Marathon Petroleum Corporation — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. MPC is an integrated downstream energy company with refining and marketing operations and a majority interest in midstream operator MPLX. The interim financial statements are unaudited.
Financial performance
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Sales and other operating revenues | $38.058 billion | $22.711 billion |
| Income from continuing operations, net of tax | $1.172 billion | $(170) million |
| Net income attributable to MPC | $845 million | $(242) million |
| Diluted earnings per share attributable to MPC | $1.49 | $(0.37) |
| Cash provided by operating activities | $2.513 billion | $454 million |
| Capital expenditures and investments | $573 million | $307 million |
- Revenue rose $15.347 billion, principally as average refined-product sales prices increased $0.99 per gallon and sales volumes rose 226 thousand barrels per day. Higher crude and product purchase costs drove most of the increase in cost of revenues.
- Refining & Marketing adjusted EBITDA, a non-GAAP measure, was $1.374 billion versus $23 million; Midstream adjusted EBITDA was $1.403 billion versus $1.322 billion. Refining & Marketing margin increased to $15.31 per barrel from $10.16, while refinery throughput rose to 2.833 million barrels per day from 2.565 million.
- Management attributed higher Midstream results mainly to higher NGL prices and increased equity-affiliate income. Net interest and other financial costs declined to $262 million from $353 million.
- Operating cash flow improved substantially, reflecting stronger operating results and a favorable working-capital change of $946 million year over year. Working capital was a $598 million source of cash in Q1 2022; commodity-price and volume effects contributed to movements in receivables, inventories and payables.
Balance sheet, debt and liquidity
- At March 31, 2022, cash and cash equivalents were $7.148 billion and short-term investments were $3.449 billion. Total assets were $90.952 billion and total equity was $30.334 billion.
- Total debt was $27.132 billion, compared with $25.948 billion at December 31, 2021; $1.075 billion was due within one year. MPLX issued $1.5 billion of 4.950% senior notes due 2052 during the quarter.
- MPC liquidity excluding MPLX was $15.558 billion; MPLX reported $4.719 billion. MPC reported compliance with credit-facility covenants and a consolidated net debt-to-total-capitalization ratio of approximately 0.00 to 1.00. MPLX reported a debt-to-EBITDA covenant ratio of 3.64 to 1.0, within its 5.0-to-1.0 limit.
- Financing activities used $2.364 billion, including $2.846 billion for MPC share repurchases and $330 million in dividends paid. MPC repurchased approximately 37 million shares at an average $75.88; $7.46 billion remained authorized at quarter-end.
Material changes, outlook and risks
- Compared with Q1 2021, MPC moved from a continuing-operations loss to a profit, supported by higher refining prices and volumes. The prior-year comparison included $234 million of after-tax Speedway discontinued-operations income; Speedway was sold in May 2021.
- Management said demand continued to recover across regions, but did not provide specific earnings or operating guidance. The 2022 MPC capital investment plan was approximately $1.7 billion, excluding MPLX; MPLX’s plan was $900 million. Expected 2022 environmental capital expenditures were $85 million.
- MPC and Neste agreed to form a 50/50 joint venture for the Martinez renewable fuels project. The filing estimated total project costs at approximately $1.2 billion and targeted renewable-diesel capacity of 260 million gallons per year in the second half of 2022, rising to 730 million gallons per year by the end of 2023. Timing depends on permits and other conditions; Neste was expected to contribute $1 billion, including half of project development costs through completion.
- Key risks identified include crude and refined-product price and margin volatility, inflation and energy costs, Russia-Ukraine conflict and sanctions, COVID-19 uncertainty, operational disruptions, regulation and environmental compliance, and litigation. Commodity derivatives produced a net loss of $340 million in Q1 2022 versus $75 million in Q1 2021.
- Environmental remediation liabilities were $416 million at quarter-end. Climate-related lawsuits in several states seek unspecified damages and abatement; outcomes could not be determined. In the Tesoro High Plains Pipeline matter, U.S. government counterclaims seek disgorgement of profits, pipeline removal and remediation. A separate Illinois action followed a March 2022 crude-oil release; MPC said it was negotiating and could not estimate resolution timing.
- The filing also describes potential contingent payments under guarantees, including maximum undiscounted amounts of $170 million for the Bakken Pipeline agreement, $103 million for one Crowley Ocean Partners vessel guarantee and $104 million for Crowley Blue Water Partners. The Dakota Access Pipeline remained operational while an environmental impact statement was being prepared.
Important facts for investors to verify
- Whether refining margins, throughput and demand remain strong, and how crude costs, product prices, differentials and energy expenses affect realized margins.
- Whether operating cash flow remains robust after working-capital effects, and how planned capital spending, dividends and share repurchases affect cash and debt.
- Progress on Martinez permits, joint-venture closing, construction and targeted production milestones.
- Developments in the environmental, pipeline and other legal matters, and any changes to recorded liabilities or contingent exposures.
- The sustainability of MPLX distributions and MPC’s stated liquidity and investment-grade credit profile under changing market conditions.