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We planned this turnaround activity to occur in the first quarter a period of seasonally weaker demand. Capture was 104% as we delivered strong commercial performance in a period of low refining margins and volatility from regulatory uncertainty. Our 8% year over year.
11m 8s
And MPLX announced over $1,000,000,000 of strategic acquisitions advancing our midstream natural gas and NGL growth strategies. Our longer term fundamental view supports an enhanced mid cycle environment for refining.
11m 23s
Despite reductions to the 2025 demand outlook, forecasts still point to a global oil demand growth mainly driven by demand for the refined products we produce. U. S. Refined product inventories have drawn for the ninth straight week and are below the five year average. This plus lower retail prices should be supportive as we move into the summer driving season a period of strong seasonal demand. Within our own domestic and export businesses, we are seeing steady year over year demand for gasoline, and growth for diesel and jet fuel And while light heavy differentials could remain narrow as Canadian producers increase maintenance in the second quarter, we believe that higher OPEC placed plus production could offset that near term tightness. We believe underlying fundamentals support stronger margins especially as announced refinery closures offset recent capacity additions. We anticipate around 800,000 barrels per day coming offline of across several refineries in The U. S. And Europe this year. In The U. S, the Gulf Coast refinery completed its closure in the first quarter and in California two announced closures are expected over the next twelve months. We have been investing in our fully integrated West Coast value chain California demand for our products is driven by the 28,000,000 conventional fuel vehicles in the state among other factors.
12m 56s
And with nearly $8,000,000 in Los Angeles, the LA region is one of the three largest refined product demand centers in The U. S. At our Los Angeles refinery, we are nearing completion of approximately $700,000,000 in infrastructure improvements to integrate and modernize utility systems to improve reliability and increase energy efficiency while also complying with tighter emission reduction regulations. Following completion, expected at the end of this year, these improvements are intended to strengthen the competitiveness of our Los Angeles refinery and position us to be one of the most cost competitive players in the region for years to come. Our long term positive fundamental view for the refining industry is unchanged and we expect demand growth to exceed the net impact of capacity additions and rationalization through the end of the decade We believe The U. S. Refining industry will remain structurally advantaged over the rest of the world. The U. S. Has a locational advantage given the accessibility of nearby crude which we believe will grow as the cost of transportation increases. The availability of low cost natural gas, low cost butane and The U. S. Refining systems flexibility all increase its competitive advantage over international sources of supply.
14m 24s
The flexibility of our refining assets and our domestic domestic and international logistical and commercial capabilities further increase our global competitive advantage. Our commitment to commercial excellence regardless of market conditions remains core to our execution. We believe that the capabilities we are building provide a sustainable advantage versus our peers, We look to demonstrate that through our financial performance. We are progressing our $1,250,000,000 standalone capital plan for 2025 with 70% targeted on high return projects designed to create optionality and improve our ability to capital on market volatility. Underpinning our commitment to safe and reliable operations maintenance capital is approximately 30% of that capital spend. In addition to the project at our LAR refinery, in our Mid Con region, we are increasing our flexibility to optimize jet production at our Robinson refinery to meet growing demand with completion expected by year end 2026. On the Gulf Coast, we are constructing a distillate hydrotreater at our Galveston Bay refinery to produce higher value ultra low sulfur diesel with completion expected by year end twenty twenty seven In addition to these multi year projects, we are executing smaller high return quick hit projects targeted at enhancing refinery yields, improving energy efficiency, and lowering our cost.
16m 1s
Leveraging our fully integrated refining system and geographic diversification across the Gulf Coast Mid Con and West Coast regions we are well positioned to deliver peer leading through cycle cash generation. In our midstream business, we've announced an announced over $1,000,000,000 of strategic acquisitions since the start of the year. First, within its NGL value chain MPLX will be acquiring the remaining 55% interest in the BANGL NGL pipeline. Full ownership of BANGL and its expansion opportunities enhance MPLX's Permian platform as we connect growing NGL production from the wellhead to our recently announced Gulf Coast fractionation facilities. The BANGL transaction is anticipated to close in July subject to the satisfaction of closing conditions. Second, MPLX expanded its crude oil value chain by acquiring gathering businesses from Whiptail Midstream in March. The San Juan Basin assets in the 4 Corners region enhances supply to our refining system. Third, within its natural gas value chain, MPLX has entered into an agreement to double its stake in the Matterhorn Express natural gas pipeline from 5% to 10%. The transaction is expected to close in the second quarter of twenty twenty five subject to the satisfaction of closing conditions. These acquisitions are expected to be immediately accretive.
17m 36s
We're all well aware of the volatility in the commodity markets However, based on feedback from our producer customers, we continue to expect year over year growth across our Marcellus, Utica, and Permian operating regions. These basins have some of the lowest breakeven prices in The U. S. Offering economically advantaged development opportunities. We believe MPLX is well positioned and has significant opportunities. To support the development plans of its producer customers especially as demand increases for natural gas powered electricity. MPLX's financial flexibility places it in an excellent position to continue to significantly grow its distributions further enhancing the value of its strategic relationship with MPC. Given our highly advantaged refining business, and the $2,500,000,000 annualized distribution from MPLX, we believe we can lead peers in capital returns through all parts of the cycle. Now I'll hand it over to John to discuss our financial performance. Thanks, Mary Anne. Moving to first quarter highlights, slide four provides a summary of our financial results. This morning we reported a first quarter net loss of $0.24 per share. During the quarter, we returned over $1,300,000,000 to shareholders through dividends, and repurchases Slide five shows the sequential change in adjusted EBITDA from fourth quarter twenty twenty four to first quarter twenty twenty five and the reconciliation between adjusted EBITDA and our net results for the quarter.
