Marathon Petroleum Corporation

Welcome to the MPC Third Quarter 2021 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 touchtone 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 Corporation's third quarter 2021 earnings conference call. The slides that accompany this call can be found on our website at MarathonPetroleum.com under the Investors tab. Joining me on the call today are Mike Hennigan, CEO, Marianne 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. Before we get into results for the quarter, we wanted to provide a brief update on the business. Midway through the quarter, we were impacted by Hurricane Ida. The Ida hurricane passed over our Garryville refinery with wind speeds topping 120 miles per hour. Fortunately, all of our employees in the region were safe, but many of them experienced severe damage to their homes and the communities around them. Our team was able to shut down our refinery in a controlled manner a day ahead of the storm and ensure operational integrity and safety of all of our employees. It took roughly a week to restore some power, which enabled the first crude unit to restart over the next several days. The remainder of the refinery restarted sequentially over the next 10 days as more power became available to the facility. I'd like to recognize our refining team and our support groups for their dedication and efforts. Our commercial teams also did an excellent job in keeping our customers in the region supplied through coordinated efforts across the company. Mary Ann will cover the specific impacts when she reviews the refining results. In addition to the Louisiana hurricane, our Los Angeles refinery was impacted by an earthquake on September 18th. Again, the major challenge was the loss of power. Once power was restored, the units were restarted, the refinery was back to normal operations in roughly one week. Our teams did an excellent job responding to these events and minimizing the negative impact to our financial results. Looking more broadly, during the quarter, we saw gradual increases in the demand for our products as mobility continued to recover. Globally, Product inventories are at their tightest level in many years, and this improvement has lifted margins. In the U.S., gasoline and diesel inventories have steadily improved and are both at the low end of their five-year averages. Jet fuel inventories have moved into the five-year range, although demand is still well below pre-pandemic levels, and we expect that to be a headwind for some time. Our system is seeing gasoline demand currently 2 to 3 percent below 2019 levels, with the West Coast still lagging at about 8 percent below. Diesel demand is now slightly above 2019 levels. Jet demand has improved but still remains down nearly 15 to 20 percent below pre-pandemic levels. Natural gas costs steadily rose during the quarter, with an average increase of over $1 from the second to the third quarter. There's still some uncertainty as we head into the fourth quarter, but lower inventory levels and strong holiday travel could be supportive. And looking at next year, if global product inventories remain tight and demand continues to recover, we would expect the refining sector to rebound in 2022. At the same time, we're watching prices to see if there's a consumer demand pullback. On the aspects of the business that are within our control, this quarter we advanced several key initiatives. We progressed our renewables initiative with the addition of a new strategic partnership with ADM. This JV will own and operate ADM's soybean processing complex in Spearwood, North Dakota. Upon completion, which is expected in 2023, this facility will source and process local soybeans, supplying approximately 600 million pounds of soybean oil exclusively for MPC, enough feedstock for approximately 75 million gallons of renewable diesel per year. While this JV provides a locally-advantaged feedstock for our Dickinson project, we continue to evaluate feedstock options for our Martinez facility in California. At Martinez, our renewable fuels facility conversion reached another project milestone when its environmental impact report was issued for public comment in mid-October. The process highlights our extensive effort working with the local regulators and other stakeholders. Also in October, United Airlines, Marathon, and others conducted a successful test flight of a 737 which flew for 90 minutes using drop-in sustainable aviation fuel. The SAF used during the test flight was 100% renewable drop-in fuel made possible by proprietary technology from Byron, our wholly owned subsidiary, which has a demonstration plant in Madison, Wisconsin. And as we continue to focus on ways to strengthen the competitive position of our assets, today we announced that we are pursuing strategic alternatives for the Kenai Refinery, which could include a potential sale. We often share our belief that our business is both a return on and a return of capital business. In this quarter, we made progress strengthening our portfolio, continuing our low-cost focus, and progressing our commitment to return capital to our shareholders. As of today, we've completed approximately 25 percent of our $10 billion share repurchase program, and we're confident in our ability to return the remaining $7.5 billion by the end of 2022. Finally, MPLX announced a third-quarter distribution consisting of a 2.5 percent increase to its base distribution amount and a special distribution amount as well. MPC will receive a total of $829 million. This announcement reinforces the strategic importance of MPLX as part of MPC's portfolio and its ability to return substantial cash to MPC and all unit holders. Slide four provides a framework around some of the ways we are challenging ourselves to lead in sustainable energy. Our approach to sustainability spans the environmental, social, and government and governance or ESG dimensions of our operations. Incompetence strengthening resiliency by lowering our carbon intensity and conserving natural resources. Developing for the future by investing in renewables and emerging technologies and embedding sustainability in decision-making in all aspects of engagement with our people and many stakeholders. We have three company-wide targets many of our investors and stakeholders know well. First, a 30 percent reduction in our Scope 1 and Scope 2 greenhouse gas emissions intensity by 2030. Second, a 50 percent reduction in midstream methane intensity by 2025. And lastly, a 20 percent reduction in our freshwater withdrawal intensity by 2030. The evolving energy landscape presents us with meaningful opportunities for innovation. We've allocated 40% of our growth capital in 2021 to help advance two significant renewable fuels projects. In late 2020, we began renewable diesel production at our Dickinson, North Dakota facility, the second largest of its kind in the United States, and are progressing the conversion of our Martinez, California, refinery to a renewable diesel facility. I'd also like to highlight a few specific updates from the corridor. We were recently awarded an ESG-A rating by MSCI. We are the only U.S.-based refiner that holds this rating. We continue to focus on enhancing our disclosures, and this quarter, we also submitted data on our Scope 3 emissions through CDP, and we are the first in our refining sector to do so. We invite you to go to the sustainability section of our website and learn more about how we are challenging ourselves to lead in sustainable energy. At this point, I'd like to turn it over to Mary Ann to review the third quarter results.