Marathon Petroleum - Q2 2024

Transcript

Operator (participant)

Welcome to MPC’s second quarter 2024 earnings call. My name is Sheila, and I will be your operator for today’s call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. To enter the queue, press star one on your touchtone phone. Please note that this conference is being recorded. I will now turn the call over to Christina Kazarian. Christina, you may begin.

Kristina Kazarian (Head of Investor Relations)

Welcome to Marathon Petroleum Corporation’s second quarter 2024 earnings conference call. The slides that accompany this call can be found on our website at marathonpetroleum.com under the Investor tab. Joining me on the call today are Maryann Mannen, Chief Executive Officer, John Quade, Chief Financial Officer, and other members of the executive team. We invite you to read the safe harbor statements on Slide 2. We will be making forward-looking statements today. Actual results may differ. Factors that could cause actual results to differ are included there, as well as in our filings with the SEC. With that, I’ll turn the call over to Maryann.

Maryann Mannen (CEO)

Thanks, Christina, and good morning, everyone. I want to take a moment to recognize Mike Hennigan’s leadership as CEO of MPC over the last four years. Mike’s record of accomplishment has been tremendously valuable, and during his tenure, he delivered transformative strategic priorities and returned a peer-leading $40 billion to shareholders. We’re fortunate to have Mike as Executive Chairman of MPC’s board going forward. Turning to the global macro environment, in Q2, supply of refined products reached all-time seasonal highs, with the margin environment supporting assets running at high utilization as new capacity additions continue to ramp. At the same time, demand for refined products set new records globally, and we expect 2024 will be another year of record refined product consumption. Within MPC’s domestic and export businesses, we are seeing steady year-over-year demand for gasoline and diesel, along with growing demand for jet fuel.

As we look forward, demand growth is expected to outpace near-term capacity additions over time, with limited global refining capacity additions expected through the end of the decade. These fundamentals continue to support an enhanced mid-cycle environment for refining, and the US refining industry is expected to remain structurally advantaged relative to the rest of the world. We believe our assets will remain the most competitive in each region in which we operate, with our fully integrated refining system and geographic diversification across the Gulf Coast, MidCon, and West Coast regions providing a competitive advantage. We remain steadfast in our commitment to safely operate our assets and protect the health and safety of our employees. Operational excellence and commercial execution have driven sustainable structural benefits, uniquely positioning us to capture market opportunities, while disciplined capital investments focused on high-return projects remain core to our value delivery.

In refining, we are making investments predominantly in our large, competitively advantaged facilities to optimize our assets and position MPC well into the future. In midstream, MPLX continues to execute attractive growth opportunities focused on generating incremental third-party cash flows, while we continue to grow our natural gas and NGL value chains. In Q2, MPLX closed the Whistler transaction, and last week, MPLX and its partners reached FID on the Blackcomb Natural Gas Pipeline. This will be a 2.5Bcf pipeline connecting supply in the Permian to domestic and export markets along the Gulf Coast, offering a compelling value proposition while providing shippers with flexible market access. Blackcomb is expected to be in service in the second half of 2026. Additionally, MPLX recently increased its ownership in BANGL.

This pipeline transports NGLs from the Permian to Sweeny, Texas, and is currently expanding its capacity to 250,000bpd. This transaction is immediately accretive and enhances MPLX’s Permian NGL value chain as part of its developing wellhead-to-water strategy. MPLX is strategic to MPC’s portfolio, providing a $2.2 billion annualized cash distribution to MPC, which fully covers MPC’s dividend and nearly all of our 2024 capital program. Our midstream segment, which is primarily comprised of MPLX, has grown its adjusted EBITDA at nearly a 7% compound annual growth rate over the last three years. Strong coverage, low leverage, and growing cash flows provide MPLX with financial flexibility, placing it in an excellent position to continue to significantly grow its distributions and further enhance the value of this strategic relationship.

