Marathon Petroleum Corporation

Welcome to Marathon Petroleum's fourth 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, President, John Quaid, 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 could differ. Factors that cause actual results to differ are there. as well as in our SEC filings. References to MPC Capital during the prepared remarks today reflect standalone MPC Capital, excluding MPLX. With that, I'll turn the call over to Mike.

Thanks, Christina. Good morning, everyone. Thank you for joining our call. First, I'd like to recognize some changes we made at our executive management level. Marion Manin has been appointed president of MPC. In this role, she'll be responsible for our refining and marketing, commercial, and HES&S organizations. John Quaid, previously CFO of MPLX, succeeds Marianne as CFO of MPC. In addition to these changes, Rick Hessling has been appointed Chief Commercial Officer. Rick will lead our global feedstock and clean products teams with the goal of maximizing margin capture across the entire value chain. Brian Partee has been appointed Chief Global Optimization Officer. Brian will be responsible for assessing and redefining business processes that are critical to improving our performance, including our value chain optimization efforts and determining investments needed to accelerate the delivery of results. At a high level, these organizational changes put more emphasis on advancing important value-creating initiatives, driving increased performance throughout our entire value chain and making a step change and our cash flow generation capability. Turning to our 2023 results, we're pleased to continue to deliver on our strategic commitments. Full-year cash provided by operating activities was over $14 billion on a consolidated basis, reflecting our team's strong execution. Our refining and marketing business delivered excellent full-year results, generating EBITDA of 12.7 12.74 per barrel throughput and capture of 100%. These results reflect strong utilization of our assets and improved execution against our commercial strategy. Incremental to our refining and marketing results, our midstream business posted nearly $6.2 billion of EBITDA. EBITDA for the midstream segment grew by approximately 7% year-over-year or by approximately $400 million. We expect MPC will receive $2.2 billion of annual cash distributions supported by MPLX's most recent 10% increase to its quarterly distribution. MPLX is strategic to MPC's portfolio. Its current pace of cash distributions fully covers MPC's dividend and more than half of our planned 2024 capital program. We expect MTLX to increase its cash distribution as it pursues growth opportunities, further enhancing the value of this strategic relationship. We are committed to returning excess capital to shareholders. In 2023, we returned $11.6 billion through share repurchases, bringing total repurchases to over $29 billion since May of 2021. In addition, we increased MPC's quarterly dividend by 10% in the fourth quarter. Over the past five years, we have grown our quarterly dividend at a compound annual growth rate of over 12%. For the full year 2023, this capital return represents a payout of 92% of our operating cash flow, excluding changes in working capital, highlighting our commitment to superior shareholder returns. Executing on our commitments combined with a strong macro environment led to total shareholder returns of approximately 31% for MPC in 2023. Turning to our view on the refining macro environment as we head into 2024, global oil demand hit a record high in 23 and we see another year of record oil consumption in 24. The IEA is currently projecting demand growth of over 1.2 million barrels per day, with their projections having been raised higher over the last three consecutive months. In our system, both domestically and within our export business, we're seeing steady demand year over year for gasoline, diesel, and jet fuel. Global supply remains constrained, and anticipated global capacity additions have progressed lower than expectations. Gasoline and diesel inventories remain tight globally. And as we look into 24, we anticipate that above average turnaround activity globally in the first quarter, as well as the transition to summer gasoline blends, will be supportive of refining margins. As we look further into 2024, we believe the U.S. refining industry will experience an enhanced mid-cycle environment due to global supply-demand fundamentals and its relative advantages over international sources of supply, including energy costs, feedstock acquisition costs, and refinery complexity. Our capital allocation priorities remain unchanged. These include, first, sustaining capital. We remain steadfast in our commitment to safely operate our assets, protect the health and safety of our employees, and support the communities in which we operate. Second, our dividend. We're committed to paying a secure, competitive, and growing dividend. We intend to evaluate the dividend at least annually. Third, growth capital. We will invest capital but be disciplined where we believe there are attractive returns which will enhance our competitiveness and position MPC well into the future. Beyond these three objectives, we will return excess capital through share repurchases to meaningfully lower our share count. From May of 21 through January 2024, we reduced our total share count by approximately 45 percent, repurchasing approximately 300 million shares at an average price of $97. As we execute in 2024, we remain committed to share repurchases as a key component of our capital allocation priorities. MPC's standalone 2024 capital investment plan, excluding MPLX, totals $1.25 billion. Underpinning our commitment to safety and environmental performance, sustaining capital is approximately 35 percent of capital spend. In refining and marketing, growth spending is down nearly $200 million compared to 2023, reflecting strong capital discipline. In 2024, we are focused on investments that enhance margin and reduce costs. In low carbon, we are investing in an opportunity that offers an attractive return, lowers our costs, increases reliability, and reduces emissions. This morning, MPLX also announced its 2024 capital investment plan of $1.1 billion, which is anchored in the Marcellus and Permian Basins. At this point, I'd like to turn the call over to Mary Ann. Thanks, Mike.

