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A Look at MPC’s Segmental Earnings

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MPC’s segmental earnings: Refining

In 1Q17, Marathon Petroleum’s (MPC) income from operations rose threefold over 1Q16 to $292 million, mainly led by midstream earnings.

The refining segment posted an operating loss of $70 million in 1Q17 due to massive turnaround activities in the quarter. In fact, the turnaround’s scale was the largest in the history of MPC, which resulted in higher direct operating costs. However, MPC’s gross refining and marketing margin rose by $1.8 per barrel over 1Q16 to $11.7 per barrel in 1Q17. We discuss the details in the next part of this series.

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Speedway and midstream segment incomes

In 1Q17, MPC’s operating income from the Speedway retail segment fell 19% YoY to $135 million because, in 1Q16, MPC had registered asset sales gain in the segment.

Also, in 1Q17, the Speedway segment’s merchandise sales and gasoline and distillate sales fell YoY. Plus, the gasoline and distillate gross margin and merchandise gross margin fell YoY. We discuss the details later in this series.

However, the midstream segment’s operating income rose 63% YoY to $309 million in 1Q17 due to a rise in processing volumes. Plus, MPC earned income from its equity stake in the pipelines—new as well as old—and marine assets.

MPC and peers’ segmental earnings pie

In 1Q17, Marathon Petroleum (MPC) derived -24% operating income from refining, 106% from midstream, 46% from marketing, and -28% from corporate and other activities.

Comparatively, Phillips 66 (PSX) derived operating income of 17% from the midstream segment, 23% from the marketing segment, 28% from chemicals, and the remainder (around 12%) from “corporate and other” activities in 1Q17.

Also, Tesoro (TSO) saw 17% of its operating income come from refining, 77% from midstream, 68% from marketing, -63% from corporate and others (mainly due to the acquisition cost).

Valero Energy’s (VLO) operating income mainly derived from the refining segment.

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