marathon petroleum corp (mpc) earnings …marathon petroleum corp (mpc) earnings report: q3 2015...
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CompanyName:MarathonPetroleumCorpCompanyTicker:MPCSector:BasicMaterialsIndustry:Energy
EventDescription:Q32015EarningsCallMarketCapasofEventDate:26.26BPriceasofEventDate:51.15
©2014TheStreet,Inc.Al l R ightsReserved Page1of22
MARATHONPETROLEUMCORP(MPC)EarningsReport:Q32015ConferenceCallTranscriptThefollowingMARATHONPETROLEUMCORPconferencecalltookplaceonOctober29,2015,10:00AMET.Thisisatranscriptofthatearningscall:
CompanyPart icipants
GeriEwing;MarathonPetroleumCorporation;IRGaryHeminger;MarathonPetroleumCorporation;PresidentandCEOTimGriffith;MarathonPetroleumCorporation;SVPandCFOMikePalmer;MarathonPetroleumCorporation;SVPSupply,DistributionandPlanningTonyKenney;MarathonPetroleumCorporation;President,SpeedwayLLCRichBedell;MarathonPetroleumCorporation;SVPRefiningDonTemplin;MarathonPetroleumCorporation;EVPSupply,TransportationandMarketingPamBeall;MarathonPetroleumCorporation;SVPCorporatePlanning,GovernmentandPublicAffairs
OtherPart icipants
EdwardWestlake;CreditSuisse;AnalystNeilMehta;GoldmanSachs;AnalystChiChow;Tudor,Pickering,Holt;AnalystEvanCalio;MorganStanley;AnalystDougTerreson;EvercoreISI;AnalystPaulCheng;BarclaysCapital;AnalystBradHeffern;RBCCapitalMarkets;AnalystPhilGresh;JPMorgan;AnalystRyanTodd;DeutscheBank;AnalystDougLeggate;BofAMerrillLynch;AnalystRogerRead;WellsFargoSecurities;AnalystJeffDietert;Simmons;Analyst
MANAGEMENTDISCUSSIONSECTION
Operator :
WelcometotheMarathonPetroleumthird-quarterearningsconferencecall.MynameisHilda,andIwillbeyouroperatorfortoday.(OperatorInstructions)Pleasenotethatthisconferenceisbeingrecorded.IwouldnowliketoturnthecallovertoGeriEwing,DirectorofInvestorRelations.Ms.Ewing,youmaybegin.
GeriEwing (IR):
Thankyou,Hilda.WelcometoMarathonPetroleumCorporation'sthird-quarterearningswebcastandconferencecall.Thesynchronizedslidesthataccompanythiscallcanbefoundonourwebsiteatmarathonpetroleum.comundertheinvestorcentertab.
OnthecalltodayareGaryHeminger,PresidentandCEO;TimGriffith,SeniorVicePresidentandChiefFinancialOfficer;andothermembersofMPC'smanagementteam.
CompanyName:MarathonPetroleumCorpCompanyTicker:MPCSector:BasicMaterialsIndustry:Energy
EventDescription:Q32015EarningsCallMarketCapasofEventDate:26.26BPriceasofEventDate:51.15
©2014TheStreet,Inc.Al l R ightsReserved Page2of22
WeinviteyoutoreadtheSafeHarborstatementonslide.It'sareminderthatwewillbemakingforward-lookingstatementsduringthecallandduringthequestion-and-answersession.Actualresultsmaydiffermateriallyfromwhatweexpecttoday.FactorsthatcouldcauseactualresultstodifferareincludedthereaswellasinourfilingswiththeSEC.
NowI'llturnthecallovertoGaryHemingerforopeningremarksandhighlights.Gary?
GaryHeminger (PresidentandCEO):
Thankyou,Geri.Goodmorning,andthankyouforjoiningus.
Wearepleasedtoreportthird-quarterconsolidatedearningsof$million.Ourresultsweredrivenbyasolidperformanceacrossallofourbusinesses.Wewereabletocapturestrongcrackspreadsinafavorablerefiningenvironment,andwetookadvantageofourflexibilitytomovefeedstocksandrefinedproductsthroughoutoursystemtooptimizeprofitabilitywhereoriginaldislocationsoccurred.Lowerfuelpricesfacilitateastrongrefineproductdemand,furthercontributingtoourresults.
Speedwayalsoperformedverywellduringthequarter,benefitingfromhigherlightproductmargins.Ourpeer-leadingmerchandisemodelalsocontinuestodriveprofitability,withhigherearningscomparedtothethirdquarteroflastyear.
OnSeptember,wecelebratedtheone-yearanniversaryofourEastCoastretailacquisition,andweareverypleasedwiththeresultsofthetransactionsofar.Thenewlocationsareperformingwell,andthebusinessisontracktomorethandoublethe$millioninsynergiesweexpectedinthisfirstyear.
Wearesignificantlyaheadofscheduleinconvertingtheacquiredstores,withnearly,ofthe,newlocationsconvertedtotheSpeedwaybrandandoperatingsystem.Inadditiontotheconvergence,overremodelsofthesenewstoreshavebeencompletedorareinprogress.ThisrapidprogressonconversionsandfocusonremodelingselectedlocationswillfurtherenhanceSpeedway'sabilitytogrowmerchandisemarginsacrossthisentireplatform.
Turningtothemidstreambusiness,welookforwardtofinalizingacombinationofMPLXandMarkWestlaterthisyearandareveryenthusiasticabouttheprospectsofthecombinedpartnership.TheMPLXandMarkWestcombinationwillcreateoneoftheindustry'slargestdiversifiedmasterlimitedpartnerships.WewillcombineMarkWest'srobustorganicgrowthopportunitieswithMPC'slargeandgrowinginventoryofMLP-qualifyingEBITDA.
ThegrowthofdistributablecashflowstothecombinedpartnershipwillalsobesupportedbyMPC'sandMPLX'sstrongfinancialposition,creatingalarge-capdiversifiedMLPwithanattractivedistributiongrowthprofileoveranextendedperiodoftime.Thestrategiccombinationwilldrivesubstantiallong-termvaluefortheunitholdersofbothpartnershipsaswellasMPCshareholders.
AtthetimeMPLXannouncedacombinationwithMarkWest,thepartnershipprovideddistributiongrowthguidancethrough.MPLXremainscommittedtothegrowthprofileprovidedinthatguidance.GiventhesignificantchangeinMLPvaluationsandtheresultanthigher-yieldenvironmentthesectorhasexperiencedinthelastseveralmonths,wenowexpectdrop-downtransactionsorsomeotherformofMPCsupportasearlyas.AsMPLX'ssponsor,wearecommittedtosupportitssuccess.
Asweworktomaximizeourshareholders'long-termreturns,wecontinuetofocusondisciplinedbalance--adisciplinedandbalancedapproachtoinvestinginthebusinessandreturningcapitaltoourinvestors.Animportantelementofthisfocushasbeentoidentifymarketopportunitiesandpursuetransactionsthataccruelong-termbenefitstoshareholders,aswehavedonewithouracquisitionsoftheGalvestonBayrefineryandtheEastCoastretailoperations.
CompanyName:MarathonPetroleumCorpCompanyTicker:MPCSector:BasicMaterialsIndustry:Energy
EventDescription:Q32015EarningsCallMarketCapasofEventDate:26.26BPriceasofEventDate:51.15
©2014TheStreet,Inc.Al l R ightsReserved Page3of22
IamconfidentwewillextendourtrackrecordwiththependingMarkWestcombination.WelookforwardtoMarkWestbecomingpartofMPLXtothebenefitofallequityownersassociatedwiththemerger.
AnotherimportantelementoftheCompany'scapitaldisciplineistomonitorchangesinthemarkettoensureinvestmentsreflectthebestlong-term,risk-adjustedreturnstoshareholders.InFebruaryofthisyear,weannounceddeferralofthefinalinvestmentdecisionontheproposedresidualoilupgraderexpansionprojectatourGaryvillerefineryinordertoevaluatetheimplicationsofmarketconditionsontheproject.WhilewestillbelievetheROUXproject,aswecallit,isanexcellentprojecttoenhanceMPC'splatform,atthistimewehavedecidedtocanceltheprojectbasedonourassessmentofmarketconditions.Andwewroteoffthe$millionincapitalizedprojectcostsincurredtodate.Wewilllooktodeploythis$.billionincapitalonavarietyofotherprojectstoprovidesuperiorlong-termreturnprospects.
Wewerealsopleasedtoreturn$millionofcapitaltoshareholdersduringthequarter.Wepurchasedmillionofourshares--$millionofoursharesandhaveapproximately$billionremainingunderourtotalof$billionofsharerepurchaseauthorizations.
Wealsopaiddividendsof$million.OurBoardapproveda$.-per-sharedividend,whichwasincreased%lastquarter,resultingina.%compoundannualgrowthrateonourquarterlydividendsincewespunin.
Wecontinueoureffortstoremainaleaderinourindustrythroughallcyclesbyfocusingonoperationalexcellenceandcontinuousoptimizationofourrefiningandmarketingsystem.Wewillcontinuetogrowourstablecashflowsthroughourretailandmidstreambusinesses,takingadisciplinedapproachtocapitalallocation,anddeliveringsignificantvaluetoourshareholdersthroughoursponsorshipofandourgeneralpartnerinterestinMPLX.
