Q1 2024 Marathon Petroleum Corp Earnings Call
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Operator: Welcome to the MPC First Quarter 2024 Earnings Call. My name is Sheila, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. Press star 1 on your touchtone phone to enter the queue.
Sheila: Welcome to the MPC first quarter 2024 earnings call. My name is Sheila and I will be your operator for today's call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session Press Star one on your Touchtone phone to enter the queue. Please note that this conference is being re.
Operator: Please note that this conference is being recorded. I will now turn the call over to Kristina Kazarian. Kristina, you may begin.
I will now turn the call over to Kristina Kazarian Kristina you may begin welcome.
Kristina Anna Kazarian: Welcome to Marathon Petroleum Corporation's First Quarter 2024 Earnings Conference Call. The slides that accompany this call can be found on our website at marathonpetroleum.com under the Investor tab. Joining me on the call today are Mike Hennigan, CEO; Maryann Mannen, President; John Quaid, CFO; and other members of the executive team. We invite you to read the Safe Harbor Statements on Slide 2. We will be making forward-looking statements today, but actual results may differ. Factors that could cause the actual results to differ are included there as well as in our filings with the SEC. With that, I'll turn the call over to Mike.
Kristina Anna Kazarian: Welcome to Marathon Petroleum Corporation's first quarter 2024 earnings conference call. The slides that accompany this call can be found on our website at marathon petroleum Dot com under the Investor Tab, joining me on the call today are Mike Hennigan, CEO Maryann Mannen, President John <unk> CFO and other members of the executive team we have.
Got you to read the Safe Harbor statements on slide two we will be making forward looking statements today actual results may differ factors that could cause the actual results to differ are included there as well as in our filings with the SEC with that I'll turn the call over to Mike.
Michael J. Hennigan: Thanks, Kristina. Good morning, and thank you for joining our call. Effective March 1, two new independent directors joined the MPC board. Eileen Drake and Kimberly Ellison-Taylor have strong records of accomplishment in complex industries, making them outstanding additions, and we're happy to have them join our board. As for the macro refining environment, we remain constructive in our view. Oil demand is at a record high globally, and we expect oil demand to continue to set records into the foreseeable future.
Mike: Thanks, Kristina good morning, and thank you for joining our call.
Mike: Effective March one two new independent directors joined the MPC Board, Eileen Drake and Kimberly Alison Taylor have strong records of accomplishment and complex industries, making them outstanding additions and we're happy to have them join our board.
Mike: As for the macro refining environment, we remain constructive in our view.
Mike: Oil demand is at a record high globally, and we expect oil demand to continue to set records into the foreseeable future.
Michael J. Hennigan: Forecasted outlooks for this year estimate 1.2 to two million barrels per day of incremental demand over 2023, primarily driven by the growing need for transportation fuel. Within our own domestic and export business, we are seeing steady demand year over year for gasoline and growth for diesel and jet, and we continue to believe that 2024 will be another year of record refined product consumption, while global supply remains constrained.
Mike: Forecasted outlook for this year estimated one point to the 2 million barrels per day of incremental demand over 2023, primarily driven by the growing need for transportation fuels.
Mike: Within our own domestic and export business, we are seeing steady demand year over year for gasoline and growth for diesel and jet fuel.
Mike: And we continue to believe the 'twenty 'twenty four will be another year of record refined product consumption.
Mike: Global supply remains constrained.
Michael J. Hennigan: Anticipated capacity additions have progressed more slowly than expected, and longer term, the level of announced capacity additions remains limited for the rest of the decade. In the first quarter, high global turnaround activity, the transition to summer gasoline blends, and light product inventories supported refining fundamentals, especially towards the end of the quarter. As we look forward, we believe these fundamentals will support an enhanced mid-cycle environment for the refining industry. Additionally, we believe the U.S. refining industry will remain structurally advantaged over the rest of the world.
Mike: Anticipated capacity additions have progressed more slowly than expected.
Mike: And longer term the level of announced capacity additions remains limited for the rest of the decade.
Mike: In the first quarter high global turnaround activity the transition to summer gasoline blends and light product inventories supported refining fundamentals, especially towards the end of the quarter.
Mike: As we look forward, we believe these fundamentals will support and enhanced mid cycle environment for the refining industry.
Mike: We believe the U S refining industry will remain structurally advantaged over the rest of the world.
Michael J. Hennigan: Our system has a locational advantage given the accessibility of nearby crude, which we believe will grow as the cost of transportation increases. The availability of low-cost natural gas, low-cost butane, and our refining system's complexity all increase our competitive advantage over international sources of supply.
Mike: Our system has a locational advantage given the access accessibility of nearby crude which we believe will grow as cost of transportation increases the.
Mike: The availability of low cost natural gas low cost butane and our refining systems complexity, all increase our competitive advantage over the international sources of supply.
Michael J. Hennigan: Even with this outlook, we remain focused on capital discipline while investing to grow earnings at a strong return. In the first quarter, we invested over $1.3 billion in capital expenditures, investments, and acquisitions comprised of attractive refining projects and midstream investments, including MPLX's $625 million strategic acquisition in the Utica Basin. In refining, we are investing predominantly at our large, competitively advantaged facilities to enhance shareholder value and position MPC well into the future.
Mike: Even with this outlook, we remain focused on capital discipline, while investing to grow earnings that have had strong returns.
Mike: In the first quarter, we invested over $1 $3 billion in capital expenditures investments and acquisitions comprised of attractive refining projects in midstream investments, including MPLX is 625 million strategic acquisition in the Utica Basin.
Mike: In refining we are investing predominantly at our large competitively advantaged facilities to enhance shareholder value and position M. P C well into the future.
Michael J. Hennigan: With a focus on safety and asset reliability, we successfully completed the largest amount of planned maintenance work in MPC's history. However, four of our largest and most profitable refineries were in turnaround during the quarter, limiting our financial performance.
Mike: With a focus on safety and asset reliability, we successfully completed the largest amount of planned maintenance work in Mpc's history.
Mike: Four of our largest and most profitable refineries were in turnaround during the quarter limiting our financial performance.
Michael J. Hennigan: These assets were in turnaround during a period of lower demand, and now we're ready to meet the increased consumption that comes with the summer driving season in midstream. MPLX continues to execute on attractive growth opportunities. The Harmon Creek 2 gas processing plant was placed into service in late February, bringing MPLX's Marcellus processing capacity to 6.5 billion cubic feet per day. And in the Permian Basin, Preakness 2 is approaching startup and is expected to be online by the end of May.
Mike: These assets were in turnaround during a period of lower demand and now we're ready to meet the increased consumption that comes with the summer driving season.
Mike: In midstream.
Mike: MPLX continues to execute on attractive growth opportunities.
Mike: The Harmon Creek to process gas processing plant was placed into service in late February, bringing mplx's Marcellus processing capacity to $6 5 billion cubic feet per day.
Mike: And in the Permian Basin Preakness, two is approaching startup and expect it to be online by the end of May.
Michael J. Hennigan: We're also building our seventh gas processing plant in the basin, Secretariat, which is expected to be online in the second half of 2025. Once operational, our total processing capacity in the Delaware Basin will be approximately 1.4 billion cubic feet per day, which would average to a pace of roughly one new plant per year since 2018. Additionally, MPLX announced two strategic transactions. In the Utica, MPLX enhanced its footprint through the acquisition of an additional ownership interest in an existing joint venture and a dry gas gathering site. We've already seen growth in the rich gas window of Utica, and we see new producers moving into the region.
Mike: We're also building our seventh gas processing plant in the basin Secretary, It which is expected to be online in the second half of 2025.
Mike: Once operational our total processing capacity in the Delaware Basin will be approximately $1 4 billion cubic feet per day, which would average two pace of roughly one new plant per year since 2018.
Mike: Additionally M.
Mike: MPLX announced two strategic transactions.
Mike: First in the Utica MPLX enhanced its footprint through the acquisition of additional ownership interest in an existing joint venture and a dry gas gathering system.
Mike: We've already seen growth in the rich gas window of the Utica and we see new producers moving into the region.
Michael J. Hennigan: MPLX entered into a definitive agreement to combine the Whistler Pipeline and Rio Bravo Pipeline projects into a newly formed joint venture. The platform expands MPLX's natural gas value chain and positions MPLX for future growth opportunities. MPLX is strategic to MPC's portfolio. Its current $2.2 billion annualized cash distribution fully covers MPC's dividend and more than half of our planned 2024 capital program. We expect MPLX to continue to increase its cash distributions as it pursues growth opportunities, further enhancing the value of this strategic relationship.
Mike: Second.
Mike: MPLX entered into a definitive agreement to combine the Whistler pipeline and Rio Bravo pipeline projects into a newly formed joint venture.
Mike: The platform expands MPLX as natural gas value chain and positions MPLX for future growth opportunities.
Mike: MPLX is strategic to Mpc's portfolio.
Mike: Its current $2.2 billion annualized cash distribution M. P C.
Mike: Fully covers mpc's dividend and more than half of our planned 2024 capital program.
Mike: We expect MPLX to continue to increase its cash distributions as it pursues growth opportunities further enhancing the value of this strategic relationship.
Michael J. Hennigan: Our overall capital allocation framework remains consistent. We will invest in sustaining our asset base while paying a secure, competitive, and growing dividend. And we intend to grow the company's earnings while exercising strict capital discipline. Beyond these three priorities, we are committed to returning excess capital through share repurchases to meaningfully lower our share count. Demonstrating this commitment today, we announce an additional $5 billion share repurchase authorization. Our total capital return through share repurchases and dividends since May of 2021 now totals $35 billion, with MPC's share count reduced by nearly 50%.
