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Barclays CEO Energy Power Conference – Marathon Petroleum Corporation

Marathon Petroleum Corporation · Sep 9, 2015 · 74 slides

Investor presentation from the Shale Experts oil & gas presentation and slide database. Every page is imaged and its text indexed for search across operators, plays, basins and time.

Slides

  1. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 1
    Barclays CEO Energy Power Conference Gary R. Heminger, President and Chief Executive Officer September 9, 2015
  2. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 2
    Advantaged Integrated Model Largest overall downstream system east of the Mississippi Significant optionality and flexibility Ability to extract value across entire supply chain Value enhancement opportunities in volatile…
  3. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 3
    MPLX/MarkWest Powerful Strategic Combination Creates a large-cap, diversified MLP with a very attractive distribution growth profile for an extended period of time MPLX affirms 2015 anticipated distribution growth guidance of 29…
  4. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 4
    Significance of MPLX/MarkWest Merger Creates large-cap, diversified MLP with peer-leading distribution growth profile Growing higher value, stable cash flow midstream business Opportunity to capture value through numerous…
  5. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 5
    MarkWest Has the Premier Position in Marcellus / Utica Second-largest natural gas processor and the fourth-largest fractionator of NGLs in the U.S. Extensive long-term producer partnerships with Marcellus & Utica area dedications of…
  6. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 6
    MPCs Currently Identified Eligible MLP EBITDA 1.6 B and growing Retained by MPC 5,400 miles of additional crude and products pipelines Owns, leases or has an ownership interest in these pipelines Pipelines 0.5% of MPLX Pipe Line…
  7. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 7
    Investing in Significant Midstream Growth Projects Access to advantaged crudes Creating industry solutions Growing midstream portfolio Sustaining pipeline advantage See appendix for legend Financial Benefits to both MPC and…
  8. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 8
    SAX and Sandpiper Enhances Crude Optionality Differentials to LLS 10 0 Expected SAX Grades Grade -10 differentials constantly changing Bakken /BBL -20 Synthetic -30 Canadian -40 Conventional Light/Medium -50 -60 Canadian…
  9. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 9
    MPCs Strength in Refining Largest refiner East of the Mississippi Refining capacity in advantaged regions Optimized seven-plant system 70 percent assured sales of gasoline production Continued focus on margin-enhancing projects…
  10. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 10
    Refinery Margin-Enhancing Projects 835 MM capital investments, generating 650 MM annual EBITDA Increasing Light Sweet Crude and Condensate Capacity Condensate splitters at Canton and Catlettsburg refineries (+60 MBD) Light crude…
  11. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 11
    Galveston Bay Driving Value Integration with Texas City refinery Revamp crude and vacuum units Optimize for future crude availability Improve distillate recovery Add hydrotreating capacity Move to 100% ULSD Idle the smallest and…
  12. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 12
    Speedways Integration to Best in Class Platform Over 800 locations converted Total capital: 500 Stores Conversion 181 MM by Oct. 2015 Remodel 240 MM Achieving synergies Conversion creates platform for increased merchandise…
  13. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 13
    Extensive Retail Network Drives Integrated Value Combination Provides 70% Assured Gasoline Sales Speedway 73 64 Largest company-owned and 53 303 12 operated c-store chain east of the Mississippi 751 240 108 Growth through Hess…
  14. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 14
    Strong Macro Environment for U.S. Refining Chicago LLS 6-3-2-1 USGC LLS 6-3-2-1 20 20 15 15 10 10 5 5 0 0 -5 -5 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2012 2013…
  15. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 15
    Macro Outlook Expect crude prices lower for longer Forward values for the Brent-WTI differential are favorable Predicting volatile crude differentials WTI Brent-WTI Brent 100 8 110 90 100 7 90 80 6 80 /BBL 70 /BBL…
  16. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 16
    Sustaining U.S. Refining Advantage 20 International Fuel Cost Comparison 15 /MMBtu 10 5 0 Henry Hub (NYMEX prompt price) European Natural Gas (Avg Import Border Price)* Japanese Liquefied Natural Gas (Import Price)*…
  17. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 17
    U.S. Refined Product Demand Year-over-Year U.S. Product Demand Growth 300 250 Continued strong refined product 200 demand Lower commodity price MBD 150 environment stimulates 2015 100 gasoline strength 50 Expect strong…
