Marathon Petroleum Corporation

Welcome to the MPC second quarter 2026 earnings call. My name is Julie 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 Brian Worthington. Brian, you may begin.

Welcome to Marathon Petroleum Corporation's second quarter 2026 earnings conference call. The slides that accompany this call can be found on our website at marathonpetroleum.com under the investors tab. Joining me today on the call are Maryann Mannen, CEO, Maria Khoury, 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 SEC filings. With that, I will turn the call over to Maryann.

Thank you, Brian. Good morning. In the second quarter, we delivered $8.5 billion of adjusted EBITDA. Safety and reliability are fundamental. This performance reflects more than market strength. It demonstrates our planning, commercial, and operational capabilities which enable safe and reliable operations to meet resilient consumer demand. Our results reflect the differentiated capabilities of our value chains and the execution of our optimization strategies. Year to date, we have operated with our lowest level of unplanned downtime this decade. On the US Gulf Coast, we ran at 100% utilization in the second quarter. Across the system, We achieved R&M margin capture of over $1 billion, the strongest on an absolute basis. Through the first half of 2026, we achieved capture of 108%. We are sourcing economically advantaged barrels, optimizing our feedstock to improve clean product yields, increasing margins in all markets we participate in. Consumer Demand remains a core strength. Extensive pipelines and logistics provide abundant access to crude, limiting our exposure to Brent price crudes, which were more significantly impacted by the Persian Gulf conflict. In the second quarter, we also completed two high return yield enhancing refining investments, further positioning us to deliver incremental value. The Robinson Product Flexibility Investment enables approximately 10,000 barrels per day of incremental jet fuel production, supporting growing regional demand. And the El Paso Yield Improvement Investment enhances the refinery's ability to produce specialty gasoline for key markets. These disciplined investments yield high returns aligned with our targeted return of 25% or above Extending the competitive position of these refining assets, the refining macro environment remains constructive. Globally, there is over 9 million barrels per day of planned and unplanned refined capacity downtime, approximately 4 million barrels per day above historical norms, reflecting ongoing Persian Gulf disruptions and accelerated Ukrainian attacks on Russian infrastructure. Against this backdrop, U.S. gasoline inventory remains well below the five-year range, while distillate inventory is at the bottom of its five-year range, underscoring continued market tightness. Within our system, consumer demand remains strong across gasoline, diesel, and jet, supported by both domestic and international markets. Looking ahead, We expect to remain in an enhanced mid-cycle environment through the end of the year and into 2027. MPC's advantage is sustainable, a diversified and integrated U.S. refining system across three regions built for optimization with access to advantage crude supply, low-cost natural gas, and the ability to supply both domestic and global consumer demand. In the second quarter, our midstream business continued to advance its natural gas and NGL growth strategy. In April, MPLX placed the Secretariat One processing plant into service. In July, the Blackcomb natural gas pipeline began commissioning activities. The joint venture partners continue to progress the pipeline as planned with Blackcomb expected to achieve full commercial service in the fourth quarter. This week MPLX is beginning operations at the Harmon Creek III processing plant in line with its strategy to add processing capacity on a just-in-time basis. This increases MPLX's total processing capacity to 8.1 billion cubic feet per day and de-ethanization capacity to over 800,000 barrels per day. In the Permian Sour gas treating volumes exceeded 150 million cubic feet per day for the second consecutive quarter as MPLX continues to optimize operations at our Titan treating facility. And sour gas treating capacity is expected to expand to over 400 million cubic feet per day by the end of the year. Natural gas and NGL fundamentals remain robust, creating compelling opportunities to support growing domestic and global demand for U.S. energy. This morning, MPLX announced it is increasing its 2026 capital growth spending outlook by $500 million to $2.9 billion. The increase primarily reflects the accelerated execution of the ongoing Gulf Coast Fractionation Project, pulling forward capital MPLX previously expected to deploy in early 2027. With multiple investments transitioning from construction to operations this year, MPLX is on track to deliver mid-single-digit adjusted EBITDA growth in 2026, weighted towards the second half of the year. This also positions MPLX for strong adjusted EBITDA growth in 2027. These investments are expected to support 12.5% annual distribution growth in 2026 and 2027, positioning MPC to lead in capital returns. During the second quarter, we returned $2.8 billion of capital inclusive of $2.5 billion of share repurchases reflecting strong cash generation and discipline execution of our capital allocation priorities. We are maintaining balance sheet discipline with a targeted cash framework that allows flexibility while supporting return of capital. We will execute safely, invest strategically, and generate significant cash all at the same time. With that, I'll turn it over to Maria to walk you through our financial performance.

