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Marathon Petroleum Kick-Starts Earnings Season with a Beat

PART:
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Part 3
Marathon Petroleum Kick-Starts Earnings Season with a Beat PART 3 OF 5

Marathon Petroleum Stock after 3Q17 Earnings Release

Marathon Petroleum stock

Marathon Petroleum (MPC) announced its results on October 26, 2017. MPC stock opened at $57.50 per share compared to its previous day’s close of $56.40. That was likely because MPC’s 3Q17 earnings surpassed analysts’ estimate, as we saw in Part 1 of this series. The stock saw a high of $57.90 and a low of $55.90 that day. Eventually, MPC stock closed at $57.30, which was 1.5% higher than the previous day’s close. That’s much different than its peers.

Marathon Petroleum Stock after 3Q17 Earnings Release

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HollyFrontier (HFC) and Phillips 66 (PSX) both fell 0.60% on October 26, 2017. Andeavor (ANDV) and Delek US Holdings (DK) fell 0.10% and 0.80%, respectively, that day. However, crude oil prices rose 0.90% that same day. Also on October 26, the broader market indicators, the SPDR S&P 500 ETF (SPY) and the SPDR Dow Jones Industrial Average ETF (DIA), rose 0.10% and 0.30%, respectively.

Marathon Petroleum’s 3Q17 update

In 3Q17, Marathon Petroleum’s capex (capital expenditure) and investments stood at $791.0 million. Of its total capex, $198.0 million was for the Refining and Marketing segment, $108.0 million was for the Speedway segment, and $453.0 million was for the Midstream segment. The rest was for corporate and other. Segmental assets were reclassified following continual drop-downs to MPLX (MPLX), MPC’s MLP.

MPC is in the midst of a strategic overhaul. MPC had planned to drop down its midstream assets, representing ~$1.4 billion of annual EBITDA (earnings before interest, tax, depreciation, and amortization), to MPLX. Assets representing ~$250.0 million of EBITDA were dropped down in 1Q17, ~$135.0 million were dropped down in 3Q17, and ~$1.0 billion is expected to be dropped down by the end of 1Q18. MPC also completed the evaluation of a tax-free separation of Speedway and resolved that Speedway could create higher value if it remained integrated within MPC. Thus, the plan to separate Speedway has been dropped. The last step of the IDR (international depository receipt) exchange is likely to be completed by 1Q18.

In its 3Q17 earnings press release, Gary R. Heminger, MPC’s chairman, president, and chief executive officer stated, “We are encouraged by improving market fundamentals and prospects for a more balanced supply-and-demand environment going forward. With our fully integrated and flexible system, strategically located assets that provide excellent optionality, and a focus on operational excellence, we believe we have a sustainable long-term competitive advantage that drives real value for shareholders over the long term. We also believe the execution of the final steps in our strategic actions will be important sources of value and cash flow, further supporting MPC’s long-term value proposition for investors.”

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