Marathon(MPC) - 2024 Q2 - Quarterly Report

Table of Contents Securities registered pursuant to Section 12(b) of the Act This section lists securities registered under Section 12(b) of the Securities Exchange Act Registered Securities Information | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | :--- | :--- | :--- | | Common Stock, $0.01 par value | MPC | New York Stock Exchange | FORM 10-Q This document confirms Marathon Petroleum Corporation's timely filing status and outstanding share count as of July 31, 2024 - Marathon Petroleum Corporation has filed its quarterly report for the period ended June 30, 2024, confirming compliance with all required filings over the past 12 months and its status as a large accelerated filer[2] - As of July 31, 2024, the company had 334,684,050 common shares outstanding[2] PART I - FINANCIAL INFORMATION Item 1. Financial Statements This section presents the company's unaudited consolidated financial statements for the period ending June 30, 2024 Consolidated Statements of Income (Unaudited) Net income and earnings per share declined year-over-year for Q2 and the first half of 2024 due to lower refining margins Key Data from Consolidated Statements of Income (Unaudited) | Metric (in millions of USD) | Q2 2024 | Q2 2023 | First Six Months 2024 | First Six Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Sales and other operating revenues | 37,914 | 36,343 | 70,620 | 71,207 | | Income from equity method investments | 373 | 199 | 577 | 332 | | Total revenues and other income | 38,362 | 36,824 | 71,573 | 71,901 | | Cost of revenues | 33,945 | 31,762 | 63,538 | 61,056 | | Income from operations | 2,522 | 3,305 | 4,306 | 7,366 | | Net income attributable to MPC | 1,515 | 2,226 | 2,452 | 4,950 | | Basic earnings per share attributable to MPC | 4.34 | 5.34 | 6.90 | 11.49 | | Diluted earnings per share attributable to MPC | 4.33 | 5.32 | 6.88 | 11.44 | - In Q2 2024, net income attributable to MPC decreased by $711 million and diluted EPS decreased by $0.99 year-over-year[8] - For the first six months of 2024, net income attributable to MPC decreased by $2,498 million and diluted EPS decreased by $4.56 year-over-year[8] Consolidated Statements of Comprehensive Income (Unaudited) Comprehensive income for Q2 and the first half of 2024 decreased year-over-year, driven by lower net income Key Data from Consolidated Statements of Comprehensive Income (Unaudited) | Metric (in millions of USD) | Q2 2024 | Q2 2023 | First Six Months 2024 | First Six Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Net income | 1,955 | 2,580 | 3,267 | 5,664 | | Other comprehensive loss | (9) | (21) | (21) | (32) | | Comprehensive income | 1,946 | 2,559 | 3,246 | 5,632 | | Comprehensive income attributable to MPC | 1,506 | 2,205 | 2,431 | 4,918 | - In Q2 2024, comprehensive income attributable to MPC decreased by $699 million year-over-year[10] - For the first six months of 2024, comprehensive income attributable to MPC decreased by $2,487 million year-over-year[10] Consolidated Balance Sheets (Unaudited) As of June 30, 2024, total assets slightly decreased while total liabilities increased, resulting in lower MPC stockholders' equity Key Data from Consolidated Balance Sheets (Unaudited) | Metric (in millions of USD) | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | 4,441 | 5,443 | | Short-term investments | 4,058 | 4,781 | | Total current assets | 31,347 | 32,131 | | Total assets | 85,229 | 85,987 | | Accounts payable | 14,865 | 13,761 | | Debt due within one year | 4,903 | 1,954 | | Total current liabilities | 24,000 | 20,150 | | Long-term debt | 24,034 | 25,329 | | Total liabilities | 57,141 | 54,588 | | MPC stockholders' equity | 21,324 | 24,404 | | Total equity | 27,886 | 30,504 | - As of June 30, 2024, total assets were $85,229 million, a decrease of $758 million from December 31, 2023[13] - As of June 30, 2024, total liabilities were $57,141 million, an increase of $2,553 million from December 31, 2023, mainly due to higher accounts payable and debt due within one year[13] Consolidated Statements of Cash Flows (Unaudited) Cash flow from operations decreased significantly in the first half of 2024, while cash outflows for investing and financing activities also decreased Key Data from Consolidated Statements of Cash Flows (Unaudited) | Metric (in millions of USD) | First Six Months 2024 | First Six Months 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | 4,774 | 8,041 | | Net cash used in investing activities | (807) | (1,696) | | Net cash used in financing activities | (4,970) | (7,627) | | Net change in cash, cash equivalents and restricted cash | (1,003) | (1,282) | | Cash, cash equivalents and restricted cash at end of period | 4,443 | 7,349 | - For the first six months of 2024, net cash provided by operating activities was $4,774 million, a year-over-year