A N N U A L R E P O R T
2019 OUR STRATEGIC PILLARS
MPC’s strategic pillars inform our actions
on a day-to-day basis, supporting our ability
to create value for our shareholders.
Through superior execution, we maintain
safe, environmentally sound operations
while managing cost and driving
operational discipline.
Our integrated value chain diversifies
our earnings and creates value beyond
our stand-alone segments, giving us the
flexibility to adapt to market conditions.
Our strong financial discipline helps grow
our profitability, provides through-cycle
protection and enables compelling
capital returns.
We demonstrate growth through innovation
as we harness the power of technology
to create and capture new business
opportunities while also reducing our
environmental impact.
We view sustainability as an environmental,
social and economic responsibility to address
the needs of future generations.
FROM THE CHAIRMAN AND CEO
Fellow shareholders,
Marathon Petroleum Corporation ended 2019 on a strong note, with
full-year earnings of $2.6 billion and excellent value capture across our
business. We continued to share our success with shareholders, returning
$3.3 billion through dividends and share repurchases throughout the year.
I’m proud to attribute our success to the dedication of our over 60,000
employees, the driving force behind our achievements from coast to
coast. We spent 2019 unlocking unrealized value throughout the company,
with our strategic pillars ensuring we maintained the right focus: superior
execution, integrating refining with logistics and marketing, strong financial
discipline, growth through innovation, and sustainability, underpinned by
the high-performing culture that makes it all possible.
EXECUTING ON OUR STRATEGY IN 2019
These strategic pillars helped guide us to operational and commercial
excellence in 2019. Our 16 refineries achieved 96% system utilization,
despite significant planned maintenance activity at eight of our refineries.
Our Refining teams were able to complete much of this turnaround
activity under budget and ahead of schedule.
We optimized our refining system for the anticipated market changes
associated with the International Maritime Organization’s low-sulfur
marine fuel rule, and we continued conversion of our existing Dickinson,
North Dakota, refinery to a biorefinery capable of manufacturing 100%
renewable diesel from corn oil and soybean oil. In California, we expect our
Los Angeles Refinery Integration and Compliance project will be complete
in the first quarter of 2020, integrating two formerly separate facilities for
greater efficiency and environmental performance.
In logistics, Gray Oak pipeline – of which MPC is a 25% owner – began
moving crude oil in the fourth quarter from the Permian and Eagle Ford
basins to the U.S. Gulf Coast market.
MPLX LP, our sponsored master limited partnership, continues work to
reverse the flow of Capline pipeline, in which MPC holds a 33% ownership
interest. The Capline reversal will enable the pipeline to transport crude oil
from the Midwest to St. James, Louisiana, beginning in mid-2021. This is
expected to provide additional supply flexibility to our Garyville refinery,
which has a direct connection to storage at St. James.
As we continued integrating former Andeavor assets acquired through our
strategic combination in late 2018, we achieved our target of converting
more than 700 retail locations, including stores in the Southwest and on the
West Coast. We also continue to expand our presence in Mexico. In addition
to significant exports from the U.S. Gulf Coast and investments in refined
product distribution, the company is now supplying over 200 retail sites,
including almost 180 that are branded ARCO®.
Synergies: When we first announced our strategic combination with
Andeavor in 2018, we anticipated at least $1 billion of annual run-rate
synergies within the first three years. As we combined our businesses
and tapped the innovation and expertise of our talented employees and
management team, we realized our synergy potential was even greater. In
2019, we realized $1.1 billion of total synergies. We are targeting $1.4 billion
of estimated annual run-rate synergies by the end of 2021.
(Continued on Page 2)
MARATHON PETROLEUM CORPORATION I 2019 ANNUAL REPORT I 1
TABLE OF CONTENTS
1
4
6
8
16
18
LETTER TO OUR SHAREHOLDERS
ABOUT US
2019 BY THE NUMBERS
EXECUTING OUR STRATEGIC VISION
OUR VALUES
DIRECTORS AND OFFICERS
MARATHON PETROLEUM CORPORATION | 2019 ANNUAL REPORT2019 (Continued from Page 1)
DELIVERING FOR OUR SHAREHOLDERS
Creating value for our shareholders has been a constant focus since we became an independent company in 2011.
Through the end of 2019, we generated a total shareholder return of 288%, exceeding the S&P 500 and our industry
peers, and returned more than $21 billion to shareholders through dividends and share repurchases. In 2019 alone,
we returned $1.4 billion in dividends and $1.95 billion in share repurchases.
THE VALUES THAT GUIDE US
Our ability to create long-term shareholder value is proven, and one of the critical factors in our success has been
our adherence to strong values that guide us in our daily work. As we focus on our strategic pillars to ensure we are
meeting and exceeding our stakeholders’ expectations, we never lose sight of these values: safety and environmental
stewardship, integrity, respect, inclusion and collaboration.
These values help ensure that across the enterprise, our tens of thousands of employees are living up to their potential,
working together as a team, taking responsibility, and protecting themselves, each other, and the communities and
environment we all share.
As the world’s need for reliable, affordable energy continues to grow, MPC will continue to position itself for long-
term success by managing, measuring and continually improving performance in environmental stewardship, safety,
community involvement, stakeholder engagement and sustainability. Through improving energy efficiency at our
operations and diversification into the natural gas business, we have significantly reduced our greenhouse gas
emissions per volume of product manufactured. We’re the only U.S. refiner to have earned the U.S. EPA’s ENERGY
STAR® Partner of the Year award for the past two years, and have received more ENERGY STAR plant certifications
than all other refining companies combined.
We’re investing hundreds of millions of dollars to convert our Dickinson, North Dakota, refinery to produce 100%
renewable diesel from corn oil and soybean oil, and we produced approximately 70 million gallons of biodiesel at
our plant in Cincinnati, Ohio, in 2019.
To emphasize our commitment to environmental stewardship, we have adopted a target for reducing our
greenhouse gas emissions intensity through 2030, and linked annual progress toward achieving the 2030 target
to our executive and certain employee compensation programs. We likewise emphasize safety throughout our
enterprise, and in 2019 our Refining organization achieved an Occupational Safety and Health Administration
recordable incident rate of 0.28 per 200,000 man-hours worked, significantly better than the industry average.
Ultimately, by staying true to our values, we reinforce our license to operate in the many communities where
we are privileged to work.
As I announced in October 2019, I will retire from MPC after our Annual Shareholders Meeting. As I look back on
my 45 years with Marathon, I am deeply proud of all we have accomplished. Our talented employees have driven
tremendous success as we have grown over the years, and consistently performed through a variety of market
conditions. I am also proud of the management team I have had the good fortune to work with over the years, and I
couldn’t be more grateful for their dedication, loyalty and diligence. Thanks to their expertise, and all our employees’
commitment to superior execution, MPC is one of the best operators in the industry. I’m confident that I retire with
the company well-positioned for a future of ever greater accomplishments. On behalf of the Board of Directors,
management team and our employees from coast to coast, I would like to thank you for your investment in MPC.
We look forward to sharing our success with you long into the future.
Sincerely,
Gary R. Heminger
Chairman and Chief Executive Officer
2
MARATHON PETROLEUM CORPORATION I 2019 ANNUAL REPORT I 3
ABO UT US
CRUDE OIL CAPACITY:
3.1million
barrels per day
~12,000
North American retail and
marketing locations
17,200miles
of pipeline we own, lease, or
have ownership interest in
116
light product
and asphalt terminals
397,000
barrels per day
of 2019 refined-product
exports
®
Domestic Marketing Area
International Marketing Area
MPC Refineries
MPC/MPLX Pipelines(a)
MPC Owned and Part-Owned
Light Product Terminals
MPC Owned Asphalt/Heavy
Oil Terminals
MPC Owned and Part-Owned
Marine Facility
Renewable Fuels
Ethanol Facility
Biodiesel Facility
Virent(c)
®
MPLX Owned and Part-Owned
Light Product Terminals
MPLX Owned Asphalt/Heavy
Oil Terminals
MPC Refineries
Cavern
MPC/MPLX Pipelines(a)
MPLX Refining
Logistics Assets
MPLX Gathering
System
MPLX Owned Marine
Facility
Natural Gas
Processing Complex(b)
Note: Illustrative representation of asset map
(a) Includes MPC/MPLX owned and operated lines, MPC/MPLX interest lines operated by others and MPC/MPLX operated lines owned by others.
(b) Includes MPLX owned and operated natural gas processing complexes.
(c) Wholly owned subsidiary of MPC working to commercialize the conversion of biobased feedstocks into renewable fuels and chemicals.
4
MARATHON PETROLEUM CORPORATION I 2019 ANNUAL REPORT I 5
2019 BY THE NUMBERS
CUMULATIVE SHARES REPURCHASED
$ Billions
15
10
5
0
3
2
1
0
s
n
o
i
l
l
i
B
$
s
n
o
i
l
l
i
B
$
15.0
13.1
9.8
2017
2018
2019
Cumulative Repurchases
ANNUAL DIVIDENDS
($ per share)
$2.12
1.4
$1.84
1.0
$1.52
0.8
2017
2018
2019
Total Dividends Paid
CASH RETURNED TO SHAREHOLDERS
$ Millions
INCOME FROM OPERATIONS
$ Millions
5,000
4,000
3,000
2,000
1,000
0
4,241
3,145
3,348
2017
2018
2019
Share Repurchases
Dividends
6,000
4,000
2,000
0
5,571
5,576
4,018
2017
2018
2019
FINANCIAL HIGHLIGHTS
Year Ended Dec. 31
Sales and other operating revenue ($mm) (1)
Income from operations ($mm)
Net income attributable to MPC ($mm)
Per-common-share data
Net income attributable to MPC – basic ($)
Net income attributable to MPC – diluted ($)
Dividends ($)
Cash and cash equivalents ($mm)
Total debt ($mm)
Equity ($mm)
Capital expenditures and investments ($mm)
Debt-to-book capitalization (%)
(1) Includes sales to related parties
6
2017
74,733
4,018
3,432
6.76
6.70
1.52
2017
3,011
12,946
20,828
3,106
37
2018
96,504
5,571
2,780
5.36
5.28
1.84
2019
123,949
5,576
2,637
4.00
3.97
2.12
2018
2019
1,687
27,524
44,049
4,304
38
1,527
28,838
42,139
6,133
40
TOTAL SHAREHOLDER RETURN
288%
MPC Total Return
S&P 500: 201%
Peers: 153%
500%
400%
300%
200%
100%
0%
2011 2012 2013 2014 2015 2016 2017 2018 2019
MPC S&P 500 Peers (1)
(1) Peer group includes: BP plc, Chevron Corporation, Exxon Mobil Corporation, HollyFrontier Corporation, PBF Energy Inc, Phillips 66 and Valero Energy Corporation.
MARATHON PETROLEUM CORPORATION I 2019 ANNUAL REPORT I 7
2019
EXECUTING OUR STRATEGIC VISION
REFINERY
UTILIZATION:
96%
DAILY REFINERY
THROUGHPUT:
3.1million
barrels
REFINING AND MARKETING
PER-BARREL MARGIN:*
$14.23
REFINED PRODUCT
EXPORTS:
397,000
barrels per day
2019 REFINED PRODUCT YIELDS (mbpd):**
Gasoline .................................................................. 1,560
Distillates ................................................................1,087
Feedstocks and special products ..................315
Asphalt ...........................................................................87
Propane .........................................................................55
Heavy fuel oil ............................................................. 49
Total ..................................................................... 3,153
* *Excludes inter-refinery volumes of 110 mbpd
*See reconciliation, page 20
*See reconciliation, page 20
RETAIL FUEL MARGIN*: 24.26 cents per gallon
Our success is defined by our ability to execute across our
enterprise, and our Strategic Pillars define how we create value.
OUR STRATEGIC PILLARS
SUPERIOR
EXECUTION
INTEGRATED
VALUE
CHAIN
GROWTH
THROUGH
INNOVATION
STRONG
FINANCIAL
DISCIPLINE
SUSTAINABILITY
H I G H - P E R F O R M I N G C U LT U R E
RETAIL STORE CONVERSIONS SINCE
ANDEAVOR STRATEGIC COMBINATION:
708
RETAIL FUEL SALES
(million gallons)
10,212
6,937
5,799
MERCHANDISE SALES
($ millions)
6,305
4,893
5,232
8
MARATHON PETROLEUM CORPORATION I 2019 ANNUAL REPORT I 9
2017
2018
2019
2017
2018
2019
2019
EXECUTING OUR STRATEGIC VISION: REVENUE-ENHANCING PROJECTS UNDER WAY
u LOS ANGELES
REFINERY
INTEGRATION
AND COMPLIANCE
(LARIC): Integrating
the formerly separate
Wilmington and
Carson refineries for
greater efficiency
and environmental
performance.
Anticipated completion:
First half of 2020
u GARYVILLE COKER DRUM
REPLACEMENT PROJECT:
Expect unit capacity increase
of approximately 17%.
Anticipated completion:
First quarter 2020, in time to take advantage
of anticipated benefit from International
Maritime Organization 2020 fuel standard
u GARYVILLE CRUDE REVAMP:
Achieved expected
fractionation improvements
and a 5% capacity increase.
Completed:
Fourth quarter 2019
u DICKINSON RENEWABLE
DIESEL PROJECT:
Conversion of petroleum
refinery to 100% renewable
diesel manufacturing.
Anticipated completion:
Late 2020
10
MARATHON PETROLEUM CORPORATION I 2019 ANNUAL REPORT I 11
2019
EXECUTING OUR STRATEGIC VISION: FOCUSING ON SAFETY AND ENVIRONMENTAL STEWARDSHIP
MPC is committed to
the safety of those who
work at our facilities
and the communities
where we operate. We
are committed to creating
a safe environment and
work diligently to prevent
incidents and injuries
throughout all operations.
We focus on continually
improving our safety
management systems and
compliance programs by
engaging our employee and
contractor workforce via
training, behavior-based
safety programs, contractor
safety councils, and
sharing best practices and
lessons learned.
MPC REFINING OSHA RECORDABLE RATE*
(incidents/200,000 hours)
0.25
REFINING PROCESS SAFETY EVENT (PSE) RATE
(events/200,000 hours)
1.0
0.8
0.6
0.4
0.2
0
0.7
0.6
0.6
0.4
0.36
0.34
0.29
0.27
0.28
0.20
0.15
0.10
0.05
0
0.22
0.16
0.15
0.16
0.18
0.08
0.04
0.05
0.05
0.04
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
MPC Refining
U.S. Refining avg**
Tier 1 PSE
Tier 2 PSE
* The OSHA Recordable Incident Rate is the number of incidents per 200,000
hours of work.
**Based on U.S. Bureau of Labor Statistics data
PSEs are unplanned or uncontrolled releases of a material from a process. The PSE rate is the count
of events per 200,000 hours of work. Tier 1 PSEs are the most serious type. PSE rates for Andeavor
Refining have been included in this chart, including years prior to our strategic combination.
In 2019, our Refining
organization implemented
a new system to drive
improved DEI performance
across the MPC enterprise.
TIER 3 & 4 DESIGNATED ENVIRONMENTAL INCIDENTS (DEIs)
(count)
160
Almost 40% reduction in first full year of program
140
120
100
80
60
40
20
0
44
39
31
135
85
2015
2016
2017
2018
2019
DEIs include three categories of environmental incidents: releases to the environment (air,
land or water), environmental permit exceedances and agency enforcement actions.
This chart includes legacy MPC refineries, Speedway, MPLX Logistics and Storage, and
Cincinnati Renewable Fuels. MPLX Gathering and Processing data is included as of Jan. 1,
2016. Legacy Andeavor asset data is included as of Jan. 1, 2018.
12
MARATHON PETROLEUM CORPORATION I 2019 ANNUAL REPORT I 13
2019 EXECUTING OUR STRATEGIC VISION: RENEWABLE FUELS
The opportunities associated with advancing renewable fuels are
an extensive part of our short- and long-term business strategy.
We have made significant investments in the production,
research and development of biofuels. In 2019, we delivered
approximately 2.4 billion gallons of biofuels to consumers.
ETHANOL
A joint venture between MPC and
The Andersons produced more than
460 million gallons of ethanol in 2019,
and we blended more than 2 billion
gallons of ethanol into the gasoline
that we marketed and sold in 2019.
BIODIESEL
MPC produced more than 70 million
gallons of biodiesel at our Cincinnati
biodiesel plant in 2019, and we
blended almost 100 million gallons of
biodiesel into the diesel fuel that we
marketed and sold in 2019.
RENEWABLE DIESEL
We are investing roughly $470 million
to convert our Dickinson, North Dakota,
refinery into a 12,000 bpd biorefinery
that will process corn and soybean oil
to produce renewable diesel. We intend
to sell the renewable diesel in the
California market to comply with the
California LCFS.
®
ADVANCED BIOFUELS
Virent is a wholly-owned subsidiary of
MPC working to commercialize a novel
process — referred to as the BioForming®
process — for converting biobased
feedstocks into renewable fuels and
chemicals. We continue to make progress
on our demonstration unit to further
develop the Virent technology toward a
full-scale application.
BIOCRUDE
In 2020, we plan to begin purchasing from Fulcrum BioEnergy, Inc. a crude oil substitute
that is derived from gasifying presorted separated municipal solid waste. We are investing
in our Martinez refinery to allow us to store the feedstock onsite and feed it into our
existing fluid catalytic cracking unit.
14
MARATHON PETROLEUM CORPORATION I 2019 ANNUAL REPORT I 15
2019 OUR VALUES
Safety &
Environmental
Stewardship
Integrity
Collaboration
Respect
Inclusion
SAFETY AND
ENVIRONMENTAL
STEWARDSHIP:
Protecting our people and the
world we all share has been
and remains a priority for
MPC. We aim for an accident-
free, incident-free workplace
to ensure everyone goes
home safely, every day. We
are committed to safe and
environmentally responsible
operations to protect the health
and safety of our employees,
contractors and communities.
COLLABORATION:
We are a company of driven,
accomplished professionals
who are more than the sum of
their training and experience.
We actively partner with our
communities, governments
and business partners to find
and create shared values,
making a positive difference
together. We foster constructive,
solution-oriented dialogues; we
genuinely listen to one another
and seek out perspectives
different from our own.
RESPECT:
Respect is built upon the
principle that every one of us is
valuable and contributes toward
achieving our Vision. We treat
everyone professionally, with
courtesy, honesty and trust. We
consider how other people’s
ideas can improve what we do
and we encourage everyone to
openly share their perspectives,
ideas and concerns.
INCLUSION:
We value diversity in culture,
background, perspective and
experiences. We strive to
provide our employees with
a collaborative, supportive
and inclusive work
environment where they can
maximize their full potential
for personal and business
success. This happens when
our employees, contractors
and other stakeholders feel
valued themselves, and value
others for who they are.
INTEGRITY:
Integrity at MPC is more than
the business conduct policies
and procedures we follow. We set high
expectations for ourselves and build trust
in each other, with business partners,
shareholders and the communities where we
work and live. We say what we’re going to do
– and then do it.
16
MARATHON PETROLEUM CORPORATION I 2019 ANNUAL REPORT I 17
MARATHON PETROLEUM CORPORATION I 2019 ANNUAL REPORT I 17
2019 BOARD OF DIRECTORS
CORPORATE OFFICERS
Standing: J. Cohen, S. Tomasky, A. Alkhayyal, S. Davis, C. Bunch, M. Stice, E. Galante, K. Rucker | Seated: E. Bayh, J. Rohr, G. Heminger, J. Surma
Back row: T. Case, K. Thomson, J. Wilkins, D. Wehrly, R. Hernandez, D. Linhardt, J. Quaid, D. Heppner, G. Plumby
Middle row: R. Hessling, B. Partee, S. Gagle, T. Griffith, T. Kaczynski, D. Whikehart, D. Sauber, K. Kazarian
Seated: A. Kenney*, F. Laird, D. Templin, G. Heminger, M. Hennigan, M. Benson, R. Brooks
Abdulaziz F. Alkhayyal
Retired Senior Vice President, Industrial
Relations, Saudi Aramco. Mr. Alkhayyal
joined Saudi Aramco in 1981 and held
positions of increasing responsibility before
being named senior vice president, Refining,
Marketing and International in 2001, and
senior vice president, Industrial Relations
in 2007.
Evan Bayh
Sen. Bayh was U.S. senator from, and
governor of, Indiana. Sen. Bayh served on
numerous Senate committees, holding key
leadership roles on several of them.
Charles E. Bunch
Retired Chairman and CEO, PPG Industries,
Inc. Mr. Bunch joined PPG in 1979 and held
various positions of increasing responsibility
before being appointed president, chief
operating officer and board member in 2002,
and chairman and CEO in 2005. He retired as
CEO in 2015 and as chairman in 2016.
Jonathan Z. Cohen
Chairman and CEO of Hepco Capital
Management, LLC, co-executive chairman of
Osprey Technology Acquisition Corp., and
chairman of the board of Falcon Minerals
Corp. Mr. Cohen founded and previously
served as CEO of Osprey Energy Acquisition
Corp. He also co-founded Atlas Energy, Inc.,
Atlas Pipeline Partners LP, Arc Logistics
Partners LP and Castine Capital Management,
LLC. Previously, Mr. Cohen was CEO of
Resource America, Inc. and was the founder
and CEO of Resource Capital Corp..
Steven A. Davis
Former Chairman and CEO, Bob Evans
Farms, Inc. Mr. Davis previously served as
president of Long John Silver’s and A&W
All-American Food Restaurants, and held
senior executive and operational positions
in Yum! Brands’ Pizza Hut division and Kraft
General Foods.
Edward G. Galante
Retired Senior Vice President and
Management Committee Member of
Exxon Mobil Corporation. Mr. Galante held
various management positions of increasing
responsibility during his more than 30 years
with Exxon Mobil Corporation, including
serving as executive vice president of
ExxonMobil Chemical Company from 1999
to 2001.
Gary R. Heminger
Chairman and CEO of Marathon Petroleum
Corporation. He is also chairman of the
general partner of MPLX LP. Mr. Heminger
joined Marathon Oil Company in 1975 and
held various leadership positions, including
head of Marathon’s downstream operations
beginning in 2001. Mr. Heminger was named
president and CEO of Marathon Petroleum
Corporation in 2011 and chairman in 2016.
