MARATHON PETROLEUM CORPORATION 2026 Q2 Earnings Call

Brian, you may begin. Welcome to Marathon Petroleum Corporation's second quarter 2026 earnings conference call.

The slides that accompany this call can be found on our website at marathonpetroleum.com under the Investors tab. Joining me today on the call are Maryann Mannen, CEO, Maria Khoury, CFO, and other members of the executive team. We invite you to read the safe harbor statements on slide two. We will be making forward-looking statements today. Actual results may differ. Factors that could cause actual results to differ are included there as well as in our SEC filings. With that, I will turn the call over to Maryann.

Thank you, Brian. Good morning. In the second quarter, we delivered $8.5 billion of adjusted EBITDA. Safety and reliability are fundamental. This performance reflects more than market strength. It demonstrates our planning, commercial, and operational capabilities, which enable safe and reliable operations to meet resilient consumer demand. Our results reflect the differentiated capabilities of our value chains and the execution of our optimization strategies. Year to date, we have operated with our lowest level of unplanned downtime this decade. On the U.S. Gulf Coast, we ran at 100% utilization in the second quarter. Across the system, we achieved R&M margin capture of over $1 billion, the strongest on an absolute basis. Through the first half of 2026, we achieved capture of 108%. We are sourcing economically advantaged barrels, optimizing our feedstock to improve clean product yields, increasing margins in all markets we participate in.

Our ability to run advantage crude and optimize yields to meet consumer demand remains a core strength. Extensive pipelines and logistics provide abundant access to crude, limiting our exposure to Brent-priced crudes, which were more significantly impacted by the Persian Gulf conflict. In the second quarter, we also completed two high-return, yield-enhancing refining investments, further positioning us to deliver incremental value. The Robinson product flexibility investment enables approximately 10,000 barrels per day of incremental jet fuel production, supporting growing regional demand, and the El Paso yield improvement investment enhances the refinery's ability to produce specialty gasoline for key markets. These disciplined investments yield high returns aligned with our targeted return of 25% or above, extending the competitive position of these refining assets. The refining macro environment remains constructive.

Globally, there is over 9 million barrels per day of planned and unplanned refined capacity downtime, approximately 4 million barrels per day above historical norms, reflecting ongoing Persian Gulf disruptions and accelerated Ukrainian attacks on Russian infrastructure. Against this backdrop, U.S. gasoline inventory remains well below the five-year range, while distillate inventory is at the bottom of its five-year range, underscoring continued market tightness. Within our system, consumer demand remains strong across gasoline, diesel, and jet, supported by both domestic and international markets. Looking ahead, we expect to remain in an enhanced mid-cycle environment through the end of the year and into 2027. MPC's advantage is sustainable, a diversified and integrated U.S. refining system across three regions built for optimization with access to advantaged crude supply, low-cost natural gas, and the ability to supply both domestic and global consumer demand.

In the second quarter, our midstream business continued to advance its natural gas and NGL growth strategy. In April, MPLX placed the Secretariat I processing plant into service. In July, the Blackcomb natural gas pipeline began commissioning activities. The joint venture partners continue to progress the pipeline as planned, with Blackcomb expected to achieve full commercial service in the fourth quarter. This week, MPLX is beginning operations at the Harmon Creek III processing plant in line with its strategy to add processing capacity on a just-in-time basis. This increases MPLX's total processing capacity to 8.1 billion cubic feet per day and de-ethanization capacity to over 800,000 barrels per day.

In the Permian, sour gas treating volumes exceeded 150 million cubic feet per day for the second consecutive quarter as MPLX continues to optimize operations at our Titan treating facility, and sour gas treating capacity is expected to expand to over 400 million cubic feet per day by the end of the year. Natural gas and NGL fundamentals remain robust, creating compelling opportunities to support growing domestic and global demand for U.S. energy. This morning, MPLX announced it is increasing its 2026 capital growth spending outlook by $500 million to $2.9 billion. The increase primarily reflects the accelerated execution of the ongoing Gulf Coast fractionation project, pulling forward capital MPLX previously expected to deploy in early 2027. With multiple investments transitioning from construction to operations this year, MPLX is on track to deliver mid-single-digit adjusted EBITDA growth in 2026, weighted towards the second half of the year.