decrease of $3,267 million[15] - For the first six months of 2024, net cash used in financing activities was $4,970 million, a year-over-year decrease of $2,657 million, mainly due to reduced share repurchases and increased debt issuance[15] Consolidated Statements of Equity and Redeemable Noncontrolling Interest (Unaudited) MPC stockholders' equity decreased as of June 30, 2024, driven by share repurchases and comprehensive loss Key Data from Consolidated Statements of Equity and Redeemable Noncontrolling Interest (Unaudited) | Metric (in millions of USD) | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | MPC stockholders' equity | 21,324 | 24,404 | | Noncontrolling interests | 6,562 | 6,100 | | Redeemable noncontrolling interest | 202 | 895 | | Treasury stock (at cost) | (48,592) | (43,502) | | Retained earnings | 36,423 | 34,562 | - As of June 30, 2024, MPC stockholders' equity was $21,324 million, a decrease of $3,080 million from December 31, 2023[18] - In the first six months of 2024, the company repurchased 28 million common shares for $5,114 million in cash[18] Notes to Consolidated Financial Statements (Unaudited) This section provides detailed explanations and supplementary information for the consolidated financial statements 1. Description of the Business and Basis of Presentation Marathon Petroleum Corporation is a leading integrated downstream energy company with the largest U.S. refining system and midstream operations via MPLX LP - The company is a leading integrated downstream energy company, operating the largest refining system in the U.S. and conducting midstream business through MPLX LP[19] - These interim consolidated financial statements are unaudited, comply with SEC regulations for interim reporting, and are prepared in accordance with GAAP[20] - The company controls MPLX through its ownership of the general partner interest, leading to the consolidation of MPLX and the recording of noncontrolling interests[22] 2. Accounting Standards and Disclosure Rules The company adopted ASU 2023-01 in Q1 2024 with no material impact and is assessing the future disclosure impact of new SEC and FASB rules - In Q1 2024, the company adopted ASU 2023-01, Leases (Topic 842): Common Control Arrangements, with no material impact on its financial statements or disclosures[23] - The new SEC rule on climate-related disclosures (SEC Release No. 33-11275) was stayed in April 2024, and the company is evaluating its potential impact on the FY2025 Form 10-K disclosures[24] - FASB's ASU 2023-09 (Income Tax Disclosures) and ASU 2023-07 (Segment Reporting Disclosures) will be effective in FY2024 or FY2025, and the company is assessing their disclosure impact[25][26] 3. Short-Term Investments As of June 30, 2024, short-term investments totaled $4,058 million, primarily in high-quality, liquid securities with maturities within one year Short-Term Investment Composition (in millions of USD) | Investment Type | Fair Value at June 30, 2024 | Fair Value at December 31, 2023 | | :--- | :--- | :--- | | Commercial paper | 2,815 | 3,156 | | Certificates of deposit and time deposits | 1,504 | 1,837 | | U.S. government securities | 386 | 784 | | Corporate notes and bonds | 193 | 85 | | Total | 4,898 | 5,862 | | Cash | 3,601 | 4,362 | | Total (including cash) | 8,499 | 10,224 | | Total Short-Term Investments | 4,058 | 4,781 | - As of June 30, 2024, total short-term investments were $4,058 million, down from $4,781 million on December 31, 2023[27][28] - The company's investment policy restricts investments to high-quality, short-term, and highly liquid securities, with all available-for-sale debt securities maturing or being available within one year[28][29] 4. Master Limited Partnership The company controls MPLX through its general partner interest and held approximately 63% of MPLX common units as of June 30, 2024 - The company owns the general partner interest and a majority limited partner interest in MPLX, holding approximately 63% of MPLX common units as of June 30, 2024, down from 65% at year-end 2023[30] MPLX Unit Repurchase Program | Metric (in millions, except per-unit data) | Q2 2024 | Q2 2023 | First Six Months 2024 | First Six Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Common units repurchased | 2 | — | 4 | — | | Cash paid for common units repurchased | 75 | — | 150 | — | | Average cost per unit | 41.10 | — | 40.56 | — | - As of June 30, 2024, approximately $696 million remained available under the MPLX unit repurchase authorization[31] - On February 15, 2023, MPLX redeemed all 600,000 of its Series B Preferred Units for a redemption price of $600 million, resulting in a net decrease to retained earnings of $2 million[32] 5. Variable Interest Entities The company consolidates MPLX as a variable interest entity (VIE) because it controls MPLX and is its primary beneficiary - The company