Solid execution of our three strategic pillars remains foundational. We believe the improvements we've made to our cost structure, portfolio, and commercial execution have driven sustainable structural benefits, irrespective of the market environment. We will continue to build on this strong foundation to recognize value throughout our business, Our refining utilization in 2023 was 92% as we operated our portfolio to meet consumer demand. Recently, we have said we believe our average capture over longer periods of time is approaching 100%. And in 2023, our full year capture was 100%. This commitment to commercial excellence is foundational, and we expect to continue to see these results. While our capture results will fluctuate based on market dynamics, we believe that the capabilities we have built over the last few years and expect to enhance further will provide a sustainable advantage. Turning to our operations in the Gulf Coast, the Galveston Bay reformer repairs progressed as planned. We started the unit back up in mid-November and returned to full operating rates by mid-December. At our Martinez facility, We will be operating at approximately 22,000 barrels per day in the short term. We have been working closely with the regulators to proceed with repairs to ensure safe and reliable operations. Let me move to slide seven, which shows our capital investment plan for 2024 in a bit more detail. MPC's investment plan, excluding MPLX, totals $1.25 billion. The plan includes $1.2 billion for refining and marketing segments. Our growth capital plan is approximately $825 million between traditional projects and low carbon. We are investing primarily at our large competitively advantaged facilities to enhance shareholder value and position MPC well into the future. Within traditional refining and marketing, $100 million is associated with a multi-year project to increase finished distillate yield at the Galveston Bay Refinery. $375 million is focused on smaller projects targeted at enhancing yields at our refineries, improving energy efficiency, and lowering our costs, as well as investments in our branded marketing footprint. Within low carbon, approximately $330 million is allocated to a multi-year infrastructure investment at our Los Angeles refinery, which will improve energy efficiency and lower facility emissions, and $20 million for smaller projects focused on emerging opportunities. Slide eight provides an overview of the multi-year investment at our Los Angeles refinery. The Los Angeles refinery is a core asset in our West Coast value chain and is one of the most competitive refineries in the region. This investment, once completed, is expected to further enhance its cost competitiveness by integrating and modernizing utility systems, which will improve reliability and increase energy efficiency. Additionally, a portion of this improvement addresses a new regulation mandating further reductions in emissions. This regulation applies to all Southern California refineries. The improvements are expected to be completed by the end of 2025. We expect to generate a return on our investment of approximately 20%. Turning to slide 9, at Galveston Bay, we are investing to construct a 90,000-barrel per day high-pressure distillate hydrotreater This project is planned to strengthen the competitiveness of the refinery through increased production of higher-value finished products. Once in service, the new distal and hydrotreater will upgrade high-sulfur distillate to ultra-low-sulfur diesel, eliminating the need for third-party processing or sales into shrinking lower-value high-sulfur export markets. This strategic investment ensures we provide the clean-burning fuels the world demands and further enhances the competitive position of our U.S. Gulf Coast value chain. The project is expected to be complete by year-end 2027 and generate a return of over 20%. Turning to our low-carbon initiatives, we challenge ourselves to lead in sustainable energy by setting meaningful targets to reduce greenhouse gas emissions, methane emissions, and freshwater intensity, targets which we believe we can demonstrate a tangible pathway to accomplish. In our 2024 capital outlook, we are investing to significantly lower energy intensity and emissions at Los Angeles, one of our largest refineries. Additionally, we are investing smaller amounts of capital in early stage developments like RNG, which could significantly aid in greenhouse gas emission reductions in the future. Overall, we're taking disciplined steps to advance our goal to lower the carbon intensity of our operations and the products we manufacture. while continuing to supply a growing and evolving market by safely operating our current asset base with the objective to deliver superior cash flow. Let me turn the call over to John.