DuetothetimingofMarkWest'sspecialmeetingfortheproposedcombinationwithMPLX,wearemovingouranalystdaymeetingbackonedaytoDecember.Atthattime,weplantoupdate--provideanupdateonourallocationofcapital,includingmargin-enhancingopportunitiesidentifiedatourGalvestonBayrefinery,Speedway'sgrowthinsynergiesfromthestoresacquiredinSeptemberof,thecompellingcombinationwithMarkWestandothermidstreamareasoffocus.WelookforwardtoseeingyouatourcombinedMPCandMPLXanalystdayonDecember.
Withthat,letmeturnthecallovertoTimtowalkyouthroughthefinancialresultsforthethirdquarter.Tim?
T imGrif f ith (SVPandCFO):
Thanks,Gary.Slideprovidesearningsonbothanabsoluteandper-sharebasis.AsGarymentioned,ourfinancialperformancewasstrongonceagaininthethirdquarter,withearningsof$million,or$.perdilutedshare,duringthethirdquarterof,comparedto$million,or$.perdilutedshare,inthethirdquarteroflastyear.Justnote,third-quarterearningsreflectsthe$millionimpairmentcharge,orabout$.perdilutedshare,forthecancellationoftheROUXprojectthatGaryjustmentioned.Youcanseetheearningsthroughthirdquarterarealreadyabout$millionaheadoftheentireyearlastyear.
Thechartonslideshowsbysegmentthechangeinearningsfromthethirdquarteroflastyear.The$millionnetincreaseinearningswasprimarilyduetohigherincomefromourrefiningandmarketingandSpeedwaysegments,whichI'lldiscussfurtherinjustaminute.Partiallyoffsettingthesehigherearningsis$millionnon-cashimpairmentchargeforROUX,whichisincludedintheitemsnotallocatedinthechart,aswellashighertaxesresultingfromhighertaxableincomeinthequarter.
Turningtoslide,refiningandmarketingsegmentincomefromoperationswasabout$.billioninthethirdquarter,comparedwith$millioninthesamequarterlastyear.The$millionincreasewasprimarilydueto
CompanyName:MarathonPetroleumCorpCompanyTicker:MPCSector:BasicMaterialsIndustry:Energy
EventDescription:Q32015EarningsCallMarketCapasofEventDate:26.26BPriceasofEventDate:51.15
©2014TheStreet,Inc.Al l R ightsReserved Page4of22
strongercrackspreadsinourmarketsandthefavorableeffectsofContangointhecrudeoilmarketinthethirdquarterof.
Youmayrecallthecrackspreadsweprovideinourmarketmetricsonourwebsitearecalculatedusingpropproductandcrudeprices.Thepricewepayforcrude,ontheotherhand,isestablishedtodayspriortothepropmonth.Thispricedifferenceisreflectedinthe$millionfavorableContangoreflectedasmarketstructureonthewalk.Partiallyoffsettingtheseincreaseswaslessfavorablecrudeacquisitioncostsrelativetoourmarketindicatorsandlowerdollarbaserefineryvolumetricgainsresultingfromoveralllowercommodityprices,bothofwhichareincludedinthe$millionothergrossmarginscolumnonthechart.
Onslide,weprovidetheSpeedwaysegmentearningsbridgeforthethirdquarter.Speedway'sincomefromoperationsmorethandoubledfromthesamequarterlastyear.Speedway'snewlyacquiredlocationswereanimportantpartofthatincrease,contributingadditionalincomeofapproximately$milliontothequarter'sresults,orapproximately$millionofEBITDAinthethirdquarter.
ForthelegacySpeedwaylocations,lightproductgrossmarginwasabout$millionhigherinthethirdquartercomparedtothesamequarterlastyear.Thisincreasewasprimarilyduetohigherlightproductdemandandafavorablepricingenvironmentduringthequarter.Overall,theSpeedwaysegmentgasolineanddistillategrossmarginincreasedby$.pergallonfromthethirdquarteroftothethirdquarterthisyear.
Speedway'smerchandisemargininthelegacylocationswas$millionhigherinthethirdquartercomparedtothethirdquarterlastyear,primarilydrivenbyanincreaseinmerchandiseandfoodsalesandimprovedmargins.
Onasame-storebasis,gasolinesalesvolumesincreased.%,andmerchandisesales,excludingcigarettes,increased.%inthethirdquartercomparedtothesamequarterlastyear.Asyoucompareoursame-storegasolinesalestoindustryaverages,Iwouldpointoutthatthesecanvaryduetomanyfactorsincludingregionalfootprint,weatherandcompetition.Speedwaycontinuouslystrivestooptimizetotalgasolinecontributionsbetweenvolumeandmargintoensurefuelmarginsremainadequate.
Asyoumightexpect,totallightproductsaleswerealmostdoubledinthethirdquarterlastyearasaresultoftheHessacquisition,andwearepleasedtohighlightthatgasolinevolumesforthelegacySpeedwaylocationswereup.%inthethirdquarteronanabsolutebasisversusthesamequarterlastyear.Giventhatwearenowoneyearintotheacquisition,OctoberwillbethefirstmonthournewEastCoastlocationswillbeincludedinouryear-over-yearsame-storemetrics.SofarforOctober,totalCompanygas--same-storegasoline'svolumesareup.%versusOctoberlastyear.
Slideshowsthechangesinourpipelinetransportationsegmentversusthethirdquarterlastyear.Incomefromoperationswasupslightlyfromthesamequarterlastyearwith$millionofincomeinthisquarter.Theincreasewasprimarilyduetohighertransportationrevenueinthequarter,reflectinghigheraveragetariffratesandhighercrudeandlightproductthroughputvolumes,partiallyoffsetbyincreasedoperatingexpensesandabout$millionintransaction-relatedcostsincurredaspartoftheMarkWestcombination.
Slidepresentsthesignificantelementsofourchangesinourcashpositionforthequarter.Wehadabout$billionofcashonhandattheendofthequarter.Or,operatingcashflowwasa$.billionsourceofcash.The$millionuseofworkingcapitalnotedontheslideprimarilyrelatestoadecreaseinaccountspayablepartiallyoffsetbyadecreaseonaccountsreceivable.Thedecreaseinaccountspayableandreceivablewereprimarilyduetolowercrudeoilandrefinedproductpricesduringthequarter,whichcreatedtheuseofcashgiventhegenerallylongertermsonthecrudepurchases.
CompanyName:MarathonPetroleumCorpCompanyTicker:MPCSector:BasicMaterialsIndustry:Energy
EventDescription:Q32015EarningsCallMarketCapasofEventDate:26.26BPriceasofEventDate:51.15
©2014TheStreet,Inc.Al l R ightsReserved Page5of22
Wecontinueddeliveringonourcommitmenttobalanceinvestmentsinthebusinesswithreturnofcapitaltoshareholders.Wereturned$milliontoshareholdersduringthequarter,including$millioninsharerepurchases.Sharerepurchaseswereslightlylowerthisquarterasweplanourliquidityneedsoverthenextseveralmonths,includingthe$millioncontributionfortheMarkWestcombinationand,basedoncurrentprices,theapproximately$milliontoMPLXtomaintainour%generalpartnerinterestafterthecombinationiscompleted.Sharecountattheendofthequarterwasmillionshares,reflectingrepurchaseactivitysincethespinofabout%ofthesharesoutstandingatthattime.
Turningtoslide,inthethirdquarterwepaida$.-per-sharedividend,representinga%increaseoverthe$.-per-sharedividendpaidduringthesecondquarter.Itwasthefifthincreaseinourdividend,andourdividendhasseena.%compoundannualgrowthratesinceMPCbecameastandalonepublicCompanyinmid-.Ourcontinuedfocusongrowingregularquarterlydividendsdemonstratesourongoingcommitmenttoourshareholderstoshareinthesuccessofthebusiness.AndasGaryhighlighted,wearepleasedtoaffirmthatcommitmentwiththe$.-per-sharedividenddeclaredyesterday.
Slideshowsthatourbalancesheetcontinuestobestrongandourleveragelow,withgrossdebtatlessthanonetimesthe$.billionofLTMEBITDAandadebt-to-total-capitalratioof%.
SlideprovidesanupdatedoutlookinformationonkeyoperatingmetricsforMPCforthefourthquarterof.Weareexpectingfourthquarterthroughputvolumesof.millionbarrelsperday,whicharedownslightlycomparedtothefourthquarterofduetomoreplannedmaintenancethisyear.Asthefourthquarterbeginsandwecomeoutofthesummerdrivingseason,weexpecttoseenormalseasonaldemandlevels,whicharetypicallylowerinthefourthquarter.Ourprojectedfourth-quartercorporateandotherunallocateditemsare$million,includinganestimated$millionofpensionsettlementexpenseinthequarter.
Withthat,letmeturnthecallbackovertoGeri.Geri?
GeriEwing (IR):
Thanks,Tim.Asweopenthecallforquestions,weaskthatyoulimityourselftoonequestionplusafollow-up.Youmayre-promptforadditionalquestionsastimepermits.Withthat,wewillnowopenthecallstoquestions.Hilda?
QUESTIONS&ANSWERS
RETURNTOTOP
Operator :
(OperatorInstructions)EdwardWestlake,CreditSuisse.
EdwardWestlake (Analyst-CreditSuisse):
Goodmorning,andcongratsontheresults.AppreciateobviouslymostofyourquestionsthismorningareprobablygoingtobeonMarkWest.The--someformofsupport--obviouslyadrop-downwouldhelp,buttalkmethroughwhatotherformsofsupportyouhave.AndthenIhaveamoregeneralquestiononMarkWest.
GaryHeminger (PresidentandCEO):
Yes,goodmorning.Howyoubeen?