controls MPLX through its general partner and consolidates it as a variable interest entity (VIE), recording a noncontrolling interest[35] - MPLX's creditors generally have no recourse to MPC's credit, although MPC has provided guarantees for certain debts of LOOP LLC and LOCAP LLC[36] MPLX Balance Sheet Information (in millions of USD) | Metric | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | 2,501 | 1,048 | | Equity method investments | 4,373 | 3,743 | | Property, plant and equipment, net | 19,186 | 19,264 | | Long-term debt | 19,245 | 19,296 | 6. Related Party Transactions The company engages in sales and purchases with related parties, primarily involving sales of refined products and purchases of utilities and transportation services Related Party Transactions (in millions of USD) | Transaction Type | Q2 2024 | Q2 2023 | First Six Months 2024 | First Six Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Sales to related parties | 227 | 263 | 498 | 452 | | Purchases from related parties | 574 | 480 | 1,154 | 791 | - Sales to related parties primarily consist of sales of refined products and renewable feedstocks to equity method investees[38] - Purchases from related parties mainly include utilities, transportation services, and the procurement of ethanol and renewable fuels from equity method investees[39] 7. Earnings Per Share The company calculates basic EPS using the two-class method and diluted EPS assuming the exercise of certain equity-based awards - The company calculates basic EPS using the two-class method and diluted EPS assuming the exercise of certain equity-based awards[41] Earnings Per Share Data (Unaudited) | Metric (in millions, except per-share data) | Q2 2024 | Q2 2023 | First Six Months 2024 | First Six Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Income available to common stockholders | 1,514 | 2,225 | 2,450 | 4,945 | | Basic weighted-average shares outstanding | 349 | 417 | 355 | 430 | | Diluted weighted-average shares outstanding | 350 | 419 | 356 | 432 | | Basic earnings per share attributable to MPC | 4.34 | 5.34 | 6.90 | 11.49 | | Diluted earnings per share attributable to MPC | 4.33 | 5.32 | 6.88 | 11.44 | 8. Equity The Board of Directors approved an additional $5 billion share repurchase authorization in April 2024, leaving $6.74 billion available as of June 30, 2024 - On April 30, 2024, the Board of Directors approved an additional $5 billion share repurchase authorization with no expiration date[42] - As of June 30, 2024, approximately $6.74 billion remained available under the company's share repurchase authorizations[42] Share Repurchase Totals (Unaudited) | Metric (in millions, except per-share data) | Q2 2024 | Q2 2023 | First Six Months 2024 | First Six Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Shares repurchased | 15 | 26 | 28 | 51 | | Cash paid for shares repurchased | 2,896 | 3,068 | 5,114 | 6,248 | | Average cost per share | 185.34 | 117.62 | 177.54 | 122.07 | 9. Segment Information The company operates through two reportable segments: Refining & Marketing and Midstream - The company has two reportable segments: Refining & Marketing and Midstream[44] - The Refining & Marketing segment refines crude oil and distributes refined products, while the Midstream segment (primarily MPLX) gathers, transports, and stores crude oil, refined products, and NGLs[45] Segment Adjusted EBITDA (in millions of USD) | Segment | Q2 2024 | Q2 2023 | First Six Months 2024 | First Six Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Refining & Marketing | 1,972 | 3,163 | 3,846 | 7,016 | | Midstream | 1,620 | 1,532 | 3,209 | 3,062 | | Total | 3,592 | 4,695 | 7,055 | 10,078 | Segment Sales and Other Operating Revenues (in millions of USD) | Segment | Q2 2024 | Q2 2023 | First Six Months 2024 | First Six Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Refining & Marketing (to external customers) | 36,654 | 35,167 | 68,139 | 68,830 | | Midstream (to external customers) | 1,260 | 1,176 | 2,481 | 2,377 | | Consolidated sales and other operating revenues | 37,914 | 36,343 | 70,620 | 71,207 | 10. Net Interest and Other Financial Costs Net interest and other financial costs increased year-over-year for Q2 and the first half of 2024 Net Interest and Other Financial Costs (in millions of USD) | Metric | Q2 2024 | Q2 2023 | First Six Months 2024 | First Six Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Interest income | (105) | (119) | (206) | (240) | | Interest expense | 341 | 329 | 682 | 663 | | Pension and other postretirement non-service costs | (11) | (25) | (22) | (48) | | Net interest and other financial costs | 194 | 142 | 373 | 296 | - In Q2 2024, net interest and other financial costs increased by $52 million year-over-year[52] - For the first six months of 2024, net interest and other financial costs increased by $77 million