Marathon’s stock performance
Marathon Petroleum (MPC) announced its results on April 28, 2016, before market hours. The stock saw a weak opening on that day. MPC opened at $40.5 per share, lower than the previous day’s close of $41.4. The stock saw highs of $43.3 and lows of $40.2 during the day, but eventually closed at $40.9, ~0.94% lower than the previous day’s close but still trending in line with peers PBF Energy (PBF) and Western Refining (WNR).
By comparison, on April 28, 2016, PBF and WNR fell by 5.1% and 2.6%, respectively. Plus, Northern Tier Energy (NTI) saw a 1.1% fall 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 Marathon Petroleum (MPC) in its portfolio.
Marathon Petroleum’s capex and growth plans
In 1Q16, Marathon Petroleum’s capex stood at $684 billion. MPC undertook turnaround and improvement activities at its Robinson and Galveston Bay refineries. Thus, Robinson refinery’s light crude oil processing capacity and total capacity rose by 30 MBpd (thousand barrels per day) and 20 Mbpd, respectively. The Galveston Bay refinery process improvement project was aimed at widening margins at the refinery. These activities have placed MPC in a favorable spot to take advantage of the likely strong summer gasoline demand in the second quarter of the year.
Moving on to capex, MPC has lowered its capex guidance for 2016 to $3.0 billion. $1.3 billion of this is expected to be incurred in its midstream segment, which includes MPLX, an MPC-sponsored master limited partnership. MPC aims to generate higher cash flows from its more stable midstream segment. MPC has dropped down marine assets to MPLX for $600 million to provide growth impetus to MPLX.
Plus, the merger of MarkWest Energy Partners with MPLX has further enhanced MPLX’s growth opportunities. One of MPLX’s processing plants and one of its de-ethanizers began operations in the Marcellus Shale in April 2016. Plus, MPLX is in the process of developing an efficient natural gas liquids marketing system in the Marcellus and Utica shales. To fund its organic growth plans, MPLX has entered into an agreement to privately place $1 billion of convertible securities.