19m 16s
Adjusted EBITDA for the quarter was approximately $2,000,000,000 lower sequentially by $145,000,000 due to decreased results in our refining and marketing, and Renewable Diesel segments. In addition to effects from the mix of pre tax earnings between our R and M and Midstream businesses, our tax rate was further lowered by discrete tax benefits recognized in the quarter. Moving to our refining and marketing first quarter segment results on Slide six. Our refineries ran at 89% utilization, processing 2,600,000 barrels of crude per day. We completed significant planned turnaround activity in the quarter particularly in our Gulf Coast region where utilization decreased from 97% in the fourth quarter of last year to 82% in the first quarter. As compared to fourth quarter of last year, the effects of lower Gulf Coast volumes were partially offset by higher margins in the Mid Con, and the West Coast. R and M segment adjusted EBITDA was $1.91 per barrel for the quarter. Turning to slide seven, first quarter capture of 104% was driven by solid commercial execution as well as seasonally strong clean product tailwinds. Leveraged the scale of our fully integrated system across all three regions to capture margin opportunities across our entire value chain.
20m 45s
From feedstocks to products. Slide eight shows our Midstream segment performance for the quarter Our Midstream segment continues to deliver cash flow growth with an 8% year over year increase in quarterly segment adjusted EBITDA. And in the first quarter MPC received $619,000,000 of distributions from MPLX a 12.5% increase compared to the $550,000,000 received in the first quarter of twenty twenty four. MPLX remains a source of durable growth as it progresses its mid single digit adjusted EBITDA growth strategy. Slide nine shows our renewable diesel segment performance for the quarter and what was a challenging environment. Our renewable diesel facilities ran at 70% utilization mainly as a result of unplanned downtime at both facilities. As compared to last year's fourth quarter, the segment's largest headwind was changes in regulatory credits, which reduced margins across the industry. As we look forward, based on the latest guidance we have already taken actions we expect will allow us to realize incremental 45Z credits starting at the beginning of the second quarter and will continue to pursue value for the 45Z credits we were unable to recognize in the first quarter. That said, we're focused on what we can control. At our Martinez joint venture facility, one of the most competitive renewable diesel operations in The U. S, we are optimizing the renewable refinery to its nameplate capacity.
22m 24s
Leveraging flexible logistics and pretreatment capabilities to enable a diverse slate and margin. We have addressed the operational items that limited production in the first quarter and following some planned downtime at our Dickinson refinery in April, both our renewable refineries are positioned to run-in the second quarter.
22m 46s
Slide 10 presents the elements of change in our consolidated cash position for the first quarter. Operating cash flow excluding changes in working capital was $1,000,000,000 for the quarter driven by the strength and growth of our midstream business. Working capital was a $1,100,000,000 use of cash for the quarter primarily driven by inventory builds mostly in our Gulf Coast region. Crude and product inventory builds related to planned turnarounds here in the first and second quarters as well as product builds related to in transit export shipments. In the second quarter, we expect some, but maybe not all of this inventory build will reverse as turnarounds are completed and inventory is drawn to normal operating levels. First quarter capital expenditures and investments were $795,000,000 and MPLX completed the acquisition of a gathering business from Wiptoe Mid for $237,000,000 In the quarter, MPC issued $2,000,000,000 in senior notes and this issuance was intended to replace the $750,000,000 of senior notes matured in September of last year as well as refinance the $1,250,000,000 of senior notes that matured on May 1. MPLX repaid $500,000,000 of maturing debt in February and also issued $2,000,000,000 of senior notes. MPlex used a portion of the proceeds to retire $1,200,000,000 of senior notes scheduled to mature in June.
24m 23s
At the end of the quarter, MPC had approximately $3,800,000,000 in consolidated cash, including MPC cash of $1,300,000,000 and MPLX cash of $2,500,000,000 We continue to manage our balance sheet to an investment grade credit profile. We remain comfortable with our minimum target of about of about $1,000,000,000 of cash on the balance sheet being sufficient to run the business. This is supported by the $2,500,000,000 and growing annual distribution from MP MPLX as well as our undrawn credit facilities of $5,000,000,000 all positioning us to have ample liquidity to endure market fluctuations. Turning to guidance on Slide 11, we provide our second quarter outlook [indiscernible] turnaround activity behind us, we are ready to run to meet increasing seasonal demand. We're projecting throughput volumes of 2,800,000 barrels per day representing utilization of 94%. Turnaround expense is projected to be approximately $265,000,000 in the second quarter with activity mainly focused in the mid Con and West Coast regions. For the full year, turnaround expenses are expected to be similar to last last year at around $1,400,000,000 Operating costs are projected to be 5.3 per barrel in second quarter. Distribution costs are expected to be approximately $1,500,000,000 Corporate costs are expected to be $220,000,000 With that, let me pass it back to Mary Anne.