  18. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 18
    U.S. Gross Refined Product Exports Increasing 4.5 4.0 Gasolines MPC Finished Product 3.5 Kero-Jet Exports = 300 MBD YTD* 3.0 Diesels 2.5 Propane/Propylene MMBD 2.0 Gross Product Exports 1.5 1.0 0.5 0.0 Source: U.S. Energy…
  19. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 19
    Capital Return and Investment Strategy 22
  20. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 20
    Balanced Approach to Returning Capital and Investment Returned 2x adjusted free cash 11.1 flow to investors since spin** Billion 8.7 Billion Investing in value-enhancing projects and acquisitions Capital Invested in the…
  21. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 21
    Substantial Dividend Growth Since Spin-Off 0.35 350 +28% 0.30 300 +19% 0.25 250 +20% MM /Share 0.20 200 +40% 171 0.15 141 138 136 136 150 129 126 123 122 +25% 119 116 116 113 0.10 89 87 85 100 71 0.05 50 0.00…
  22. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 22
    Share Repurchases Since Spin-Off 1,200 8,000 1,028 Since spin-off: 1,000 882 10 B in total Board 6,000 Qtrly Repurchases MM 850 authorizations 800 Cumulative MM 689 682 6.9 B returned to shareholders 600 4,000…
  23. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 23
    What You Are Missing First Mover Peer Leader Separation from upstream Sustained performance Drop-down MLP creation through all cycles Capital returns to shareholders Consistent and reliable operator Using MLP to be industry…
  24. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 24
    Appendix 27
  25. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 25
    Fully Integrated Downstream System Refining and Marketing Seven-plant refining system with 1.7 MMBPCD capacity One biodiesel facility and interest in three ethanol facilities One of the largest wholesale suppliers in our market area…
  26. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 26
    Investing in Significant Midstream Growth Projects Youngstown Sandpiper Canton Pa. Canadian MPC Investment: 1.0 B - 1.2 B Midland MPC Equity: 27% - 30% Wellsville 2017 completion est. Bakken M3, Leesville Steubenville M3, Scio…
  27. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 27
    Performing Consistently in the Top Tier Engine behind MPCs focus on capital returns Operating Income Per Barrel of Crude Throughput** 20 MPCs Rank 15 Competitor Range 1 2 10 2 /BBL 5 1 5 2 3 5 1 3 2 7 3 3 3 1 3 2 0…
  28. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 28
    Our Priorities for Our Investors Maintain top-tier safety and Share Price 70 environmental performance 60 Sustain our focus on shareholder returns 50 Balance capital returns with 40 value-enhancing investments 30 Spin- off Grow…
  29. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 29
    Sustaining Capital Returns Since Spin Cumulative Return of Capital Since July 1, 2011 10,000 8.7 B 8,000 6,000 MM 4,000 2,000 0 Dividends Share repurchases 32
  30. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 30
    Focused Return of Capital to Shareholders LTM Ended 6/30/15 8,000 7,000 6,000 2,772 Hess Retail Acquisition 5,000 Dividends and share Dividends and share repurchases 1.8x of MM Adj. Free Cash Flow*** repurchases* 4,000…
  31. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 31
    MPCs Value of Integration Crude Price RIN Decline 2,800 Distortion 2,600 2,400 Flexible refining system 2,200 2,000 Large retail MM presence 1,800 1,600 Extensive logistics with considerable 1,400 optionality…
  32. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 32
    Leveraging Existing Capacity to Run Light Sweet Crude 30 Reforming Capacity % of Crude Capacity 25 45% sweet crude oil throughput in 2Q 2015 20 Industry versus 68% sweet crude oil capacity Average 15 Reformer capacity captures…
  33. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 33
    Increasing Light Sweet Crude and Condensate Capacity Condensate splitters Condensate Processing Opportunity Canton: 25 MBD Light Naphtha to Gasoline Blending Completed 4Q 2014 Ultra-Sweet New Heavy Naphtha to Reforming…
  34. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 34
    Rising MPC Finished Product Exports 350 300 250 200 MBD 150 100 50 0 2010 2011 2012 2013 2014 1H 2015 37
  35. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 35
    Growing Gulf Coast Export Capabilities Export investments totaling 120 MM Added new 500,000 barrel export tank Export Capacity 600 at Garyville in 2013 510 500 Galveston Bay in 2015 395 +30 MBD ULSD 400 345 320 MBD 40% ROI…
  36. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 36
    Capitalizing on Global Growth in Diesel Demand Distillate Production 700 600 Garyville +35 MBD ULSD in 2014-2016 MBD 500 232 MM investment 400 45% ROI 300 2012 2013 2014 2015E 2016E 2017E Galveston Bay +9 MBD ULSD in 2015…
  37. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 37
    MPLX/MPC Utica Build-Out Connectivity 40
  38. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 38