EdwardWestlake (Analyst-CreditSuisse):
CompanyName:MarathonPetroleumCorpCompanyTicker:MPCSector:BasicMaterialsIndustry:Energy
EventDescription:Q32015EarningsCallMarketCapasofEventDate:26.26BPriceasofEventDate:51.15
©2014TheStreet,Inc.Al l R ightsReserved Page6of22
Good.Thanksverymuch.Thegirlsaredoingwell.
GaryHeminger (PresidentandCEO):
Good,good;gladtohearthat.So,Ed,asyouknow,aswehavetalkedonthiscallbefore,wehavemanyformsofsupport.Letmebackupreallyandtalkaboutthistransactionandtheoverallmarket.Istillcontinuetobesurprisedathowtheoverallmarkethasperformed,especiallyhowMPLXhasperformed.
Inahigher-yieldenvironment,ofcourse,weneedtotalkaboutpossiblysupportearlierthanwehadinitiallyplannedthanlater.ButIthinktheindustriallogicisstillsostrongwiththecombinationofthesetwocompanies,MarkWesthavingjustanoutstandingsuiteofassetsandgrowthopportunities,andMPLXhavingatremendousbacklogandagrowingbacklogofEBITDAthatiseligiblefordrop-downsaswegodowntheroad.
Ofcourse,wehavetremendousflexibility.I'mnotgoingtotieusdowntojustone.Butwecanincubateprojects,andthat'sourplangoingforward,andwehavebeenveryspecificaboutthatplangoingforward.AndwhenIstepbackandlookattheoverallenvironmentinthisMLPworldtodayandlookathowstrongMPLXis,andyoucompareusagainstotherMLPsthatwerejustadrop-downstorybefore,westillcomparevery,veryfavorably,ifnotoneofthebestinindustry,andnowwe'retyingittoaverystronggrowthprofile.
AndsoIstepbackandlookatitat,Ed--Ireallydon'tlookatitaswhetherit'sagatheringofprocessing,whetherit'sanaturalgasMLP,whetherit'sarefinedproductsMLP,aretailMLP.It'swhatisyourbacklogandwhat'sthequalityoftheEBITDAthatyouhave.AndIbelievethatwehave,again,oneofthebest-qualityinventoriesofEBITDAthatcangointothissectorgoingforward.AndasIsaid,welookedatincubatingprojects.WetakethebacklogofprojectsthatMarkWesthas,wecanincubatethoseprojectsinsideMPC,droptheminattherighttime.
Wecandomanyotherthings.Lookatthemultiplesonhowwedropdownassets,othercommercialarrangementswherewedointercompanyloans,IDRgivebacks,thelistgoesonandonoftheflexibility.Butonthefrontside,wenow--basedontheyieldenvironmentofMLPs,andIdoexpectthatouryieldwillimprovesubstantiallyasthemarketgetsmorecomfortablethatthiscombinationisgoingforward.
EdwardWestlake (Analyst-CreditSuisse):
Andthenontheyieldcomfort,obviouslythere'sabigmoveinthespreadsoftheoverallindex.ButtheupstreamintheNortheastisunderstressbecausegaspricesarelowandNGLpricesarelow.AndwhenyoulookatMarkWest,althoughtheyhavealotofcapacityandacreagededication,theMPCs,thevolumeprotectionisrelativelylowonsomeofthenewareas.Sojustgiveussomecolorastohowmuchdiligenceyou'vedoneontheabilityoftheMarkWestEBITDAtodeliveragainstyourexpectations.Andthenifitdoesfallshort,whatwouldbetheplantosupporttheoverallcombinedEBITDAtotheextentthatvolumesintheNortheastdisappoint?
GaryHeminger (PresidentandCEO):
Right.Andwediddo,obviously,atremendousamountofduediligencebeforeweeversignedthisagreement.Butstepback,Ed,andlookattheMarcellusandtheUtica.Andyoulookat--youallandeveryoneonthiscallisveryfamiliarwithsomeofthemajorproducersintheseregionsandthesuccessthattheycontinuetohaveintheMarcellusandtheUticaatthistime.
Theareasof--andjustsomeofthewellsthathavebeenmadepublicrecentlyareverylargewellsintheacreagepositionsthatwehave.
IwillletFranktalkabouthiscurrentenvironmentmorewhenhehashisearningscallnextweek.SoI'm
CompanyName:MarathonPetroleumCorpCompanyTicker:MPCSector:BasicMaterialsIndustry:Energy
EventDescription:Q32015EarningsCallMarketCapasofEventDate:26.26BPriceasofEventDate:51.15
©2014TheStreet,Inc.Al l R ightsReserved Page7of22
notgoingtogo--overstepmyboundsherewithhiscurrentbusiness,butwedidalotofworkontheduediligence.Webelievethebreak-evencostintheMarcellusandUtica,whichisthepredominantareaofinfluenceofMarkWest,continuetobesomeofthebestbasinsinthecountry.Andifthereisaslowdown,aswe'vealreadyindicated,wewillconsiderdroppingdownearlier.Andwe'vetalkedaboutthis$.billionofprojectbacklogorEBITDAbacklogwehaveinsideMPC,andthatcontinuestogrowaswegoforward.
Thekey,though,thatweareveryinterestedinandthelogicbehindthisdealonacombinationiswehavethebalancesheetandthefinancialstrengthtoreallytakethebacklogofprojectswithinMarkWestandbringthemtothetable.AndIthinkthatwillovershadowanydrop-offin--fromtheproducerside.
EdwardWestlake (Analyst-CreditSuisse):
Thanksverymuch.
Operator :
NeilMehta,GoldmanSachs.
NeilMehta(Analyst-GoldmanSachs):
Gary,Iwantedtogiveyoutheflooralittlebitontheoilmacro,whichyouarealwaysgreataboutreflectingon.IwantedyoutotalkthroughyourviewsonBrentLOSandsomeofthesekeycrudespreadsinapotentiallylowerproductionenvironment.AndalsoviewsontheflatpriceaswegetintotheOPECmeetinginDecember.
GaryHeminger (PresidentandCEO):
Wow,Idon'tknowthatIhaveenoughtimetotalkaboutthat,Neil.Butanyway,letme--Ibelievethelasttimeweweretogether,themarketcontinuestoillustratethatwe'regoingtobelowerforlonger.IbelieveespeciallyasyouseethetradeflowsandyoulookatthecruderesourcesthatarecomingfromtheMiddleEast,WestAfrica,thatismovingintotheEastCoasttoday.Butspecificallythosecrudes--andwe'refindingsomeothersupplysources,mainlyIraqicrudes--IcanhaveMichaelPalmer,who'swithmetoday,addressthismore--butIraqicrudesthatarecomingintotheGulf.AndIthinkwhatthisisgoingtoillustrateforalongerperiodoftime,you'regoingtoseetheinfluenceofimportsontopofcontinueddomesticproduction.
Whiledomesticproductionhassomewhatflattenedout,especiallyinthePermianandtheEagleFord,wearecontinuingtosee--andweseethisthroughourownershipinLOOP,wearecontinuingtoseegoodgrowthinoffshoreGulfofMexicoproduction.
Sofortheremainderoftheyearandintonextyear,we'restilllookingprobablyinthe$to$range.Youmightgetupintothehighersmid-to-laternextyear.Ithinkwe'regoingtobeprobablyrange-boundinthatarenaformostofandprobablyintountilyoustarttosee--becauseyou'regoingtohavetoseenotonlysomedomesticproduction,butyou'regoingtohavetoseeabalancingofthisincrementalIraqiproductioncomingon.AndyoualsohavetowatchwhereRussiaistakingsomeoftheirproductionandhowtheyhavebeentakingsomeoftheirproductionoutofstrategicpetroleumreserveintootherpartsoftheworldandtheeffectthathasontheAsianmarkets.SoIwouldkeepallthosethingsinmindwhenyoulookatthose,Neil.
Bringingitback,then,tospreadsheredomestically,Ithinkwiththeincrementalproduction,asIjustmentioned,cominginfromtheGulfCoast,Ithinkthatbodeswellforthesupplyside.We'recomingdownoffthehigh-demandquarterhereintheUSasfarasrefiningcapacityandthecrudethatisneededtosatisfytherefiningcapacityintheUS.AndIthinkhereaswegetintothelatterpartofthefourthquarter--firstquarter,you'regoingtoseespreadswidenout--Brent,Tuck-in--andIwillletMikePalmer,whois
CompanyName:MarathonPetroleumCorpCompanyTicker:MPCSector:BasicMaterialsIndustry:Energy
EventDescription:Q32015EarningsCallMarketCapasofEventDate:26.26BPriceasofEventDate:51.15
©2014TheStreet,Inc.Al l R ightsReserved Page8of22
theexpertonthespreadmarket,addanythingtoit.
MikePalmer (SVPSupply,DistributionandPlanning):
Gary,Icouldn'thavesaiditbettermyself.TheonethingIguessIwouldaddisjust,again,thatwe--inthethirdquarter,wedidrunalittlemoresourcrudethanwedidinthequarterbeforeorthethirdquarterlastyear.AndIthinkoneofthethingsthatweareseeing,ofcourse,isthattheGulfofMexicoproductioncontinuestoincrease.
Andtheninadditiontothat,wehaveseen--asGarypointedout,wehaveseensomeforeigncargoopportunitiesintotheGulfCoastthatwe'vetakenadvantageof,andothershaveaswell.AndIthinkthat'slikelytocontinue,as,again,GarypointedouttheIraqicrudeisbeingproduced.ThereiscertainlythepossibilitythatwewillhavesomeIraniancrudethatwewillbetradingintheworld--increasedvolumesnextyear.AndIthinkthatwillcontinuetohavesomepressureagainstsourgradesthatshouldlookattractive.