Thank you, Maryann, and good morning. Our second quarter results demonstrate a strong financial performance across the business. We delivered earnings per share of $17.73 and adjusted EBITDA of $8.5 billion. Refining and marketing adjusted EBITDA per barrel was $24.84. Cash flow from operations, excluding working capital changes, was $6.6 billion. And we returned $2.8 billion to shareholders. These results reflect both market strength and discipline execution. The next slide shows the year-over-year change in adjusted EBITDA from second quarter 2025 to second quarter 2026. Adjusted EBITDA increased approximately $5.2 billion year-over-year, primarily driven by our refining and marketing segment. Overall, our results show how our operational execution translated into financial performance. Now, turning to our segment results, We provide an overview of our refining and marketing segment, where R&M second quarter adjusted EBITDA was approximately $6.7 billion. Execution matters, and we delivered. All regions contributed to the significant improvement year over year, primarily driven by a stronger margin environment. On total throughput of nearly 3 million barrels per day, Reflecting strong availability following our first quarter plant turnaround activity, our refineries ran at 94% utilization. In the Gulf Coast, we ran 100% utilization, delivering $27 of adjusted EBITDA per barrel, where crude optimization, higher jet yields, and strong domestic and export demand were differentiators. In the MidCon, we ran at 87% utilization as we completed plan turnaround and maintenance activity, delivering nearly $21 of adjusted EBITDA per barrel. In the West Coast, we ran at 93% utilization and delivered over $27 of adjusted EBITDA per barrel, supported by strong regional value chain optimizations. We prioritize operational reliability, investments in high return projects, therefore value enhancing opportunities and continuous improvement across the portfolio. These are objectives that we can and do control, positioning MPC to perform through cycles. Turning to slide seven, second quarter capture was 112%. Our results highlight the advantage of our integrated system where planning, commercial, and operational execution are aligned to capture value across the barrel. Capture this quarter was supported by crude optimization included advantage SPR barrels received from the DOE and strong clean product margins across gasoline, diesel, and jet. In the Gulf Coast, margin capture was positively impacted by the advantage crude we ran in the quarter, increased jet fuel margins, and the physical offset related to the derivative losses in the first quarter. These tailwinds were partially offset by secondary products, which remain a market-driven headwind as prices of secondary products like higher clean product prices. This performance underscores the strength of our integrated value chain and our commitment to deliver peer-leading profitability per barrel. Slide eight. shows our midstream segment performance for the quarter. Segment adjusted EBITDA increased $137 million compared to the second quarter of 2025. The increase was primarily driven by higher rates and throughputs, including growth from equity affiliates and acquisitions, partially offset by the divestiture of non-core gathering and processing assets. As MPLX is executing plans to expand its value chains and transition projects, From construction to cash flow generation, it is also maximizing the utilization of existing assets and optimizing operations. NPLX remains on track to deliver sequential growth throughout the year, culminating in mid-single-digit adjusted EBITDA growth in 2026. Now, moving to slide 9, we cover our renewable diesel performance. Following the completion of the Martinez turnaround in the first quarter, utilization increased to 95%, reflecting a strong operational availability. Results were supported by a more constructive margin environment with uplift from feedstock optimization as well as improved regulatory credit values. Segment-adjusted EBITDA increased approximately $277 million year-over-year. As we look ahead, we remain focused on optimizing operations, leveraging feedstock and logistics flexibility, and responding to market conditions. Based on current fundamentals, we expect a constructive environment through the remainder of the year. Now, slide 10 presents the elements of change in our consolidated cash position for the second quarter. Operating cash flow, excluding changes in working capital, was approximately $6.6 billion. Working capital was a $3.8 billion source of cash for the quarter, driven by higher payables, the timing benefit of crude exchanges, and inventory draws. During the quarter, we returned over $2.8 billion of capital to shareholders, executing on our disciplined capital allocation framework. At the end of the quarter, MPC had roughly $7.8 billion of consolidated cash, including MPC's cash of $6.7 billion and MPLX's cash of over $1 billion. Now, turning to guidance, on slide 11, we provide our third quarter outlook for the refining and marketing segment. We're projecting crude throughput volumes of 2.8 million barrels per day, representing utilization Thank you, Maria. Our priorities remain consistent, operate safely and reliably,

Execute commercially, invest with discipline, and lead in the return of capital to shareholders. We remain focused on execution and are strengthened by our strategic relationship with MPLX. Our competitive advantage is sustainable. It is built on integrated value chains, scale, flexibility, and disciplined execution. Our portfolio and optimization capabilities position us to deliver peer leading profitability per barrel in each region where we operate. We are disciplined in how we deploy capital. We invest where we see clear line of sight to returns, strong demand pool, and sustainable competitive advantages. At the same time, we maintain our commitment to return capital to shareholders supported by strong cash generation. MPLX remains the key differentiator for MPC strengthening MPCs through cycle cash flow profile and enhancing our ability to deliver industry-leading capital returns. We remain constructive on the outlook for both U.S. refining and midstream. While volatility will persist, our priorities remain consistent. Capture upside, protect the downside, and lead in the return of capital to our shareholders. With that, I'll return the call back to Brian.

Thank you, Maryann. As we open the call for questions, as a courtesy to all participants, we ask that you limit yourself to one question and a follow-up. If time permits, we will re-prompt for additional questions. We will now open the call to questions.