MPC’s total capital return since May 2021 has reduced MPC’s share count by nearly 50%. Cash generation will continue to influence buyback capacity as we return to a normalized balance sheet, and given our highly advantaged refining business and the $2.2 billion annualized distribution from MPLX, we believe we can lead peers in capital returns through all parts of the cycle. MPC generated second quarter adjusted earnings per share of $4.12, with operational excellence and strong commercial performance supporting our quarterly results. This quarter, we delivered refining utilization of 97% and capture of 94%, up 2%, while other refining peers reported sequential declines. Adjusted R&M EBITDA per barrel of $7.07 and cash from operations, excluding the impacts of working capital, of $2.7 billion both led refining peers.

We returned $3.2 billion to our shareholders this quarter. The capabilities we have built provide a sustainable advantage, and we expect to continue to see the impact on our quarterly results. With that, let me turn the call over to John.

John Quaid (CFO)

Thanks, Maryann. Slide 5 shows the sequential change in adjusted EBITDA from Q1 2024 to Q2 2024, as well as the reconciliation between net income and adjusted EBITDA for the quarter. Adjusted EBITDA increased sequentially by $133 million, driven by improved results in both our refining and marketing and midstream segments. The tax rate for the quarter was 16%, resulting in a tax provision of $373 million, which largely reflects the earnings mix between our refining and marketing and midstream businesses. Turning to our segment results, Slide 6 provides an overview of our refining and marketing segment for Q2, and following significant turnaround activity in Q1, our refineries ran at 97% utilization, processing nearly 2.9 million bpd of crude per day.

Refining operating costs were $4.97 per barrel in Q2, lower sequentially, primarily due to higher throughputs, lower project-related expenses associated with reduced turnaround activity, and lower energy costs. In our largest region, the US Gulf Coast, operating costs were $3.73 per barrel, demonstrating our cost competitiveness. Sequentially, per-barrel margins declined, primarily due to lower crack spreads. Slide 7 provides an overview of our refining and marketing margin capture of 94% for the quarter, which reflected tailwinds from gasoline margins, offset by increased headwinds from secondary product pricing driven by high refining industry utilization. Gasoline margins were supported by a falling price environment during the quarter, and our integrated system and realized demand across our multiple sales channels were competitive differentiators to our capture performance.

Slide 8 shows the changes in our midstream segment adjusted EBITDA versus Q1 2024. Our midstream segment is generating strong cash flows, with MPLX distributions contributing $550 million in cash flow to MPC this quarter. The two midstream transactions Maryann discussed earlier further enhance our Permian value chains for both natural gas and NGLs, and through organic growth and disciplined investments, MPLX continues to provide growing cash flows to MPC. MPLX is a differentiator in the MPC portfolio and remains a source of durable earnings growth. Slide 9 presents the elements of change in our consolidated cash position for Q2, with operating cash flow, excluding changes in working capital, of $2.7 billion, driven by both our refining and midstream businesses.

Working capital was a $541 million source of cash for the quarter, primarily driven by a decrease in refined product prices. Capital expenditures and investments totaled $541 million, and during Q2, MPLX issued $1.65 billion in tenured senior notes, the proceeds of which MPLX expects to use to retire senior notes maturing in December of this year and February of next year. MPC returned $2.9 billion through share repurchases and $290 million in dividends during the quarter, and in July, we repurchased just over $900 million of MPC shares, leaving $5.8 billion remaining under our current share repurchase authorizations and highlighting our commitment to superior shareholder returns..

At the end of Q2, MPC had approximately $6 billion in consolidated cash and short-term investments, excluding cash at MPLX. Turning to guidance, Slide 10 provides our Q3 outlook, with projected crude throughput volumes of just over 2.6 million bpd, representing utilization of 90%. Planned turnaround expense is projected to be approximately $330 million in Q3, with activity focused in the MidCon and Gulf Coast regions, and full-year turnaround expense is anticipated to be approximately $1.4 billion. Operating costs are projected to be $5.35 per barrel in Q3, while distribution costs are expected to be approximately $1.55 billion and corporate costs are expected to be $200 million.

