Marathon Petroleum Notches Up Gains in Third-Quarter 2012, Expects Progress from Detroit, Texas Refineries

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Researched by Industrial Info Resources (Sugar Land, Texas)--Marathon Petroleum Corporation (NYSE:MPC) (Findlay, Ohio), a leading petroleum refiner, announced third-quarter 2012 earnings that were slightly ahead with those from the same period last year, despite a small drop in refining margins. Net income for the quarter was reported to be $1.22 billion, an 8.03% increase from third-quarter 2011.

Total revenues stood at $21.25 billion, a 2.89% increase from the same period last year. The Refining & Marketing segment was hindered by higher crude oil costs during the quarter, as well as higher planned maintenance and turnaround expenses, but benefited from strong blended crack spread profits. The company's Speedway business saw slightly lower same-store gasoline and merchandise sales, as well as increased expenses. Notably, though, the company reported a $183 million pre-tax gain during the third quarter from the 2010 sale of Minnesota assets.

Capital expenditures for the quarter were $360 million, compared with $305 million in the same period last year. However, the higher spending was in the Speedway and Pipeline Transportation segments, which saw increases that more than tripled and doubled, respectively; Refining & Marketing, by far the largest segment of the three, saw an 18.75% decrease.

Industrial Info is tracking more than $1.63 billion in active projects involving Marathon Petroleum, including the $2.5 million upgrade of a firewater protection system at a refinery in Canton, Ohio. The project involves upgrading and adding to the underground duct firewall loop piping around perimeter of the 73,000-barrels per day (BBL/d) crude oil refinery, and it is expected to be completed in January 2013. Industrial Info also is tracking $15 million in planned turnarounds at the same facility.

"We estimate that U.S. gasoline demand was down about 0.3% and distillate demand was down about 3% in the third quarter of 2012, compared with a year ago," said Gary Heminger, the president and chief executive officer of Marathon Petroleum, in a conference call. "We expect U.S. gasoline demand to remain soft through the remainder of 2012, and expect total-year 2012 demand to be down approximately 0.2%. Total year distillate demand is expect to decline about 1.9% in 2012."

Although Marathon Petroleum experienced operational income losses in its three major segments, all were relatively small:

• The Refining & Marketing segment reported $1.69 billion in income from operations, a 1.17% decrease from third-quarter 2011.
• The Speedway segment reported $79 million in income from operations, a 10.59% decrease from the same period last year.
• The Pipeline Transportation segment reported $52 million in income from operations, a 7.14% decrease from third-quarter 2011.

"Looking ahead into 2013, we expect U.S. gasoline demand to be flat, and distillate demand to be up about 3.7%," Heminger said in the conference call. "In addition, we expect export opportunities to remain attractive in 2013."

Heminger said that Marathon Petroleum's $2.2 billion heavy oil upgrade project at the Detroit refinery is nearly complete, with the startup expected sometime early this month. With a new capacity of 120,000 BBL/d, the heavy crude oil processing capacity is expected to quintuple to 100,000 BBL/d. The company also announced last month that it signed a definitive agreement to purchase BP plc's (NYSE:BP) (London, England) refinery in Texas City, Texas, in a deal that is altogether worth about $2.5 billion. The acquisition is expected to close next year.

"The refinery is one of the largest and most complex refineries in the U.S.," he said. "This is a unique opportunity to acquire world-scale refining assets at an attractive price. In addition to the 451,000-BBL/d refinery, the agreement also includes the 1,040-megawatt cogen facility, four terminals, three intrastate natural gas liquids pipelines, contracts representing 1,200 brand [retail] locations, and 50,000 BBL/d assigned shipper history on the Colonial pipeline."

For more information, visit Industrial Info's North American Petroleum Refining Project Database.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.