26m 3s
Thanks, John. We are unwavering in our commitment to safe and reliable operations. Operational excellence, commercial execution and our cost competitiveness yield sustainable structural benefits and position us to deliver peer leading financial performance in each of the regions in which we operate. To deliver this, we will optimize our portfolio to deliver outperformance now and in the future. We'll leverage our value chain advantages and ensure the competitiveness of our assets. While we continue to invest in our people. Our execution of these commitments positions us to deliver the strongest through cycle cash generation durable midstream growth, is expected to deliver cash flow uplift and to deliver distribution increase going forward a differentiator from our peers. Investing capital where we believe there are attractive returns will enhance our competitiveness now for the future. We are committed to leading in capital allocation and will return excess capital through share repurchases. MPC is positioned to create exceptional value through peer leading performance execution of our strategic commitments and its compelling value proposition. Let me turn the call back to Christina.
27m 28s
Thanks, Marianne. As we open the call for your questions as a courtesy to all participants, we ask you limit yourself to one question and we'll follow-up. If time permits, we will re prompt additional questions.
27m 38s
Operator, please open the call for questions. Operator, we're ready for questions. Thank you. We will now begin our question and answer session. Session. Our first question comes from Neil Mehta with Goldman Sachs. Your line is open.
28m 11s
Yes. Good morning, Mary Anne and team.
28m 15s
A lot to talk about here, but maybe we start on what you're seeing real time. From a demand perspective. As we get into deeper here in the second quarter Are you seeing any physical evidence of an economic slowdown? And just maybe give you some real time color of what you're seeing in your system here?
28m 36s
Yes. Good morning, Neil, and thanks for the question. Look, I think we've seen refined cracks improve. You look, we're about $4 better the second quarter than we were in the first It's showing the typical seasonal improvement into the second quarter. You've seen our guidance when we look at overall utilization 94%, particularly when you look at the Gulf Coast 96% for us as we get out of our second largest turnaround and if you will ready to run-in the second quarter. We think we are well positioned to meet this seasonal uptick in demand. And certainly when you look at the fundamentals, the inventories that I referred to the five year average and certainly sort of the overall outlook But I'm going to ask Rick to give you some specifics as he's looking at our system and demand to address your question.
29m 33s
Yes, Neil to bolt on to Mary Anne's comments, So real time, we're very optimistic on what we're seeing within the domestic business, we're seeing steady year over year demand for gas and we're seeing growth in diesel and jet fuel. And then additionally when we look at our exports Neil when you go year on year, quarter on quarter we're seeing increases in export demand as well. So all the way across our system, we are seeing positive signs and aren't really seeing a slowdown whatsoever. Closer to home to what Mary Anne mentioned, on the inventory I want to double tap on that for a moment because those signals are really important to us and a great indication of how the market is setting up as we head into our summer driving season. So as you know we did a lot of turnaround work in Q1. We are ready to run-in Q2 And with the lower street prices year on year, we see this as another strong demand signal that the consumers will have. To continue this demand strength that we're seeing. And lastly, Mary Anne mentioned the $4 a barrel increase versus Q1. Just a few specifics on that.
30m 55s
To break down for you by region. In the Mid Con, we're seeing a $6 a barrel increase of where we stand today versus the Q1 results. And the Gulf Coast the $3 a barrel increase and in the West Coast, $5 a barrel increase So strength across the system Neil. [indiscernible] Okay. You see in the margins for now and so it's definitely notable in some of the hard hard data here. So okay, then the follow-up is just on the West Coast specifically. Seen a lot of developments here, most notably, Benicia, But how are you guys thinking about [indiscernible] the multiyear outlook for the West Coast? How do you position yourself? And do you think that political environment is such that if you go into a period of strong margins, you'll be able to capitalize that?
31m 53s
Yes. Thanks, Neil. Maybe a few things around the West Coast and our views sort of longer term. First, as you know, we've been investing, I mentioned it on some of my prepared remarks, there. We've been investing in our LA asset We believe its flexibility, the integrated nature of that asset, its ability to process different types of crudes etcetera. Gives us a long term competitive advantage. In the case of this, capital that we're putting to work gives us efficiency, improves performance [indiscernible] while at the same time we are complying with regulatory requirements around emissions. So overall, we think that's been a good investment. Just when we think about demand in the in the West Coast, dollars 28,000,000 conventional fuel vehicles as I like to say in the state. A lot of that demand is centered in the Los Angeles region. So speaks well for our asset also. And then you speak about the regulatory environment. We've spent a lot of time as you know go back really to 2018, 2019 frankly as we began our assessment of our profitability and the competitive nature of our assets in that region, when we made the decision frankly to close March Martinez as a fossil fuel refinery of it right continued as a renewable diesel We're watching the regulatory environment very closely right.
33m 23s
We've got minimum inventory law went into place in the beginning the year, but frankly the rule making isn't done I think right now the state and the officials there are focused on resupply as maintenance and turnaround activity happens to ensure that we can provide they can provide requirements for consumers there. There's also been conversation around whether or not the state would own or operate refineries. We certainly don't think that that's plausible. But we'll watch it closely. And last what I would say is we are spending time with the regulatory agencies through our Washington office, etcetera, to ensure that there is an understanding of sort of the longer term view and the decisions that they are trying to make there. So we're comfortable as we sit here today recognizing that a challenging environment We think we've got one of the most competitive assets in the region, and hopefully have done a good job of telling you why that's the case. Going to ask Rick excuse me to give you a little bit of color on what we're seeing maybe long term with demand there.
