Q4 2021 Marathon Petroleum Corp Earnings Call

Speaker 1: margins will be well positioned for 2022.

Well positioned for 2022.

On the aspects of the business that are within our control. This quarter. We made continued progress on our priorities.

Speaker 1: On the aspects of the business or within our control, this quarter we may continue progress on our priority.

Speaker 1: Since our last earnings call at the beginning of November , we've repurchased approximately $3 billion of shares. That puts us at approximately 55% complete on our initial $10 billion share repurchase program.

Since our last earnings call at the beginning of November we've repurchased approximately $3 billion of shares.

That puts us at approximately 55% complete on our initial $10 billion share repurchase program.

Speaker 1: Further reinforcing our commitment to return capital to shareholders, we obtained board approval for an additional $5 billion in share repurchase authorization.

Further reinforcing our commitment to return capital to shareholders. We obtained board authorization board approval for an additional $5 billion in share repurchase authorization.

Speaker 1: This brings our total outstanding authorization to approximately $9.5 billion.

This brings our total outstanding authorization to approximately $9 5 billion.

Today, we announced our 2022 capital spending outlook, we expect MPC will have approximately $1 $7 billion in capital expenditures with approximately 50% of the $1 $3 billion growth capital for our Martinez refinery conversion.

Speaker 1: Today we announced our 2022 Capital Spending Outlook. We expect MPC will have approximately $1.7 billion in capital expenditures, with approximately 50 percent of the $1.3 billion growth capital for our Martinez Refinery conversion.

Speaker 1: Total cost for the Martinez refinery conversion is estimated at $1.2 billion.

Total cost for the Martinez Martinez refinery conversion is estimated at $1 2 billion.

Speaker 1: Approximately $300 million has been spent to date, $700 million for 2022, and $200 million for 2023.

Approximately $300 million has been spent to date seven.

$700 million for 2022 and $200 million for 2023.

Speaker 1: This competitive capital cost is driven by the fact that Martinez' assets are conducive to retrofit and we can leverage existing infrastructure and logistics.

This competitive capital cost is driven by the fact that Martinez as assets are are conducive to retrofit and we can leverage existing infrastructure and logistics.

Speaker 1: At Martinez, the project reached another milestone as the 60-day comment period for the Environmental Impact Report concluded on December 17, 2021.

At Martinez the project reached another milestone as the 60 day comment period for the environmental impact report concluded on December 17th of 2021, we.

Speaker 1: We remain committed to progressing the conversion to a renewable fuel facility. Engineering is complete and we're ready to begin construction. Our plan is to have the first phase start up in the second half of 2022.

We remain committed to progressing the conversion to a renewable fuels facility engineering is complete and we're ready to begin construction. Our plan is to have the first phase startup in the second half of 'twenty two.

Speaker 1: We've already sourced some advantage feed stocks for the Martinez facility and are engaged in negotiations with multiple parties for the balance.

We've already sourced some advantaged feedstocks for the Martinez facility and are engaged in negotiations with multiple parties for the balance.

Speaker 1: Our strategy is multifaceted, including long-term arrangements, joint ventures and alliances, all of which are common in the space.

Our strategy is multifaceted, including long term arrangements joint ventures, and alliances all of which are common in this space. A recent example of our success would be our joint venture with ADM. We're also leveraging existing capabilities that are currently supporting dickinson to optimize between the two facilities.

Speaker 1: A recent example of our success would be our joint venture with ADM. We're also leveraging existing capabilities that are currently supporting Dickinson to optimize between the two facilities.

Speaker 1: We remain confident in our progress and ability to secure feedstocks for Martinez.

We remain confident in our progress and ability to secure feedstocks for Martinez.

Speaker 1: On Kenai, we have been working a sales process since we last communicated.

On Kenai, we have been working a sales process since we last communicated we'll be back to you. When we have additional details that we can share.

Speaker 1: We'll look back to you when we have additional details that we can share.

Speaker 1: In 2021, we progressed all three of our strategic initiatives in Slide 4 highlights this execution.

In 2021, we progressed all three of our strategic initiatives and slide four highlights this execution.

Speaker 1: Under portfolio, we completed the Speedway sale, receiving $17.2 billion of proceeds from that transaction and securing the 15-year fuel supply agreement with 7-Eleven.

On the portfolio, we completed the speedway sale, receiving $17 2 billion of proceeds from that transaction and securing the 15 year fuel supply agreement with 711.

Speaker 1: Our Dickinson Renewable Diesel Facility started up, reached capacity, and we've been successfully optimizing the operation.

Our Dickinson renewable diesel facility started up reached capacity and we've been successfully optimize optimizing the operation.

Speaker 1: We made two strategic decisions to idol our Gallup refinery in the convert Martinez to a renewable fuel facility.

We made two strategic decisions to idle, our Gallup refinery and the convert Martinez to a renewable fuels facility.

And this year MPLX produced exceptionally strong cash flow, which provided $2 $2 billion of contributions to MPC.

Speaker 1: And this year, MPLX produced exceptionally strong cash flow, which provided $2.2 billion of contributions to MPC.

Speaker 1: As we look at cross-reduction, what began as a $1.5 billion cross-reduction initiative is being embraced by the organization and now a low-cost culture is becoming embedded in how we conduct our business.

As we look at cost reduction what began as a $1 5 billion cost reduction initiative is being embraced by the organization and now our low cost culture is becoming embedded in how we conduct our business.

Speaker 1: Finally on commercial, while I've been reluctant to share too much, I wanted to highlight a few items that have commercial significance in our portfolio.

Finally on commercial while I've been reluctant to share too much I wanted to highlight a few items that have commercial significance in our portfolio.

Speaker 1: In March of 2021, we started up the Beatrice pretreatment facility, which processes about 3,000 barrels a day of advantaged feedstock for the Dickinson Renewable Diesel Plant.

In March of 2021, we started up the Beatrice pretreatment facility, which processes about 3000 barrels a day of advantaged feedstock for the Dickinson renewable diesel plant.

Speaker 1: In December , we closed on a joint venture with ADM, which will provide approximately 5,000 barrels a day of logistically advantaged feedstock for Dickinson when the new soybean crush plant comes online in 2023.

In December we closed on a joint venture with ADM, which will provide approximately 5000 barrels a day of logistically advantaged feedstock for Dickinson when the new soybean crush plant comes online in 2023.

Speaker 1: And in January this year, we successfully started up our Cincinnati pretreatment facility, which will process about 2,000 barrels per day for our Dickinson Renewable Diesel plant. We converted this facility from its original configuration as a biodiesel plant.

And in January of this year, we successfully started up our Cincinnati pretreatment facility, which will process about 2000 barrels per day for our Dickinson renewable diesel plant.

We converted this facility from its original configuration as a biodiesel plant.

Speaker 1: Our team's execution on these three strategic priorities builds a foundation for continued value creation, and we look forward to sharing updates each quarter as we continue to advance these initiatives.

Our team's execution on these three strategic priorities builds a foundation for continued value creation, and we look forward to sharing updates each quarter as we continued to advance these initiatives.

Shifting to slide five we remained focused on challenging ourselves to leading and sustainable energy we have three companywide targets.

Speaker 1: Shifting the slide five, we remain focused on challenging ourselves to leading in sustainable energy. We have three company-wide targets.

Speaker 1: on GHG, methane, and freshwater intensity that many of our investors and stakeholders know well. In the coming weeks, we look forward to providing an update on our progress against these targets and some of our accomplishments in 2021.

On GH G methane and freshwater intensity than many of our investors and stakeholders know well.

In the coming weeks, we look forward to providing an update on our progress against these targets and some of our accomplishments in 2021.

Speaker 1: At this point, I'd like to turn the call over to Mary Ann to review the fourth quarter results.

At this point I'd like to turn the call over to Mary Anne to review the fourth quarter results.

Speaker 2: Thanks, Mike. Slide six provides a summary of our fourth quarter financial results. This morning, we reported earnings per share of $1.27 and adjusted earnings per share of $1.30.

Mike Slide six provides a summary of our fourth quarter financial results. This morning, we reported earnings per share of $1 27, and adjusted earnings per share of $1 30.

Speaker 2: Adjusted earnings exclude $132 million of pre-tax charges related to make-hole premiums for the $2.1 billion in senior notes we redeemed in December .

Adjusted earnings exclude $132 million of pre tax charges related to make whole premiums for the $2 1 billion in senior notes, we redeemed in December .

Speaker 2: Additionally, the adjustments include an incremental $112 million of tax expense, which adjusts all results to a 24% tax.

Additionally, the ingest the adjustments include an incremental $112 million of tax expense, which adjusts all results to a 24% tax rate.

Speaker 2: beginning with our first quarter 2022 results.

Beginning with our first quarter 2022 results, we will be reporting our effective tax rate on an actual basis and will no longer adjust our actual results to a 24% tax rate.

Speaker 2: We will be reporting our effective tax rate on an actual basis, and we'll no longer adjust our actual results to a 24% tax rate.

Adjusted EBITDA was $2 8 billion for the quarter, which is approximately $400 million higher from the prior quarter.

Speaker 2: Adjusted Ibadal was $2.8 billion for the quarter, which is approximately $400 million higher from the prior quarter. Cash from operations, excluding working capital, was $2 billion, which is an increase of almost $300 million from the prior quarter. Finally, during the quarter, we returned $350,000,000 to shareholders through dividend payments and approximately $2.7 billion in share reproaches.

