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Marathon Petroleum’s Cash Flow Position

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Dec. 4 2020, Updated 10:52 a.m. ET

Marathon Petroleum’s cash flow

In the first half of 2018, Marathon Petroleum (MPC) had $2.249 billion in cash from operations. The company had cash outflows of $1.466 billion due to an addition to PPE (plant, property, and equipment) additions, the acquisition, and $430 million in dividends.

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Marathon Petroleum’s cash flow surplus

Marathon Petroleum’s cash outflows were ~$1.896 billion in the first half of 2018 if we consider the PPE additions, the acquisition, and dividend payments. The company had a cash surplus of ~$353 million—the difference between cash from operations and capex and dividend outflows.

However, Marathon Petroleum’s share repurchases were ~$2.2 billion in the first half of 2018. The required cash needs were met through debt. Marathon Petroleum’s debt rose by $4.3 billion in the first half of 2018, which increased Marathon Petroleum’s cash balance. The cash balance rose from $3.0 billion at the beginning of 2018 to $5.0 billion at the end of the first half of 2018.

Peers’ cash flow

Marathon Petroleum’s cash flow surplus as a percentage of its earnings ability, or cash flow from operations, was at 16%. Marathon Petroleum’s cash flow surplus is higher than Valero Energy’s (VLO) cash flow surplus but lower than Phillips 66’s (PSX) surplus. Valero Energy and Phillips 66’s cash flow surpluses were 13% and 45%, respectively, in the first half of 2018.

Cash flow analysis

Marathon Petroleum had a cash flow surplus in the first half of 2018, which is a favorable scenario. With higher refining earnings in the second quarter, Marathon Petroleum had better cash from operations.

As the third quarter approaches, Marathon Petroleum’s earnings and cash flow from operations could rise due to the seasonal nature of the business, which was the quarterly trend in 2017 as well. With Marathon Petroleum’s growth and acquisition activities, its earnings could rise. If the earnings rise, the cash flow surplus could increase and lead to a better liquidity position.

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