James E. Rohr
Retired Chairman and CEO, The PNC
Financial Services Group, Inc. Mr. Rohr
joined PNC in 1972, serving in various
capacities of increasing responsibility. He
was named CEO in 2000 and oversaw
record growth for PNC before stepping
down as CEO in 2013.
Kim K.W. Rucker
Former Executive Vice President, General
Counsel and Secretary for Andeavor. Ms.
Rucker previously served as executive vice
president, Corporate and Legal Affairs,
general counsel and corporate secretary of
Kraft Foods Group, Inc. She held executive
positions with Avon Products Inc., Energy
Future Holdings Corp., and Kimberly-Clark
Corporation and was a partner in the law
firm of Sidley Austin LLP.
J. Michael Stice
Dean, Mewbourne College of Earth &
Energy, The University of Oklahoma.
He is a former director of MarkWest
Energy Partners, L.P. Mr. Stice’s career
includes leadership roles with Conoco
and ConocoPhillips. He also was chief
executive officer and a director of
Chesapeake Midstream Partners, L.P.,
later called Access Midstream Partners
G.P., L.L.C.
John P. Surma
Retired Chairman and CEO, United States
Steel Corporation. Prior to USS, Mr. Surma
held various leadership positions at
Marathon Oil Company, including senior
vice president of Finance and Accounting,
president of Speedway SuperAmerica
LLC, and president of Marathon Ashland
Petroleum LLC.
Susan Tomasky
Retired President of AEP Transmission
American Electric Power. Ms. Tomasky held
various executive officer positions at AEP,
including executive vice president and
general counsel, executive vice president
of Finance and chief financial officer, and
executive vice president of Shared Services.
Prior to joining AEP, Ms. Tomasky served
as a partner at the law firm of Hogan &
Hartson (now Hogan Lovells).
Gary R. Heminger
Chairman and Chief Executive Officer
Molly R. Benson
Vice President, Chief Securities, Governance and Compliance
Officer and Corporate Secretary
Raymond L. Brooks
Executive Vice President, Refining
C. Tracy Case
Senior Vice President, Western Refining Operations
Suzanne Gagle
General Counsel
Timothy T. Griffith
President, Speedway LLC
Michael J. Hennigan
President and CEO, MPLX
David R. Heppner
Vice President, Commercial and Business Development
Richard A. Hernandez
Senior Vice President, Eastern Refining Operations
Rick D. Hessling
Senior Vice President, Crude Oil Supply and Logistics
Thomas Kaczynski
Vice President, Finance and Treasurer
Kristina A. Kazarian
Vice President, Investor Relations
*Retired
Anthony R. Kenney*
Executive Vice President, Speedway LLC
Fiona C. Laird
Chief Human Resources Officer
D. Rick Linhardt
Vice President, Tax
Brian K. Partee
Senior Vice President, Marketing
Glenn M. Plumby
Senior Vice President and Chief Operating Officer, Speedway LLC
John J. Quaid
Vice President and Controller
David R. Sauber
Senior Vice President, Labor Relations, Operations, Health and
Administrative Services
Donald C. Templin
Executive Vice President and Chief Financial Officer
Karma M. Thomson
Vice President, Corporate Affairs
Donald W. Wehrly
Vice President and Chief Information Officer
David L. Whikehart
Senior Vice President, Light Products Supply and Logistics
James R. Wilkins
Vice President, Environment, Safety and Security
18
MARATHON PETROLEUM CORPORATION I 2019 ANNUAL REPORT I 19
20192019 RECONCILIATION OF REFINING & MARKETING INCOME
FROM OPERATIONS TO REFINING & MARKETING MARGIN
(in millions)
Refi ning & Marketing income from operations
Plus (Less):
Refi ning operating cost
Refi ning depreciation and amortization
Refi ning planned turnaround costs
Distribution costs
Distribution depreciation and amortization
Income from equity method investments
Net gain on disposal of assets
Other income
Biodiesel tax credit
Refi ning & Marketing margin
Refi nery throughputs (mbpd)
2019
$ 2,367
6,421
1,465
740
5,117
200
(11)
(6)
(43)
(93)
$ 16,157
3,112
RECONCILIATION OF RETAIL INCOME
FROM OPERATIONS TO RETAIL TOTAL MARGIN
(in millions)
Retail income from operations
Plus (Less):
Operating, selling, general and administrative expenses
Depreciation and amortization
Income from equity method investments
Net gain on disposal of assets
Other income
Retail total margin
Retail total margin:
Fuel margin
Merchandise margin
Other margin
Retail total margin
Retail fuel sales (millions of gallons)
2019
$ 1,582
2,456
528
(82)
(31)
(44)
$ 4,409
$ 2,478
1,827
104
$ 4,409
10,212
Non-GAAP Financial Measures
Refi ning & Marketing margin and Retail total margin are non-GAAP fi nancial measures included in this summary annual report
wrap. Reconciliations to the nearest GAAP fi nancial measures are included here and in the MPC Annual Report on Form
10-K for the year ended Dec. 31, 2019. These non-GAAP fi nancial measures are not defi ned by GAAP and should not be
considered in isolation or as an alternative to Refi ning & Marketing income from operations, Retail income from operations or
other fi nancial measures prepared in accordance with GAAP.
20
74380Text.indd 20
3/9/20 11:06 AM
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2019
OR
‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from
to
Commission file number 001-35054
Marathon Petroleum Corporation
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
27-1284632
(I.R.S. Employer Identification No.)
539 South Main Street, Findlay, OH 45840-3229
(Address of principal executive offices) (Zip code)
(419) 422-2121
(Registrant’s telephone number, including area code)
Securities Registered pursuant to Section 12(b) of the Act
Title of each class
Common Stock, par value $.01
Trading symbol(s)
MPC
Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes Í No ‘
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ‘ No Í
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes Í No ‘
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files). Yes Í No ‘
Indicate by check mark whether the registrant is a large accelerated filer, accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large Accelerated Filer Í Accelerated Filer ‘ Non-accelerated Filer ‘ Smaller reporting company ‘ Emerging growth company ‘
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ‘
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ‘ No Í
The aggregate market value of Common Stock held by non-affiliates as of June 30, 2019 was approximately $36.7 billion. This amount
is based on the closing price of the registrant’s Common Stock on the New York Stock Exchange on June 28, 2019. Shares of Common
Stock held by executive officers and directors of the registrant are not included in the computation. The registrant, solely for the purpose
of this required presentation, has deemed its directors and executive officers to be affiliates.
There were 649,503,967 shares of Marathon Petroleum Corporation Common Stock outstanding as of February 17, 2020.
Documents Incorporated By Reference
Portions of the registrant’s proxy statement relating to its 2020 Annual Meeting of Shareholders, to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934, are incorporated by reference to the extent
set forth in Part III, Items 10-14 of this Report.
MARATHON PETROLEUM CORPORATION
Unless otherwise stated or the context otherwise indicates, all references in this Annual Report on Form 10-K to
“MPC,” “us,” “our,” “we” or “the Company” mean Marathon Petroleum Corporation and its consolidated
subsidiaries.
TABLE OF CONTENTS
PART I
ITEM 1. BUSINESS
ITEM 1A. RISK FACTORS
ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 2. PROPERTIES
ITEM 3. LEGAL PROCEEDINGS
ITEM 4. MINE SAFETY DISCLOSURES
PART II
ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
ITEM 6. SELECTED FINANCIAL DATA
ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9B. OTHER INFORMATION
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERANCE
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLER MATTERS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
SIGNATURES
Page
4
22
37
38
46
48
49
50
51
85
88
151
151
151
152
152
153
153
153
154
166
GLOSSARY OF TERMS
Throughout this report, the following company or industry specific terms and abbreviations are used:
ASC
ANS
ASU
ASR
ATB
barrel
bcf/d
CARB
CARBOB
CBOB
DEI
EBITDA (a non-GAAP
financial measure)
EPA
FASB
GAAP
IDR
LCM
LIBOR
LIFO
LLS
mbpd
mbpcd
Mcf
mmbpcd
MMcf/d
MMBtu
NYMEX
NYSE
NGL
OSHA
OTC
ppb
ppm
RFS2
RIN
SEC
STAR
TCJA
ULSD
USGC
UST
VIE
VPP
WTI
Accounting Standards Codification
Alaskan North Slope crude oil, an oil index benchmark price
Accounting Standards Update
Accelerated share repurchase
Articulated tug barges
One stock tank barrel, or 42 United States gallons liquid volume, used in
reference to crude oil or other liquid hydrocarbons.
One billion cubic feet per day
California Air Resources Board
California Reformulated Gasoline Blendstock for Oxygenate Blending
Conventional Blending for Oxygenate Blending
Designated Environmental Incidents
Earnings Before Interest, Tax, Depreciation and Amortization
United States Environmental Protection Agency
Financial Accounting Standards Board
Accounting principles generally accepted in the United States
Incentive Distribution Right
Lower of cost or market
London Interbank Offered Rate
Last in, first out
Louisiana Light Sweet crude oil, an oil index benchmark price
Thousand barrels per day
Thousand barrels per calendar day
One thousand cubic feet of natural gas
Million barrels per calendar day
One million cubic feet of natural gas per day
One million British thermal units per day
New York Mercantile Exchange
New York Stock Exchange
Natural gas liquids, such as ethane, propane, butanes and natural gasoline
United States Occupational Safety and Health Administration
Over-the-Counter
Parts per billion
Parts per million
Revised Renewable Fuel Standard program, as required by the Energy
Independence and Security Act of 2007
Renewable Identification Number
United States Securities and Exchange Commission
South Texas Asset Repositioning
Tax Cuts and Jobs Act of 2017
Ultra-low sulfur diesel
U.S. Gulf Coast
Underground storage tank
Variable interest entity
Voluntary Protection Program
West Texas Intermediate crude oil, an oil index benchmark price
1
DISCLOSURES REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K, particularly Item 1. Business, Item 1A. Risk Factors, Item 3. Legal
Proceedings, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations and Item 7A. Quantitative and Qualitative Disclosures about Market Risk, includes forward-
looking statements that are subject to risks, contingencies or uncertainties. You can identify forward-looking
statements by words such as “anticipate,” “believe,” “commitment,” “could,” “design,” “estimate,” “expect,”
“forecast,” “goal,” “guidance,” “imply,” “intend,” “may,” “objective,” “opportunity,” “outlook,” “plan,”
“policy,” “position,” “potential,” “predict,” “priority,” “project,” “proposition,” “prospective,” “pursue,”
“seek,” “should,” “strategy,” “target,” “will,” “would” or other similar expressions that convey the uncertainty
of future events or outcomes.
Forward-looking statements include, among other things, statements regarding:
•
•
•
•
•
•
•
future levels of revenues, refining and marketing margins, operating costs, retail gasoline and
distillate margins, merchandise margins, income from operations, net income or earnings per share;
future levels of capital, environmental or maintenance expenditures, general and administrative and
other expenses;
the success or timing of completion of ongoing or anticipated capital or maintenance projects;
business strategies, growth opportunities and expected investment;
consumer demand for refined products, natural gas and NGLs;
the timing and amount of any future common stock repurchases; and
the anticipated effects of actions of third parties such as competitors, activist investors or federal,
foreign, state or local regulatory authorities or plaintiffs in litigation.
Our forward-looking statements are not guarantees of future performance, and you should not rely unduly on
them, as they involve risks, uncertainties and assumptions that we cannot predict. Material differences
between actual results and any future performance suggested in our forward-looking statements could result
from a variety of factors, including the following:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
our ability to successfully complete the planned Speedway separation within the expected timeframe
or at all;
our ability to achieve the strategic and other objectives related to our Midstream review;
the risk that the cost savings and any other synergies from the Andeavor transaction may not be
fully realized or may take longer to realize than expected;
risks relating to any unforeseen liabilities of Andeavor;
further impairments;
risks related to the acquisition of Andeavor Logistics LP (“ANDX”) by MPLX LP (“MPLX”);
our ability to complete any divestitures on commercially reasonable terms and within the expected
timeframe, and the effects of any such divestitures on the business, financial condition, results of
operations and cash flows;
the effect of restructuring or reorganization of business components;
the regional, national and worldwide availability and pricing of refined products, crude oil, natural
gas, NGLs and other feedstocks;
our ability to manage disruptions in credit markets or changes to credit ratings;
the reliability of processing units and other equipment;
the adequacy of capital resources and liquidity, including the availability of sufficient cash flow to
execute business plans and to effect any share repurchases or dividend increases, including within
the expected timeframe;
the potential effects of judicial or other proceedings on the business, financial condition, results of
operations and cash flows;
continued or further volatility in and degradation of general economic, market, industry or business
conditions;
2
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
compliance with federal and state environmental, economic, health and safety, energy and other
policies and regulations, including the cost of compliance with the Renewable Fuel Standard, and
enforcement actions initiated thereunder;
adverse market conditions or other similar risks affecting MPLX;
refining industry overcapacity or under capacity;
changes in producer customers’ drilling plans or in volumes of throughput of crude oil, natural gas,
NGLs, refined products or other hydrocarbon-based products;
changes in the cost or availability of third-party vessels, pipelines, railcars and other means of
transportation for crude oil, natural gas, NGLs, feedstocks and refined products;
the price, availability and acceptance of alternative fuels and alternative-fuel vehicles and laws
mandating such fuels or vehicles;
political and economic conditions in nations that consume refined products, natural gas and NGLs,
including the United States and Mexico, and in crude oil producing regions, including the Middle
East, Africa, Canada and South America;
actions taken by our competitors, including pricing adjustments, expansion of retail activities, the
expansion and retirement of refining capacity and the expansion and retirement of pipeline capacity,
processing, fractionation and treating facilities in response to market conditions;
completion of pipeline projects within the United States;
changes in fuel and utility costs for our facilities;
accidents or other unscheduled shutdowns affecting our refineries, machinery, pipelines, processing,
fractionation and treating facilities or equipment, or those of our suppliers or customers;
acts of war, terrorism or civil unrest that could impair our ability to produce refined products,
receive feedstocks or to gather, process, fractionate or transport crude oil, natural gas, NGLs or
refined products;
adverse changes in laws including with respect to tax and regulatory matters;
political pressure and influence of environmental groups upon policies and decisions related to the
production, gathering, refining, processing, fractionation, transportation and marketing of crude oil
or other feedstocks, refined products, natural gas, NGLs or other hydrocarbon-based products;
labor and material shortages;
the costs, disruption and diversion of management’s attention associated with campaigns
commenced by activist investors; and
the other factors described in Item 1A. Risk Factors.
We undertake no obligation to update any forward-looking statements except to the extent required by
applicable law.
3
PART I
ITEM 1. BUSINESS
OVERVIEW
Marathon Petroleum Corporation (“MPC”) has over 130 years of experience in the energy business, and is the
largest independent petroleum product refining, marketing, retail and midstream business in the United States.
We operate the nation’s largest refining system with more than 3 million barrels per day of crude oil refining
capacity and believe we are one of the largest wholesale suppliers of gasoline and distillates to resellers in the
United States. We believe we operate the second largest chain of company-owned and operated retail gasoline
and convenience stores in the United States. We distribute our refined products through one of the largest
terminal operations in the United States and one of the largest private domestic fleets of inland petroleum
product barges. In addition, our integrated midstream energy asset network links producers of natural gas and
NGLs from some of the largest supply basins in the United States to domestic and international markets.
Our operations consist of three reportable operating segments: Refining & Marketing, Retail and Midstream.
Each of these segments is organized and managed based upon the nature of the products and services it offers.
•
•
Refining & Marketing – refines crude oil and other feedstocks at our 16 refineries in the Gulf Coast,
Mid-Continent and West Coast regions of the United States, purchases refined products and ethanol
for resale and distributes refined products through transportation, storage, distribution and marketing
services provided largely by our Midstream segment. We sell refined products to wholesale marketing
customers domestically and internationally, to buyers on the spot market, to our Retail business
segment and to independent entrepreneurs who operate primarily Marathon® branded outlets.
Retail – sells transportation fuels and convenience products in the retail market across the United
States through company-owned and operated convenience stores, primarily under the Speedway®
brand, and long-term fuel supply contracts with direct dealers who operate locations mainly under
the ARCO® brand.
• Midstream – transports, stores, distributes and markets crude oil and refined products principally for
the Refining & Marketing segment via refining logistics assets, pipelines, terminals, towboats and
barges; gathers, processes and transports natural gas; and gathers, transports, fractionates, stores and
markets NGLs. The Midstream segment primarily reflects the results of MPLX LP (“MPLX”).
MPLX is a diversified, large-cap master limited partnership (“MLP”) formed in 2012 that owns and
operates midstream energy infrastructure and logistics assets and provides fuels distribution
services. As of December 31, 2019, we owned the general partner and approximately 63 percent of
the outstanding MPLX common units.
On October 1, 2018, we completed the Andeavor acquisition. Andeavor shareholders received in the aggregate
approximately 239.8 million shares of MPC common stock valued at $19.8 billion and $3.5 billion in cash.
Andeavor was a highly integrated marketing, logistics and refining company operating primarily in the Western
and Mid-Continent United States. Our acquisition of Andeavor in 2018 substantially increased our geographic
diversification and the scale of our assets, which provides increased opportunities to optimize our system.
Corporate History and Structure
MPC was incorporated in Delaware on November 9, 2009 in connection with an internal restructuring of
Marathon Oil Corporation (“Marathon Oil”). On May 25, 2011, the Marathon Oil board of directors approved
the spinoff of its Refining, Marketing & Transportation Business into an independent, publicly traded
company, MPC, through the distribution of MPC common stock to the stockholders of Marathon Oil on
June 30, 2011. Our common stock trades on the NYSE under the ticker symbol “MPC.”
4
Recent Developments
Strategic Actions to Enhance Shareholder Value
On October 31, 2019, we announced our intention to separate our retail transportation fuel and convenience
store business, which is operated primarily under the Speedway brand, into an independent, publicly traded
company through a tax-free distribution to MPC shareholders of publicly traded stock in the new independent
retail transportation fuel and convenience store company. This transaction is targeted to be completed in the
fourth quarter of 2020, subject to market, regulatory and certain other conditions, including final approval by
MPC’s board of directors, receipt of customary assurances regarding the intended tax-free nature of the
transaction, and the effectiveness of a registration statement to be filed with the SEC. The Speedway business
is currently a reporting unit within our Retail segment. MPC will retain its direct dealer business, which is also
included in the Retail segment as currently reported.
MPC’s board of directors also formed a special committee to evaluate strategies to enhance shareholder value
through a review of the Midstream business and to analyze, among other things, the strategic fit of assets with
MPC, the ability to realize full valuation credit for midstream earnings and cash flow, balance sheet impacts
including liquidity and credit ratings, transaction tax impacts, separation costs, and overall complexity.
MPLX Acquisition of ANDX
On July 30, 2019, MPLX completed its acquisition of Andeavor Logistics LP (“ANDX”), and ANDX survived
as a wholly-owned subsidiary of MPLX. At the effective time of the merger, each common unit held by ANDX’s
public unitholders was converted into the right to receive 1.135 MPLX common units. ANDX common units
held by certain affiliates of MPC were converted into the right to receive 1.0328 MPLX common units.
Additionally, 600,000 ANDX preferred units were converted into 600,000 preferred units of MPLX (the “Series
B preferred units”). Series B preferred unitholders are entitled to receive, when and if declared by the MPLX
board, a fixed distribution of $68.75 per unit, per annum, payable semi-annually in arrears on February 15 and
August 15, or the first business day thereafter, up to and including February 15, 2023. After February 15, 2023,
the holders of Series B preferred units are entitled to receive cumulative, quarterly distributions payable in
arrears on the 15th day of February, May, August and November of each year, or the first business day
thereafter, based on a floating annual rate equal to the three month LIBOR plus 4.652 percent.
The transaction simplified our two sponsored MLPs, MPLX and ANDX, into a single listed entity to create a
leading, large-scale, diversified midstream company anchored by fee-based cash flows. The combined entity
has an expanded geographic footprint that is expected to enhance its long-term growth opportunities and the
sustainable cash flow profile of the business.
OUR VISION, VALUES AND BUSINESS STRATEGIES
We are committed to creating a valued, dynamic energy company that enhances life’s possibilities.
Underpinning this vision are our core values of integrity, respect, inclusion, collaboration, and safety and
environmental stewardship.
Our business strategy is based on five strategic pillars designed to define how we create value through
integrated value chain, growth through innovation, strong
competitive advantages: superior execution,
financial discipline and sustainability. These strategic pillars are supported by our commitment to maintaining
a high-performing culture and workforce. We continuously strive to enhance our workforce through active
recruitment of the best candidates, including those from diverse backgrounds. We develop our high quality
workforce through coaching, mentoring and the delivery of robust training programs focused on leadership,
commercial skills, safety, environmental stewardship, diversity and inclusion and other professional and
technical skills. We describe our strategic pillars more fully below.
Superior Execution
We are committed to superior execution in everything we do across our organization.
Our Refining & Marketing segment focuses on maintaining and enhancing the reliability and availability of
our refining assets, while improving our overall cost structure. Actions to improve our refining cost structure
include reducing turnaround costs, improving energy efficiency, and driving operational improvements across
our 16 refineries.
Our Midstream segment concentrates on achieving operational excellence by operating its assets safely and
efficiently, while capturing synergies across our various systems.
5
Our Retail segment is expanding existing technology and utilizing data analytics to support and embrace
consumer convenience trends, while improving profitability through operational excellence.
Integrated Value Chain
We believe the scale of our operations distinguishes us from our competitors. Our nationwide footprint
enables connectivity to key supply sources and demand hubs. We have access to advantaged feedstocks and
our logistics system lowers crude acquisition costs, increases optionality, and increases our speed to market.
Our broad market presence creates superior product placement options and our nationwide marketing channels
create significant optimization opportunities. Our substantial refining capacity and dock infrastructure on the
West Coast and Gulf Coast and our marine assets, uniquely position us to provide reliable supply while
allowing for international product placement and marine transportation cost optimization.