Cash from operations, excluding working capital was $2 billion.

Which is an increase of almost $300 million from the prior quarter.

Finally during the quarter, we returned $350 million to $354 million to shareholders through dividend payments and approximately $2 7 billion in share repurchases in.

Speaker 2: In the three months since our last earnings call, we have repurchased approximately $3 billion of shares.

In the three months since our last earnings call, we have repurchased approximately $3 billion of shares.

Speaker 2: Slide 7 illustrates the progress we have made towards lowering our cost structure over the past two years. As we think about our strategy on cost structure, I want to emphasize a few things. We will never compromise the safety of employees or the integrity of our assets. And we are committed to ensure the current cost reductions are sustainable, even during periods of general cost pressure.

Slide seven illustrates the progress we have made towards lowering our cost structure over the past two years as we think about our strategy on cost structure I want to emphasize a few things we will never compromise the safety of employees or the integrity of our assets and we are committed to ensure the current cost reductions are.

Anable, even during periods of general cost pressures.

Speaker 2: Since the beginning of 2020, we have been able to maintain roughly $1.5 billion of cost reductions that have been taken out of the company's total cost. Refining has been lowered by approximately $1 billion. Our refining operating cost in 2020 began at $6 per barrel, while we were able to finish 2021 with a full-year operating cost per barrel that was $5.

At the beginning of 2020, we have been able to maintain roughly $1 5 billion of cost reductions that had been taken out of the company's total cost.

Finding has been lowered by approximately $1 billion, our refining operating cost in 2020 began at $6 per barrel.

While we were able to finish 2021 with a full year operating cost per barrel that was $5 <unk>.

Speaker 2: Additionally, midstream was reduced by $400 million and corporate cost by about $100 million.

Additionally, midstream was reduced by $400 million and corporate cost by about $100 million.

Speaker 2: However, regardless of the margin environment, our EBITDA is directly improved by this $1.5 billion. This improvement is expected to make the company more resilient in future down cycles while having more bottom line profitability in up cycles.

However, regardless of the margin environment, our EBITDA is directly improve by this $1 5 billion.

This improvement is expected to make the company more resilient and future down cycles, while having more bottom line profitability in up cycles.

Speaker 2: Turning to slide eight, we would like to highlight our financial priorities for 2022. First, sustaining capital as we remain steadfast in our commitment to safely operate our assets, protect the health and safety of our employees, and support the communities in which we operate.

Turning to slide eight we would like to highlight our financial priorities for 2022 first sustaining capital as we remain steadfast in our commitment to safely operate our assets protect the health and safety of our employees and support the communities in which we operate.

Second we're committed to the dividend as we continue to purchase shares we will reduce the share count and increase the potential of returnable cash flow.

Speaker 2: Second, we're committed to the dividend. As we continue to purchase shares, we will reduce the share count and increase the potential of returnable cash flow.

Speaker 2: Third, we continue to believe this is both a return on and return of capital business, and we will continue to invest capital where we believe there are attractive returns. In traditional refining, we're focused on investments that are resilient and reduce cost. In renewables, current spend is primarily focused on our Martinez Renewable Fuels conversion.

Third we continue to believe this is both a return on and return of capital business and we will continue to invest capital, where we believe there are attractive returns.

And traditional refining we're focused on investments that are resilient and reduce cost and renewables current spend is primarily focused on our martinez renewable fuel conversion.

Speaker 2: We believe that cherry purchases can be used to meaningfully return capital to shareholders.

We believe that share repurchases can be used to meaningfully return capital to shareholders.

Speaker 2: In order to successfully execute the strategies guided by these priorities, MPC needs a strong balance sheet as a foundation. We continue to manage our balance sheet to an investment grade credit profile.

In order to successfully execute the strategy is guided by these priorities MPC needs a strong balance sheet as a foundation, we continue to manage our balance sheet to an investment grade credit profile.

Speaker 2: Moving to another key focus area, slide nine highlights our focus on strict capital discipline. Today we announced our 2022 capital outlook for MPC.

Moving to another key focus area slide nine highlights our focus on strict capital discipline today, we announced our 2022 capital outlook for MPC.

Speaker 2: MPC's 2022 capital investment plan totals approximately $1.7 billion.

Mpc's 2022 capital investment plan totaled approximately $1 7 billion.

Speaker 2: As we continue to focus on strict capital discipline, our overall spend remains approximately 30% below 2019 spending levels.

As we continue to focus on strict capital discipline, our overall spend remains approximately 30% below 2019 spending levels.

Speaker 2: Sustaining capital is approximately 20% of capital spend, underpinning our commitment to safety and environmental performance. Of the remaining 80% for growth, approximately 50% of this $1.3 billion supports the conversion of Martinez into a renewable fuels facility.

Sustaining capital is approximately 20% of capital spin underpinning our commitment to safety and environmental performance.

The remaining 80% for growth approximately 50% of this $1 3 billion supports the conversion of Martinez into a renewable fuels facility.

Speaker 2: the remainder of the growth capital is for other projects already underway. At our refineries, the growth capital is primarily for projects that enhance returns at MPC's large coastal assets, with a focus on completing Galveston Bay's star project, as well as smaller projects at Garyville and Los Angeles.

The remainder of the growth capital is for other projects already underway.

At our refineries the growth capital is primarily for projects that enhance returns at Mpc's large coastal assets with a focus on completing Galveston Bay Star project as well as smaller projects at <unk> in Los Angeles.

Going forward, we expect growth capital will continue to have a significant portion for renewables and projects that will help us reduce future operating costs.

Speaker 2: Going forward, we expect growth capital will continue to have a significant portion for renewables and projects that will help us reduce future operating costs.

Speaker 2: Slide 10 shows the reconciliation from that income to adjusted Ibeda, as well as the sequential change in adjusted Ibeda from the third quarter 2021 to fourth quarter 2021.

Slide 10 shows the reconciliation from net income to adjusted EBITDA as well as the sequential change in adjusted EBITDA from the third quarter 2021 to fourth quarter 2021.

Speaker 2: Adjusted EBITDA was higher quarter over quarter, driven primarily by a $354 million increase from refining and marketing.

Adjusted EBITDA was higher quarter over quarter, driven primarily by a $354 million increase from refining and marketing the.

Speaker 2: The adjustment column reflects $132 million of pre-tax charges for May coal premiums per debt redemption during the quarter, which has also been excluded from the interest column.

The adjustment column reflects $132 million of pre tax charges for make whole premiums for debt redemption redemption during the quarter, which has also been excluded from the interest column.

Moving to our segment results Slide 11 provides an overview of our refining and marketing segment. The business reported continued improvement from last quarter with adjusted EBITDA of $1 5 billion.

Speaker 2: Moving to our segment results, slide 11 provides an overview of our refining and marketing segment. The business reported continued improvement from last quarter with adjusted EBITDA of $1.5 billion.

Speaker 2: Fourth quarter EBITDA increased $354 million when compared to the third quarter of 2021. The increase was driven primarily by higher refining margins in the U.S. Gulf Coast and West Coast regions. U.S. Gulf Coast production increased by 14 percent, recovering from storm-related downtime last quarter, and saw its margin per barrel increase 31 percent.

Fourth quarter, EBITDA increased $354 million when compared to the third quarter of 2021.

The increase was driven primarily by higher refining margins in the U S Gulf Coast and West Coast regions.

The us Gulf Coast production increased by 14% recovering from storm related downtime last quarter and solid margin per barrel increased 31% due to higher export sales and higher sales of light product inventory the west coast margin per barrel increased 40% associated with increased demand and refine.

Speaker 2: due to higher export sales and higher sales of light product inventory. The West Coast margin per barrel increased 40 percent associated with increased demand and refinery outages.

Sorry outages.

Speaker 2: Utilization was 94 percent for the quarter, slightly improved from the third quarter. The higher Gulf Coast throughput was offset by lower throughput in the mid-con for planned turnaround activity.

Utilization was 94% for the quarter slightly improved from the third quarter, the higher Gulf Coast throughput was offset by lower throughput in the mid con for planned turnaround activity.

Operating expenses were higher in the fourth quarter, primarily due to higher natural gas prices. It was also higher routine maintenance and planned project expense. Additionally, we saw natural gas prices soften during the quarter coming off higher than the $5 to $6 range and ending in the $3 to $4 range.

Speaker 2: Operating expenses were higher in the fourth quarter, primarily due to higher natural gas prices. There was also higher routine maintenance and planned project expense. Additionally, we saw natural gas prices soften during the quarter, coming off highs in the $5 to $6 range and ending in the $3 to $4 range.

Speaker 2: Slide 12 shows the change in our midstream EBITDA versus the third quarter of 2021. Our midstream segment continues to demonstrate earnings resiliency and stability with consistent results from the previous quarter.

Slide 12 shows the change in our midstream EBITDA versus the third quarter of 2021.

Midstream segment continues to demonstrate earnings resiliency and stability with consistent results from the previous quarter.

Speaker 2: Slide 13 presents the elements of change in our consolidated cash position for the fourth quarter.

Slide 13 presents the elements of change in our consolidated cash position for the fourth quarter.

