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Marathon Petroleum’s Segmental Earnings: The 3Q17 Trend

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MPC’s segmental earnings: Refining and Marketing

Marathon Petroleum’s (MPC) operating income rose 262.0% over 3Q16 to $1.6 billion in 3Q17.

The Refining and Marketing segment’s operating income rose from $252.0 million in 3Q16 to $1.1 billion in 3Q17. That was due to the rise in its refining margin. MPC’s gross Refining and Marketing margin rose $3.50 per barrel over 3Q16 to $14.10 per barrel in 3Q17. The rise was mainly due to a wider blended LLS (Louisiana Light Sweet) 6-3-2-1 crack. In addition, its refinery utilization stood at 102% in 3Q17 compared to 100% in 3Q16.

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Marathon Petroleum’s peer Valero Energy (VLO) noted a rise in its GRM (gross refining margin) of $2.20 per barrel over 3Q16 to $10.90 per barrel in 3Q17. Andeavor’s (ANDV) consolidated refining index value has risen by $5.50 per barrel over 3Q16 to $17.70 per barrel in 3Q17. That could result in a higher margin for ANDV in its 3Q17 earnings. Also, Phillips 66 (PSX) is likely to see a surge in its refining margins year-over-year in 3Q17, likely due to higher USGC (US Gulf Coast) WTI (West Texas Intermediate) 3-2-1 crack in 3Q17 over 3Q16.

Incomes for the Speedway and Midstream segments

In 3Q17, MPC’s operating income from its Speedway segment was unchanged at $209.0 million. That was due to the fall in its gross margin, offset by the fall in operating expenses and the impact of the new joint venture with Pilot Flying J. The gross margins for fuels (gasoline and distillate) as well as merchandise in million dollar terms fell in 3Q17 over 3Q16. Lower volumes led to a fall in gross margins in both segments. The fuels margin per unit also fell in 3Q17 over 3Q16.

The Midstream segment’s operating income rose from $310.0 million in 3Q16 to $355.0 million in 3Q17. That was due to growth in volumes from the natural gas and NGL (natural gas liquids) processing and fractionating segment. The gathering system throughputs also rose in 3Q17 over 3Q16.

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