Q3 2024 Marathon Petroleum Corp Earnings Call
A question and answer session. Press star when on your touchtone phone to enter the queue. Please note that this conference is being recorded. I will now turn the call over to Kristina Kazarian, Kristina, you may begin.
Kristina Kazarian: Welcome to Maryann's On Patrolium Corporation's third quarter 2020 for earnings conference call.
Kristina Kazarian: The slides that a company this call can be found on our website at marathompatroleum.com under the Investor cab.
Kristina Kazarian: Joining me today on the call her Maryann Mannen CEO, John Quaid, CSL 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. Actual results may differ. Actors that cause actual results to differ are included there as well as in our filing with the SEC. With that, I'll turn the call over to Maryann.
Maryann Mannen: Thanks Kristina and good morning everyone.
Maryann Mannen: We remain committed to peer leading operational excellence, commercial performance, and profitability per barrel in each of the regions in which we operate, while being steadfast in our commitments to safely, reliably operate our assets and protect the health and safety of our employees.
Kristina Kazarian: The Global Macro Environment continues to exhibit refined product demand growth. And we expect 2024 will be another year of record refined product consumption.
Kristina Kazarian: Within our domestic and export businesses, we have seen steady year over year demand for gasoline and diesel and growth in demand for jet fuel.
Kristina Kazarian: Refining margins were volatile in the third quarter as the market digested the implications of a light turnaround season, less these in all supply interruptions than anticipated, and the uncertainties around global economic growth, particularly the pace within China.
Kristina Kazarian: By leveraging our fully integrated refining system and geographic diversification across across the Gulf Coast, Mid-Con, and West Coast regions, our portfolio of assets is well positioned to perform in this dynamic market environment.
Kristina Kazarian: Beyond 2024, we expect demand growth to exceed the net impact of capacity additions and rationalizations through the end of the decade.
Kristina Kazarian: These fundamentals support and enhanced mid-cycle environment for refining. The availability of low cost energy, the complexity of our facilities, and our domestic and international logistical capabilities are further increase our global competitive advantage.
Kristina Kazarian: The US refining industry will remain structurally advantage over the rest of the world. Operational excellence and commercial execution have driven the sustainable structural benefit.
Kristina Kazarian: Our discipline long-term strategic and quick hit investments are allocated to projects that we believe will achieve attractive returns.
Kristina Kazarian: These projects are expected to strengthen our competitiveness and position NPC well into the future.
Kristina Kazarian: We believe prioritization of these capabilities will ensure that our assets will remain the most competitive in each region in which we operate, positioning us to deliver the strongest through cycle cash generation and lead in capital allocation.
Kristina Kazarian: In midstream, MPLX continues to execute attractive growth opportunities, anchored in the
Kristina Kazarian: In the third quarter, MPLX began operations at Pre-Knowz II, a gas processing plant located in the Permian Basin, and today announced an additional processing plant in the northeast.
Kristina Kazarian: The Harmon Creek 3 project will bring northeast gas processing capacity to 8.1 billion cubic feet per day and fractionation capacity to 800,000 barrels per day once completed in the second half of 2026.
Kristina Kazarian: Executing its well-head to water strategy, MPLX progressed its natural gas and NGL pipeline projects, including the capacity expansion of the Bangle Natural Gas Liquid Pipeline and Blackcomb Natural Gas Pipeline in collaboration with its partners.
Speaker Change: MPLX's Strategic to MPC's portfolio and therefore its value proposition. Our midstream segment, which is primarily comprised of MPLX, has grown its adjusted of a job by over 6% on a three-year annual compound basis through 2023.
Kristina Kazarian: This growth and the durability of its cash flow profile supported a 12.5% increase to its quarterly distribution, increasing the expected annual cash distribution to MPC to $2.5 billion.
Kristina Kazarian: As MPLX is able to grow its distribution, the cash flow MPC receives is expected to fully cover MPC's dividend and all of our capital programs in 2025.
Kristina Kazarian: MPLX is growing portfolio and financial flexibility as expected to support this level of annual distribution increases in the future, strengthening the value proposition to MPC.
Kristina Kazarian: and PC's total capital returns since May 2021 has reduced MPC share count by over 50%.