Operating cash flow was approximately $2 billion in the quarter. This excludes changes in working capital and also excludes the cash we received for our cares tax refund in the quarter, which was approximately $1 6 billion source of cash and is included in the income tax bar of the chart.

Speaker 2: Operating cash flow was approximately $2 billion in the quarter. This excludes changes in working capital and also excludes the cash we received for our CARES tax refund in the quarter, which was approximately $1.6 billion source of cash and is included in the income tax bar of the chart.

Speaker 2: Working capital was an approximate $1.3 billion source of cash this quarter, driven primarily by reduction in crude and product inventory.

Working capital was an approximate $1 3 billion source of cash this quarter, driven primarily by a reduction in crude and product inventory.

Speaker 2: As we announced on last quarter's call, MPC redeemed $2.1 billion in senior notes in December .

As we announced on last quarter's call MPC redeemed $2 1 billion in <unk>.

<unk> senior notes in December .

Speaker 2: Under income taxes, we received approximately $1.6 billion of our CARES tax refund in the fourth quarter. We also used about $300 million to offset against our Speedway tax obligation.

Under income taxes, we received approximately $1 6 billion of our cares tax refund in the fourth quarter. We also used about 300 million to offset against our speedway tax obligation.

Speaker 2: There is about $60 million of the refund remaining, which we expect in the first half of 2022. We paid approximately $1.2 billion for our speedway income tax obligation. All that remains is about $50 million of state and local taxes.

There is about $60 million of the refund remaining which we expect in the first half of 2022.

We paid approximately $1 2 billion for our speedway income tax obligation.

All that remains is about $50 million of state and local taxes.

Speaker 2: With respect to capital return during the quarter, MPC returned $354 million to shareholders through our dividend and repurchased approximately $2.7 billion worth of shares. At the end of the quarter, MPC had approximately $10.8 billion in cash and short-term investments.

With respect to capital return during the quarter MPC returned $354 million to shareholders through our dividend and repurchased approximately $2 $7 billion worth of shares.

At the end of the quarter MPC had approximately $10 8 billion in cash and short term investments.

Speaker 2: Slide 14 provides our capital investment plan for 2022, which reflects our continuing focus on strict capital discipline. MPC's investment plan, excluding MPLX, totals approximately $1.7 billion. The plan includes $1.6 billion for refining and marketing segment, of which approximately 300 million, or roughly 20%, is related to maintenance and regulatory compliance spending.

Slide 14 provides our capital investment plan for 2022, which reflects our continuing focus on strict capital discipline Mpc's investment plan, excluding MPLX totals approximately $1 7 billion.

The plan includes $1 6 billion for refining and marketing segment of which approximately $300 million of roughly 20% is related to maintenance and regulatory compliance spending.

Speaker 2: Our growth capital plan is approximately 1.3 billion split between renewables and ongoing projects. Within renewables spending the majority is allocated for the Martinez conversion. On going projects and our refining and marketing segment, we'll enhance the capability of our refining assets, particularly in the golf coast, and also support our focus on growing the value recognized from our marathon and arco-marketing brands.

Our growth capital plan is approximately $1 3 billion split between renewables and ongoing projects within renewable spending the majority is allocated for the Martinez conversion.

Ongoing projects in our refining and marketing segment will enhance the capability of our refining assets, particularly in the Gulf Coast and also support our focus on growing the value recognized from our marathon and Arco marketing brands.

Speaker 2: Also included is approximately $100 million of corporate spending to support activities we believe will enhance our ability to lower future costs and capture commercial value.

Also included is approximately $100 million of corporate spending to support activities, we believe will enhance our ability to lower future costs and capture commercial value.

Speaker 2: This morning, MPLX also announced their 2022 capital investment plan of $900 million. Their plan includes approximately $700 million of growth capital, $140 million of maintenance capital, and $60 million for the repayment of their share of the Bakken Pipeline joint ventures debt due in 2022.

This morning, MPLX also announced their 2022 capital investment plan of $900 million. Their plan includes approximately $700 million of growth capital of $140 million of maintenance capital and $60 million for the repayment of their share of the Bakken pipeline joint ventures debt due in 2022.

Speaker 2: On slide 15, we review our progress on our return to capital.

On Slide 15, we review our progress on our return of capital.

Speaker 2: Since our last earnings call at the beginning of November , we have repurchased approximately $3 billion of company shares.

Since our last earnings call at the beginning of November we have repurchased approximately $3 billion of company shares.

Speaker 2: This puts us at approximately 55% complete on our initial $10 billion repurchase program commitment, leaving approximately $4.5 billion remaining. We remain committed to complete the $10 billion program by the end of 2022. And as we are ahead of pace, given our recent repurchases, could foresee completion sooner than initially planned.

This puts us at approximately 55% complete on our initial $10 billion repurchase program commitment, leaving approximately $4 5 billion remaining we remain.

Committed to complete the $10 billion program by the end of 2022.

And as we are ahead of pace given our recent repurchases could foresee completions sooner than initially planned.

As part of our long term commitment to return capital, we announced an incremental $5 billion share repurchase authorization today, increasing our recent repurchase authorization to $15 billion.

Speaker 2: As part of our long-term commitment to return capital, we announced an incremental $5 billion share repurchase authorization today, increasing our recent repurchase authorizations to $15 billion. We plan to continue using open market repurchase programs, although all of the programs we have previously discussed remain available to us to complete our commitment. We intend to use programs that allow us to buy on an ongoing basis.

We plan to continue using open market repurchase programs, although all of the programs. We have previously discussed remain available to us to complete our commitment.

We intend to use programs that allow us to buy on an ongoing basis and we will provide updates on the progress during our earnings call.

Speaker 2: and we will provide updates on the progress during our earnings call.

Speaker 2: As we have said many times, we believe a strong balance sheet is essential to being successful in a competitive commodity business. It's the foundation allowing us to execute our strategy. Slide Sucks 16 highlights some of the key points about our balance sheet. And PC ended the year with approximately $10.8 billion of cash and short-term investments.

As we have said many times, we believe a strong balance sheet is essential to being successful in a competitive commodity business. It's the foundation, allowing us to execute our strategy slide 16 highlights some of the key points about our balance sheet.

<unk> ended the year with approximately $10 8 billion of cash and short term investments, but longer term. We believe that we will need to maintain about $1 billion of cash on the balance sheet. Additionally, we will always ensure that we have enough liquidity to endure market fluctuations.

Speaker 2: But longer term, we believe that we will need to maintain about $1 billion of cash on the balance sheet.

Speaker 2: Additionally, we will always ensure that we have enough liquidity to endure market fluctuation.

Speaker 2: Currently, we have a $5 billion bank revolver that is undrawn. We continue to manage our balance sheet to an investment-grade profile. At year-end, MPC's gross debt-to-capital ratio is 21%, and our long-term gross debt-to-capital target is approximately 30%. As we continue to execute our share repurchase program, we will see that ratio increase.

Currently we have a $5 billion bank revolver that is undrawn and we continue to manage our balance sheet to an investment grade profile at year end Mpc's gross debt to capital ratio is 21% and our long term gross debt to capital target is approximately 30% as.

As we continue to execute our share repurchase program, we will see that ratio increase.

Speaker 2: After the recent redemption in December , our current structural debt is approximately six and a half billion dollars and we do not have any maturities until 2024.

After the recent redemption in December our current structural debt is approximately $6 5 billion and we do not have any maturities until 2024.

Speaker 2: Turning to guidance, slide 17, we provide our first quarterly outlook. We expect total throughput volumes of roughly 2.9 million barrels per day. Planned turnaround costs are projected to be approximately $155 million in the first quarter. The majority of the activity will be in the Gulf Coast region. Our 2022 planned turnaround activity is back half-weighted this year.

Turning to guidance Slide 17, we provide our first quarterly outlook, we expect total throughput volumes of roughly $2 9 million barrels per day planned turnaround costs are projected to be approximately $155 million in the first quarter.

The majority of the activity will be in the Gulf Coast region. Our 2022 planned turnaround activity is back half weighted this year.

Speaker 2: Total operating costs are projected to be $5.10 per barrel for the quarter. Distribution costs are expected to be approximately $1.3 billion for the quarter. Corporate costs are expected to be $160 billion.

Total operating costs are projected to be $5 10 per barrel for the quarter.

Distribution costs are expected to be approximately $1 $3 billion for the quarter.

Corporate costs are expected to be $170 million.

Speaker 3: With that, let me turn the call back over to Christina. Thanks, Marianne. As we open the call for your questions, as a courtesy to all participants, we ask that you limit yourself to one question and one follow-up. If time permits, we'll reprompt for additional questions. And with that, operator will open it to questions. Thank you. We will now begin the question and answer session. If you have a question, please press star then one-

With that let me turn the call back over to Christina. Thanks, Maryann as we open the call for your questions as a courtesy to all participants we ask that you limit yourself to one question and one follow up if time permits we will re prompt for additional questions and with that operator, we'll open it to questions.

Thank you we will now begin the question and answer session. If you have a question. Please press Star then one on your Touchtone phone if you wish to be removed from the queue. Please press Star then two if you are using a speakerphone you may need to pick up the handset first before pressing the numbers. Once again, if you have a question.

Please press Star then one on your Touchtone phone.

Our first question comes from Doug Leggate with Bank of America. Your line is open.