This also positions MPLX for strong adjusted EBITDA growth in 2027. These investments are expected to support 12.5% annual distribution growth in 2026 and 2027, positioning MPC to lead in capital return. During the second quarter, we returned $2.8 billion of capital inclusive of $2.5 billion of share repurchases, reflecting strong cash generation and disciplined execution of our capital allocation priorities. We are maintaining balance sheet discipline with a targeted cash framework that allows flexibility while supporting return of capital. We will execute safely, invest strategically, and generate significant cash all at the same time. With that, I'll turn it over to Maria to walk you through our financial performance.

Thank you, Maryann, and good morning. Our second quarter results demonstrate a strong financial performance across the business. We delivered earnings per share of $17.73, an adjusted EBITDA of $8.5 billion. Refining and marketing adjusted EBITDA per barrel was $24.84. Cash flow from operations, excluding working capital changes, was $6.6 billion. And we returned $2.8 billion to shareholders. These results reflect both market strength and disciplined execution. The next slide shows the year-over-year change in adjusted EBITDA from second quarter 2025 to second quarter 2026. Adjusted EBITDA increased approximately $5.2 billion year-over-year, primarily driven by our refining and marketing segment. Overall, our results show how our operational execution translated into financial performance. Turning to our segment results, we provide an overview of our refining and marketing segment, where R&M second quarter adjusted EBITDA was approximately $6.7 billion. Execution matters, and we delivered.

All regions contributed to the significant improvement year-over-year, primarily driven by a stronger margin environment. On total throughput of nearly three million barrels per day, reflecting a strong availability following our first quarter plant turnaround activity, our refineries ran at 94% utilization. In the Gulf Coast, we ran 100% utilization, delivering $27 of adjusted EBITDA per barrel, where crude optimization, higher jet yields, and strong domestic and export demand were differentiators. In the MidCon, we ran at 87% utilization as we completed plant turnaround and maintenance activity, delivering nearly $21 of adjusted EBITDA per barrel. In the West Coast, we ran at 93% utilization and delivered over $27 of adjusted EBITDA per barrel, supported by a strong regional value chain optimization. We prioritize operational reliability, investments in high-return projects, therefore value-enhancing opportunities and continuous improvement across the portfolio.

These are objectives that we can and do control, positioning MPC to perform through cycles. Turning to slide seven, second quarter capture was 112%. Our results highlight the advantage of our integrated system, where planning, commercial, and operational execution are aligned to capture value across the barrel. Capture this quarter was supported by crude optimization, included advantage SPR barrels received from the DOE, and a strong clean product margins across gasoline, diesel, and jet. In the Gulf Coast, margin capture was positively impacted by the advantage crude we ran in the quarter, increased jet fuel margins, and the physical offset related to the derivative losses in the first quarter. These tailwinds were partially offset by secondary products, which remain a market-driven headwind as prices of secondary products lag higher clean product prices.

This performance underscores the strength of our integrated value chain and our commitment to deliver peer-leading profitability per barrel. Slide eight shows our midstream segment performance for the quarter. Segment adjusted EBITDA increased $137 million compared to the second quarter of 2025. The increase was primarily driven by higher rates and throughput, including growth from equity affiliates and acquisitions, partially offset by the divestiture of non-core gathering and processing assets. As MPLX is executing plans to expand its value chains and transition projects from construction to cash flow generation, it is also maximizing the utilization of existing assets and optimizing operations. MPLX remains on track to deliver sequential growth throughout the year, culminating in mid-single-digit adjusted EBITDA growth in 2026. Moving to slide nine, we cover our renewable diesel performance.

Following the completion of the Martinez turnaround in the first quarter, utilization increased to 95%, reflecting a strong operational availability. Results were supported by a more constructive margin environment, with uplift from feedstock optimization, as well as improved regulatory credit values. Segment adjusted EBITDA increased approximately $277 million year-over-year. As we look ahead, we remain focused on optimizing operations, leveraging feedstock and logistics flexibility, and responding to market conditions. Based on current fundamentals, we expect a constructive environment through the remainder of the year. Slide 10 presents the elements of change in our consolidated cash position for the second quarter. Operating cash flow, excluding changes in working capital, was approximately $6.6 billion. Working capital was at $3.8 billion source of cash for the quarter, driven by higher payables, the timing benefit of crude exchanges, and inventory draws.