Kristina Kazarian: And following last week's announced 10% increase to MPC's dividends, over the past three years, we've grown our quarterly dividend at a compound annual growth rate of approximately 16%.
Kristina Kazarian: We announced in additional $5 billion share repurchase authorization. This will provide a flexibility to execute our peer leading capital return commitment.
Kristina Kazarian: Given our highly advantage refining business and the $2.5 billion annualized distribution from MPLX, we are positioned to lead peers in capital return through all parts of the cycle.
Kristina Kazarian: MPC generated third-quarter earnings per share of $1.87. This quarter, we delivered refining utilization at 94% reflecting our operational excellence and value chain optimization.
Kristina Kazarian: Utilization in the West Coast and Mid-Con regions was in the upper 90s demonstrating strong reliability. Utilization in the US Golf Coast region reflected execution of turnaround activity.
Kristina Kazarian: The team executed to deliver capture of 96% reflecting strong commercial performance in a volatile market. Our capture improved by 2% exceeding the rate of improvement achieved by our closest peers.
Kristina Kazarian: This performance drove our NM segment adjusted at a dollar of $3.82 per barrel and cash from operations excluding the impacts of working capital of $1.9 billion. And in the third quarter, we continue to lead our peers in capital return.
Kristina Kazarian: The capabilities we have built provide a sustainable advantage and we expect to continue to see the impact on our quarterly results.
Kristina Kazarian: Let me turn the call over to John. Thanks, Maryann. Slide 5 shows the sequential change in adjusted EBDA from 2 to 3rd quarter, 2024, as well as the reconciliation between net income and adjusted EBDA for the quarter.
John Quaid: The Justice EBITDA was lowers sequentially by approximately $900 million, driven by decreased results in our refining and marketing segment. The tax rate for the quarter was 10%, reflecting the earnings mix between our R&M and midstream businesses.
Kristina Kazarian: Moving to our segment results, slide 6 provides an overview of our refining and marketing segment for the third quarter.
Kristina Kazarian: Lower Crack Spreads, reduce per barrel margin sequentially.
Kristina Kazarian: Our refineries ran at 94% utilization, processing nearly 2.8 million barrels of crude per day.
Kristina Kazarian: Refining operating costs were $5.30 per barrel in the third quarter. Higher sequentially, primarily due to lower throughputs and higher project-related expenses, associated with increased turnaround activity.
Kristina Kazarian: 5.7 provides an overview of our refining and marketing margin capture of 96% for the quarter, and improvement of 2% from the 2nd quarter.
Kristina Kazarian: The improvement was primarily driven by our operational and commercial teams execution of value-driven secondary product strategies as prices strengthened relative to gasoline quarter of a quarter.
Kristina Kazarian: This was partially offset by clean product margins declining sequentially, and we also continued to see headwinds from our renewables business during the quarter.
Kristina Kazarian: Flight 8 shows our midstream segment performance for the quarter.
Kristina Kazarian: Our midstream segment continues to deliver cash flow growth.
Kristina Kazarian: segmented Justin Eva-Daw was flat sequentially, but increased approximately 6% year over year, primarily due to higher throughputs and rates.
Kristina Kazarian: MPElex remains a source of durable earnings growth as it advances project targeted to enhance our natural gas and NGL value change.
Speaker Change: Why D'Nine presents the Elements of Change in our Consolated Cast position for the third quarter?
Kristina Kazarian: Operating cash flow, excluding changes in working capital, was $1.9 billion in the quarter, driven by both our refining and midstream businesses.
Speaker Change: Working Capital was a $179 million use of cash for the quarter, primarily driven by decreases and crude prices.
Speaker Change: This quarter, capital expenditures, investments, and acquisitions were $922 million, including $210 million for MPLex's acquisition of an additional 20% interest in the Bangle pipeline.
Speaker Change: MPC utilized cash to repay $750 million of debt due in the quarter, which we plan to refinance.
Kristina Kazarian: MPC returned $2.7 billion through share repurchases and $273 million in dividends during the quarter. In the October, we repurchased $500 million of MPC shares.
Kristina Kazarian: At the end of the third quarter, MPC had approximately 5.1 billion in consolidated cash and short-term investments, including MPLX cash of $2.4 billion.
