proceeds to strengthen our balance sheet and return capital to MPC shareholders. An important priority in our commitment is to defend a solid investment-grade credit profile. On a mid-cycle basis, we expect to target MPC standalone debt to EBITDA leverage metric of around one to one and a half times. This metric contemplates MPC earnings and also includes distributions from MPLX. Given the significant and stable distributions from MPLX, we don't envision an MPC balance sheet with less than $5 billion of debt on a through-cycle basis. As a reminder, we also expect to increase the cash component of our core liquidity position by an additional $1 billion to offset the loss of cash flows from Speedway upon completion of the sale. With respect to debt reduction, we have approximately $2.5 billion of debt that can be addressed with minimal friction costs. We'll be thoughtful in how we reduce incremental debt amounts to minimize costs while not jeopardizing our credit rating. Within this framework, we continue to expect that the remaining proceeds will be targeted for shareholder return. We continue to evaluate the form and timing, and we'll share more details as we get closer to the transaction close. Moving to slide seven, we highlight some of the reductions we've made to our cost structure. In refining, we've reduced our operating costs by more than $1 billion from the 2019 spending levels. In the midstream business, we've reduced our costs by over $200 million. And at the corporate level, we've applied the same discipline, and these reductions are reflected in our fourth quarter results. We're pleased with these results when you consider we have not compromised on our commitment to safely operating our assets and protect the health and safety of our employees, customers, and support the communities in which we operate. In fact, the full year 2020 was the company's best performance ever in this area, with a nearly 30% improvement across both our process and personal safety rates and our best ever environmental performance. Moving to another key focus area, slide eight highlights our focus on capital discipline. Today, we announced our 2021 Capital Outlook for MPC. We significantly reduced our capital program from 2019 levels. MPC's investment plan now stands approximately $1.4 billion excluding MPLX. This reflects a nearly $1.7 billion reduction from 2019 and a $1.2 billion reduction from our initial plans for 2020 prior to the pandemic. Our 2021 outlook reflects funding for growth projects already underway, however, Our incremental growth capital will be primarily focused on renewables and projects that we expect will help us reduce future operating costs. We expect our team's focus on lowering our cost structure and capital discipline to be something that will be a recurring theme for 2021 and beyond. At this point, I'd like to turn it over to Mary Ann to review the fourth quarter results.