Ontheotherhand,thesweetcrude,aswehavetalkedaboutbefore,ontheGulfhasbeenalittlemoreexpensive.Thereisnotasurplusinthislight-sweetcrudewaitingtofindahome.Theproducershavemanyavenuestoclearit.So,again,thattomepointstowardprobablyalittlemoresourcrudethatwewillrun.
NeilMehta(Analyst-GoldmanSachs):
Thankyou.Thesecondquestionismoreofahousekeepingquestion.Thebuybackwasatouchlowerthanwewereexpectinginmaybethepreviousquarteraswell.WasthatrelatedtoMarkWestandsomeoftheprocessesgoingonthere?Anythingyoucanspeaktointermsofthequarterlybuyback.
T imGrif f ith (SVPandCFO):
Sure,Neil.ThisisTim.Again,therehasbeennosortofphilosophicalchangearoundthewaythatwe'veapproachedcapitalreturntoshareholders.Ithinkinanygivenquarterwe'regoingtoplancarefullyintheliquidity.WeobviouslyhaveacontributionthatMPCwillmaketotheMarkWesttransactionthatwecertainlyarethinkingaround.Butifyoulookatcashbalances,thingsaregenerallyinlinewithwherewe'reat.So,nochangetobehavior,nochangetobelief.Ithinkjustcircumstancesinthequarterweresuggestiveofalittlebitloweractivity.
NeilMehta(Analyst-GoldmanSachs):
Thanks,team.Iappreciateit.
Operator :
ChiChow,Tudor,Pickering,Holt.
ChiChow(Analyst-Tudor,Pickering,Holt):
IguessjustonMarkWest,there'sbeenalotofspeculationontheacquisitionpricegiventhedeclineinbothMPLXandMarkWestunitprices.Howcomfortableareyouwithtransactionasitiscurrentlystructured?Andarethereanyactionsyouareconsideringtosupporttheclosingofthedeal?
GaryHeminger (PresidentandCEO):
Well,Chi,Ibelievethisdealisstillvery,verycompelling.We'vealready--Ithinkthebiggestandmostpositiveaction,weannouncedtodaywhenwereaffirmedguidance.ButyoujuststepbackandlookatthestrengthofMPC'sbalancesheet,MPLX'sbalancesheet,thefinancialpositionwe'rein--itbodesvery
CompanyName:MarathonPetroleumCorpCompanyTicker:MPCSector:BasicMaterialsIndustry:Energy
EventDescription:Q32015EarningsCallMarketCapasofEventDate:26.26BPriceasofEventDate:51.15
©2014TheStreet,Inc.Al l R ightsReserved Page9of22
welltotakethiscombination,whichIthinksetsusuponapedestalasthebestcombinationinthebusinessgoingforward.Andwefeelit'sacompellingenterprise.WehaveanumberofoptionsthatIalreadytalkedabout.Andwebelieve,ineffect--wethinktoday,tomorrow,wewillgoeffectivewithaproxy,anditwillbesentoutshortly.
ChiChow(Analyst-Tudor,Pickering,Holt):
Okay.Iguessthetimingofclosingshere--bymovingtheanalystdaybackoneday,isthatcorrespondingtowhenyouexpecttobeabletobeclosed?
GaryHeminger (PresidentandCEO):
Right.Andthat'swhat--maybenotnecessarilyclosed,Chi;itjustdependsonthetiming.ButThanksgivingandanotherbankholiday--orIguessit'sColumbusDay--VeteransDay,I'msorry.VeteransDaythatiscomingup,welosetwobusinessdays.So,unfortunately,that'sjustthewaythetimingworked;itmovedusbackjustthedaytobeabletohavetheanalystmeeting.So,yes,that'saswewouldexpecttohavethevoteinthefirst,secondofDecembertimeframe.
ChiChow(Analyst-Tudor,Pickering,Holt):
Gotit.Thanks.AndIhaveacouplequestionsfollowinguponNeil'squestionsonthecrudemarkets.Canyoutalkaboutwhatyouhaveseenontheheavycrudemarketsboth--what'sgoingoninCanadawiththenewDetroitcoker?ArethespreadsforWCIstillattractive?Howdoyouseethatmarketplayingout?We'vegotpipelineaccessnowallthewaytoHouston.You'vegotupgraders--Iguess(inaudible)cancutonupgraders.HowdoyouseetheheavyCanadianmarketandthen,conversely,theheavymarketintheGulfCoastaswell?Anyviewsonhowsupplydemandwilllookgoingforwardhere?
GaryHeminger (PresidentandCEO):
Sure.LetmeaskMiketotakethis.
MikePalmer (SVPSupply,DistributionandPlanning):
Yes,Chi,I'llgiveyousomethoughtsonthat.TheheavyCanadianmarketcontinuestobeveryattractive.We'veseendifferentialstoTIthathavebeengyratingaroundthatminus$mark.Byhistoricalstandards,that'saprettygooddiscountina$,$environment.
We--and,again,thismarketisinfluencedbymanythingsthattakeplace.WesawagreatopportunityontheheavyCanadianthissummerduringsometurnaroundsthatweretakingplace.Thespreadswentalittlewider,andwereallytookadvantageofthat.WebroughtquiteabitmoreCanadianintooursystem,andwewereabletomoverecordamountsdowntoGaryville.
So,goingforward,again,Idon'tseeanyreasontobelievethatthat'sgoingtochange.Wethinkthatthedifferentialwillstayinthatkindofarange,andwewillcontinuetotakeeveryadvantagewecan.WearecontinuouslylookingatforeigncargoopportunitiesthatwecanbringtotheGulfCoast.WeseeopportunitiescominginfromBrazilwithsomeoftheirheavysweetcrudes.
Weoftentimesfindverygoodvaluesincrudesthataremoredifficulttorun.TheyareeitherhighTAMorthey'vegotsomeotherissue.TheMexicancrudehasbeenrelativelyattractiveaswell.
Sotheheavymarketlooksprettygoodrightnow,andIdon'tseeanyreasonwhythatshouldchange.
ChiChow(Analyst-Tudor,Pickering,Holt):
DoestheagreementwithPemexonthecrudeswap--doesthatopenthingsupabitmore,oranyimpact
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there?
MikePalmer (SVPSupply,DistributionandPlanning):
No,Idon'tthinkso.Asyouknow,that'sa--Ithinkwhat'sbeenapprovedis,barrelsaday.It'sreallyarelativelysmallamount.Ireallydon'tseethatchangingthemarketforusatall.
ChiChow(Analyst-Tudor,Pickering,Holt):
Gotit.Okay,thanks,Mike.Appreciateit.
Operator :
EvanCalio,MorganStanley.
EvanCalio (Analyst-MorganStanley):
Gary,thanksfortheupdateonMarkWest.Maybejustafollow-upthere.Ipresumeyouwilluseaproxysolicitorthatwillinformyouhowthevoteisgoingthroughthatsolicitationperiodandutilizethatdatatodetermineorconsideryouroptionsasitrelatestotheoffer.Isthatfair?
GaryHeminger (PresidentandCEO):
Yes,sir.That'scorrect.
EvanCalio (Analyst-MorganStanley):
Andthenifthetransactionwerevoteddown,whichIknowisinyourbasecaseorours--butIpresumeintothatscenario,youjustrevertbacktoyourpriordrop-downstrategygivenyoursignificantpotentialattheparentandyousourcegrowthinternally.Isthatyourthoughts?
GaryHeminger (PresidentandCEO):
Well,you'rerightinyourfirststatement.Thatcertainlyisinourbasecase.Weareveryconfidentthatthiscreatesa--justastellarpositioninthemarketplace,onewithastrongfinancialposition,atremendousgrowthprofile.Butifforsomereasonitdidnotgothrough,you'reabsolutelyright,wewouldreverttoMPLX.
EvanCalio (Analyst-MorganStanley):
Great.Ithinkit'sagreat--willbeagreattransactionforMPCandMPCshareholders.
Differentquestion,canyoudiscusspipelinecommittedvolumesinyourtwoBakkenpipelines?AndhowdoyouthinkabouttherisktoMPCoryourexposureinanenvironmentwhereBakkenisindecline?AndIknowpipelineshouldhave--shouldbesuperiortorailinthatenvironment,butwhatareyourthoughtshere,maybeanyactualexposure?
GaryHeminger (PresidentandCEO):
Sure,Mikewilltakethat.
MikePalmer (SVPSupply,DistributionandPlanning):
Yes,Iwillanswerthat,Evan.SoletmefirstmentionthatourSouthernAccessExtensionPipeline,SAX,ajointventurewithEnbridge,it'sacompletedproject.We'regoingtobefillinglinefillsandtankbottomsinearlyDecember.AndthenbyJanuary,wewillbefullyoperationalandonline.
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Wearealreadypurchasingcrudeforthatpipe.Wefullyexpectthatwe'regoingtobeatplannedrates.ItwillbeacombinationofnotonlytheNorthDakotacrude,butitwillhaveavarietyofvariousCanadiancrudes.WearereallyexcitedabouthavingthisSAXpipelineopen.Itcreatessomeflexibilityandsomeoptionalitythatwewereoutof,andIthinkwe'regoingtoseesomerealstrongearningscomingfromcrudethatwillbecomingdownthatpipelinetoourPatokahub.