Kristina Kazarian: Turning to slide 10, our capital allocation priorities remain consistent. Our number one priority is sustaining capital. We remain steadfast in our commitment to safely operate our assets and protect the health and safety of our employees and the communities in which we operate.
Kristina Kazarian: We are committed to paying a secure, competitive and growing dividend.
Kristina Kazarian: We will invest where we believe there are attractive returns which will enhance our competitiveness and position MPC well into the future.
Kristina Kazarian: After meeting those requirements, we will return all excess capital through share repurchases, even as we approach a more normalized balance sheet.
Kristina Kazarian: and including the additional $5 billion announced this morning, we currently have $8.5 billion remaining under our Sherry Purchis authorizations, highlighting our commitment to superior, sureholder returns.
Kristina Kazarian: As Maryann highlighted earlier with our highly advantage refining business and the $2.5 billion annualized distribution from MPOX, we are positioned to lead peers and capital returns through all market cycles.
Kristina Kazarian: Turn to guidance on slide 11 we provide our fourth quarter outlook.
Speaker Change: We are projecting crude throughput volumes of just over 2.6 million barrels per day, representing utilization of 90%.
Speaker Change: Turneran Expenses projected to be approximately $285 million in the fourth quarter, with activity focused in the mid-con region.
Speaker Change: Operating costs are projected to be $5.50 per barrel, distribution costs are expected to be approximately $1.5 billion, and corporate costs are expected to be $200 million in the quarter.
Speaker Change: and Summary on slide 13, this quarter are RNM segment generated $1.1 billion of adjusted EBITDA in our midstream segment delivered $1.6 billion of adjusted EBITDA.
Speaker Change: We invested $922 million in the business and returned $3 billion of capital. With that, let me pass it back to Maryann.
Maryann Mannen: Thanks John.
Maryann Mannen: We are unwavering in our commitment to safe and reliable operations, operational excellence, commercial execution, and our cost competitiveness yields sustainable structural benefits.
Maryann Mannen: and position us to deliver peer-leading financial performance in each of the regions in which we operate.
Maryann Mannen: To deliver this, we will optimize our portfolio to deliver out performance now and in the future. We'll leverage our value chain advantages and ensure the competitiveness of our assets while continuing to invest in our people.
Maryann Mannen: Our execution of these commitments positioned us to deliver the strongest through cycle cash generation. Dortable midstream growth is expected to deliver cash flow uplift.
Maryann Mannen: Investing Capital where we believe there are attractive returns, will enhance our competitiveness now and for the future. We are committed to leading capital allocations and will return excess capital through share repurchases.
Maryann Mannen: and PC is positioned to create exceptional value through peer-releading performance.
Maryann Mannen: Execution of our strategic commitment and its compelling value proposition.
Maryann Mannen: Let me turn the call back to Kristina. Thanks, Maryann. As you all been to call for questions, the courtesy to all participants, we ask that you listen to yourself to one question and a follow-up. If time permits, will we prompt for additional questions? Sheila, we are ready.
Sheila: Thank you. We will now begin the question and answer session. If you have a question, please press star then one on your touchtone phone. If you wish to be removed from the queue, please press star then too.
Maryann Mannen: If you are using a speaker phone, you may need to pick up the answer first before pressing the numbers. Once again, if you have a question, please press star that one on your touchstone phone. Our first question will come from Neil Meadow with Goldman Sachs. Your line is open.
Neil Meadow: Good morning, Maryann and team, thanks for the rundown and good quarter year, I thought,
Neil Meadow: and the first topic would be good to get your perspective on was capital returns. As you've thought about 2024, you've been kind of run rating $2.5 billion a buyback.
Neil Meadow: and a quarter, and as we think about 2025, the Ford Curve.
Neil Meadow: and your view of enhanced cycle relative to your cash balances.
Neil Meadow: Just curious on your perspective on the level.
Neil Meadow: or 2025. It seems like a billion and a half dollars is what most investors are calibrating to and atties into the $500 million you did in October, but you just are perspective on the quarterly run rate of buybacks would be helpful.
