The operator introduces the MPC Fourth Quarter 2023 Earnings Call and turns it over to Kristina Kazarian. She introduces the speakers and reminds listeners of the Safe Harbor statements. Mike Hennigan, CEO, recognizes changes in the executive management team and introduces new appointments. Maryann Mannen is now President of MPC and John Quaid is the new CFO. Rick Hessling is the new Chief Commercial Officer and Brian Partee is the new Chief Global Optimization Officer. These changes aim to improve the company's performance and maximize margin capture.

The organizational changes have resulted in a stronger focus on value-creating initiatives and improved cash flow generation. The company has successfully met its strategic commitments, with strong cash provided by operating activities and excellent results in the Refining & Marketing and Midstream segments. The company expects to receive significant cash distributions from MPLX and is committed to returning excess capital to shareholders through share repurchases and dividend increases. This represents a payout of 92% of operating cash flow, demonstrating the company's commitment to shareholder returns.

In 2023, MPC had a strong performance with a total shareholder return of 31%. The global oil demand is expected to continue to increase in 2024, leading to steady demand for gasoline, diesel, and jet fuel. The company anticipates a supportive refining margin due to above-average turnaround activity and transition to summer gasoline blends. In the long term, the U.S. refining industry is expected to have a favorable mid-cycle environment. MPC's capital allocation priorities include sustaining capital, paying a secure and growing dividend, and investing in growth opportunities with attractive returns.

The company plans to return excess capital through share repurchases and has already reduced its total share count by 45%. They are committed to share repurchases as a key part of their capital allocation strategy. The company's 2024 capital investment plan, excluding MPLX, is $1.25 billion and focuses on safety and environmental performance. In Refining & Marketing, they are investing in projects that enhance margin and reduce costs. MPLX also announced their 2024 capital investment plan of $1.1 billion, which is focused on the Marcellus and Permian basins. The company's three strategic pillars of cost structure, portfolio, and commercial execution have driven sustainable benefits, with refining utilization at 92% in 2023 and an average capture of 100%. They are committed to commercial excellence and expect to continue seeing positive results.

The company expects to have a sustainable advantage in the market due to their capabilities and ongoing investments. They have successfully completed repairs at their Gulf Coast and Martinez facilities and are working with regulators to ensure safe operations. Their capital investment plan for 2024 totals $1.25 billion, with a focus on traditional projects and low carbon initiatives. A significant portion of the investment will go towards improving energy efficiency and lowering emissions at their Los Angeles refinery, which is a key asset in their West Coast value chain.

The company is making investments to improve the cost competitiveness, reliability, and energy efficiency of its refineries. These investments also address new regulations for emissions reductions. At Galveston Bay, a new high-pressure distillate hydrotreater will upgrade high sulfur distillate to ultra-low sulfur diesel, increasing the production of higher value finished products and reducing the need for third-party processing. The company is also investing in low carbon initiatives, setting targets to reduce greenhouse gas and methane emissions, and water intensity. These efforts are expected to generate a return on investment of over 20%. Additionally, the company is investing in early-stage developments, such as RNG, to further reduce greenhouse gas emissions in the future.

In the fourth quarter, the company reported adjusted earnings per share of $3.98 and adjusted EBITDA of over $3.5 billion. Cash flow from operations was nearly $2.3 billion and the company returned $311 million to shareholders through dividends and share repurchases. The company's refineries ran at a 91% utilization and processed 2.7 million barrels of crude per day. Per barrel margins were lower sequentially across all regions due to lower crack spreads.

In the fourth quarter, the company had a capture rate of 122% and refining operating costs of $5.67 per barrel. The Midstream segment saw a 7% increase in EBITDA compared to the previous year. Operating cash flow was $2.3 billion, but working capital was a $1.1 billion use of cash due to declining crude prices. Capital expenditures and investments totaled $896 million, including an acquisition by MPLX. The company also returned $2.8 billion to shareholders through share repurchases and dividends.

The paragraph discusses Marathon Petroleum Corporation's commitment to delivering superior shareholder returns through a 125% payout of their operating cash flow, excluding changes in working capital. The company has approximately $5.9 billion remaining for share repurchases and ended the fourth quarter with $10.2 billion in cash and short-term investments. They also provide guidance for the first quarter, including expected crude throughput volumes, turnaround expenses, operating costs, distribution costs, and corporate costs. The company has demonstrated strong execution on their strategic commitments and their partnership, MPLX, has also shown growth.

The company has been investing capital wisely to increase earnings and generate strong cash flow. They will continue to prioritize investments in safe and reliable assets with attractive returns. The Midstream segment has seen significant growth in EBITDA, and the company expects to receive a substantial amount of cash distributions from its partnership. The company has generated $14 billion in cash from operations, increased its dividend, and repurchased shares, resulting in a 92% payout ratio. MPC is seen as a top choice for refinery investments with strong cash generation and potential for superior returns for shareholders. A question and follow-up will be allowed during the Q&A portion of the call.

The speaker, Maryann Mannen, responds to a question about the company's strong quarter performance. She explains that their focus on commercial performance and delivering best through cycle cash flow has contributed to a 122% system capture and $885 million margin uplift. She attributes this success to structural changes and other factors such as strong light product margins, favorable secondary products impact, and stronger jet fuel premiums. The speaker also addresses the question of how much of this performance is repeatable.

In paragraph 12, the speaker explains that some of the factors that contributed to the company's success in the quarter are not repeatable, such as the drop in oil prices and the completion of projects. They also mention that they had a heavy turnaround season in the first quarter, but it was planned strategically to take advantage of lower margins. In the second quarter, they expect to see stronger results as a result of these turnarounds.