In summary, our Q2 results reflect strong cash generation and disciplined capital allocation. The refining and marketing segment generated $2 billion of adjusted EBITDA, and MPLX distributed $550 million to MPC, supporting investments of over $500 million and capital returns of approximately $3.2 billion. With that, let me pass it back to Maryann.

Maryann Mannen (CEO)

Thanks, John. My priorities align with those that have made MPC a peer-leading energy investment. We remain unwavering in our commitment to safe and reliable operations, and operational excellence, commercial execution, and cost competitiveness create sustainable structural advantages that position us to deliver peer-leading financial performance regardless of market conditions. We will optimize our portfolio to deliver outperformance now and in the future, leverage our value chain advantages, ensure the competitiveness of our assets, and continue investing in our people. Executing on these commitments positions us to deliver the strongest through-cycle cash generation, supported by durable midstream growth and disciplined capital investment in opportunities with attractive returns. We are committed to leading in capital allocation and will return excess capital to shareholders through share repurchases.

MPC is positioned to create exceptional value through peer-leading performance, disciplined execution of our strategic commitments, and a compelling value proposition. I will now turn the call back over to Christina.

Speaker 15

Thanks, Maryann. As we open the call for questions, we ask, as a courtesy to all participants, that each person limit themselves to one question and one follow-up. If time permits, we will re-prompt for additional questions. We will now open the call. Sheila?

Operator (participant)

Thank you. We will now begin the question-and-answer session. If you have a question, please press star then 1 on your touchtone phone. To be removed from the queue, press star then 2. If you are using a speakerphone, you may need to pick up the handset before pressing the numbers. Once again, if you have a question, please press star then 1 on your touchtone phone. Our first question will come from Manav Gupta with UBS. Your line is open.

Manav Gupta (Analyst)

Good morning, and congratulations on a very strong start. Looking at the attractive midstream projects you are executing, Maryann—such as BANGL, Whistler, and now Blackcomb—and considering the growth of the distribution at MPLX, is there a thought process to grow the MPLX distribution by 10%? Even sustaining that growth for two more years could increase the distribution to MPC to approximately 2.7+, at which point it would cover your full CapEx and dividend, effectively making you a recession-proof refiner.

Maryann Mannen (CEO)

Thanks, Manav. I think you summarized it well. The strategy we are executing at MPLX targets mid-single-digit growth. As you’ve seen over the past three years, we have achieved that, with nearly 8% growth in distributable cash flow. To your point, we have increased the dividend over the last three years, and particularly over the last two years, by 10% per year. We believe our wellhead-to-water strategy, along with the key initiatives you just mentioned—our investment in BANGL, our JV in the Utica, Whistler, and, most recently, the FID of Blackcomb—continues to support our ability to deliver mid-single-digit growth.

Therefore, our goal of increasing that distribution and returning it to MPC creates, we believe, incremental strategic value between MPC and MPLX. As you noted, this would fully cover the MPC dividend and largely the capital that MPC has historically deployed. We believe this strategic relationship becomes increasingly important as we are able to grow MPLX’s distribution going forward.

Manav Gupta (Analyst)

Perfect. A quick follow-up: looking at the Gulf Coast OpEx of $3.72, which appears to be the lowest in the business, can you help us understand the drivers behind this improvement? Three or four years ago, MPC was not the lowest-cost Gulf Coast operator. What initiatives contributed to this achievement, and is this level of efficiency sustainable going forward?

Maryann Mannen (CEO)

Manav, thanks. One of our key initiatives and priorities has been profitability per barrel, which we view as a core element of our cost-competitive commitment across all regions where we operate. As we have discussed over the past few years, the work we have undertaken is sustainable. Ultimately, our goal is to deliver the best EBITDA per barrel in each region. We appreciate your recognition of the Gulf Coast. I’ll pass it to Rick to see if he wants to add any additional comments on the Gulf Coast.

