OREANDA-NEWS. Marathon Petroleum Corporation (NYSE: MPC) today reported third-quarter earnings of USD 168 million, or USD 0.54 per diluted share, compared with USD 1.22 billion, or USD 3.59 per diluted share, in the third quarter of 2012. For the third quarter of 2013, earnings adjusted for special items were USD 183 million, or USD 0.59 per diluted share, compared with earnings adjusted for special items of USD 1.13 billion, or USD 3.31 per diluted share, for the third quarter of 2012.

“During the quarter, we returned nearly USD 1.2 billion of capital to our shareholders through a combination of dividends and share repurchases,” said MPC President and Chief Executive Officer Gary R. Heminger. “On Sept. 26, the MPC board of directors approved an additional USD 2 billion share repurchase authorization through September 2015. This underscores our ongoing commitment to returning capital to our shareholders on a sustained basis while making value-enhancing investments in the business.”

Heminger noted that since becoming a publicly traded company in June 2011, MPC has increased its dividend 110 percent and has repurchased nearly USD 3.7 billion, or 17 percent, of its shares. As of Sept. 30, the company had USD 2.3 billion remaining under its share repurchase authorizations.

MPC's results were supported by consistent financial performance from its Pipeline Transportation segment and strong performance in the company's Speedway retail segment. “Speedway's excellent results reflect an increase in same-store sales, along with higher gasoline and distillate gross margins,” said Heminger. “We are investing in Speedway's continued success through an expansion of growth opportunities. By adding new convenience stores in Pennsylvania and Tennessee, we have increased the number of states in which Speedway has operations from seven to nine.”

Heminger noted that during the third quarter, MPC and the refining industry as a whole faced lower crack spreads, narrower crude oil differentials, and backwardation in the crude oil market compared to the third quarter of 2012. Additionally, MPC experienced lower product price realizations compared to spot market reference prices, which the company believes was due in part to the relatively higher cost of renewable identification numbers. “We believe U.S. refiners will continue to benefit from the projected significant growth in North American oil and natural gas production, along with past refinery investments in clean fuels production that is bolstered by strong global demand for refined products,” Heminger said. “In addition to improved future market conditions for the domestic refining industry, we expect to benefit from investments in our midstream operations, including those in MPLX LP, which will increase earnings and cash flow for this growing component of our business.”

Segment Results

Total income from operations was USD 301 million in the third quarter of 2013, compared with USD 1.9 billion in the third quarter of 2012.

Refining & Marketing

Refining & Marketing segment income from operations was USD 227 million in the third quarter of 2013, compared with USD 1.69 billion in the third quarter of 2012. The decrease was primarily due to a USD 10.57 per barrel reduction in the Refining & Marketing gross margin, which was USD 2.55 per barrel in the third quarter of 2013, compared with USD 13.12 per barrel in the third quarter of 2012. The main factors contributing to the decrease in the gross margin were narrower crude oil differentials, lower crack spreads and lower product price realizations compared to the spot market product prices used in the Light Louisiana Sweet (LLS) crack spread calculation.

In the third quarter of 2013, the sweet and sour crude oil differentials narrowed by USD 5.67 per barrel, or 46 percent, and the West Texas Intermediate/LLS crude oil differentials narrowed by USD 13.05 per barrel, or 76 percent, when compared to the third quarter of 2012. Regarding the lower crack spreads, the Chicago and U.S. Gulf Coast LLS 6-3-2-1 blended crack spread decreased to USD 6.52 per barrel in the third quarter of 2013 from USD 11.81 per barrel in the third quarter of 2012.

Refined product sales volume was 2.15 million barrels per day (bpd) in the third quarter of 2013, compared with 1.61 million bpd in the third quarter of 2012. Higher refinery throughputs and sales volumes, attributable in large part to the Galveston Bay refinery, which MPC acquired on Feb. 1, 2013, partially offset the impact of crude oil differentials and crack spreads.

Speedway

Speedway segment income from operations was USD 102 million in the third quarter of 2013, compared with USD 76 million in the third quarter of 2012. The USD 26 million increase was primarily the result of a higher gasoline and distillate gross margin and merchandise gross margin, partially offset by less income due to the absence of operating asset sales and higher operating expenses. Speedway gasoline and distillate gross margin per gallon averaged 14.04 cents in the third quarter of 2013, compared with 11 cents in the third quarter of 2012.

Pipeline Transportation

Pipeline Transportation segment income from operations was USD 54 million in the third quarter of 2013, compared with USD 52 million in the third quarter of 2012. The third-quarter 2013 segment income includes 100 percent of the operations of MPLX LP (NYSE: MPLX), a midstream master limited partnership formed by MPC in October 2012. The increase in segment income was primarily due to an increase in transportation revenue, partially offset by an increase in operating and depreciation expenses.

Corporate and Special Items

Corporate and other unallocated expenses of USD 59 million in the third quarter of 2013 were USD 15 million lower than in the third quarter of 2012. The decrease was primarily due to lower unallocated employee benefit and information technology expenses. During the third quarter of 2013, MPC recorded pretax pension settlement expenses of USD 23 million resulting from the level of employee lump sum retirement distributions occurring in 2013, compared with USD 33 million of pension settlement expenses in the third quarter of 2012.

During the third quarter of 2012, MPC recognized a pretax gain of USD 183 million resulting from the sale of most of the company's Minnesota assets in 2010.

Strong Financial Position and Liquidity

On Sept. 30, 2013, the company had USD 2 billion in cash and cash equivalents, an unused USD 2.5 billion revolving credit agreement and a USD 1 billion unused trade receivables securitization facility. The company's credit facilities and cash position should provide it with sufficient flexibility to meet its day-to-day operational needs and continue its balanced approach to investing in the business and returning capital to shareholders. As of Sept. 30, 2013, the company's strong financial position was further reflected by its debt-to-total-capital ratio of 23 percent.