Mike: Our overall capital allocation framework remains consistent we will invest in sustaining our asset base, while paying a secure competitive and growing dividend and we intend to grow the company's earnings while exercising strict capital discipline.
Mike: Beyond these three priorities, we are committed to returning excess capital through share repurchases to meaningfully lower our share count.
Mike: Demonstrating this commitment today, we announced an additional $5 billion share repurchase authorization.
Mike: Our total capital return through share repurchases and dividends since may of 2021 now totals $35 billion with MPC share count reduced by nearly 50%.
Michael J. Hennigan: Let me take a second to share our view on value. We continue to believe share repurchases make sense at the current share price level. When we purchase MPC stock, we are buying into a premier, highly-advantaged refining system. We're also buying into a growing midstream business via our ownership of MPLX. And finally, we are buying strong business execution, disciplined investment, and a commitment to capital returns, which will continue to position MPC as an excellent investment. At this point, I'd like to turn the call over to Maryann. Thank you.
Mike: Let me take a second to share our view on value.
Mike: We continue to believe share repurchases makes sense at the current share price level. When we purchase M. P. C stock we are buying into a premier highly advantaged refining system.
Mike: We're also buying into a growing midstream business via our ownership in MPLX and.
Mike: And finally, we are buying strong business execution disciplined investment and a commitment to capital returns, which will continue to position M. P. C as an excellent investment.
Mike: At this point I'd like to turn the call over to Marianne.
Marianne: Thank you Mike.
Maryann T. Mannen: Our team's operational and commercial execution supported our ability to generate earnings per share of $2.58 for the quarter and $3.3 billion of adjusted EBITDA while having four of our largest refineries in turnaround. This quarter, in conjunction with the planned turnaround activity, we took the opportunity to execute incremental, smaller, high-return, quick-hit projects focused on optimization and reliability initiatives. This planned maintenance activity contributed to a reduction in refinery throughput of nearly 270,000 barrels per day, or 9%, compared with the fourth quarter.
Marianne: Our team's operational and commercial execution supported our ability to generate earnings per share of $2.58 for the quarter and $3.3 billion of adjusted EBITDA, while having four of our largest refineries in turnaround.
Marianne: This quarter in conjunction with the planned turnaround activity.
Marianne: Took the opportunity to execute incremental smaller high return quick hit projects focused on optimization and reliability initiatives.
Marianne: This planned maintenance activity contributed to a reduction in refinery throughput of nearly 270000 barrels per day or 9% compared with the fourth quarter.
Maryann T. Mannen: We plan this turnaround activity to occur in the fourth quarter, in the first quarter, excuse me, with a focus on safety and asset integrity and in a period of seasonally weaker demand. Now, with a large portion of our 2024 activity complete, we are well positioned to run our refining system near full utilization through the summer driving season. Capture in the quarter was 92 percent and reflects the seasonal market backdrop. Light product margins were weaker, and product inventory builds were both headwinds to quarterly results.
Marianne: We plan this turnaround activity to occur in the fourth quarter and the first quarter excuse me with a focus on safety and asset integrity and in a period of seasonally weaker demand.
Marianne: Now with a large portion of our 2024 activity complete we are well positioned to run our refining system near full utilization through the summer driving season.
Marianne: Capture in the quarter was 92% and reflects the seasonal market backdrop.
Marianne: Light product margins were weaker and product inventory builds were both headwinds to quarterly results.
Maryann T. Mannen: Our commitment to commercial excellence remains foundational. We believe that the capabilities we have built over the last few years provide a sustainable advantage over our peers. And we expect to continue to see the impact in our quarterly results. We are successfully progressing our 2024 capital investment plan. This includes executing on a multi-year infrastructure investment at our Los Angeles refinery and construction of a distillate hydrotreater at our Galveston Bay refinery, both expected to yield returns of approximately 20 percent or more. In addition to these large projects, we continue to execute on smaller, high-return, quick-hit projects targeted at enhancing refinery yields, improving energy efficiency, and lowering our costs.
Marianne: Our commitment to commercial excellence remains foundational we believe that the capabilities. We have built over the last few years provide a sustainable advantage versus our peers and we expect to continue to see the impact in our quarterly results.
Marianne: We are successfully progressing our 2020 for capital investment plan.
Marianne: Includes executing on our multiyear infrastructure investment at our Los Angeles refinery and construction of a distillate hydro treater at our Galveston Bay refinery, both expected to yield returns of approximately 20% or more in.
Marianne: In addition to these large projects we continue to execute on smaller high return quick hit projects targeted at enhancing refinery yields improving energy efficiency and lowering our cost let me turn the call over to John.
John J. Quaid: Let me turn the call over to John. Thanks, Mary.
John: Thanks, Mary Anne.
John J. Quaid: Slide 6 shows the sequential change in adjusted EBITDA from Q4 2023 to Q1 2024, as well as the reconciliation between net income and adjusted EBITDA for the quarter. Adjusted EBITDA was lowered sequentially by approximately $300 million, driven primarily by heavy planned turnaround activity, resulting in lower R&M throughput.
John: Slide six shows the sequential change in adjusted EBITDA from fourth quarter 2023, So first quarter 2024, as well as the reconciliation between net income and adjusted EBITDA for the quarter.
John: Adjusted EBITDA was lower sequentially by approximately $300 million driven primarily by heavy planned turnaround activity, resulting in lower R&M throughput.
John J. Quaid: To assist with your analysis, we thought it was helpful to note the company recorded an $89 million, or $0.20 per share, charge resulting from the quarterly fair value remeasurement of certain long-term incentive compensation. Aligned with shareholder value creation, the charge was driven by the $53 or 36% increase in our share price, as well as our total shareholder return performance versus our peers during the quarter. Again, this charge, which we did not adjust for, reduced earnings by 20 cents per share. The tax rate for the quarter was 18%, resulting in a tax provision of $293 million.
John: To assist with your analysis, we thought it helpful to note the company recorded an $89 million or <unk> 20 per share charge, resulting from the quarterly fair value remeasurement of certain long term incentive compensation.
John: Line with shareholder value creation, the charge was driven by the $53 or 36% increase in our share price as well as our total shareholder return performance versus our peers during the quarter.
John: This charge, which we did not adjust for reduced earnings by <unk> 20 per share.
John: The tax rate for the quarter was 18%, resulting in a tax provision of $293 million.
John J. Quaid: While this rate is lower than what we'd expect to see for the year, it reflects the permanent tax benefits of net income attributable to non-controlling interests in MPLX, as well as a discrete benefit related to equity compensation realized in the quarter. Moving to our segment results, slide seven provides an overview of our refining and marketing segment for the first quarter. Our refining and marketing results reflect lower throughputs associated with plant turnaround activity, as our refineries ran at 82% utilization, processing over 2.4 million barrels of crude per day. Refining operating costs were $6.14 per barrel in the first quarter, higher sequentially, primarily due to lower throughput.
John: This rate is lower than what we'd expect for the seat to see for the year. It reflects the permanent tax benefits of net income attributable to noncontrolling interest in MPLX as well as a discrete benefit related to equity compensation realized in the quarter.
John: Moving to our segment results Slide seven provides an overview of our refining and marketing segment for the first quarter.
Marianne: Our refining and marketing results reflect lower throughput associated with planned turnaround activity as our refineries ran at 82% utilization processing over two 4 million barrels of crude per day.
Marianne: Refining operating costs were $6 14 per barrel in the first quarter higher sequentially, primarily due to the lower throughput.
John J. Quaid: Sequentially, per barrel margins were up slightly as higher crack spreads were offset by lower margin caps. Slide nine shows the changes in our midstream segment adjusted EBITDA versus the fourth quarter of 2023. Our midstream segment is growing and generating strong cash flow. In this quarter, MPLEX's distribution contributed $550 million in cash flow to MPC. As Mike said, MPLX remains a source of durable earnings in the MPC portfolio and is a differentiator for us. Slide 10 presents the elements of change in our consolidated cash position for the first quarter.
Marianne: Sequentially per barrel margins were up slightly as higher crack spreads were offset by lower margin capture.
Marianne: Slide nine shows the changes in our midstream segment adjusted EBITDA versus the fourth quarter of 2023.
Marianne: Our midstream segment is growing and generating strong cash flows in this quarter Mplx's distribution contributed $550 million in cash flow to MPC.
Marianne: As Mike said MPLX remains a source of durable earnings and the MPC portfolio portfolio and is a differentiator for us.
Marianne: Slide 10 presents the elements of change in our consolidated cash position for the first quarter.
John J. Quaid: Operating cash flow, excluding changes in working capital, was over $1.9 billion in the quarter, driven by both our refining and midstream businesses. Working capital was a $389 million use of cash for the quarter, driven primarily by minor builds in crude and refined product inventories mainly related to the turnaround activity. This quarter, capital expenditures, investments, and acquisitions were $1.3 billion, including $710 million of growth and maintenance capital and $622 million for MPLX acquisitions net of cash received.
Marianne: Operating cash flow excluding changes in working capital was over $1 $9 billion in the quarter driven by both our refining and midstream businesses.
Marianne: Working capital was a $389 million use of cash for the quarter, driven primarily by minor builds in crude and refined product inventories mainly related to the turnaround activity.
Marianne: This quarter capital expenditures investments and acquisitions were $1 3 billion.
Marianne: Including $710 million of growth and maintenance capital and $622 million for MPLX acquisitions net of cash received.
John J. Quaid: Highlighting our steadfast commitment to superior shareholder returns, MPC returned $2.5 billion via repurchases and dividends during the quarter. As Mike commented, earlier today, we announced the approval of an additional $5 billion for share repurchases. And as of April 26th, we have $8.8 billion remaining under our current share repurchase authorizations. And from May of 2021 through April 26 of this year, we have repurchased 312 million shares, or 48% of the shares that were outstanding in May of 2021.
