KEY POINTS
- Marathon’s Q3 profit exceeded expectations, driven by high throughput.
- Midstream unit revenue increased due to higher rates and volume.
- Refining and marketing margins dropped year-over-year.
Marathon Petroleum, the Ohio-based oil refining company, said on Tuesday that its third-quarter profit had increased, and the results topped analyst estimates, due to the firm’s throughput and utilization rates, despite uncertain macroeconomic conditions.
The company outlined a $5bn billion expansion in its anticipated share repurchase program taking the total buyback to $8.5bn.
Strong throughput and utilization drive profit
Marathon’s Q3 performance was supported by a higher-than-expected crude processing rate despite a mixed market for refining margins.
The quarter’s crude capacity utilization of 94 percent exceeded the 90 percent expectation. The refiner exceeded its projection of 2.84 million barrels per day (bpd) with an average of 3 million bpd.
Thanks to effective refinery turnarounds and reduced distribution costs, the company’s earnings per share reached $1.87, significantly more than Wall Street’s projection of 98 cents.
Higher transport rates and volumes drove a 5.8 percent increase in adjusted core earnings to $1.6 billion for Marathon’s midstream division.
Decline in refining margins tempered by high performance
Despite its strong quarter, Marathon saw a decline in refining and marketing margins, which averaged $14.35 per barrel compared to $26.16 a year ago.
However, the refiner remained resilient, with its shares rising nearly 4% to $150.29 following the earnings report.
CEO Maryann Mannen attributed the fluctuating refining margins to a lighter turnaround season, fewer seasonal supply interruptions, and concerns over global economic growth, especially in China.
According to Reuters, Mannen affirmed that Marathon is well-positioned to thrive in this dynamic environment, leveraging its strong operational capabilities to drive value for shareholders.
Midstream growth and strategic buyback expansion
Independent of its refining business, Marathon’s midstream segment also remains a cash cow producing $1.6bn in Q3 core earnings on the back of higher rates and volumes.
This success further backs up the decision of the company to increase its share buyback program by $5 billion to create better value for shareholders.
Marathon’s Q3 results and its new enlarged buyback program, though, show Marathon as a company that is keen on growth and is valuable regardless of the fact that the global refining market has been less than friendly for Marathon and many of its peers.
Marathon’s competitors in the broader industry, Valero Energy and Phillips 66, also announced lower Q3 profits this week because of margin challenges.