    MPLX Developing a Comprehensive Utica System Cornerstone Pipeline and Additional Opportunities Industry solution, 16-inch pipeline connecting Utica Shale region to East Sparta, Ohio, tank farm 250 MM capital investment Includes tank…
  39. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 39
    MPLX Distributions and Sales Proceeds to MPC* 30 27.3 24.1 19.7 20.7 20 17.5 18.5 15.8 16.6 MM 15.1 9.8 10 0 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 LP Distributions GP Distributions, including IDRs MPC…
  40. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 40
    Generating Significant Cash Flow Through All Cycles Pro forma EBITDA adjusted for current configuration Pro forma EBITDA 8,000 6,000 MM 4,000 2,000 0 2009 2010 2011 2012 2013 2014 2009 thru 2014 Mid- Pipeline…
  41. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 41
    Sustaining Core Liquidity Needs Minimum cash balance of 500 MM - 1.0 B Requirements Ongoing Operating Cash-Flow Requirements Maintenance/Sustaining Capital Interest Payments Dividend Payments Contingent Calls on Corporate Liquidity -…
  42. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 42
    Growing Global Product Demand Compounded Annual 120 Growth Rates Actual Forecast 2030 vs. 2014 100 +1.2% Other Distillate and gasoline 80 Other -1.0% demand continues to rise Fuel Oil Fuel Oil MMBD 60 +1.2% Fuel oil…
  43. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 43
    Rising North American Crude & NGLs Production 25 2015 Actual Forecast 20 Canada 15 MMBD 10 5 U.S. 0 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 Sources: EIA, CAPP, MPC 46
  44. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 44
    Growing Crude Oil Supply 1,800 2014 5,000 2014 150 2014 North Dakota Texas Ohio 1,500 4,000 125 1,200 100 3,000 MBD MBD MBD 900 75 2,000 600 50 300 1,000 25 Actual Forecast Actual Forecast Actual Forecast 0 0 0…
  45. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 45
    Refining Capacity in Advantaged Regions 100% in PADDs II and III Canadian Bakken 100% Utica 80% PADD IV PADD II 60% PADD V 40% PADD I 20% 0% PADD III MPC VLO HFC PSX TSO PADD II PADD III PADD I PADD IV PADD V Permian Basin…
  46. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 46
    Refinery Capacity BPCD NCI* Garyville 522,000 11.4 Galveston Bay 451,000 13.3 Catlettsburg 242,000 10.2 Robinson 212,000 10.1 Detroit 130,000 9.8 Canton 90,000 8.0 Texas City 84,000 8.0 Total 1,731,000 11.1** The Nelson…
  47. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 47
    Balance in Refining Network Canton (Ohio) 90,000 Catlettsburg (Ky.) 242,000 Midwest Capacity Detroit (Mich.) 130,000 674,000 BPCD Robinson (Ill.) 212,000 Galveston Bay 451,000 (Texas) Texas City (Texas) 84,000 Garyville (La.)…
  48. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 48
    U.S./Canada Key Existing and Planned Pipelines In Service MBPD Pipeline Date 300 Line 9 Reversal 2015 300 SAX 2015 200 Diamond 2017 450 Dakota Access 2017 450 ETCO 2017 (Trunkline Conversion) 225/375 Sandpiper 2017 300…
  49. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 49
    Compelling Advantage for Pipeline and Marine All costs shown as /BBL Pipeline costs exclude any storage or transfer fees and line loss Sources: MPC, publicly available information 52
  50. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 50
    Creating Crude/Condensate Advantage Source: MPC 53
  51. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 51
    Key Strengths Balanced Operations Crude Oil Refining Capacity Crude Slate 61% PADD II 55% Sour Crude PADD III 45% Sweet Crude 39% As of June 30, 2015 2Q 2015 Assured Sales of Gasoline Production (Speedway + Brand +…
  52. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 52
    Speedway Value Total Gross Margin Mix 2011-2014 Average Top-tier performance in the convenience store industry Light Scalable technology and Product organizational infrastructure 37% Merchandise Disciplined expense control 63%…
  53. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 53
    Growing Speedway 800 Segment EBITDA* 696 600 143 MM 400 553 424 487 200 404 381 0 2010 2011 2012 2013 2014 Legacy Speedway Hess *Non-GAAP disclosure, see appendix for reconciliation to Speedway segment income from…
  54. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 54
    Acquisition of Hess Retail Transaction Overview Hess retail acquisition included: 1,245 company operated locations Transport fleet with capacity to transport 1 B gal/yr. Pipeline shipper history in various pipelines, including 40…
  55. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 55
    Transformative Transaction for MPC and Speedway Accelerates strategy to grow higher valued and stable cash-flow businesses Provides larger integrated platform for growth in new markets Meaningfully expands scale and provides…
  56. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 56
    Enhances Strategic Value for Integrated System Refined Product Placement Opportunities Incremental 200 MBPD of refined products placement capacity, increases assured gasoline Incremental supply of MPC Gulf Coast refined products to…
  57. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 57
