Findlay, OH-based refiner/marketer Marathon Petroleum Corp. (MPC) is positioned to thrive in various oil price markets, and senior executives on Wednesday said they were anticipating continued growth this year, following strong increases in 2014.
Among the shale plays, Marathon is a major oil buyer in the Utica, and operations are "relatively unchanged" compared to other areas, such as the Bakken and Eagle Ford shales, and Niobrara formation, CEO Gary Heminger said during a conference call.. "If you look at the rig count declines [in the later three shale plays] vs. the Utica, the rig counts in the Utica are basically unchanged.”
As one of the largest purchasers in the Utica, MPC continues to see growth.
"We continue to see growth in the Utica production and are confident that it reflects the lack of real change in the rig count."
The proposed 612-mile, $2.6 billion Sandpiper oil pipeline from the Bakken in North Dakota to Wisconsin that MPC is partnering with Enbridge Energy Partners LP has been delayed, but Heminger assured that the project is still on track. Permitting delays, not market concerns, is what has pushed the timing back a year, he said.
"The project continues to move along well," he said. "It is just a delay in the permitting as to why we deferred the capital spending [on the project], but we would expect it to be moving along once the right-of-way and the certificate needs are completed by the end of this year."
The CEO also downplayed concerns about resolving the ongoing ban on U.S. crude oil exports. Allowed exports now are restricted to condensate, and he said that he doesn't see those exports as being an issue for U.S. refineries.
"As I have said in the past, there is not really a glut of crude oil on the market, therefore, we don't necessarily have to be able to export light crude oil," said Heminger, noting the glut is not factual. "We continue to see areas where we have not received the volumes of light crude that we expected."
Heminger contended that about half of the crude oil needs of North America are being supplied through imports, and that means there is not a glut of light sweet crude in North America.
"Looking at the condensate that is being exported, I'm not sure the volumes have increased all that much. The media attention has dropped off, and it has not affected us."
Heminger said the key indicator on where crude oil price spreads between West Texas Intermediate and Brent might be headed is to watch the volumes of imports on the Gulf Coast. In recent weeks, they have been increasing steadily, he said.
"We believe we can run up to 65% light sweet crude in our units,” and the company ran 49% in 4Q2014, “so we have a tremendous runway to run light sweet crude if it is priced right to the alternative next best barrel, and that is what we would buy," Heminger said.
"While crude oil prices fell and crack spreads narrowed during the fourth quarter, MPC experienced strong product price realizations at both the wholesale and retail levels,” he told analysts. “Fundamentally, ours is a spread business, and we are well positioned to drive sustainable earnings in a variety of crude price environments, so we continue to believe our best days are in front of us."
Profits in 4Q2014 were $798 million ($2.86/share), compared to $626 million ($2.07) in the year-ago period. Full-year 2014 profits were $2.52 billion ($8.78), versus $2.11 billion ($6.64) in 2013. Revenues were $3.6 billion.
CFO Donald Templin said profits in the retail Speedway brand gasoline station/store sector were a major contributor to the overall increased 2014 profits, along with the major refining/marketing unit's results.
"The falling crude oil prices had a positive impact on results in the latter part of 2014," Templin said.
In addition, to Speedway, the addition of Hess Corp.'s 1,300 retail gasoline/store units last year contributed $113 million in added 2014 income (see Daily GPI, May 23, 2014).