Growth Through Innovation
We intend to leverage technology to enhance margins system wide and develop new opportunities for industry
leading solutions.
In the Refining & Marketing segment, we are focused on increasing upgrading capability at our refineries to
provide yield flexibility and conversion capacity. We continue investing in high return capital projects that
increase export capacity, resid destruction and diesel production. We also leverage technology and the
expertise of our employees and business partners to optimize catalyst formulations and other refining
processes to produce higher valued products.
In our Midstream segment, we are alleviating in-basin bottlenecks and connecting supply to global demand
markets through investments in our marine fleet, export opportunities and long-haul crude oil, natural gas and
NGL pipelines. We continue our efforts to leverage existing assets for incremental third-party business. We
also prioritize our growth in strategic basins, such as the Permian and Marcellus.
In our Retail segment, we are focused on high value growth opportunities, utilizing superior technology,
capturing key market opportunities, and leveraging our buying power. Our plans include the continued
conversion of acquired locations to the Speedway brand and systems, growth in existing and new markets,
dealer sites, commercial diesel fueling expansion, food service through store remodels and high quality
acquisitions.
Strong Financial Discipline
We are committed to maintaining an investment grade credit profile and providing through business cycle
financial flexibility and protection. We employ a disciplined and balanced approach to capital allocation,
including a focus on only the highest returning capital projects in our respective business segments. In our
midstream segment, MPLX is targeting positive free cash flow, after capital investments and distributions, in
2021. Achieving this would allow MPLX to fund both its distribution and capital program entirely from
internally generated cash flow.
Since becoming a stand-alone company in June 2011, our dividend has increased by a 23 percent compound
annual growth rate and our board of directors has authorized share repurchases totaling $18.0 billion. Through
open market purchases and two ASR programs, we have repurchased 327 million shares of our common stock
for approximately $15.0 billion, representing approximately 46 percent of our outstanding common shares when
we became a stand-alone company in June 2011. We achieved these shareholder returns while meaningfully
investing in the business and maintaining an investment-grade credit profile. As of December 31, 2019,
$3.0 billion of authorization remains available for future share repurchases.
Sustainability
We view sustainability as our environmental, social and economic responsibility. We believe that
sustainability is a fundamental process of shared value creation, in which strategic investment and innovation
help our society achieve economic growth, environmental preservation and resource conservation. This shared
value helps ensure the social and economic needs of future generations are met.
Our operations, assets and processes require specialized knowledge, advanced operating procedures and a
commitment to excellence to ensure safety and maximize environmental stewardship. Our approach to
sustainability is defined by not only the work we do to conform and comply with all laws and regulations, but
also by our drive to meet or exceed our own rigorous environmental and safety targets.
6
We are committed to investing in sustainable solutions for energy demand by increasing our renewable diesel
production and minimizing carbon intensity. We are in the process of converting our Dickinson refinery into
an approximately 180 million gallon per year renewable diesel facility by the end of 2020.
In 2019, the EPA recognized Marathon Petroleum Corporation as an ENERGY STAR® Partner of the Year
for the second year, the only oil and gas company to receive such honor. This award recognized the significant
energy efficiency gains achieved since we established our “Focus on Energy” program at our refineries nearly
a decade ago. Through the implementation of this program, we have earned approximately two-thirds of the
total ENERGY STAR certifications awarded to the U.S. refining sector since 2006. Overall, we have realized
considerable savings in energy costs and our energy efficiency efforts have enabled us to significantly lower
our greenhouse gas intensity.
We remain committed to operating our assets in a safe and reliable manner and targeting continual
improvement in our safety and environmental record across our operations through the use of a rigorous,
independently audited management system, RC14001®:2015. This management system integrates health,
environmental stewardship, safety and security to ensure compliance and continual improvement. Six of our
16 refineries and our Marathon Pipe Line, Terminals and Transport and Rail organizations maintain RC14001
certification. Additionally, our Marine organization maintains management system certification through the
American Waterways Operators Responsible Carrier Program. We are continuing to align our recently
acquired assets with our internal management system requirements.
through our DEI program, which establishes goals
We proactively address our regulatory requirements and encourage our operations to continually improve their
environmental performance
and measures
performance. DEI is a metric adopted by MPC to capture several categories simultaneously. It includes three
categories of environmental incidents: releases to the environment (air, land or water), environmental permit
exceedances and agency enforcement actions. We rank DEIs in terms of their severity, with Tier 4 being the
most severe, and Tier 1 being the least. We continually strive for improvements in our environmental
performance. In 2019, we fully implemented the DEI program across all of the assets we acquired from
Andeavor in October 2018. As a result of implementing the program, we achieved a 37 percent reduction in
Tier 3 and Tier 4 DEIs from our 2018 baseline.
OUR OPERATIONS
Our operations consist of three reportable operating segments: Refining & Marketing, Retail and Midstream.
REFINING & MARKETING
Refineries
We currently own and operate 16 refineries in the Gulf Coast, Mid-Continent and West Coast regions of the
United States with an aggregate crude oil refining capacity of 3,067 mbpcd. During 2019, our refineries
processed 2,902 mbpd of crude oil and 210 mbpd of other charge and blendstocks. During 2018, our refineries
processed 2,081 mbpd of crude oil and 193 mbpd of other charge and blendstocks.
Our refineries include crude oil atmospheric and vacuum distillation, fluid catalytic cracking, hydrocracking,
catalytic reforming, coking, desulfurization and sulfur recovery units. The refineries process a wide variety of
condensate and light and heavy crude oils purchased from various domestic and foreign suppliers. We produce
numerous refined products, ranging from transportation fuels, such as reformulated gasolines, blend-grade
gasolines intended for blending with ethanol and ULSD fuel, to heavy fuel oil and asphalt. Additionally, we
manufacture aromatics, propane, propylene and sulfur. See the Refined Product Marketing section for further
information about the products we produce.
Our refineries are integrated with each other via pipelines, terminals and barges to maximize operating
efficiency. The transportation links that connect our refineries allow the movement of intermediate products
between refineries to optimize operations, produce higher margin products and efficiently utilize our
processing capacity. For example, naphtha may be moved from Dickinson to Garyville where excess
reforming capacity is available. Also, shipping intermediate products between facilities during partial refinery
shutdowns allows us to utilize processing capacity that is not directly affected by the shutdown work.
7
Following is a description of each of our refineries and their capacity by region.
Gulf Coast Region (1,163 mbpcd)
Galveston Bay, Texas City, Texas Refinery (585 mbpcd). Our Galveston Bay refinery is a world-class refining
complex resulting from the combination of our former Texas City refinery and Galveston Bay refinery. The
refinery is located on the Texas Gulf Coast approximately 30 miles southeast of Houston, Texas and can
process a wide variety of crude oils into gasoline, feedstocks, distillates, petrochemicals, propane and heavy
fuel oil. The refinery has access to the export market and multiple options to sell refined products. Our
cogeneration facility, which supplies the Galveston Bay refinery, currently has 1,055 megawatts of electrical
production capacity and can produce 4.3 million pounds of steam per hour. Approximately 46 percent of the
power generated in 2019 was used at the refinery, with the remaining electricity being sold into the electricity
grid.
Garyville, Louisiana Refinery (578 mbpcd). Our Garyville refinery, which is one of the largest refineries in the
U.S., is located along the Mississippi River in southeastern Louisiana between New Orleans, Louisiana and
Baton Rouge, Louisiana. The Garyville refinery is configured to process a wide variety of crude oils into
gasoline, distillates, petrochemicals, feedstocks, asphalt, propane and heavy fuel oil. The refinery has access
to the export market and multiple options to sell refined products. Our Garyville refinery has earned
designation as an OSHA VPP Star site.
Mid-Continent Region (1,193 mbpcd)
Catlettsburg, Kentucky Refinery (291 mbpcd). Our Catlettsburg refinery is located in northeastern Kentucky
on the western bank of the Big Sandy River, near the confluence with the Ohio River. The Catlettsburg
refinery processes sweet and sour crude oils, including production from the nearby Utica Shale, into gasoline,
distillates, asphalt, petrochemicals, heavy fuel oil, propane and feedstocks. Our Catlettsburg refinery has
earned designation as an OSHA VPP Star site.
Robinson, Illinois Refinery (253 mbpcd). Our Robinson refinery is located in southeastern Illinois. The
Robinson refinery processes sweet and sour crude oils into gasoline, distillates, feedstocks, petrochemicals,
propane and heavy fuel oil. The Robinson refinery has earned designation as an OSHA VPP Star site.
Detroit, Michigan Refinery (140 mbpcd). Our Detroit refinery is located in southwest Detroit. It is the only
petroleum refinery currently operating in Michigan. The Detroit refinery processes sweet and heavy sour
crude oils, including Canadian crude oils, into gasoline, distillates, asphalt, feedstocks, petrochemicals,
propane and heavy fuel oil. Our Detroit refinery has earned designation as an OSHA VPP Star site.
El Paso, Texas Refinery (131 mbpcd). Our El Paso refinery is located approximately three miles east of
downtown El Paso, Texas. The El Paso refinery processes sweet and sour crudes into gasoline, distillates,
asphalt, heavy fuel oil, propane, feedstocks and petrochemicals.
St. Paul Park, Minnesota Refinery (103 mbpcd). Our St. Paul Park refinery is located along the Mississippi
River southeast of St. Paul Park, Minnesota. The St. Paul Park refinery primarily processes sweet crude from
the Bakken region in North Dakota as well as various grades of Canadian sweet and heavy sour crude and
manufactures gasoline, distillates, asphalt, feedstocks, propane, petrochemicals and heavy fuel oil.
Canton, Ohio Refinery (95 mbpcd). Our Canton refinery is located approximately 60 miles south of Cleveland,
Ohio. The Canton refinery processes sweet and sour crude oils, including production from the nearby Utica
Shale, into gasoline, distillates, asphalt, feedstocks, propane, petrochemicals and heavy fuel oil. The Canton
refinery has earned designation as an OSHA VPP Star site.
Mandan, North Dakota Refinery (71 mbpcd). The Mandan refinery processes primarily sweet domestic crude
oil from North Dakota and manufactures gasoline, distillates, propane, heavy fuel oil, feedstocks and
petrochemicals.
Salt Lake City, Utah Refinery (63 mbpcd). Our Salt Lake City refinery is now the largest in Utah. The Salt
Lake City refinery processes crude oil from Utah, Colorado, Wyoming and Canada to manufacture gasoline,
distillates, feedstocks, propane, heavy fuel oil and petrochemicals.
Gallup, New Mexico Refinery (27 mbpcd). Our Gallup refinery is located near Gallup, New Mexico and is the
only active refinery in the Four Corners area. The Gallup refinery primarily processes high-quality crude
known as Four Corners Sweet into gasoline, distillates, feedstocks, heavy fuel oil and propane.
8
Dickinson, North Dakota Refinery (19 mbpcd). Our Dickinson refinery is located four miles west of
Dickinson, North Dakota. The Dickinson refinery primarily processes domestic crude oil from North Dakota
and manufactures ultra-low sulfur diesel and feedstocks. We are in the process of converting this refinery into
an approximately 180 million gallon per year renewable diesel facility by December 2020.
West Coast Region (711 mbpcd)
Los Angeles, California Refinery (363 mbpcd). Our Los Angeles refinery is located in Los Angeles County,
near the Los Angeles Harbor. The Los Angeles refinery is the largest refinery on the West Coast and is a
major producer of clean fuels. The Los Angeles refinery processes heavy crude from California’s San Joaquin
Valley and Los Angeles Basin as well as crudes from the Alaska North Slope, South America, West Africa
and other international sources and manufactures cleaner-burning CARB gasoline and CARB diesel fuel, as
well as conventional gasoline, distillates, feedstocks, petrochemicals, propane and heavy fuel oil.
Martinez, California Refinery (161 mbpcd). Our Martinez refinery is located in Martinez, California. The
Martinez refinery processes crude oils from California and other domestic and foreign sources and
manufactures cleaner-burning CARB gasoline and CARB diesel fuel, as well as conventional gasoline and
distillates, feedstocks, petrochemicals, propane and heavy fuel oil.
Anacortes, Washington Refinery (119 mbpcd). Our Anacortes refinery is located about 70 miles north of
Seattle on Puget Sound. The Anacortes refinery processes Canadian crude, domestic crude from North Dakota
and Alaska North Slope and international crudes to manufacture gasoline, distillates, heavy fuel oil,
feedstocks, propane and petrochemicals.
Kenai, Alaska Refinery (68 mbpcd). Our Kenai refinery is located on the Cook Inlet, 60 miles southwest of
Anchorage. The Kenai refinery processes mainly Alaska domestic crude, domestic crude from North Dakota,
along with limited international crude and manufactures distillates, gasoline, heavy fuel oil, feedstocks,
asphalt, propane and petrochemicals.
Planned maintenance activities, or turnarounds, requiring temporary shutdown of certain refinery operating
units, are periodically performed at each refinery. See Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations for additional detail.
Refined Product Yields
The following table sets forth our refinery production by product group for each of the last three years
including production from the refineries acquired in the Andeavor acquisition from October 1, 2018 forward.
(mbpd)
Gasoline
Distillates
Feedstocks and petrochemicals
Asphalt
Propane
Heavy fuel oil
Total
2019
2018
2017
1,560
1,087
315
87
55
49
3,153
1,107
773
288
69
41
38
2,316
932
641
277
63
36
37
1,986
9
Crude Oil Supply
We obtain the crude oil we refine through negotiated term contracts and purchases or exchanges on the spot
market. Our term contracts generally have market-related pricing provisions. The following table provides
information on our sources of crude oil for each of the last three years. It includes crude sourced for the
refineries acquired in the Andeavor acquisition from October 1, 2018 forward. The crude oil sourced outside
of North America was acquired from various foreign national oil companies, production companies and trading
companies.
(mbpd)
United States
Canada
Middle East and other international
Total
2019
2018
2017
1,962
541
399
2,902
1,319
465
297
2,081
999
381
385
1,765
Our refineries receive crude oil and other feedstocks and distribute our refined products through a variety of
channels, including pipelines, trucks, railcars, ships and barges.
Renewable Fuels
We in the process of converting our Dickinson, North Dakota refinery into an approximately 180 million
gallon per year renewable diesel facility by December 2020.
We own a biofuel production facility in Cincinnati, Ohio that produces biodiesel, glycerin and other
by-products. The capacity of the plant is approximately 80 million gallons per year.
Our wholly-owned subsidiary, Virent, is an advanced biofuels facility in Madison, Wisconsin that is working
to commercialize a process for converting biobased feedstocks into renewable fuels and chemicals.
We hold an ownership interest in ethanol production facilities in Albion, Michigan; Logansport, Indiana;
Greenville, Ohio and Denison, Iowa. These plants have a combined ethanol production capacity of
approximately 475 million gallons per year (31 mbpd) and are managed by our joint venture partner, The
Andersons.
Refined Product Marketing
Our refined products are sold to independent retailers, wholesale customers, our brand jobbers and our Retail
segment. In addition, we sell refined products for export to international customers. As of December 31, 2019,
there were 6,901 branded outlets in 35 states, the District of Columbia and Mexico where independent
entrepreneurs primarily maintain Marathon-branded outlets. We believe we are one of the largest wholesale
suppliers of gasoline and distillates to resellers and consumers within our 41-state market area.
The following table sets forth our refined product sales volumes by product group for each of the last three
years including sales from the refineries acquired in the Andeavor acquisition from October 1, 2018 forward.
(mbpd)
Gasoline
Distillates
Feedstocks and petrochemicals
Asphalt
Propane
Heavy fuel oil
Total
2019
2018
2017
1,967
1,205
345
93
72
53
3,735
1,416
847
289
70
44
37
2,703
1,201
691
265
68
37
39
2,301
10
Refined Product Sales Destined for Export
We sell gasoline, distillates and asphalt for export, primarily out of our Garyville, Galveston Bay, Anacortes,
Martinez, Los Angeles and Kenai refineries. The following table sets forth our refined product sales destined
for export by product group for the past three years including sales from the refineries acquired in the
Andeavor acquisition from October 1, 2018 forward.
(mbpd)
Gasoline
Distillates
Asphalt and other
Total
2019
2018
2017
131
215
51
397
117
193
24
334
96
192
9
297
Gasoline and Distillates. We sell gasoline, gasoline blendstocks and distillates (including No. 1 and No. 2
fuel oils,
jet fuel, kerosene and diesel fuel) to wholesale customers, Marathon-branded independent
entrepreneurs, our Retail segment and on the spot market. In addition, we sell diesel fuel and gasoline for
export to international customers. The demand for gasoline and distillates is seasonal in many of our markets,
with demand typically at its highest levels during the summer months.
Feedstocks and Petrochemicals. We are a producer and marketer of feedstocks and petrochemicals. Product
availability varies by refinery and includes, among others, propylene, naphtha, alkylate, xylene, butane,
benzene, raffinate, dry gas, cumene, toluene and platformate. We market these products domestically to
customers in the chemical, agricultural and fuel-blending industries. In addition, we produce fuel-grade coke
at our Garyville, Detroit, Galveston Bay and Los Angeles refineries, which is used for power generation and
in miscellaneous industrial applications, and anode-grade coke at our Los Angeles and Robinson refineries,
which is used to make carbon anodes for the aluminum smelting industry.
Asphalt. We have refinery-based asphalt production capacity of up to 136 mbpcd, which includes asphalt
cements, polymer-modified asphalt, emulsified asphalt, industrial asphalts and roofing flux. We have a broad
customer base,
including asphalt-paving contractors, government entities (states, counties, cities and
townships) and asphalt roofing shingle manufacturers. We sell asphalt in the domestic and export wholesale
markets via rail, barge and vessel.
Propane. We produce propane at all of our refineries except Dickinson. Propane is primarily used for home
heating and cooking, as a feedstock within the petrochemical industry, for grain drying and as a fuel for trucks
and other vehicles. Our propane sales are split approximately 80 percent and 20 percent between the home
heating market and petrochemical consumers, respectively.
Heavy Fuel Oil. We produce and market heavy residual fuel oil or related components, including slurry, at all
of our refineries except Dickinson. Heavy residual fuel oil is primarily used in the utility and ship bunkering
(fuel) industries, though there are other more specialized uses of the product.
Terminals and Transportation
We transport, store and distribute crude oil, feedstocks and refined products through pipelines, terminals and
marine fleets owned by MPLX and third parties in our market areas.
We own a fleet of transport trucks and trailers for the movement of refined products and crude oil. In addition,
we maintain a fleet of leased and owned railcars for the movement and storage of refined products.
The locations and detailed information about our Refining & Marketing assets are included under Item 2.
Properties and are incorporated herein by reference.
11
Competition, Market Conditions and Seasonality
The downstream petroleum business is highly competitive, particularly with regard to accessing crude oil and
other feedstock supply and the marketing of refined products. We compete with a number of other companies
to acquire crude oil for refinery processing and in the distribution and marketing of a full array of refined
products. Based upon company data as reported in the “The Oil & Gas Journal 2019 Worldwide Refinery
Survey,” we ranked first among U.S. petroleum companies on the basis of U.S. crude oil refining capacity.
We compete in four distinct markets for the sale of refined products—wholesale, including exports, spot,
branded and retail distribution. Our marketing operations compete with numerous other independent
marketers, integrated oil companies and high-volume retailers. We compete with companies in the sale of
refined products to wholesale marketing customers, including private-brand marketers and large commercial
and industrial consumers; companies in the sale of refined products in the spot market; and refiners or
marketers in the supply of refined products to refiner-branded independent entrepreneurs. In addition, we
compete with producers and marketers in other industries that supply alternative forms of energy and fuels to
satisfy the requirements of our industrial, commercial and retail consumers.
Market conditions in the oil and gas industry are cyclical and subject to global economic and political events
and new and changing governmental regulations. Our operating results are affected by price changes in crude
oil, natural gas and refined products, as well as changes in competitive conditions in the markets we serve.
Price differentials between sweet and sour crude oils, ANS, WTI and LLS crude oils and other market
structure impacts also affect our operating results.
Demand for gasoline, diesel fuel and asphalt is higher during the spring and summer months than during the
winter months in most of our markets, primarily due to seasonal increases in highway traffic and construction.
As a result, the operating results for our Refining & Marketing segment for the first and fourth quarters may
be lower than for those in the second and third quarters of each calendar year.
RETAIL
Our Retail segment sells gasoline, diesel and merchandise through convenience stores that it owns and
operates, primarily under the Speedway brand, and gasoline and diesel through direct dealer locations. Our
company-owned and operated convenience stores offer a wide variety of merchandise, including prepared
foods, beverages and non-food items. Speedway’s Speedy Rewards® loyalty program has been a highly
successful loyalty program since its inception in 2004, which averaged approximately 6.3 million active
members in 2019. Speedway’s ability to capture and analyze member-specific transactional data enables us to
offer Speedy Rewards® members discounts and promotions specific to their buying behavior. We believe
Speedy Rewards® is a key reason customers choose Speedway over competitors and it continues to drive
significant value for both Speedway and our Speedy Rewards® members.
As of December 31, 2019, our Retail segment had 3,898 company-owned and operated convenience stores
across the United States and we have long-term supply contracts for 1,068 direct dealer locations primarily in
Southern California, largely under the ARCO® brand.
Speedway also owns a 29 percent interest in PFJ Southeast LLC (“PFJ Southeast”), which is a joint venture
between Speedway and Pilot Flying J with 125 travel center locations primarily in the Southeast United States
as of December 31, 2019. Additionally, Speedway and Pilot Travel Centers LLC (“PTC”) entered into an
agreement effective October 1, 2019 in which PTC will supply, price and sell diesel fuel at certain Speedway
and PTC locations with both companies sharing in the diesel fuel margins. At December 31, 2019, this
agreement included approximately 330 Speedway and PTC fueling locations across 13 states, including
approximately 180 Speedway commercial fueling locations.
The locations and detailed information about our Retail assets are included under Item 2. Properties and are
incorporated herein by reference.
