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Marathon Petroleum’s Earnings Mix by Segment

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MPC’s earnings mix by segment

Marathon Petroleum’s (MPC) operating income rose 51% yearly to $440 million in the first quarter. The rise in midstream earnings led to the rise in operating income, changing the company’s earnings mix by segment.

With the rise in midstream earnings in the first quarter, the contribution of the midstream segment to overall earnings rose. The midstream segment, which contributed 106% of total earnings in Q1 2017, contributed 129% to total earnings in Q1 2018. The Speedway segment’s contribution declined from 46% to 22%. The refining segment dented earnings by 30% in the first quarter. Also, corporate and other expenses hurt earnings by 20%.

MPC is realizing its focus on enlarging its steady midstream earnings to shield itself from refining earnings volatility. Let’s briefly look at each of the segment’s performance in the first quarter.

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Refining segment loss

The refining segment’s operating loss rose from $70 million in Q1 2017 to $133 million in Q1 2018 due to the drop-down of assets to MPLX (MPLX), MPC’s master limited partnership, on February 1. This drop-down resulted in a net reduction of $181 million in the refining segment’s earnings and an equivalent rise in midstream earnings.

Also, MPC’s gross refining and marketing margin fell by $1.1 per barrel yearly to $10.6 per barrel in the first quarter. Valero Energy (VLO) and Phillips 66’s (PSX) observed rises in their gross refining margins to $8.4 per barrel and $9.3 per barrel, respectively.

Speedway and midstream segment incomes

In Q1 2018, MPC’s operating income from Speedway fell 30% year-over-year to $95 million. The fall in Speedway incomes was due to the decline in light fuel margin, a rise in operating costs due to labor expenses, and accelerated depreciation.

Meanwhile, the midstream segment’s operating income rose from $309 million in Q1 2017 to $567 million in Q1 2018. The rise in midstream income was due to the drop-down of assets. Plus, the rise was supported by the growth in gathering system throughputs and volumes of natural gas processed and NGL fractionated in the first quarter.

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