MPC 'Optimistic' on Growth

Spinoff from Marathon Oil "right transaction at right time"

Published in CSP Daily News

FINDLAY, Ohio -- In reporting second-quarter 2011 earnings, Marathon Petroleum Corp. president and CEO Gary R. Heminger said he is "optimistic about growth prospects for our Speedway retail operations and Marathon-branded jobber stations."

Previously, Heminger said that Marathon Petroleum, which was spun off from Marathon Oil Corp. on June 30 ( click here for previous CSP Daily News coverage), is "hungry for acquisitions" ( click here).

"The spinoff of MPC from Marathon Oil Corp. was the right transaction at the right time," Heminger said yesterday. "As an independent company with a strong financial position and financing in place, our objective is to selectively pursue new growth opportunities while exercising financial discipline to maintain our investment-grade profile."

During the quarter, Speedway completed the purchase of 23 convenience stores in Chicago, Illinois and northwestern Indiana from the bankrupt Gas City ( click here), which Heminger said strengthens Speedway's presence in that important geographic market. All of the locations have been rebranded and are now integrated into Speedway's operations.

Speedway's 2011 second-quarter segment income from operations was $80 million, compared with $83 million in second-quarter 2010. The second-quarter 2010 segment income from operations included the results of the 166 convenience stores and 67 franchise convenience stores that were part of the December 2010 sale of Marathon's Minnesota refinery and related assets ( click here for previous coverage).

Speedway's gasoline and distillate gross margin per gallon improved considerably, averaging 15.02 cents in second-quarter 2011, up from 11.68 cents in second-quarter 2010. The contribution from the higher gasoline and distillate gross margin was partially offset by lower sales volumes attributable to the Minnesota asset disposition, as well as lower demand due to higher gasoline and distillate retail prices and the state of the economy in Speedway's Midwest markets.

Same-store gasoline sales in second-quarter 2011 decreased 5%, essentially offsetting the increase of 5% achieved in second-quarter 2010.

Same-store merchandise sales were flat in second-quarter 2011, compared with an increase of 4% for second-quarter 2010. Merchandise gross margin was $178 million in second-quarter 2011, compared with $207 million in second-quarter 2010, which primarily reflects the effects of the Minnesota asset disposition.

Overall, Marathon Petroleum has reported second-quarter net income of $802 million, or $2.24 per diluted share, compared with net income of $405 million, or $1.13 per diluted share, in second-quarter 2010.

Total segment income from operations was $1,394 million in second-quarter 2011, compared with $721 million in second-quarter 2010.

Refining & Marketing segment income from operations was $1.26 billion in second-quarter 2011, compared with $590 million in second-quarter 2010. The increase was primarily the result of a higher refining and marketing gross margin, which increased to 25.66 cents per gallon in second-quarter 2011 from 13.06 cents per gallon in second-quarter 2010.

MPC is the nation's fifth-largest refiner with a crude capacity in excess of 1.1 million barrels per day in its six-refinery system. Marathon-brand gasoline is sold through approximately 5,100 independently owned locations across 18 states. In addition, Speedway LLC, an MPC subsidiary, owns and operates the nation's fourth largest convenience store chain, with approximately 1,375 locations in seven states. MPC also owns, operates, leases or has ownership interest in approximately 9,600 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.