Competition, Market Conditions and Seasonality
We face strong competition for sales of retail gasoline, diesel fuel and merchandise. Our competitors
include service stations and convenience stores operated by fully integrated major oil companies, independent
entrepreneurs and other well-recognized national or regional convenience stores and travel centers, often
selling gasoline, diesel fuel and merchandise at competitive prices. Non-traditional transportation fuel retailers,
such as supermarkets, club stores and mass merchants, have affected the convenience store industry with their
12
entrance into sales of retail gasoline and diesel fuel. Energy Analysts International, Inc. estimated such
retailers had approximately 16 percent of the U.S. gasoline market in 2019.
Demand for gasoline and diesel fuel is higher during the spring and summer months than during the winter
months in most of our markets, primarily due to seasonal increases in highway traffic. As a result, the
operating results for our Retail segment for the first and fourth quarters may be lower than for those in the
second and third quarters of each calendar year. Margins from the sale of merchandise tend to be less volatile
than margins from the retail sale of gasoline and diesel fuel.
MIDSTREAM
The Midstream segment primarily includes the operations of MPLX, our sponsored MLP, and certain related
operations retained by MPC.
MPLX
MPLX owns and operates a network of crude oil, natural gas and refined product pipelines and has joint
ownership interests in other crude oil and refined products pipelines. MPLX also owns and operates light
products terminals, storage assets and maintains a fleet of owned and leased towboats and barges. MPLX’s assets
also include natural gas gathering systems and natural gas processing and NGL fractionation complexes.
MPC-Retained Midstream Assets and Investments
We have ownership interests in several crude oil and refined products pipeline systems and pipeline
companies and have indirect ownership interests in two ocean vessel joint ventures through our investment in
Crowley Coastal Partners.
The locations and detailed information about our Midstream assets are included under Item 2. Properties and
are incorporated herein by reference.
Competition, Market Conditions and Seasonality
Our Midstream operations face competition for natural gas gathering, crude oil transportation and in obtaining
natural gas supplies for our processing and related services; in obtaining unprocessed NGLs for gathering and
fractionation; and in marketing our products and services. Competition for natural gas supplies is based
primarily on the location of gas gathering facilities and gas processing plants, operating efficiency and
reliability and the ability to obtain a satisfactory price for products recovered. Competitive factors affecting
our fractionation services include availability of capacity, proximity to supply and industry marketing centers
and cost efficiency and reliability of service. Competition for customers to purchase our natural gas and NGLs
is based primarily on price, delivery capabilities, flexibility and maintenance of high-quality customer
relationships. In addition, certain of our Midstream operations are highly regulated, which affects the rates
that our common carrier pipelines can charge for transportation services and the return we obtain from such
pipelines.
Our Midstream segment can be affected by seasonal fluctuations in the demand for natural gas and NGLs and
the related fluctuations in commodity prices caused by various factors such as changes in transportation and
travel patterns and variations in weather patterns from year to year.
ENVIRONMENTAL MATTERS
Our management
is responsible for ensuring that our operating organizations maintain environmental
compliance systems that support and foster our compliance with applicable laws and regulations, and for
reviewing our overall environmental performance. We also have a Corporate Emergency Response Team that
oversees our response to any major environmental or other emergency incident involving us or any of our
facilities.
We believe it is likely that the scientific and political attention to greenhouse gas emissions, climate change,
and climate adaptation will continue, with the potential for further regulations that could affect our operations.
Currently, legislative and regulatory measures to address greenhouse gas emissions are in various phases of
review, discussion or implementation. The cost to comply with these laws and regulations cannot be estimated
at this time, but could be significant. For additional information, see Item 1A. Risk Factors. We estimate and
publicly report greenhouse gas emissions from our operations. Additionally, we continuously strive to
improve operational and energy efficiencies through resource and energy conservation where practicable.
13
Our operations are subject to numerous laws and regulations relating to the protection of the environment.
Such laws and regulations include, among others, the Clean Air Act (“CAA”) with respect to air emissions,
the Clean Water Act (“CWA”) with respect to water discharges, the Resource Conservation and Recovery Act
(“RCRA”) with respect to solid and hazardous waste treatment, storage and disposal, the Comprehensive
Environmental Response, Compensation, and Liability Act (“CERCLA”) with respect
to releases and
remediation of hazardous substances and the Oil Pollution Act of 1990 (“OPA-90”) with respect to oil
pollution and response. In addition, many states where we operate have similar laws. New laws are being
enacted and regulations are being adopted on a continuing basis, and the costs of compliance with such new
laws and regulations are very difficult to estimate until finalized.
For a discussion of environmental capital expenditures and costs of compliance, see Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations-Environmental Matters and
Compliance Costs.
Air
Greenhouse Gas Emissions
We are subject to many requirements in connection with air emissions from our operations. Internationally
and domestically, emphasis has been placed on reducing greenhouse gas emissions. In July 2019, the Trump
Administration continued its shift in climate-related policy away from the Obama Administration’s policies by
repealing the “Clean Power Plan” and replacing it with the Affordable Clean Energy rule, which establishes
guidelines for states to develop plans to address greenhouse gas emissions from existing coal-fired power
plants. President Trump also announced the United States’ intention to withdraw from the 2015 Paris UN
Climate Change Conference Agreement, which aims to hold the increase in the global average temperature to
well below two degrees Celsius as compared to pre-industrial levels. Many of the policies and regulations
rescinded through Executive Order 13783 had been adopted to meet the United States’ pledge under the Paris
Agreement. The U.S. climate change strategy and implementation of that strategy through legislation and
regulation may change under future administrations; therefore, the impact to our industry and operations due
to greenhouse gas regulation is unknown at this time.
In the absence of federal legislation or regulation of greenhouse gas emissions, states are becoming active in
regulating greenhouse gas emissions. These measures may include state actions to develop statewide or
regional programs to impose emission reductions. These measures may also include low-carbon fuel
standards, such as the California program, or a state carbon tax. These measures could result in increased costs
to operate and maintain our facilities, capital expenditures to install new emission controls and costs to
administer any carbon trading or tax programs implemented. For example, in 2017, the California state
legislature adopted AB 398, which provides direction and parameters on utilizing cap and trade after 2020 to
meet the 40% reduction target from 1990 levels by 2030 specified in SB 32. Compliance with the cap and
trade program is demonstrated through a market-based credit system. The CARB is now exploring the
potential for additional greenhouse gas reductions by 2045 via a yet undefined carbon neutrality standard.
Much of the compliance costs associated with these California regulations are ultimately passed on to the
consumer in the form of higher fuel costs. We cannot currently predict the impact of these regulations on our
liquidity, financial position, or results of operations, but we do not believe such impact will be material.
In sum, requiring reductions in greenhouse gas emissions could result in increased costs to (i) operate and
maintain our facilities, (ii) install new emission controls at our facilities and (iii) administer and manage any
greenhouse gas emissions programs, including acquiring emission credits or allotments. These requirements
may also significantly affect MPC’s refinery operations and may have an indirect effect on our business,
financial condition and results of operations. The extent and magnitude of the impact from greenhouse gas
regulation or legislation cannot be reasonably estimated due to the uncertainty regarding the additional
measures and how they will be implemented.
Regardless of whether legislation or regulation is enacted, given the continuing global demand for oil and gas
- even under different hypothetical carbon-constrained scenarios - MPC has taken actions that have resulted in
lower greenhouse gas emission intensity and we believe we are positioned to remain a successful company
well into the future. We have instituted a program to improve energy efficiency of our refineries and other
assets which will continue to pay dividends in reducing our environmental footprint as well as making us
more cost-competitive. We believe our mature governance and risk-management processes enable the
company to effectively monitor and adjust to any transitional, reputational or physical climate-related risks.
14
Other Air Emissions
In 2015, United States Environmental Protection Agency (“EPA”) finalized a revision to the National Ambient
Air Quality Standards (“NAAQS”) for ozone. The EPA lowered the primary ozone NAAQS from 75 ppb to
70 ppb. This revision initiated a multi-year process in which nonattainment designations will be made based on
more recent ozone measurements that includes data from 2016. On November 6, 2017, the EPA finalized ozone
attainment/unclassifiable designations for certain areas under the new standard. In actions dated April 30, 2018
and July 25, 2018, the EPA finalized nonattainment designations for certain areas under the lower primary ozone
standard. In some areas, these nonattainment designations could result in increased costs associated with, or
result in cancellation or delay of, capital projects at our facilities. For areas designated nonattainment, states will
be required to adopt State Implementation Plans (“SIPs”) for nonattainment areas. These SIPs may include NOx
and/or volatile organic compound (“VOC”) reductions that could result in increased costs to our facilities. We
cannot predict the effects of the various SIPs requirements at this time.
In California,
the Board for the South Coast Air Quality Management District (“SCAQMD”) passed
amendments to the Regional Clean Air Incentives Market (“RECLAIM”) that became effective in 2016,
requiring a staged reduction of nitrogen oxide emissions through 2022. In 2017, the State of California passed
AB 617, which requires each air district that is a nonattainment area for one or more air pollutants to adopt an
expedited schedule for implementation of best available retrofit control technology (“BARCT”) on specific
facilities. BARCT applies to all facilities subject to RECLAIM. In response to AB 617, the SCAQMD is
currently working to “sunset” the existing RECLAIM program and replace it with applicable BARCT
regulations. A “sunset” of the RECLAIM program and application of BARCT could result in increased costs
to operate and maintain our facilities or install emissions controls at our facilities in the SCAQMD.
Water
We maintain numerous discharge permits as required under the National Pollutant Discharge Elimination
System program of the CWA and have implemented systems to oversee our compliance with these permits. In
addition, we are regulated under OPA-90, which, among other things, requires the owner or operator of a tank
vessel or a facility to maintain an emergency plan to respond to releases of oil or hazardous substances.
OPA-90 also requires the responsible company to pay resulting removal costs and damages and provides for
civil penalties and criminal sanctions for violations of its provisions. We operate tank vessels and facilities
from which spills of oil and hazardous substances could occur. We have implemented emergency oil response
plans for all of our components and facilities covered by OPA-90 and we have established Spill Prevention,
Control and Countermeasures plans for all facilities subject to such requirements.
Additionally, OPA-90 requires that new tank vessels entering or operating in U.S. waters be double-hulled and
that existing tank vessels that are not double-hulled be retrofitted or removed from U.S. service. All barges
used for river transport of our raw materials and refined products meet the double-hulled requirements of
OPA-90. Some coastal states in which we operate have passed state laws similar to OPA-90, but with
expanded liability provisions, that include provisions for cargo owner responsibility as well as ship owner and
operator responsibility.
On October 22, 2019, the EPA and the United States Army Corps of Engineers (“Army Corps”) published a
final rule to repeal the 2015 “Clean Water Rule: Definition of Waters of the United States” (“2015 Rule”),
which amended portions of the Code of Federal Regulations (“CFR”) to restore the regulatory text that existed
prior to the 2015 Rule, effective December 23, 2019. The rule repealing the 2015 Clean Water Rule has been
challenged in multiple federal courts. On January 23, 2020, the EPA and the Army Corps finalized the
Navigable Waters Protection Rule (“2020 Rule”) to define “waters of the United States.” This rule will
become effective 60 days after publication in the Federal Register and will replace the pre-2015 regulatory
text that had been restored by the October 2019 Rule. The 2020 Rule will likely be challenged in court. A
broader definition of “waters of the United States,” such as that included in the 2015 Rule, could result in
increased cost of compliance or increased capital costs for construction of new facilities or expansion of
existing facilities.
In 2015, the EPA issued its intent to review the CWA categorical effluent limitation guidelines (“ELG”) for
the petroleum refining sector. During 2017, the EPA prepared and issued an information request (“ICR”)
requesting significant wastewater and treatment process details from select refineries, seven of which were
ours. Responses to the ICR were submitted to the EPA in early 2018. In September 2019, the EPA issued its
“Detailed Study of the Petroleum Refining Category - 2019 Report” which concluded the EPA’s review. In
October 2019, the EPA published its “Preliminary Effluent Guidelines Program Plan 14” (“Plan 14”) and
requested comments. Plan 14 indicated that the EPA was proposing to conclude the study of the Petroleum
15
Refinery Category and not take further action at this time, however, it also indicated that it intended a future
review or study of the category but did not elaborate on scope or timing of such review or study. Changes in
the ELG could result in increased costs of compliance, including capital improvement projects at our facilities.
As part of our emergency response activities, we have used aqueous film forming foam (“AFFF”) containing
per- and polyfluoroalkyl substances (“PFAS”) chemicals as a fire suppressant. At this time, AFFFs containing
PFAS are the only proven foams that can prevent and control most flammable petroleum-based liquid fires.
In May 2016, the EPA issued lifetime health advisories (“HAs”) and health effects support documents for two
PFAS substances - Perfluorooctanoic Acid (“PFOA”) and Perfluorooctane Sulfonate (“PFOS”). The EPA’s
HAs, which identify the concentration of PFOA and PFOS in drinking water at or below which adverse health
effects are not anticipated to occur over a lifetime of exposure, are 0.07 parts per billion (70 parts per trillion)
for PFOA and PFOS. HAs are non-regulatory and reflect the EPA’s assessment of the best available peer-
reviewed science.
In February 2019, EPA issued a PFAS Action Plan identifying actions the EPA is planning to take to study
and regulate various PFAS chemicals. The EPA identified that it would evaluate, among other actions,
(1) proposing national drinking water standards for PFOA and PFOS, (2) develop cleanup recommendations
for PFOA and PFOS, (3) evaluate listing PFOA and PFOS as hazardous substances under CERCLA, and
(4) conduct toxicity assessments for other PFAS chemicals. In February 2020, the EPA announced its
preliminary determinations to regulate PFOS and PFOA in drinking water and is taking public comment on
such preliminary determinations. If the preliminary determinations become final, the EPA will set drinking
water limits for PFOS and PFOA.
Congress has introduced multiple bills in the House and Senate proposing to regulate PFAS. To date, only one
such Bill has been signed into law. The National Defense Authorization Act includes provisions that added
certain PFAS to the Toxics Release Inventory under the Emergency Planning and Community Right-to-Know
Act. Facilities that manufacture, process or produce listed PFAS in quantities of more than 100 pounds per
year will be required to report their releases of PFAS. We expect further congressional action or EPA action in
the future, however, it is unknown at this time what future legislation and/or regulation will entail.
In addition, many states are actively proposing and adopting legislation and regulations relating to the use of
AFFF. Additionally, some states are adopting and proposing state-specific drinking water and cleanup
standards for various PFAS. We cannot currently predict the impact of these regulations on our liquidity,
financial position, or results of operations.
Solid Waste
We continue to seek methods to minimize the generation of hazardous wastes in our operations. RCRA
establishes standards for the management of solid and hazardous wastes. Besides affecting waste disposal
practices, RCRA also addresses the environmental effects of certain past waste disposal operations, the
recycling of wastes and the regulation of USTs containing regulated substances.
Remediation
We own or operate, or have owned or operated, certain convenience stores and other locations where, during
the normal course of operations, releases of refined products from USTs have occurred. Federal and state laws
require that contamination caused by such releases at these sites be assessed and remediated to meet
applicable standards. Penalties or other sanctions may be imposed for noncompliance. The enforcement of the
UST regulations under RCRA has been delegated to the states, which administer their own UST programs.
Our obligation to remediate such contamination varies, depending on the extent of the releases and the
applicable state laws and regulations. A portion of these remediation costs may be recoverable from the
appropriate state UST reimbursement funds once the applicable deductibles have been satisfied. We also have
ongoing remediation projects at a number of our current and former refinery, terminal and pipeline locations.
Claims under CERCLA and similar state acts have been raised with respect to the clean-up of various waste
disposal and other sites. CERCLA is intended to facilitate the clean-up of hazardous substances without regard
to fault. Potentially responsible parties for each site include present and former owners and operators of,
transporters to and generators of the hazardous substances at the site. Liability is strict and can be joint and
several. Because of various factors including the difficulty of identifying the responsible parties for any
particular site, the complexity of determining the relative liability among them, the uncertainty as to the most
desirable remediation techniques and the amount of damages and clean-up costs and the time period during
16
which such costs may be incurred, we are unable to reasonably estimate our ultimate cost of compliance with
CERCLA; however, we do not believe such costs will be material to our business, financial condition, results
of operations or cash flows.
Renewable Fuels and Other Fuels Requirements
The U.S. Congress passed the Energy Independence and Security Act of 2007 (“EISA”), which, among other
things, set a target of 35 miles per gallon for the combined fleet of cars and light trucks in the United States by
model year 2020. In August 2012, the EPA and the National Highway Traffic Safety Administration
(“NHTSA”) jointly adopted regulations that increased the mile per gallon standards for passenger cars and
light trucks through model year 2025. In 2018, the EPA and the NHTSA jointly proposed the Safer Affordable
Fuel-Efficient Vehicles Rules for Model Years 2021-2026, which would propose new Corporate Average Fuel
Economy (“CAFE”) standards for model years 2022 through 2026, amend the 2021 model year CAFE
standards, amend the EPA’s carbon dioxide emission standards for model years 2021 through 2025, and
establish new carbon dioxide emission standards for model year 2026. The EPA’s preferred alternative is to
retain the model year 2020 standards for both programs through model year 2026. The standards established
by the final regulation may differ. Higher CAFE standards for cars and light trucks have the potential to
reduce demand for our transportation fuels.
In addition, the NHTSA and the EPA issued rules providing that the Energy Policy and Conservation Act
(“EPCA”) preempts state regulations of tailpipe carbon dioxide emissions, withdrew the waiver granted to
California for its Advanced Clean Car program and determined that the Clean Air Act permits other states to
adopt only those California standards that are designed to control traditional “criteria pollutants.” California
may establish per its Clean Air Act waiver authority different standards that could apply in multiple states.
New or alternative transportation fuels such as compressed natural gas could also pose a competitive threat to
our operations.
Pursuant to the Energy Policy Act of 2005 and the EISA, the EPA has promulgated a Renewable Fuel
Standard (“RFS”) program that requires certain volumes of renewable fuel be blended with our products.
EISA requires the total volume of renewable transportation fuels sold or introduced annually in the U.S. to
reach 36.0 billion gallons by 2022. Within the total volume of renewable fuel, EISA established nested
categories of renewable fuel: advanced biofuel; biomass-based diesel; and cellulosic biofuel.
By November 30 of each year, the EPA is required to promulgate the annual renewable fuel standards for the
following compliance year. In a legal challenge to the 2014-2016 volumes, the D.C. Circuit Court of Appeals
vacated the total renewable volume for 2016 and remanded to the EPA for reconsideration consistent with the
court’s opinion. A rule that increases the total renewable volume for any compliance year to make up for the
2016 shortfall could increase our cost of compliance with the RFS program, require us to use carryover RINs
and be detrimental to the RIN market.
The EPA has finalized the annual renewable fuel standards for the year 2020. For the first time, the EPA has
proposed to reallocate to non-exempt obligated parties the renewable volume obligations of the refiners that
were granted a small refinery exemption. Also, the Tenth Circuit Court of Appeals recently held that a small
refinery is eligible for an exemption from the RFS only if it is applying for an extension of its original
exemption. According to the EPA’s data, seven refineries were granted the small refinery exemption in 2015.
The EPA granted 19 small refinery exemptions in 2016, 35 exemptions in 2017, and 31 exemptions in 2018.
A lawsuit challenging the 2018 small refinery exemption letter is currently pending in the D.C. Circuit Court
of Appeals, and similar additional lawsuits may be filed in the future. The reallocation of volumes under the
2020 rule or the invalidation of past small refinery exemptions granted to us or other refiners could result in a
decrease in the RIN bank, an increase in the price of RINs or an increase in the amount of renewable fuel we
are required to blend, any of which could increase MPC’s RFS cost of compliance.
The RFS is satisfied primarily with ethanol blended into gasoline. Vehicle, regulatory and infrastructure
constraints limit the blending of significantly more than 10 percent ethanol into gasoline (“E10”). Since 2016,
the volume requirements have resulted in the ethanol content of gasoline exceeding the E10 blendwall, which
will require obligated parties to either sell E15 or ethanol flex fuel at levels that exceed historical levels or
retire carryover RINs.
There is currently no regulatory method for verifying the validity of the RINs sold on the open market. We
have developed a RIN integrity program to vet the RINs that we purchase, and we incur costs to audit RIN
17
generators. Nevertheless, if any of the RINs that we purchase and use for compliance are found to be invalid,
we could incur costs and penalties for replacing the invalid RINs.
In addition to the federal Renewable Fuel Standards, certain states have, or are considering, promulgation of
state renewable or low carbon fuel standards. For example, California began implementing its Low Carbon
Fuel Standard (“LCFS”) in January 2011. In September 2015, the CARB approved the re-adoption of the
LCFS, which became effective on January 1, 2016, to address procedural deficiencies in the way the original
regulation was adopted. The LCFS was amended again in 2018 with the current version targeting a 20 percent
reduction in fuel carbon intensity from a 2010 baseline by 2030. The CARB is now exploring the imposition
of a 50% renewable fuel requirement for diesel (Low Emission Diesel) sold in California by 2030. We incur
costs to comply with the California LCFS, and these costs may increase if the cost of LCFS credits increases.
In sum, the RFS has required, and may in the future continue to require, additional capital expenditures or
expenses by us to accommodate increased renewable fuels use. We may experience a decrease in demand for
refined products due to an increase in combined fleet mileage or due to refined products being replaced by
renewable fuels. Demand for our refined products also may decrease as a result of low carbon fuel standard
programs or electric vehicle mandates.
Tribal Lands
Various federal agencies, including the EPA and the Department of the Interior, along with certain Native
American tribes, promulgate and enforce regulations pertaining to oil and gas operations on Native American
tribal lands where we operate. These regulations include such matters as lease provisions, drilling and
production requirements, and standards to protect environmental quality and cultural resources. For example,
the EPA has established a preconstruction permitting program for new and modified minor sources throughout
Native American tribal lands, and new and modified major sources in nonattainment areas in those areas. In
addition, each Native American tribe is a sovereign nation having the right to enforce certain laws and
regulations and to grant approvals independent from federal, state and local statutes and regulations. These
laws and regulations may increase our costs of doing business on Native American tribal lands and impact the
viability of, or prevent or delay our ability to conduct, our operations on such lands.
