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Bank of America Global Energy Conference – Marathon Petroleum Corporation

Marathon Petroleum Corporation · Nov 11, 2015 · 75 slides

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Slides

  1. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 1
    Bank of America - Global Energy Conference Donald C. Templin, Executive Vice President Supply, Transportation, and Marketing November 11, 2015
  2. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 2
    MPCs Advantaged System First Mover and Peer Group Leader Top-tier safety and environmental performance Integrated downstream system Growing Midstream/MPLX MPLX/MWE merger Enhancing margins in our refining operations Speedway Hess…
  3. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 3
    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…
  4. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 4
    MPLX/MarkWest Powerful Strategic Combination Creates a large-cap, diversified MLP with a very attractive distribution growth profile for an extended period of time Combined partnership expects compound annual distribution growth rate…
  5. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 5
    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…
  6. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 6
    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 and Utica area dedications of…
  7. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 7
    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…
  8. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 8
    Investing in Significant Midstream Growth Projects Access to advantaged crudes Creating industry solutions Growing midstream portfolio Sustaining pipeline advantage Financial benefits to both MPC and MPLX See appendix for…
  9. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 9
    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…
  10. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 10
    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…
  11. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 11
    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…
  12. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 12
    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…
  13. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 13
    Speedways Integration to Best in Class Platform Nearly 1,000 locations converted Total capital: 500 Stores Conversion 181 MM completed Remodel 240 MM Oct. 2015 Achieving synergies Conversion creates platform for increased…
  14. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 14
    Extensive Retail Network Drives Integrated Value Speedway 74 64 Largest company-owned and operated 51 303 12 c-store chain east of the Mississippi 752 241 108 Growth through Hess acquisition 108 308 488 63 327 647 848 1 61…
  15. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 15
    Sustaining U.S. Refining Advantage Natural Gas Price Comparison 18 Actual Forecast Japanese Liquefied Natural Gas (World Bank)* 16 European Natural Gas (World Bank)* 14 HH Spot Price (World Bank) 12 /MMBtu 10 8 6 4 2 0…
  16. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 16
    Continuing U.S. Refined Product Demand Year-over-Year U.S. Product Demand Growth 300 250 Continued strong refined product 200 demand Lower fuel prices with continued MBD 150 income and employment growth 100 stimulated 2015…
  17. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 17
    Increasing U.S. Gross Refined Product Exports 4.5 4.0 Gasolines MPC Finished Product 3.5 Kero-Jet Exports = 315 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…
  18. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 18
    Capital Return and Investment Strategy 20
  19. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 19
    Balanced Approach to Returning Capital and Investment Returned 1.9x adjusted free cash 11.7 flow to investors since spin** Billion 9.1 Billion Investing in value-enhancing projects and acquisitions Capital Invested in the…
  20. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 20
    Substantial Dividend Growth Since Spinoff 0.35 +28% 350 0.32 0.30 300 +19% 0.25 0.25 +20% 250 0.21 +40% /Share 0.20 200 MM 0.175 171 171 +25% 141 138 136 136 0.15 129 126 123 122 150 0.125 119 116 116 113 0.10…
  21. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 21
    Share Repurchases Since Spinoff 1,200 8,000 1,028 Since spinoff: 1,000 850 882 10 B in total Board Qtrly Repurchases MM 6,000 800 689 authorizations Cumulative MM 682 7.05 B returned to 600 4,000 shareholders 500 452…
  22. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 22
    Why MPC First Mover Peer Leader Separation from upstream Sustained performance Creation of Drop-down MLP through all cycles Capital returns to shareholders Consistent and reliable operator Using MLP to be industry solution…
  23. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 23
    Appendix 25
  24. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 24
    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…
  25. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 25
    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…
  26. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 26
    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 /BBL 2 5 1 5 2 3 5 1 3 2 7 3 3 3 1 3 2 0…
  27. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 27
    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…
  28. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 28
    Sustaining Capital Returns Since Spin Cumulative Return of Capital Since July 1, 2011 10,000 9.1 B 8,000 6,000 MM 4,000 2,000 0 Dividends Share repurchases 30
  29. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 29
    Focused Return of Capital to Shareholders LTM Ended 9/30/15 5,000 Dividends and share 4,500 repurchases 1.5x of Adj. Free Cash Flow*** 4,000 3,500 Dividends and share repurchases* 3,000 2,036 1,378 Adjusted MM Free Cash…
  30. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 30
    MPCs Value of Integration 3,500 Crude 3,000 RIN Price Decline Flexible refining Distortion system 2,500 Large retail MM presence 2,000 Extensive logistics with considerable 1,500 optionality 1,000 1Q12 2Q12 3Q12…
  31. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 31
    Leveraging Existing Capacity to Run Light Sweet Crude 30 Reforming Capacity % of Crude Capacity 25 44% sweet crude oil throughput in 3Q 2015 20 Industry versus 68% sweet crude oil capacity Average 15 Reformer capacity captures…
