Marathon’s 4Q15 segmental analysis
Marathon Petroleum Corporation’s (MPC) operating income fell by 73% to $338 million in 4Q15 over 4Q14. The refining segment’s operating income declined by 80% over 4Q14 to $207 million in 4Q15. This was due to inventory valuation adjustment charge of $345 million levied on the refining segment. But the gross refining and marketing margin fell by $2.4 per barrel over 4Q14 to $12.7 per barrel.
Speedway and midstream segment incomes
In 4Q15, MPC’s operating income from Speedway fell by 51%, to $135 million, over 4Q14. This decline was on account of an inventory valuation adjustment charge of $25 million, coupled with a lower gross margin on light products. But the merchandise margin rose over the quarter, partly offsetting the fall in income.
The midstream segment’s 4Q15 operating income, meanwhile, rose by 22% over 4Q14 to $71 million. This was due to MarkWest Energy Partners’ merger with MPLX, which became effective in December 2015. The higher income from the segment was partially offset by the merger transaction cost.
Operating income and peer refining margin trend
On a sequential basis, the company’s operating income fell by 78%. All the segments reported declines in income in 4Q15 over 3Q15. Specifically, the refining, Speedway, and midstream segments saw falls in 4Q15 operating income by 86%, 44%, and 1%, respectively, over 3Q15.
MPC’s peers Valero Energy Corporation (VLO) and Tesoro Corporation (TSO) witnessed declines in gross refining margins in 4Q15 over 4Q14 as well. VLO and TSO saw their refining margins narrow by $0.3 and $3 per barrel over 4Q14 to $10.9 and $12.8 per barrel, respectively, in 4Q15.
However, Phillips 66 (PSX) noted a marginal rise of $0.1 per barrel over 4Q14 to $9.4 per barrel. The Vanguard Energy ETF (VDE) has 11% exposure to the refining sector and has MPC, VLO, TSO, and PSX in its portfolio.
Now let’s take a look at Marathon Petroleum’s stock performance after the release of its 4Q15 results.