TRADEMARKS, PATENTS AND LICENSES
Our Marathon trademark is material to the conduct of our refining and marketing operations, and our
Speedway and ARCO trademarks are material to the conduct of our retail operations. Additionally, the retail
and marketing businesses we acquired in the Andeavor acquisition primarily use the Shell® and Mobil®
brands for fuel sales and ampm® and Giant® brands for convenience store merchandise. We currently hold a
number of U.S. and foreign patents and have various pending patent applications. Although in the aggregate
our patents and licenses are important to us, we do not regard any single patent or license or group of related
patents or licenses as critical or essential to our business as a whole. In general, we depend on our
technological capabilities and the application of know-how rather than patents and licenses in the conduct of
our operations.
EMPLOYEES
We had approximately 60,910 regular full-time and part-time employees as of December 31, 2019, which
includes approximately 40,390 employees of our Retail segment.
Approximately 4,650 of our employees are covered by collective bargaining agreements. Of these employees,
approximately 190 employees at our St. Paul Park refinery are covered by a collective bargaining agreement
scheduled to expire on December 31, 2020. Approximately 280 employees at our El Paso refinery are covered
by a collective bargaining agreement scheduled to expire in April 2021. Approximately 3,425 employees at
our Anacortes, Canton, Catlettsburg, Galveston Bay, Los Angeles, Mandan, Martinez and Salt Lake City
refineries are covered by collective bargaining agreements that are due to expire in early 2022. The remaining
750 hourly represented employees are covered by collective bargaining agreements with expiration dates
ranging from 2021 to 2024.
18
Information about our Executive and Corporate Officers
The executive and corporate officers of MPC are as follows:
Name
Gary R. Heminger
Donald C. Templin
Timothy T. Griffith
Michael J. Hennigan
Raymond L. Brooks
Glenn M. Plumby*
Suzanne Gagle
Fiona C. Laird*
C. Tracy Case*
Richard A. Hernandez*
Rick D. Hessling*
Brian K. Partee*
David R. Sauber*
David L. Whikehart*
Molly R. Benson*
David R. Heppner*
Thomas Kaczynski
Kristina A. Kazarian*
D. Rick Linhardt*
John J. Quaid
Karma M. Thomson*
Donald W. Wehrly*
James R. Wilkins*
* Corporate officer.
Age as of
February 1,
2020
66
56
50
60
59
60
54
58
59
60
53
46
56
60
53
53
58
37
61
48
52
60
53
Position with MPC
Chairman and Chief Executive Officer
Executive Vice President and Chief Financial Officer
President, Speedway LLC
MPLX President and Chief Executive Officer
Executive Vice President, Refining
Executive Vice President and Chief Operating Officer, Speedway LLC
General Counsel
Chief Human Resources Officer
Senior Vice President, Western Refining Operations
Senior Vice President, Eastern Refining Operations
Senior Vice President, Crude Oil Supply and Logistics
Senior Vice President, Marketing
Senior Vice President, Labor Relations, Operations, Health and
Administrative Services
Senior Vice President, Light Products, Supply and Logistics
Vice President, Chief Securities, Governance & Compliance Officer and
Corporate Secretary
Vice President, Commercial and Business Development
Vice President, Finance and Treasurer
Vice President, Investor Relations
Vice President, Tax
Vice President and Controller, Principal Accounting Officer
Vice President, Corporate Affairs
Vice President and Chief Information Officer
Vice President, Environment, Safety and Security
Mr. Heminger is Chairman of the Board and Chief Executive Officer. He has served as the Chairman of the
Board since April 2016 and as Chief Executive Officer since June 2011. Mr. Heminger also served as
President from July 2011 until June 2017. He has served as MPLX’s Chairman of the Board since June 2012
and as Chief Executive Officer from June 2012 through October 2019. Mr. Heminger began his career with
Marathon in 1975 and has served in roles in finance and administration, auditing, marketing and commercial,
and business development, including as President of Marathon Pipe Line Company; Manager, Business
Development and Joint Interest of Marathon Oil Company; and Vice President and Senior Vice President,
Business Development, Marathon Ashland Petroleum LLC. In 2001, he was named Executive Vice President,
Supply, Transportation and Marketing, and was appointed President of Marathon Petroleum Company LLC
and Executive Vice President-Downstream of Marathon Oil Corporation later that year. Mr. Heminger has
announced his plans to retire as Chairman of the Board and Chief Executive Officer effective April 29, 2020.
He will also retire from MPLX’s board of directors on that date.
Mr. Templin was appointed Executive Vice President and Chief Financial Officer effective July 2019. Prior
to this appointment, he served as President, Refining, Marketing and Supply beginning in October 2018,
President beginning in July 2017, Executive Vice President of MPC and President of MPLX beginning in
January 2016, Executive Vice President, Supply, Transportation and Marketing beginning in March 2015,
Vice President and Chief Financial Officer of MPLX beginning in 2012, and Senior Vice President and Chief
Financial Officer of MPC beginning in June 2011.
19
Mr. Griffith was appointed President of Speedway LLC effective July 2019. Prior to this appointment, he
served as Senior Vice President and Chief Financial Officer beginning in March 2015, Vice President,
Finance and Investor Relations, and Treasurer beginning in January 2014, and Vice President of Finance and
Treasurer beginning in August 2011.
Mr. Hennigan was appointed Chief Executive Officer of MPLX effective November 2019 and has served as
President since June 2017. Before joining MPLX, Mr. Hennigan was President, Crude, NGL and Refined
Products of the general partner of Energy Transfer Partners L.P., an energy service provider. He was President
and Chief Executive Officer of Sunoco Logistics Partners L.P., an oil and gas transportation, terminalling and
storage company, from 2012 to 2017, President and Chief Operating Officer beginning in 2010, and Vice
President, Business Development beginning in 2009.
Mr. Brooks was appointed Executive Vice President, Refining effective October 2018. Prior to this
appointment, he served as Senior Vice President, Refining beginning in March 2016, General Manager of the
Galveston Bay refinery beginning in February 2013, General Manager of the Robinson refinery beginning in
2010, and General Manager of the St. Paul Park, Minnesota refinery beginning in 2006.
Mr. Plumby was appointed Executive Vice President and Chief Operating Officer, Speedway LLC effective
August 2019. Prior to this appointment, he served as Senior Vice President and Chief Operating Officer,
Speedway LLC beginning in January 2018, Senior Vice President of Operations, Speedway LLC beginning in
September 2013, and Vice President of Operations, Speedway LLC beginning in December 2010.
Ms. Gagle was appointed General Counsel effective March 2016. Prior to this appointment, she served as
Assistant General Counsel, Litigation and Human Resources beginning in April 2011, Senior Group Counsel,
Downstream Operations beginning in 2010, and Group Counsel, Litigation beginning in 2003.
Ms. Laird was appointed Chief Human Resources Officer effective October 2018. Prior to this appointment,
she was Chief Human Resources Officer at Andeavor beginning in February 2018. Before joining Andeavor,
Ms. Laird was Chief Human Resources and Communications Officer for Newell Brands, a global consumer
goods company, beginning in May 2016 and Executive Vice President, Human Resources for Unilever, a
global consumer goods company, beginning in July 2011.
Mr. Case was appointed Senior Vice President, Western Refining Operations effective October 2018. Prior to
this appointment, he served as General Manager of the Garyville refinery beginning in December 2014, and
General Manager of the Detroit refinery beginning in June 2010.
Mr. Hernandez was appointed Senior Vice President, Eastern Refining Operations effective October 2018.
Prior to this appointment, he served as General Manager of the Galveston Bay refinery beginning in February
2016, and General Manager of the Catlettsburg refinery beginning in June 2013.
Mr. Hessling was appointed Senior Vice President, Crude Oil Supply and Logistics effective October 2018.
Prior to this appointment, he served as Manager, Crude Oil & Natural Gas Supply and Trading beginning in
September 2014, and Crude Oil Logistics & Analysis Manager beginning in July 2011.
Mr. Partee was appointed Senior Vice President, Marketing effective October 2018. Prior to this
appointment, he served as Vice President, Business Development beginning in February 2018, Director of
Business Development beginning in January 2017, Manager of Crude Oil Logistics beginning in September
2014, and Vice President, Business Development and Franchise at Speedway beginning in November 2012.
Mr. Sauber was appointed Senior Vice President, Labor Relations, Operations, Health and Administrative
Services effective October 2018. Prior to this appointment, he served as Senior Vice President, Human
Resources, Health and Administrative Services beginning in January 2018, and Vice President, Human
Resources and Labor Relations beginning in February 2017. Before joining MPC, Mr. Sauber was Vice
President, Human Resources Policy, Benefits and Services of Shell Oil Company, a global energy and
petrochemical company, beginning in 2013.
Mr. Whikehart was appointed Senior Vice President, Light Products, Supply and Logistics effective October
2018. Prior to this appointment, he served as Vice President, Environment, Safety and Corporate Affairs
beginning in February 2016, Vice President, Corporate Planning, Government & Public Affairs beginning in
January 2016, and Director, Product Supply and Optimization beginning in March 2011.
20
Ms. Benson was appointed Vice President, Chief Compliance Officer and Corporate Secretary effective
March 2016 and as Chief Securities and Governance Officer effective June 2018. Prior to her 2016
appointment, she served as Assistant General Counsel, Corporate and Finance beginning in April 2012.
Mr. Heppner was appointed Vice President, Commercial and Business Development effective October 2018.
Prior to this appointment, he served as Senior Vice President of Engineering Services and Corporate Support
of Speedway LLC beginning in September 2014, and Director, Wholesale Marketing beginning in January
2010.
Mr. Kaczynski was appointed Vice President, Finance and Treasurer effective August 2015. Prior to this
appointment, he was Vice President and Treasurer of Goodyear Tire and Rubber Company, one of the world’s
largest tire manufacturers, beginning in 2014, and Vice President, Investor Relations beginning in 2013.
Ms. Kazarian was appointed Vice President, Investor Relations effective April 2018. Prior to this
appointment, she was Managing Director and head of the MLP, Midstream and Refining Equity Research
teams at Credit Suisse, a global investment bank and financial services company, beginning in September
2017. Previously, Ms. Kazarian was Managing Director of MLP, Midstream and Natural Gas Equity Research
at Deutsche Bank, a global investment bank and financial services company, beginning in September 2014,
and an analyst specializing on various energy industry subsectors with Fidelity Management & Research
Company, a privately held investment manager, beginning in 2005.
Mr. Linhardt was appointed Vice President, Tax effective February 2018. Prior to this appointment, he
served as Director of Tax beginning in June 2017, and Manager of Tax Compliance beginning in May 2013.
Mr. Quaid was appointed Vice President and Controller effective June 2014. Prior to this appointment, he
was Vice President of Iron Ore at United States Steel Corporation, an integrated steel producer, beginning in
January 2014, and Vice President and Treasurer beginning in August 2011.
Ms. Thomson was appointed Vice President, Corporate Affairs effective October 2018. Prior to this
appointment, she was Vice President of Andeavor Logistics beginning in June 2017, and Andeavor’s Vice
President, Salt Lake City refinery beginning in October 2012.
Mr. Wehrly was appointed Vice President and Chief Information Officer effective June 2011.
Mr. Wilkins was appointed Vice President, Environment, Safety and Security effective October 2018. Prior
to this appointment, he served as Director, Environment, Safety, Security and Product Quality beginning in
February 2016, and Director, Refining Environmental, Safety, Security and Process Safety Management
beginning in June 2013.
Available Information
General information about MPC, including Corporate Governance Principles and Charters for the Audit
Committee, Compensation Committee, Corporate Governance and Nominating Committee and Sustainability
Committee, can be found at www.marathonpetroleum.com by selecting “Investors” under “Corporate
Governance” and “Board of Directors”. In addition, our Code of Business Conduct and Code of Ethics for
Senior Financial Officers are also available in this same location. We will post on our website any
amendments to, or waivers from, either of our codes requiring disclosure under applicable rules within four
business days of the amendment or waiver.
MPC uses its website, www.marathonpetroleum.com, as a channel for routine distribution of important
information, including news releases, analyst presentations, financial information and market data. Our
Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as
any amendments and exhibits to those reports, are available free of charge through our website as soon as
reasonably practicable after the reports are filed or furnished with the SEC. These documents are also
available in hard copy, free of charge, by contacting our Investor Relations office. In addition, our website
allows investors and other interested persons to sign up to automatically receive email alerts when we post
news releases and financial
information on our website. Information contained on our website is not
incorporated into this Annual Report on Form 10-K or other securities filings.
21
ITEM 1A. RISK FACTORS
You should carefully consider each of the following risks and all the other information contained in this
Annual Report on Form 10-K in evaluating us and our common stock. Some of these risks relate principally to
our business and the industry in which we operate, while others relate to the ownership of our common stock.
Our business, financial condition, results of operations and cash flows could be materially and adversely
affected by these risks, and, as a result, the trading price of our common stock could decline.
RISKS RELATING TO OUR BUSINESS
Our financial results are affected by volatile refining margins, which are dependent on factors beyond
our control.
Our operating results, cash flows, future rate of growth, the carrying value of our assets and our ability to
execute share repurchases and continue the payment of our base dividend are highly dependent on the margins
we realize on our refined products. Historically, refining and marketing margins have been volatile, and we
believe they will continue to be volatile. Our margins from the sale of gasoline and other refined products are
influenced by a number of conditions, including the price of crude oil. The price of crude oil and the price at
which we can sell our refined products may fluctuate independently due to a variety of regional and global
market factors that are beyond our control, including:
• worldwide and domestic supplies of and demand for crude oil and refined products;
•
•
•
•
•
•
•
•
transportation infrastructure availability, local market conditions and operation levels of other
refineries in our markets;
natural gas and electricity supply costs incurred by refineries;
political instability, threatened or actual terrorist incidents, armed conflict or other global political
conditions;
local weather conditions;
seasonality of demand in our marketing areas due to increased highway traffic in the spring and
summer months;
natural disasters such as hurricanes and tornadoes;
domestic and foreign governmental regulations and taxes; and
local, regional, national and worldwide economic conditions.
Some of these factors can vary by region and may change quickly, adding to market volatility, while others
may have longer-term effects. The longer-term effects of these and other factors on refining and marketing
margins are uncertain. We purchase our crude oil and other refinery feedstocks weeks before we refine them
and sell the refined products. Price level changes during the period between purchasing feedstocks and selling
the refined products from these feedstocks can have a significant effect on our financial results. We also
purchase refined products manufactured by others for resale to our customers. Price changes during the
periods between purchasing and reselling those refined products can have a material and adverse effect on our
business, financial condition, results of operations and cash flows.
Lower refining and marketing margins may lead us to reduce the amount of refined products we produce,
which may reduce our revenues, income from operations and cash flows. Significant reductions in refining
and marketing margins could require us to reduce our capital expenditures, impair the carrying value of our
assets (such as property, plant and equipment, inventory or goodwill), and decrease or eliminate our share
repurchase activity and our base dividend.
Legal, technological, political and scientific developments regarding emissions and fuel efficiency may
decrease demand for transportation fuels.
Developments aimed at reducing greenhouse gas emissions may decrease the demand or increase the cost for
our transportation fuels. Attitudes toward these products and their relationship to the environment may
significantly affect our effectiveness in marketing our products. Government efforts to steer the public toward
non-petroleum-based fuel dependent modes of transportation may foster a negative perception toward
transportation fuels or increase costs for our products, thus affecting the public’s attitude toward our major
product. Advanced technology and increased use of vehicles that do not use petroleum-based transportation
22
fuels or that are powered by hybrid engines would reduce demand for motor fuel. We may also incur increased
costs for our products, which we may not be able to pass along to our customers. These developments could
potentially have a material adverse effect on our business, financial condition, results of operations and cash flows.
Our operations are subject to business interruptions and casualty losses. Failure to manage risks
associated with business interruptions could adversely impact our operations, financial condition,
results of operations and cash flows.
Our operations are subject to business interruptions such as scheduled refinery turnarounds, unplanned
maintenance or unplanned events such as explosions, fires, refinery or pipeline releases or other incidents,
power outages, severe weather, labor disputes, or other natural or man-made disasters, such as acts of
terrorism.
Explosions, fires, refinery or pipeline releases or other incidents involving our assets or operations may result in
serious personal injury or loss of human life, significant damage to property and equipment, environmental
pollution, impairment of operations and substantial losses to us. Damages resulting from an incident involving
any of our assets or operations may result in our being named as a defendant in one or more lawsuits asserting
potentially substantial claims or in our being assessed potentially substantial fines by governmental authorities.
In addition, we operate in and adjacent to environmentally sensitive waters where tanker, pipeline, rail car and
refined product transportation and storage operations are closely regulated by federal, state and local agencies
and monitored by environmental interest groups. Certain of our refineries receive crude oil and other feedstocks
by tanker or barge. Transportation and storage of crude oil, other feedstocks and refined products over and
adjacent to water involves inherent risk and subjects us to the provisions of the OPA-90 and state laws in U.S.
coastal and Great Lakes states and states bordering inland waterways on which we operate, as well as
international laws in the jurisdictions in which we operate. If we are unable to promptly and adequately contain
any accident or discharge involving tankers, pipelines, rail cars or above ground storage tanks transporting or
storing crude oil, other feedstocks or refined products, we may be subject to substantial liability. In addition, the
service providers we have contracted to aid us in a discharge response may be unavailable due to weather
conditions, governmental regulations or other local or global events. International, federal or state rulings could
divert our response resources to other global events.
We do not insure against all potential losses, and, therefore, our business, financial condition, results of
operations and cash flows could be adversely affected by unexpected liabilities and increased costs.
We maintain insurance coverage in amounts we believe to be prudent against many, but not all, potential
liabilities arising from operating hazards. Uninsured liabilities arising from operating hazards,
including
explosions, fires, refinery or pipeline releases, cybersecurity breaches or other incidents involving our assets or
operations, could reduce the funds available to us for capital and investment spending and could have a material
adverse effect on our business, financial condition, results of operations and cash flows. Marine vessel charter
agreements may not provide complete indemnity for oil spills, and any marine charterer’s liability insurance we
carry may not cover all losses. Historically, we also have maintained insurance coverage for physical damage
and resulting business interruption to our major facilities, with significant self-insured retentions. In the future,
we may not be able to maintain insurance of the types and amounts we desire at reasonable rates.
We rely on the performance of our information technology systems, and the interruption or failure of
any information technology system, including an interruption or failure due to a cybersecurity breach,
could have an adverse effect on our business, financial condition, results of operations and cash flows.
We are heavily dependent on our information technology systems, including our network infrastructure and
cloud applications, for the safe and effective operation of our business. We rely on such systems to process,
transmit and store electronic information, including financial records and personally identifiable information
such as employee, customer, investor and payroll data, and to manage or support a variety of business processes,
including our supply chain, pipeline operations, gathering and processing operations, retail sales, credit card
payments and authorizations at our retail outlets, financial transactions, banking and numerous other processes
and transactions. Our systems and infrastructure are subject to damage or interruption from a number of
potential sources including natural disasters, malware, power failures, cyber-attacks and other events. We also
face various other cybersecurity threats from criminal hackers, state-sponsored intrusion, industrial espionage
and employee malfeasance, including threats to gain unauthorized access to sensitive information or to render
including personally
data or systems unusable. Certain vendors have access to sensitive information,
23
identifiable customer,
investor and employee data and a breakdown of their technology systems or
infrastructure as a result of a cyber-attack or otherwise could result in unauthorized disclosure of such
information.
Our cybersecurity protections, infrastructure protection technologies, disaster recovery plans and employee
training may not be sufficient to defend us against all unauthorized attempts to access our information. We
have been and may in the future be subject to attempts to gain unauthorized access to our computer network
and systems. To date, the impacts of prior events have not had a material adverse effect on us.
Any cybersecurity incident could result in theft, destruction, loss, misappropriation or release of confidential
financial and other data, intellectual property, customer awards or loyalty points; give rise to remediation or
other expenses; expose us to liability under federal and state laws; reduce our customers’ willingness to do
business with us; disrupt the services we provide to customers; and subject us to litigation and legal liability
under federal and state laws. Any of such results could have an adverse effect on our reputation, business,
financial condition, results of operations and cash flows.
Competition in our industry is intense, and very aggressive competition could adversely impact our
business.
We compete with a broad range of refining and marketing companies, including certain multinational oil
companies. Competitors with integrated operations with exploration and production resources and broader
access to resources may be better able to withstand volatile market conditions and to bear the risks inherent in
the refining industry. For example, competitors that engage in exploration and production of crude oil may be
better positioned to withstand periods of depressed refining margins or feedstock shortages.
We also face strong competition in the market for the retail sale of transportation fuels and merchandise. Our
competitors include outlets owned or operated by fully integrated major oil companies or their dealers or
jobbers, and other well-recognized national or regional retail outlets, often selling transportation fuels and
transportation fuel
merchandise at very competitive prices. Several non-traditional
retailers such as
supermarkets, club stores and mass merchants are in the retail
transportation fuels business. These
non-traditional transportation fuels retailers have obtained a significant share of the transportation fuels
market and we expect their market share to grow. Because of their diversity, integration of operations,
experienced management and significant financial resources, these companies may be better able to withstand
volatile market conditions or levels of low or no profitability in the retail segment of the market. In addition,
these retailers may use promotional pricing or discounts, both at the pump and in the store, to encourage
in-store merchandise sales. These activities by our competitors could pressure us to offer similar discounts,
adversely affecting our profit margins. Additionally, the loss of market share by our convenience stores to
these and other retailers relating to either transportation fuels or merchandise could have a material adverse
effect on our business, financial condition, results of operations and cash flows.
We are subject to interruptions of supply and increased costs as a result of our reliance on third-party
transportation of crude oil and refined products.