Raymond Brooks (EVP of Refining)

On the Gulf Coast, utilization is at a strong level. We believe it is a highly constructive market going forward and expect it to continue rebounding, Manav.

Manav Gupta (Analyst)

Thanks, guys.

Raymond Brooks (EVP of Refining)

Thank you.

Operator (participant)

Next, we will hear from Neal Mehta with Goldman Sachs. You may proceed.

Speaker 15

Good morning, Mary Ann and team. Mary Ann, as you take on the CEO role, can you share your perspective on your first six months on the job? What are your key objectives, and what areas are you focused on?

Maryann Mannen (CEO)

Good morning, Neal. Thank you. First and foremost, our focus remains on creating exceptional value. As we have shared and discussed this morning, we believe we can deliver the strongest EBITDA per barrel and cash flow per share. Alongside our commitment to safe and reliable operations, we will continue to prioritize operational excellence and commercial performance, ensuring that our profitability per barrel remains best in class. Ultimately, our goal is to maintain peer-leading capital allocation, guided by principles of return on and return of capital, and we will continue to drive all our actions to uphold these standards.

I shared a few points, and we will continue to build on them by leveraging our value chains. We also remain committed to ensuring the competitiveness of our assets, which we will continually evaluate. Additionally, as I mentioned earlier, durable midstream growth and the associated cash flows represent another compelling value proposition for MPC. Together, these initiatives position us to deliver the strongest through-cycle cash flow. These are the areas you will see me focus on—not only over the next six months but continuously as we drive value for our shareholders.

Neil Mehta (Analyst)

Thank you, Mary Ann. If I may, I’d like to drill down on one specific topic. Over the past couple of years, the business has created significant value largely through organic growth. There have been questions regarding potential M&A activity in the renewable diesel space, with some trade articles referencing Neste in particular. Could you share your perspective on how you create value in that business and any thoughts specifically regarding M&A in this area?

Maryann Mannen (CEO)

Yes, sure, Neal. Let me address the Neste point first. That rumor is not factual; we are not having any conversations about a buyout with Neste. I wanted to make that clear. As we continue to evaluate opportunities, we see value within our portfolio. As I mentioned earlier, the competitive nature of each of our regions presents ongoing opportunities to drive performance. Our focus remains on commercial performance and continuing to deliver the strongest EBIT per barrel.

Right now, we see the opportunities within our own portfolio and will continue to evaluate, over the long term, how best to deliver that value proposition. We remain confident in our ability to grow organically.

Neil Mehta (Analyst)

Super clear, Maryann. Thank you.

Operator (participant)

Our next question will come from Paul Chang with Scotiabank. Your line is open.

Paul Cheng (Analyst)

All right. Thank you. Good morning, Maryann, John, and team. I have two questions. The first is likely for Rick regarding TMX, which has been operational for several months: do you believe the full impact has already been felt in the marketplace, or is there more to come? We were surprised that roughly two-thirds of the incremental barrels appear to be exported to Asia, and how has that additional volume on the West Coast affected your operations, particularly in terms of your crude slate and product yield? The second question may be for John: on page 18, the “other margin” line shows $108 million—could you provide some context on that?

Can you maybe share a little bit more detail what's inside there? Thank you.

Maryann Mannen (CEO)

Hey, Paul. Thank you. Regarding TMX, first and foremost, as we’ve discussed over the last several quarters, the start-up has largely proceeded as anticipated, and the results are consistent with how we expected them to play out in the marketplace. I will now pass it to Rick to provide additional insight, particularly on developments on the West Coast.