Thank you. We will now begin the question and answer session. If you have a question, please press star, then 1 on your touchtone phone. If you wish to be removed from the queue, please press star, then 2. If you are using a speakerphone, You may need to pick up the handset first before pressing the numbers. Once again, if you have a question, please press star then one on your touch tone phone. The first question comes from Neil Mehta with Goldman Sachs. Your line is open.

Yeah, good morning, Maryann, and thanks for doing this. The first question is just on the refining side. The capture was Very strong at 112%. You called out a couple things, including crude optimization and the strength of the product margin, but maybe you could just help us understand what was the formula for success around the capture rate as we think about modeling this on the go forward, too.

Yeah, good morning, Neil. Thank you. So you know this. Our overall objective with respect to commercial and planning and frankly our operational execution is to optimize our results, add value in all markets. And there's always variables that we're not able to control. But I think when you look at our results, there's a few things that you should always expect to see that are largely consistent. One is would be our ability to capture, take advantage of the opportunities in the prompt, things like dislocations, supply constraints, regional asset disruptions, crude sourcing, as you saw in this quarter. And there are just a few, and we should be able to optimize around those. But the other element there is really trying to build sustainability into these results. You've heard me say before, we're using our planning, our commercial, and our operational competency to do that. You know, one example is our ability to narrow our decision windows, which means we're now able to make better decisions, value-driven decisions on the opportunities that are presented and in particular in volatile markets. We're using an abundance of data, digital competencies to give our commercial leaders, our commercial planners, the analytics to make market-informed decisions, value decisions, value-driven decisions and to make them faster. So our goal, as you know, is really to achieve peer leading profitability in every region where we operate. This quarter in particular, the 112 was driven by strict inventory discipline in a backward dated market. We had benefits from crude sourcing and optimization as you've heard us talk about. We obviously had favorable impact from the derivatives that came through with the physical receipt in the second quarter. consistent with what we shared in the first quarter, incremental jet production in a very strong margin environment, and then reliability in a strong crack environment. So these are a few of the things that are both market-driven and our own commercial and planning capabilities that drove that. But I'm going to ask the team to give you a little more detailed insight to help with the results in this quarter. So I'm going to pass it to Rick.

Yeah, hi, Neil. I'm going to start with where Maryann ended, and that's on reliability. Everything starts with Mike's team delivering safe, reliable operations at our refineries. That truly is the foundation of our ability to optimize our fully integrated system. And as Maryann mentioned in her opening remarks, in a volatile market, our crude optimization team excelled across three regions. Let me give you just a few examples that demonstrate our commercial sophistication and our maturity in terms of where we're at. I'll start with the purchase of SPR exchange barrels, Neil. We bought directly from the SPR. We avoided the middleman. And we're grateful where the DOE releases helped meet market demands and ultimately consumer demands. We ran more than double Venezuelan crudes in 2Q versus what we ran in 1Q. We ran record amounts of Canadian heavy in the Gulf Coast in the second quarter, thus reducing our exposure to Brent-based crudes. And out on the West Coast, we ran twice as many California-based crudes than normal with advantaged economics due to the recent peer closures. that we've seen in that market, making these barrels available. And Neil, we had many, many more yield enhancement shifts, but maybe I'll just pause there and pass it over to Julian and have him give you a little bit of color on a few of our yield enhancement shifts. Julian? Thanks, Rick.

Morning, Neil. In terms of the formula for success that you mentioned, I think that at its core, it's now our underlying operating model and the sustainable capabilities we've embedded that drives capture through enhanced execution. So planning the responsible for identifying value enhancing strategies under all market conditions and to do that we'll leverage crude sourcing, logistics optionality, but really the depth of our integrated value chains. And in combination, it's my planning, Rick's commercial and Mike's operational teams who collaborate seamlessly now to optimize across these integrated value chains and run our strategies through the assets safely and Reliably. And in Q2, I think JET is a really good example of this. So we leveraged the strong market signals that Rick's team identified, and then we worked hand-in-hand with Mike's team to re-optimize quickly on refinery yields. And we were able to take full advantage of the JET investments that came online at Garyville and Robinson a quarter, almost perfect timing. And that resulted in a 3% increase in JET yield year-on-year. And in fact, since 2024, we've now increased our JET yield capability from 8% to 12%. So I think the key to our success fundamentally is that we've really enhanced our ability to rapidly adapt to changing market conditions, and we can flex between jet and diesel production as appropriate to the conditions.

That's great. Very thorough. Very helpful. Just the follow-up is just on cash. You guys are... Sitting on a lot of it, Maryann. And so just your perspective on some of the moving pieces that you think about, what's the optimal level of cash relative to the $1 billion you've talked about in the past? Return of capital, how aggressive you want to be. And then working capital is such a big nut this quarter. How do we think about the unwind of that item?

Yeah, certainly, Neal. So just on cash flow, no change to our priorities on capital allocation. You know, as you saw in the quarter, we did build a bit of cash on the strength, but our capital allocation priorities are unchanged. The strength of MPLX distribution should allow us to continue to lead in the return of capital. No change when we think about overall the cash balance that we need, roughly a billion dollars You probably heard Maria speak on the SPR as well. You know, we do have an obligation to repay that, and we'll look at those balances as well. But we really don't have a change at all in the way that we think about our cash balances. And then on working capital, I'll pass it to Maria and have her give you some of the sensitivities. But obviously, strong quarter this quarter. We talked about inventory draw, etc., But let me give it to Maria, and she'll give you a little more color on the specifics on working capital. And hopefully that answers your question.