Speaker Change: Good morning, Neil. Thank you. First and foremost, we are committed to leading our peers in capital returns through all parts of the cycle. And that means returning all cash after our requirements to shareholders.
Speaker Change: When we think about mid-cycle, there's no doubt we see volatility we've seen it in the last quarter and that volatility could continue. But we remain constructive on the long term when we look at the demand profile over the next decade. We look at the net.
Maryann Mannen: If you will be between capacity additions that are coming online, we don't see anything beyond 2026.
Maryann Mannen: and you look at the capacity that it's actually coming offline as well. We think over the long term that remains an extremely constructive environment for us to operate.
Maryann Mannen: You mentioned a comment about sort of how we think about Sherry Purchas beyond that period. Look, one of the things that we are trying to achieve is our peer leading performance in all of the regions we operate. We're going to do that through commercial performance. We're going to do that through our operational excellence.
Maryann Mannen: Therefore, we should have the strongest cash flow through cycle. And when we do that, we should then have the ability to lead our peers in capital allocation.
Maryann Mannen: Contributing to that, as I was mentioning in my comments, is the durability of that midstream business. We saw the 12 and a half percent increase in the distribution that we announced a few days ago, and that brings about 2 and a half billion.
Maryann Mannen: to MPC on an annual basis.
Maryann Mannen: Covers the MPC dividend, which as you know we just increased.
Maryann Mannen: and the capital, though we haven't given our capital guidance for 2025, Hi, the likely it's going to cover our capital for 2025 as well.
Maryann Mannen: So again just summarizing here we expect that when we perform in this manner we will have the strongest through cycle cash flow and we'll be able to lead our peers in our capital allocation through Sherry purchase.
Speaker Change: Okay Maryann, we'll take two thanks and then the follow-up is just on the west coast.
Maryann Mannen: Very volatile, tough environment in Q3. Things seem to be getting better in Q4, and you have a big announcement in LA at NLA around retirement. So how do you think about the West Coast setup and some of the moving pieces that we go into the next year?
Maryann Mannen: Yeah, thanks, Neil
Speaker Change: You know, first I think as we've been sharing over the last several quarters, we believe in our West Coast, we have
Maryann Mannen: One of the most competitive assets in the region. If you take a look at our performance in this quarter, we think the results on the West Coast.
Maryann Mannen: Demonstrate that.
Speaker Change: We've got a fairly sophisticated set of assets in that region. It's a region where we have been monitoring for a long period of time, frankly, if you go back to as early as 2020.
Speaker Change: We have been assessing the performance in that region and our ability to be profitable. We made a decision at that point in time to shutter the Martinez asset as a traditional refined fossil fuel refinery.
Speaker Change: So again, when we look at the capability of that asset, we look at the access, waterborne, we look at our crude sourcing, we look at the capability for Canadian coming out of TMX.
Maryann Mannen: We think over the long term those decisions that others are making as well, both well for us and we remain committed to that West Coast region.
Speaker Change: Thank you, Mary.
Speaker Change: Next we will hear from Doug Lugget with Wolf Research
Maryann Mannen: You may proceed.
Doug Lugget: Thank you, good morning everyone, thanks for taking my questions. Maryann, I apologize for following up on the cast of Turn Question, but post-2026 is two years away for a rebalancing of global capacity. Let's assume things remain soft.
Doug Lugget: I know on a margin I would for a period of time how much tolerance are you prepared to have on your balance sheet at the empty sea level to fund your cash returns? I wonder if you could put a limit on where you would allow your balance sheet to get to?
Speaker Change: Good morning Doug. You know, one of the things we've shared for a period of time is the comfort that we have with our cash balance.
Speaker Change: and we remain comfortable as we've shared in the past that about a billion dollars.
Speaker Change: is where we think our cash balances need to be on the NPC side. And again, part of that comfort comes from historically as we weathered other things like COVID, et cetera, and liquidity evaluations.
Speaker Change: Second, as I mentioned, we do have the benefit of our midstream cash flow, that doorability of that stream 2.5 billion coming to MPC.
Speaker Change: When we think about cash allocation, therefore capital allocations, again, we intend to lead in capital allocations as we execute on the things that I mentioned, we should be able to have the strongest performance, peer-leading and each of the regions we operate, generating strongest cash flow, and then we'll return that cash, not necessary for other requirements.