Speaker 4: Thank you. Good morning everyone. Mike, Marianne, I think this is the first time we've spoken so Happy New Year. Great start to the year of your earnings. But I've got a couple of questions if I may. The first one, Marianne, is maybe for you on the dividend policy going forward.

Thank you and good morning, everyone.

Mike Maryann I think this is the first time you spoken so happy new year.

Great Great start to a year with your earnings, but I got a couple of questions. If I may.

The first one maybe for you on the dividend policy going forward.

Speaker 4: And I guess the way I want to frame the question is, when you're done with your buy-buy,

So we don't want to frame. The question is when you're done with your buybacks.

Speaker 4: the absolute dividend burden is going to be quite a bit lower than it is today and quite a bit lower than the distribution you get from MPLX, your share. So what are you thinking with the yield now down around 3%, what are you thinking in terms of the appropriate payout ratio, if you like, or dividend policy going forward? How should we think of that evolving?

The absolute dividend burden.

Theres going to be quite a bit lower than it is today.

Quite a bit lower than the distribution you get from MPLX Youll share.

So what are you thinking with the yield now down around 3% what are you thinking in terms of the appropriate.

Payout ratio if you like our dividend policy going forward, how should we think about evolving.

Yeah. Good morning, Doug So maybe a couple of things first as you've seen from the capital framework that we've been sharing this morning. The dividend obviously remains an important piece of the capital allocation strategy as.

Speaker 2: Good morning, Doug. So maybe a couple of things. First, as you've seen from the capital framework that we've been sharing this morning, the dividend obviously remains an important piece of the capital allocation strategy.

Speaker 2: You know, as you look, you're right, you know, as we continue to complete our capital program, share repurchase program, the amount of capital that's allocated toward the dividend obviously will be declining. We think that somewhere, you know, if you look at the current dividend versus where it's been, you know, that's somewhere in a range of two to three hundred million dollars right now.

As you look you are right as we continue to complete our capital program share repurchase program the amount of capital that's allocated towards the dividend, obviously will be declining we think thats somewhere if you look at the current dividend versus where it's been that that's somewhere in a range of $2 million to $300 million right now.

Speaker 2: We continue to think that share repurchase in the short term is an appropriate allocation of that. As we get to what we would consider to be a capital structure in a more normal environment, meaning we complete that share repurchase, we'll continue to evaluate the timing of any dividend change. But again, when you look at the difference in that dividend payment, we certainly think that we're providing that allocation in an appropriate manner.

We continue to think that share repurchase in the short term.

Is a appropriate allocation of that as we get to what we would consider to be a capital structure in a more normal environment, meaning we complete that share repurchase will continue to evaluate the timing of any dividend change, but again when you look at the difference in that dividend payment we certainly.

Thinks that.

We're providing that allocation and appropriate manner.

Speaker 1: Hey, Doug, it's Mike. Let me just add a little bit to Mayor's comments.

Hey, Doug its Mike, let me just add a little bit to <unk> comments.

Speaker 1: you know one of the things that i think maybe get missed construed is you know we are still committed to the dividend as merges said however we're in a little bit of a different situation then the normal operating cash flow i mean we're sitting with about eleven billion dollars on the balance sheet in a large return program

One of the things that I think maybe get misconstrued is we are still committed to the dividend as Mary just said however, we're in a little bit of a different situation than the normal operating cash flow I mean, we're sitting with about $11 billion on the balance sheet and a large return program.

Speaker 1: You know, and as you just saw, we did about $3 billion, you know, since the last call. So as far as order of magnitude, you know, we're committed to returning capital.

And as you just saw we did about $3 billion since the last call. So as far as order of magnitude we're committed to returning capital, but right now the size of the share repurchase relative to the dividend is just.

Speaker 1: But right now the size of the share repurchase relative to the dividend is just out of proportion until we get to a more normal balance sheet. So I don't want people to think we're not committed to the dividend. We are going to evaluate it, as Mayor just said, but right now we're putting a lot of the effort in the return into the buyback program. Hope that helps.

Out of proportion until we get to a more normal balance sheet. So I don't want people to think we're not committed to the dividend we are going to evaluate it as Mary just said, but right now we're putting a lot of the effort in in the return into the into the buyback program I hope that helps.

Speaker 4: It does. It's just that you've got a lot of headroom to do all of the above, I guess. And I just was curious, given the share price, the yield is now back at a sub-average level, I guess you could say. So there seems to be a lot of headroom there, but thank you for that. My follow-up is maybe a little bit of a technical question. And I don't know if Ray is on, or if one of you guys wants to try this, but what I'm really interested in is, we saw some structural changes 20 years ago that reset the mid-cycle.

It does is just you've got a lot of headroom to do all of the above I guess and just was curious given the share prices the yield does not lock it up.

Sub average level I guess, you could say so there's a lot of it seems that a lot of headroom there, but thank you for that my follow up is maybe a little bit of a technical question and I don't know if ray is on but.

When you guys wants to try this book.

What I'm really interested in is.

We saw some structural changes 20 years ago.

<unk> the mid cycle.

Speaker 4: refining earnings capacity, if you like, with alkylate and with mismatch of demand supply and so on. And what we are real interested in is what's happening with natural gas between the US and Europe and the structural advantage that puts on US refineries.

Refining.

Now turning his capacity if you like with alkylate and this mismatch with demand supply and so on.

What we're really interested in is what's happening with natural gas between the us and Europe and the structural advantage.

So on U S refiners.

Speaker 4: And I'm wondering if you've given any thought to that in terms of whether you believe that if what we're seeing in Europe , let's say, or internationally currently, could be another structural tailwind for realized refining margins for U.S. refiners and Marathon specifically.

And I'm wondering if you've given any thought to that in terms of whether you believe that if what we're seeing in Europe was there internationally currently.

Could be another structural tailwind for realized refining margins for U S refiners and medical and specifically.

Doug It's Mike, let me I'm going to punt that over to Brian on products and Rick on crude and give you a little bit of color. Its a good question, obviously that dynamic is occurring in Europe . So why don't you start Brian Yes sure.

Speaker 5: Doug, it's Mike. Let me, I'm going to punt that over to Brian on products and Rick on crew to give you a little bit of color. It's a good question. Obviously, there's, that dynamic is occurring in Europe . So, why don't you start, Brian ? Yeah, sure. Doug, good morning. This is Brian . Great question. So, I think the short answer is too early to tell, but I think you're on to it. Mary Ann mentioned.

Good morning. This is Brian Great question. So I think the short answer is too early to tell but I think you're onto it maryann mentioned in her prepared comments the volatility we've seen in natural gas over the last several months, we've gone from $3 gas six down to four now we're picking back up to five so.

Speaker 5: In her prepared comments, the volatility we've seen in natural gas over the last several months, we've gone from $3 gas to $6.

Speaker 5: down to four. Now we're peaking back up to five. So, you know, directionally, yes, very supportive relative to the cheap natural gas position we have that, you know, we believe is certainly sustainable over the long term in the US.

Directionally, yes, very supportive relative to the cheap natural gas position. We have that we believe is certainly sustainable over the long term in the U S.

Speaker 5: But ultimately, these are long-term decisions for anybody that has that exposure overseas to higher natural gas prices. But yeah, directionally, we do see it as supportive. It's just a little bit too early to tell. But if we stay in this, you know, $5 to $6 gas range, it will absolutely put pressure on those that have that exposure and we'll look for upside. But it's one of many variables.

But ultimately these are long term decisions for anybody that has an exposure overseas to higher natural gas prices.

But yes, directionally, we do see it as supportive it's just a little bit too early to tell but if we stay in this five to $6 gas range.

It will absolutely put pressure on those that are have that exposure and we will look for upside, but it's one of many variables.

Speaker 4: I'm curious, have you seen any shift in imports coming from Europe as a consequence of that cost disadvantage? I'll leave it there.

I'm curious have you seen any shift in imports coming from Europe as a consequence of that cost disadvantage and I'll leave it there. Thank you.

Speaker 5: Yeah, no, from an import perspective, not yet. I mean, that's one thing that we're looking at both, you know, the fundamental balance in the Atlantic Basin, looking at opportunities to actually export into Europe . But the ARBs has been pretty stable. No, no big immediate changes here in the short term, but we're watching it very closely.

Yeah, no from an import perspective, not yet I mean, that's one thing that we're looking at both.

The fundamental balance in the Atlantic basin looking at opportunities to actually export into Europe , but the arbs has been pretty stable.

No no big immediate changes here in the short term, but we're watching it very closely.

Thanks for taking my question.

Speaker 6: Hey Doug, it's Rick. I'll just add on a few more comments. With Europe at $30 and MMBTU, or thereabouts...

Doug This is Greg I'll, just add on a few more comments with with Europe at $30 an M M Btu or thereabouts. There is no doubt a structural advantage, but with that being said what we're what we're seeing right now out of Europe is just slight run cuts at best because their margins are covering or higher opex cost.

Speaker 6: there's no doubt a structural advantage. But with that being said, what we're seeing right now out of Europe is just slight run cuts at best because their margins are covering their higher OpEx costs.

Speaker 6: So we haven't seen the impact substantially yet. If it continues, I think that's another story. So as Brian said, it's still a little bit too early to tell. But then I'll also leave you with a couple of wildcards that we're watching closely, which could exasperate it as well in terms of NAC gas costs. It's the Russian-Ukraine conflict, which we're all well aware of. And then ultimately, it's Nord Stream 2, and what is the result that comes out of that? So...