Marianne: Highlighting our steadfast commitment to superior shareholder returns MPC returned $2 $5 billion via repurchases and dividends during the quarter.
Marianne: As Mike commented earlier today, we announced the approval of an additional $5 billion for share repurchases and as of April 26, We had $8 8 billion remaining under our current share repurchase authorizations.
Marianne: And from May of 2021 through April through April 26th of this year, we have repurchased 312 million shares or 48% of the shares that were outstanding in may of 2021.
John J. Quaid: At the end of the first quarter, MPC had approximately $7.6 billion in consolidated cash and short-term investments, which included $385 million of MPLX cash. Turning to guidance, on slide 11, we provide our second quarter outlook. With our significant first-quarter turnaround activity behind us, we are projecting higher throughput volumes of nearly 2.8 million barrels per day, representing utilization of 94 percent.
Marianne: At the end of the first quarter MPC had approximately $7 $6 billion in consolidated cash and short term investments, which includes $385 million of MPLX cash.
Marianne: Turning to guidance on slide 11, we provide our second quarter outlook.
Marianne: With our significant first quarter turnaround activity behind us we are projecting higher throughput volumes of nearly $2 8 million barrels per day, representing a utilization of 94%.
John J. Quaid: Planned turnaround expense is expected to be approximately $200 million in the second quarter, with activity primarily in the MidCon region. Operating costs are projected to be $4.95 per barrel in the second quarter, much lower than the first quarter, reflecting the benefit of running our system near full utilization and lower expected operating costs. For the full year, we expect operating costs per barrel to trend towards a more normalized level of $5 per barrel, subject to energy cost volatility. Distribution costs are expected to be approximately $1.5 billion for the second quarter. Corporate costs are expected to be $200 million.
Marianne: Planned turnaround expense is expected to be approximately $200 million in the second quarter with activity primarily in the mid Con region.
Marianne: Operating costs are projected to be $4 95 per barrel in the second quarter much lower than the first quarter, reflecting the benefit of running our system near full utilization and lower expected operating costs.
Marianne: For the full year, we expect operating cost per barrel to trend towards a more normalized level of $5 per barrel subject to energy cost volatility.
Marianne: Distribution costs are expected to be approximately $1 5 billion for the second quarter.
Marianne: Corporate costs are expected to be $200 million.
Michael J. Hennigan: With that, let me pass it back to Mike.
Marianne: With that let me pass it back to Mike.
Michael J. Hennigan: In summary.
Michael J. Hennigan: Our unwavering commitment to safety, operational excellence, and sustained commercial improvement positions us as well. We will continue to prioritize capital investments to ensure the safe and reliable performance of our assets. We will also invest in projects where we believe there are attractive returns. The enhanced mid-cycle environment should continue longer term given our advantages over marginal sources of supply and growing global demand.
Michael J. Hennigan: Our unwavering commitment to safety operational excellence and sustained commercial improvement positions us well.
Michael J. Hennigan: We will continue to prioritize capital investments to ensure the safe and reliable performance of our assets.
Marianne: We will also invest in projects, where we believe there are attractive returns.
Michael J. Hennigan: The enhanced mid cycle environment to continue longer term given our advantages over marginal sources of supply and growing global demand.
Michael J. Hennigan: MPLX remains a source of growth and a unique competitive advantage in our portfolio. We believe it will continue to grow its cash distributions to cover both MPC's dividend and capital requirements and still generate excess cash before the first dollar of a final EBITDA is earned. Another way to frame it, MPC has reduced its share count from approximately $650 million in May of 2021 down to approximately $355 million at the end of the first quarter.
Marianne: MPLX remains a source of growth and a unique competitive advantage in our portfolio.
Marianne: We believe it will continue to grow its cash distributions to cover both mpc's dividend and capital requirements and still generate excess cash before the first dollar of refining EBITDA is earned in.
Marianne: Another way to frame it MPC has reduced its share count from approximately $650 million in may of 2021 down to approximately $355 million at the end of the first quarter.
Michael J. Hennigan: Over this same time frame, the MPLX units owned by MPC are held roughly flat at approximately 650 million units. Thus, the ratio of MPLX units held by MPC to our outstanding shares, or the potential value to MPC on a per share basis from MPLX, has nearly doubled. The midstream business, which continues to grow, provides a unique value proposition for MPC shareholders. We believe MPC is positioned as the refiner investment of choice, with the strongest through-cycle cash generation and the ability to deliver superior returns, supported by our steadfast commitment to return capital.
Marianne: Over this same timeframe the MPLX units owned by M. P. C as held roughly flat at approximately 650 million units.
Marianne: So the ratio of MPLX units held by MPC to our outstanding shares or the potential value to MPC on a per share basis from MPLX has nearly doubled.
Marianne: The midstream business, which continues to grow provides a unique value proposition for MPC shareholders.
Marianne: We believe M. P. C is positioned as the refiner investment of choice with the strongest through cycle cash generation and the ability to deliver superior returns supported by our steadfast commitment to return capital.
Michael J. Hennigan: Consistent with our goal to have the strongest through-cycle cash generation, even with four of our most profitable refineries in turnaround, adjusted on a comparable basis, we still generated more cash from operations than our refining peers. I am very proud of the team's accomplishments. With that, let me turn the call back to Kristina.
Marianne: Consistent with our goal to have the strongest through cycle cash generation.
Marianne: Even with four of our most profitable refineries in turnaround adjusted on a comparable basis, we still generated more cash from operations than our refining peers very proud of the team's accomplishments.
Marianne: With that let me turn the call back to Christina Thanks, Mike as we open the call up for your questions as a courtesy to all participants we ask that you limit yourself to one question and a follow up if time permits we'll re prompt for additional questions with that operator, we're ready.
Kristina Anna Kazarian: Thanks, Mike. As we open the call up for your questions, as a courtesy to all participants, we ask that you limit yourself to one question and a follow-up. If time permits, we'll re-prompt for additional questions. With that, operator, we're ready.
Operator: Thank you. We will now begin the question and answer session. If you have a question, please press star then 1 on your touchtone phone. If you wish to be removed from the queue, please press star then 2. 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 1 on your touchtone phone. Our first question comes from Neil Mehta with Goldman Sachs. Your line is open.
Speaker Change: 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.
Marianne: Wish to be removed from the queue. Please press Star then two.
Marianne: 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.
Marianne: Your first question comes from Neil Mehta with Goldman Sachs. Your line is open.
Neil Singhvi Mehta: Yeah, good morning, Mike and Maryann team. Thanks for taking the time. I had two questions. The first one is more of an industry one, which is, you know, your perspective on the West Coast. We've seen as Rodeo has shut down and Martinez, West Coast margins have really strengthened here, particularly for gasoline. So what's your outlook as we go into the summer and your thoughts on doing business in California products?
Neil Singhvi Mehta: Hey, good morning, Mike and Marianne team, Thanks for taking the time.
Neil Singhvi Mehta: Yeah two questions. The first one is more of an industry, one which is your perspective on the west coast, we've seen as <unk> shutdown and Martinez West coast margins have really strengthened here.
Marianne: Particularly for gasoline so what's your outlook as we go into the summer.
Marianne: And your thoughts on doing business in California broadly thank you.
Rick D. Hessling: Yeah, good morning, Neil. I'll let Rick start off with that one. Yeah, hi, Neil.
Speaker Change: Hey, good morning, Neil I'll, let Rick start off with that one.
Rick: Yeah, Hi, Neil Good morning, the market really in California is fundamentally short and it's long diesel that's kind of the thesis.
Rick D. Hessling: Yeah, hi Neil. Good morning.
Rick D. Hessling: The market really in California is fundamentally short, and it's long diesel. That's kind of the thesis as we look out there. And an example of that is if you look at gasoline inventories, especially right now, they're tight. In fact, they're below the five-year average, and we're seeing solid demand across the integrated system. So I generally would say that's the reasoning. That's the reasoning for the scenario right now. And I just want to reiterate, the market is short gasoline. And so this is an environment that we expect may persist through summer, and we'll see where it goes from there.
Rick: As we look out there and an example of that is if you look at gasoline inventories, especially right now there are tight in fact, they are below the five year average and we're seeing solid demand across the integrated system. So I generally would say that's the reasoning.
Rick: That's the reasoning for the scenario right now and I just want to reiterate the market is short gasoline and so.
Rick: This is an environment that we expect may persist through summer and we'll see where it goes from there.
Michael J. Hennigan: Team. And then the follow-up is just on the return of capital cadence. The buyback this quarter, the 2.2, was a little bit lighter than what I think many in the street were modeling. Just any thoughts on whether that was a reflection of some of the one-time working capital and M&A dynamics or valuation sensitivity? And how should we think about that over the next few years?
Speaker Change: Thanks, Kate and then the follow up is just on the return of capital cadence the buyback this quarter. The 2.2 was a little bit later.
Speaker Change: I think many in the street were modeling just any thoughts on what was that a reflection of.
Speaker Change: And some of the onetime working capital and M&A dynamics or evaluation sensitivity and how should we think about that over the course of the year.
Michael J. Hennigan: Yeah, no, this is Mike. Thanks for that question. There is no change in our commitment to returning capital, evidenced by the fact that we got the board to authorize another $5 billion. So, what I would say is, don't read into the quarter by quarter variability. To your point, it could have been a little bit higher, but there are a lot of factors that are influencing the activity within the quarter. So the takeaway should be we are committed, and that hasn't changed. We believe in returning capital to shareholders. You're going to continue to see us do that.