Speaker Change: and the framework that we have been implementing doesn't change as we watch that mid-cycle return.
Speaker Change: So this would be clear where would you like to see your net that, is there a limit?
Speaker Change: Yeah, on the MPC side, you know, we've always talked about, you know, being in a range of 25 to 30% debt to capital, and that's a gross number. And we remain comfortable in that position. Today we're sitting on under.
Speaker Change: Fixin' a half billion of debt. That's been with the cause, you know, we've got about a 750 million refinance and we intend to refinance that.
Speaker Change: We felt like when we looked at market environments and other volatility happening, it was beneficial for us to evaluate that. So that 750 is intended to be refinanced.
Speaker Change: It was a shorter term decision as we look for opportunities to put that back on the balance sheet that rates.
Speaker Change: Thanks for the clarification, Maryann. I guess my follow-up is related to your prepared remarks.
Speaker Change: I don't think I've heard you say this before, so I wonder if I could ask you to elaborate. We will optimize our portfolio, you know, to obviously maximize returns. It sounds like under your leadership, there's a portfolio review, under way, is there something that...
Speaker Change: You're not happy with the answer at base and I guess specifically you still have a decent amount of, you know
Speaker Change: Equity, Interest and Multiple Pipelines, I guess could potentially monetize. I wonder if you could just elaborate on what you meant by Optimizer portfolio.
Speaker Change: Yep.
Speaker Change: at certainly Doug, nothing different. One of our strategic pillars for a long time.
Speaker Change: is ensuring the competitive nature of all of the assets in our portfolio. And so my comment there is our commitment that we are going to continue to evaluate those assets in the portfolio. Today all of those assets are cash flow positive.
Speaker Change: but will ensure that that competitive nature of those assets continues both today and in the future. So it is merely our commitment to ensure the competitive nature of our assets, not anything different intended by that comment.
Speaker Change: Grace that up, thanks so much
Speaker Change: You're welcome, Dan.
Speaker Change: Our next question will come from the North Gupta with UBS, your line is open.
North Gupta: Good morning my question is around the capital investment you are making you highlighted high return investments in Los Angeles and Galvestonberry fine-reest. Can you help us remind exactly what kind of projects you are doing over there? And obviously to follow up a little bit on the meal questions your competitors are looking to chart refineries on the West Coast and you are actually making an investment in Los Angeles so help us understand that.
Speaker Change: Third and late good morning. So let me start with the west coast. We talked earlier this year about an investment that we are making in our LA assets.
Speaker Change: We think that investment with roughly 20% return. One helps us reduce scope one, scope two emissions.
Speaker Change: gives us operational efficiency, reduces cost and ultimately will improve our competitiveness in that region.
Speaker Change: in addition to giving us compliance for Knox admissions. But a 20% return.
Speaker Change: given the strength of that acid in the West Coast.
Speaker Change: and what we believe to be certainly a competitive asset we think is inappropriate to admit to capital in that region.
Speaker Change: The other question that you were referencing or project, excuse me, Monobois, the project, the DHT in Galveston Bay. And again, another one that we talked about this year, follow on to our Star Project. This allows us, well, with a similar return in that 20% range, allows us to convert high-self or diesel.
Speaker Change: to ultra-low sulfur diesel, and particularly when you look at the curves going forward again we think.
Speaker Change: will give us further competitive advantage.
Speaker Change: on the US Golf Coats, given the strength of our asset there in that region. Let me pause and see if that answers your question.
Speaker Change: That's perfect Maryann, Mike, follow up a little bit on the midstream site 12% to a 45% distribution growth. It kind of is getting to a point where you can grow MPC distribution as well as cover the capx.
Mike: Just on trying to understand, are the opportunities you're looking in exclusively organic, your press release is saying you can grow that 5% betap organically, but are you also open to small, both on deals or JVs, minority interest and projects to grow your midstream business.
Speaker Change: Thank you for the question. So, you're correct. We increase that MPLX distribution, as you say, 12.5%.
Speaker Change: Just a few days ago, really on this drink, the durability of our cash flows based on, you know, over the last three years, we've seen, a bit dog grow at just under 7% we've seen our distributable cash flows just under 8%.