Hi, Neil. Yes, on working capital, we had a large benefit this quarter, as you saw, of $3.8 billion. You know, we are cognizant of the timing of what our working capital needs and the elements. If you think about it, you know, we are already starting to rebuild inventory, right? We have a liability and a repayment obligation for these crude exchanges. And we will be watching as well our payables. Now, it's good to keep in mind the sensitivity that we have communicated. For every $10 move in crude, that is about a $550 million change in working capital one way or another. So trust that helps us. Hope that helps, Neil.

Thank you. Very helpful. Thanks, guys.

You're welcome. Thank you. Thank you. The next question comes from Manav Gupta with UPS. Your line is open.

Good morning, Maryann and team. And I was hoping to talk a little bit on refining macro. Your opening comments were very interesting where you said, you know, 9 million barrels offline, 4 million more than normal. and it's been offline for some time here. So I'm just trying to understand what this has done to global product inventory. How long could it take to replenish it? But more importantly, we have actually seen serious damage to Russian refining capacity. We have seen damages in the Middle East. So is there a possibility here that for the next 10 years or so, even the mid-cycle is higher given the actual unplanned downtime which could go on for some time and the Global Product Inventory Depletion, if you could talk about that.

Certainly, and good morning again, Manav. So, you know, we've been very constructive, as you know, on the long term, even before the conflict, and then certainly the opportunities and the challenges that the Persian Gulf conflict have created on top of the Russian Ukraine, we remain constructive well into 2020-27. As you mentioned, the global supply, it's extremely dynamic. As we've seen, it is difficult for us to have a level of prediction as to when it will resolve. You've got, I think you mentioned this already, with respect to Persian Gulf conflict, the Middle East refineries have really been slow to come back online. And then again, any further disruption in the region could cause further supply constraints to evolve. Russian-Ukraine conflict, certainly the acceleration of the Ukrainian attacks on Russian refineries have led to more than 2.8 million barrels offline, downtime there as well. That's a third of Russian's refinery capacity offline and the country's fully banned diesel exports. We certainly see that it will take quite some time for the infrastructure to be repaired. And then, as I mentioned in my remarks as well, you've got global product balances remain extremely tight and some of the lowest levels of inventories in gasoline and diesel that we've seen. I'm going to pass it to Rick and let him give you a little more color as he sees some of the market impacts here.

Yeah, hi, Manav. I think where I'll start is on the demand side, just to give you a feel for what we're seeing in all three of the regions we operate. So within our system, we continue to see consumer demand being resilient on gas, diesel, and jet. And this is both domestically and internationally. We are seeing very strong signals in both markets. As an example, U.S. Jet was at an all-time high in June, the demand for it was, and we hit distillate records on exports in the quarter in 2Q and continue to see very positive economic signals there. If I move on, though, if you look at, as you and Maryann have touched on, the amount of refining capacity offline, I think... What I want to leave you with and I hope doesn't get overlooked is the medium sour availability, which is reduced by the Middle East conflict and more refineries running light crudes, that ultimately is yielding more gasoline globally. And the diesel spread is partially high as a result of that. in combination with, as Maryann mentioned, low global inventories, but especially low global inventories in the U.S. and in Europe. So we're seeing most everyone taking the appropriate signals, and we're all in max diesel mode. And we've watched this play out before. When you're in max mode of any one product for a significant period of time, It puts pressure on other products, and we're starting to see that pull through on the gas crack, as I think you're seeing in the indicators. And then finally, I'll leave you with this. You know, as refineries are running hard, and as we enter hurricane season, a little bit of an elevated turnaround season in 3Q, which is in line with other 3Qs, we do expect more volatility here in the near-term, Manav. Any refining disruption as you've seen over the last couple of months, it really doesn't matter what region you're in, Gulf Coast, West Coast, MidCon, it is proving to cause significant outsized market moves and we just see a lot of that continuing to happen here as we look forward through the end of the year and beyond.

Thank you. My quick follow-up here is on the West Coast where things appear particularly tight. I think there was a theory at one point that California can import its way out of the problem. It clearly looks like that's not going to work. So, A, your leverage over there, can you move some product from your refinery in Washington over to California to capitalize on it? And do you think my market will get even tighter in 3Q given one of the bigger peers of yours has already announced downtime at both the refineries?

Yeah, Mon, a really insightful question. What I would start by saying is, you know, the Jones Act waiver is allowing us and the rest of the industry to make movements from the Gulf Coast into the West Coast, but those movements aren't enough to overcome the lack of Asian imports that are not coming in as they usually would due to the Middle East conflict. To your point, I would tell you we are extremely well positioned with LAR and our Pacific Northwest assets to meet consumer demands, especially as you rightfully noted, several of our competitors there will have turnarounds here in 3Q.