WithregardtoSandpiper,IguessIwouldsaythatprobably--exactlywhatyousaidearlierwethinkthatNorthDakotacrudeisgoingtocontinuetobeveryattractiveforthosethathavepipelinespace.Wearethebestoptioninthemarket.WealsothinkthataswecontinuetohavefairlynarrowBrentTIspreads,whatyouarereallygoingtoseeisthattheEastCoastplayersthathavebeenrailingsomuchNorthDakotalight,wereallydobelievethatthosevolumesaregoingtodecrease.Andasthecommitmentskindofrunout--astheyare--theywillbecanceledandprobablywon'tbere-upped.Sowethinkthat'sgoingtocreate--it'sgoingtotakesomeofthepressureoffNorthDakotalightmaybethatyouseetoday.SowethinkSandpiperisgoingtobeanothergreatvehicleforus.Itwillcreateflexibilityandoptionalityinamarketthatwearesurewillincreaseproductiondowntheroad.
EvanCalio (Analyst-MorganStanley):
Great--
GaryHeminger (PresidentandCEO):
AndEvan,theotherthingaboutthosetwopipelines--andMikewasspeakingtothetremendousadvantagetoMPC--isthatgivesagreatcashflowEBITDAstreamthenbacktoMPLXdowntheroad.
EvanCalio (Analyst-MorganStanley):
Allright,exactly.MaybeifIcouldonemore,Gary,andthanksforthemacroviewsontheoilside.Butinthepast,you'vealsosharedyourmacroviewsontheothersideoftheequationdemand.Anycommentsondemandasyouseeiteitherthroughretail,export--what'syourthoughtstheregiventhat'sanincreasingconcerninthemarket?Iwillleaveitthere.
GaryHeminger (PresidentandCEO):
Right.AsTimmentionedinhisscripttoday,weareverypleasedhere--Octoberyeartodate,weareup.%inSpeedwayonthegasolineside.Andyouwillrecallwhenwespokelastyearaboutthissametime,wewerelookingforanincreaseingasolinedemand.However,wewereintheshoulderquarter,anditreallydidn'tkickoffuntilearlyintothesecondquarter.Ithinktheconsumerreallyhadsomeconfidencethatthisgasolinepricewasheretostay.Andgasolinedemandhasbeenveryrobustoverthesecond,thirdquarterandnowstartingintothefourthquarter.
Ontopofthat,youlookatexportsforbothgasolinedemandanddistillatesdemand,andwe,too,setanewrecordhereinthisquarterforourrefinedproductexportswith,barrelsperday.So--andwewillcontinuetorampupourgasolineexportsaswe'vecompletedacoupleofgasolinetanks,bothinGaryvilleandcontinuingtoimproveinGalvestonBay,withourlogisticstobeabletomoveoutthegasoline.
Sowethinkthatgoingintohere--andasImentionedearlieronthemacrosideofcrude,Ithinkthatstandstobenefittheconsumerverywell,andyouwillcontinuetoseegoodgasolineincrementaldemand.
Turningtothedistillateside,globaldistillateshavebeenabitflat.AndIwouldsayit'sbecause--ifyoulookatover-the-roaddieselhereintheUS,itstill--andwehaveprettygoodopticsthroughallofthetravelcentersandcommercialfuelinglocationsthatTonyhasdoneatSpeedway.Sowehaveapretty
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goodfeelofoverallgasordistillatedemand,andourdistillateexportdemandcontinuestobestrong.
Ithinkwhatyou'reseeingisthat,acrosstheglobeandhowsomeoftheregionsintheglobehavechanged,someoftheexportsandtheglobeinwhichtheyarehittinghavesloweddownalittlebit.Ourdistillatedemandexportscontinuetobeverystrong.Butitappearsonamacrobasis,somepartsoftheglobe,distillatedemandhasslowedalittlebit.
EvanCalio (Analyst-MorganStanley):
Ileaveitthere.Appreciateit,guys.
Operator :
DougTerreson,EvercoreISI.
DougT erreson (Analyst-EvercoreISI):
SoGary,Ijustwantedtoseeifyoucouldclarifythelastpointthatyoumadeaboutdistillatedemand.Ithinkyouhighlightedthattherewereacoupleofregionsthathadbeenalittlebitspottyrecently.Couldyouprovidealittlebitmorecoloronwhichonesthosemightbe?
GaryHeminger (PresidentandCEO):
Well,itappearsasthoughthere'sbeenaslowdowninAsia,andallofushaveseenthat.Andthen,obviouslyBrazilhashadsomebitofasomewhatofaslowdown.Europecontinuestoberobust.TheLatinAmericancountriesforthemostpartcontinuetobestrong.AndyouareseeingmoreofanincrementalgasolinepickupintheLatinAmericancountriesthanotherpartsoftheworld.
Sothemarketsinwhichweservecontinuetobeverystrong.ButIwasansweringthatquestion,Doug,onaglobalbasis--andthenewrefineriesthathavecomeoninSaudiArabia,someinChina,andIthinkthatisjustthematerialbalance.Thewayit'smovingaroundtheworldiswhereyouareseeingsomesoftness.
DougT erreson (Analyst-EvercoreISI):
Okay,Ijustwantedtobesure.Andthenalso,Gary,afewminutesagoyoutalkedaboutSpeedwayandhowthatbusinessiswellaheadofexpectationsasitrelatestosynergiesyouthoughtyouwouldhavewhentheacquisitionwasconsummated.Somyquestionisbetweenthemajorsourcesofsynergy,whichatthetimewerelightproductsupplyandlogisticsandmarketingenhancementsandthenSG&A.Whichonesaredrivingthepositivesurpriseversustheoriginalexpectations?
Andthesecondquestionishowarelightproductbreakevenstrendingaswell,andaretheysimilarlysurpassingyourexpectationsattheoutsetofthetransaction?
GaryHeminger (PresidentandCEO):
Sure,Doug.I'mgoingtoturnthisovertoTonyKenney,whoisontheline.Tony?
T onyKenney(President,SpeedwayLLC):
Hey,Doug.Howareyoudoing?Thesynergiesinallthecategoriesareaheadofpaceineachoneofthosethatyoumentioned
So,goingbacktoGary'scomments--openingcomments,wearetimesaheadofwherewethoughtwewouldbeinonsynergies,andIwillprovidemoredetailonthatatanalystday.
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DougT erreson (Analyst-EvercoreISI):
Okay,great.Thanksalot,guys.
GaryHeminger (PresidentandCEO):
Andalightproductbreakeven,Tony?
T onyKenney(President,SpeedwayLLC):
Yes,andwithrespecttolightproductbreakeven,we'reaboutapennyaheadofwherewethoughtwewouldbewhenweoriginallyputourforecasttogether.So,again,that'sacombinationofthebusinessjustperformingwellbutalsotheenhancedsynergiesthatwearerealizingaswell.
DougT erreson (Analyst-EvercoreISI):
Okay,okay.Thanksalot.
Operator :
PaulCheng,Barclays.
PaulCheng (Analyst-BarclaysCapital):
Anumberofquickquestions,hopefully.Gary,justcurious,fourthquartertheturnaroundseemsunreasonablyheavyforyouguys.Arethoseprimarilyinthecrudeunitorconversion?Andalsothat--theturnaroundcycle,aretheygoingtobesomewhatsimilartoorhigherorlower?
GaryHeminger (PresidentandCEO):
I'mgoingtohaveRichBedelltakethatforyou.
RichBedell(SVPRefining):
Yes,thisisRich.Theturnaroundsinthethirdquarter--whatwe'vehadisRobinsonhasbeenprimarilyaroundahydrocrackeranditsrevamp.InCatlettsburg--andtheRobinsononeisfinished.InCatlettsburg,wedohaveacrudeunitnow.We'redoingarevamptothatonetorecovermoregasoil.SothathasimpactedthecruderunsatCatlettsburg.WealsohadashutdownplannedatDetroittodosomecokercleanoutandcatalystchangesthere,andthatoneiswrappinguprightnow.Sothosewerethemajorturnaroundactivitieshereinthethirdquarterforus.
PaulCheng (Analyst-BarclaysCapital):
Howaboutwhichistheturnaroundcyclegoingtobecomparableto??Orthatweshouldassumeit'sgoingtobehigherorlower?
RichBedell(SVPRefining):
Paul,youknow,ourpolicyiswedon'ttalkaboutturnaroundsintothefuture.
PaulCheng (Analyst-BarclaysCapital):
Okay.AndmaybethisisforGary.There'salotofmovementintheMLPsectorintermsofvaluationhavedroppedquitealotoverthelastsixmonths.Andthenwehavealsostartedseeingthelowerproduction.So,someoftheMLPoperatorsstarttovoiceconcern.Theindustrymayhaveseen,atleastshort-termormedium-term,over-investmentinthelotlogisticoutset.Doyousharethesameviewandwhetherthat--
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inanyshapeorform,thatmayhavechangedyourviewonthatmarket?Orhowyouaregoingto--goingforwardintermsofyourorganicinvestment?
GaryHeminger (PresidentandCEO):
No.Infact,Paul,I'mgladyoubroughtthatquestionforward.Webelievethatisthemostimportantpartofourplatformofthisstrategiccombinationisthatwearerunning--allofourmidstreamassetsarerunningverywell.Wedonotseestrandedinvestment.AndasanumberofpeersandmembersoftheindustrywithintheMLPcommunityarestartingtotalkaboutloweringtheirguidanceandreducingtheirinvestment,loweringtheirguidancegoingforward,wejustreaffirmedagainthismorning--Ibelievethisisnowthethirdtimesinceweannouncedthistransactionthatwehavereaffirmedourguidanceandwherewebelievetogo--orwherewearegoingtogowiththiswithourmidstream.Andit'sbasedonthefundamentalsofourbusiness.WehavesuchabacklogandprojectswithinMarkWest.WehaveabacklogwithsomeprojectswithinMPC.Andalotofthebarrelsthataregoingtomovethroughsomeoftheseprojectsarebarrelsthatwealreadycontrol.