  32. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 32
    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…
  33. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 33
    Rising MPC Finished Product Exports 350 300 250 200 MBD 150 100 50 0 2010 2011 2012 2013 2014 Sept 30, 2015 YTD 35
  34. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 34
    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…
  35. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 35
    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…
  36. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 36
    MPLX/MPC Utica Build-Out Connectivity 38
  37. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 37
    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…
  38. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 38
    MPLX Distributions and Sales Proceeds to MPC* 40 31.3 30 27.3 24.1 20.7 MM 18.5 19.7 20 15.1 15.8 16.6 17.5 9.8 10 0 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 LP Distributions GP Distributions, including IDRs…
  39. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 39
    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…
  40. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 40
    Sustaining Core Liquidity Needs Target 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 -…
  41. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 41
    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…
  42. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 42
    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 7 100 90 80 6 80 70 5 /BBL…
  43. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 43
    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…
  44. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 44
    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
  45. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 45
    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…
  46. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 46
    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…
  47. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 47
    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…
  48. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 48
    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.)…
  49. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 49
    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…
  50. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 50
    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
  51. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 51
    Creating Crude/Condensate Advantage Source: MPC 53
  52. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 52
    Key Strengths Balanced Operations Crude Oil Refining Capacity Crude Slate 61% PADD II 56% Sour Crude PADD III 44% Sweet Crude 39% As of Sept 30, 2015 3Q 2015 Assured Sales of Gasoline Production (Speedway + Brand +…
  53. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 53
    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%…
  54. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 54
    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…
  55. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 55
    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…
  56. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 56
    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…
  57. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 57
    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…
  58. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 58
    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…
  59. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 59
    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…
  60. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 60
    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…
  61. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 61
    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…
  62. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 62
    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…
  63. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 63
    Capital Expenditures & Investments (MM) MPC 2015 Budget 3Q 2015 YTD Refining & Marketing 1,042 215 550 Midstream 234 83 184 Total Refining & Marketing Segment 1,276 298 734 Speedway 452 130 275 Pipeline Transportation 659 114 352…
  64. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 64
    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…
  65. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 65
    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…
  66. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 66
    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…
  67. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 67
    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…
  68. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 68
    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…
  69. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 69
    Incentive Distribution Rights 3Q 2015 distribution of 0.4700/unit is in top tier of IDRs 71
  70. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 70
    4Q 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…
  71. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 71
    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 3Q Net income attributable to MPC 2,262 1,215 449 623 2,389 3,389 725 593 168 626 199 855 672 798…
  72. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 72
    Reconciliation Adjusted Free Cash Flow to Net Cash Provided by Operations (MM) 2014 2015 LTM (For the Quarter) 4Q 1Q 2Q 3Q Net cash provided by operating activities 388 1,190 994 1,069 3,641 Additions to property, plant and…
  73. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 73
    Reconciliation Adjusted Free Cash Flow to Net Cash Provided by Operations Since 9/30/11 (MM) Spinoff Net cash provided by operating activities 16,617 Additions to property, plant and equipment (6,000) Acquisitions (4,526)…
  74. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 74
    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…
  75. Bank of America Global Energy Conference – Marathon Petroleum Corporation – slide 75
    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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