Manav Gupta from UBS congratulates the operator and asks about the company's goal of achieving 100% capture. Mike Hennigan responds by stating that while they focus on EBITDA per barrel margin and free cash, they have overshot their goal. Manav then asks about the company's growth projects in Los Angeles and Galveston Bay. Mike explains that they are investing in their L.A. facility to improve competitiveness and reliability, and the Galveston Bay project aims to increase efficiency and lower costs.

The company has announced a margin enhancement project and believes that the current spreads for unhydrotreated distillate will remain wide. Both projects are expected to have returns of over 20% and will improve the competitive position of the company's facilities. The company is also focused on margin enhancement, lower costs, and efficiency. The renewable diesel project on the West Coast is currently running at 22,000 barrels a day and the company is working with regulators to reach the nameplate capacity of 48,000 barrels a day. The company's JV partnership with Neste will result in a differential of 13,000 barrels a day for MPC.

The speaker, Rick Hessling, explains that their company is constantly optimizing their slate and looking at different factors such as region and plant to improve their total return. They prioritize overall profitability rather than suboptimizing for the benefit of one plant over another. They have also worked to create optionality within their Mid-Con system and are currently managing this optionality with the TMX and Gulf Coast systems.

The company is constantly updating and optimizing its crude slate and entire value chain in order to capture more value. They have made changes and are excited about future opportunities. The company has a net cash position and is focused on generating cash and delivering commercially. The debt maturity profile at the MPC level is shown and the company is considering where they want their balance sheet to be as those debts come due.

The speaker discusses the financial flexibility and strong balance sheet of the company, as well as their target debt-to-cap ratio. They also mention the potential for acquisitions in the refining sector, but the company has not shown interest in this in the past. However, having additional assets could allow them to apply their technical expertise and potentially reduce risk and increase commercial opportunities.

Mike Hennigan explains that the company is constantly evaluating both internal and external opportunities for investments. While Dave Heppner's team focuses on external assets, they also look at the company's current assets and have announced two new projects with a potential return of over 20%. The company has also made investments in low carbon and RNG facilities. The company is pleased with their current projects and is investing $475 million in traditional refining, with $100 million allocated to the DHT project.

The speaker discusses the success of smaller high-return projects in their facilities and the importance of running reliably and being smart commercially. They mention their improved performance in the fourth quarter and their goal of optimizing operations based on the total company. They believe there is still room for improvement and have made organizational changes to work towards this goal.

The speaker discusses the progress the company has made and their optimism for the future. They mention that it is difficult to determine what stage they are in, but they are constantly striving for improvement. They also mention changes in their approach to business and their focus on generating cash. The other speaker adds that they have built regional capabilities and have been successful in linear programming.

The changes in the management team were driven by the desire to reward results and promote personal growth. The team approach is heavily emphasized in decision-making. The decision to extend Mike Hennigan's role is up to the Board.

The Board is aware that their responsibility is a top priority and they are working on it. They have been making progress for some time and it will continue to play out. Regarding the balance sheet, the company may end up staying at the same debt level if they continue to buy back shares. The company wants to find the appropriate level of leverage and their cash position will likely be used for return to shareholders.

The speaker discusses their company's focus on generating cash, properly managing the balance sheet, and returning excess capital to shareholders. They also mention a strong performance in the previous year and their commitment to continuing to prioritize return of capital. They will consider various factors, including the refining macro environment, but remain steadfast in their commitment. The other speaker adds that returning capital is part of their company's DNA and duty.

The speaker discusses the company's plan to return capital to shareholders and maintain their assets while also investing in the business. They emphasize their commitment to generating cash and returning capital regardless of the market environment. The speaker also addresses the potential impact of heavy maintenance in the first quarter, stating that their objective is still to reach 100% capture by 2024 and that the maintenance on crude units is not expected to have a significant negative impact on their capture.

The speaker discusses the variables that impact the capture rate and mentions that they are not expecting turnaround to have a negative impact. They also mention new refining capacity coming online in the second half of the year and steady demand for gas and diesel, leading to a supportive spring and summer season.

The speaker discusses the current state of the oil market, noting that while there has been attention on two upcoming refineries, they believe demand will continue to rise and keep margins above mid-cycle levels. They remain bullish due to the lack of supply response to match demand. In their prepared remarks, they mention an enhanced mid-cycle environment for U.S. refiners in the coming years and attribute this to various global supply and demand factors. The speaker is then asked to elaborate on the primary drivers that will uplift margins for U.S. refiners.

In this paragraph, Rick Hessling discusses the advantages that the U.S. market provides for the company, including access to feedstock and crude, cheap natural gas prices, and a skilled workforce. He also mentions the potential for an enhanced mid-cycle and the positive impact it could have on the company's bottom line, citing their large scale as a major factor. Additionally, he mentions the bullish outlook for global demand and the potential for strong performance in the upcoming spring and summer.

The speaker, Mike Hennigan, discusses how his company approaches financial planning by using scenario planning rather than trying to estimate specific numbers. He also mentions a new project on the West Coast that will improve reliability, efficiency, and reduce greenhouse gas emissions. The project has a return of over 20% and is not related to avoiding regulatory penalties. Hennigan acknowledges that the West Coast market may face challenges in the future due to increasing competition.

The speaker believes that their company has a strong competitive advantage and is in it for the long-term. They also believe that not all facilities will survive in the long-term, but they want to have a reliable, efficient, and low-cost facility. Another speaker adds that their integrated system in California is a competitive advantage over other refiners, especially during times of demand decline. The call concludes with the invitation for further questions and thanking the participants for joining.

This summary was generated with AI and may contain some inaccuracies.