Speaker Change: We believe there are a series of organic projects.
Speaker Change: that can help us fuel that mid-single digit growth.
Speaker Change: One of the things that we don't see necessarily when you look at the amount of capital that we're putting to work in MPLX is the strength of our JVs and as we grow those JVs, that that allocation is not included in the capital. So that's another source.
Speaker Change: of continued growth for us.
Speaker Change: The other comment that you made also was really around our growth strategy that what we call our well-head-to-water strategy.
Speaker Change: and we think we've provided examples here, the increase in the bangle ownership as we're looking at our NGO and not gas and frankly, crude value chains as well. Though that well-headed water strategy is anchored in the Parmian.
Speaker Change: We think those opportunities there to continue to capture the full value chain are extremely supportive of our ability to continue to support mid-single digit growth in MPLX.
Speaker Change: and then the comment about whether or not we would look at other vote-on, if you look at the...
Speaker Change: Decision we made in the Udaka. We think the opportunity for the Udaka increased utilization.
Speaker Change: We did a transaction to buy out the rest of our J.V. partner there in the first quarter summit. So we think we've got good examples of where we can continue to grow and mid-Single Digig growth.
Speaker Change: Thank you so much.
Speaker Change: and your most welcome.
Speaker Change: Next, you will hear from Paul Chang with Skowship Bank, your line is open.
Paul Chang: Thank you.
Paul Chang: Good morning guys.
Paul Chang: Maryann, you look like in the third quarter, you're full-punished, really good, much better than you, favorite sign.
Paul Chang: and then your turnaround expendios, no one's just kill it.
Speaker Change: Do you have a breakdown, how much of the better than an expected fool put your steel tool?
Speaker Change: I bet I execute the turn of wrong and how much is just the base operation or lesser on 10, downtown than you expected. And also from that standpoint, if the turn of wrong have you changed the process, how you do it, you're in other words, that.
Speaker Change: Yeah, thanks for the question Paul. One of the things that I want to be sure that we talk about is our commitment to our operational performance. And you can see as we've shared our commitment to peer leading operational performance as well. We talk about commercial performance giving us sustainable benefits.
Paul Chang: Clearly our operational performance, including our safe and reliable operations, has given us sustainable benefits as well. I'm going to ask Tim to talk a little bit about the strengths of those capabilities and what it's done frankly with respect to our turnaround capabilities.
Tim: Hello Paul. Hey, we're routinely in the first quartile of Solomon on the turnaround performance. I think you've probably recognized that from the past.
Paul Chang: and that's really based on our best in class procedures and processes that we have. But you know, we're not standing still at all. We're continuing to improve and tweak these processes over time.
Speaker Change: and what we found really is that when we execute our turnaround outages using this consistent approach, we do so across all of the facilities and that leads to good results.
Speaker Change: Art also point out that our large scale really allows us to assist a smaller plant, which then enables the consistent performance regardless of the location. So I think that's another key benefit that you're seeing come through.
Speaker Change: And I'd also like to maybe take the opportunity to give a shout out to our teams as we had outstanding safety and environmental performance during our four fall turnaround. So we had like zero OSHA recordables, zero lost time entries, no significant environmental events, all during these...
Speaker Change: Turn around this fall. So I think this is just yet another example of our safe and reliable focus and our operational excellence mindset. So hopefully that helps.
Speaker Change: That's great Maryann, can I ask, we know about this, so please, I think you are probably not making money in Matinsa at least
Speaker Change: and if we assume the margin in the environment we make flat at this level, what's the, and after we take into consideration of the margin laws due to from BTC transition to PTC.
Speaker Change: What's the path to poverty? I mean, what internally you are doing that will be able to allow you to act to bridge the gap and be able to push it back up to making money.
Speaker Change: Yeah, thanks for the question Paul. So on Martinez, first of all, as we have shared, we expect that by the end of the fourth quarter.
Speaker Change: We will have Martinez returning to full nameplate capacity on plan, right? That's a range of about 48,000 barrels a day.
Speaker Change: When you talk about profitability, you know, actually make a comment here on the West Coast.