Raymond Brooks (EVP of Refining)

Yeah. Hi, Paul, it’s Rick. A few comments here—really no surprises. From a yield perspective, the changes are insignificant. What has changed, however, and is quite beneficial, is that the incremental Canadian barrels entering the market have put pressure on the ANS barrel. As you know, we are a significant buyer and runner of ANS barrels on the West Coast, so this has been very positive for us. Additionally, with our TMX commitment, we can run these advantageous barrels not only at Anacortes but also in Los Angeles. Overall, this has been very positive, and we expect it to continue in this manner going forward.

A Regarding the export to Asia, that is not surprising. In fact, we expect that pattern to continue, more or less. Paul, it will largely depend on differentials—both quality differentials and shipping/transportation to the West Coast. When you factor in those variables, you can reasonably anticipate how this will play out going forward.

John Quaid (CFO)

Good morning, Paul. It’s John. Regarding the “other margin” change you see for R&M, not all of it, but primarily, it relates to finalizing our insurance claim for the Galveston Bay reformer. We recognized that income in the first quarter and received the cash proceeds in Q2. So while the recognition occurred in Q1, this was the final settlement, meaning there is nothing to offset it in Q2. That is what is driving the change you are seeing. Thank you.

Operator (participant)

Our next question comes from Roger Read with Wells Fargo. Please go ahead.

Roger Read (Analyst)

Yeah,Thanks. Good morning, and congratulations, Maryann, on everything. I’d like to take a couple of shots at some of the macro trends. As we consider what we call “better than mid-cycle,” or the new mid-cycle, how are you viewing the market structure? How does that fit with generally higher utilization across the industry, which has put some pressure on cracks, at least for a few months this summer? How do you see this evolving over the next six to twelve months?

Maryann Mannen (CEO)

Sure, Roger. Thanks. A couple of points. First and foremost, over the long term, we continue to believe in an enhanced mid-cycle in the U.S. In the short term, as we discussed, Q2 follows a period of high turnarounds in Q1, which affected the market. We also expect continued volatility in supply and demand. However, over the long term, we do not anticipate significant challenges. While new supply may come online, we believe expected demand will absorb it.

Clearly, there may be some short-term volatility due to factors such as China’s recent demand trends and OPEC decisions. However, over the long term, we continue to believe in an enhanced mid-cycle. To frame it quantitatively, when running a billion barrels, each incremental dollar represents roughly $1 billion to the MPC portfolio. I’ll pass it to Rick to provide additional color.

Raymond Brooks (EVP of Refining)

Yeah, Roger, just a few additional comments. Supply and demand are generally in line with our expectations. Looking closer at domestic utilization over the past couple of weeks, it is down about 4%, bringing us to roughly 90% utilization, which aligns with our guidance going forward. We view this as very constructive. Regarding demand, MPC is seeing steady consumption domestically and from exports for gas and diesel, with particularly strong signals on the jet fuel side.

So we believe those tailwinds, combined with the supply and demand picture that's truly in balance, further backs up our mid-cycle plus thoughts going forward.

Roger Read (Analyst)

I appreciate that. You kind of clipped me on my follow-up on the demand side, so I'll, I'll leave it there and turn it back to you all. Thanks.

Raymond Brooks (EVP of Refining)

Thank you, Roger.

Operator (participant)

Our next question will come from John Royal with JP Morgan. Your line is open.

John Royall (Analyst)

Hi, good morning. Thanks for taking my question. My first question relates to your 90% utilization guide for 3Q, which seems relatively low for MPC in this quarter. There appears to be a fair amount of turnaround activity based on total turnaround dollars. Is there any economic downtime, or have any turnaround activities been pulled forward, or is there any other response to the weaker crack environment factored into that 90%?

John Quaid (CFO)

Good morning, John. I’ll take that to start. You’re correct regarding the turnaround activity. As I mentioned, we have work underway in the MidCon and the Gulf Coast, which will impact what we are able to run. I’ll make an initial comment and then turn it over to Rick for any additional input. Our focus remains on running our assets optimally to meet market demand.