34m 34s
Yes. So Neil, we continue to see pretty pretty positive signals also on the West Coast. But I want to maybe take step back and give some color to our positioning as well to add on to Mary Anne's comments. So we have the largest refinery in California. It is complex. It is fully integrated. And we will beat the what we call high cost alternative of imports into the region all day long. With that being said, the closures that we have seen certainly are a tailwind to our not only our LAR facility, also to our Pacific Northwest facilities. So if you look, they will also be the beneficiary of product placement And as you know, the West Coast is structurally short gasoline and jet. So we will be leaning into these markets as others close. And lastly, want to leave you with a nugget that not a lot of people talk about. It's on the feedstock side. If these closures happen that have been announced Neil we will be the beneficiary as well. We have a large TMX position, taking advantage barrels from Canada. But above and beyond that we're a big ANS and a big SJV buyer and we will be the beneficiary of those closures that if they happen that will put incremental pressure on those differentials.
36m 3s
We have a large appetite for those grades. So I'll leave it there, Neil.
36m 7s
Great color. Thanks, team.
36m 9s
Thank you.
36m 10s
Thank you, Neil.
36m 12s
Thank you. Our next question comes from Doug Leggate with Wolfe Research. Your line is open.
36m 19s
Good morning, everyone. Thanks for taking my questions.
36m 22s
Mary Anne, I want to come back to a topic that I feel like we used to bring it up relatively frequently and then it kind of fell into the background a little bit and it's the issue of capture rates. You had one of the heaviest turnaround seasons in, I guess, in your history this quarter. Yet your capture rate kind of knocked it out of the park. And I know this is related to the commercial organization that you've built up over the last several years. And I'm just wondering as you get back into normal utilization rates into the when you don't have a lot of downtime. Should we be thinking that your capture rate has shifted up as a matter of course or I'm just curious how you would respond to that comment?
37m 8s
Good morning, Doug and thanks for your question. So as you know one of the things that we've been really leaning in for some time is our ability to improve our commercial performance. We think it is one of the most important elements when we think about our value proposition, and our peer leading performance. And over the last few years, as you said, we've been building what we think are sustainable benefits across the system organization wise other capabilities we've talked about, our London office, our Singapore office, our Houston office in addition to our Findlay offices as well. So, some of these capabilities will transcend. 've also said that approaching 100% is clearly an objective of ours And we think some of the sustainable advantages that we've really put in place, are being demonstrated through our financial performance. And as you know some of these things regardless of whether it's a high crack environment or a low crack environment may not be in our control but the ones that are, are that what we are trying to focus on quarter after quarter. We think right looking at our fully integrated system, and trying to leverage those capabilities You hear us talk about value chain integration the strategic importance of the relationship between MPC and MPLX.
38m 40s
We believe all of these will continue to deliver capture rates approaching 100%. And I'll look at Rick and see if there was anything else that Rick wanted to add particularly as we think about what happened in the quarter.
38m 55s
Yes. Thank you, Mary Anne. Doug, I have to chuckle for a moment. I'm guessing Mary Anne thinks I paid you to ask that question because we are quite proud of our results not only has it been this quarter, but I think you've seen it the last several quarters. And I do want to reiterate that it is structurally sustainable. We believe we built the system and have the value chain to continue to garner more value than our competition. And three areas of particularly strong performance that I want to highlight and our specific teams Specialty Products, Asphalt and Product margins. And sometimes we mention Product margins and they're specific to a region. This past quarter, I would tell you it's all three regions. It's Gulf Coast, Mid Con and West Coast. So very proud of the team's performance and wringing value out of the entire value chain as Mary Anne referenced.
39m 54s
Okay. Well, I was thinking the 100% might now be a little conservative, but we'll see where we go.
40m
Please don't do that to me. But we're confident in our ability to outperform in this area, Doug.
40m 7s
Thanks for the answer. Mariana, completely unrelated question. Again, it's something come up periodically. You've talked about you want to hold $1,000,000,000 of cash in the balance sheet. But you did admittedly have some working capital moves and you lend it into the balance sheet this quarter it seems for share buybacks. What is the net debt level at the MPC level Try that again. The net debt NPC level that you're comfortable with as opposed to the cash level at the MPC level?
40m 39s
Yes. Thanks for the question, Doug. Maybe just a couple of other comments as well before I get your specific answer. But one of the things that we think is important as we try to lean in with respect to our capital allocation priorities and they haven't changed. You talk about the $1,000,000,000 As you know from quarter to quarter some of those things just depending on commodity prices, etcetera that will ebb and flow. But the billion dollars continues to be something that we have stress tested and remain comfortable in part because we had a real life situation many years ago called COVID that helped us understand that. The second part of that as you know, and I think you've been asking me this question for a couple of quarters, now, right, if not longer than that. The distribution that MPC receives from MPLX at $2,500,000,000 today covers the MPC dividend to its shareholders as well as the 2025 capital plan that MPC has announced. And hopefully, you can see that we are supporting that mid single digit growth in MPLX. And the distribution increase of 12.5%, which means the cash coming back to MPC should continue to increase as that growth in MPLX happens.
42m 8s
These are all factors that give us confidence when we talk about $1,000,000,000 on the balance sheet, that that continues to be, if you will, a durable basis. I'm going to pass it to John and he can talk a bit about the debt to specifically answer that question. Doug.