So we haven't seen the impact substantially yet if it continues.

That's another story, so as Brian said, it's still a little bit too early to tell.

But then also leave you with a couple of Wildcards that we're watching closely which could exasperated as well in terms of Nat gas cost.

Russia, and Ukraine conflict, which we're all well aware of and then ultimately it's Nord stream two and what is the result that comes out of that so.

Speaker 6: A tailwind could get much, much better depending on how either one of these two plays out. It's just a little bit too early, Doug. Got it. Thanks again.

A tailwind could get much much better depending on how either one of these two plays out it's just a little bit too early Doug.

Got it thanks again.

Youre welcome Doug.

Thank you. Our next question will come from Chris <unk> with Citigroup. Your line is open.

Speaker 3: Our next question will come from Prashant Rao with Citigroup. Your line is open.

Hi, good morning, Thanks for taking my question.

Speaker 7: I wanted to switch to talking about renewable diesel a bit. First, on Martinez, could we dive in a little bit to the CAPEX that you've outlined specifically? What all is getting completed this year? And I guess related to that, does that sort of tie into the utilization level we see for the guidance on the West Coast? And when you talk about back half-weighted turnarounds as well, is that sort of impacting that too? I have a follow-up. Thanks. Great.

I wanted to switch to talking about renewable diesel a bit first on Martinez could you dive in a little bit to the capex that you've outlined specifically what all is getting completed this year and.

I guess related to that.

Ed.

High into the utilization level, we see for the guidance on the West coast.

And when you talk about back half weighted.

Turnarounds as well does that is that sort of impacting that too and I have a follow up thanks.

Greg can you give the Martinez update.

Speaker 5: Yeah, sure. Thanks for that question. And if I start talking about Martinez, and before I get into the CapEx, I kind of want to talk about where we're at with the project.

Sure. Thanks for that question and if I start talking about Martinez and before I get into the Capex I kind of wanted to talk about where we're at with the project in regards to permitting and so as we covered before we completed the public comment period in December and right now over law.

Speaker 8: in regards to permitting. And so, as we covered before, we completed the public comment period in December . And right now, over the last month and a half, we've been working really hard with Contra Costa County to address all questions and get the permit to the finish line. And so, we're really targeting.

Last month and are happy been working really hard with the Contra Costa County to address all questions in and get the permit to the finish line and so we're really targeting.

Speaker 8: the end of Q1 to have the CEQA permit done and be ready to push shuttles in the ground. And with that, what I want to emphasize is we're absolutely ready to do that. Our engineering is complete for the first phase. It's nearly complete for the backup.

They add up Q1 to have the sequent permit done and be ready to put shovels in the ground and with that what I want to emphasize is we're absolutely ready to do that our engineering.

Is complete for the first phase is nearly complete for the backup a few phases. We have the equipment on site. We have the pipe we have the pilings we have at the vessels that we need to do this project. So we're we're ready from that standpoint, now as far as what's in the project I've talked a lot.

Speaker 8: a few phases. We have the equipment on site, we have the pipe, we have the pilings, we have the vessels that we need to do this project. So we're ready from that standpoint. Now as far as what's in the project...

Speaker 8: I've talked a lot over the past couple calls about why Martinez makes sense and I've talked about three hydro processing units, two hydrogen plants, I've talked about the co-gen power generation on site.

Over the past couple of calls about why Martinez makes sense and I've talked about three hydro processing units two hydrogen plants I've talked about.

The co Gen power generation on site.

Speaker 8: As far as what we're spending the money on, what I want to emphasize is a couple key things in that regard. One is pre-treatment.

As far as what we're spending the money on what I want to emphasize a couple key things in that regard one is pre treatment.

Speaker 8: You know, this project is really driven by we want to be able to process.

This project.

It was really driven by we want to be able to process.

Speaker 8: all the renewable feedstocks and we want to be able to pre-treat them ourselves. So we've invested in pre-treatment capabilities. We're really excited about the technology that we've chosen. We feel it is a good technology that we're spending money on that will have a lower capex, have sustainability advantages, so we feel good about that.

All of the renewable feedstocks, and we want to be able to pre treat them ourselves. So we've invested in pre treatment capabilities. We're really excited about the technology that we've chosen.

We feel it is a.

Good technology that we're spending money on that will have a lower capex have sustainability advantages. So we feel good about that and then the other thing I want to emphasize is we're investing a lot in logistics.

Speaker 8: And then the other thing I want to emphasize is we're investing a lot in logistics. Why Martinez? Martinez has scale. Martinez has optionality. And so we have optionality on truck, rail, pipe, and water as far as bringing feedstocks in and products out. So, you know, just wanted to give a little bit of color on, hey, what we're spending money on in 2022.

Martinez Martinez has scale Martinez has optionality and so we have optionality on truck rail pipe and water as far as bringing feedstocks and products out so.

Just wanted to give a little bit of color on what we're spending money on in 2022.

Thank you.

Speaker 7: Thank you. The follow-up... I'm sorry.

I'm sorry go ahead.

Speaker 1: Yeah, Prashanth, it's Mike. I just want to add a little bit more color to what Ray said. So if you back up, the way I've looked at this project from the beginning is...

Yes, Sean it's Mike I, just wanted to add.

A little bit more color to what Ray said so.

If you back up the way I've looked at this project from the beginning is.

Speaker 1: You know, do we have competitive cap backs? Do we have competitive op backs and logistics and ultimately, you know, feedstock to make it work? So.

Do we have competitive capex do we have competitive opex and logistics and ultimately feedstock to make it work so.

Speaker 1: You know, Ray's just talked a little bit about the CapEx, and we finally have disclosed that number. You know, part of the reason I wanted to explain that we hadn't disclosed it up until this point is because we've been working the feedstock side of the business.

Raise just talked a little bit about the <unk>.

Capex and we finally have disclosed that number part of the reason I wanted to explain that we hadn't disclosed it up into this point is because we've been working the feedstock side of the business.

Speaker 1: you know, pretty detailed. And that's still in progress. So hopefully we'll give more updates as time goes by. But we're at a point as we've negotiated with a lot of different counterparties that we felt comfortable now that we can disclose the capex because that's been part of all the discussions and all the

Detailed and that's still in progress so hopefully we'll give more updates as time goes by.

We're at a point as we've negotiated with a lot of different counterparties that we felt comfortable now that we can disclose the capex because that's been part of all of the discussions and all that.

Speaker 1: you know, the negotiations that have occurred on that side of the ledger. So I think, you know, us disclosing that now, Ray, trying to give you a little bit more feel for, you know, we put some CapEx in that we believe is going to give us lower operating expenses over time. And I think the whole puzzle is kind of coming together is the way we thought of the project.

The negotiations that have occurred on on that side of the ledger. So I think us disclosing that now right trying to give you a little bit more feel for we put some capex in that we believe is going to give us lower operating expenses over time and I think the whole puzzle is kind of coming together is the way we thought of the project competitive capex competitive.

Speaker 1: competitive COPEX, competitive OPEX, good logistics, as Ray just mentioned. And then, like I said, we're still working that feedstock side, but we're pretty far along in what we're trying to accomplish.

Opex good logistics as Ray just mentioned and then like I said, we're still working that feedstock side, but we're pretty far along in and what we're trying to accomplish there.

Speaker 7: Thanks Mike, that's super helpful and I wanted to pick up on that feedstock site and specifically the pre-treatment that you highlighted.

Thanks, Blake that's super helpful and I wanted to pick up on that feedstock side and specifically the pretreatment that you highlighted.

Speaker 7: You know, you highlighted Beatrice that came up last year, you've got the Cincinnati Project now, pretreatment's a big part of Martina, it sounds like, so it's kind of a two-parter. One is...

You highlighted a few trees that came up last year, you've got the Cincinnati project now pre treatment is a big part of Martina It sounds like.

So kind of a two parter one.

Speaker 9: more broad, big picture. We're seeing a world right now where, you know, the differentials between feedstocks are trying to, are getting tighter. You know, some of that is

Just more broad big picture.

Seeing the world right now where the.

The differentials between feedstocks are trying that are getting tighter and some of that is could be temporary based upon timing of projects coming online and logistical issues, but some of it might be related to some shifts going on and I think that's a bit of a debate shifts going on in reflecting Ci scores.

Speaker 9: could be temporary based upon timing of projects coming online and logistical issues, but some of it might be related to some shifts going on, and I think that's a bit of a debate just going on in reflecting CI scores.

I guess this is sort of.

Speaker 9: A bigger philosophical question is the value of pre-treatment or how do you pivot on what your pre-treatment do, what you want to scope out as you think about how feedstock differentials might change as the supply ramp globally, but specifically when the U.S. goes up, and I'll leave it there.

Bigger philosophical question as well.

The value of pretreatment or how do you pay.

Pivot on what your pre treatment through what you want to scope out as you think about how feedstock differentials might change.

The supply ramp globally, but specifically within the U S goes up.

And I'll leave it there thanks.

Sean It's Mike I'll start off and then I'll, let Brian array jump in if they'd like to.