We utilize the services of third parties to transport crude oil and refined products to and from our refineries. In
addition to our own operational risks, we could experience interruptions of supply or increases in costs to
deliver refined products to market if the ability of the pipelines, railways or vessels to transport crude oil or
refined products is disrupted because of weather events, accidents, governmental regulations or third-party
actions. In particular, pipelines or railroads provide a nearly exclusive form of transportation of crude oil to, or
refined products from, some of our refineries. A prolonged interruption, material reduction or cessation of
service of such a pipeline or railway, whether due to private party or governmental action or other reason, or
any other prolonged disruption of the ability of the trucks, pipelines, railways or vessels to transport crude oil
or refined products to or from one or more of our refineries, could have a material adverse effect on our
business, financial condition, results of operations and cash flows.
24
Our investments in joint ventures decrease our ability to manage risk.
We conduct some of our operations through joint ventures in which we share control over certain economic
and business interests with our joint venture partners. Our joint venture partners may have economic, business
or legal interests or goals that are inconsistent with our goals and interests or may be unable to meet their
obligations. Failure by us, or an entity in which we have an interest, to adequately manage the risks associated
with any acquisitions or joint ventures could have a material adverse effect on the financial condition or
results of operations of our joint ventures and adversely affect our business, financial condition, results of
operations and cash flows.
Our inventory risk management activities may result in substantial derivative variability or losses.
We enter into derivative transactions to manage the risks from changes in the prices of crude oil, refined
products, natural gas and other feedstocks associated with our physical inventories and future production, and
these transactions may result in substantial derivatives variability or losses, which could increase the volatility
of our earnings. We manage price risk on inventories above or below our target levels to minimize the impact
commodity price fluctuations have on our earnings and cash flows. Consequently, our results may fluctuate
significantly from one reporting period to the next depending on commodity price fluctuations and our relative
physical inventory positions. These transactions may also expose us to the risk of financial loss. For example,
if our production is less than we anticipated at the time we entered into a hedge agreement or if a counterparty
to our hedge agreement fails to perform its obligations under its agreement, we may suffer a financial loss.
We have significant debt obligations; therefore, our business, financial condition, results of operations
and cash flows could be harmed by a deterioration of our credit profile, a decrease in debt capacity or
unsecured commercial credit available to us, or by factors adversely affecting credit markets generally.
At December 31, 2019, our total debt obligations for borrowed money and finance lease obligations were
$29.28 billion, including $20.12 billion of obligations of MPLX and its subsidiaries. We may incur substantial
additional debt obligations in the future.
Our indebtedness may impose various restrictions and covenants on us that could have material adverse
consequences, including:
•
•
•
•
•
increasing our vulnerability to changing economic, regulatory and industry conditions;
limiting our ability to compete and our flexibility in planning for, or reacting to, changes in our
business and the industry;
limiting our ability to pay dividends to our stockholders;
limiting our ability to borrow additional funds; and
requiring us to dedicate a substantial portion of our cash flow from operations to payments on our
debt, thereby reducing funds available for working capital, capital expenditures, acquisitions, share
repurchases, dividends and other purposes.
A decrease in our debt or commercial credit capacity, including unsecured credit extended by third-party
suppliers, or a deterioration in our credit profile could increase our costs of borrowing money and limit our
access to the capital markets and commercial credit. Our credit rating is determined by independent credit
rating agencies. We cannot provide assurance that any of our credit ratings will remain in effect for any given
period of time or that a rating will not be lowered or withdrawn entirely by a rating agency if, in its judgment,
circumstances so warrant. On November 1, 2019, Moody’s announced it had changed its outlook for MPC’s
and MPLX’s credit ratings from stable to negative following the announcement of the planned Speedway
spinoff and Midstream review. The planned Speedway spinoff and Midstream review could be factors causing
or contributing to a future determination by one or more of the rating agencies to lower MPC’s or MPLX’s
credit rating. Any changes in our credit capacity or credit profile could materially and adversely affect our
business, financial condition, results of operations and cash flows.
We have a trade receivables securitization facility that provides liquidity of up to $750 million depending on
the amount of eligible domestic trade accounts receivables. In periods of lower prices, we may not have
sufficient eligible accounts receivables to support full availability of this facility.
25
Uncertainty relating to the calculation of LIBOR and other reference rates and their potential
discontinuance may adversely affect interest expense related to our outstanding debt.
National and international regulators and law enforcement agencies have conducted investigations into a
number of rates or indices, which are deemed to be “reference rates.” Actions by such regulators and law
enforcement agencies may result in changes to the manner in which certain reference rates are determined,
their discontinuance or the establishment of alternative reference rates. In particular, it appears highly likely
that LIBOR will be discontinued or modified by the end of 2021.
At this time, it is not possible to predict the effect that these developments, any discontinuance, modification
or other reforms to LIBOR or any other reference rate, or the establishment of alternative reference rates, may
have on LIBOR, other benchmarks or floating rate indebtedness. Uncertainty as to the nature of such potential
discontinuance, modification, alternative reference rates or other reforms may materially adversely affect the
trading market for securities linked to such benchmarks. Furthermore, the use of alternative reference rates or
other reforms could cause the market value of, the applicable interest rate on and the amount of interest paid
on our floating rate indebtedness to be materially different than expected and could materially adversely
impact our ability to refinance such floating rate indebtedness or raise future indebtedness on a cost effective
basis.
Historic or current operations could subject us to significant legal liability or restrict our ability to
operate.
We currently are defending litigation and anticipate we will be required to defend new litigation in the future.
Our operations, including those of MPLX, and those of our predecessors could expose us to litigation and civil
claims by private plaintiffs for alleged damages related to contamination of the environment or personal
injuries caused by releases of hazardous substances from our facilities, products liability, consumer credit or
privacy laws, product pricing or antitrust laws or any other laws or regulations that apply to our operations.
While an adverse outcome in most litigation matters would not be expected to be material to us, in class-
action litigation, large classes of plaintiffs may allege damages relating to extended periods of time or other
alleged facts and circumstances that could increase the amount of potential damages. Attorneys general and
other government officials may pursue litigation in which they seek to recover civil damages from companies
on behalf of a state or its citizens for a variety of claims, including violation of consumer protection and
product pricing laws or natural resources damages. We are defending litigation of that type and anticipate that
we will be required to defend new litigation of that type in the future. If we are not able to successfully defend
such litigation, it may result in liability to our company that could materially and adversely affect our
business, financial condition, results of operations and cash flows. In addition to substantial liability, plaintiffs
in litigation may also seek injunctive relief which, if imposed, could have a material adverse effect on our
future business, financial condition, results of operations and cash flows.
A portion of our workforce is unionized, and we may face labor disruptions that could materially and
adversely affect our business, financial condition, results of operations and cash flows.
Approximately 4,650 of our employees are covered by collective bargaining agreements. Of these employees,
approximately 190 employees at our St. Paul Park refinery are covered by a collective bargaining agreement
scheduled to expire on December 31, 2020. Approximately 280 employees at our El Paso refinery are covered
by a collective bargaining agreement scheduled to expire in April 2021. Approximately 3,425 employees at
our Anacortes, Canton, Catlettsburg, Galveston Bay, Los Angeles, Mandan, Martinez and Salt Lake City
refineries are covered by collective bargaining agreements that are due to expire in early 2022. The remaining
750 hourly represented employees are covered by collective bargaining agreements with expiration dates
ranging from 2021 to 2024. These contracts may be renewed at an increased cost to us. In addition, we have
experienced in the past, and may experience in the future, work stoppages as a result of labor disagreements.
Any prolonged work stoppages disrupting operations could have a material adverse effect on our business,
financial condition, results of operations and cash flows.
In addition, California requires refinery owners to pay prevailing wages to contract craft workers and restricts
refiners’ ability to hire qualified employees to a limited pool of applicants. Legislation or changes in regulations
could result in labor shortages, higher labor costs, and an increased risk that contract employees become joint
employees, which could trigger bargaining issues, employment discrimination liability issues as well as wage
and benefit consequences, especially during critical maintenance and construction periods.
26
One of our subsidiaries acts as the general partner of a master limited partnership, which may involve a
greater exposure to certain legal liabilities than existed under our historic business operations.
One of our subsidiaries acts as the general partner of MPLX, a master limited partnership. Our control of the
general partner of MPLX may increase the possibility of claims of breach of fiduciary duties, including claims
of conflicts of interest. Any liability resulting from such claims could have a material adverse effect on our
future business, financial condition, results of operations and cash flows.
If foreign investment in us or MPLX exceeds certain levels, MPLX could be prohibited from operating
inland river vessels, which could materially and adversely affect our business, financial condition,
results of operations and cash flows.
The Shipping Act of 1916 and Merchant Marine Act of 1920 (collectively, the “Maritime Laws”), generally
require that vessels engaged in U.S. coastwise trade be owned by U.S. citizens. Among other requirements to
establish citizenship, entities that own such vessels must be owned at least 75 percent by U.S. citizens. If we
fail to maintain compliance with the Maritime Laws, MPLX would be prohibited from operating vessels in the
U.S. inland waters. Such a prohibition could materially and adversely affect our business, financial condition,
results of operations and cash flows.
We are subject to certain continuing contingent liabilities of Marathon Oil pursuant to agreements we
entered into in connection with our spinoff from Marathon Oil, which could materially and adversely
affect our business, financial condition, results of operations and cash flows.
Although our spinoff from Marathon Oil occurred in mid-2011, certain liabilities of Marathon Oil could
become our obligations. For example, we entered into a separation and distribution agreement with Marathon
Oil that includes provisions governing the relationship between our company and Marathon Oil following our
spinoff. Among other things,
the separation and distribution agreement provides for indemnification
obligations designed to make us financially responsible for substantially all liabilities that may exist relating
to our downstream business activities, whether incurred prior to or after our spinoff, as well as certain
obligations of Marathon Oil assumed by us. Our obligations to indemnify Marathon Oil under the
circumstances set forth in the separation and distribution agreement could subject us to substantial liabilities.
Marathon Oil also agreed to indemnify us for certain liabilities. However, third parties could seek to hold us
responsible for any of the liabilities retained by Marathon Oil, and there can be no assurance that the
indemnity from Marathon Oil will be sufficient to protect us against the full amount of such liabilities, that
Marathon Oil will be able to fully satisfy its indemnification obligations or that Marathon Oil’s insurers will
cover us for liabilities associated with occurrences prior to our spinoff. Moreover, even if we ultimately
succeed in recovering from Marathon Oil or its insurers any amounts for which we are held liable, we may be
temporarily required to bear these losses ourselves. Such liabilities could have a material adverse effect on our
business, financial condition, results of operation and cash flows.
A significant decrease in oil and natural gas production in MPLX’s areas of operation, whether due to
sustained declines in oil, natural gas and NGL prices, natural declines in well production, or otherwise,
may adversely affect MPLX’s business, results of operations and financial condition, and could reduce
its ability to make distributions to us.
A significant portion of MPLX’s operations are dependent on the continued availability of natural gas and
crude oil production. The production from oil and natural gas reserves and wells owned by its producer
customers will naturally decline over time, which means that MPLX’s cash flows associated with these wells
will also decline over time. To maintain or increase throughput levels and the utilization rate of MPLX’s
facilities, MPLX must continually obtain new oil, natural gas, NGL and refined product supplies, which
depend in part on the level of successful drilling activity near its facilities, its ability to compete for volumes
from successful new wells and its ability to expand its system capacity as needed.
We have no control over the level of drilling activity in the areas of MPLX’s operations, the amount of reserves
associated with the wells or the rate at which production from a well will decline. In addition, we have no
control over producers or their production decisions, which are affected by, among other things, prevailing
and projected energy prices, drilling costs per Mcf or barrel, demand for hydrocarbons, operational challenges,
access to downstream markets, the level of reserves, geological considerations, governmental regulations and
the availability and cost of capital. Because of these factors, even if oil or natural gas reserves are known to
exist in areas served by MPLX assets, producers may choose not to develop those reserves. Reductions in
27
exploration or production activity in MPLX’s areas of operations could lead to reduced throughput on its
pipelines and utilization rates of its facilities.
Decreases in energy prices can decrease drilling activity, production rates and investments by third parties in
the development of new oil and natural gas reserves. The prices for oil, natural gas and NGLs depend upon
factors beyond our control, including global and local demand, production levels, changes in interstate
pipeline gas quality specifications, imports and exports, seasonality and weather conditions, economic and
political conditions domestically and internationally and governmental regulations. Sustained periods of low
prices could result in producers also significantly curtailing or limiting their oil and gas drilling operations
which could substantially delay the production and delivery of volumes of oil, natural gas and NGLs to
MPLX’s facilities and adversely affect their revenues and cash available for distribution to us. This impact
may also be exacerbated due to the extent of MPLX’s commodity-based contracts, which are more directly
impacted by changes in natural gas and NGL prices than its fee-based contracts due to frac spread exposure
and may result in operating losses when natural gas becomes more expensive on a Btu equivalent basis than
NGL products. In addition, the purchase and resale of natural gas and NGLs in the ordinary course exposes
our Midstream operations to volatility in natural gas or NGL prices due to the potential difference in the time
of the purchases and sales and the potential difference in the price associated with each transaction, and direct
exposure may also occur naturally as a result of production processes. Also, the significant volatility in natural
gas, NGL and oil prices could adversely impact MPLX’s unit price, thereby increasing its distribution yield
and cost of capital. Such impacts could adversely impact MPLX’s ability to execute its long-term organic
growth projects, satisfy obligations to its customers and make distributions to unitholders at intended levels,
and may also result in non-cash impairments of long-lived assets or goodwill or other-than-temporary
non-cash impairments of our equity method investments.
Significant stockholders may attempt to effect changes at our company or acquire control over our
company, which could impact the pursuit of business strategies and adversely affect our results of
operations and financial condition.
Our stockholders may from time to time engage in proxy solicitations, advance stockholder proposals or
otherwise attempt to effect changes or acquire control over our company. Campaigns by stockholders to effect
changes at publicly traded companies are sometimes led by investors seeking to increase short-term
stockholder value through actions such as financial restructuring, increased debt, special dividends, stock
repurchases or sales of assets or the entire company. Responding to proxy contests and other actions by
activist stockholders can be costly and time-consuming and could divert the attention of our board of directors
and senior management from the management of our operations and the pursuit of our business strategies. As
a result, stockholder campaigns could adversely affect our results of operations and financial condition.
Our operations could be disrupted if we are unable to maintain or obtain real property rights required
for our business.
We do not own all of the land on which certain of our assets are located, particularly our midstream assets, but
rather obtain the rights to construct and operate such assets on land owned by third parties and governmental
agencies for a specific period of time. Therefore, we are subject to the possibility of more burdensome terms
and increased costs to retain necessary land use if our leases, rights-of-way or other property rights lapse,
terminate or are reduced or it is determined that we do not have valid leases, rights-of-way or other property
rights. Any loss of or reduction in these rights, including loss or reduction due to legal, governmental or other
actions or difficulty renewing leases, right-of-way agreements or permits on satisfactory terms or at all, could
have a material adverse effect on our business, financial condition, results of operations and cash flows.
Certain of our facilities are located on Native American tribal lands and are subject to various federal
and tribal approvals and regulations, which may increase our costs and delay or prevent our efforts to
conduct planned operations.
Various federal agencies within the U.S. Department of the Interior, particularly the Bureau of Indian Affairs,
Bureau of Land Management, and the Office of Natural Resources Revenue, along with each Native
American tribe, regulate natural gas and oil operations on Native American tribal lands, including drilling and
production requirements and environmental standards. In addition, each Native American tribe is a sovereign
nation having the right to enforce laws and regulations and to grant approvals independent from federal, state
and local statutes and regulations. These tribal laws and regulations include various taxes, fees, requirements
to employ Native American tribal members and other conditions that apply to operators and contractors
28
conducting operations on Native American tribal lands. Persons conducting operations on tribal lands are
generally subject to the Native American tribal court system. In addition, if our relationships with any of the
relevant Native American tribes were to deteriorate, we could face significant risks to our ability to continue
operations on Native American tribal lands. One or more of these factors may increase our cost of doing
business on Native American tribal lands and impact the viability of, or prevent or delay our ability to conduct
operations on such lands.
RISKS RELATING TO STRATEGIC TRANSACTIONS
Our proposed spinoff of Speedway may not be completed on the currently contemplated timeline or at
all and may not achieve the intended benefits.
On October 31, 2019, we announced our intention to separate Speedway into an independent, publicly traded
company by the end of 2020. This transaction is subject to certain conditions, including final approval by our
board of directors, receipt of customary assurances regarding the intended tax-free nature of the transaction
and the filing and effectiveness of a registration statement with the SEC. Unanticipated developments,
including possible delays in obtaining various regulatory approvals or clearances, uncertainty of the financial
markets and challenges in establishing infrastructure or processes, could delay or prevent the proposed spinoff
or cause the proposed spinoff to occur on terms or conditions that are less favorable or different than expected.
Even if the spinoff is completed, we may not realize some or all of the anticipated benefits from the spinoff.
Expenses incurred to accomplish the proposed spinoff may be significantly higher than what we currently
anticipate. Executing the proposed spinoff also requires significant time and attention from management,
which could distract them from other tasks in operating our business. Following the proposed spinoff, the
combined value of the common stock of the two publicly traded companies may not be equal to or greater
than what the value of our common stock would have been had the proposed spinoff not occurred. If the
proposed Speedway spinoff is completed, our diversification of revenue sources will diminish due to the
separation of the Speedway business, and our business, financial condition, results of operations and cash
flows may be subject to increased volatility as a result.
If the proposed spinoff of Speedway were to fail to qualify as a transaction that is generally tax-free for
U.S. federal income tax purposes, MPC and MPC shareholders could be subject to significant tax
liabilities.
The Speedway spinoff is subject to the receipt of customary assurances regarding the intended tax-free nature
of the transactions for U.S. federal income tax purposes. Notwithstanding receipt of an Internal Revenue
Service (“IRS”) private letter ruling and/or the opinion(s) of tax advisors, the IRS could determine that the
distribution and/or certain related transactions should be treated as taxable transactions for U.S. federal
income tax purposes if it determines that any of the representations, assumptions, or undertakings upon which
the IRS private letter ruling or the opinion(s) of tax advisors were based are inaccurate or have not been
complied with. In addition, an IRS private letter ruling would not address all of the issues that are relevant to
determining whether the distribution, together with certain related transactions, qualifies as a transaction that
is generally tax-free for U.S. federal income tax purposes. The opinion(s) of tax advisors represent the
judgment of such tax advisors and are not binding on the IRS or any court, and the IRS or a court may
disagree with the conclusions in the opinion(s) of tax advisors. Accordingly, notwithstanding receipt by MPC
of an IRS private letter ruling and/or the opinion(s) of tax advisors, there can be no assurance that the IRS will
not assert that the distribution and/or certain related transactions do not qualify for tax-free treatment for U.S.
federal income tax purposes or that a court would not sustain such a challenge. In the event the IRS were to
prevail with such challenge, Speedway, as well as MPC and MPC shareholders, could be subject to significant
U.S. federal income tax liability.
If the distribution were to fail to qualify as a transaction that is generally tax-free for U.S. federal income tax
purposes under Sections 355 and 368(a)(1)(D) of the Internal Revenue Code (the “Code”), in general, for U.S.
federal income tax purposes, MPC would recognize taxable gain as if it had sold the Speedway common stock in
a taxable sale for its fair market value, and MPC shareholders who receive Speedway common stock in the
distribution would be subject to tax as if they had received a taxable distribution equal to the fair market value of
such shares. Even if the distribution were to otherwise qualify as a tax-free transaction under Sections 355 and
368(a)(1)(D) of the Code, it may result in taxable gain to MPC (but not its shareholders) under Section 355(e)
of the Code if the distribution were deemed to be part of a plan (or series of related transactions)
pursuant to which one or more persons acquire, directly or indirectly, shares representing a 50 percent or
greater interest (by vote or value) in MPC or Speedway. For this purpose, any acquisitions of MPC or Speedway
29
shares within the period beginning two years before the distribution and ending two years after the distribution
are presumed to be part of such a plan, although MPC or Speedway may be able to rebut that presumption
(including by qualifying for one or more safe harbors under applicable Treasury Regulations). If the IRS were
to determine that acquisitions of MPC or Speedway stock, either before or after the distribution, were part of a
plan or series of related transactions that included the distribution, such determination could result in
significant tax liabilities to MPC.
Our ongoing review of other strategic alternatives for our Midstream business may pose additional
risks to our business.
Our board of directors has formed a special committee to evaluate strategies to enhance shareholder value
through a review of our Midstream business, which we primarily conduct through MPLX. Our exploration of
strategic alternatives, including any uncertainty created by this process, involves a number of risks: significant
fluctuations in our stock price could occur in response to developments relating to the strategic review process
or market speculation regarding any such developments; we may encounter difficulties in hiring, retaining and
motivating key personnel during this process or as a result of uncertainties generated by this process or any
developments or actions relating to it; we may incur substantial increases in general and administrative
expense associated with increased legal fees and the need to retain and compensate third-party advisors; and
we may experience difficulties in preserving the commercially sensitive information that may need to be
disclosed to third parties during this process or in connection with an assessment of our strategic alternatives.
The strategic review process also requires significant time and attention from management, which could
distract them from other tasks in operating our business. There can be no assurance that this process will result
in the pursuit or consummation of any strategic transaction. The occurrence of any one or more of the above
risks could have a material adverse impact on our business, financial condition, results of operations and cash
flows.
Significant acquisitions, if any, in the future will involve the integration of new assets or businesses and
present substantial risks that could adversely affect our business, financial conditions, results of
operations and cash flows.
Any significant future transactions involving the addition of new assets or businesses will present potential
risks, which may include, among others:
•
•
•
•
•
•
•
inaccurate assumptions about future synergies, revenues, capital expenditures and operating costs;
an inability to successfully integrate assets or businesses we acquire;
a decrease in our liquidity resulting from using a portion of our available cash or borrowing capacity
under our revolving credit agreement to finance transactions;
a significant increase in our interest expense or financial leverage if we incur additional debt to
finance transactions;
the assumption of unknown environmental and other liabilities, losses or costs for which we are not
indemnified or for which our indemnity is inadequate;
the diversion of management’s attention from other business concerns; and
the incurrence of other significant charges, such as impairment of goodwill or other intangible
assets, asset devaluation or restructuring charges.