42m 25s
Hey, morning, Doug. Thanks for the question. So maybe again to take it back as you know, we'd like to kind of think about the two balance sheets a little bit So if I think about MPC standalone, I'll come back to MPLX in the midstream business. Look, we've said absolute gross debt we're comfortable in and around plus or minus $7,000,000,000 right? So $7,000,000,000 absolute debt, dollars 1,000,000,000 of minimum cash target. Again, I commented and Mary Anne did why we continue to be really, really comfortable with that. And comfortable with our investment grade profile. MPLX is a little interesting, right? Debt has stayed relatively flat, but we've really grown the EBITDA four year CAGRs of 7% So leverage has really come down. And there we look at kind of a gross debt to EBITDA and we're sitting at end of this quarter at about 3.3 times And we've said, look, given that business, the durability and stable cash flows it generates, we're comfortable up to four. So we see a lot of capacity there as MPLX looks at its growth opportunities to leverage that balance sheet. Again on the MPC side, absolute debt about $7,000,000,000 As I think you know there we talk again about a gross debt cap ratio And I think we've got some of that in our materials as well.
43m 45s
What you would see more with an investment grade approach, it's a little bit interesting there because if we did something like we did this quarter where we're leaning into buybacks and maybe a lower profitability market, you're going to impact that ratio. But over time, we're really comfortable with that 7,000,000,000 So hopefully that helps Doug.
44m 5s
It does. Thanks very much indeed guys.
44m 8s
You're welcome Doug. Thank you.
44m 11s
Thank you. Our next question comes from Manav Gupta with UBS. Your line is open.
44m 18s
Good morning. Congrats on a strong quarter.
44m 21s
I wanted to ask you about the crude quality discounts. Looks like OPEC would be raising volumes faster than most of us expected. So help us understand your near to medium term outlook for crude quality and how MPC can benefit from it?
44m 38s
Yes. Hi, Manav. This is Rick. Good to hear from you. I will say this is very positive for us given the amount of heavy crude we run all three regions West Coast, Gulf Coast and Mid Con. So we are arguably the largest heavy refiner in the country. And so we will benefit significantly and as we see the acceleration of OpEx volume and with the recent announcement this weekend certainly as a tailwind for the light heavy spreads. Additionally though, I'd like to give you some color on Canadian because Canadian has recently been depressed, but we see upside there Manav as well when you look at not only the OPEC announcement of accelerating their barrels into the market But as you look forward on their forward curve and I don't even think the OPEC piece is baked in yet. In the fourth quarter Manav, we're seeing $3 to $4 a barrel discounts greater than what we see today. So certainly that's a benefit to us as we run a lot of heavy Canadian as you know. I hope that helps Manav.
45m 50s
Perfect. I actually also wanted to follow-up a little bit on the midstream side. 7% year on year growth on the MPLX side. But when we look at year to date, almost $1,000,000,000 of acquisitions some of which have not even closed, right? And so if you think about it, how should we look at the distributions from MPLX growing over a period of time given you already had an attractive lineup of project growth at Track one, Track two and now you're adding $1,000,000,000 of additional assets. So can we think about that 120.5% growth from distribution could be sustainable for the next like three to four years? And then you're already covering your CapEx and dividend through that distribution. So buybacks also be supported through that distribution? If you could talk about that. Thank you.
46m 44s
Manav, thank you and good morning. Appreciate your question. So first of all, when you look at [indiscernible] MPLX, the midstream business, we talk about a compound annual growth rate both on EBITDA and DCF in and about 7%. For four years. We think as you have heard us talk about as well, that we have projects and opportunities to be able to continue that mid single digit growth, I'll bet I say it might not be perfectly linear, as we move out The point of that 12.5 distribution increase last year was to say when you look at the growth opportunities, when you look at these mid teen returns projects, using that strict capital discipline lens, we felt very good about suggesting that that 12.5% was clearly doable for the next few years to your point because of the durability of those earnings and the opportunities that we see. This quarter we put about $1,000,000,000 to work You are absolutely correct. Some of that has not closed yet. Bangle gives us will give us 100% ownership very critical when we think about the ability to support our producer customers, important to the integration of our wellhead to water strategy, Second, we talked about Whiptail.
48m 16s
It's a gathering. It's natural gas crude oil and water gathering system. We talk a lot about the value chain importance and the strategic relationship between MPC and MPLX. It's in the four corners, critically important on the opportunity for our L Paso refinery. So two examples as you say plus as you know we talked about $1,700,000,000 of capital in MPLX that is growth oriented of which 85% was natural gas and NGL focused. Secretariat seventh largest sorry, seventh processing plant in the Permian, bringing our processing capability when it comes online at the end of the year to about 1.4 Bcf. So really making the connections in the integrated value chains. So we believe that 12.5% is durable for multi years as we bring it back to MPC. To your point, we are already covering the MPC dividend. And as you know, we are continuing to lean in delivering right excess cash via buyback on the MPC side and then we are still covering the cost or excuse me, the capital cost with that distribution. So certainly as it grows, it will continue to give us even greater flexibility on the MPC side of the house. I hope that addressed your question Manav.
49m 43s
Thank you so much.
49m 45s
You are welcome.
49m 48s
Thank you. Our next question comes from Paul Cheng with Scotiabank. Your line is open.
49m 54s
Hey, guys. How are you doing?
49m 57s
Good morning, Paul. We're well. How are you?
49m 59s
Very good. Good morning.