Thank you so much. You're welcome. Thank you.

Thank you. The next question comes from Doug Legate with Wolf Research. Your line is open.

Thank you. Good morning, everybody. Maryann, it's great to hear you on the call. I wonder if I could hit one very specific question and one follow-up. My specific question is on capture rates. You clearly had extraordinary capture rates across all three defineries. You normally show pretty fantastic capture rates in the fourth quarter when the RVP rules are different. butane blending and so on. So my question is the RVP waiver as I understand it was one of the policy steps taken by the US government. So are you benefiting from that butane blending uplift in your capture in the second quarter and should we therefore expect that also in the third quarter? That's my first question. Now I've got to follow up on the cash balance.

Yes, certainly. Good morning, Doug. So That benefit, certainly it would be a part of 2Q, but it is just a really small element of all of the contributors that we were trying to articulate in the second quarter. So certainly a benefit, but not one that is significant in the second quarter. We tried to mention the things in the second quarter that led to that. I'd say two things. One, we had clearly market tailwinds, as we talked about and then good commercial and planning execution, really trying to optimize in the prompt and bring those sustainable changes that we've been referring to to deliver the most profitability per barrel in each of the regions where we operate. Hope that helps.

Yeah, it does. Thank you. Maryann, my follow-up is, I mean, clearly I hear my peers talking about The extraordinary market we're in right now, and those of us who have been doing this for 30 years are looking at it going, well, how long is this going to last? And I see you not deploying 100% of your surplus cash to buybacks. We see obviously the big cash build on your balance sheet this quarter. I'm just curious, do you have any hesitancy about allocating your full cash distributions in the current environment? In other words, do you have any concerns on the durability of of the current margin environment. Thanks.

Yeah, certainly. Thanks for the question, Doug. No, our capital allocation priorities are consistent. No change there. We believe the return of capital via share buyback to our shareholders continues to be the right vehicle. When we talk about cash balances, you know, timing matters. Obviously, there's been a lot of volatility in the quarter. But that volatility doesn't change the way we think about returning capital. The only thing that's slightly different, and Maria mentioned it as well, with the SPR barrels, we have an obligation to repay those barrels in the future. But overall, and that's embedded in the working capital that she spoke about. But again, our overall view on the cash that we need to run the company notwithstanding, the SPR return is consistent and therefore the return of capital remains a priority. I hope that helps, Deb.

It does. Thanks a lot.

You're welcome. Thank you.

Thank you. The next question comes from Sam Margolin with Wells Fargo. Your line is open.

Good morning. Thanks for the question. So historically, Marathon and the whole refining industry has been pretty successful at identifying the best possible growth investments. When there's a surplus of light crude, we saw the industry build out some distillation capacity. When there's a call on product, there's been very timely conversion projects that have been executed and MPC is certainly a part of that. Right now, I think the salient question is how you see growth potential on the refining side. in the context of not only product shortages that are accumulating structurally, but also crude availability dynamics that are changing with Venezuela and Canada as well in growth mode. Thanks.

Yeah, thanks, Sam. So I'm going to pass the question first to Julian to talk about crude sourcing, et cetera, and then I'll come back and just talk in general the way that we are thinking about deployment of capital with respect to refining in general. But Julian first, please.

Thanks, Maryann. Hi, Sam. I think in relation to the crudes that we choose to put in front of our refineries, I'll start and reinforce that we'll always maximize the most cost-effective feed start to run through our system at all times. And we've already got the ability to run over 100 different types of crudes across our system, with Garryville being the most flexible refinery on the Gulf Coast. We've got two premier Gulf Coast assets, and we can run almost any crude that's put before us, all based on economics. So we have very high crude optionality, but we don't really see a need to further invest in the ability to run more different types of crudes. We have that choice across our enterprise, so we're all ready to run in terms of crude, slate, diversification.

Thanks, Julian. Sam, so maybe to your question on how we are thinking about deploying capital in the refining space, hopefully you've seen even over the last few years, we're not relying on any particular specific market environment, a mid-cycle enhanced crack, et cetera. We're really looking to deploy capital where we can improve reliability, optimize around the yield. I think the example that Julian and others have talked about here, and Mary Ann McClellan. and align with the way that we see the portfolio for today and the portfolio for the future and then maintaining that strict discipline around the returns that we expect when we put capital to work. I hope that helps, Sam.

Yeah, it does. And then it's along the same reinvestment team, but renewable diesel, probably worth asking, commodity margins are back to where they were when you FID'd Martinez. And so... It's obviously very policy driven. And so your thoughts on kind of the call on incremental renewable diesel capacity as well would be helpful. Thank you.

Yeah, you're welcome, Sam. No different. The capital that we put to work in RD is really for efficiency only. And there's no change in the way we think about the allocation of capital today to the renewable segment. We want that asset to run well, reliably, as you've seen in the second quarter of Feedstock Sourcing there, Safe and Reliable Operations, and obviously the benefit of the regulatory environment has helped. But we have no change in the way that we're thinking about capital in that particular segment. Efficiency only, as we said in the beginning of the year.

Thanks.

You're welcome, Sam.

