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How Is Marathon Petroleum’s Liquidity Position?

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Marathon Petroleum’s cash flows

In the first nine months of 2018, Marathon Petroleum (MPC) had $3.4 billion in cash from operations. The company had cash outflows of $2.8 billion in the form of PPE (plant, property, and equipment) additions and acquisitions and $0.6 billion in the form of dividends.

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Marathon Petroleum’s cash flows matched

Marathon Petroleum’s cash outflows amounted to ~$3.4 billion in the first nine months of 2018 if we consider PPE additions, acquisitions, and dividend payments. The company’s cash flow from operations of $3.4 billion matched its necessary capex, acquisition costs, and dividend payments of $3.4 billion in the period.

Further, Marathon Petroleum’s share repurchases stood at $2.6 billion in the first nine months of 2018. Its required cash needs were met via its debt. Marathon Petroleum’s debt rose $5.3 billion in the first nine months of the year. This also increased Marathon Petroleum’s cash balance, which rose from $3.0 billion at the beginning of the period to $5.0 billion at the end of the period.

Peers’ cash flows

Comparatively, Phillips 66’s (PSX) cash flow from operations of $3.4 billion was more than sufficient to cover its capex and dividend cash outflows. Phillips 66 was left with $0.7 billion in surplus cash after incurring these necessary expenses. However, Valero Energy’s (VLO) cash flow from operations of $2.7 billion couldn’t cover these cash outflows.

What a cash flow analysis reveals

Marathon Petroleum’s cash flow from operations matched its vital outflows—a moderate business scenario.

Marathon Petroleum’s capex and acquisition activities could result in better earnings and cash flows in the future, which might improve the company’s cash flow position. However, it will have to be cautious during periods of weaker refining margins and earnings, which could result in cash flow shortfalls.

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