Speaker Change: You know, as we are ramping up the challenges of profitability are there, if you exclude the impact of Martinez in our West Coast performance.
Speaker Change: R. West Coast Performance is actually positive in the quarter. As we go forward, we certainly believe that at full name plate.
Speaker Change: We will be profitable, frankly, one of the more profitable renewable diesel facilities.
Speaker Change: I'm going to pass it to John because I think you had some questions also around BTC and John is going to take you through that. Yeah, thanks, Maryann. Morning Paul. Maryann really hit on the main factor for our Martinez facility and we're on track to do this is to get it back up the full capacity again running the advantage feedstocks we can run there. So, and Paul as we look at that transition right is BTC right now is set to expire. Here comes PTC, we're still waiting on regulations, etc.
Speaker Change: Prepare for all scenarios, but we would see longer term, you know, the market will balance that out, but the key for us to be profitable in the West Coast is where we are now and being on track to getting back up the full capacity.
Speaker Change: Thanks, I hope.
Speaker Change: You all are next.
Speaker Change: Our next question will come from Roger Reed with Wells Fargo. You may proceed.
Roger Reed: Yeah, thanks. Good morning. Maybe a couple of operational questions with some of the changes here as we look at.
Roger Reed: The West Coast and the changes coming here in, I guess, early 26, but maybe even a little sooner was some sort of unplanned downtime type items.
Roger Reed: How do you think about the incremental barrels coming to California? You know, we've heard talk about it would be an Asian barrel. You know, historically we would have said maybe Gulf Coast or even parts of Europe can bring California back in.
Roger Reed: but we've got closures coming in both of those locations.
Roger Reed: California, though, relative to the rest of your fleet and really the US and generals pretty expensive place to operate.
Roger Reed: What do you think about in terms of an incremental margin as California becomes more dependable or more dependent, excuse me, on an imported barrel?
Speaker Change: Hey, good morning, Rager. It's Rick. So if you, I won't speak for our competitors, but when you look at what has happened in the past
Speaker Change: We believe it will most likely be an Asian barrel. South Korea is a logical choice and I will tell you Roger that.
Speaker Change: That will introduce some new nuances to the state of California. We believe that could cause more volatility. You have increased transit time and you have...
Speaker Change: Market disruptors in terms of additional transportation costs to bring a barrel in. But specifically I would tell you South Korea slash Asia will be the primary market where we believe imports would come from.
Speaker Change: Okay, and then on the Gulf Coast we do have a company that's going to be closed in one of their units in January. They've pretty much confirmed that here in the last few days. Any thoughts on what that means for...
Speaker Change: Crude availability on the golf course. I mean, generally, a heavy crude unit. You've got heavy crude units on the golf coast. Does it matter? Is it crude just go elsewhere? And it doesn't really...
Speaker Change: Effect, you know, differentials just any thoughts along those lines.
Speaker Change: Yeah, great question, Roger. So...
Roger Reed: They are a big buyer of Canadian crews and as you know, you know, the Gulf Coast market has a large appetite for it.
Speaker Change: When you rebound on some market, there will be winners and losers and I will say that.
Speaker Change: and more incremental capacity and the golf coast is a very good thing. For the spread we believe and we should.
Speaker Change: Reap the benefits of that, especially our Galveston Bay refinery.
Speaker Change: Okay, thank you.
Speaker Change: You're welcome. Thank you, Roder.
Speaker Change: Once again, if you would like to ask a question at this time you can press star one and record your new one from dead. Our next question comes from John Royal with AP Morgan. Your line is open.
John Royal: Hi, good morning, thank you for taking my questions
John Royal: So my first question is just on a feasibility within chapter 8. You're tracking somewhere in the mid-90s on chapter year to day.
Speaker Change: When I look at the past couple years, there's obviously always an order to quarter volatility, but that's not out of the ordinary for one, two, three, two. But forke was historically tended to be a big quarter from a capture perspective. So my question is, do you consider the year-to-date capture to be generally in line with...
Speaker Change: and what you would typically expect and recognizing that there are a lot of moving pieces, but if you have a more kind of seasonally normal for Q, could we expect the full year to average somewhere around that 100% range so.
