Findlay, Ohio-based Marathon Petroleum Corp. (MPC) this week released its second quarter 2021 report outlining a boost to its income from the same quarter a year ago, the closing of its sale of Speedway, and its continued focus on advancing its renewable projects and lowering its cost structure.
Marathon reported net income of $8.5 billion, or $13.00 per diluted share, for the second quarter of 2021, compared with net income of $9 million, or $0.01 per diluted share, for the second quarter of 2020.
Adjusted net income was $437 million, or $0.67 per diluted share, for the second quarter of 2021. This compares to an adjusted net loss of $868 million, or $(1.33) per diluted share, for the second quarter of 2020. Adjusted results for these periods exclude net pre-tax benefits of $11.6 billion and $1.4 billion, for the second-quarter 2021 and second-quarter 2020, respectively.
“As demand slowly recovers from the effects of the pandemic, we continue to focus on the aspects of our business within our control,” said President and CEO Michael J. Hennigan. “This quarter, we closed the Speedway sale and, as part of our capital return commitment, announced $10 billion of the proceeds would be allocated to share repurchases.”
Hennigan noted that the company has repurchased approximately $1 billion of shares, achieved its targeted structural debt reduction of $2.5 billion, and is commencing the next steps towards completing the remaining $9 billion return of capital over the next 12 to 16 months.
“Our renewable projects are progressing well,” Hennigan added. “The Dickinson renewable diesel plant reached its design capacity during the quarter. Detailed engineering and permitting progressed for the conversion of Martinez to renewable fuels. As we challenge ourselves to lead in sustainable energy, this quarter, we published our annual Sustainability and Climate Reports. Both reports expand our disclosures around environmental, social and governance matters.”
Results From Operations
As previously announced, on May 14, 2021, MPC closed on the $21 billion sale of Speedway to 7-Eleven. Consistent with reporting from prior quarters, Speedway’s results through the close of the sale are presented separately as discontinued operations.
Adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA) was $2.2 billion in the second quarter of 2021, compared with $653 million for the second quarter of 2020. As detailed in the table below, adjusted EBITDA is shown for both continuing and discontinued operations. Adjusted EBITDA from continuing operations excludes refining planned turnaround costs.
Refining & Marketing (R&M)
R&M segment income from operations was $224 million in the second quarter of 2021, compared with a loss of $1.5 billion for the second quarter of 2020.
Segment adjusted EBITDA was $751 million in the second quarter of 2021, versus $(919) million for the second quarter of 2020. Segment adjusted EBITDA excludes refining planned turnaround costs, which totaled $61 million in the second quarter of 2021 and $162 million in the second quarter of 2020. The increase in R&M earnings was primarily due to higher crack spreads in all regions. Additional benefits were from higher throughput and reduced operating expenses, partially offset by narrower crude differentials.
R&M margin was $12.45 per barrel for the second quarter of 2021, versus $7.64 for the second quarter of 2020. Crude capacity utilization was 94%, resulting in total throughput of 2.9 million barrels per day. If adjusted to include capacity idled in 2020, utilization would have been approximately 89%.
Midstream segment income from operations, which primarily reflects the results of MPLX LP (NYSE: MPLX), was $977 million in the second quarter of 2021, compared with $869 million for the second quarter of 2020.
Segment adjusted EBITDA was $1.3 billion in the second quarter of 2021, versus $1.2 billion for the second quarter of 2020. Results for the quarter benefited from higher revenue and lower operating expenses.
Corporate and Items Not Allocated
Corporate expenses totaled $180 million in the second quarter of 2021, compared with $195 million in the second quarter of 2020.
In the second quarter of 2021, items not allocated to segments include $56 million due to non-cash impairments related to minor changes in the portfolio. In the second quarter of 2020, items not allocated to segments included net benefits of $1.4 billion, primarily for a $1.5 billion lower of cost or market (LCM) inventory benefit.
The sale of Speedway to 7-Eleven closed on May 14, 2021. The second quarter results reflect MPC’s ownership of Speedway through the close of the sale, and these results are reported as discontinued operations.
Speedway income from operations was $283 million in the second quarter of 2021, compared with $426 million for the second quarter of 2020. Speedway’s adjusted EBITDA was $284 million in the second quarter of 2021, versus $528 million for the second quarter of 2020.
Financial Position and Liquidity
As of June 30, 2021, MPC had $17.3 billion of cash, cash equivalents, and short-term investments. There are no borrowings outstanding under the company’s $5 billion five-year bank revolving credit facility.
MPC debt at the end of the second quarter of 2021 totaled $9.1 billion, excluding MPLX debt. Debt outstanding decreased by $3.3 billion from the end of the first quarter of 2021. MPC’s debt-to-capital ratio, excluding MPLX, was 24% at the end of the second quarter of 2021.
Strategic and Operations Update
The company closed the $21 billion sale of Speedway to 7-Eleven and announced its expectation to use proceeds from the sale to strengthen the balance sheet and return capital to shareholders, which includes the repurchase of $10 billion of MPC’s common stock.
On June 15, 2021, MPC completed a modified Dutch auction which resulted in the repurchase of nearly 15.6 million shares for approximately $1 billion. The company reiterated its commitment to repurchase the remaining $9 billion of shares within the next 12 to 16 months.
MPC may utilize various methods to affect the repurchases, which could include open market repurchases, negotiated block transactions, accelerated share repurchases, tender offers or open market solicitations for shares, some of which may be effected through Rule 10b5-1 plans. The timing of repurchases will depend upon several factors, including market and business conditions, and repurchases may be discontinued at any time.
The Dickinson renewable diesel facility reached design capacity of 184 million gallons per year during the second quarter. The company also progressed activities associated with the conversion of the Martinez refinery to a renewable diesel facility. Discussions with feedstock suppliers, detailed engineering and permitting activities continue to advance. The Martinez facility is expected to produce 260 million gallons per year of renewable diesel by the second half of 2022, with pretreatment capabilities coming online in 2023. The facility is expected to be capable of producing 730 million gallons per year by the end of 2023.
In the Midstream segment, the company remains focused on executing the strategic priorities of strict capital discipline, lowering the cost structure, and portfolio optimization. Several projects advanced during the quarter, including the Wink to Webster crude oil pipeline, the Whistler natural gas pipeline, and the reversal of the Capline crude pipeline. The Whistler Pipeline began full commercial service in the beginning of July. Each of these projects includes minimum volume commitments from customers.
MPC published both its annual Sustainability and Climate-Related Scenarios reports, which are available online at its website, www.marathonpetroleum.com.