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Marathon Petroleum: Stronger Refining and Midstream Segments

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Refining segment growth activities

In this part, we’ll discuss Marathon Petroleum’s (MPC) refining and midstream segments’ growth projects.

In the refining segment, the important ongoing projects include the Galveston Bay Star program, Dickinson Renewable Diesel project, and Los Angeles LARIC project.

These three projects are expected to add ~$1.0 billion of annual EBITDA to the company by 2022.

The LARIC project is expected to contribute $125 million of incremental annual EBITDA. The Dickinson project is expected to add $180 million of EBITDA. The Galveston Bay Star program could contribute $525 million of annual EBITDA—the highest among other projects. The program is expected to increase the site’s refining capacity by 40 thousand barrels per day. The project will also increase resid processing capability, improve gasoil recovery, and reduce the cost at the site. Star’s estimated capex of $1.5 billion—$1.2 billion is expected to be spent from 2019 to 2022.

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Midstream growth activities

Marathon Petroleum focuses on midstream expansion to create a steady stream of income. Marathon Petroleum plans to expand its export terminals to tap global third-party revenues. The company has the Mt. Airy and LOOP terminals in operation. Marathon Petroleum’s planned terminals include South Texas Gateway and Texas City. The company continues to grow third-party revenues in the Bakken and Marcellus/Utica regions.

In the Permian, Marathon Petroleum has the Conan crude gathering system plus natural gas gathering and processing plants at Hidalgo and Argo. The company plans to set up three more plants in the region—Apollo, Torñado, and Preakness. The system and plants will feed crude oil to the Gray Oak and Wink-to-Webster pipelines, natural gas to Whistler pipeline, and NGL to the BANGL (Belvieu Alternative NGL) pipeline. The plants will reduce costs and increase stable midstream earnings for the company.

Marathon Petroleum’s continuous effort to raise midstream earnings has started materializing. In the first quarter, Marathon Petroleum’s midstream earnings rose 60% YoY to $908 million. The segment supported the company’s overall earnings when the refining segment posted a loss. Marathon Petroleum has almost created a stable, integrated, and diversified earnings model.

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