50m 5s
The Marianne just want to ask that.
50m 8s
Seems like you and a lot of your peers, everyone is looking at the NGL value chain and have a lot of opportunity. And so that seems a very consensus view and everyone is pursuing a wellhead to water strategy. So can you try to help us understand that how your strategy may be different than your peers? And there's also in the commodity business, there's always some fear. If everyone is pursuing the same strategy and everyone see that is such a great thing, it turned out that the result may not be as good. As everyone hoped. So maybe that you can help us that to better say understand that what is the risk in terms of everyone is doing this.
50m 54s
Certainly, Paul. Thanks for the question. So we think and we've talked about our wellhead to water strategy our completion two fracs and the export terminal 2028 and twenty twenty nine. We are very confident in our ability to fill these two fracs As I mentioned just earlier, we've got the seventh processing plant in the Permian that's going to be complete. That'll give us 1.4. And frankly, our current customer commitments really support this project. Also keep in mind today we meaning as we're thinking about this fractionation we are using third party fracs, which we will not need to use in the future. We think it has a very solid cost position as we shared with you the total cost of the project. We think when we look at both C3 and ethane, ethane will be a domestic sale, but we know the strength of C3 when we look at its requirements in Asia, Japan, So we think that export market will be there. And we think we're very good at executing projects. And certainly our commercial prowess will give us the ability to market that in the future. They would be a few of the things, Paul, that I would tell you will differentiate this project from our peers As I mentioned, we're not looking we're not done.
52m 22s
We are really trying to adapt as these markets are changing. And completing these value chains particularly when we're looking at that wellhead to water strategy.
52m 31s
I hope that addresses your question Paul.
52m 33s
Okay, great. The second question is on the renewable diesel business. Yes, I mean, it does look like that the RIN price is going higher and hopefully the LCFS price will get will the amendment will go through and then we will see them higher. Later this year or next year. But in addition to the market condition, mean, else are you doing internally trying to improve the profitability of that business. I was a little bit surprised that we are say, the pent downtime in the first quarter after or I mean that we have the fire end subsequently that you guys have we build the unit or that repaired the unit. So can you help us understand that? I mean, what is the root cause of the outages in the first quarter? And more importantly, that one of the initiatives that you are doing to help to improve the operation and reliability of that business. Hey, morning Paul, it's John.
53m 40s
I'll start here and if we have any other questions, I'll look some of my peers as well. So I and some of this I tried to have in our prepared remarks as well. As you noted, there's a portion of this business that's supported by regulations, whether it's RINs, LCF, etcetera, but we're really focused on the things that we can control. And as I mentioned in my remarks, we did have some opportunities here in the first quarter to address utilization. I will tell you again we're taking a turnaround, doing some work at Dickinson, it's ready to run and quarter to date Martinez is running as we expect it to be. So without getting into details of what those things are, I think it's maybe more important to tell you the plant is running as we expect. And that's then what we're focused on. If we take our Martinez position, really looking with our partner to optimize the feedstock into the facility, really leverage that pretreat which is a competitive advantage for the for the facility and obviously where it's located in California, the key market. So those are the things we're really focused on. As you note, as now we get to kind of hit the ground running and really run that plant and see what we can do.
54m 53s
So, those are the big things that we can control. Again, we'll continue to work with government affairs etcetera for the respective agencies to understand, the impact of their decisions. And I guess I wanted to maybe add too Paul, you didn't ask it but you might. Obviously, there's a lot of change in the industry going from the lenders tax credit to the production tax credit. We like others were reacting to guidance that came out during the quarter. As I mentioned, we had very limited recognition in the first quarter. But we've already taken action that's going to drive that. And let me be clear too, we're also going to continue to push on the regulations etcetera to get back the value we weren't able to recognize in Q1 as well. So that's another we're taking. So hopefully that gives you a little bit of the [indiscernible] play of the land.
55m 44s
Sean, can you tell us that what is the average duration before you had to change your catalyst and Matinsa?
55m 54s
Yes. That might be a detailed question, Paul, that will work with the team with you offline.
55m 59s
Okay.
56m
We do.
56m
Thank you.
56m 1s
Thank you.
56m 2s
Thank you, Paul.
56m 5s
Thank you. Our next question comes from Theresa Chen with Barclays. Your line is open. Good morning. Thank you for taking my questions.
56m 13s
I'd like to double click on the West Coast outlook one more time. Just on the profitability and the idea that the supply of California spec products coming from Asia by means of a regular way production of CARBOB in Asia versus opportunistic and the regularity of and cadence of imports on an ongoing basis.
56m 37s
Even if in state facilities can produce cheaper do you think the regularity of imports will cap benchmark cracks over time?
56m 48s
Hi, Theresa. This is Rick. So generally I would say we're tracking imports as everyone else is very closely. What imports are doing is creating a lot of volatility. And what I mean by that is, when imports come in, they do have an impact on the marketplace But when that inventory is run through, we then see spike within the we then see a spike within marketplace. Place. So it's somewhat of a feast or famine because to bring imports in is challenging because you have a forty plus day transit time. So it's a big bet. On where the market will be by the time they get into the West Coast system. So we continue to see imports just reeking a lot of havoc on volatility within the and continue to see our advantage really over overplaying any imports that would be sustainable because we don't believe they're going to be consistently sustainable long term. Month in month out and that's what you've seen here as of recent.
