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MPC’s Earnings Rose across Segments in the Fourth Quarter

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Marathon Petroleum’s Refining segment operating earnings

Marathon Petroleum (MPC) posted better-than-expected earnings on February 7. For more on this, read Marathon Petroleum’s Q4 Operating Earnings Surge. Now let’s look at the earnings on the segmental level.

Marathon Petroleum’s (MPC) operating income rose by 72% over Q4 2017 to $2.0 billion in Q4 2018. The rise in operating income was led by an increase in R&M (Refining and Marketing), Retail, and Midstream earnings.

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The R&M segment’s operating earnings rose from $0.7 billion in Q4 2017 to $0.9 billion in Q4 2018 due to higher throughput led by the integration of Andeavor’s refining capacities. MPC’s throughputs rose from 2.0 MMbpd (or million barrels per day) in Q4 2017 to 3.1 MMbpd in Q4 2018. Also, wider oil spreads supported refining earnings. Marathon Petroleum’s gross refining and marketing margin rose by $2.0 per barrel over Q4 2017 to $15.1 per barrel in Q4 2018.

Peer Valero Energy’s (VLO) gross refining margin also rose from $8.8 per barrel in Q4 2017 to $11.0 per barrel in Q4 2018. Further, Phillips 66 (PSX) could also post better margins led by wider spreads in the fourth quarter.

Retail and Midstream segment income

In Q4 2018, Marathon Petroleum’s operating income from retail rose by 314% YoY to $0.6 billion due to the addition of Andeavor’s retail assets. Plus, the rise in fuel margin and merchandise sales further supported MPC’s Retail earnings. Marathon Petroleum has started converting Andeavor stores to the Speedway brand.

Meanwhile, the Midstream segment’s operating income rose from $0.3 billion in Q4 2017 to $0.9 billion in Q4 2018 due to the addition of earnings from Andeavor Logistics, the dropdown of midstream assets, and record processing volumes.

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