Thank you. The next question comes from Joe Latch with Morgan Stanley. Your line is open.

Hey, good morning, team, and thanks for taking my questions. So I wanted to follow up on Sam's renewable fuels question, and I think it was the strongest quarter from an earnings standpoint since the segment was broken out. And I know the industry overall has seen tailwinds from higher credit prices, but could you just maybe unpack some of the drivers for Marathon specifically and speak to the repeatability of the strong results?

Yeah, hi, Joe. This is Rick. What I'll start with is we continue to have a constructive view. It was key for us, as is in our entire refining portfolio, that we ran, and Maryann mentioned this in her opening remarks, at 95% utilization this quarter. So that is an absolute must, and we did quite well there. Renewable diesel margin continues to look favorable given the fundamental RIN balance. As you probably well know, the market is short, and we believe it will continue to stay short. And when I speak of short, I'm specifically referring to the RIN balances. And we've seen volatility in the RVO market here in the last week to 10 days, but we believe the market is short and will continue to be short, and the volatility is probably short-lived. We believe we remain well positioned and we're going to continue to optimize around our assets at Martinez and Dickinson and really lean into our pretreatment at Martinez as well, which we believe is a significant benefit. Hope that helps, Joe.

Thanks, Rick. Yep, that's helpful. And then I wanted to follow up on some of the comments within refining. So one of the areas about performance relative to our expectations was on the Gulf Coast. And I know utilization was strong, like you called out in the opening remarks, but could you just provide some more detail on what you saw during 2Q? And then as part of that, could you also talk about the economic signals and arms you're seeing in the export market? Thank you.

Yeah, so maybe I'll start and then turn it over to Maryann. I'll start on the export side. I mentioned record diesel export numbers that we exported. And so that would be a combo of both from Garyville and GBR. We continue to see very strong ARBs and demands specifically in Latin America and in Europe on the Gulf Coast, as well as we're leaning into the jet market out there as well. And while the diesel to jet market Thank you for joining us. and then when we look at exports, we're seeing a little bit better than average export demand and margins as well on gas. So some very positive signals on the Gulf Coast that we're leaning into, Joe.

And Joe, Maryann, let me just give you maybe a little more color on what drove the Gulf Coast. You know, first, we continue to talk about our lost capacity due to internal problems being, frankly, at the lowest level that we've seen in a decade. So reliability and execution really mattered, and that, I would say, is one of the drivers. Second, you heard us talk about Garyville obviously having incremental jet capacity. You saw those jet-to-diesel margins, so clearly being able to deliver that, those incremental volumes, in a very healthy market backdrop helped the results there on the Gulf Coast as well. And then Rick and Maria both talked a bit about the benefit of SPR and the crude sourcing, right? So it's not just SPR, but just in general. And Julian mentioned the flexibility that we have with being able to run multiple crudes. So incremental Venn, WCS, So crude sourcing, clearly a strong variable into the Gulf Coast as well. They would be a few of the things that I would tell you drove our Gulf Coast performance. Hope that helps.

That's great. Thank you very much. You are welcome.

Thank you. The next question comes from Teresa Chen with Barclays. Your line is open.

Good morning. Thank you for taking my questions. Would you provide some additional color on your views on quality differentials from here and key dynamics to watch for the balance of 2026 and beyond? And on the Gulf Coast consumption of heavy barrels in particular, would you elaborate on the economics of running WCS versus Venezuelan crude and how does that compare across your Gulf Coast refining system currently?

Yeah, hi, Theresa. This is Rick. Thank you for the question. I'll start with how heavy compares to Venezuelan in our system. I would tell you eight out of ten times heavy wins when we look at the economic advantage of a heavy Canadian barrel versus Venezuela. Now, that's not to say we don't like the Venn barrel. We do. We bought twice as much in 2Q as we did 1Q. But I think a key differentiator is when you think of Marathon. We have the largest appetite for Canadian barrels of anyone in the United States. And on the Gulf Coast specifically, we have a large appetite. So economically, to address your question head on, that usually wins the day for us, both at Garyville and at GBR. From a Venezuela perspective, when you look at the econ, we continue to see more Venn's barrels coming to the U.S., so they'll have to price those barrels accordingly. I believe they'll continue to be more economical for us, and that inadvertently will put direct pressure on other grades such as WCS. When I and we look at WCS, today it's call it WTI minus $14 a barrel. And when we look forward, if you look at 4Q, Teresa, on the forward curve, it's north of $16 a barrel. So it's going to move positive in our direction by about $2 a barrel between now and the fourth quarter, which is certainly a nice tailwind. I mentioned earlier we also have the benefit of domestic California crudes at LAR, which we've doubled up on there as well at very advantageous numbers. So that along with the SPR barrels, we were a large buyer of SPR barrels. And if you look year to date, they've released about 110, 111 million barrels of SPR, at least is accounted for. and we believe there's potentially another 38 million barrels that they could release yet this year. So we believe that'll apply some pressure on differentials which will be a definite tailwind for us from a feedstock perspective. And then lastly, I would say when the conflict gets solved and you get more Middle East barrels coming in to the Gulf Coast, specifically into North America, That's going to continue to put pressure on every competing grade in the Gulf Coast. So when that day happens, it'll be another tailwind. I hope that helps, Teresa.

