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MPC’s Refining Segment after Its Operating Loss in Q1

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Marathon Petroleum’s operating earnings

Marathon Petroleum (MPC) posted its first-quarter results on May 8. The company’s earnings were lower than analysts’ estimate. To learn more, read MPC’s Q1 Earnings Fall Short of Analysts’ Expectations.

Marathon Petroleum’s operating income rose 52% compared to the first quarter of 2018 to $669 million in the first quarter. The higher operating income was led by increased retail and midstream earnings. The increase was partly offset by lower R&M (refining and marketing) earnings.

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The R&M segment posted an operating loss of $334 million in the first quarter. However, the company’s throughput rose due to the integration of Andeavor’s refining capacities. Marathon Petroleum’s throughputs rose from 1.9 MMbpd (million barrels per day) in the first quarter of 2018 to 3.1 MMbpd in the first quarter. Marathon Petroleum’s gross refining and marketing margin rose by $0.6 per barrel from the first quarter of 2018 to $11.2 per barrel in the first quarter.

Valero Energy’s (VLO) gross refining margin fell from $8.7 per barrel in the first quarter of 2018 to $8.0 per barrel in the first quarter. The refining margin fell due to the decline in oil spreads and gasoline cracks. HollyFrontier’s (HFC) gross refining margin fell by $0.1 per barrel compared to the first quarter of 2018 to $12.7 per barrel in the first quarter. Phillips 66’s (PSX) worldwide refining margin fell by $2.1 per barrel YoY to $7.2 per barrel in the first quarter. The refining margin fell due to the decline in refining margins in three of the company’s four operating regions.

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Retail and midstream segments

In the first quarter, Marathon Petroleum’s operating income from the retail segment rose 79% YoY to $170 million. The operating income rose due to the addition of Andeavor’s retail assets. The rise in the retail fuel margin, merchandise margin, and merchandise sales supported Marathon Petroleum’s retail earnings. Marathon Petroleum has been converting Andeavor stores to the Speedway brand. The company targets 700 cumulative conversions by the end of the year.

The midstream segment’s operating income rose from $567 million in the first quarter of 2018 to $908 million in the first quarter. The operating income rose due to the addition of earnings from Andeavor Logistics. The company saw higher pipeline and terminal throughputs and better gathering, processing, and fractionating volumes in the first quarter.

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