year-over-year[52] 11. Income Taxes The company's income tax expense was below the U.S. statutory rate for Q2 and the first half of 2024, primarily due to tax benefits related to noncontrolling interests - In Q2 2024, the company's income tax expense was $373 million, which was below the U.S. statutory rate primarily due to permanent tax benefits related to noncontrolling interests[53] - For the first six months of 2024, the income tax expense was $666 million, also below the U.S. statutory rate for similar reasons[53] - In the same periods of 2023, the income tax expense was also below the statutory rate, benefiting from noncontrolling interests and foreign-derived intangible income[53] 12. Inventories As of June 30, 2024, total inventories were $9,800 million, consisting mainly of refined products and crude oil Inventory Composition (in millions of USD) | Inventory Type | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Crude oil | 3,512 | 3,211 | | Refined products | 5,153 | 4,940 | | Materials and supplies | 1,135 | 1,166 | | Total | 9,800 | 9,317 | - As of June 30, 2024, total inventories were $9,800 million, an increase of $483 million from December 31, 2023[54] - Inventories are stated at the lower of cost or market, with crude oil and refined product costs evaluated on a consolidated basis[54] 13. Equity Method Investments The company engaged in several equity method investment transactions in 2024, including the Whistler joint venture and a Midstream acquisition - On May 29, 2024, MPLX participated in the Whistler joint venture transaction, contributing its interest in Whistler Pipeline, LLC to a new entity and recognizing a $151 million gain and receiving a $134 million cash distribution[55] - On March 22, 2024, MPLX acquired additional ownership interests in existing joint ventures and gathering assets for $625 million in cash, enhancing its position in the Utica Shale and leading to the consolidation of Ohio Condensate Company, L.L.C. (OCC)[56][57][58] - On March 8, 2023, the company acquired a 49.9% interest in LF Bioenergy, which develops renewable natural gas projects, and accounts for it as an equity method investment[59] 14. Property, Plant and Equipment (PP&E) As of June 30, 2024, net property, plant, and equipment totaled $34,686 million, with the Midstream segment holding the largest share Net Property, Plant and Equipment (PP&E) (in millions of USD) | Segment | Net at June 30, 2024 | Net at December 31, 2023 | | :--- | :--- | :--- | | Refining & Marketing | 14,193 | 14,504 | | Midstream | 19,943 | 20,031 | | Corporate | 550 | 577 | | Total | 34,686 | 35,112 | - As of June 30, 2024, net property, plant, and equipment was $34,686 million, a decrease of $426 million from December 31, 2023[60] 15. Fair Value Measurements The company uses fair value measurements for commodity contracts and embedded derivatives, with non-recurring measurements related to recent transactions Recurring Fair Value Measurements (in millions of USD) | Category | Net Carrying Value at June 30, 2024 | | :--- | :--- | | Assets: Commodity contracts | 8 | | Liabilities: Commodity contracts | 2 | | Liabilities: Embedded derivatives in commodity contracts | 69 | - Level 3 instruments relate to embedded derivative liabilities in natural gas purchase commitments, valued using unobservable inputs like NGL prices and renewal probabilities[64] - Non-recurring fair value measurements were related to the Whistler joint venture transaction and the Midstream asset acquisition[66] - As of June 30, 2024, the carrying value of the company's debt was approximately $28.6 billion, with a fair value of approximately $26.7 billion[67] 16. Derivatives The company does not designate commodity derivatives as accounting hedges and uses them to manage price risks, resulting in a net loss in the first half of 2024 - The company does not designate any commodity derivative instruments as accounting hedges and uses them primarily to manage price risks for inventory, refined product sales, and crude oil purchases[68] Fair Value of Derivative Instruments (in millions of USD) | Balance Sheet Location | Assets at June 30, 2024 | Liabilities at June 30, 2024 | Assets at Dec 31, 2023 | Liabilities at Dec 31, 2023 | | :--- | :--- | :--- | :--- | :--- | | Other current assets | 183 | 195 | 244 | 249 | | Other current liabilities | — | 14 | — | 11 | | Deferred credits and other liabilities | — | 57 | — | 50 | Impact of Commodity Derivatives on Statements of Income (in millions of USD) | Income Statement Location | Gain (Loss) for Q2 2024 | Gain (Loss) for Q2 2023 | Gain (Loss) for First Six Months 2024 | Gain (Loss) for First Six Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Sales and other operating revenues | (2) | 8 | (2) | 10 | | Cost of revenues | (46) | 50 | (120) | 111 | | Other income | (1) | — | (1) | 1 | | Total | (49) | 58 | (123) | 122 | 17. Debt As of June 30, 2024, total debt was $29,281 million, with MPLX issuing $1.65 billion in new senior notes in May 2024 Outstanding Borrowings (in millions of USD) | Debt Type | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | MPC senior notes | 6,449 | 6,449 | | MPLX senior notes | 22,350 | 20,700 | | Total debt | 29,281 | 27,620 | | Amount due within one year | (4,903) | (1,954) | | Total long-term debt due after one year | 24,034 | 25,329 | - On May 20, 2024, MPLX issued $1.65 billion of 5.50% senior notes due June 2034, with proceeds used mainly to repay existing debt[75] Available Capacity on Credit Facilities (in millions of USD) | Entity | Total Capacity | Available Capacity | | :--- | :--- | :--- | | MPC (excluding MPLX) bank revolving credit | 5,000 | 4,999 | | MPC trade accounts receivable securitization | 100 | 100 | | MPLX bank revolving credit | 2,000 | 2,000 | 18. Revenue The company discloses revenue from external customers by segment and product line, with refined products driving Refining & Marketing revenue Revenue from External Customers by Segment and Product Line (in millions of USD) | Segment/Product Line | Q2 2024 | Q2 2023 | First Six Months 2024 | First Six Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Refining & Marketing | | | | | | Refined products | 34,094 | 32,864 | 63,341 | 64,787 | | Crude oil | 2,099 | 1,875 | 3,887 | 3,205 | | Services and other | 461 | 428 | 911 | 838 | | Midstream | | | | | | Refined products | 393 | 377 | 766 | 797 | | Services and other | 867 | 799 | 1,715 | 1,580 | | Total sales and other operating revenues | 37,914 | 36,343 | 70,620 | 71,207 | - The Refining & Marketing segment's revenue is primarily from refined product sales, which amounted to $34,094 million in Q2 2024[78] - The Midstream segment's revenue is primarily from services and other operations, which amounted to $867 million in Q2 2024[78] 19. Supplemental Cash Flow Information This section provides supplemental details on cash paid for interest and taxes, along with a reconciliation of capital expenditures Supplemental Cash Flow Information from Operating Activities (in millions of USD) | Metric | First Six Months 2024 | First Six Months 2023 | | :--- | :--- | :--- | | Interest paid, net of amounts capitalized | 602 | 584 | | Income taxes paid, net | 191 | 1,400 | Reconciliation of Capital Expenditures to Additions to PP&E (in millions of USD) | Metric | First Six Months 2024 | First Six Months 2023 | | :--- | :--- | :--- | | Additions to property, plant and equipment from the statements of cash flows | 1,072 | 938 | | Increase (decrease) in capital accruals | (46) | 18 | | Total capital expenditures | 1,026 | 956 | 20. Other Current Liabilities As of June 30, 2024, other current liabilities totaled $1,323 million, primarily comprising environmental credit obligations and accrued interest Composition of Other Current Liabilities (in millions of USD) | Liability Type | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Environmental credit obligations | 594 | 778 | | Accrued interest | 326 | 316 | | Other current liabilities | 403 | 551 | | Total | 1,323 | 1,645 | - As of June 30, 2024, other current liabilities totaled $1,323 million, a decrease of $322 million from December 31, 2023[83] 21. Accumulated Other Comprehensive Income (Loss) As of June 30, 2024, accumulated other comprehensive loss was $152 million, mainly driven by changes in pension and other benefits Changes in Accumulated Other Comprehensive Income (Loss) (in millions of USD) | Metric | Balance at Dec 31, 2023 | Change in First Six Months 2024 | Balance at June 30, 2024 | | :--- | :--- | :--- | :--- | | Pension benefits | (261) | (9) | (270) | | Other benefits | 129 | (9) | 120 | | Other | 1 | (3) | (2) | | Total | (131) | (21) | (152) | - As of June 30, 2024, the accumulated other comprehensive loss was $152 million, an increase of $21 million from December 31, 2023[84] 22. Pension and Other Postretirement Benefits Net periodic pension benefit costs increased year-over-year for Q2 and the first half of 2024, with no contributions made to funded pension plans Net Periodic Benefit Cost (in millions of USD) | Metric | Q2 2024 | Q2 2023 | First Six Months 2024 | First Six Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Pension benefits | | | | | | Service cost | 53 | 48 | 107 | 97 | | Interest cost | 31 | 29 | 61 | 58 | | Expected return on plan assets | (37) | (42) | (74) | (84) | | Net periodic pension benefit cost | 40 | 21 | 80 | 44 | | Other benefits | | | | | | Service cost | 5 | 5 | 10 | 10 | | Interest cost | 8 | 8 | 16 | 16 | | Net periodic other benefit cost | 7 | 7 | 15 | 15 | - For the first six months of 2024, net periodic pension benefit cost was $80 million, a year-over-year increase of $36 million[86] - The company made no contributions to its funded pension