So,asIsaid,manyarebackingupontheirgrowth.Andthisiswhat--fromEdWestlake'sfirstquestionthismorningiswhyIwantedtospeaktothat.Iswehaveavery,verystrongcase,andIbelievewedeservetobe--ouryielddeservestobemuchlowerandpricedwiththehighdrop-down,high-valueMLPsinthebusiness.
AndletmeaskDonTemplintomakeafewcommentsaswell.
DonT emplin (EVPSupply,TransportationandMarketing):
Yes,Paul,Ithinkoneofthethingsthatisreallyintriguingtousandexcitesusisthat,particularlyinUticaandMarcellus,thereisclearlymoreproductionthatexistsnowthanthereisareasonabletake-awaycapacity.Andsoyou'refindingtheproducercustomersareveryconstrainedintermsoftheirabilitytogettheirproducttoamarketwheretheycangetanappropriaterealization.
Andsowelookatthatasbeingarealstrategicopportunityforustobeabletomeettheneedoftheproducercustomers.Sothoseareprojectsthatareripeforinvestment,wherethere'salreadyproduction,andwebelievetherewillbe--incontinuingproduction,butthere'salreadyproductionandaneedfortake-awaycapacity.SoourabilitytotakeonprojectsthatallowproducercustomerstomovetheirNGLstoamarketwheretheygetahighernetbackisahighpriorityforusandarealopportunity.
GaryHeminger (PresidentandCEO):
AndPaul,weareoneofthefewMLPsthathavethefinancialstrengthtobeabletogetthisdone.Thoseprojects,theback-upthat'sintheUtica,theMarcellus,theydon'tgetdoneunlessyouhaveastrongbalancesheet.Andyoucanincubatetheseprojectsovertime.That'swherethestrategiclogicis.
PaulCheng (Analyst-BarclaysCapital):
Great.AndGaryandDon,IthinkIhavetwofinalquestions.OneontheGalvestonBay--IthinkthatpreviouslyyouguyshavebeentalkingabouttheopportunitynowthatyousortofliketheGalvestonBayversiontwo.Youalreadyfixedahouse,andnowthatislookingfortheopportunitytograbthelow-hangingfruitorotheropportunityset.
Isthatany--maybetheupdateyoucanprovideintermsofquantifyingroughlywhatisthatopportunitysetmaylooklikeforthenexttwoorthreeyears?
Andsecondly,thatwhenyoudidthewrite-downthismorningindicatethatsomerelatedtothelonglead-timeequipment.Isthereanyalternativeuseofthoseequipmentorthatyouaretotally--thereasonthat
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youhaveawrite-downisthatyouarenottakingdeliveryatall?Andalsothatfromthatstandpoint,isthereanychangeinyourfutureFIDpullsetssothatyouwillnothavethistypeofsituationinotherwordsthatthetimingofwhenyouaresupposedtoorderthelonglead-timeequipment?
GaryHeminger (PresidentandCEO):
No,that'safairquestion,Paul.IwilltakethelatterquestionontheROUXfirst,andthenIwillcomebacktoGVR.OntheROUX,wecontinuetolooktoseeifthere's--ifwehaveuseofsomeofthislongleadequipment.It'sspecificallydesigned,andit'scalledlongleadbecauseittakesthreeorfouryearstobeabletofabricatesomeofthis.
So,forthemostpart,whatwedidiswestoppedthefabricationearlyinthestages.Therefore,itwouldnothave--it'snotina--forthemostpart,it'snotinafinishedstate.Soitwouldhaveverylittlelead.
Themajorityofthat$millionwasthepreliminaryengineering.Ofcourse,allofthathasvaluedowntheroadasmarketsturnaround.Andwe'llreevaluate--Isaidinmytalkearlier,thisstillisaverystrongprojectandmakesagoodstrategicprocessplatforminsideofoursystem.Butthemarketshavecertainlyturnsouth.Andifthespreadsaren'tgoingtobethere,itdoesn'tmakesensetogoforward.
AsfarasourFIDprocess,ourFIDprocessworkedverywellhereinthatwedidn'tforcesomethingtogothrough,andweminimizedallofthefabricationexpense.Wehavenotdoneanyworkinthefieldasfarasanyconstructionoranyearth-movingwhatsoeverinordertobeabletostartthisproject.OurFIDprocessandthestepsthatwegothroughtomakethatfinaldecisionworkedverywell.Butasalways,Paul,wetrytocertainlyback-endloadanytypeofequipment,anylongleadtimeuntilwehavemadea--clearlyafinaldecision.
Whenwemadethatdecisiontwoyearsago,thiswasa%recurringproject,andthemarketcertainlyhasturnedtheotherdirection.
AndthenyourfirstquestionaboutGalvestonBay,youstoleourthunderalittlebit.Thatwillbethecenterpieceofwhatwewilltalkaboutonanalystday.We'regoingtotalkaboutGalvestonBay,wewilltalkaboutourmidstreambusinessbecauseit'sgoingtobeacombinationanalystdaymeetingwithMPLX.Wewillspendalotoftimeonmidstreamandthenobviouslyspendalotoftime,Tonyalreadymentioned--Speedway.Sowewillbegivingalotofthose,asyousay,low-hangingfruit,howwewillharvest.Andthetypeofprojectswe'relookingatatGalvestonBaywillhavequickreturnsandquickreturnsofEBITDA,andtheywon'tbelong-leadprojectsofcapitalthat'smany,manyyearsoutbeforeyoustartgettingyourreturn.
PaulCheng (Analyst-BarclaysCapital):
Verygood.Thankyou.
Operator :
BradHeffern,RBCCapitalMarkets.
BradHef f ern (Analyst-RBCCapitalMarkets):
AndSpeedway,justcirclingbacktoanearlierquestion,Iwaswonderingifyoucouldputafinerpointonthesynergiesgeneratedtodate.Hasitbeentheoverallpoolofsynergieshasexpanded,orhavetheybeenjustcominginfasterthanyouwouldexpect,andperhapsthegoalnowbecomesthegoal?Buttheoverallsynergiesarenotmorethanyouoriginallyexpected?
GaryHeminger (PresidentandCEO):
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Allright,Tony?
T onyKenney(President,SpeedwayLLC):
Yes,so,originallywehadindicatedthatwewouldgenerate$millionofsynergiesin.AndasGarymentioned,that'saboutXthatnumberthatwe'veseensofar.
Sowhat'shappenedis,again,alludingbacktoGary'scomments,whenyouthinkabouttheacceleratedconversions,theback-officeplatforms,theoperatingplatforms,thebenefitswegettoreallymarketingthestoresalongthesamelinesaswedoourlegacystores,thoseareallgeneratingadditionalsynergiesthatwearerealizingfromthatactivity.Whenyouaddinthenumberofremodelsthatwe'vecompleted--sotheseareprojectswe'respending$,to$,togointothestoresandreallyredesignhowwearemerchandisingthekeyareasofthestore.And,again,thosearegivingrisetosynergiesonanacceleratedbasis.
Andthen,lastly,Iwouldsaythatthe--justtheoverallintegrationoftheoperations,thepeoplehavebeentremendous.Theamountoftimeit'stakentotrainthousandsofemployeesonnewsystemsandprocedureshasreallyexceededourexpectations.So,again,fromanoperatingexpensestandpointandthenoverallfromtheG&Astandpoint,wehavebeenabletotakeadvantageofthosesavingsaswell.
BradHef f ern (Analyst-RBCCapitalMarkets):
Okay,gotit.AndthenjustthinkingaboutSpeedwayingeneralanditsplaceintheportfolio,obviouslyitisaveryvaluableasset.Atthispoint,theheadstoresarenotmature.Butfast-forwardacoupleyears,ifyoufeelthatyouarenotgettingthecreditthatyoushouldforSpeedwayintheshareprice,howdoyouthinkaboutunlockingthat?
GaryHeminger (PresidentandCEO):
Well,wewilljustcontinuetofollowthatthrough,Brad.WecontinuetobelieveSpeedway,asyousaid,isavery,verystrategicpartofourportfolioalongwithourrefiningsystemandourmidstreamandhoweverythingworksandwemovethosevolumesthroughourintegratedlogisticsspace.Butwewillcoverthatdowntheroad.
BradHef f ern (Analyst-RBCCapitalMarkets):
Okay,Iwillleaveitthere.Thanks.
Operator :
PhilGresh,JPMorgan.
PhilGresh (Analyst-JPMorgan):
Thefirstquestion,justonemoreonMPLX,couldyoutalkalittlebitmoreabouttheinterplaybetweenthedropsthatyou'renottalkingaboutintheorganicgrowththatyouseefromMarkWestandotheropportunities?Howshouldwethinkaboutthemixofthosetwothingswhenyoulookatinordertohitthat%distributiongrowthtarget?
GaryHeminger (PresidentandCEO):
Well,youlookatMarkWestbyitselftoday--andthey'vestatedpublicly,theyhaveabout$.billionofCapExintheirplanthisyear.Thatwillbecomingonsomeworktheyalreadyhadgoingon.Andasfieldsmature--andtheotherthingishowtheyareimprovingutilizationoftheassetsthattheyalreadyhavein
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place.YoutakeontopofthattheassetsthatwehavealreadyputintotheMLP,howtheycontinuetogrow.
Andthenoneofthethingsthatiskindofaflywheel,ifyoulookatit,ishowwemoverefinedproducts.Sometimesitmakesmoresensetomoverefinedproductsouttheexports.Sometimesitmakesmoresensetotakethemthroughourpipelinesystems.Andwetakethatallintoaccount.Andthenyoucouplethatwithpossibledrop-downsthatwemaylookat.