Speaker Change: and the
Speaker Change: Good morning John, thanks for your question.
Speaker Change: I think you know when we talk about capture, we think our commercial performance is a key deliverable, particularly as we try to execute to be the most competitive in each region where we operate.
Speaker Change: to your point. If you look at the last several fourth quarters of our performance, our capture in the fourth quarter has been greater than the capture in the prior three quarters.
Speaker Change: There is nothing in the fourth quarter of 2024 that would tell us that that behavior should be anything different at this point in time.
Speaker Change: Great, exactly what I was looking forward to. Thank you.
Speaker Change: Next one's maybe for John.
Speaker Change: Maybe talk a little bit about the potential timing for refining anything of the debt.
Speaker Change: The E-Togout at the MPC level and what the user proceeds could be there. Should we think about this?
Speaker Change: The three two bi-backers may be being held back at that time by that cash outflow. And therefore, by the same token, maybe we can expect the proceeds to go back to the bi-back.
Speaker Change: Yeah, thanks for the question, John. I mean, as we discussed before, that was a maturity. We took the advantage of the flexibility of our balance sheet to, you know, opportunistically, looked at, to refinance that at the right time. We want to get maybe past an election and some other things before we...
Speaker Change: We look to do that but we'll do that at the right time.
Speaker Change: again to the earlier comments will be comfortable with that level of debt as we look out longer term.
Speaker Change: Again, just trying to leverage some of the flexibility of the balance sheet to get the most optimal cost of that debt and we look to refinance it.
Speaker Change: Thank you.
Speaker Change: Welcome John.
Speaker Change: Our next question will come from Jason Gableman with TD Cohen. You may proceed.
Jason Gableman: Good morning, thanks for taking my questions.
Jason Gableman: I want to go back.
Jason Gableman: Yeah, I wanted to go back to the shoulder returns and focus on this minimum $1 billion cash balance.
Jason Gableman: and I guess the question is more about timing of getting to that $1 billion and as we think about heading into a weaker environment next year, are you looking to maybe retain a bit more cash above that cash balance that you can deploy?
Jason Gableman: The Excess Cash on the Balance Sheet towards the buyback in a weaker environment or how do you exactly think about the timing of drawing that down?
Jason Gableman: Hey, more in Jason, it's John, I'll take that, you know, look, when we look at that $1 billion target, that's
Speaker Change: That's what we look at minimum cash through a down cycle, right? That's what we're analyzing. So we remain very comfortable with that amount, and there's a couple of reasons why. You've heard a lot on the call today.
Speaker Change: You know how we're confident in the competitiveness of our operations and each of the regions we operate and the things we're working on to drive positive cash flow.
Speaker Change: and then we've got this fantastic midstream investment in MPLX that continues to grow.
Jason Gableman: Crow its distribution and drives 2.5 billion right now, evangelized distributions back to MPC. So, all of those factors are why we're very comfortable with that one billion, and it might differentiate us from maybe some of our peers that don't have that same business set.
Speaker Change: Hopefully that helps.
Speaker Change: Yeah, it does, thanks. The other question just on the quarterly results, you had mentioned that your capture trended better than peers.
Speaker Change: Just wondering if there's anything specific that drove that, that you call out in the quarter, or if it's something more structural. Thanks.
Speaker Change: Hi, this is Rick. I really would have to give a huge shout out to our specialty products teams.
Speaker Change: So, oftentimes specialty products is ahead when, but when a market turns
Speaker Change: It's only as good as your team executing on the market turning and when I think of some specific commodities that we don't often talk about, when I think of asphalt pet cams, butane and propane, we really did a great job. The team was phenomenal at capturing that market.
Speaker Change: when it was there within the quarter and I really am proud of them and I truly believe they out performed our competition.
Speaker Change: That I would say is the largest single call out.
Speaker Change: Okay, sounds good, thanks.
Speaker Change: You're welcome, Jay.
Speaker Change: and that has all the time that we have for questions today.
Jason Gableman: Great, thank you so much for joining us on our call today. If you should have follow-up questions, please reach out. The IRR team is available all day to help you with your questions. Thank you everybody.
Speaker Change: That does conclude today's conference. Thank you for participating. You may disconnect at this time.