The article introduces the MPC First Quarter 2024 Earnings Call and provides information about the participants and the Safe Harbor statements. It also mentions the addition of two new independent directors to the MPC Board and their strong records of accomplishment. The macro-refining environment is described as constructive, with a record high in global oil demand and an expected increase in demand for transportation fuels. The company's domestic and export business is seeing steady demand for gasoline and growth in diesel and jet fuel, leading to a belief that 2024 will see record consumption of refined products.

Global supply remains limited for the rest of the decade and the U.S. refining industry has a competitive advantage due to its locational advantage and access to low cost resources. Despite this, the company remains focused on capital discipline and has invested in refining projects and midstream investments. The company also completed a significant amount of maintenance work during the quarter and is now ready to meet increased demand during the summer driving season. MPLX, the company's midstream branch, continues to pursue growth opportunities.

The Harmon Creek II gas processing plant and Preakness II in the Permian Basin have recently come online, with a new plant in the basin, Secretariat, expected to be operational in the second half of 2025. MPLX, a strategic asset for MPC, has announced two transactions in the Utica and entered into a joint venture for natural gas pipelines. MPC's capital allocation framework prioritizes sustaining assets, paying dividends, and growing earnings while exercising capital discipline and returning excess capital through share repurchases.

In addition to announcing a $5 billion share repurchase authorization, the company has already returned $35 billion to shareholders through repurchases and dividends since May 2021. The company believes that share repurchases are a good investment at the current share price level, as it gives investors access to a premier refining system, a growing midstream business, and strong business execution. The company's operational and commercial execution, along with planned maintenance activity, contributed to earnings per share of $2.58 and adjusted EBITDA of $3.3 billion for the quarter. Refinery throughput was reduced due to planned turnaround activity, but with a large portion of this activity now complete, the company is well positioned to run its refining system at full capacity through the summer. The company's capture rate for the quarter was 92%, reflecting the seasonal market conditions, with weaker light product margins and inventory builds impacting results.

The company's commitment to commercial excellence is evident in their sustainable advantage over their peers and their successful execution of their 2024 capital investment plan. They have completed large projects and continue to focus on smaller projects to improve refinery yields and lower costs. In the first quarter of 2024, adjusted EBITDA was lower due to planned turnaround activity, and the company recorded a charge related to long-term incentive compensation. The tax rate for the quarter was 18%.

The first quarter results for the Refining & Marketing segment reflect lower throughputs due to planned turnaround activity, resulting in higher operating costs and slightly higher margins. The Midstream segment, which includes MPLX, contributed $550 million in cash flow to MPC and remains a strong source of earnings. Operating cash flow for the quarter was over $1.9 billion, with a use of $389 million for working capital. Capital expenditures and investments totaled $1.3 billion, and MPC returned $2.5 billion to shareholders through repurchases and dividends.

The company has announced the approval of an additional $5 billion for share repurchases and has repurchased a significant number of shares. They also have a strong financial position and provide guidance for the second quarter, projecting higher throughput volumes and lower operating costs. The company remains committed to safety and operational excellence and will continue to prioritize capital investments and pursue projects with attractive returns. The company is well positioned in the current mid cycle environment and expects this to continue due to their advantages and growing global demand.

MPLX is a key source of growth and competitive advantage for MPC. It is expected to continue increasing cash distributions to cover MPC's dividend and capital requirements while generating excess cash even before earning refining EBITDA. MPC has reduced its share count while maintaining its ownership of MPLX units, nearly doubling the potential value to MPC on a per share basis. The midstream business provides a unique value proposition for MPC shareholders. Despite 4 refineries being in turnaround, MPC still generated more cash from operations than its peers. The call is now open for questions, with a limit of 1 question and a follow-up. The first question is from Neil Mehta with Goldman Sachs.

The speaker is discussing the current state of the West Coast market, specifically the impact of Rodeo and Martinez shutting down on gasoline margins. They believe the market is fundamentally short and long on diesel, and this trend may continue through the summer. They also address the lower-than-expected buyback in the quarter, but reassure that their commitment to returning capital to shareholders remains unchanged.

Manav Gupta asks Mike and Rick about the global capacity expansion and if it will affect the 2025 market. Mike and Rick are optimistic about demand setting records and believe that supply will remain constrained. They also mention that demand numbers are often revised upwards and that the expansions coming online may not be enough to keep up with demand.

The US agency has been underestimating gasoline and diesel demand for a long time, and people should pay attention to the revisions that occur. The first quarter was exceptional due to a $650 million turnaround expense, but the rest of the year is expected to see improved performance and lower OpEx per barrel. The company had four of its largest assets in turnaround and is well poised for the summer driving season. The second quarter guidance shows increased utilization and lower OpEx per barrel.