Theotherthingis--letmeturnitovertoPam.PamBeallisherewithme.PamismanagingallofthetransitionbetweenMPLXandMarkWest,soletmehavePamgiveyousomeofherthoughts.
PamBeall(SVPCorporatePlanning,GovernmentandPublicAffairs):
GaryreallyelaboratedextensivelyearlyonthecallaboutthemanydifferentwaysthattheparentcansupportthedistributiongrowthforMPLXgoingforward.Soit'snotsimplyacombinationofdrop-downandorganicgrowth.Andwewilldetermineaswemovethrough,basedonalotofdifferentconsiderations,whatwethinkisthebestcombinationofthemanytoolsthatMPCcanlendtothepartnershiptosupportitsdistributiongrowth.
DonT emplin (EVPSupply,TransportationandMarketing):
Phil,thisisDon.Ithinktheotherreallyimportantfactorinthereistheyieldenvironment.ThatwillimpacthowthetrajectoryofwheretheEBITDAsourcesareandhowthatworksgoingahead.Sowhatwefeelgreataboutisthatwehavealotofoptionsandtoolstobeabletomanagewhateveryieldenvironmentthatweareintobeabletoreachthat--thedistributiongrowthguidancethatwe'vearticulated.AndwethinkthatdifferentiatesMPLXfrommanyofMLPsthatareoutthere.SoIcan'ttellyoutheexactpercentage,butIcantellyouwehaveallthetoolsthatweneedtomeetthatdistributiongrowthguidance,andthatisadifferentiator.
PhilGresh (Analyst-JPMorgan):
Yes,okay.Andthenonthecapitalspending,ifIthinkaboutthecorebusinessoutsideoftheMarkWest,numberone,you'retrackingwellbelowthefull-yearguidance.Andnumbertwo,I'mjustwonderinghowyouarethinkingaboutthatasyoucompareitagainsthowyou'rethinkingabout,again,outsideofMarkWest.Howareyouthinkingaboutthattoday?Andifyoucouldmaybetiethattohowyou'rethinkingaboutreturnofcapitalaswell--theavailabilityofcashflowtoreturningcapitaltoshareholders--again,thisquarterbeingabitlower.Howareyouthinkingaboutthat?
GaryHeminger (PresidentandCEO):
Phil,areyouspeakingtoMPC?
PhilGresh (Analyst-JPMorgan):
Yes.
GaryHeminger (PresidentandCEO):
Right,okay.Timwilltakethat.
T imGrif f ith (SVPandCFO):
Phil,Ithinkagreatquestion.Forcapitalspendingthroughthirdquarter,we'renotterriblyfaroffourexpectationsandwouldexpectthatourfull-yearwillbeaboutwhereweexpected.So--andthat'snotunusualtoseealittlebitheavierofacapitalspendinthefourthquarter.Thatincludesallelementsof
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thebusiness.Obviouslywe'vegotsomecontinuedinvestmentonthepipelineprojectsthatweareworkingonwithinrefiningandwithinSpeedway.SoIthinkforthefullyearwewillgetthere.
We'rereallynotatapositionrightnowtotalkabout.HopefullyyoucanjoinusfortheinvestordayinDecember.Ithinkweintendtogiveyoualittlebitmorecoloraroundourintentionandexactlywherewe'regoingtodevoteresourcesfornextyearacrosstheentirebusiness.
Thereturnofcapitalpieceisanothergoodquestion.Ithinkyou'veseenfromusandwillcontinuetoseefromusaverybalancedapproach.Thisisnotanall-in,one-way-or-another.Wethinkthatwe--it'scarefullyandthenwithaprettydisciplinedapproachinvestinthebusinesswherewethinkitmakessense,anddothatwithafocusonshareholderreturnsaswell.Webelievethatthedividendandsharerepurchasearepartoftheoverallvalueequationforinvestors,andthat'ssomethingwe'regoingtoremaincommittedto.
PhilGresh (Analyst-JPMorgan):
Okay.Allright.Thanksalot.
Operator :
RyanTodd,DeutscheBank.
RyanT odd (Analyst-DeutscheBank):
MaybeifIcouldjustfollowupwithonefollow-upontheROUXproductcancellation.Youdiscusseditalittlebit,butmaybeifyouthinkaboutgeneralcapitaldeploymentgoingforward,isthisjustmoreofaproject-specific?Shouldwethinkaboutitintermsofthespecificeconomicsofthisproject?Isitacommentonrelativegasolineversusdistillatecracksgoingforward?Orifwethinkaboutit,canweviewthisas--whenyouthinkaboutcapitalallocationwithinyourportfolio,asbetteropportunitiesoutsideofrefining,orarethereotheropportunitieswithinrefiningifthesespreadsaren'tgoingtoworkwhereyoucanmaybeshiftcapitalgoingforward?
GaryHeminger (PresidentandCEO):
It's,firstofall,aspecificproject,Brian.Andit'sthemarketconditionsthatweareseeingtoday.Thisprojectwasallabouttakingheavyresid,upgradingitthroughtheROUX,andmaking(inaudible)fordiesel.Andit'saspreadfromthat.Andweallknowwherecrudepriceshavegone,thereforewheretheproductpricehasgone,andthespreadhascollapsedsignificantly.
AsIstatedatonetime,thisspecificprojecthada%return.It'sgoingtohaveabout$millionto$billionofannualEBITDA.AndourFIDprocesswork,we'reontopofthat.Anditsuggeststhatthemarketconditions,iftheyaregoingtobelowerforlonger,nowisnotthetimetoinvestinthem.ButwebelievethatthebackdroptothatiswehavesuperiorprojectsspecificallyaroundGalvestonBaythatarehigherratesofreturn,muchquickerreturnsofcapitalintoourmarketplacethatmakesmoresense.
So,yes,wewrotethisoff.Weshelvedthisforthetimebeing.Butwhenthemarketscomeback,wehavealltheengineeringdone,complete,andwecanpullitoffthe--youdon'tsayshelfanymore,youpullitoutofthecomputerandawayyougo.Soit'sa--therightdecisionfromacapitaldisciplineapproach,butitgivesustheavailablecapital.Thereareotherprojectsinrefiningand,ofcourse,othergoodreturnsthatwehaveeitherinthemidstreamorintheSpeedwayspace.
RyanT odd (Analyst-DeutscheBank):
Allright,thanksfortheclarityonthat.Iwillleaveitthere,actually.
CompanyName:MarathonPetroleumCorpCompanyTicker:MPCSector:BasicMaterialsIndustry:Energy
EventDescription:Q32015EarningsCallMarketCapasofEventDate:26.26BPriceasofEventDate:51.15
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Operator :
DougLeggate,BankofAmerica.
DougLeggate (Analyst-BofAMerrillLynch):
So,look,alotofstuffhasobviouslybeenasked,butIhavetwothings.Andthenmaybeyouwanttosavethisfortheanalystday.Gary,you'vebeenprettyopenandactiveaboutfindingwaystoreleasevalueovertheyears.Andobviouslyoneofthebigslugsofyourbusinessnowisretailfollowingtheacquisition,obviously,ayearortwoago.Whatareyourlonger-termstrategicthoughtsforretailintermsofwhat--ifyoulookatpeersinthestreet,youcouldargueitgetsahigher-multiplebusinessthat'sembeddedinalower-multiplerefiningbusiness.SoI'mjustcuriousaboutyourbroadthoughtsonthat.AsIsay,maybeit'sanissuefortheanalystday.AndI'vegotafollow-up,please.
GaryHeminger (PresidentandCEO):
Right,andIjusthadasimilarquestiontothat.We'vebeenveryclear--youandIhavetraveledandtalkedaboutthisinthepast.Speedwayisaverystrategicpartofourbusiness.Ourstrategiesarewewanttohaveaveryhigh-controlvolumeoutofourrefineryspecificallyforgasoline.AndasSpeedwaycontinuestogrowthedieselpartofitsbusiness,itiscertainlycontinuingtohelpthat.
Ithinkifyouwanttolookatthecaptureratefromourrefiningandthemarginsthatwegetfromsomeofourrefining,itcertainlyhelpshavingSpeedwayinordertohaveaveryratabledemandsourcethathastakenyourrefinedproduct.
Lastly,asIsaidlastyearwhenwedidtheacquisitionoftheSpeedwayEast,thatwewanttogrowSpeedwaytobea$billion-a-yearEBITDAbusiness.AndIwillknockonwood,andwewillsharemorewithyouatanalystday,butIthinkwe'reprettymuchgoingtobethereinthefirstyearofoperations.
So,itillustratesthatourstrategy--thetremendousexecutionbyTonyandtheSpeedwayteaminordertobeabletoaccomplishthis,togetabouttwiceasmanystoresreconvertedinthefirstyearthanwehadanticipatedisvery,verystrong.Butwewillsharemorewithyouatanalystday.IthinkyourrealquestionisarewethinkingaboutspinningSpeedwayoff,andtheansweris(multiplespeakers)--
DougLeggate (Analyst-BofAMerrillLynch):
Yes,Ididn'twanttobethatobvious.But,yes,that'sprettymuchit.
GaryHeminger (PresidentandCEO):
Theanswerisno.Thisisavery,verykeypartofourstrategygoingforward.