Raymond Brooks (EVP of Refining)

Yes, John covered it well. We will operate economically, and 90% represents the guidance we believe is appropriate as we are roughly one-third of the way through the quarter.

John Royall (Analyst)

Great. Thank you. I was hoping to get some operational color on how Martinez is performing and progressing toward its target of reaching full capacity by year-end. Relatedly, do you have any concerns about feedstock prices being pushed higher due to Martinez ramping back to full and Rodeo coming online and increasing runs of lower-cost feedstocks?

Maryann Mannen (CEO)

Yeah, John, this is, this is Tim.

Speaker 15

We continue to believe Martinez is a highly competitive facility. In the second quarter, we brought a second unit back online, enabling the plant to operate at roughly 75% of its nameplate capacity. As noted previously, we expect to bring the final production unit online by year-end, allowing Martinez to operate at 100% of its nameplate capacity. We are on track to achieve that goal.

Speaker 14

Okay, thank you.

Operator (participant)

Next, we will hear from Jason Gabelman with TD Cowen. You may proceed.

Jason Gabelman (Analyst)

Good morning. Thanks for taking my questions. My first question is on shareholder returns and the pace of buybacks going forward. Q2 was a very strong buyback quarter. Adjusting for working capital over the past couple of quarters, net debt at the parent has increased by approximately $1.5 billion. Is that indicative of how you plan to manage the balance sheet as you continue deploying excess capacity toward buybacks? Alternatively, might you take a more cautious approach in the near term, considering potential market dislocations or stock price movements that could create a more advantageous opportunity to buy back shares?

Maryann Mannen (CEO)

Hey, Jason. Thanks. Regarding buybacks, we appreciate your comment on the second quarter, which totaled $2.9 billion. We continue to view share repurchases as an appropriate return of capital, particularly given MPC’s current equity price and the long-term growth opportunities we see in the business. You can expect us to continue using cash to buy back stock, with no change to that approach. The change in net debt quarter-over-quarter largely reflects the drawdown in cash.

You know, We’ve discussed what we believe is a reasonable cash position. I’ll let John provide a bit more detail on that. That said, we are not near any limit, and we continue to believe in share buybacks as a key use of capital moving forward.

Jason Gabelman (Analyst)

Great, thanks. My follow-up is specifically on results in the MidCon. Gross margin came in very strong. Could you share what drove that performance and whether there were any one-time items or notable factors to call out for the quarter?

Raymond Brooks (EVP of Refining)

Hey, Jason, it’s Rick Hessling. There were no one-time items this quarter. The strong results reflect the competitive advantage of our MidCon assets, which benefit from a fully integrated system. We have spent many years creating optionality from “cradle to grave,” from refining all the way through to the end consumer. We believe this integration continues to drive and will continue to drive strong results.

Jason Gabelman (Analyst)

Thanks.

Operator (participant)

Our next question will come from Carlos for Doug Leggate with Wolfe Research. Your line is open.

Speaker 14

Hey, everyone. This is Carlos. Doug sends his apologies. First, congratulations on the quarter, and thank you for taking the question. We would like to understand what you view as an appropriate dividend growth policy in the event of a potential slowdown in buybacks, particularly given the strength of your MPLX distribution and its ability to provide coverage. Thank you..

Maryann Mannen (CEO)

Thanks for the question, Carlos. Regarding our dividend policy, there is no change in how we approach it. Our criteria remain the same: we want the dividend to be sustainable, competitive, and have the ability to grow. Over the last few years, we have increased the dividend at a compound annual growth rate of approximately 12.5%. As we do each year, we will review the dividend in the third quarter and provide an update, maintaining our focus on sustainability and competitiveness.

We continue to believe that our return of capital strategy includes both dividends and share repurchases, with share repurchases serving as the primary vehicle for returning capital.