The company took advantage of downtime at their largest plants to work on projects that will improve reliability in the future. This decision may result in higher earnings for the company's subsidiary, MPLX, in the next quarter. The company's executives also added that they chose to use the first quarter to invest in increasing reliability for the rest of the year. Despite heavy spending in the quarter, the company is confident in their assets and optimistic about the rest of the year. Analysts on the call also asked about the potential impact on earnings, to which the executives responded that there may be less sensitivity on the L&S side of the business due to contractual structures. Overall, the company believes they have positioned themselves well for the future.

Maryann Mannen, speaking on behalf of the company, explains that the lower throughput and higher OpEx and turnaround expenses compared to last quarter's guidance were due to some additional projects that were undertaken during the turnaround period. These projects were aimed at improving reliability and safety for future operations. As for the impact of the TMX spot up on their West Coast operations, Rick Hessling states that they have a commitment on the line and expect to receive Canadian advantaged crude into both their Pacific Northwest and West Coast systems.

The speaker believes that there will be many opportunities for the company in the spot market at the Westridge dock to transport barrels to LA and blend heavy Canadian oil with lighter grades. The exact amount of WCS they will be able to run is unknown and will depend on the economics. The company has been generating a lot of cash and is committed to returning capital to shareholders, but the amount may vary from quarter to quarter.

The company is committed to returning capital to shareholders and generating cash. They have a capital framework in place and are focused on maintaining their position as a leader in both areas. They have successfully generated more cash than their peers in the first quarter, despite some challenges. They will continue to reduce the share count and are aiming for a long-term capture rate of 100%. The key drivers for increasing this rate in the future include potential improvements in commercial operations and ongoing capital projects at their refineries. The exact timeline for reaching a 100% capture rate is uncertain, but the company remains committed to their goals.

The company is focused on improving its commercial performance and has made changes in the organization to optimize value chain. They believe there are opportunities for further improvement and are aiming for 100% performance. However, they caution that market factors can affect their capture metric and the most important metric to look at is cash.

The paragraph discusses the importance of generating cash as the main metric for analyzing business performance, rather than focusing on other variables. The speaker also clarifies that the other income in the R&M walk is not related to the Martinez biofuel project. They then provide an update on the project, stating that it is currently operating at 50% of its capacity due to a heater tube failure, but is expected to increase to 75% in the third quarter.

In the first quarter, the company expects to reach a nameplate production of 48,000 barrels per day at the Martinez plant, with plans to ramp up to full capacity by the end of the year. The company is working with regulators to address any necessary fixes and there are currently no associated costs included in the second quarter guidance. The impact of product margins and inventories had a negative effect on capture metrics in the first quarter, but the company made strategic decisions that they believe were the right ones. As market dynamics change, the company will continue to share updates.

The operator introduces the next question from Roger Read about the company's expectations for crude oil. Read asks about the impact on the Mid-Con and Gulf Coast regions due to the availability of barrels, particularly on the heavy side. The company's representative, Rick Hessling, responds by stating that light heavy spreads are stable and the WCS spread will likely return to its current level due to strong Canadian production. He also mentions that the company does not believe there will be a shortage of heavy barrels in the Mid-Con region, and they anticipate running a similar mix of Canadian barrels as they have in the past. When asked about the potential decrease in Gulf Coast barrels, Hessling states that they do not expect significant changes.

The speaker discusses the stability of their oil production mix and potential for growth in Brazil, Guyana, and Canada. They also mention the possibility of obtaining barrels from the Middle East. In regards to the West Coast, they mention potential limitations in running maximum barrels of WCS due to its higher acidity compared to ANS. They also note the record high octane spreads, which is driven by Tier 3 low sulfur gasoline specs and strong export signals, and the speaker emphasizes their company's large production of octane.

The company is experiencing high demand for octane long product due to a combination of factors such as strong petchem margins, persistent length in the NAFTA market, and high turnarounds in Q1 and Q2. They are also long on diesel in California and are looking for export opportunities to clear the excess product. The direction of wholesale gasoline prices has had a significant impact on the company's marketing margins and R&M capture, benefiting them in Q4 but acting as a headwind in Q1. The extent of this impact depends on the region and market conditions.

In the first quarter, there was a $14 flat price increase which was a significant headwind for the company. They need to remain competitive in the market and it affects their capture. The company has a goal to increase cash flows from third parties and optimize within their own system. The distribution from MPLX currently covers the MPC dividend and more than half of the capital, but they aim to increase it even further in the future. The company is bullish on natural gas growth and believes it has tailwinds behind it.

The speaker discusses the potential for MPLX cash generation to cover the dividend and capital at MPC while also generating excess cash. They state that there is no specific target for this, but the company will continue to focus on growing this ability. The speaker then thanks the audience for their interest and offers further assistance if needed before ending the conference call.

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