DougLeggate (Analyst-BofAMerrillLynch):
Gary,myfollow-upisreally--IguesswestartedoffthecalltalkingaboutMPLXormaybeIcouldjustfinishitupthere.Clearly,thesharepriceofMPLXisnotunderpressure.Ithinkthat'sawidermarketissuethanjustaMarathonissue.Butleavingthataside,whatdoesitdotoyourviewonwhatyouthinkyoucanattractbywayofacquisitionmultiplesforyourmidstreamassets?AndI'mthinkingmorethelonger-termrefiningdrops.Alotofyoustillthinkthatsortoftomultipleisstillreasonable.Andifso,whendoyouthinkwecanstarttoseethatprocesskickstartagain?
GaryHeminger (PresidentandCEO):
Well,Iwillanswerthatfromaverymacroviewpoint,Doug.Aswelookacrosstheentiremidstreamspace,Istillthinkyou'regoingtoseeconsolidationinthemidstreams.Ithinkyouhaveto.Thepressureon
CompanyName:MarathonPetroleumCorpCompanyTicker:MPCSector:BasicMaterialsIndustry:Energy
EventDescription:Q32015EarningsCallMarketCapasofEventDate:26.26BPriceasofEventDate:51.15
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balancesheetsofcertainmidstreamcompanies--that'swhythisisacompellingcombination.Andtheindustriallogicisourstrongbalancesheetwithacompanythathasatremendousbacklogofprojectsandcan'tdoallofthemontheirown.Sothat'snumberone.Ithinkyou'regoingtocontinuetoseeadditionalcombinationsinthisbusiness.
Thenextpointthat--whenyoulookoutatassetsthatareavailable,high-qualityassetsthatareattractiveinthemarketplacearestilldemandingan,,andsometimesevenahighermultiplewhenyouarecompetingforthoseassetsinanopenauction.
SoIthinkthemarket--becausewhatwe'retalkingaboutthatisavailabletobedroppedintotheMLPareveryhigh-quality,veryhigh-sustainingcashflowassets,andtheywilldemandapremiuminthemarketplace.SoIstillthinkthatmarketisgood.Don,doyouhaveanycomments?
DonT emplin (EVPSupply,TransportationandMarketing):
Well,maybetheotherjustobservation,Doug,isinanenvironmentwheretheyieldshavewidenedasmuchastheyhave,thereisprobablygoingtobesomepressurejustaroundthemarketingeneralonmultiples.Imean,ifyouhaveahighercostofcapitalonahigheryield,whatyouareabletopayforatacquisition,Ithink,doesgodownovertime.
DougLeggate (Analyst-BofAMerrillLynch):
Okay.Well,Iappreciatethefullanswer.Don,we'llseeyouinacoupleofweeks.Thanksagain,everybody.
GaryHeminger (PresidentandCEO):
Getfeelingbetter.Don'tbringanyofthosegermstoourmeeting.
DougLeggate (Analyst-BofAMerrillLynch):
Yougotit.Thanksalot.
Operator :
RogerRead,WellsFargo.
RogerRead (Analyst-WellsFargoSecurities):
Canwetalkabouttheexportalittlebit?Youmentioneddoingsomethingstoexpandedandifyoucouldgojustalittlefurtherthanrecordvolumesbutwheredoyouthinkvolumescangogiventheexpansion?Andasyoumentionedearlier,somecompetitionpickingupandprobablynotanythingwewouldcallcoremarketsofyours.ButthereissomecapacitycomingoninLatinAmericainfitsandstarts,let'ssay.Andalotofdowntimeinthatregionaswellthatmaynotresumeanytimesoon.Justgiveusanideaofwherethat--Ithinkitwas,youmentioned.
GaryHeminger (PresidentandCEO):
Yes,wedid,thisquarter.LetmeaskRichBedell,andMikePalmermayhaveafewcommentsaswell.
RichBedell(SVPRefining):
Asfarastheprojectsthatwehavetoincreaseourexportcapacity,there's--twoarerampingupthisyear.OneisdoneatGaryvilleandthatwastoincreasethegasolineportion.InGalvestonBay,wearedoingsomethingtoincreasethedistillateportion.Andthenlookingdowntheroadbyabout,Ithinkrightnowwewilltakethatuptoabout,willbeourstatedcapacityonexports.Butthenwegouptoalittle
CompanyName:MarathonPetroleumCorpCompanyTicker:MPCSector:BasicMaterialsIndustry:Energy
EventDescription:Q32015EarningsCallMarketCapasofEventDate:26.26BPriceasofEventDate:51.15
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above,withaprojectthatwewillcompleteinatGalvestonBaythatreallytakestheoldcrudeimportdocksandmakesthemintogasolineanddistillateexportdocks.SoMike,youcantalkaboutthebiggerscaleofthedemand.
MikePalmer (SVPSupply,DistributionandPlanning):
Sure.Roger,here'swhatIwouldsay.It's--thisexportmarketisextremelydynamic.It'sverycomplex.Everytimewestarttoseemaybealittleslowdowninonearea,thestrengthshiftsanditgoessomewhereelse.ThepredominanceofourbusinessendsuptodayinEuropeorinLatinAmerica.
Butinadditiontothat,weactuallyhavecargoestheygoallthewaytoAsia.There'sallkindsofdifferentneedsouttherefordifferentspecsanddifferent-sizedcargoes.AndasIsay,themarketisextremelydynamic.Wehonestlyhavehad--wehaven'tmissedastepsincethesebigexportrefinerieshavecomeon.Andnoreasontobelievethatwewon'tcontinuetohavetheadvantagethatwe'vehadinthepast.
RogerRead (Analyst-WellsFargoSecurities):
Okay,that'sgreat.Andonefollow-uponthat,youmentionedweakdieseldemandoveralldomestically,globally.Itseemstomeanysortofpickupinthatisgoingtotightenthedistillatemarketfairlyquickly.AndIdon'tknowexactlyhowtonamethetimingofthat.Butdoyouseethatthereisany--especiallygiventheshifttogasolinethissummerthatthereisasubstantialamountofexcessdistillatecapacitythat'snotbeingusedoutthere?
GaryHeminger (PresidentandCEO):
No,wedon'tthinkthere'sthatmuch.Infact,alotofupsetsaroundtheworldinrefiningoverthelastquarterhavebeenabletosoakupalotofthatexcessinventoryinthemarketplace.Butyouareright;itgoesback,Roger,tobasiceconomictheory.It'snotgoingtotakemuchtoturnthatdistillatemarketaround.Whetherit's,barrelsadayor,barrelsaday,it'sfairlybalancedtoday.Andsoit'snotgoingtotakemuchtohappen.AlittlebitofpickupinAsia,alittlebitofpickupinBrazilthatIwasmentioningearlier.Europecontinuestoremainstrong.Soit'snotgoingtotakemuchto,Ithink,putthingsinapositivepositiononthedistillatesideoftheequation.
RogerRead (Analyst-WellsFargoSecurities):
Okay,great.Thanks.SeeyouallinDecember.
Operator :
JeffDietert,SimmonsandCompany.
Jef f Dietert (Analyst-Simmons):
Myquestionisrelatedtohigh-octanegasoline,andIwaswonderingifyoucouldcommentonyourflexibilitytoincreaseproductionofhigh-octanegasolinewithinyoursystem.Areyouseeingretailsalesandhigh-octanegasolinegrowmorerapidly?Andthentheregular-octanegasoline?
GaryHeminger (PresidentandCEO):
WewillhaveRichtakethefirstandTonytaketheretailside.
RichBedell(SVPRefining):
Fromtherefiningstandpoint,we'veseenthatoctanedemandhasgoneup.Primarily,Ithinkit'srelatedtorunningtheshalecrudesandtheCanadiancrudeswiththediluent.Soyouareusingyouroctane,you're
CompanyName:MarathonPetroleumCorpCompanyTicker:MPCSector:BasicMaterialsIndustry:Energy
EventDescription:Q32015EarningsCallMarketCapasofEventDate:26.26BPriceasofEventDate:51.15
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blendingitupintherefinery.Ouroctaneknobs--Marathon'srefinery,wehaveaprettyhighpercentageofreformercapacity,andweutilizeitfully.Sowearegeneratingoctanethere.Wearealsolookingatprojectstogenerateadditionaloctanethroughourcatcrackersandalpunits.Butwe've--lookatourproductslatesandweoptimizeourrefineriesaroundthat.
Mike,doyouwanttotakealittlebitaroundsomeoftheoctanesales?
GaryHeminger (PresidentandCEO):
AndJeff,IwillfinishthecallherewithoneofthekeythingsthatwewilltalkaboutwiththeMPLandMarkWestcombinationiswe'relookingataprojectthathasanalkaloid-typeunitdowntheroadthatcantakethebutanethatisintheMarcellus--sotheMarcellusUticaregionsarelongbutane.Wecantakebutane,putitthroughanalkylationunit,andmakeahigh-octaneblendstock.Andthat'soneofthekeythingsthat--oneoftherealstrengthswebringtothetableintothis--inthiscombinationthathelpstheproducers.Ithelpsusbeingshortoctaneandhelpstheindustryandtheconsumers.Sothat'sabigpartthatwewilltalkaboutinDecemberaswell.
Jef f Dietert (Analyst-Simmons):
Thanksverymuch.
Operator :
Thankyou.Weshownofurtherquestions.IwouldliketoturnthecallovertoMs.Ewingforfinalremarks.
GeriEwing (IR):
Thankyouforjoiningustoday,andthankyouforyourinterestinMarathonPetroleumCorporation.Shouldyouhaveadditionalquestionsorwouldlikeclarificationonanyofthetopicswediscussedthismorning,TeresaHomanandIwillbeavailabletotakeyourcalls.Thankyou.
Operator :
Thankyou,ladiesandgentlemen.Thisconcludestoday'sconference.
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