Speaker 14

Thank you. That actually sets up my follow-up question. In a softer market, how would you prioritize the balance between share buybacks and managing the balance sheet? Would you consider increasing leverage, and if so, to what extent?

Maryann Mannen (CEO)

No, I don’t believe we would relever the balance sheet. We’ve discussed our strategy and structure regarding debt-to-capital ratios, and we will continue to monitor that. At this point, however, we do not see a reason to increase leverage on the MPC balance sheet.

Speaker 14

Thank you.

Maryann Mannen (CEO)

You're welcome, Carlos.

Speaker 15

... The next question will come from Matthew Blair with TPH. Your line is open.

Rick Hessling (SVP of Global Feedstocks)

Thanks, and congratulations on a remarkable quarter. On the refining side, the slides mention tailwinds in Q2 from rising gasoline margins, but we noticed that your gasoline yield was slightly lower than normal at 49%. Could you explain what contributed to the lower yield, and do you expect it to rebound as we move into the third quarter?

Raymond Brooks (EVP of Refining)

Hi, Matt, it’s Rick. The lower gasoline yields were primarily due to the feedstock inputs. However, the ultimate margin capture was enabled by our ability to optimize returns on our specific commodities. This reflects the team’s efforts from “cradle to grave” to maximize margin, regardless of the yield percentage.

Rick Hessling (SVP of Global Feedstocks)

Sounds good. Sticking with refining, when we look at octane spreads by region, the Midwest really stands out. We’re seeing approximately a $40 premium versus regular gasoline, compared with around $9 in the Gulf Coast. Could you explain what is driving these wide Midwest octane spreads, and is that something MPC is able to capture in its system?

Raymond Brooks (EVP of Refining)

All right, that’s a great call-out. This is Rick again. The market in the Midwest is currently tight, with notable disruptions affecting supply and demand, which has been beneficial for us. While the octane spreads have widened significantly, we do expect a slight pullback; assuming they remain at current levels would likely be overly optimistic. That said, the Midwest market remains constructively tight at this time.

Rick Hessling (SVP of Global Feedstocks)

Great. Thank you very much.

Raymond Brooks (EVP of Refining)

Thank you.

Speaker 15

Now, our next question will come from Theresa Chen with Barclays. Your line is open.

Theresa Chen (Analyst)

Hi Hi, just a quick follow-up on your midstream strategy as it complements R&M. As you expand your wellhead-to-water footprint from the Permian to the Texas Gulf Coast, is your preference still to retain commodity exposure at MPC? For example, if you secure that final piece and market LPGs across the water, as some midstream competitors do, would R&M retain that portion of earnings, and could that structurally enhance R&M’s margin capture?

Rick Hessling (SVP of Global Feedstocks)

Yes, Theresa, you are correct. We would retain that commodity risk at MPC, as you noted, with no intention of transferring it. I’ll pass it to Dave to provide some additional color.

Dave Heppner (SVP of Strategy and Business Development)

Yes, Theresa. As we continue to build out our wellhead-to-water strategies, one consideration is through the MPLX lens—creating an industry solution both for MPC and other shippers on the system. The second piece is looking at the enterprise perspective: how can we complement the MPC–MPLX relationship to create incremental value, while, as Mary Ann mentioned, keeping the commodity risk from marketing and trading activity on MPC’s books? I hope that helps.

Theresa Chen (Analyst)

Thank you.

Rick Hessling (SVP of Global Feedstocks)

Theresa, I think it's also the benefit of our integrated asset portfolio. I think you really see that come through.

Theresa Chen (Analyst)

Got it. Thank you.

Rick Hessling (SVP of Global Feedstocks)

You're welcome, Theresa.

Speaker 15

All All right, Sheila. If there are no further questions, thank you for your interest in MPC. If you have additional questions or would like clarification on any topics discussed this morning, please reach out to our investor relations team, who will be happy to assist. Thank you for joining us today. This concludes today’s conference.