Speaker Change: Yes. This is Mike. Thanks for that question. There there is no change in our commitment to returning capital evidenced by the fact that we got the board to authorize another $5 billion. So what I would say it is don't read into the quarter by quarter variability to your point it could've been a little bit higher but there's a lot of.
Speaker Change: Factors that are influencing the activity within the quarter. So the takeaway should be we are committed and that hasnt changed we believe in returning capital to shareholders Youre going to continue to see us do that.
Speaker Change: Thanks, Mike.
Speaker Change: Yeah.
Manav Gupta: Thank you. Next, we will hear from Manav Gupta with UBS. Your line is open.
Speaker Change: Thank you next we will hear from Manav Gupta with UBS. Your line is open.
Michael J. Hennigan: Guys, in your introductory comments, you did mention that some global capacity was supposed to come online. It's a challenge. It's not really coming on. I'm trying to understand here, once we go past 2024, like 2025, if there are limited capacity expansions that we are aware of, and at this point, I think we understand that 2024 will be above mid-cycle. But based on your commentary, would it be fair to say, given the road year shutdown and other Houston refinery shutting down, you could well see 2025 also as a year where cracks are above, well above, the mid-cycle levels?
Manav Gupta: Thanks, Mike.
Manav Gupta: In your introductory comments you did mention that some global capacity was supposed to come on it's challenged it's not really come on I'm trying to understand here. Once we go past 2020 for like 2025. There is limited capacity expansions that we're aware off and at this point I think we understand the 'twenty 'twenty four will be above.
Manav Gupta: Mid cycle, but based on your commentary would it be fair to say given rodeo shutdown. Another Houston refinery shutting down you could see 2025 also as a year, where cracks are above well above the mid cycle levels.
Rick D. Hessling: Yeah, Manav, I think you said it very well. I'll let Rick add some comments.
Speaker Change: Yeah Manav.
Manav Gupta: I think you said it very well I'll, let Rick add some comments, but in general like we said in our prepared remarks global supply is constrained and we are a believer that demand will continue to set records year after year throughout the rest of the decade. So we're very bullish demand with I can train.
Rick D. Hessling: But in general, like we said in our prepared remarks, global supply is constrained, and we are a believer that demand will continue to set records year after year throughout the rest of the decade. So we're very bullish. Demand with a constrained supply scenario leads us to, you know, the situation that we have in the market today. We don't see it changing based on everything that we know is available to us. And that's why we have that view. But I'll let Rick add some color.
Rick: Constrained supply scenario leaves us to you know the situation that we have in the market today, we don't see that changing based on everything that we know is available to us.
Rick: And that's why we have that view, but I'll, let Rick add some some color.
Michael J. Hennigan: Yeah, hi, Manav. So I will echo Mike's comments and share what you know and what you're reading is what we're seeing and hearing in the marketplace as well, that the expansions appear to be continuously delayed. And with that, you know, Mike mentioned in his opening remarks, we see demand growing by 1.2 to upwards of 2 million barrels a day. So pick a number even between there. And that exceeds Manav, the expansions that may come online end a year this year or sometime in 2025. So even with those expansions coming online, we see demand outpacing those expansions. And thus why we're so optimistic about this mid cycle plus environment last.
Rick: Yes, Hi, Manav, so I will echo Mike's comments and share what you know and what you are reading is what we're seeing and hearing in the marketplace as well that the expansions appear to be continuously delayed in with that.
Rick: Mike mentioned in his opening remarks, we see demand growing by one point to to upwards to 2 million barrels a day, so pick a number even in between there and that exceeds mine of the <unk>.
Rick: The expansions that May come online end of year this year or sometime in 2025, so even with those expansions coming online we see demand outpacing those expansions and thus why we're so optimistic on this mid cycle plus environment lasting.
Michael J. Hennigan: And Manav, let me also add that historically, the demand numbers continue to get revised up. I know everybody's real-time in their thought process, but it's also good to look back no matter which agency is doing it. In fact, you know, the U.S. agency, when they put out the monthlies, have continually for a long period of time been underestimating gasoline and diesel demand. So it's just another factor that should put on people's radars to, you know, really look at all the revisions that have occurred because the demand numbers have been stronger once they get fully corrected and vetted than they are sometimes in real-time disclosure.
Speaker Change: And Manav, let me also add that historically the demand numbers continue to get revised up I know everybody's real time in their thought process, but it's also good to look back no matter, which agency is doing and in fact, you know the U S agency when they put the monthly is out have continually for a long period of time been under.
Speaker Change: Estimating gasoline and diesel demand. So it's just another factor that should put on People's radar to really look at all of the revisions that have occurred because the demand numbers have been stronger once they get fully corrected embedded than they are sometimes in the in the real time disclosures.
Speaker Change: Okay. My quick follow up here is I don't think I remember any time, when I've seen a $615 million turnaround expense in a single quarter. So this quarter was truly exceptional amount of downtime you took now if we look at second quarter guidance, it's meaningfully up but if you look at the rest of the should we imagine that.
Manav Gupta: My quick follow-up here is, I don't think I can remember any time when I've seen a $650 million turnaround expense in a single quarter. So this quarter was truly exceptional in the amount of downtime you took. Now we look at second quarter guidance; it's meaningfully higher. But if you look at the rest of the year, should we imagine that 1Q truly was exceptional? Because if you were to run harder for the rest of the year, that would mean better capture, lower OPEX per barrel, but it would also translate to higher GNP earnings when you translate it to the MPLX side.
Speaker Change: <unk> truly was the cash sooner because if you put it on hardware for the rest of the year that would mean better capture lowered opex per barrel, but it also translate to higher GNP earnings when you translate that to the MPLX site.
Maryann T. Mannen: Manav, good morning. It's Maryann.
Speaker Change: Manav good morning, It's Maryann, let me, let me start so you're absolutely right we tried to share.
Maryann T. Mannen: Let me, let me start. So, you know, you're absolutely right. We tried to share, you know, as we were on our call last quarter, that we expected to have really the largest turnaround in MPC history in the first quarter, and we did. We had four of our largest assets in turnaround. We think that's important, as you have well stated, given, you know, getting that work done ahead of the summer driving season. We think we are well poised for that. That we think will add reliability in the future as well. Hope that answers your question.
Maryann T. Mannen: We were on our call last quarter.
Maryann T. Mannen: That we expected to have really the largest turnaround in mpc's history in the first quarter and we did we had four of our largest assets.
Maryann T. Mannen: In turnaround.
Maryann T. Mannen: We think that's important as you well stated given getting that work done ahead of summer driving season, we think we are well poised for that.
Maryann T. Mannen: You made comment also about the.
Maryann T. Mannen: <unk> you can see from our guidance you know utilization is that opex per barrel. Similarly, when you look at quarter over quarter.
Speaker Change: Throughput.
John J. Quaid: Yeah, and hey, Manav, it's John. Just to build on what Maryann's saying to connect some dots as well, those additional projects that we took the time to do, right, you can see some of that in Turnaround, some of that in OpEx, but really, we felt like given the window we had in getting ready for the rest of the year, that was the right thing to do. Sorry, just wanted to add that.
Speaker Change: Impacted by the turnaround.
Speaker Change: It was certainly a driver sequentially, we're down Opex and you can see from what we guided in the second quarter as well.
Speaker Change: That you know that opex per barrel.
Speaker Change: He is actually well below that.
Speaker Change: What we printed for the for the first quarter. So I think you said it well we took the opportunity in the quarter.
Speaker Change: While we had the downtime at those largest plants as I mentioned in my prepared remarks to work on some projects at those same refineries.
Speaker Change: Refineries those same assets that we think will add reliability in the future as well hope that answers your question.
Speaker Change: And Hey, Manav, it's John just to build on what maryann, saying to connect some dots as well those additional projects that we took the time to do right you can see some of that in turnaround some of that in opex, but really we felt like given the window, we had in getting ready for the rest of the year that was the right thing to do sorry, I just wanted to add that.
Manav Gupta: And just to quickly follow up, the higher throughput also results in higher MPLX earnings for the next quarter, right?
Speaker Change: And just to quickly follow up the higher throughput also result in higher MPLX earnings for the next quarter right.
John J. Quaid: Hey Manav, it's John, and I'm not sure if this question came up on the MPLX call as well, but I know a little bit about it from my prior role. You know, remember, there's maybe less sensitivity on the L&S side of that business as refinery utilization moves higher and lower, just given the contractual structure of those contracts. So, while there is some sensitivity, it may not be as much as you might be sensitive to. Okay, thank you.
Speaker Change: Yeah, Hey, Manav, it's John.
Speaker Change: I'm not sure. If this question came up on the MPLX call as well, but I know a little bit about it from my prior role remember, there's maybe less sensitivity on the <unk> side of that business as refinery utilization moves higher and lower just given the contractual structure of those contracts. So.
Speaker Change: While there is some sensitivity it may not be as much as you might be thinking okay. Thank you.
Michael J. Hennigan: Manav, it's Mike. I just want to add, as Maryann said, we chose to use the first quarter to take down four of our most profitable refineries because it's a lower demand period in the US, etc. And our thought process there was, Spend that money, increase the reliability, get ourselves ready so that we're able to perform in the second and third quarters as we progress out the year.
Speaker Change: Manav, it's Mike I, just wanted to add I think the takeaway is as Maryann said as we chose to use the first quarter to take down four of our most profitable refineries, it's a lower demand period in the U S et cetera, and our thought process. There was spend that money increase the reliability get ourselves ready.
Speaker Change: So that we're able to perform in the second and third quarters as we progress out the year. So we think we've positioned ourselves very well despite a heavy spend in the in the quarter. We're happy that we've done it we think the assets are in really good shape and we're looking forward to the rest of the year.