58m 1s
Understood.
58m 2s
And on the midstream side, with what seems to be an increasingly visible near to medium term slowdown in associate gas growth from liquids plays and a relatively unchanged long term natural gas demand outlook. What is your view on pursuing infrastructure growth opportunities in dry gas production areas and further diversify the growth opportunity set within your footprint? Yes, Theresa, it's Mary Anne. I appreciate the question. If you go back and you look at the things that we have been focused on last year, we did the Utica transaction summit We think that made sense for for a lot of reasons and continues to one of the opportunities that we were looking for was increasing utilization, We put a lot of capital to work in the Utica a few years ago. And as we watch that dried liquids move change. So we'll continue to evaluate that. But as you've seen from the things that we are looking at right now you see where the majority of our priorities are focused. But again, we'll look for those through our lens of how do we deliver mid single digit growth consistently ensure that we got mid teens returns through that that support the 12.5% distribution.
59m 29s
So we'll continue to evaluate. Thank you.
59m 36s
You're welcome.
59m 39s
Thank you. Our next question comes from John Royall with JP Morgan. Line is open.
59m 46s
Hi, good morning. Thanks for taking my question.
59m 49s
So my first question is a follow-up on the LA refinery project. I know you had it as a year end start up and it sounded like from Mary Anne's comments in the opener that that project is getting maybe close to completion. So any more granular target on the start up timing would be helpful. And then it seems like the project is more geared towards reliability and costs as well as compliance. So should we think of the 20% IRR target as being highly exposed to the commodity and margin environment therefore, maybe somewhat lower risk than your other two big projects?
1h 26s
Yes. Thanks for the question, John. Yes, we're looking at you're right, We remain committed to that project and expect it to be complete, I'd say closer to the end of the third, early fourth quarter. The 20% return is not subject to commodity price One of the things that we try to do with this project, you may remember a while ago there was a NOx reduction emission requirement I think it's rule eleven oh nine to be specific. Which no longer allowed paper credits. It had to be absolute So given what we believe to be one of the most competitive assets in the region, we said we would work to ensure that we had compliance Then once we made that decision, we looked at how else we could optimize. So there were other changes that add efficiency and reduce overall cost. That's what's driving the 20%, certainly not commodity price driven.
1h 1m 28s
Great. Thank you. And then we're at the end of the call, so maybe I can sneak in a little bit more of a housekeeping question. And happy to take it offline if it's too detailed. But we noticed a big step up in interest expense in 1Q and obviously, was some net issuance of debt at both the parent and the MPLX level. Is there anything one time in that line this quarter? Or should we think about that as kind of a similar level going forward?
1h 1m 55s
Yes, yes, probably similar. Hey, good morning, John. It's John Quaid. Sorry, I jumped right in. Probably the biggest thing if you're looking at that over time would be where as our cash balance move lower, you're seeing a little bit less of an offset from an interest interest income standpoint. You can see those details when we file our 10 Q later today. But outside of that, no one time items here in the quarter.
1h 2m 19s
Thank you.
1h 2m 21s
Welcome, John. Thank you.
1h 2m 25s
Thank you. Our next question comes from Matthew Blair with TPH. Your line is open.
1h 2m 32s
Thank you and good morning. I had two questions on the RD side. One, are you still finding it economic to run vegetable oil based feeds or have you shifted entirely to low CI feeds And then two, do you think that your RD segment is on track for an EBITDA positive quarter in Q2 as you roll off some of the challenges from Q1. It sounded like the feedstocks weren't quite optimized and you didn't capture all the 45Cs. So putting that behind you, is RD on track to be EBITDA positive in Q2?
1h 3m 7s
Yes. Hey, morning, Matt. It's John. Let me try and take that maybe at a higher level. As I said, we're focused on the things we can control, what gets interesting with the feedstocks. Again, a lot of effects from 45Z, kind of saying that imported UCO doesn't qualify. So that's affected some of the domestic feedstocks and we've got teams that as you would expect are every day optimizing the best feedstocks we can push through that facility in Martinez and leverage its pretreatment unit. Look, it's a regulatory supported business. So I'm not going to go out on a limb and talk about profitability for Q2. We're going to focus on the things we can control and that's going to be driving the operational performance of the unit, getting the right slate through the pretreat and through the facility and meeting the demands of our customers. Mary, I know if you want Yes, Matt. Thanks. And I think John's done a nice job of giving you some color there. A few things that I would also comment on. Remember that our decision to have a JV with Neste gives us a level of competitiveness we think now that the PTU unit is up and running as of the end of twenty twenty four.
1h 4m 26s
Remember the requirements with Neste was their ability to bring advantage feedstock. We certainly have that advantage as well. So different sources optimizing now around the PTU unit. And as you've heard us say, we continue to believe we are the most competitive relative, notwithstanding what the regulatory environment is going to do and will ensure that we have cost efficiency in that asset as we do in all of our assets. It is certainly one of our core principles when we think about operational performance and commercial excellence there, we'll continue to optimize as John said. But it is something that we think is an opportunity for us now that the PTU is operating Sounds good. Thanks for comments. And I guess speaking of the regulatory picture, do you have any views on the upcoming RVO It sounds like there might be a good chance that the D4 category gets moved up quite a bit. Would you expect D6s to decouple from D4s And then finally, regarding the new California LCFS targets, do you think they'll be implemented in 2025? Or are we looking more like a 2026 start up date for that?