Speaker 1: Yeah, Prashanth, it's Mike. I'll start off and then I'll let, you know, Brian or Ray jump in if they'd like to, you know, one of the things, you know, people have asked me about, you know, can you talk a little bit about commercial stuff? And I've tried not to, you know, go into a lot of detail there. But the point you're making is, it's got a little bit of portfolio, a little bit of commercial side to it. You know, long term, I think the point you're making is, you know, markets equilibrate, and you'll see some competitiveness. And we agree with that. It's part of the reason, you know, that we stress test

One of the things people have asked me about can you talk a little bit about commercial stuff and I've tried not to go into a lot of detail there, but the point, you're making is has got a little bit of portfolio a little bit of commercial side to it long term I think the point, you're making is market's equilibrate and youll see some competitiveness and we agree.

With that it's part of the reason that we stress test Martinez, but in the short term, we got tickets and up and running in and you've got to be fast in this business you got to be quick and I think what youre seeing through the team effort here, because it's part portfolio and its part commercial was to get this Beatrice plant up and running.

Speaker 1: But in the short term, you know, we've got Dickinson up and running and and you've got to be fast in this business. You've got to be quick. And I think what you're seeing, you know, through the team effort here, because it's part portfolio and it's part commercial, was to get this.

Speaker 1: You know, Beatrice plant up and running, you know, get, you know, 3,000 barrels a day of really advantage feedstock there, get a couple thousand barrels a day of converting the biodiesel plant.

Get 3000 barrels a day of really advantaged feedstock there get a couple of thousand barrels a day of converting the biodiesel plants. So it's it's partly the portfolio of the engineering team working with the commercial team to your point right at the moment.

Speaker 1: It's partly the portfolio or the engineering team working with the commercial team. To your point, right, you know, right at the moment, you know, those those feedstocks are advantaged and getting pretreated long term. You're right. The competitiveness will will change over time. There'll be more weak equilibrium. But at the same time, you know, as Ray talked about, we felt, you know, having full pretreatment at Martinez was still going to be a good thing for us in the long.

Those feedstocks are advantaged and get into pretreated long term you are right. The competitiveness will change over time there'll be more equilibrium, but at the same time as ray talked about we felt.

And full pretreatment at Martinez was still going to be a good thing for us in the long term and the technology that we pick there. So there's a lot of important thoughts from our engineering and technical side that also married to what we want to try and achieve commercially and like I said, hopefully we'll be able to give you a little bit more color on feedstock as time goes by but we.

Speaker 1: And the technology that we picked there, you know, so there's a lot of important thoughts, you know, from an engineering and technical side that also married to what we want to try and achieve commercially.

Speaker 1: And like I said, hopefully we'll be able to give you a little bit more color on feedstock as time goes by, but we felt it was a good enough time to explain, you know, what the CapEx number is and how we're feeling about it.

We felt it was a good enough time to explain what the Capex number is and how we're feeling about it.

Speaker 9: Thanks, Mike. That's super helpful. Appreciate the time, guys, and I'll turn it over. You're welcome, Prashant.

Thanks, Mike that's Super helpful. Appreciate the time, guys and I'll turn it over.

Youre welcome Prashant.

Thank you. Our next question will come from Neil Mehta with Goldman Sachs. Your line is open.

Speaker 10: Good morning, Mike, team. Two questions for me. The first one is on refining. Capture rate, as you show on slide 22, was very strong, 116 percent this quarter. And I recognize capture rates are very hard metrics to try to calibrate, but as soon as we can, we'll be able to do that.

Morning, Mike team.

Two questions from me. The first one is on refining capture rate as you show in Slide 22 was very strong 116% this quarter and I recognize.

Capture rates are very hard metric to kind of calibrate.

On Slide 23, you help us think through some things like other margin. So Mike I guess a question for you is how much of this do you think is a carryforward and versus a onetime dynamic.

Speaker 10: Mike, I guess the question for you is, how much of this do you think is a carry forward versus a one-time dynamic? And are some of the things that you talked about around optimizing?

The things that you talked about around optimizing the commercial side of the business.

Speaker 10: and getting your costs down, starting to show up in that cap.

And getting your cost downs, starting to show up in the capture rate number.

Speaker 2: Hey, Neal, it's Mary Ann. Let me try to give you some color there and then I'll pass it back to Mike. So, appreciate the comments. You know, in the quarter, as you saw, about 116% capture overall. We had a couple of things happening in the quarter. One, you know, in general, inventory, you know, was a tailwind for us this quarter. You know, we have inventory impacts, you know, period to period. You can actually look at the third quarter, you know, as an example of that. Capture, you know, was about 100%.

Hey, Neil It's Maryann, let me try to give you some color there and then I'll pass it back to pass it back to Mike. So I appreciate the comments.

In the quarter as you saw 916% capture overall, we had a couple of things happening in the quarter. One in general inventory was a tailwind for us this quarter, we have inventory impact period to period, you can actually look at the third quarter. As an example of that capture was about 100%.

Speaker 2: We benefited from crude timing impacts from running some advantage third quarter inventories purchased and we ran that in the fourth quarter. And we had some seasonally strong marketing margins. So historically I think we have been talking about a baseline for our refining capture in and about a range of 95%.

Benefited from crude timing impacts from running some advantage third quarter inventory purchased and we ran that in the fourth quarter and we had some seasonally strong marketing margins. So.

Historically I think we have been talking about a baseline for our refining capture in an about a range of 95%.

Speaker 2: And while there's volatility in the quarter, quarter to quarter, we're looking right now, we think just based on this commercial execution that we've been talking about, that our baseline is more like 100%.

And you know while there is volatility in the quarter.

Quarter to quarter.

We're looking right now we think just based on this commercial execution that we've been talking about.

Then our baseline is more like 100, 100%.

Speaker 2: I'll make a couple of comments and then again I'll pass it on to Mike, just something specific in the quarter.

I'll make a couple of comments and then again I'll pass it onto Mike just something specific in the quarter, we did benefit in the fourth quarter from an adjustment $62 million for the full year adjustment for the 2021 wins, that's pretty ratable quarter by quarter. So one fourth of that belongs in the.

Speaker 2: We did benefit in the fourth quarter from an adjustment $62 million for the full year adjustment for the 2021 RINs.

Speaker 2: That's pretty rateable quarter by quarter, so, you know, one-fourth of that, you know, belongs in the quarter. And we also did see a benefit of about $39 million for the Dickinson LCFS adjustment for lower CI in the quarter. So there are a few things that benefited the quarter overall. And I'll pass it back to.

Quarter, and we also did see a benefit of about $39 million for the Dickinson L. CFS.

Adjustment for lower Ci in the quarter. So there are a few things that benefited the quarter overall and I'll pass it back to Mike.

Yes, I'm going to add but it looks like Brian wants to jump in I want to comment and then I'll finish up.

Speaker 1: Yeah, Neil, I'm going to add, but it looks like Brian wants to jump in with a comment and then I'll finish up.

Speaker 5: Yeah, Neil, thanks for the question. This is Brian . So just commercially, you know, we are hyper focused on optimization and improvement. I think we've been pretty transparent and clear about that as one of our three key strategic initiatives.

Yes, Neil Thanks for the question. This is Brian So just commercially.

We are hyper focused on optimization and improvement I think we've been pretty transparent and clear about that as one of our three key strategic initiatives. So just just a bit of color the Gulf coast with an area here over the last quarter, where we saw some nice margin improvements in our operations commercially that helped to drive a better <unk>.

Speaker 5: So just a bit of color, you know, the Gulf Coast was an area here over the last quarter where we saw some nice marked improvements in our operations commercially that helped to drive a better capture.

Sure.

Speaker 5: You know, really fundamentally what's helping with that for us and our business is better alignment of the team.

Really fundamentally whats, helping with that for us and our business is better alignment of the team for getting the right resources and getting them focused in the right areas and aligned efficiently in a couple of examples in the Gulf Coast, just highlighting that as an example, it's really helping us drive our marketing book in our growth.

Speaker 5: getting the right resources and getting them focused in the right areas and aligned efficiently. In a couple of examples in the Gulf Coast, just highlighting that as an example, it's really helping us drive our marketing book and our growth in and along the Gulf Coast. And then our export expansion as well, we've been really focused on our expansion of our export book.

And along the Gulf Coast, and then our export expansion as well we've been really focused on our expansion of our export book and specific to our export book are really focused on more delivered cargo. So we're moving further down the value chain higher margin capture.

Speaker 5: In specific to our export book, we're really focused on more delivered cargo, so we're moving further down the value chain, higher margin capture, so we've had a lot of success in growing that line of our business. And then lastly, we did take in a position in the Caribbean in the fourth quarter that allows us to optimize supply both internationally and domestically, particularly into Florida.

So we've had a lot of success in growing that line of our business and then lastly, we did taken a position in the Caribbean.

In the fourth quarter that allows us to optimize supply both internationally and domestically, particularly into Florida as well as the developing blending program.

Speaker 5: as well as a, you know, a developing blending program in and along the Caribbean. So, just wanted to provide some colors, some examples of things that we're doing to help advance our commercial initiatives.

Along the Caribbean so.

Just wanted to provide some color and some examples of things that we're doing to help advance our commercial initiatives.

Speaker 1: and and it was my you know one of the things uh... you know happy with the progress that brought in the team or making some of the areas but i'd i do want to stay on the record that i'm not a big fan of this metric you know i've said that many many times

And Neil it's Mike one of the.

Things.

