Profits surge for US refiner Marathon Petroleum on strong crack spreads

By Ben DuBose
Online Editor

Marathon Petroleum reported earnings of $891 million in the first quarter of 2015, compared with $199 million in the first quarter of 2014. Those earnings included lower pre-tax pension settlement expenses of $1 million, compared with $64 million a year ago.

"Our record first quarter earnings highlight Marathon Petroleum's ability to take full advantage of favourable market conditions," said Gary R. Heminger, president and CEO of the downstream company. 

"Our extensive logistics and retail networks give us tremendous flexibility in feedstock acquisition and the ability to optimise refining operations and product distribution throughout our marketing footprint," he added.

Heminger said Marathon's integrated refining system made a significant contribution to the quarter's earnings. 

"Our refineries operated very well during the first quarter, and we were able to capture the strong Gulf Coast and Midwest crack spreads," he said, noting that the facilities also benefited from lower maintenance activity relative to the prior year. 

"I am particularly proud of the dedicated employees at both our Catlettsburg and Galveston Bay refineries for operating our facilities safely, efficiently, and without production impact during the recent work stoppage."

Marathon resolved the strike at the Catlettsburg refinery in Kentucky, but the Galveston Bay stoppage continues over local issues. Heminger said his company looks forward to a "successful resolution" at Galveston in the near-term.

Marathon's refining and marketing segment posted income from operations of $1.32 billion in the first quarter of 2015, compared with $362 million a year earlier. 

The increase was primarily due to higher US Gulf Coast and Chicago crack spreads and lower turnaround and other direct operating costs, according to company officials. The Gulf Coast and Chicago Light Louisiana Sweet 6-3-2-1 blended crack spread increased to $9.69/bbl in the first quarter of 2015 from $7.85/bbl a year earlier.

Meanwhile, turnaround and major maintenance costs declined to $0.79/bbl in the first quarter of 2015 from $3.15/bbl in 2014, owing to the heavy turnaround activity a year go.

Income from operations in Marathon's pipeline transportation segment weakened slightly, from $72 million in the first quarter of 2014 to $67 million in 2015. The decrease was primarily due to an increase in various operating expenses, the company said.