30
RISKS RELATING TO THE ANDEAVOR ACQUISITION
The Andeavor acquisition may not be accretive, and may be dilutive, to MPC’s earnings per share and
cash flow from operations per share, which may negatively affect the market price of shares of MPC
common stock.
The Andeavor acquisition may not be accretive, and may be dilutive, to MPC’s earnings per share and cash
flow from operations per share. Earnings per share and cash flow from operations per share in the future are
based on preliminary estimates that may materially change. In addition, future events and conditions could
decrease or delay any accretion, result in dilution or cause greater dilution than is currently expected.
Any dilution of, or decrease or delay of any accretion to, MPC’s earnings per share or cash flow from
operations per share could cause the price of MPC’s common stock to decline.
MPC has incurred and will continue to incur significant costs in connection with the Andeavor
acquisition, which may be in excess of those anticipated by MPC.
MPC has incurred substantial expenses in connection with the Andeavor acquisition. MPC expects to continue
to incur a number of non-recurring costs associated with combining the operations of the two companies and
achieving desired synergies. These fees and costs have been, and may continue to be, substantial.
Additional unanticipated costs may be incurred in the integration of the two companies’ businesses. The
elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the
businesses, may not be sufficient to allow MPC to offset integration-related costs over time. These integration
costs, as well as other unanticipated costs and expenses, could materially and adversely affect MPC’s results
of operations, financial position and cash flows.
MPC’s results may suffer if it does not effectively manage its expanded operations following the
Andeavor acquisition.
MPC’s success depends, in part, on its ability to manage its expansion following the Andeavor acquisition,
which poses numerous risks and uncertainties, including the need to integrate the operations and business of
Andeavor into its existing business in an efficient and timely manner, to combine systems and management
controls and to integrate relationships with customers, vendors and business partners.
MPC may fail to realize all of the anticipated benefits of the Andeavor acquisition.
The success of the Andeavor acquisition depends, in part, on MPC’s ability to realize the anticipated benefits
and cost savings from combining MPC’s and Andeavor’s businesses, including the annual gross, run-rate,
commercial and corporate synergies that MPC expects to realize within the first three years after the
combination. The anticipated benefits and cost savings of the Andeavor acquisition may not be realized fully
or at all, may take longer to realize than expected, may require more non-recurring costs and expenditures to
realize than expected or could have other adverse effects. There could be potential unknown liabilities and
unforeseen expenses associated with the Andeavor acquisition that were not discovered in the course of
performing due diligence.
We have recorded goodwill and other intangible assets that could become further impaired and result
in material non-cash charges to our results of operations.
We accounted for the Andeavor and other acquisitions using the acquisition method of accounting, which
requires that the assets and liabilities of the acquired business be recorded to our balance sheet at their
respective fair values as of the acquisition date. Any excess of the purchase consideration over the fair value
of the acquired net assets is recognized as goodwill.
As of December 31, 2019, our balance sheet reflected $20.0 billion and $3.0 billion of goodwill and other
intangible assets, respectively. These amounts include goodwill and other intangible assets of $17.3 billion
and $2.8 billion, respectively, recognized in connection with the Andeavor acquisition. As a part of our annual
impairment review for goodwill, MPLX recorded approximately $1.2 billion of impairment expense in the
fourth quarter of 2019. To the extent the value of goodwill or intangible assets becomes further impaired, we
may be required to incur additional material non-cash charges relating to such impairment. Our operating
results may be significantly impacted from both the impairment and the underlying trends in the business that
triggered the impairment.
31
RISKS RELATING TO OUR INDUSTRY
Meeting the requirements of evolving environmental or other laws or regulations may reduce our
refining and marketing margin and may result in substantial capital expenditures and operating costs
that could materially and adversely affect our business, financial condition, results of operations and
cash flows.
Various laws and regulations are expected to impose increasingly stringent and costly requirements on our
operations, which may reduce our refining and marketing margin. Laws and regulations expected to become
more stringent relate to the following:
•
•
•
•
•
•
•
•
•
•
the emission or discharge of materials into the environment,
solid and hazardous waste management,
the regulatory classification of materials presently used in our business,
pollution prevention,
greenhouse gas emissions,
climate change,
characteristics and composition of transportation fuels, including the quantity of renewable fuels
that must be blended into transportation fuels,
public and employee safety and health,
inherently safer technology, and
facility security.
The specific impact of laws and regulations on us and our competitors may vary depending on a number of
factors, including the age and location of operating facilities, marketing areas, crude oil and feedstock sources,
production processes and subsequent judicial interpretation of such laws and regulations. As a result of these
laws and regulations, we have incurred and will continue to incur substantial capital, operating and
maintenance, and remediation expenditures to modify operations, install pollution control equipment, perform
site cleanups or curtail operations. Such expenditures could materially and adversely affect our business,
financial condition, results of operations and cash flows. For additional information on environmental laws
and regulations that may affect us, see Item 1. Business - Environmental Matters above.
Federal, state and local legislation and regulatory initiatives relating to hydraulic fracturing could delay or
impede producer’s gas production or result in reduced volumes available for our midstream assets to gather,
process and fractionate. While we do not conduct hydraulic fracturing operations, we do provide gathering,
processing and fractionation services with respect to natural gas and natural gas liquids produced by our
customers as a result of such operations. If federal, state or local laws or regulations that significantly restrict
hydraulic fracturing are adopted, such legal requirements could make it more difficult to complete natural gas
wells in shale formations and increase producers’ costs of compliance.
Climate change and greenhouse gas emission regulation could affect our operations, energy
consumption patterns and regulatory obligations, any of which could affect our results of operations
and financial condition.
Currently, multiple legislative and regulatory measures to address greenhouse gas (including carbon dioxide,
methane and nitrous oxides) and other emissions are in various phases of consideration, promulgation or
implementation. These include actions to develop international, federal, regional or statewide programs,
which could require reductions in our greenhouse gas or other emissions, establish a carbon tax and decrease
the demand for our refined products. Requiring reductions in these emissions could result in increased costs to
(i) operate and maintain our facilities, (ii) install new emission controls at our facilities and (iii) administer
and manage any emissions programs, including acquiring emission credits or allotments.
For example, in 2017, the California state legislature adopted AB 398, which provides direction and parameters
on utilizing cap and trade after 2020 to meet the 40% reduction target from 1990 levels by 2030 specified in SB
32. Compliance with the cap and trade program is demonstrated through a market-based credit system.
Additionally, the CARB is now exploring the potential for additional greenhouse gas reductions by 2045 via
a yet undefined carbon neutrality standard. Other states are proposing, or have already promulgated, low
32
carbon fuel standards or similar initiatives to reduce emissions from the transportation sector. If we are unable
to pass the costs of compliance on to our customers, sufficient credits are unavailable for purchase, we have to
pay a significantly higher price for credits, or if we are otherwise unable to meet our compliance obligation,
our financial condition and results of operations could be adversely affected.
Regional and state climate change and air emissions goals and regulatory programs are complex, subject to
change and considerable uncertainty due to a number of factors including technological feasibility, legal
challenges and potential changes in federal policy. Increasing concerns about climate change and carbon
intensity have also resulted in societal concerns and a number of international and national measures to limit
greenhouse gas emissions. Additional stricter measures and investor pressure can be expected in the future
and any of these changes may have a material adverse impact on our business or financial condition.
International climate change-related efforts, such as the 2015 United Nations Conference on Climate Change,
which led to the creation of the Paris Agreement, may impact the regulatory framework of states whose
policies directly influence our present and future operations. Though the United States has announced its
intention to withdraw from the Paris Agreement, U.S. climate change strategy and implementation of that
strategy through legislation and regulation may change under future administrations; therefore, the impact to
our industry and operations due to greenhouse gas regulation is unknown at this time.
We could also face increased climate-related litigation with respect
to our operations or products.
Governmental and other entities in California, New York, Maryland and Rhode Island have filed lawsuits
against coal, gas, oil and petroleum companies, including the Company. The lawsuits allege damages as a
result of climate change and the plaintiffs are seeking unspecified damages and abatement under various tort
theories. Similar lawsuits may be filed in other jurisdictions. There remains a high degree of uncertainty
regarding the ultimate outcome of these lawsuits, as well as their potential effect on the Company’s business,
financial condition, results of operation and cash flows.
Regulatory and other requirements concerning the transportation of crude oil and other commodities
by rail may cause increases in transportation costs or limit the amount of crude oil that we can
transport by rail.
We rely on a variety of systems to transport crude oil, including rail. Rail transportation is regulated by
federal, state and local authorities. New regulations or changes in existing regulations could result in increased
compliance expenditures. For example, in 2015, the U.S. Department of Transportation issued new standards
and regulations applicable to crude-by-rail transportation (Enhanced Tank Car Standards and Operational
Controls for High-Hazard Flammable Trains). These or other regulations that require the reduction of volatile
or flammable constituents in crude oil that is transported by rail, change the design or standards for rail cars
used to transport the crude oil we purchase, change the routing or scheduling of trains carrying crude oil, or
require any other changes that detrimentally affect the economics of delivering North American crude oil by
rail could increase the time required to move crude oil from production areas to our refineries, increase the
cost of rail transportation and decrease the efficiency of shipments of crude oil by rail within our operations.
Any of these outcomes could have a material adverse effect on our business and results of operations.
Severe weather events and other climate conditions may adversely affect our facilities and ongoing
operations.
We have mature systems in place to manage potential acute physical risks, such as floods, hurricane-force
winds, wildfires and snowstorms, and potential chronic physical risks, such as higher ocean levels. If any such
events were to occur, they could have an adverse effect on our assets and operations. Specifically, where
appropriate, we are hardening and modernizing assets against weather damage and ensuring we have
resiliency measures in place, such as storm-specific readiness plans. We have incurred and will continue to
incur additional costs to protect our assets and operations from such physical risks and employ the evolving
technologies and processes available to mitigate such risks. To the extent such severe weather events or other
climate conditions increase in frequency and severity, we may be required to modify operations and incur
costs that could materially and adversely affect our business, financial condition, results of operations and
cash flows.
33
Plans we may have to expand existing assets or construct new assets are subject to risks associated with
societal and political pressures and other forms of opposition to the future development, transportation
and use of carbon-based fuels. Such risks could adversely impact our business and ability to realize
certain growth strategies.
Our anticipated growth and planned expenditures are based upon the assumption that societal sentiment will
continue to enable and existing regulations will remain intact
to allow for the future development,
transportation and use of carbon-based fuels. A portion of our growth strategy is dependent on our ability to
expand existing assets and to construct additional assets. However, policy decisions relating to the production,
refining, transportation and marketing of carbon-based fuels are subject to political pressures and the influence
and protests of environmental and other special interest groups. One of the ways we may grow our business is
through the construction of new pipelines or the expansion of existing ones. The construction of a new
pipeline or the expansion of an existing pipeline, by adding horsepower or pump stations or by adding
additional pipelines along existing pipelines, involves numerous regulatory, environmental, political, and legal
uncertainties, most of which are beyond our control. The approval process for storage and transportation
projects has become increasingly challenging, due in part to state and local concerns related to pipelines,
negative public perception regarding the oil and gas industry, and concerns regarding greenhouse gas
emissions downstream of pipeline operations. In addition, government disruptions, such as a U.S. federal
government shutdown, may delay or halt the granting and renewal of permits, licenses and other items
required by us and our customers to conduct our business. Our expansion or construction projects may not be
completed on schedule (or at all) or at the budgeted cost. In addition, our revenues may not increase
immediately upon the expenditure of funds on a particular project. For instance, if we build a new pipeline,
the construction will occur over an extended period of time and we will not receive any material increases in
revenues until after completion of the project. Delays or cost increases related to capital spending programs
involving engineering, procurement and construction of facilities (including improvements and repairs to our
existing facilities) could adversely affect our ability to achieve forecasted internal rates of return and operating
results, thereby limiting our ability to grow and generate cash flows.
Large capital projects can take many years to complete, and market conditions could deteriorate
significantly between the project approval date and the project startup date, negatively impacting
project returns. If we are unable to complete capital projects at their expected costs and in a timely
manner, or if the market conditions assumed in our project economics deteriorate, our business,
financial condition, results of operations and cash flows could be materially and adversely affected.
Delays or cost increases related to capital spending programs involving engineering, procurement and
construction of facilities could materially adversely affect our ability to achieve forecasted internal rates of
return and operating results. Delays in making required changes or upgrades to our facilities could subject us
to fines or penalties as well as affect our ability to supply certain products we produce. Such delays or cost
increases may arise as a result of unpredictable factors, many of which are beyond our control, including:
•
•
•
•
•
•
•
denial of or delay in receiving requisite regulatory approvals or permits;
unplanned increases in the cost of construction materials or labor;
disruptions in transportation of components or construction materials;
adverse weather conditions, natural disasters or other events (such as equipment malfunctions,
explosions, fires or spills) affecting our facilities, or those of vendors or suppliers;
shortages of sufficiently skilled labor, or labor disagreements resulting in unplanned work
stoppages;
market-related increases in a project’s debt or equity financing costs; and
nonperformance by, or disputes with, vendors, suppliers, contractors or subcontractors.
Any one or more of these factors could have a significant impact on our ongoing capital projects. If we were
unable to make up the delays associated with such factors or to recover the related costs, or if market
conditions change, it could materially and adversely affect our business, financial condition, results of
operations and cash flows.
34
The availability of crude oil and increases in crude oil prices may reduce profitability and refining and
marketing margins.
The profitability of our operations depends largely on the difference between the cost of crude oil and other
feedstocks we refine and the selling prices we obtain for refined products. A portion of our crude oil is
purchased from various foreign national oil companies, production companies and trading companies,
including suppliers from Canada, the Middle East and various other international locations. The market for
crude oil and other feedstocks is largely a world market. We are, therefore, subject to the attendant political,
geographic and economic risks of such a market. If one or more major supply sources were temporarily or
permanently eliminated, we believe adequate alternative supplies of crude oil would be available, but it is
possible we would be unable to find alternative sources of supply. If we are unable to obtain adequate crude
oil volumes or are able to obtain such volumes only at unfavorable prices, our operations, sales of refined
products and refining and marketing margins could be adversely affected, materially and adversely impacting
our business, financial condition, results of operations and cash flows.
We are subject to risks arising from our non-U.S. operations and generally to worldwide political and
economic developments.
We operate and sell some of our products in non-U.S. jurisdictions, particularly in Mexico, South America
and Asia. Our business, financial condition, results of operations and cash flows could be negatively impacted
by disruptions in any of these markets, including economic instability, restrictions on the transfer of funds,
duties and tariffs, transportation delays, difficulty in enforcing contractual provisions, import and export
controls, changes in governmental policies, labor unrest, security issues involving key personnel and changing
regulatory and political environments. Global outbreaks of infectious diseases, such as the coronavirus first
detected in Wuhan, China, could affect demand for refined products and economic conditions generally. In
addition, if trade relationships deteriorate with these countries, if existing trade agreements are modified or
terminated, new economic sanctions relevant to such jurisdictions are passed or if taxes, border adjustments or
tariffs make trading with these countries more costly, it could have a material adverse effect on our business,
financial condition, results of operations and cash flows.
We are required to comply with U.S. and international laws and regulations, including those involving anti-
bribery, anti-corruption and anti-money laundering. For example, the Foreign Corrupt Practices Act and
similar laws and regulations prohibit improper payments to foreign officials for the purpose of obtaining or
retaining business or gaining any business advantage. Our compliance policies and programs mandate
compliance with all applicable anti-corruption laws but may not be completely effective in ensuring our
compliance. Our training and compliance program and our internal control policies and procedures may not
always protect us from violations committed by our employees or agents. Actual or alleged violations of these
laws could disrupt our business and cause us to incur significant legal expenses, and could result in a material
adverse effect on our reputation, business, financial condition, results of operations and cash flows.
More broadly, political and economic factors in global markets could impact crude oil and other feedstock
supplies and could have a material adverse effect on us in other ways. Hostilities in the Middle East or the
occurrence or threat of future terrorist attacks could adversely affect the economies of the U.S. and other
developed countries. A lower level of economic activity could result in a decline in energy consumption,
which could cause our revenues and margins to decline and limit our future growth prospects. These risks
could lead to increased volatility in prices for refined products, NGLs and natural gas. Additionally, these
risks could increase instability in the financial and insurance markets and make it more difficult or costly for
us to access capital and to obtain the insurance coverage that we consider adequate. Additionally, tax policy,
legislative or regulatory action and commercial restrictions could reduce our operating profitability. For
example, the U.S. government could prevent or restrict exports of refined products, NGLs, natural gas or the
conduct of business in or with certain foreign countries. In addition, foreign countries could restrict imports,
investments or commercial transactions.
35
Compliance with and changes in tax laws could materially and adversely impact our financial
condition, results of operations and cash flows.
We are subject to extensive tax liabilities, including federal and state income taxes and transactional taxes
such as excise, sales and use, payroll, franchise, withholding and property taxes. New tax laws and regulations
and changes in existing tax laws and regulations could result in increased expenditures by us for tax liabilities
in the future and could materially and adversely impact our financial condition, results of operations and cash
flows.
Additionally, many tax liabilities are subject to periodic audits by taxing authorities, and such audits could
subject us to interest and penalties.
Terrorist attacks aimed at our facilities or that impact our customers or the markets we serve could
adversely affect our business.
The U.S. government has issued warnings that energy assets in general, including the nation’s refining,
pipeline and terminal infrastructure, may be future targets of terrorist organizations. The threat of terrorist
attacks has subjected our operations to increased risks. Any future terrorist attacks on our facilities, those of
our customers and, in some cases, those of other pipelines, could have a material adverse effect on our
business. Similarly, any future terrorist attacks that severely disrupt the markets we serve could materially and
adversely affect our results of operations, financial position and cash flows.
RISKS RELATING TO OWNERSHIP OF OUR COMMON STOCK
Provisions in our corporate governance documents could operate to delay or prevent a change in
control of our company, dilute the voting power or reduce the value of our capital stock or affect its
liquidity.
The existence of some provisions within our restated certificate of incorporation and amended and restated
bylaws could discourage, delay or prevent a change in control of us that a stockholder may consider favorable.
These include provisions:
•
•
•
•
•
•
•
•
•
•
providing that our board of directors fixes the number of members of the board;
providing for the division of our board of directors into three classes with staggered terms;
providing that only our board of directors may fill board vacancies;
limiting who may call special meetings of stockholders;
prohibiting stockholder action by written consent, thereby requiring stockholder action to be taken
at a meeting of the stockholders;
establishing advance notice requirements for nominations of candidates for election to our board of
directors or for proposing matters that can be acted on by stockholders at stockholder meetings;
establishing supermajority vote requirements for certain amendments to our restated certificate of
incorporation;
providing that our directors may only be removed for cause;
authorizing a large number of shares of common stock that are not yet issued, which would allow
our board of directors to issue shares to persons friendly to current management, thereby protecting
the continuity of our management, or which could be used to dilute the stock ownership of persons
seeking to obtain control of us; and
authorizing the issuance of “blank check” preferred stock, which could be issued by our board of
directors to increase the number of outstanding shares and thwart a takeover attempt.
We believe certain of these provisions protect our stockholders from coercive or otherwise unfair takeover
tactics by requiring potential acquirers to negotiate with our board of directors and by providing our board of
directors time to assess any acquisition proposal, and are not intended to make us immune from takeovers.
However, these provisions apply even if the offer may be considered beneficial by some stockholders and
could delay or prevent an acquisition.
36
Our restated certificate of incorporation also authorizes us to issue, without the approval of our stockholders,
one or more classes or series of preferred stock having such designation, powers, preferences and relative,
participating, optional and other special rights, including preferences over our common stock respecting
dividends and distributions, as our board of directors generally may determine. The terms of one or more
classes or series of preferred stock could dilute the voting power or reduce the value of our common stock.
For example, we could grant holders of preferred stock the right to elect some number of our board of
directors in all events or on the happening of specified events or the right to veto specified transactions.
Similarly, the repurchase or redemption rights or liquidation preferences we could assign to holders of
preferred stock could affect the residual value of our common stock.
Finally, to facilitate compliance with the Maritime Laws, our restated certificate of incorporation limits the
aggregate percentage ownership by non-U.S. citizens of our common stock or any other class of our capital
stock to 23 percent of the outstanding shares. We may prohibit transfers that would cause ownership of our
common stock or any other class of our capital stock by non-U.S. citizens to exceed 23 percent. Our restated
certificate of incorporation also authorizes us to effect any and all measures necessary or desirable to monitor
and limit foreign ownership of our common stock or any other class of our capital stock. These limitations
could have an adverse impact on the liquidity of the market for our common stock if holders are unable to
transfer shares to non-U.S. citizens due to the limitations on ownership by non-U.S. citizens. Any such
limitation on the liquidity of the market for our common stock could adversely impact the market price of our
common stock.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
37
ITEM 2. PROPERTIES
We believe that our properties and facilities are adequate for our operations and that our facilities are
adequately maintained. See the following sections for details of our assets by segment.
REFINING & MARKETING
The table below sets forth the location and crude oil refining capacity for each of our refineries as of
December 31, 2019. Refining throughput can exceed crude oil refining capacity due to the processing of other
charge and blendstocks in addition to crude oil and the timing of planned turnaround and major maintenance
activity.
Refinery
Gulf Coast Region
Galveston Bay, Texas City, Texas
Garyville, Louisiana
Subtotal Gulf Coast region
Mid-Continent Region
Catlettsburg, Kentucky
Robinson, Illinois
Detroit, Michigan
El Paso, Texas
St. Paul Park, Minnesota
Canton, Ohio
Mandan, North Dakota
Salt Lake City, Utah
Gallup, New Mexico
Dickinson, North Dakota
Subtotal Mid-Continent region
West Coast Region
Los Angeles, California
Martinez, California
Anacortes, Washington
Kenai, Alaska
Subtotal West Coast region
Crude Oil Refining
Capacity (mbpcd)
585
578
1,163
291
253
140
131
103
95
71
63
27
19
1,193
363
161
119
68
711
3,067
The following table sets forth the location and capacity of our biofuel production facility as of December 31,
2019.