Happy with the progress that Brian and the team are making in some of those areas, but I do want to stay on the record that I'm not a big fan of this metric.

That many many times.

Speaker 1: uh... and and uh... the main reason is because there's a other uh... things that can drive the metric in different direction

And the main reason is because there is other things that can drive the metric in different directions.

Speaker 1: You know, the spread between light products and heavy products is the most dominant feature in it.

The spread between light products and heavy products as the most dominant feature in it and I just wanted to remind people that you can have a low capture agency is still making a lot of money or you could have a high capture rate and not be making as much. So you got to be a little careful or you got to dig into the details because the metric itself.

Speaker 1: And I just want to remind people that you can have a low capture rate and she's still making a lot of money or you could have a high capture rate and not be making as much. So you've got to be a little careful or you've got to dig into the details because the metric itself...

Speaker 1: you have some flaws now with that said am i glad that we're making incremental progress sure you know i think you know all things being equal we you know we want to see the number up higher than not but i'd but i just keep on a caution your christina tired of me saying this to her all the time you know that there's other other factors that influence that metric

It has some flaws now with that said am I glad that we're making incremental progress sure I think all things being equal we want to see the number up higher than not but but I'd just keep want to caution you. Christine is tired of me, saying this to her all the time.

Theres other other factors that influence that metric.

Speaker 1: that, you know, can mislead or misalign some of the activities going on. But overall, you know, as Mayor said and Brian said, you know, good things happen should should drive that in the right direction. But I just want to keep putting that caution out. I'm I'm still challenging Christine and our team to come up with a better way to do it. We haven't come up with that yet, but.

Ken mislead or missile line some of the activity that's going on but overall as Meera said and Brian said, good things happen should drive that in the right direction, but I just want to keep putting that caution out of them.

I'm still challenging Kristine and our team to come up with a better way to do it we haven't come up with that yet, but but we're working on it because I think we may be able to come up with something that might be a little better but in the meantime, I know everybody.

Speaker 1: But we're working on it because I think we may be able to come up with something that might be a little better. But in the meantime, I know everybody.

Speaker 1: tracks this one and is used to looking at it so it is what it is and I just wanted to make sure I had that caution.

<unk>. This one and is used to looking at it. So it is what it is and I just wanted to make sure I had that caution on it.

Been clear about that in a lot of good perspective there.

Follow up is back on Martinez. So thanks for the $1 $2 billion is there a way to tie that into an EBITDA number.

Either with or without the blenders tax credit or is it still too early for you guys to come out there with the with an EBITDA number that we can then ultimately tie back into returns.

Yes, Neal it's a good question. It is still a little early what I was saying earlier is we're still actively engaged in some feedstock discussions. So we can't go to that disclosure, we got to the point with our discussions that capital is now very open with everybody. So we thought we could disclose it so so.

Speaker 1: You know, it's a good question. It is still a little early. What I was saying earlier is

Speaker 1: We're still actively engaged in some feedstock discussions, so we can't go to that disclosure. We got to the point with our discussions that Capital is now very open with everybody, so we thought we could disclose it. So that's where we are in the process.

That's where we are in the process.

Speaker 1: You know, as you saw in our prepared remarks, we have secured some feedstock. We're still in some discussions, but still a little premature. But, you know, we were thinking that we could at least put the capital out there, and that would give some color to some of the questions that people have been asking us. And I know, you know, it's taken a little bit of time, but part of it is.

So in our prepared remarks, we have secured some feedstock we're still in some discussions, but it's still a little premature, but we were thinking that we could at least put the capital out there and that would give some color to some of the questions that people have been asking this and I know.

It's taken a little bit of time, but part of it is yes.

We couldn't disclose it while we were still in some some level of those negotiations now that we're past that we can disclose that piece, but but we still have some activity going on.

Okay.

Youre welcome Neal.

Yeah.

Our next question will come from Roger read with Wells Fargo. Your line is open.

Yes, thanks, good morning, and congratulations on the quarter.

Maybe to kind of take up were part of the answer to Neil's question left off you made the comment about capture doesn't tell the whole story.

One of the big things is the reduction in costs. So.

We look at the conversion of Martinez the closure of Gallup, we think about that in terms of the impact on costs should we think about that as an impact on capture.

What else should we be thinking about is going on and is there any possibility you can quantify across those items to help us understand what.

We ought to consider is sustainable and what we ought to consider is.

Maybe just a product of current market environment.

Yeah, Roger it's a good question.

What I'm trying to say is the metric can be driven by different factors other than what we're doing then things we have control of.

Brian was mentioned in some of the things that we have control of that we think are increasing our commercial capture what I was trying to say, sometimes the spreads themselves can drive that metric in a different direction. So the only thing I was trying to say is the metric itself has some good parts to it it has some bad parts.

Do it and you usually have to drill down really understand what's happening now.

Just said I'm happy with the commercial team, making progress for apples to apples, we want to see that number higher but I just want to continue to caution people that theres some flaws in the metric or some other things that drive it just like <unk> said in her remarks.

<unk>.

Part of like you said cost and everything that we're doing on that side is still a high focus we have a lot of focus as Brian said on the commercial side of the business trying to be a little reluctant to give a lot of details in that regard because of the competitive nature of it but also listen in some people, saying Hey can you give me some color what's going on there. So we tried.

To pick a few examples that we could give you a little bit of the way, we're thinking about it and hoping it helps.

I'll leave it there.

And one other small add to make maybe as you're thinking about that cost and sustainability.

The sustainability of the cost reductions keep in mind that as we are in the middle of this Martinez conversion. There are current operating cost included in that capture rate that youre seeing now.

So those operating costs.

Complete the conversion the day to day operating costs are already embedded in that capture rate as you're seeing it today.

Okay, Yes.

So.

Well.

Also as a follow up on that for another time I guess the other question I had on the commercial side, obviously, it's been a focus of the company.

<unk>.

Leadership, there and I was just curious how you see the commercial ops going forward.

That should work its way out.

Yeah, Roger it's Mike I'll take that again.

I would say in general you're referring to that we made a change at the CEO level.

Do want to say Bryan was a contributor this year, he's a nice guy and a very smart guy.

And the commercial team has been doing some really good stuff, but ultimately we werent in sync on philosophy and expectations. So I thought a change was necessary, but but I don't want to diminish the progress that the team has made I don't want to diminish Rick and Brian or were on the call here today and their teams are I love Brian's word hyper focused I was glad to hear that.

We think there is opportunity for us in this area.

I said, we had a little bit of philosophical and expectation differences that I just thought it was warranted to make a change rather than try and.

Get that back on track it was it was warranted to make a change but.

I'm happy with the progress that's been occurring I think we have clear line of sight of some of some other opportunities for us I know, we frustrate people by not giving a lot of detail there, but hopefully you'll just continue to see it in results and we will try to think of ways and opportunities that we can explain some things that will that will help you guys understand the business from our perspective.

A little better.

No I appreciate that.

Don't worry about it we will make sure to keep you frustrated from.

Question is coming from the sell side.

I appreciate that Roger Thank you.

Thank you. Our next question comes from Manav Gupta with Credit Suisse. Your line is open.

Hey, Mike and team.

My question is is it a little bit around the Capex of Martin. This is about 1.2, if my math is right. That's putting you about that 1616 $5 a gallon.

Oh very good pre treat and what we are generally seeing out there is people who are trying to build really high clasp retreats on hitting that cost stuff about 325 to $3 50. So if you can talk about you know.

What level would that Capex, what is allowing you to do it at about 50% of what others are doing and what role has already operations at Dickinson, where you were already making R&D what are the learnings from there.

Likely kind of I think allowing you to bring this facility on at highly discounted capex per gallon basis.

Hey, Manav this re let me take a.

Take another shot at talking about Martinez and your math is right. It's about <unk> 60 a.

Capacity gallon for that.

Which we feel good about compared to the industry and why we are excited about this project as far as why that's the case it gets back to the toolkit, that's already sitting there at Martinez.

The three hydro crackers hydro treaters.

Two.

Hydrogen plants and a co gen facility. So what were investing the big thing Thats, new is investing in to Pretreat system. The rest that we're doing is we're investing a lot of ink connectivity piping to get all those people are those.

And those units to go to the right places and logistics from that standpoint, so largely the reconfiguring of Martinez allowed us to have a very capital efficient project.

And then Mike I, just want to reemphasize, something that's important and give ray and his team some credit for.

At the end of the day, we spent a lot of time thinking about this capex and ultimately to your point, it's a good number but we actually had a lower capital case that we thought would have a higher operating expense.

Ray mentioned and we chose to spend a little more capital so trying to bring a little more commerciality into the decision to assist.

The technical side of it I think has played out really well for us.

Ray Hasnt talked a lot about it but the technology that we pick there.

It was very important and offline we can talk to you a little bit about that but that's been a very important part of how this <unk>.

Project has played itself out choosing to go a little higher on Capex, even though it's a pretty good rate just so that we get lower opex. It was an important part of the discussion.

The sustainability of the project and the way we've set up that part of the project, we're pretty happy about so ray and his team connected to the commercial side of it. That's the important part that we're trying to emphasize today that it's not just engineers pick an accident. There is a connectivity that has to occur between those that.

That makes the project better so even in his example, and I know you're you're thinking hey, it's a good number we actually had a case that was a lower number higher opex and we went with this case because we thought it was a a better long term to have that opex lower than and like I said, the technology and the sustainability and the carbon output of it.