plans in the first six months of 2024; benefit payments for unfunded plans were $4 million for pension and $25 million for other postretirement benefits[87] 23. Commitments and Contingencies The company faces various legal proceedings and environmental matters, with environmental remediation liabilities of $365 million as of June 30, 2024 - The company is subject to various legal proceedings, environmental matters, and guarantee commitments, which management believes will not have a material adverse effect on its consolidated results, financial position, or cash flows[88][91][93] - As of June 30, 2024, total accrued liabilities for environmental remediation were $365 million[89] - The company faces multiple climate-related lawsuits seeking unspecified damages and emissions abatement, with the outcomes currently uncertain[90] - The company guarantees debt for LOOP and LOCAP, with a maximum potential undiscounted payment of $222 million as of June 30, 2024[95] - The company has a contingent equity contribution agreement for its investment in the Dakota Access Pipeline, with a maximum potential undiscounted payment of approximately $78 million as of June 30, 2024[97][98] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides a detailed analysis of the company's financial condition and operating performance DISCLOSURES REGARDING FORWARD-LOOKING STATEMENTS This report contains forward-looking statements involving risks and uncertainties, and actual results may differ materially from expectations - Forward-looking statements cover future financial and operational results, ESG initiatives, capital expenditures, business strategies, market demand, and capital return transactions[105] - These statements are not guarantees of future performance, and actual results may differ materially due to various factors, including economic conditions, regulatory changes, commodity price volatility, and operational disruptions[105][106] EXECUTIVE SUMMARY Q2 2024 results were impacted by a lower margin environment, though the company advanced strategic midstream growth and share repurchases - The performance in Q2 2024 reflected a lower margin environment, but long-term demand growth is expected to support the U.S. refining industry[108] - The company completed the Whistler joint venture transaction and a Midstream acquisition, enhancing its midstream capabilities[110][112] - The Board of Directors approved an additional $5 billion share repurchase authorization on April 30, 2024, with $6.74 billion remaining available as of June 30, 2024[114] Net Income and Diluted EPS Attributable to MPC | Metric | Q2 2024 | Q2 2023 | First Six Months 2024 | First Six Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Net income attributable to MPC (in millions of USD) | 1,520 | 2,230 | 2,450 | 4,950 | | Diluted EPS attributable to MPC | 4.33 | 5.32 | 6.88 | 11.44 | OVERVIEW OF SEGMENTS This section details the operating models and profit drivers for the Refining & Marketing and Midstream segments - The Refining & Marketing segment's Adjusted EBITDA is primarily driven by refining throughput, margins, operating costs, and distribution costs[121] - Crack spreads are a key indicator of refining profitability, and the company's ability to process various crude oils at discounts (sweet/sour differential) also impacts margins[122] Refining & Marketing Segment Adjusted EBITDA Annual Sensitivities (in millions of USD) | Change in Market Conditions | Estimated Change | | :--- | :--- | | Blended crack spread ($1.00 per barrel change) | 1,080 | | Sour crude oil differential ($1.00 per barrel change) | 500 | | Sweet crude oil differential ($1.00 per barrel change) | 500 | | Natural gas price ($1.00 per MMBtu change) | 330 | - The Midstream segment's profitability depends on pipeline tariffs and volumes, terminal throughput, fuel distribution volumes, and prices for natural gas and NGLs[127][128] RESULTS OF OPERATIONS Consolidated net income decreased year-over-year for Q2 and the first half of 2024, primarily due to lower Refining & Marketing margins Consolidated Results of Operations Net income attributable to MPC declined significantly year-over-year for Q2 and the first half of 2024, driven by lower refining margins - In Q2 2024, net income attributable to MPC decreased by $711 million year-over-year, primarily due to lower Refining & Marketing margins[132] - For the first six months of 2024, net income attributable to MPC decreased by $2.50 billion year-over-year, also due to lower Refining & Marketing margins[135] Key Consolidated Operating Results (in millions of USD) | Metric | Q2 2024 | Q2 2023 | Change | First Six Months 2024 | First Six Months 2023 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Sales and other operating revenues | 37,914 | 36,343 | 1,571 | 70,620 | 71,207 | (587) | | Income from equity method investments | 373 | 199 | 174 | 577 | 332 | 245 | | Total revenues and other income | 38,362 | 36,824 | 1,538 | 71,573 | 71,901 | (328) | | Cost of revenues | 33,945 | 31,762 | 2,183 | 63,538 | 61,056 | 2,482 | | Income from operations | 2,522 | 3,305 | (783) | 4,306 | 7,366 | (3,060) | | Net income attributable to MPC | 1,515 | 2,226 | (711) | 2,452 | 4,950 | (2,498) | Segment Results Refining & Marketing Adjusted EBITDA declined significantly in Q2 and the first half of 2024, while Midstream Adjusted EBITDA grew Segment Adjusted EBITDA (in millions of USD) | Segment | Q2 2024 | Q2 2023 | First Six Months 2024 | First Six Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Refining & Marketing | 1,972 | 3,163 | 3,846 | 7,016 | | Midstream | 1,620 | 1,532 | 3,209 | 3,062 | | Total | 3,592 | 4,695 | 7,055 | 10,078 | - In Q2 2024, Refining & Marketing Adjusted EBITDA decreased by $1.19 billion, primarily due to lower per-barrel margins and higher distribution costs[151] - For the first six months of 2024, Refining & Marketing Adjusted EBITDA decreased by $3.17 billion, driven by lower per-barrel margins and increased distribution and operating costs[156] - In Q2 2024, Midstream Adjusted EBITDA increased by $88 million, mainly due to higher tariff rates, increased pipeline and gas processing volumes, and contributions from recent acquisitions[169] - For the first six months of 2024, Midstream Adjusted EBITDA increased by $147 million for similar reasons as in the second quarter[170] Non-GAAP Financial Measure The company uses Refining & Marketing margin, a non-GAAP measure, to evaluate the segment's operational and financial performance - Refining & Marketing margin is defined as sales revenue less the cost of refinery inputs and purchased products and is used to evaluate the segment's performance[175] Reconciliation of Refining & Marketing Segment Adjusted EBITDA to Refining & Marketing Margin (in millions of USD) | Metric | Q2 2024 | Q2 2023 | First Six Months 2024 | First Six Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Refining & Marketing segment adjusted EBITDA | 1,972 | 3,163 | 3,846 | 7,016 | | Refining & Marketing gross margin | 1,921 | 2,625 | 3,049 | 6,231 | | Refining & Marketing margin | 4,845 | 5,883 | 9,449 | 12,560 | LIQUIDITY AND CAPITAL RESOURCES Cash flow from operations declined in the first half of 2024, but the company maintains ample liquidity and continues its capital return program Cash Flows Operating cash flow decreased by $3.27 billion in the first half of 2024 due to lower operating results and unfavorable working capital changes Summary of Cash Flows (in millions of USD) | Metric | First Six Months 2024 | First Six Months 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | 4,774 | 8,041 | | Net cash used in investing activities | (807) | (1,696) | | Net cash used in financing activities | (4,970) | (7,627) | | Total decrease in cash | (1,003) | (1,282) | - For the first six months of 2024, net cash from operating activities decreased by $3.27 billion year-over-year, primarily due to lower operating results and unfavorable working capital changes[178] - For the first six months of 2024, net cash used in financing activities was $4.97 billion, a year-over-year decrease of $2.66 billion, mainly due to reduced share repurchases and increased debt issuance[182] Capital Resources As of June 30, 2024, MPC (excluding MPLX) and MPLX had total liquidity of $11.1 billion and $6.0 billion, respectively MPC (excluding MPLX) Liquidity (in millions of USD) | Metric | Available Capacity | | :--- | :--- | | Bank revolving credit facility | 4,999 | | Trade accounts receivable financing | 100 | | Cash and cash equivalents and short-term investments | 5,998 | | Total liquidity | 11,097 | MPLX Liquidity (in millions of USD) | Metric | Available Capacity | | :--- | :--- | | Bank revolving credit facility | 2,000 | | MPC intercompany loan agreement | 1,500 | | Cash and cash equivalents | 2,501 | | Total liquidity | 6,001 | - Both MPC and MPLX maintain investment-grade credit ratings and have sufficient internal cash flow and capital market access to meet their operational and funding needs[186][187][191][192] Capital Requirements The company's 2024 capital investment plan is approximately $1.25 billion (excluding MPLX), while MPLX's plan is $1.1 billion - MPC's 2024 capital investment plan totals approximately $1.25 billion, and MPLX's capital investment plan is $1.1 billion[195] MPC and MPLX Capital Expenditures and Investments (in millions of USD) | Entity/Segment | First Six Months 2024 | First Six Months 2023 | | :--- | :--- | :--- | | MPC (excluding MPLX) Refining & Marketing | 595 | 664 | | MPC (excluding MPLX) Corporate and other | 18 | 40 | | Midstream - MPLX | 565 | 515 | | Total | 1,178 | 1,219 | - As of June 30, 2024, approximately $6.74 billion remained available under