Marathon Petroleum Corporation

Welcome to the MPC first quarter 2023 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 Marathon Petroleum Corporation's first quarter 2023 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, 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. And with that, I'll turn it over to Mike.

Thanks, Christina. Good morning, everyone. Let me first share our view on the macro environment. In the first quarter, volatility in the global energy market remained high, driven by uncertainties around the potential for recession, the pace of China's economic recovery, and the impact of sanctions on Russian products. At the same time, supply remains tight, supported by nearly 4 million barrels per day of global refining capacity that has come offline in the last couple of years. Global demand continues to grow as the need for affordable, reliable energy increases throughout the world. IEA is projecting 2 million barrels a day increase in 2023. Since last quarter, distal cracks have come down, gasoline cracks have improved, as expected given the onset of the summer driving season. So overall, we believe supply constraints, and growing demand will support strong refining margins throughout 2023. Cracks have decreased from 2022 levels, but are still above historic mid-cycle levels. In alignment with what we said last quarter, we remain bullish into the driving season, and gasoline strength is expected to improve the diesel situation while jet demand continues to improve. As we continue throughout the year, much will depend on the ongoing recovery in China and the extent, if any, of recessionary impacts. We continue building out our global presence supported by our offices in Houston, London, and Singapore as we invest in our global commercial strategy, and our cost advantage refining system is well positioned to supply growing markets. This quarter, Despite significant planned turnaround work at several key facilities, in particular in our Gulf Coast region at Galveston Bay and Garyville, we delivered the strongest first quarter results in the company's history. Planned maintenance activities reduced refinery throughput by 11 million barrels compared with the fourth quarter. Our team's operational and commercial execution supported our ability to generate refining and marketing segment adjusted EBITDA of nearly $4 billion, or $15.09 per barrel. MPLX remains a strategic part of MPC's portfolio as it continues to grow its cash flows and capital returns. Our midstream segment delivers durable and growing earnings. This quarter, it generated adjusted EBITDA of $1.5 billion, which is up 9% year over year. MPLX distribution to MPC was roughly $500 million this quarter and an annualized rate of over $2 billion, which fully covers MPC's dividend as well as half of our planned 2023 capital program. During the first quarter, we advanced value-creating projects. At Galveston Bay, we completed the STAR project. Rather than expand the GBR cokers, we elected to upgrade the Resid Hydrocracker unit as it offers better conversion and increased liquid volume yield. Fractionation modifications offer increased diesel recovery, and the refinery will be able to process significantly more discounted heavy crude. Overall, SAR is expected to add 40,000 barrels per day of incremental crude capacity and 17,000 barrels per day of resid processing capacity. Startup activities are progressing, and we expect to start a ramp through the second quarter of 2023. The incremental profitability from this project will primarily be determined by the spread between heavy crude and untreated diesel over the incremental 40,000 barrels a day of crude capacity. At the Martinez Renewable Fuels Facility, we reached full phase one production capacity of 260 million gallons per year of renewable fuels ramping to design rates and yields as planned. Phase II construction activities are on schedule. Pretreatment capabilities are expected to come online in the second half of 2023, which will enable the facility to ramp to its full expected capacity of 730 million gallons per year by the end of 2023. Martinez will be among the largest renewable diesel facilities in the world, underpinned by a competitive operating and capital cost profile, robust inbound and outbound logistics flexibility, an advantaged feedstock slate, and our strategic relationship with Nest State. In the first quarter, we returned over $3.5 billion to MPC shareholders via dividends and share repurchases. And today, we announced an additional $5 billion share repurchase authorization reinforcing our commitment to strong capital returns. Let me share some of the progress on our low-carbon initiatives. The Martinez and Dickinson facilities are competitively advantaged. They're supported by upstream value creation integration with our Beatrice and Cincinnati pretreatment plants and downstream integration with our vast marketing footprint. The strategic partnerships we're cultivating with Neste, ADM, and the Andersons creates platforms for additional collaboration within renewables. This quarter, we made an investment in an emerging producer of dairy farm-based renewable natural gas, providing the ability to participate in early stage development at an attractive entry point. Our VIRINT subsidiary is progressing a commercially feasible assessment for converting bio-based feedstocks into gasoline and sustainable aviation fuel. We believe through these projects and opportunities, we are taking steps to advance our goal to lower the carbon intensity of our operations and the products we manufacture and supply to a growing market. At this point, I'd like to turn the call over to Mary Ann.