Marathon Petroleum Reports 3Q Increases Helped by 2010 SuperAmerica Sale

But R&M, Speedway income from operations down for quarter on gasoline margins

Published in CSP Daily News

By  Greg Lindenberg, Online Editor

FINDLAY, Ohio -- Marathon Petroleum Corp. (MPC) has reported third-quarter net income of $1.224 billion, compared with net income of $1.133 billion, in the third quarter of 2011.

For the quarter, net income adjusted for special items was $1.129 billion, compared with net income adjusted for special items of $1.133 million, in third-quarter 2011. The results included an after-tax asset sale settlement gain of $117 million for the 2010 sale of a refinery and the 166-store SuperAmerica convenience store chain in Minnesota.

(See Related Content below for previous CSP Daily News coverage.)

"MPC's continued strong operating performance allowed us to leverage favorable market conditions, which led to very strong financial results during the third quarter," said MPC president and CEO Gary R. Heminger.

Early in the third quarter, MPLX LP filed a registration statement with the U.S. Securities  & Exchange Commission  (SEC) for an initial public offering (IPO) of common units representing limited partner interests in MPLX. MPC intends for MPLX to become its primary vehicle for ownership, operation and growth of hydrocarbon-based pipelines and other midstream assets. The IPO was priced on Oct. 25, and units are currently trading on the New York Stock Exchange under the ticker symbol "MPLX" (see Related Content below for previous coverage).

During the company's third-quarter earnings call, Heminger introduced Garry Peiffer, executive vice president of corporate planning and investor and government relations, as president of MPLX.

In October, MPC announced that it had signed a definitive agreement to purchase BP's refinery in Texas City, Texas, and related assets, including pipelines, four terminals and retail marketing contract assignments for approximately 1,200 branded sites for a base price of $598 million, plus inventories estimated at $1.2 billion (see Related Content below for previous coverage). The acquisition is expected to close early in 2013 and be accretive to earnings in the first year of operation.

Total income from operations was $1.895 billion in third-quarter 2012, compared with $1.759 billion in third-quarter 2011.

Refining & Marketing segment income from operations was $1.691 billion in third-quarter 2012, compared with $1.711 billion of segment income in third-quarter 2011. The R&M gross margin was relatively unchanged at $13.12 per barrel in third-quarter 2012, compared with $13.18 per barrel in third-quarter 2011.

The Speedway segment income from operations was $76 million in third-quarter 2012, compared with $85 million in third-quarter 2011. The $9 million decrease was primarily the result of a lower gasoline and distillates gross margin and higher expenses, partially offset by an increase in merchandise gross margin. Speedway gasoline and distillates gross margin per gallon averaged 11 cents in third-quarter 2012, compared with 12.57 cents in third-quarter 2011.

Speedway same-store merchandise sales decreased 0.8% in third-quarter 2012, compared with a 1.8% increase in third-quarter 2011. Same-store gasoline sales volume decreased 3.9% in third-quarter 2012, compared with a decrease of 1.6% in third-quarter 2011; however, same-store merchandise sales, excluding tobacco, increased 4.1% compared to the same quarter last year, which had a 7.2% same-store increase over 2010.

Merchandise margin was $217 million in third-quarter 2012 compared with $200 million during the same period last year. This $17 million increase was primarily due to an increase in the number of stores compared to the same period last year.

Same-store gasoline sales volumes decreased 3.9% in the third-quarter 2012 compared with the 2011 third quarter. Speedway's October same-store gasoline volumes were up approximately 1%, which puts their same-store sales down about 1% year-to-date.

Regarding the decrease, Hemginer said "it's all price."

"If you look at the last three or four years how that retail price and the discretionary demand changed. ... I would say that the price level now seems to be $3.50," he said on the call. "Once you get over $3.50, the discretionary demand seems to drop. We're seeing right now here in the month of October that demand has picked up because we got below the $3.50 range. So I would say it's all price level. And ... over the summer, early fall, we got up close to $4, and that's really been the determining factor."

Findlay, Ohio-based MPC is the nation's fifth-largest refiner, with a crude oil refining capacity of approximately 1.2 million barrels per calendar day in its six-refinery system. Marathon-brand gasoline is sold through more than 5,000 independently owned retail outlets across 18 states. In addition, Speedway LLC, an MPC subsidiary, owns and operates the nation's fourth-largest convenience store chain, with approximately 1,460 stores in seven states. MPC also owns, leases or has ownership interests in approximately 8,300 miles of pipeline. MPC's fully integrated system provides operational flexibility to move crude oil, feedstocks and petroleum-related products efficiently through the company's distribution network in the Midwest, Southeast and Gulf Coast regions.

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