Michael J. Hennigan: So we think we positioned ourselves very well despite, you know, a heavy spend in the quarter. We're happy that we did it. We think the assets are in really good shape, and we're looking forward to the rest of the year.
Paul Cheng: Thank you. Next, we will hear from Paul Cheng with Scotiabank. Hey guys, hey guys.
Speaker Change: Thank you.
Speaker Change: Thank you Youre welcome next.
Speaker Change: Next we will hear from Paul Cheng with Scotiabank.
Paul Cheng: You May proceed hey, guys.
Paul Cheng: Hey guys, good morning. Good morning, Paul.
Paul Cheng: Hey, guys good morning.
Paul Cheng: Good morning, Paul.
Paul Cheng: My I get.
Maryann T. Mannen: I guess that may be the answer. If we look at comparing to your guidance from last quarter, your throughput is lower, optics, and turnaround expense are higher than the guidance, or is it all contributed to what you characterized as some of this quick hit projects that is not originally in the guidance, or is something else contributing to that? That's the first question.
Paul Cheng: Yes, that's that.
Paul Cheng: If we look at comparing to your guidance from last quarter and your full putting it all.
Paul Cheng: It makes a ton of while expenses are higher than the guidance is at all controversial by what you would characterize that.
Paul Cheng: Some of this quick hit projects that yes.
Paul Cheng: Regionally in the guidance or Thats something else is contemplated that that's the first question.
Maryann T. Mannen: Paul, hi, it's Maryann. So, yeah, I think you characterized it well. We took the opportunity while those assets were down in turnaround to work on a few projects, frankly, one at each of them that we felt would improve reliability going forward. When you talk about the guidance throughput, as you said, slightly below that that we guided, which contributed to the OPEX per barrel number that you saw slightly higher than what we guided.
Paul Cheng: Oh, Hi, it's Marianne so yeah, I think you characterized it well and we took the opportunity while those assets were down in turnaround to work on a few projects frankly wanted each of them that we felt would improve reliability going forward. When you when you talk about the guidance through.
Paul Cheng: And as you said slightly below that.
Paul Cheng: That we that we guided which contributed to the to the Opex per barrel number that you saw slightly higher than what we guided but but in general you know as you are as were in turnaround and we look at the activity. There. We took the opportunity to do what we needed to do to ensure safe reliable operations and as Mike has already said given us the opportunity to run hard as we look at that driving.
Maryann T. Mannen: But in general, you know, as you are, as we're in a turnaround, and we look at the activity there, we took the opportunity to do what we needed to do to ensure safe, reliable operations and, as Mike has already said, given us the opportunity to run hard as we look at the driving season ahead and increased performance.
Paul Cheng: Season ahead and increase performance.
Paul Cheng: Okay, the second question is that, maybe this is for Rich, with the TMA startup, how will that impact your West Coast operation? Will you be able to fully replace the heavy oil and the medium sour that you're currently running over there with the WCS, or will that have some kind of configuration limitation? Because the WCS consists mostly of bitumen and a lot of condensate but doesn't have metal.
Paul Cheng: Okay.
Speaker Change: The question is that maybe this is for which with the Tam make spot.
Speaker Change: It will impact West coast Operation will you be able to 40, we pace.
Speaker Change: The heavy oil and the medium sour that currently wanting or what they are buying.
Speaker Change: WCS or Thats, where we have some kyle configuration in the patient because the WCS.
Speaker Change: Yes, low <unk> is the pitch Monday in a wall of condensate, but don't have to.
Rick D. Hessling: Yeah, hi, Paul, and thank you for the question. So on the West Coast, specifically, let me maybe back up and share what is public. We do have a TMX commitment on the line, and we believe we will be a significant beneficiary because we will see we will receive incremental Canadian advantaged crude, not only into Paul, our Pacific Northwest system, but also into our West Coast system. And specifically to your question, you know, we'll end up, I believe, having a significant amount of opportunities on the spot market within the Westridge Dock to take potentially barrels to LA.
Speaker Change: Yeah, Hi, Paul and thank you for the question. So on the West Coast, specifically, I mean, maybe back up and share what is public we do have a <unk> commitment on the line and we believe we will be.
Paul Cheng: Significant beneficiary, because we will see we will receive incremental Canadian advantaged crude not only into Paul our Pacific Northwest system, but also are our west coast system and specifically to your question you know we'll end up.
Paul Cheng: I believe having a significant amount of opportunities on the spot market with them the westridge dock to take potentially barrels to Huawei.
Rick D. Hessling: And because of sulfur limitations, because the majority of people out on the West Coast, I believe, as you know, are running ANS, we believe you'll see somewhat of a dumbbell-type blending system where you'll take heavy Canadian with a lighter grade and introduce it into the units out there. But the net-net for us is we believe it'll be quite positive for us, not only at Anacordas, our Pacific Northwest refinery, but also in L.A.
Paul Cheng: And because of sulfur limitations because of the majority of people out on the West Coast I believe as you know are running.
Paul Cheng: And thus we believe you'll see somewhat of a dumbbell type.
Paul Cheng: Lending system, where you'll take heavy Canadian with a lighter grade and introduce it into the units out there, but the net net for US as we believe it will be quite positive for us not only at Anacortes, Our Pacific Northwest refinery, but also at La <unk>.
Paul Cheng: Rich, can you share how much WCS you think you may be able to run?
Paul Cheng: Rich can you share that how much WCS or you think you can make a better one.
Paul Cheng: Yeah.
Rick D. Hessling: Right now, Paul, that's an unknown. We're continuing to look at the system, and we'll look at the economics, so that'll vary from month to month.
Rich: Right now Paul that's that's an unknown, we're continuing to look at the system and we will look at the economics, so that will vary from month to month.
Paul Cheng: All right. You too.
Speaker Change: Alright, thank you.
Paul Cheng: You're welcome. Thank you, Paul.
Speaker Change: Youre welcome. Thank you Paul.
John Macalister Royall: Thank you. Next, we will hear from John Royall of J.P. Morgan. Your line is open.
Speaker Change: Thank you next we'll hear from John Royall with Jpmorgan. Your line is open.
John Macalister Royall: Hi, good morning. Thanks for taking my question. So my question is a follow-up on capital allocation. You drew cash by about $2 billion at the parent level in one queue. You now sit at about $7 billion in parent cash. So we're slowly getting closer to the $1 billion minimum cash balance, and I know we aren't there yet.
John Macalister Royall: Hi, good morning, Thanks for taking my question.
John Macalister Royall: So my question is a follow up on capital allocation you drew cash by about 2 billion at the parent level in <unk>.
John Macalister Royall: Now sit at about $7 billion in parent cash so we're slowly getting closer to the 1 billion minimum cash balance and I know, we arent there yet but can you talk about how we should think about the buyback once you get to your minimum cash balance should we expect something like a 100% of free cash flow paid out, giving you won't be supplementing with the balance sheet any more.
Michael J. Hennigan: But can you talk about how we should think about the buyback once you get to your minimum cash balance? Should we expect something like 100% of free cash flow paid out, given you won't be supplementing with the balance sheet anymore? Just any color on what kind of normal could look like after you've drawn down your cash would be helpful.
John Macalister Royall: Just any color on what kind of normal could look like after you've drawn down your cash would be helpful.
Michael J. Hennigan: Yeah, John, this is Mike. You know, I start off by saying, you know, we've been fortunate enough to continue to generate cash. That's been a good story for us. You know, back to Neil's first question, we want to make sure there's no ambiguity. We're committed to returning capital. One of the questions that Neil asked, was it a little lower in a quarter?
John Macalister Royall: Yes, John this is Mike.
Michael J. Hennigan: I'll start off by saying, we've been fortunate enough to continue to generate cash that's been a good story for us.
Michael J. Hennigan: You know back to Neal's first question, we want to make sure Theres no ambiguity, we're committed to returning capital.
Michael J. Hennigan: One of the questions that Neil asked was it a little lower in the quarter and I tried to explain to not read into that quarter to quarter variability because a lot of factors that impact that so I think the biggest takeaway is we're huge believers in returning capital to shareholders.
Michael J. Hennigan: And I tried to explain, you know, not to read into that quarter-to-quarter variability because a lot of factors that impact that. So, I think the biggest takeaway is that we're huge believers in returning capital to shareholders. And depending on the market conditions, etc., we evaluate it every single quarter, and we try and put a program in place that prioritizes that.
Michael J. Hennigan: And depending on the market conditions et cetera, we evaluated every single quarter and we try and put a program in place that prioritizes that at the same time. We're also looking at where should we invest you heard maryann just talk about we decided to spend a little bit more money in the first quarter to enhance the reliability of our assets.
Michael J. Hennigan: At the same time, you know, we're also looking at where we should invest. You heard Maryann just talk about how we decided to spend a little bit more money in the first quarter to enhance the reliability of our assets. You know, that's a good decision on our part. It's, you know, the first decision in our capital framework. But going forward, I think the big takeaway is that you'll continue to see us be a leader in returning capital to shareholders.
Speaker Change: Yeah, that's a good decision on our part as you know the first decision and our capital framework, but going forward I think the big takeaway is youll continue to see us be a leader in returning capital to shareholders. That's something we believe in you will see us be a leaner and generating cash among our peers as I said in my prepared.
Michael J. Hennigan: That's something we believe in. You'll see us be a leader in generating cash among our peers. As I said in my prepared remarks, you know, very happy despite the situation we were in in the first quarter with four of our largest, most profitable assets down, we still generated more cash than our peers. So, we think that was a good accomplishment. And over time, you're going to see that, you know, we'll remain committed to our capital framework of which, you know, when will we get to that $1 billion? You know, that's a good question.