That's incredibly helpful. Thank you for that answer, Rick. Looking at the Gulf Coast again with Blackcomb ramping higher and multiple BCS per day of residue egress from the Permian headed to the Texas Gulf Coast over the near to medium term. How do you think about how this incremental gas translates as far as better profitability for your refining assets in the Gulf Coast, Galveston in particular, both in terms of getting cheaper gas to augment Capture and COGS, as well as Lower OPEX. How would you think about that going forward?

Yeah, Teresa, I'll take a stab at that. So we have several commitments that we're making on many, if not all, of the lines you just mentioned. And I will tell you that you will continue to see a bottleneck as NatGas gets closer to the U.S. Gulf Coast refining complex and and we are solving for that. We are solving for that from an optionality and flexibility perspective with the sole intent of reducing our net gas cost into our refining system on the Gulf Coast. So the bottleneck is moving from what we would say ultimately it'll continue to move downstream from Waha closer to the water and we will benefit from that bottleneck moving closer to us as we will ultimately be able to provide cheaper feedstock, cheaper net gas costs into our Gulf Coast refining system.

Thank you. You're welcome, Teresa. I hope that answers the question.

Thank you. The next question comes from Connor Fitzpatrick with Bank of America. Your line is open.

Hi there, thanks for taking my question. I'll do another follow-up on renewable fuels for a second. So, you know, policy changes with each renewable volume obligation that comes out, they generally don't shrink year over year. So given the tight market balance today, it looks like that could continue after 2027. So I was just wondering what you think the sustainability of margins for renewable diesel are today beyond 2027 and where you think supply could evolve market-wide as a result. Thanks.

So Connor, the set three rule is supposed to come out by mid next year and that'll set obligations for 2028 and 2029. We feel those obligations need to be realistic based upon U.S. production and recognition of the existing headwinds to imports, which include tariffs, the exclusion from the production tax credit, the registration and compliance requirements in Set 2, and even the potential reduction in the RIN value from the Set 2 rule. Right now, as Rick mentioned earlier, we are pulling on the bank, and that is not sustainable. So we feel that the Set 3 rule has got to lower the obligations to be more realistic of more supply-demand fundamentals. Thank you.

You're welcome, Connor.

Thank you. The next question comes from John Royal with Piper Sandler. Your line is open.

Good morning. Thanks for taking my question. So my first question is another follow-up on captures, and I hate to pound on it too much, but it's just such an important part of your story. After this really strong result, you're tracking well above 100% year-to-date. And thinking about 2H and some of the drivers you called out, presumably you can keep buying advantage of Venezuelan barrels. You'll likely have more opportunity to buy from the SPR. And you've got these new projects running. And on top of that, 4Q is always very seasonally strong. Is it fair to say that this year's full year capture should look even higher than last year's 105%? And if that's the case, are you thinking of the long-term targets any differently today? Or would you view the past couple years' strength as more transitory, especially given some of this is self-help?

Hey John, good morning and thanks for the question. So let me try to take that question in a couple of parts. So first half of the year, as you said, absolutely right, 108%. There were clearly some things in that first half of the year that we think are sustainable, right? And that is both the operations planning, commercial, and operation excellence. that allow us to optimize both in the short term and the long term, capture the prompt and continue to generate sustainable change. So those things will continue. But there were a few things in the first half of the year that we don't control. Obviously, the volatility that was created in Q1 on derivatives, we saw the benefit of that unwind in the second quarter. A crude sourcing, to your point, however, is something that we should have the opportunity to deliver going forward. That doesn't change for all of the reasons Rick talked about. Availability of Venn, pressure on WCS, and we're a significant buyer and utilizer, if you will, of WCS. Third quarter, just keep in mind, if you look over 2023 to 2025... It has tended to be the most muted quarter of all four quarters. It averages 95, which means some are higher, some are lower. But there's a lot of headwinds there, inventory build ahead of the hurricane season. And again, if you go back and you look, secondaries is always a challenge for us. But on average, the secondary product impact is typically the most significant in the third quarter. Having said all that, we believe that our sustainable changes that we're making, you heard Julian talk about our crude sourcing optimization, Mike is running reliably across the entire system, and then Rick's commercial team obviously doing its part with respect to optimizing in the prompt. So I'm going to pass it to Rick, and I'll allow him to give you a little more color. Our focus is really to ensure that through all markets, We are delivering incremental barrels. I mean, sorry, incremental profitability, incremental EBITDA per barrel. That is our objective. I'm going to pass it to Rick.

Yeah, John. Maryann really captured the majority of what I would have had to have said. I'll add two things. You know, we're one month into the quarter, so a lot of time to play out to see how this quarter actually goes. And then certainly fourth quarter is generally quite different than the third quarter, as Maryann indicated. There's two additional items that I would lean into when you look at 2Q results versus what we're seeing early on here in 3Q. While margins are good, they're not to the level they were. And when I say margins, I'm specifically speaking to product margins. They're not to the level that we saw in 2Q through a month or so in of the quarter. And then we've seen a pullback in the jet to diesel spread. So There's a lot of puts and takes here, a lot to go here within the corridor. So we'll watch the game play out and optimize as best we can around it.