1h 5m 47s
Thank you.
1h 5m 48s
Hey, Matt. Thank you. Thanks for your question. I'm going to ask Jim to provide as much color as we possibly can to many of your questions. As you know, the regulatory environment ebb and flowing there and some of those things we just don't have control over. We can certainly give you our views, but let me pass it to Jim and he'll provide some of the color that he can where the specifics are.
1h 6m 13s
Hey, Matt. Still a lot of uncertainties on the LCFS timeline. But we anticipate CARB will issue that revised package to the Office of Administrative Law by the May That will allow the Office of Administrative Law to make their final decision by the June. So there will be a lot more clarity by the June.
1h 6m 36s
Carb's been pretty quiet in the public regarding the effective date if the administrative law approves the package. It could be anywhere from the beginning of second quarter or push all the way into 2026 as you suggest. They just have not been open about that.
1h 6m 55s
Hopefully that's somewhat helpful and responsive there Matt.
1h 7m
Great. Thank you.
1h 7m 2s
You're welcome.
1h 7m 5s
Thank you. And our last question will come from Gabelman with TD Cowen. Your line is open.
1h 7m 12s
Yes. Hey, good morning. Thanks for squeezing me into the call. I wanted to go back to the $7,000,000,000 debt target that you mentioned. And I guess it's kind of two parts. Given decline in prices, I think could see another working capital headwind in the quarter. I know you suggested of the 1Q working capital will unwind. But given that and potential for some volatility in the stock, given the macro environment. How willing are you if at all, to go above the $7,000,000,000 debt target either to absorb working capital volatility and or support buybacks if the stock gets further dislocated?
1h 8m 4s
Hey, Jason, it's John. Thanks for the question. I'll and see if there's some other comments as well. Said, let me take the tail end of that. And I think I'll circle back to some of Mary Anne's comments. We're We're focused on driving our performance and driving our cash flow and having that then drive our capital return, right. So we're in a nice position with midstream business, MPLX growing that business, that flow covering our capital covering our dividend up at the MPC side, So we're performing, we're running our assets safely and reliably, we're getting all the value and then some that the market is providing. That's the cash we're going to look to use to return capital and do repurchases not really looking to increase debt to do repurchases. That's not on my radar right now. Again, we'll manage the business with our revolvers etcetera, working capital moves. That's what those are for. But really comfortable with that $7,000,000,000 of debt long term.
1h 9m 9s
Great. Thanks for that. My follow-up is just on midstream growth again. Know we've touched it. Quite a bit on the call, but I'm wondering if you could characterize the appetite to do larger deals as as the market weakens here? You'd seem probably bullish on the midstream growth outlook. You've done small deals that are enhancing the earnings growth of that business. So do you feel like it's more favorable to continue to do those smaller deals? Would you be open to a larger deal if the right one came across? Thanks.
1h 9m 47s
Yes. Thanks, Jason. And appreciate your comments on mid midstream growth. I would say as we continue to look at those opportunities, we're going to do it through the lens of strict capital discipline. We want to ensure that they have the ability to deliver mid teens returns that they are supportive of our mid single digit growth objective and we certainly have the ability to execute. We hopefully have demonstrated to you over the last several quarters our ability to lean in both organically and inorganically to drive the wellhead to water strategy I mentioned earlier the strength in the Utica and what we tried to do there. We just announced a smaller one gathering crude oil, water and nat gas. So hopefully we've demonstrated to you the opportunities that we see and the ability to support it. But they will be through that strict capital discipline lens regardless of their size, Jason.
1h 10m 52s
Okay, great. Thanks for the answers. You're welcome.
1h 10m 56s
Thank you.
1h 10m 59s
All right. If there are no further questions, thank you for your interest in Marathon. Should you have additional questions or want clarifications on top topics discussed. This morning, please contact us and our team will be available to help with your call. Thank you for joining us today. Thank you. That concludes today's conference. Thank you for participating. You may disconnect at this time. And speakers, you are back in the post conference.
Key Insights
MPC reported a first quarter net loss of $0.24 per share, with adjusted EBITDA of approximately $2 billion, down $145 million sequentially due to lower results in refining, marketing, and renewable diesel segments; over $1.3 billion was returned to shareholders through dividends and repurchases.
Refineries ran at 89% utilization (2.6 million barrels/day) in Q1, impacted by significant planned turnaround activity, especially in the Gulf Coast; Q2 throughput is projected at 2.8 million barrels/day (94% utilization) with turnaround expenses of ~$265 million.
MPLX announced over $1 billion in strategic acquisitions year-to-date, supporting midstream natural gas and NGL growth; Q1 midstream segment adjusted EBITDA grew 8% year-over-year, and MPC received $619 million in distributions from MPLX (up 12.5% YoY).
The company is progressing a $1.25 billion standalone capital plan for 2025, with 70% targeted at high-return projects; major infrastructure improvements at the Los Angeles refinery (~$700 million) are expected to complete by late Q3/early Q4, targeting a 20% IRR not dependent on commodity prices.
Management remains optimistic on demand, citing steady gasoline and growing diesel/jet fuel demand, low inventories, and strong export trends; guidance for full-year turnaround expenses is ~$1.4 billion, and the company maintains a minimum cash target of $1 billion and a gross debt target of ~$7 billion, supported by a $2.5 billion annualized distribution from MPLX.