Michael J. Hennigan: Remarks.
Michael J. Hennigan: Are you happy. Despite this situation we were in the first quarter with four of our largest most profitable assets down we still generated more cash than our peers. So we think that was a good accomplishment.
Michael J. Hennigan: And over time, you're going to see that we'll we'll remain committed to our capital framework of which you know when when when we get to that 1 billion. That's a good question you know I don't know that I can predict it depending on how the market treats us but I.
Michael J. Hennigan: You know, I don't know that I can predict it, depending on how the market treats us. But I think the biggest takeaway is that we're committed to returning capital. And as long as we continue to generate cash, we'll continue to do that and reduce the share count going forward.
Michael J. Hennigan: I think the biggest takeaway is we're committed to returning capital and as long as we continue to generate cash will continue to do that and reduce the share count going forward.
John Macalister Royall: Great, thanks, Mike. And then so my follow-up is just on long-term captures. I don't think you're officially calling 100% your long-term capture, but that's certainly where the business is trending. And you've talked a lot about sources of improvements to date. My question is, what are the key drivers going forward for driving that capture from 100% to, you know, something like 105% or something larger on a sustainable basis? Are there more singles and doubles you can hit on the commercial side? Is it some of the capital projects you're working on at the refineries? I'm just trying to get a sense for where we should be looking for the next wave of improvements on the capture side.
Speaker Change: Okay, great. Thanks, Mike and then so.
Speaker Change: My follow up is just on long term captures.
Speaker Change: I don't think you are officially calling a 100% your long term capture but that's certainly where the business has trended.
Speaker Change: And you've talked a lot about sources of improvements to date. My question is what are the key drivers going forward are driving that capture from 100% to something like 105% or something larger on a sustainable basis.
Speaker Change: Are there more singles and doubles you can hit on the commercial side.
Michael J. Hennigan: Some of the capital projects. They are working at the refineries and I'm just trying to get a sense for where we should be looking for the next wave of improvements on the capture side.
Maryann T. Mannen: John, hey, it's Maryann. And thanks for the question. You know, as we've been sharing, our commercial performance remains foundational. You heard us talk about last quarter, some changes that we made in the organization to continue to focus on value chain optimization. That's clearly an objective that Mike has for the organization.
Michael J. Hennigan: John Hey, it's maryann and thanks for the question.
Maryann T. Mannen: As we've been sharing our commercial performance remains foundational you know you've heard us talk about it last quarter you know some changes that we made in the organization to continue to focus on value chain optimization. That's clearly an objective that Mike has for the organization.
Maryann T. Mannen: You know, we're not done. We think a lot of the things that we have put in place are sustainable, but we do believe there are opportunities going forward. We'd like to say that, you know, we're approaching 100%, you know, over a longer period of time, as you've seen; we did it last year. And, as you know, there are things in the market that we can't control. You know, when you look at our performance this quarter, you know, as I shared, we had weaker light product margins, and obviously, the commercial team took some decisions pretty late in the quarter on product inventory build as well.
Michael J. Hennigan: We're not done we think a lot of the things that we have put in place are sustainable, but we do believe there's opportunities going forward, we like to say that you know we're approaching 100% over a longer period of time as you've seen we did it we did it last year and as you know theres things that from.
Michael J. Hennigan: The market that we can't control when you look at our performance this quarter.
Michael J. Hennigan: As you know we had a weaker light product margins as I as I shared in obviously the commercial team took some decisions.
Michael J. Hennigan: A decision you know pretty late in the quarter on product inventory build as well, but we will continue to focus on the things that we can and we do believe there are opportunities that will allow us.
Maryann T. Mannen: But we will continue to focus on the things that we can, and we do believe there are opportunities that will allow us to, you know, continue to improve commercial performance. But we, you know, we say we're approaching 100%, and we hope you've seen us use that as a deliverable going forward. Ultimately, at the end of the day, you know, as Mike has shared with you, our objective is to deliver the strongest dividend per barrel and cash generation relative to our peers. And that remains a key focus when we look at our capture performance. Thank you.
Michael J. Hennigan: We continue to improve commercial performance, but we say, we're approaching 100% and we hope you have seen us use that as a deliverable going forward ultimately at the end of the day you know as Mike had shared with you. Our objective is to deliver the strongest EBITDA per barrel and cash generation relative to our.
Michael J. Hennigan: Peers and that remains a key focus when we look at our capture performance.
Michael J. Hennigan: Yeah, John, I can't help myself to jump in here. You know, I know this capture metric gets a lot of discussion and, you know, Kristina has been steadfast that we need to report on it. I just want to caution, as I always do, that there are a lot of factors, market factors, etc., that impact that. The market should know we're committed to improving our commercial performance. That's obviously a goal here.
Speaker Change: Thank you.
Speaker Change: Yes, John I can't help myself to jump in here.
John Macalister Royall: I know this capture metric gets a lot of discussion and Christine has been steadfast that we need to report on it I just want to caution as I always do that there's a lot of factors market factors et cetera that hit on that.
Speaker Change: The market should know we're committed to improving our commercial performance that that's obviously our goal here, but the metric that I want is to look at the most is cash at the end of the day you go to the bottom of the sheet as opposed to all the very.
Michael J. Hennigan: But the metric that I want you to look at the most is cash. At the end of the day, you know, go to the bottom of the sheet as opposed to, you know, all the very, you know, different variables throughout it. The most important thing is, are we generating the most cash? So that's the metric that I start with, as we analyze the, you know, performance of the assets, etc. So I just want to reiterate that I know a lot of people like to talk about capture, but it's not one that I think tells the story of the business that much.
Speaker Change: Different variables throughout at the most important thing is are we generating the most cash so that's the metric that I start with as we analyze the.
Speaker Change: The performance of the assets et cetera. So.
Speaker Change: Just want to reiterate that I know a lot of people like to talk capture it.
Speaker Change: It's not the one that I think tells the story of the business that much.
Operator: Our next question will come from Jason Gabelman with TD Cohen. You may proceed.
Speaker Change: Understood. Thank you.
Speaker Change: Youre welcome.
Speaker Change: Our next question will come from Jason <unk> with TD Cowen you May proceed.
Jason Daniel Gabelman: Yeah, hey, good morning. Thanks for taking my questions. I wanted to first ask about the Martinez biofuel projects. It looks like the other income line, in refining, was close to $200 million this quarter. I think that includes the impact from Martinez, so I was hoping to get an idea of how much that contributed to earnings this quarter and then how you think about the ramp up in capacity to 100% from the current 50%. Thanks.
Jason: Yeah, Hey, good morning, Thanks for taking my questions I wanted to first ask about the Martinez biofuel projects. It looks like the other income line was close to in refining was closer to $200 million. This quarter I think that includes.
Jason: The impact from Martinez I was hoping to get an idea of how much that contributed to earnings this quarter and then how you think about.
Jason: The ramp up in capacity to 100%.
Speaker Change: From our current 50% thanks, great Great Hey, Jason It's John Let me take the first part of that and then I'll turn it over to Maryann, but just to clarify that other that youre seeing on the R&M walk it is not related to the Martinez.
John J. Quaid: Great. Hey Jason, it's John. Let me take the first part of that and then I'll turn it over to Maryann, but just to clarify, that other that you're seeing on the R&M walk, it is not related to Martinez. Largely, what you're seeing there are, and you've seen it in prior quarters, are some of the insurance proceeds we've recognized in regards to a claim we had at some of our refineries. But I'll turn it over to Maryann to talk about Martinez, but I wanted to clarify that it's not in that bar.
John Macalister Royall: Largely what you're seeing there.
John Macalister Royall: You've seen it in prior quarters or some of the insurance proceeds we've recognized in regards to a claim we had.
John Macalister Royall: Some of our refineries, but I'll turn it over to Maryann to talk about Martinez, but I wanted to clarify its not in that in that bar.
Maryann T. Mannen: Hey Jason, it's Maryann. Thanks for the question. So let me give you an update on Martinez. As you stated, we are currently operating at about 50% of our nameplate capacity. In November, we had a heater tube failure at Martinez, and as I shared with you last quarter, we continue to work with the regulators to align on what repairs are necessary and ensure a safe, reliable operation going forward. We would expect to continue to operate at 50% for the second quarter.
John Macalister Royall: And then it's maryann. Thanks. Thanks for the question. So let me give you an update on Martinez as you stated we are currently operating at about 50% of our nameplate capacity.
Maryann T. Mannen: In November we had a heater tube failure at Martinez and as I shared with you last quarter, we continue to work with all the regulators.
Maryann T. Mannen: To align on what repairs are necessary and ensure a safe reliable operation going forward.
Maryann T. Mannen: We would expect to continue to operate at 50% for the second quarter.
Maryann T. Mannen: And then somewhere in the mid-third quarter, we would expect to see our capacity increase to about 75% of that nameplate. And again, when I talk about nameplate, I'm talking about 48,000 barrels a day, by the way, just for clarity. And then we do expect to ramp up to full capacity on Martinez by year end. So again, 50% second quarter, ramping to 75% mid-third quarter, with full rate capacity by year end.
Maryann T. Mannen: Then yeah somewhere mid third quarter, and we would expect to see our capacity increase to about 75% of that nameplate and again when I talk about nameplate I'm talking about 48000 barrels a day by the way just for clarity and then we.
Maryann T. Mannen: We do expect to ramp up to full capacity on Martinez by by year end, So again, 50% second quarter at ramping to 75% mid third quarter with full rate capacity by year end.
Jason Daniel Gabelman: Got it. And that means, I guess, that you got approval for the Fixes that you need to make in the unit. And then is there any cost op-ex associated with the improvements you need to make at the plant?