I think it turned out to be really good. So we're we're happy to disclose it and offline we can give a little bit more color around some of those details.

Okay and Mike My follow up question, obviously it is.

You took over.

The focus kind of changed internally do you know off.

<unk> cost cuts and everything is falling in place you know what I mean.

Almost anything of $1 billion post dividend free cash on a quarterly basis. So I'm just trying to understand when you start looking at this kind of cash level buildup, even with your buybacks like what's the like what is the optimum depth level or is this the dry powder.

Could actually go out and make a strategic acquisition at some point given the way the cash is building on the balance sheet now.

So I'll, let Matt talk about the balance sheet and debt, obviously, an important part, but I'll give you a <unk>.

Big Picture look is part of the way we looked at this business as we want all of our assets to generate free cash so you're pointing out something that we've been working on over the last couple of years you make portfolio adjustments you just commercial activity do all those things. So that you end up in a position where we like where we are right now and it was mentioned earlier we are.

And abandon the dividend, we've kind of put that a little on hold as we return a lot of capital via share buybacks, but but I'm still a big believer in you got to be in this position. So you got to put the business in this position. So that you can then have really good discussions about return of capital and return on capital.

We do want to grow the business.

We've been very selective in where we're going to put some of that money and we will continue to be that way and when we are selective we will have cash that will return to shareholders.

When we are selective and we think we have a good investment we're going to put it there and we're going to continue to challenge all of our teams to tie the technical side of this business to the commercial side of this business such that at the end of the day, we put ourselves in a position where we have the choices that you were talking about so.

We have some thoughts going forward I don't want to get ahead of ourselves.

But at the same time I'm happy that the team has embraced the concept the philosophical concept of putting ourselves in a position where all assets contribute free cash we'll generate that as you know I've said, many many times, we don't control the market. So we're a price taker and a large part of refining so that'll make some of our business volatile.

And then we want to have the balance sheet in a good position as well. So I don't know if maryland's to comment on that but but at the end of the day I think you've pointed out the good endgame, which is generate a lot of cash in the business have some flexibility and then make some good decisions on what's the best way to create value.

Yeah.

It's maryann I will just add maybe a few additional comments we've been looking over the last several quarters and talking about the.

The balance sheet, we continue to say that that investment grade profile for us is critically important that means we need to stay in and around our gross debt to capital range of about 30%, we're below that as that as I shared with you today, but keep in mind, we've got $9 5 billion of share repurchase remaining and all other things.

Being consistent as we continue to do that share repurchase rate, we will see that ratio improve we've done quite a bit of work to ensure we've got the right liquidity will sit with the $1 billion on the balance sheet, which is somewhat lower than we had.

Initially contemplated a few quarters ago, we think that that's certainly.

Positive step.

Mike already mentioned that returning to the more I'll say it in a normal capital structure.

We have outlined our capital priorities, obviously sustaining capital the dividend being important and then we will use share repurchase opportunistically to return that capital as we see the outlook for 2020 hope that helps.

Thank you for taking my questions.

Youre welcome.

Our next question will come from Phil Gresh with Jpmorgan. Your line is open.

Yes, hi, good morning.

First question.

One clarification clarification on Neal's question around the RVO piece, but maybe and I think you said $62 million per quarter. So when I multiply that by four in terms of what showed up in the fourth quarter, specifically and then my real question.

Just around your comments on maintenance being a bit more backend loaded I was hoping you could remind us.

What a normal maintenance level would be per year end or if youre willing to comment.

If you have an annual number that we can be thinking about thank you.

Yes sure of course, so let me be clear the $62 million that I referred to is the annual adjustment for 2021 compliance here. So the $62 million is total adjustment or reduction if you will to our obligation for all of 2021.

One if you think about the impact on that on the capture rate in the quarter. So we were about 116, that's about a 1.7 change and the capture rate, including all 60 to my comment on a quarterly basis was just to say that it's fairly ratable. So we had we had that RVO obligation at the beginning of the year you would have thought.

Roughly a $15 million benefit to the prior quarters. That's all that I was trying to say I hope that answers that question. The second one is really around turnaround and I guess, what we would say, yes, absolutely back half of the year, we see a greater weight waiting if you will towards our turnaround expenses, we see this year, meaning two.

<unk> thousand 22 slightly higher than a normal year, we tend to think normal is in the range of 6% to $700 million as you saw from what we had.

This year, so we do expect that to be a higher.

Total for 2022, I'll, let Mike add any comments.

No I don't have anything that though.

Okay, Great. That's very helpful and thank you for that clarification.

My second one.

On the buybacks, obviously the pace.

<unk> has essentially tripled from from.

<unk> run rate.

With the increase in the authorization.

Recognizing that doesn't have specific.

And date is there any reason to think that that the new run rate that <unk> been doing is not.

Achievable are doable on a go forward basis or anything in particular about the fourth quarter.

You would say is non repeatable.

It's Marianne I'd say you know look we'll we'll look at liquidity.

Certainly as you know committed when we were on our third quarter earnings call to changing the cadence and hopefully that we've demonstrated our ability to do so in the third quarter. So from our third quarter performance, we'll absolutely look at liquidity and as I said, we remain committed to getting that done in 2022 and given the pace.

That we've achieved we're likely to be able to get that done sooner and again I'm talking about the $10 billion initial commitment.

Right. Okay. Thank you.

Thank you and we do have time for just one more question.

Last question will come from Paul Cheng with Scotiabank. Your line is open.

Guys good morning.

Good morning, Paul Good question I think one yes, just maybe paid off their house, keeping one to follow up to maryann answer to an earlier.

You talked about that.

At gentlemen benefit then.

Just one.

Can you just give us what the defendant fed funds are cool.

Timing benefit and also.

Inventory benefit.

By region.

So thats just a quick follow up here.

My question is for my from a commercial operation.

If we look back into your earlier, Neil Korea, Sunoco 20 somewhat years ago.

Okay.

And when Youre looking at that.

Longer term.

So when you look at that operation.

Hi, Mary to facilitate.

West of finding and an Audi operation <unk> operation or that should we also look at yes, It's a profit center light model it Bob Bye.

By BP share with telecom with those guys.

What do you envision that.

That business, where are they going to do.

And what have already a competition, where do you think is the biggest opportunity.

With potential improvement or upside that you still ambition from that business over the next one or two years.

So I'll start with your second part and I'll, let <unk> go back to the first part so it to answer your question Paul It's both it's.

Yeah, it should be a separate.

Profit center for US Rick Brian the team are very committed to that.

You heard you heard some examples earlier so that's a standalone and then the other part of it is connectivity to the whole business, making sure the commercial and the portfolio side are totally in sync. So so the answer is really both you have to do both really really well.

Again, when I started this by saying.

Portfolio cost and commercial.

All linked and and they all have an obligation across the supply chain.

So that's one obligation and then they all have to do excellence in their own regard.

The commercial area needs to do excellence in just the commercially a raise team needs to do excellence like I was saying earlier about picking that technology at the end of the day that that's something that goes across both and then had some excellence inside of it so.

Answered.

Short answer to your question is both.

Like I said earlier I'm trying to give you. Some examples of how we're approaching it try not to go into too much detail, but just give you a little bit more of a philosophy. So hopefully that helps and then I'll, let Mary talk on the first part and Mike.

Can I just ask one question on that approach.

Commercial operation going to be essential Neu commercial operation or essential idea in other words that if there is a.

Tradeoff by refinery.

Are they going to do on the file at that day to day adjustment in terms of the operation or that Youll have a centralized team took what they may all therefore, which approach that you guys are thinking.

Yes again the answer is both.

We have part of our commercial team is dedicated to the <unk>.

Supply chain and what we're doing and then part of it is more entrepreneurial and and trying to look at it in a little bit different regard. So I think both still the right answer.

Thank you Marianne sorry.

No no worries at all yes. Unfortunately, we really do not provide those inventory movements quarter to quarter on a regional basis, though.

Not disclosed and it's not actually something that we that we would typically share.

Can I ask that the on the <unk>.

Page 22 on your presentation you show.

Capturing empower 597.

We can identify based on the RVO and CFS roughly 100, so do you have the.

500.

On the total sum, yes that.

Primary driven by the fact that both the inventory and timing.

Timing on that yet.

Not break down by region can do.

Sure that what is that.

Total system on those two benefits.

Hey, Paul It's Maryann, maybe we can take that offline and address all of your questions specifically.

Would that would that would be helpful. Yes that would be great. Thank you.

Sounds good.

And Paul the only thing that I would add is again.

<unk> quarterly results. There is always timing from Q3 into Q4 Q4 into Q1 some of that occurred here.

Like I said American give you a little bit more offline and Christina and the team, but but just be careful when you look at one quarter isolated.

That tends to get a little bit misaligned, if there was activity across the quarters. So just keep that in mind. When you guys have the discussion alright, thanks very much.

Yeah.

Alright Sheila.

And that will go on the top right are you still there.

Yes that was all the time that we had for questions for today.

Perfect well. Thank you so much for everyone for joining our call. This afternoon. If you have any questions that you didn't get addressed on the call today and the Investor Relations team is available anytime. Please just reach out thank you again.

Thank you that does conclude today's conference. Thank you for participating you may disconnect at this time.