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How Marathon Petroleum’s Marketing Segment Is Performing

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MPC’s marketing segment position

Marathon Petroleum (MPC) aims to expand its marketing segment (or Speedway) as it produces a steady cash flow and confirmed sales of its refined products. It expects to spend $530 million in its Speedway segment in 2018. It expects to grow its footprint in existing as well as new regions. It’s also planning to capitalize on acquisition opportunities in the segment.

As part of its restructuring exercise, Marathon Petroleum also examined the option of a tax-free separation of Speedway. However, the company concluded that Speedway could create more value if it stays integrated with MPC.

MPC has a wide network of outlets in the Midwest, on the East Coast, and in the Southeast regions of the United States. The Speedway segment, through its retail outlets, derives revenue from the sale of refined products and general merchandise to customers. MPC had 2,744 convenience stores in 4Q17.

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Performance in 4Q17

MPC’s Speedway segment income from operations fell 10% over 4Q16 to $149 million in 4Q17. Volumes of transportation fuels (gasoline and distillate) fell 1% YoY (year-over-year) to 1.5 billion gallons in 4Q17. The decline in volumes was due to the contribution of 41 travel centers to PFJ Southeast, a joint venture between Pilot Flying J and MPC, in 4Q16. MPC’s merchandise sales fell 2% YoY to $1.2 billion.

However, transportation fuels margins and merchandise margins saw a mixed trend in 4Q17. Transportation fuel margins rose in 4Q17 over 4Q16, but merchandise margins fell. Transportation fuels rose 10% over 4Q16 to $0.18 per gallon in 4Q17. The merchandise margin fell from 28.4% in 4Q16 to 28.1% in 4Q17. Normally, margins on the sale of merchandise are steady compared to margins on the sale of fuels.

MPC’s peer Phillips 66’s (PSX) Marketing and Specialty earnings declined 11% YoY to $124 million in 4Q17.

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