Speaker Change: Got it and that means I guess, how you got approval for.
Speaker Change:
Speaker Change: <unk>.
John Macalister Royall: Fixes that you need to make in the unit and then is there any cost.
John Macalister Royall: The opex associated with.
John Macalister Royall: The.
John Macalister Royall: The improvements you do you need to make at the plant.
Maryann T. Mannen: So in our second quarter guidance, we do not yet have any costs yet included in that second quarter guidance. Sorry about that.
John Macalister Royall: So in our second quarter guidance, we do not have any cost yet included in that second quarter guidance, sorry about that.
Jason Daniel Gabelman: Yes, we continue to work with regulators to align on the path forward. So we believe, again, we will continue to work with them. But we believe we understand the work that needs to be done, and we are aligning with our regulators to achieve that.
John Macalister Royall: Yes, we continue to work with regulators to align on the path forward. So we believe again continue to work with them, but we believe we understand.
John Macalister Royall: The the work that needs to be done and we are aligning with our regulators to achieve that.
Jason Daniel Gabelman: Great, thanks. And then my other question is, sorry Mike, I'm going to go back to this capture metric and... You know, you include just $392 million headwind on slide eight of capture impact. Some of that is from product inventory and derivatives. I'm wondering if that amount, if you could share what that is and if that reverses in 2Q. Thanks. Yeah, it's Maryann.
Speaker Change: Great. Thanks, and then my other question is sorry, Mike I'm going to go back to this capture metric.
John Macalister Royall: You.
Speaker Change: You include just $392 million headwind on slide eight of capture impact some of that is from product inventory and derivatives.
Speaker Change: I'm wondering.
Speaker Change: If that amount if you could share what that is and if that reverses in.
Speaker Change: <unk>. Thanks.
Maryann T. Mannen: Yeah, it's Maryann. So, you know, we try to give you on that slide; we show you the impact that is from crude oil and the impact from product. And what you saw this quarter is that what was normally a very positive impact from product margins really narrowed quite a bit in the first quarter. Alternatively, you know, that crude is typically a key driver. It always pulls capture, and that'll ebb and flow just depending on a series of things.
Speaker Change: Yeah.
Speaker Change: And so you'll notice that we tried to give you on that slide we show you the impact that is from crude and the impact from a product and what you saw this quarter is what was normally a very positive impact from product margins really narrowed quite a bit in the first quarter.
Speaker Change: Turning to bleed that crude is typically a key driver eat OAS pool of capture and that will ebb and flow just depending on a series of things, but the key driver in this first quarter as you see where product margins and then and the inventories right. We made some commercial decisions, which we think were the right ones and we made those decisions sort of late.
Maryann T. Mannen: But the key driver in this first quarter, as you see, was product margins and inventories. Right? We made some commercial decisions which we think were the right ones. And we made those decisions sort of late in the quarter. But, you know, as those market dynamics change, we'll be able to share that with you going forward.
Speaker Change: Late in the quarter.
Speaker Change: But as those market dynamics change.
Speaker Change: We will be able to share that with you going forward.
Roger David Read: You're welcome, Jason. Our next question will come from Roger Read with Wells Fargo. Your line is open.
Speaker Change: Okay. Thanks.
Jason: Our next welcome Jason.
Jason: Our next question will come from Roger read with Wells Fargo. Your line is open.
Roger David Read: Yeah, good morning. I guess I'd like to dig into here, maybe your expectations for crude deaths we've heard from. Some of the other companies, you know; what's going on in terms of available barrels out there? And you've talked a little bit about the positives on the West Coast, but how should we think about the impact in the mid-con down to the Gulf Coast, mid-con thinking the WCS going West instead of South, and then along the Gulf Coast, just what you're seeing in terms of available barrel on the heavy, medium to heavy side, and thoughts on the light heavy spread.
Roger David Read: Yes, good morning.
Roger David Read: I guess I'd like to dig into here, maybe your expectations on crude desk, we've heard from.
Roger: Some of the other companies whats going on in terms of available barrels out there and you've talked a little bit about the positives on the west coast, but how should we think about the impact in the <unk>.
Roger: Mid con down to the Gulf Coast mid Con thinking that WCS going west instead of South and then along the Gulf Coast, just what Youre seeing in terms of available barrels on the heavy medium to heavy side and thoughts on the light heavy spreads.
Rick D. Hessling: Yeah, hi, Roger, it's Rick. So I'll start with some light, heavy spreads, and we can, we continue to see them right about where they're at today. Obviously, we've seen the WCS spread come in a few bucks. And ironically, if you look out on the forward curve towards the end of this year, it actually starts to move back out two to $3 due to, you know, strong Canadian production and diluent blending. So we see this as a little bit of a near-term blip. Specifically in the mid-con, I do believe there's a misconception that the mid-con will be shorted heavy. We don't believe that to be the case.
Roger: Yeah, Hi, Roger it's Rick So I'll start with light heavy spreads we can see we continue to see them right about where they're at today, obviously, we've seen the WCS spread come in a few bucks and Ironically, if you look out on the forward curve towards the end of this year.
Roger: It actually starts to move back out.
Roger: Two to $3 due to strong Canadian production and diluent blending so we see this as a little bit of a near term blip spin.
Rick: Specifically in the mid Con I do believe there is a misconception that the mid con will be shorted, having we don't believe that to be the case as you know we're a big buyer in the mid con and when we look at T. M X coming online we believe the marginal Canadian barrel, that's going to get backed out of the system first.
Rick D. Hessling: As you know, we're a big buyer in the mid-con, and when we look at TMX coming online, we believe the marginal Canadian barrel that's going to get backed out of the system first is a US Gulf Coast export barrel. And so with that being said, when we're looking forward here, and whether it's pad two, three, or five, we expect to generally run about the same mix of Canadian barrels that we've run here the past several quarters.
Rick: As a U S Gulf coast export barrel.
Rick: And so with that being said when we're looking forward here and whether it's pad two three or five we expect to generally run about the same mix of Canadian barrels that we run here of the past several quarters.
Roger David Read: Yeah, that makes sense. And I guess if we do see fewer barrels on the Gulf Coast, Canadian or otherwise, what, what's your anticipation there relative to what you've been running at either Galveston Bay?
Speaker Change: Yes that makes sense and I guess, if we do see.
Roger: Fewer barrels on the Gulf Coast.
Roger: Canadian or otherwise what what's your anticipation there relative to what you've been running at either Galveston Bay or Gary Bill.
Rick D. Hessling: Yeah, we don't see it changing a lot. I will tell you, when we look at Brazilian growth, and we look at Guyana production, and then Canada, even with some barrels getting backed out, we don't see our mix changing that much, Roger. And then we certainly have barrels that could potentially come from the Middle East if we get the right economic signal. So, all in all, I really don't expect a significant change.
Roger: Yeah, we don't see it changing a lot I will tell you when we look at Brazilian growth and when we look at Guyana production.
Roger: And then Canadian even with some barrels getting back we don't see our mix changing that much Roger.
Roger: And then we certainly have barrels that could potentially come from the middle East if we get the right economics signal. So I would say all in I really don't expect a significant change.
Roger David Read: And I appreciate that. One final clarification on the West Coast. We've heard some say that the acidity of the WCS barrel could be a headwind for running some. And I think when people ask about your ability to run max, you know, barrels of WCS, maybe that's what they're getting at. Is there any limitation from a metallurgical, you know, kind of physical capacity issue for you on the West Coast?
Speaker Change: No I appreciate that one final just clarification on the West coast, we've heard some say that.
Roger: Acidity of the WCS barrel could be a headwind for for running some and I think when people ask about your ability to run Max barrels of WCS, maybe that's what they are getting at is there any limitation from <unk>.
Roger: <unk>.
Roger: Kind of a physical capacity issue for you on the West coast.
Rick D. Hessling: It is something that will balance, Roger. I believe I said earlier that ANS, the biggest difference is ANS has about five times less sulfur than WCS, so that's why we believe there will be a lot of blending going on on the West Coast. But I do believe, in general, you will see it limit others' toolkits on what the amount is that they can run, but we've yet to see, we need to see that play out. understood. Thank you.
Roger: It is something that will balance Roger I believe I said earlier and asked.
Roger David Read: The biggest difference is an asset has about five times.
Roger David Read: Lower sulfur than WCS. So that's why we believe there will be a lot of blending going on on the west coast, but I do believe in general you will see it limit others tool kits, what the amount is that they can run.
Roger David Read: But we've yet to see if we need to see that play out.
Speaker Change: Understood. Thank you.
Speaker Change: Thank you Roger.
Matthew Robert Lovseth Blair: Our next question comes from Matthew Blair with TPH. Your line is open.
Speaker Change: Our next question comes from Matthew Blair with T. P. H Your line is open.
Matthew Robert Lovseth Blair: Thank you and good morning. We're seeing octane spreads at record levels. Is that a function of the Tier 3 low sulfur gasoline specifications and perhaps some dynamics in the NAFTA market? Can you talk about the drivers here and how much of MPC's gasoline production is high octane?
Matthew Robert Lovseth Blair: Thank you and good morning, we're seeing octane spreads record levels that are a function of the tier three.
Matthew Robert Lovseth Blair: Low sulfur gasoline specs and perhaps any day.
Matthew Robert Lovseth Blair: Dynamics in the NAFTA market.
Matthew Robert Lovseth Blair: Talk about the drivers here and how much of Mpc's gasoline production is high octane.
Rick D. Hessling: Yeah, Matt, it's Rick again. So I will tell you a good call out. We're seeing octane values be extremely high. And as you know, we have a lot of reforming capacity. So we are a large octane producer. So we're seeing the benefit. Certainly, you hit on a couple of the reasons.
