Marathon Petroleum posts Q1 profit on rising refining margins

Marathon Petroleum reported a profit in the first quarter of 2017. AP file photo by Michael Conroy.

Marathon Petroleum shares up in trading Thursday

Marathon Petroleum posted a Q1 profit on Thursday thanks to a jump of 18 per cent in refining margins and despite difficult market conditions.

Marathon’s shares were up as much as 4.1 per cent to $51.62 in trading on Thursday morning.

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Chief Executive Gary Heminger said market conditions in the first quarter were challenging for both refining and marketing due to higher inventory levels of distilled crude products and seasonally weak demand.

Despite the tough conditions, Marathon’s operating loss in the segment narrowed to $70 million in the quarter ending March 31, from $86 million this time last year.

The company reported refining and marketing margins rose by 18 per cent to $11.65/barrel which is well above Barclays’ estimate of $10.30/barrel.

Higher turnaround activity resulted in Marathon processing less crude.  But, according to a press release issued by MPC, the turnaround activity was the largest ever undertaken in a quarter and was accomplished under budget and ahead of schedule.

“With this turnaround activity at our three Gulf Coast refineries complete, we are positioned to take advantage of increasing refinery margins, favorable crude oil and refinery feedstock purchase costs, and seasonal improvement in consumer demand for our products,” Heminger said.

Total throughput fell 3.7 per cent to 1.71 million b/d in Q1, higher than Barclays’ estimate of 1.68 million b/d.  Crude oil capacity utilization was down from 93 per cent in the final quarter of 2016 to 83 per cent in 2017 Q1.

Reuters reports refinery direct operating costs increased 16.5 per cent to $9.45/barrel, but were well below brokerage Jefferies estimate of $10.18/barrel.

MPC says it expects to process 1.975 million b/d in Q2, 4.6 per cent higher than 2016 Q2.

Net profit attributable to the company increased to $30 million, or 6 cents per share.  In 2016 Q1, it was $1 million, or less than 1 cent per share.

Excluding items, Marathon Petroleum earned 6 cents per share.  Analysts had anticipated a loss of 5 cents per share, according to Thomson Reuters.

Revenue and other income rose 27.8 per cent to $16.39 billion, topping the average analyst estimate of $15.43 billion.