Marathon’s stock performance
Marathon Petroleum Corporation (MPC) announced its results on February 3, 2016, before market hours, and saw a weak opening on that day. MPC opened at $39.8 per share—lower than the previous day’s close of $40.3. It saw highs of $40.1 and lows of $35.4 during the day but eventually closed at $37.2—around 7.6% lower than the previous day’s close but still trending in line with peers Valero Energy Corporation (VLO) and Tesoro Corporation (TSO).
By comparison, on February 3, 2016, VLO and TSO fell by 6.7% and 1.6%, respectively, while Phillips 66 (PSX) saw a 0.8% rise on the same day. For refining sector stocks, you could consider the iShares US Energy ETF (IYE), which has ~10% exposure to the sector and has MPC, VLO, TSO, and PSX in its portfolio.
Marathon’s capex position
In 2015, Marathon Petroleum’s capex was $2.4 billion. MPC continues to focus on its STAR (South Texas Asset Repositioning) program, wherein MPC plans to fully integrate its Galveston Bay and Texas City refineries by 2020. The STAR project will require a total investment of $2 billion in a staged manner until 2020.
MPC has thus lowered its capex guidance for 2016 to $3.7 billion, of which $1.7 billion is expected to be incurred in its midstream segment (including MPLX). MPC aims to generate higher cash flows from its more stable midstream segment.
The merger of MarkWest Energy Partners LP with MPLX LP (an MPC-sponsored master limited partnership) on December 4, 2015, was a key event in the fourth quarter. Also, with the aim of strengthening MPLX, MPC plans to drop down its inland marine business to MPLX at a supportive valuation in exchange for MPLX’s equity. This transaction is likely to close by 2Q16 and is still subject to requisite approvals.
In the next and final part of this series, we’ll look at the latest analyst recommendations for Marathon Petroleum.