Matthew Robert Lovseth Blair: Yes, Matt it's Rick again, so I will tell you a good call out we're seeing octane values be extremely high and as you know we have a lot of reforming capacity. So we are.
Matthew Robert Lovseth Blair: Large octane producers so we're seeing the benefit certainly.
Matt: You hit on a couple of the reasons spec. So certainly a region, but I will also tell you we're seeing strong signals on the export side and when you think about the export market, we're sending over volume there that generally does not have ethanol in it. So that is eating up a lot of octane long product and then.
Rick D. Hessling: SPEX is certainly a region, but I will also tell you that we're seeing strong signals on the export side. And when you think about the export market, we're sending over volume there that generally does not have ethanol in it. So that is eating up a lot of octane-long product. And then there is persistent length in the NAPFA market due to poor petchem margins. So that's, that's helping us out on the octane side. And then lastly, more recently here, you're certainly seeing the impact of high turnarounds, just taking octane off the market here in Q1. And it's carrying into Q2. And we see it persisting for a while.
Matthew Robert Lovseth Blair: There is persistent Wang from the naphtha market due to poor pet Chem margins. So that's that's helping us out.
Matthew Robert Lovseth Blair: <unk> side, and then lastly, more recently here.
Matthew Robert Lovseth Blair: Certainly seeing the impact of high turnarounds, just taking octane off the market here in Q1, and it is carrying into Q2 and and we see it persisting for awhile math.
Matthew Robert Lovseth Blair: Sounds good. And then, circling back to an earlier question, I think you mentioned your long diesel in California. Is that a function of RV share, you know, approaching 60% or so? And if so, what do you do with those extra diesel barrels? Are they exported to like Mexico or, or Canada or Asia? Yeah.
Speaker Change: Sounds good and then circling back to an earlier question I think you mentioned your long diesel in California is that a function of RV share.
Matthew Robert Lovseth Blair: Coaching 60% or so.
Matthew Robert Lovseth Blair: If so what do you do with those extra diesel barrels are they export it to like Mexico, or Canada or Asia.
Rick D. Hessling: Yeah, so great, great comment. And in my comment earlier, the industry, I would say, is long diesel.
Speaker Change: Yeah, so great great comment and Mike.
Speaker Change: My comment earlier the industry I would say is long diesel.
Matthew Robert Lovseth Blair: And we're not alone in that category. We are as well. And you're right, we've got to we've got to find export opportunities, Matt, whether anything waterborne, where we can find a home to clear the product is what we and others are doing.
Speaker Change: And we're not alone in that category, we are as well and you're right. We've got to we've got to find export opportunities, Matt whether anything waterborne, where we can find a home declare the product is what we and others are doing.
Rick D. Hessling: Great, thanks for all the helpful commentary. Absolutely, thank you.
Matt: Great. Thanks for all the helpful commentary.
Speaker Change: Absolutely. Thank you.
Matthew Robert Lovseth Blair: Absolutely. Thank you.
Speaker Change: Thank you our last question will come from Theresa Chen with Barclays. Your line is open.
Theresa Chen: Thank you. Our last question will come from Theresa Chen with Barclays. Your line is open.
Theresa Chen: Hi, when we think about your marketing margins within R&M, the direction of wholesale gasoline prices benefiting Q4 as they came off and then acting as a headwind in Q1 as prices shot up, how much can that move the broader R&M capture quarter to quarter or the cash generation from the segment, and how should we think about the drivers of this going into the second quarter?
Theresa Chen: Hi, when we think about your marketing margins within R&M.
Speaker Change: Yes.
Theresa Chen: Direction of wholesale gasoline prices benefiting Q4, as they came off and then acting as a headwind in Q.
Theresa Chen: One is prices shot up how much can that move the broader R&M capture quarter to quarter or the cash generation from the segment and how should we think about the truck driver assist subsequent to the second quarter.
Rick D. Hessling: Hi, Tracy. Can you restate the back half of your question? I'm not sure I caught that part. Please. This is Rick.
Theresa Chen: Hi, trace so can you restate the back half of your question I'm not sure I caught that part. Please this is Rick.
Theresa Chen: Here Rick, related to your marketing margins and the move of the like wholesale gasoline prices benefiting Q4 as prices declined and then acting as the headwind as they came up, how much of that can really bring noise to the R&M capture quarter to quarter?
Rick: Sure Mike.
Rick: Related to your marketing margins and the move of the like.
Rick: Wholesale gasoline prices.
Rick: Benefit fitting Q4 as prices declined and then acting as a headwind as they came up.
Rick: How much that can bring noise to the arm R&M capture a quarter to quarter.
Rick D. Hessling: Yeah, a good question. It can be significant. And depending on the region, it's just tough, as you pointed out, in an upward market. If you look at Q1, to your point, Theresa, I think we had a $14 flat price increase throughout the quarter. So it definitely was a headwind, and it could have been significant. You know, we, amongst all of our competitors, need to be competitive on our racks. And in an up market, it continues to be a headwind. So I don't have a specific number that I can share with you, but it's definitely a factor in our favor.
Michael J. Hennigan: Yeah. Good question, so it can be significant and depending on the region. Its just tough as you pointed out in an upward market. If you look at Q1 to your point <unk>. So I think we had a $14 flat price increase throughout the quarter. So it definitely.
Rick: Was a headwind and it can be significant.
Rick: Amongst all of our competitors.
Rick: Need to be competitive at our racks and in an up market. It continues to be a headwind. So I don't have a specific number that I can share with you.
Rick: But it's definitely a factor in our capture.
Theresa Chen: Got it. And Mike, going to your earlier comments about NPLX as a strategic investment, and with the announcement at the partnership over the past few months, and just the migration of more and more third party cash flows, do you have a long-term target of the breakdown of third party to GP, then the dollar cash flows over time? And would a shift towards more third-party cash flows help NPC possibly have more flexibility in the upcoming contracting events to take place in the next few years?
Speaker Change: Got it.
Speaker Change: Going to your earlier comments about MPLX as a strategic investment and with the announcement at the partnership over the past few months and just migration of more and more third party cash flows do you have a long term target of the breakdown of third party <unk>.
Speaker Change: With the dollar cash flows over time and with a shift towards more third party cash flows MPC, possibly have more flexibility in the upcoming contracting events take place over the next few years.
Michael J. Hennigan: Yeah, Theresa.
Michael J. Hennigan: Yeah, Theresa, we don't have a target per se, using that term, but we do have the goal of generating increasing cash flows from third parties, as well as optimizing within our own system as well. The point I was trying to make is where we stand today, that distribution from MPLX covers the MPC dividend and more than half of the capital. But going out, and again, this isn't guidance.
Speaker Change: Yes, so we don't have a target per se using that term.
Speaker Change: We do have the goal of generating increasing cash flows.
Speaker Change: From third parties as well as optimizing within our own system as well.
Speaker Change: Point I was trying to make is where we stand today that distribution from MPLX covers the MPC dividend and more than half of the capital.
Speaker Change: But going out and again this isn't guidance, but if you look at the trend.
Michael J. Hennigan: But if you look at the trend, you know, we're going to continue to increase the MPLX distribution over time. And as you see that occurring, and depending on the capital needs it, at the refining side of the business, you know, the statement I said was, there'll be a point where MPLX distribution will cover the dividend and all the capital and still have excess cash. That's how unique the competitive advantages of that business are. And, you know, we've been bullish on natural gas growth for a long time. And I always caution: I'm not saying natural gas price; I'm saying natural gas growth volume.
Speaker Change: We're going to continue to increase the MPLX distribution over time, and as you see that occurring and depending on the capital needs. It at the <unk>.
Speaker Change: Finding side of the business.
Speaker Change: The statement I said was there'll be a point, where mplx's distribution will cover the dividend.
Speaker Change: And all of the capital and still have excess cash that's how unique the competitive advantages of that business and we've been bullish natural gas growth for a long time and I I always caution I am not saying natural gas price I'm, saying natural gas growth volume.
Michael J. Hennigan: We continue to believe that that has tailwinds behind it, whether it's, you know, all the topics that have been talked about recently. But as that continues to occur, that ability for MPLX cash generation to increase will just continue. And it'll get to a point where it's covering, you know, the distribute, I'm sorry, the dividend at MPC, the capital at MPC, and still generate excess cash. That's where we're headed. So I don't know that we have a target other than that goal, and we'll try and keep growing that.
Speaker Change: Continue to believe that that has tailwind behind it whether it's all of the topics that have been talked about recently, but as that continues to occur that ability for MPLX cash generation to increase will just continue and it will get to a point where it's covering.
Speaker Change: The distribute I'm sorry, the dividend at MPC, the capital of MPC and still generate excess cash that's where we're headed so I don't know that we have a target other than that target and we'll try and keep growing that.
Kristina Anna Kazarian: All right. With that, thank you so much for your interest in Marathon Petroleum Corporation. Should you have additional questions or would you like clarification on topics discussed this morning, please reach out, and the IR team will be available to help with your calls today. Thank you for joining us.
Speaker Change: Thank you.
Speaker Change: Youre welcome Teresa.
Speaker Change: Okay.
Speaker Change: Alright with that thank you so much for your interest in Marathon Petroleum Corporation should you have additional questions or would you like clarification on topics discussed. This morning, please reach out and the IR team will be available to help with your call today. Thank you for joining us.
Operator: Thank you. That does conclude today's conference. Thank you once again for your participation. You may disconnect at this time.
Speaker Change: Thank you that does conclude today's conference. Thank you once again for your participation you may disconnect at this time.