    Synergies and Marketing Enhancements Will Drive Value 400 Earnings Opportunities 70 300 45 Operating and G&A expense MM 40 200 35 365 100 175 synergies of 75 MM 0 2013 Pro Forma Hess Form 10 WilcoHess Operating and G&A…
  58. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 58
    Focus on Improving Light Product Breakeven 13 12.39 11 Each 1.00 cent per gallon improvement Light Product Breakeven (cpg) 9 = 30 MM annual pretax earnings Total Expenses 7 7.13 LPBE = Merchandise Margin Light Product…
  59. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 59
    Speedway and Hess Side-by-Side Comparison Hessa Speedwayb Company Operated Sites 1,255 1,478 Fuel Sales Speedway generates an incremental 198,500 177,400 (gallons/store/month) 17,300 of merchandise margin per Fuel Margin 0.137…
  60. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 60
    Allocating Capital to Higher Valued Businesses 2012 2015 Capital Investment Profile 3,000 2,500 2,000 MM 1,500 1,000 500 0 2012 2013 2014 2015E Refining & Marketing, excluding Midstream Midstream Pipeline…
  61. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 61
    2015 Significant Capital Projects 2015 Capital Budget - 2.5B Refining & Marketing margin-enhancing projects Corporate Increase light crude capacity at Robinson Speedway & Other Distillate growth at Garyville, Galveston Bay and…
  62. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 62
    Capital Expenditures & Investments (MM) MPC 2015 Budget 2Q 2015 YTD Refining & Marketing 1,042 160 335 Midstream 234 47 101 Total Refining & Marketing Segment 1,276 207 436 Speedway 452 100 145 Pipeline Transportation 659 157 238…
  63. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 63
    Renewable Fuels Corn Ethanol Plants 67% equity interest* in Greenville, Ohio 110 MM gallon/year capacity 60% equity interest in Clymers, Indiana 110 MM gallon/year capacity 43% equity interest in Albion, Michigan 55 MM gallon/year…
  64. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 64
    Annual Price and Margin Sensitivities MM (After Tax) LLS 6-3-2-1 Crack Spread* Sensitivity 450 (per 1.00/barrel change) Sweet/Sour Differential** Sensitivity 200 (per 1.00/barrel change) LLS-WTI Spread*** Sensitivity 100 (per…
  65. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 65
    MPLXs Priorities for Investors Maintain Safe and Reliable 90 Operations Unit Price 80 Sustain Long-term LP Distribution Growth; 29% in 2015, 70 25% CAGR through 2017, and approximately 20% in 2018 and 2019 60 50 Focus on…
  66. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 66
    MPLX and MPC are Aligned MPLX Organizational Structure Marathon Petroleum Corporation and Affiliates MPC views MPLX as integral to its (NYSE: MPC) operations and is aligned with its 100.0% ownership 69.5% Public success and…
  67. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 67
    MPLX Deficiency Payment Effect Example For illustrative purposes only Quarter Quarter Quarter Quarter Quarter Quarter Quarter (MM) 1 2 3 4 5 6 7 Quarterly deficiency payment 2 5 3 5 - - - Use or expiration of credit (on or…
  68. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 68
    Incentive Distribution Rights 2Q 2015 distribution of 0.4400/unit is in top tier of IDRs 71
  69. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 69
    3Q 2015 Outlook Other Total Corporate Percent of Turnaround Depreciation Other Crude Charge/ Total Direct and Other WTI-priced and Major and Manufacturing Throughput* Feedstocks Throughput* Operating Unallocated Crude Maintenance…
  70. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 70
    EBITDA Reconciliation to Net Income Attributable to MPC 2007 2008 2009 2010 2011 2012 2013 2014 2015 (MM) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q Net income attributable to MPC 2,262 1,215 449 623 2,389 3,389 725 593 168 626 199 855 672 798…
  71. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 71
    Reconciliation Adjusted Free Cash Flow to Net Cash Provided by Operations (MM) 2014 2015 LTM (For the Quarter) 3Q 4Q 1Q 2Q Net cash provided by operating activities 1,078 388 1,190 994 3,650 Additions to property, plant and…
  72. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 72
    Reconciliation Adjusted Free Cash Flow to Net Cash Provided by Operations Since 6/30/11 (MM) Spin-off Net cash provided by operating activities 15,548 Additions to property, plant and equipment (5,487) Acquisitions (4,526)…
  73. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 73
    EBITDA Reconciliation to Net Income for Hess (MM) 2013* 2017E Net Income 47 138 Less: Net interest and other financial income (costs) (12) - Add: Provision for income taxes 22 78 Add: Depreciation and amortization 94 149 EBITDA…
  74. Barclays CEO Energy Power Conference – Marathon Petroleum Corporation – slide 74
    Market Indicators Used in Project EBITDA Calculations 2015-2019 ULSD (USGC; /BBL) 121.80-128.98 Sour Gas Oil (/BBL) 118.41 Sweet Gas Oil (/BBL) 121.35 WTI 3:2:1 Crack Spread (/BBL) 13.81 77

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