the company's share repurchase authorizations[199] - MPLX repurchased 4 million units for $150 million in the first six months of 2024, with $696 million remaining available for unit repurchases[201] ENVIRONMENTAL MATTERS AND COMPLIANCE COSTS The company incurs substantial expenditures for environmental compliance, with no material changes since year-end 2023 - The company incurs substantial capital, operating, maintenance, and remediation expenditures due to environmental laws and regulations, which could adversely affect operating results if not recovered through product prices[205] - There have been no additional material changes in environmental matters and compliance costs since December 31, 2023[206] CRITICAL ACCOUNTING ESTIMATES There have been no material changes to the company's critical accounting estimates since the 2023 annual report - As of June 30, 2024, there have been no material changes to the critical accounting estimates disclosed in the annual report for the year ended December 31, 2023[207] ACCOUNTING STANDARDS NOT YET ADOPTED Information regarding accounting standards not yet adopted is available in Note 2 to the consolidated financial statements - For detailed information on accounting standards not yet adopted, refer to Note 2 to the consolidated financial statements[208] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section discloses the company's exposure to commodity price and interest rate risks - The company does not designate any of its commodity derivative instruments as accounting hedges[209] Net Gain (Loss) on Commodity Derivatives (in millions of USD) | Metric | First Six Months 2024 | First Six Months 2023 | | :--- | :--- | :--- | | Realized gain (loss) on settled derivative positions | (106) | 137 | | Unrealized loss on net open derivative positions | (17) | (15) | | Net gain (loss) | (123) | 122 | Impact of Interest Rate Changes on Long-Term Debt Fair Value (in millions of USD) | Debt Type | Fair Value at June 30, 2024 | Change in Fair Value from 100 bps Decrease in Rates | | :--- | :--- | :--- | | Fixed-rate | 26,868 | 1,998 | | Variable-rate | — | — | Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2024, with no material changes to internal control - As of June 30, 2024, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[216] - There were no material changes in internal control over financial reporting during the quarter ended June 30, 2024[217] PART II - OTHER INFORMATION Item 1. Legal Proceedings The company is subject to various legal proceedings that are not expected to have a material adverse effect on its financial condition - The company is a party to various legal proceedings, contingencies, and commitments, including environmental matters[219] - Management believes these proceedings will not have a material adverse effect on the company's consolidated results of operations, financial position, or cash flows[219] - There have been no material changes in legal matters since December 31, 2023[220] Item 1A. Risk Factors There have been no material changes to the company's risk factors since the 2023 annual report - There have been no material changes to the risk factors from those disclosed in the annual report for the year ended December 31, 2023[221] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 15.7 million common shares for $2.9 billion in Q2 2024, with $6.7 billion remaining under its authorization Summary of Equity Securities Repurchases (in millions of USD) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | | :--- | :--- | :--- | :--- | :--- | | April 1 - April 30, 2024 | 3,730,000 | 213.81 | 3,730,000 | 8,840 | | May 1 - May 31, 2024 | 5,753,993 | 176.47 | 5,753,993 | 7,825 | | June 1 - June 30, 2024 | 6,259,311 | 172.95 | 6,259,311 | 6,742 | | Total | 15,743,304 | 183.91 | 15,743,304 | | - As of June 30, 2024, $6,742 million remained available under the share repurchase authorizations[222] Item 5. Other Information Director Kim K.W. Rucker adopted a Rule 10b5-1(c) trading plan in May 2024 to sell 7,392 common shares - Company director Kim K.W. Rucker adopted a Rule 10b5-1(c) trading plan to sell 7,392 common shares between August 19, 2024, and August 19, 2025[223] - No other directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement during the quarter ended June 30, 2024[223] Item 6. Exhibits This section lists the exhibits filed with the quarterly report, including officer certifications and XBRL data files - Exhibits include the company's articles of incorporation, bylaw amendments, certifications from the CEO and CFO, and Inline XBRL data files[224] SIGNATURES This quarterly report was duly signed on August 6, 2024, by an authorized officer of Marathon Petroleum Corporation - This report was signed on August 6, 2024, by Erin M. Brzezinski, Vice President and Controller of Marathon Petroleum Corporation[225]