{"id":31924,"date":"2023-07-05T21:52:04","date_gmt":"2023-07-06T01:52:04","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/marathon-petroleum-stock-potential-positive-returns-with-tight-markets-nysempc\/"},"modified":"2023-07-05T21:52:06","modified_gmt":"2023-07-06T01:52:06","slug":"marathon-petroleum-stock-potential-positive-returns-with-tight-markets-nysempc","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=31924","title":{"rendered":"Marathon Petroleum Stock: Potential Positive Returns With Tight Markets (NYSE:MPC)"},"content":{"rendered":"
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When Marathon Petroleum (NYSE:MPC<\/span>) reported the 1st quarter earnings, management described the markets, tight. Crack spreads, the difference between crude oil costs and product sales, have been volatile, ranging at least in the Gulf Coast, between $60 last June to $30 this June, but markets still remain tight. For Marathon, with its rather unique business structure having two sources of cash, operations driven by crack spreads and distributions from MPLX (<\/span>MPLX), continues to mint money. With regard to the last source, <\/span>management stated,<\/span><\/p>\n

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“This quarter, it generated adjusted EBITDA of $1.5 billion, which is up 9% year-over-year. MPLX distributions to MPC was roughly $500 million this quarter and an annualized rate of over $2 billion, which fully covers MPC’s dividend as well as half of our planned 2023 capital program.”<\/p>\n<\/blockquote>\n

In our past MPLX article, we noted strong signs of increased distributions perhaps 10%, an increase which would pay for most of the total capital plus dividend equaling $775 million last quarter. From the seasonally higher crack spreads, the company generates enormous amounts of cash, which it has used primarily to repurchase stock. Investors ought to be asking questions. Will tight markets continue supporting strong cash flow? What will management decide to do with all the cash? Let’s measure the size of the doghouse vs. the size of the dog. (If the dog just doesn’t fit, there has to be spillover.)<\/span><\/p>\n

1st Quarter Results<\/h2>\n

A slide from the company’s 1st quarter presentation summaries the results.<\/p>\n

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Marathon 1st Quarter <\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n

Of the $775 million spent by Marathon for capital and dividends, MPLX sourced $500 million leaving approximately $5 billion in EBITDA and most of the free cash flow $4.2 billion free for spending elsewhere. The company used $3.2 billion to repurchase shares equaling approximately 25 million leaving 425 million issued. It has $9 billion left on its repurchase authorization. Quarterly earnings totaled $6 per share.<\/p>\n

Working capital’s $100 million headwind slightly lowered cash, but a bigger headwind, heavy 1st quarter Gulf Coast planned maintenance plus Winter Storm Elliott impacted utilization negatively by 5% dropping from 94% to 89%.<\/p>\n

Another expense, tax rates, averaged just above 20% forcing the company to set aside a provision of $800 million. Corporate expense remain reigned in with last year’s $100 million reduction.<\/p>\n

Management noted strong gasoline demand during what is normally a weaker time of the year,<\/p>\n

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“So at least in our view, we think it’s a very constructive time for gasoline at this time of the year as we’re heading into which is more of the higher demand time as we head into the summer.”<\/p>\n<\/blockquote>\n

Guidance for the 2nd quarter follows:<\/p>\n