And, John, maybe just to close the question, given our objective, and that is to add incremental value through all markets, I think it's appropriate to expect that we're going to continue to drive value quarter after quarter. I hope that helps.

Thank you. Yeah, and my follow-up is hopefully a quick one. It's just kind of a mechanical question on the share buyback. Sitting on a good amount of excess cash, as others on this call have pointed out, and you weren't too far removed from another period of having a lot of excess cash, and that's when you were working off your Speedway cash. During that time period, you seemed to max out around $3 to $3.5 billion of buyback in a given quarter. So starting with the assumption that you'll be willing and able to buy back this much stock, should we think of that three to three and a half as kind of a reasonable upper bound for the buybacks as you work down this cash balance?

Yeah, John. Look, no change in the way that we think about the return of capital. Timing matters, as you can imagine. So we continue to say... The return of capital via share buyback is the priority. The growth of MPLX giving us the 2.8 billion and growing to cover our dividend for MPC and the capital that we outlay should continue to allow us to lead in the return of capital via share buyback. No change in the way that we think about that.

Thank you. The next question comes from Matthew Blair with TPH. Your line is open.

Great. Thanks for the question here. Maybe I could circle back to the comment on that the fundamental RIN balance is short and just asking for a prediction, if you can, on how this all resolves. Normally, you'd see RIN prices move higher and then imports would ramp up. but it sounds like there might be some challenges for that. So do you think that we're headed for a pretty big RIN spike as the year progresses and is MTC taking any actions today to help offset that spike? Are you buying RINs ahead of time to meet your refining obligations?

Hey Matt, this is Rick. I would tell you that from a RIN spike perspective, Usually the market does have to act and then others take that signal and respond accordingly. Certainly we're not going to step out and play the game of a regulator. And so really it's a tough call. But I would say the market will respond and I think that's what you're signaling here. And we believe the market is efficient and ultimately they will take the signals and act accordingly.

Thank you. The last question comes from Philip, I'm sorry, Philip Jungworth with VMO. Your line is open.

Great, thanks for squeezing me in here. Just coming back to the theme of integration across refining logistics and commercial, when you look at the regions, is there any one where you feel like you're better positioned here than others, like clearly Gulf Coast had a strong quarter? And if so, what's the opportunity to rolling out some of the shared learnings technologies across the other areas?

Yeah, Phil, it's Maryann. So first and foremost, I'd say no difference with respect to prioritization across all three. Each of those regions present different capabilities, differentiations that allow us, again, to have some degree of confidence that over the longer term here we'll continue to be the most profitable in every region where we operate. I'm going to ask Mike to talk a little bit about some of the things that he's doing around the maintenance side here and then pass it to Julian because there's also some incremental tools that he is using as well that allow us to look at the optimization across all three of those regions. And hopefully that'll give you a bit more color.

Mike? Sure. Thanks, Maryann. Morning, Phil. One of the couple areas we're focusing on from technology is right around drones. We're using... Quite a bit of drone inspection technology, and we're also using them for emergency response support. The other pieces are digital twin. That's where we actually scan our assets, and then we use that for maintenance planning, centralized reliability, and capital project reviews. One thing that's in the last couple years is wireless sensors have become cost competitive. So we're installing quite a bit of wireless sensing, and we're rolling that into our asset health monitoring program, which drives our predictive reliability. and then we have the digital twin which is a contextualization piece that we're using and that's how we're getting our data that we're using for predictive reliability. So those are all in motion or if not already done. So we're proceeding pretty quick in that area.

Thanks, Mike. If you think about optimization now for Marathon, let's say it's become a systemic behavior now across the entire organization. So we've now deployed very sophisticated refining and logistics models all across the network. And we're able to run those now almost continuously. And in combination with enhanced analytical capabilities, we've now got the agility and we've got the ability to re-forecast quickly, adjust our yields and optimize crude and product placement across regions and also export markets. And as we take this capability, we're long past optimizing single refineries. We optimized regional refineries and now we're optimizing cross-regional refineries. across the entire system. And that's really where both the size and the footprint of our company really matters. But your point on technology, it's the speed of being able to convert insights into executable actions that really make a difference. And we think that as we coordinate decisions as one integrated system, that's what creates a differentiating durability for us.

And Phil, we are really trying to prioritize the capital that we're using on these AI capabilities, these digital capabilities to prioritize the most value enhancing that deliver, right, that incremental ibitda per barrel. And that's the way that across the planning, commercial and operational teams, we're using these technologies. So anyway, we hope that helps to address your question, Phil.

I am showing no further questions. I'll turn the call back to Brian.

Thank you for your interest in Marathon Petroleum Corporation. Should you have any more questions or want clarification on topics discussed this morning, please contact us and our team will be available to take your calls. Thank you for joining us.