Marathon Petroleum Takes Big Earnings Hit, Expansions Proceed

Researched by Industrial Info Resources (Sugar Land, Texas)--Midstream operator, refiner and retailer Marathon Petroleum Corporation (NYSE:MPC) (Findlay, Ohio) reported net earnings of $145 million for third-quarter 2016, compared with $948 million in the same quarter last year. Lower refining margins and an impairment charge for a pipeline project were partially to blame for the large drop in earnings. Industrial Info is tracking $3.09 billion of projects belonging to Marathon Petroleum.

Income from Marathon Petroleum's Refining & Marketing segment fell from $1.43 billion in third-quarter 2015 to $306 million in the just-passed quarter. "The decrease in the quarter-over-quarter results was due to a $6.52 per barrel decrease in gross margin, primarily resulting from lower crack spreads in both Gulf Coast and Chicago markets and lower product price realizations compared to the spot market product prices used the Light Louisiana Sweet (LLS) crack spread calculation," the company said in a statement.

The company's midstream segment brought in income of $258 million, compared with $93 million in the prior-year quarter, while its Speedway convenience stores provided operating income of $209 million, compared with $243 million in 3Q15. "MPC continues to benefit from the diversified nature of its business," said Chief Executive Officer Gary Heminger. "Our Speedway and midstream businesses contributed more than $450 million of combined segment income in the third quarter, demonstrating the importance of this stable earnings base to our results."

The company also wrote down $267 million on an impairment charge for the in-limbo Sandpiper crude oil pipeline project, which was to run from North Dakota's Bakken shale to a terminal in Superior, Wisconsin. Project partner Enbridge Incorporated (NYSE:ENB) (Calgary, Alberta) pulled the plug on the project in early September, stating "that the project should be delayed until such time as crude oil production in North Dakota recovers sufficiently to support development of new pipeline capacity," which it stated was beyond the project's five-year planning horizon.

The company did note that MPLX LP (NYSE:MPLX), the master limited sponsorship sponsored by Marathon Petroleum, commenced operations of the 50-mile Cornerstone Pipeline in October. The pipeline will transport condensate from Harrison County, Ohio, to Marathon Petroleum's refinery in Canton, Ohio. Construction of the $100 million project kicked off earlier this year and took about six months to complete.

Among the largest Marathon Petroleum projects being tracked by Industrial Info is the addition of a gasoline hydrotreater at the company's refinery in Texas City, Texas. Construction of the $130 million project kicked off last month and should take about a year to complete. The 35,000-barrel-per-day (BBL/d) hydrotreater will reduce sulfur content in gasoline from 30 parts per million (ppm) to 10 ppm. Construction of a 65,000-BBL/d diesel hydrotreater that will produce 100% ultra-low-sulfur diesel is planned to kick off at the refinery in early 2018 and take about two years to complete.

The company is also under way with the addition of Train 7 at its Sherwood cryogenic natural gas processing plant in West Union, West Virginia. The 200-million-standard-feet-per-day train will bring the plant's total processing capacity up to 1.4 billion cubic feet. An eighth train of the same size could potentially be added next year.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, 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. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.