Marathon Petroleum profits slip

By LOU WILIN
STAFF WRITER

Marathon Petroleum Corp.’s profits declined 17 percent last quarter from a year earlier to $633 million, due mainly to smaller discounts on the crude it buys, and higher refinery maintenance costs.

Earnings translated into $2.10 per share, down from $2.26 per share in the October-December quarter a year earlier, the company said Wednesday.

For the full year, profit fell 35 percent to $2.17 billion. Earnings per share for 2013 were $6.84, down from $9.79 in 2012.

Findlay-based Marathon Petroleum buys crude and refines it into gasoline, diesel and other petroleum products, which it then sells. It also owns and operates Speedway stations.

For years, Marathon and other midcontinent refiners have been taking advantage of a surplus of cheap, domestically-produced crude oil, which boosted their profit margins. The domestic oil is still cheap, just not the bargain it was last year.

Marathon’s gross profit per barrel of refined petroleum products fell to $15.69 last quarter from $16.34 a year earlier. For the entire year, it dropped to $13.24 from $17.85 in 2012.

Profit from refining and marketing operations dropped 15 percent to $971 million in the October-December quarter.

In comparison, Valero Energy Corp.’s refining operating profit fell nearly 12 percent to $1.5 billion in the October-December quarter. Phillips 66’s refining earnings fell 53 percent to $450 million.

But Marathon Petroleum leaders were not complaining Wednesday. They simply had a hard act to follow after 2012’s performance.

“When we look at the fourth quarter, the pricing dynamics for domestic crude were very, very favorable,” said Mike Palmer, senior vice president for supply, distribution and planning. “Domestic crudes were very well-priced for our system.”

Marathon Petroleum’s revenue rose 20.4 percent to $25 billion last quarter, thanks to added output at the Galveston Bay refinery bought last year and Marathon’s growing exports.

Refined products sold at a rate of 2.1 million barrels per day, a 27 percent increase for the fourth quarter. In the July-September quarter, the company exported a then-record 245,000 barrels of fuel per day, nearly twice as much as it had a year earlier. Last quarter it exported still more, 298,000 barrels per day, said Chief Financial Officer Don Templin.

Exports are going to Europe and Latin America.

“We had a very strong export quarter,” Templin said. “That was split between Galveston Bay and the Garyville (La.) refinery.”

Midcontinent refiners like Marathon Petroleum are using cheaper material to produce the same gasoline and diesel as overseas refiners, giving them a huge competitive advantage, said Fadel Gheit, senior energy analyst for Oppenheimer.

Marathon wants to further grow its export business. This year it is completing a gasoline export tank project at Garyville which gives it added flexibility to blend gasoline for export, said Richard Bedell, senior vice president for refining.

It also is designing dock expansions at both Garyville and Galveston Bay, to be completed in 2015.

More export-related expansions could be on the way.

“There is a potential at Galveston Bay to increase its gasoline export capacity by another 120,000 barrels a day,” Bedell said. “Both Garyville and Galveston Bay are ideally situated at the Gulf Coast locations with the deepwater docks to serve the export market.”

Speedway’s operating income grew nearly 8 percent last quarter to $83 million, mainly due to increased gross profit on merchandise. That was partially offset by a decreased gross profit per gallon on fuel sales.

For the entire year, Speedway’s operating profit rose 21 percent to $375 million, a record for the business.

Profit growth for the year was the result of higher profit margins on fuel and merchandise. Those were offset by increased operating expenses due to an increase in the number of stores. Speedway had 1,478 stores last quarter, 14 more than a year earlier.

Profit from Marathon Petroleum’s pipeline transportation operations shrank 35 percent last quarter to $47 million. The decline was due mainly to a decrease in income from pipelines Marathon Petroleum owns with other companies. Depreciation and operating expenses also increased.

The segment’s operating profit for the entire year declined 3 percent to $210 million. The decrease was mainly due to higher operating expenses and depreciation, and reduced income from pipelines Marathon owns with other companies. Those were partially offset by increased transportation revenue.

Wilin: 419-427-8413
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