Location
Cincinnati, Ohio
Capacity
(gallons per year)
80 million
38
The following table sets forth the approximate number of locations where independent entrepreneurs maintain
branded outlets, marketed under Marathon, Shell, Mobil and other brands, as of December 31, 2019.
Location
Alabama
Alaska
Arizona
California
Colorado
District of Columbia
Florida
Georgia
Idaho
Illinois
Indiana
Iowa
Kentucky
Louisiana
Maryland
Mexico
Michigan
Minnesota
Mississippi
Nevada
New Mexico
New York
North Carolina
North Dakota
Ohio
Oregon
Pennsylvania
South Carolina
South Dakota
Tennessee
Texas
Utah
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Total
Number of
Branded Outlets
380
44
94
88
12
2
644
346
98
213
651
4
521
27
44
186
792
292
100
12
46
43
204
104
812
44
69
116
29
403
6
96
154
63
106
52
4
6,901
39
The following table sets forth details about our Refining & Marketing owned and operated terminals as of
December 31, 2019. See the Midstream - MPLX section for information with respect to MPLX owned and
operated terminals.
Owned and Operated Terminals
Light Products Terminals:
New York
Ohio
Subtotal light products terminals
Asphalt Terminals:
Florida
Illinois
Indiana
Kentucky
Louisiana
Michigan
New York
Ohio
Pennsylvania
Tennessee
Subtotal asphalt terminals
Total owned and operated terminals
Number of
Terminals
Tank Storage
Capacity
(thousand barrels)
1
1
2
1
2
2
4
1
1
1
4
1
2
19
21
316
67
383
263
82
423
547
54
12
365
1,305
451
482
3,984
4,367
40
RETAIL
Our Retail segment sells transportation fuels and merchandise through convenience stores it owns and
operates, primarily under the Speedway brand, and sells transportation fuels through long-term fuel supply
contracts to direct dealer locations, primarily under the ARCO brand. The following table sets forth the
number of company-owned convenience stores by state as of December 31, 2019.
Location
Alabama
Alaska
Arizona
California
Colorado
Connecticut
Delaware
Florida
Georgia
Idaho
Illinois
Indiana
Kentucky
Massachusetts
Michigan
Minnesota
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
Ohio
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Total
Number of
Convenience Stores
1
31
91
491
12
1
4
212
9
7
129
305
147
108
306
203
9
12
66
120
330
275
488
13
121
19
52
1
52
31
30
62
32
56
69
3
3,898
41
The following table sets forth the number of direct dealer locations by state as of December 31, 2019.
Location
Alaska
Arizona
California
Nevada
Washington
Total
Number of
Locations
1
69
935
62
1
1,068
MIDSTREAM - MPLX
The following tables set forth certain information relating to MPLX’s crude oil, refined products and water
pipeline systems and storage assets as of December 31, 2019.
Diameter
(inches)
2” - 48”
4” - 36”
4” - 8”
3” - 4”
Pipeline System or Storage
Asset
Total crude oil pipeline systems(b)(c)(d)
Total refined products pipeline
systems(b)(e)(f)
Water pipeline systems:
Belfield water system
Green River water system
Total
Barge Docks (thousand barrels)
Storage assets (thousand barrels):
Refinery Logistics - tank storage(g)
Mt. Airy Terminal
Tank Farms
Caverns
Length
(miles)
Capacity(a)
7,917
5,672
103
12
115
Various
Various
20 mbpd
15 mbpd
2,910
100,670
4,099
26,264
4,709
(a) All capacities reflect 100 percent of the pipeline systems’ and barge docks’ average capacity in thousands of barrels per day and
100 percent of the available storage capacity of our caverns and tank farms in thousands of barrels.
Includes pipelines leased from third parties.
Includes approximately 1,921 miles of pipeline in which MPLX has a 9.2 percent ownership interest, 168 miles of pipeline in which
MPLX has a 35.0 percent ownership interest, 48 miles of pipeline in which MPLX has a 40.7 percent ownership interest, 57 miles of
pipeline in which MPLX has a 58.5 percent ownership interest, 118 miles of pipeline in which MPLX has a 67.0 percent ownership
interest and 975 miles of pipeline in which MPLX has a 17.0 percent ownership interest. Also includes approximately 1,830 miles of
refined product pipeline in which we have a 24.5 percent ownership interest and 87 miles of refined product pipeline in which we
have a 65.16 percent ownership interest.
Includes approximately 399 miles of inactive pipeline.
Includes approximately 1,830 miles of pipeline in which MPLX has a 24.5 percent ownership interest and 87 miles of pipeline in
which MPLX has a 65.16 percent ownership interest.
Includes approximately 232 miles of inactive pipeline.
(b)
(c)
(d)
(e)
(f)
(g) Refining logistics assets also include rail racks, truck racks and docks.
42
The following table sets forth details about MPLX owned and operated terminals as of December 31, 2019.
Additionally, MPLX operates one leased terminal and has partial ownership interest in one terminal.
Owned and Operated Terminals
Refined Products Terminals:
Number of
Terminals
Tank Storage
Capacity
(thousand barrels)
Alabama
Alaska
California
Florida
Georgia
Idaho
Illinois
Indiana
Kentucky
Louisiana
Michigan
Minnesota
New Mexico
North Carolina
North Dakota
Ohio
Pennsylvania
South Carolina
Tennessee
Utah
Washington
West Virginia
Subtotal light products terminals
Asphalt Terminals
Arizona
California
Minnesota
Nevada(a)
New Mexico
Texas
Subtotal asphalt terminals
Total owned and operated terminals
(a) MPLX accounts for as an equity method investment.
2
3
9
4
4
3
4
6
6
1
8
1
4
4
1
12
1
1
4
1
4
2
85
3
3
1
1
1
1
10
95
443
1,310
5,367
3,407
998
988
1,221
3,229
2,587
97
2,440
12
551
1,509
2
3,218
390
371
1,149
44
825
1,587
31,745
536
755
489
252
6
178
2,216
33,961
The following table sets forth details about MPLX barges and towboats as of December 31, 2019.
Class of Equipment
Inland tank barges(a)
Inland towboats
(a) All of our barges are double-hulled.
Number
in Class
Capacity
(thousand barrels)
286
23
7,523
N/A
43
The following tables set forth certain information relating to MPLX’s consolidated and operated joint venture
gas processing facilities, fractionation facilities, natural gas gathering systems, NGL pipelines and natural gas
pipelines as of December 31, 2019. All throughputs and utilizations included are weighted-averages for days
in operation.
Gas Processing Complexes
Marcellus Shale
Utica Shale
Southern Appalachia
Southwest(b)
Bakken
Rockies
Total
Design
Throughput
Capacity
(MMcf/d)
Natural Gas
Throughput
(MMcf/d)(a)
Utilization
of Design
Capacity(a)
6,120
1,325
620
1,887
190
1,472
11,614
5,248
810
244
1,364
151
572
8,389
91%
61%
39%
79%
83%
39%
76%
(a) Natural gas throughput is a weighted average for days in operation. The utilization of design capacity has been calculated using the
weighted average design throughput capacity.
(b) Centrahoma Processing LLC’s processing capacity of 550 MMcf/d and actual throughput of 272 MMcf/d, that exceeded MPLX’s
40 percent share of the capacity of 220 MMcf/d, are not included in this table as MPLX owns a non-operating interest.
Fractionation & Condensate Stabilization Complexes
Marcellus Shale
Utica Shale
Southern Appalachia
Southwest
Bakken
Rockies
Total
Design
Throughput
Capacity
(mbpd)
NGL
Throughput
(mbpd)(a)
Utilization
of Design
Capacity(a)
347
23
24
11
34
61
500
290
9
12
6
24
4
345
84%
39%
50%
55%
83%
7%
70%
(a) NGL throughput is a weighted average for days in operation. The utilization of design capacity has been calculated using the
weighted average design throughput capacity.
De-ethanization Complexes
Marcellus Shale
Utica Shale
Southwest
Total
Design
Throughput
Capacity
(mbpd)
NGL
Throughput
(mbpd)(a)
Utilization
of Design
Capacity(a)
273
40
18
331
179
10
9
198
72%
25%
50%
64%
(a) NGL throughput is a weighted average for days in operation. The utilization of design capacity has been calculated using the
weighted average design throughput capacity.
44
Natural Gas Gathering Systems
Marcellus Shale
Utica Shale
Southwest
Bakken
Rockies
Total
Design
Throughput
Capacity
(MMcf/d)
Natural Gas
Throughput
(MMcf/d)(a)
Utilization
of Design
Capacity(a)
1,547
3,183
2,570
194
1,486
8,980
1,287
2,200
1,628
151
701
5,967
84%
70%
72%
78%
47%
69%
(a) Natural gas throughput is a weighted average for days in operation. The utilization of design capacity has been calculated using the
weighted average design throughput capacity.
The following tables set forth certain information relating to MPLX’s NGL pipelines as of December 31,
2019.
NGL Pipelines
Marcellus Shale
Utica Shale
Southern Appalachia
Southwest(a)
Bakken
Rockies
(a)
Includes 38 miles of inactive pipeline.
Diameter
4” - 20”
4” - 12”
6” - 8”
6”
8” - 12”
8”
Length
(miles)
399
119
138
50
84
10
Design
Throughput
Capacity
(mbpd)
Various
Various
35
39
80
15
MIDSTREAM - MPC-RETAINED ASSETS AND INVESTMENTS
The following tables set forth certain information related to our crude oil and refined products pipeline
systems not owned by MPLX.
As of December 31, 2019, we had partial ownership interests in the following pipeline companies.
Pipeline Company
Crude oil pipeline companies:
Capline LLC
Gray Oak Pipeline, LLC
LOOP(a)
Total
Refined products pipeline companies:
Ascension Pipeline Company LLC
Centennial Pipeline LLC(b)
Muskegon Pipeline LLC
Wolverine Pipe Line Company
Total
Diameter
(inches)
Length
(miles)
Ownership
Interest
Operated
by MPL
40”
30”
48”
16”
24”-26”
10”
6”-16”
644
850
48
1,494
32
796
170
796
1,794
33%
25%
10%
50%
50%
60%
6%
Yes
No
No
No
Yes
Yes
No
(a) Represents interest retained by MPC and excludes MPLX’s 41 percent ownership interest in LOOP. Pipeline mileage is excluded
from total as it is included with MPLX assets.
(b) All system pipeline miles are inactive.
45
The following table provides information on private crude oil pipelines and private refined products pipelines
that we own as of December 31, 2019.
Private Pipeline Systems
Crude oil pipeline systems:
Middle Ground Shoals Pipeline
Inactive pipelines
Total
Refined products pipeline systems:
Illinois and Indiana pipeline systems
Texas pipeline systems
Inactive pipelines
Total
Diameter
(inches)
Length
(miles)
Capacity
(mbpd)
12”
4”
8”
4
9
13
59
103
62
224
11
N/A
11
11
45
N/A
56
As of December 31, 2019, we had a partial ownership interest in the following crude oil terminal.
Terminal
South Texas Gateway Terminal LLC(a)
Ownership
Interest
25%
Tank Storage
Capacity
(thousand barrels)
TBD
(a)
The tank storage capacity for this company will be determined when the terminal project is placed into service.
The following table sets forth details about the assets held by two ocean vessel joint ventures in which we
hold a 50% interest as of December 31, 2019.
Class of Equipment
Jones Act product tankers(a)
750 Series ATB vessels(b)
Number
in Class
Capacity
(thousand barrels)
4
3
1,320
990
(a) Represents ownership through our indirect noncontrolling interest in Crowley Ocean Partners.
(b) Represents ownership through our indirect noncontrolling interest in Crowley Blue Water Partners.
ITEM 3. LEGAL PROCEEDINGS
We are the subject of, or a party to, a number of pending or threatened legal actions, contingencies and
commitments involving a variety of matters, including laws and regulations relating to the environment. Some
of these matters are discussed below. While it is possible that an adverse result in one or more of the lawsuits
or proceedings in which we are a defendant could be material to us, based upon current information and our
experience as a defendant in other matters, we believe that these lawsuits and proceedings, individually or in
the aggregate, will not have a material adverse effect on our consolidated results of operations, financial
position or cash flows.
SEC Matter
We have been cooperating with the staff of the SEC in connection with a formal investigation regarding
Andeavor’s historical share repurchase activity and an informal
investigation regarding MPC’s share
repurchase activity. The staff of the SEC has indicated that it intends to recommend an action with respect to
Andeavor’s historical share repurchase activity. We will continue to fully cooperate with the SEC staff in
connection with these matters. We are unable to predict the outcome or impact of these investigations on our
consolidated results of operations, financial position or cash flow.
46
Litigation
In May 2015, the Kentucky attorney general filed a lawsuit against our wholly-owned subsidiary, Marathon
Petroleum Company LP (“MPC LP”), in the United States District Court for the Western District of Kentucky
asserting claims under federal and state antitrust statutes, the Kentucky Consumer Protection Act, and state
common law. The complaint, as amended in July 2015, alleges that MPC LP used deed restrictions, supply
agreements with customers and exchange agreements with competitors to unreasonably restrain trade in areas
restitution and
within Kentucky and seeks declaratory relief, unspecified damages, civil penalties,
disgorgement of profits. At this stage, the ultimate outcome of this litigation remains uncertain, and neither
the likelihood of an unfavorable outcome nor the ultimate liability, if any, can be determined, and we are
unable to estimate a reasonably possible loss (or range of loss) for this matter. We intend to vigorously defend
ourselves in this matter.
Environmental Proceedings
Governmental and other entities in California, New York, Maryland and Rhode Island have filed lawsuits
against coal, gas, oil and petroleum companies, including the Company. The lawsuits allege damages as a
result of climate change and the plaintiffs are seeking unspecified damages and abatement under various tort
theories. Similar lawsuits may be filed in other jurisdictions. At this early stage, the ultimate outcome of these
matters remain uncertain, and neither the likelihood of an unfavorable outcome nor the ultimate liability, if
any, can be determined.
Anacortes Refinery
The naphtha hydrotreater unit at the Anacortes refinery was involved in a fire in April 2010, which fatally
injured seven employees and rendered the unit inoperable. The Washington State Department of Labor &
Industries (“L&I”) investigated the incident and issued a citation in October 2010 with an assessed fine of
approximately $2 million. Andeavor appealed the citation in January 2011 as it disagreed with L&I’s
characterizations of operations at the refinery and believed that many of the agency’s conclusions were
mistaken. In separate September 2013, November 2013 and February 2015 orders, the Board of Industrial
Insurance Appeals (“BIIA”) granted partial summary judgment in Andeavor’s favor rejecting 33 of the
original 44 allegations in the citation as lacking legal or evidentiary support. The hearing on the remaining 11
allegations concluded in July 2016. On June 8, 2017, the BIIA Judge issued a proposed decision and order
vacating the entire citation, which L&I and the United Steel Workers (“USW”) appealed. On September 18,
2017, the BIIA granted L&I and USW’s petitions for review of the BIIA judge’s June 8, 2017 proposed
decision and order. On January 25, 2018, the BIIA issued an order remanding 12 of the allegations for further
proceedings. Proceedings regarding the 12 remanded citations are ongoing.
Detroit Refinery
In June 2019, we received an offer from the Michigan Department of Environment, Great Lakes, and Energy
(“EGLE”) to settle violations alleged in five NOVs issued to the refinery between September 2017 and
February 2019. In December 2019, the settlement discussions were expanded to include two additional NOVs
issued to the refinery during October and December 2019. The NOVs allege violations of emissions
limitations and other requirements of the refinery’s air permit and Michigan air pollution control laws. We are
negotiating a settlement of the allegations with EGLE and cannot currently estimate the timing of the
resolution of this matter.
El Paso Refinery
On February 19, 2020, we reached an agreement with the EPA regarding alleged violations at our El Paso
refinery. The agreement requires payment of $359,000 for stipulated penalties associated with an EPA review
relating to the existing Consent Decree in U.S. v. Western Refining Co. LP, W.D. Texas No.
3:11-CV-00276-FM (entered August 31, 2011).
Galveston Bay Refinery
In August 2019, we received an offer from the Texas Commission on Environmental Quality to settle
violations alleged in enforcement notices issued to the refinery in March 2019. The notices allege violations of
emissions limitations and other requirements of the refinery’s air permit. We are negotiating a settlement of
the allegations and cannot currently estimate the timing of the resolution of this matter.
47
Los Angeles Refinery
In February 2020, we received an offer from the South Coast Air Quality Management District to settle an
NOV issued to the refinery in September 2018 for 13 self-reported Title V deviations. The deviations involve
flaring, opacity, fugitive emissions, and carbon canisters, among others. We are negotiating a settlement and
cannot currently estimate the timing of the resolution of this matter.
Martinez Refinery
On February 12, 2016, TRMC received an offer to settle 35 NOVs received from the Bay Area Air Quality
Management District (“BAAQMD”). The NOVs were issued from May 2011 to November 2015 and allege
violations of air quality regulations for ground level monitors located at our Martinez refinery. In November
2019, the settlement discussions were expanded to include 47 additional NOVs issued to the refinery between
2015 and 2018. While we are negotiating a settlement of the allegations with the BAAQMD, we cannot
currently estimate the timing of the resolution of this matter.
On July 18, 2016, the U.S. Department of Justice (“DOJ”) lodged a complaint on behalf of the EPA and a
Consent Decree in the U.S. Court for the Western District of Texas. Among other things, the Consent Decree
required that the Martinez refinery meet certain annual emission limits for NOx by July 1, 2018. In February
2018, TRMC informed the EPA that it would need additional time to satisfy requirements of the Consent
Decree. In the fourth quarter for 2019, TRMC and the United States entered into an agreement to amend the
Consent Decree to resolve these issues. The Consent Decree amendment will include a civil penalty of
approximately $6.5 million and a schedule for installation of a Selective Catalytic Reduction system to control
NOx emissions from the FCCU.
On January 23, 2020, TRMC received an offer to settle 59 NOVs received from the BAAQMD. The NOVs
were issued between April 2015 and March 2019 and allege violations of air quality regulations and the
Martinez refinery’s air permit. While we are negotiating a settlement of the allegations with the BAAQMD,
we cannot currently estimate the timing of the resolution of this matter.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
48
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is listed on the NYSE and traded under the symbol “MPC.” As of February 17, 2020, there
were 31,293 registered holders of our common stock.
Issuer Purchases of Equity Securities
The following table sets forth a summary of our purchases during the quarter ended December 31, 2019, of
equity securities that are registered by MPC pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended:
Period
10/01/2019-10/31/2019
11/01/2019-11/30/2019
12/01/2019-12/31/2019
Total
Total Number
of Shares
Purchased(a)
Average
Price Paid
per Share(b)
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans
or Programs
Maximum Dollar
Value of Shares that
May Yet Be Purchased
Under the Plans
or Programs(c)
1,038,235 $
68
12,862
1,051,165
62.86
65.78
60.70
62.83
1,033,027 $
—
—
1,033,027
2,954,604,016
2,954,604,016
2,954,604,016
(a)
The amounts in this column include 5,208, 68 and 12,862 shares of our common stock delivered by employees to MPC, upon vesting
of restricted stock, to satisfy tax withholding requirements in October, November and December, respectively.
(b) Amounts in this column reflect the weighted average price paid for shares purchased under our share repurchase authorizations and
for shares tendered to us in satisfaction of employee tax withholding obligations upon the vesting of restricted stock granted under
our stock plans. The weighted average price includes commissions paid to brokers on shares purchased under our share repurchase
authorizations.
(c) On April 30, 2018, we announced that our board of directors had approved a $5 billion share repurchase authorization in addition to
the remaining authorization pursuant to the May 31, 2017 announcement. These share purchase authorizations have no expiration
date. The share repurchase authorization announced on April 30, 2018, together with prior authorizations, result in a total of
$18 billion of share repurchase authorizations since January 1, 2012.
49
ITEM 6. SELECTED FINANCIAL DATA
The following table should be read in conjunction with Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations and Item 8. Financial Statements and Supplementary Data.
(In millions, except per share data)
2019
2018(a)
2017(b)
2016
2015(c)
Year Ended December 31,
Statements of Income Data
Sales and other operating revenue(d)
Income from operations
Net income
Net income attributable to MPC
Net income attributable to MPC per share:
Basic
Diluted
Dividends per share
Statements of Cash Flows Data
Net cash provided by operating activities
Acquisitions, net of cash acquired(a)(c)
Common stock repurchased
Dividends paid
(In millions)
Balance Sheet Data
Total assets
Long-term debt(e)
$123,949
5,576
3,255
2,637
$ 96,504
5,571
3,606
2,780
$ 74,733
4,018
3,804
3,432
$ 63,339
2,386
1,213
1,174
$ 72,051
4,708
2,868
2,852
$
$
$
$
$
$
$
$
$
$
$
$
4.00
3.97
2.12
9,441
129
1,950
1,398
5.36
5.28
1.84
6,158
3,822
3,287
954
6.76
6.70
1.52
6,612
249
2,372
773
$
$
$
$
2.22
2.21
1.36
4,017
—
197
719
$
$
$
$
5.29
5.26
1.14
4,076
1,218
965
613
2019
2018(a)
December 31,
2017
2016
2015(c)
$ 98,556
28,838
$ 92,940
27,524
$ 49,047
12,946
$ 44,413
10,572
$ 43,115
11,925
(a) On October 1, 2018, we acquired Andeavor. The financial results for these operations are included in our consolidated results from
the date of acquisition.
(b)
Earnings for 2017 include a tax benefit of approximately $1.5 billion, or $2.93 per diluted share, as a result of re-measuring certain
net deferred tax liabilities using the lower corporate tax rate enacted in the fourth quarter of 2017.
(c) On December 4, 2015, MPLX, our consolidated subsidiary, merged with MarkWest. The financial results for these operations are
included in our consolidated results from the date of acquisition.
(d)
Includes sales to related parties. The 2019 and 2018 periods reflect an election to present certain taxes on a net basis concurrent with
our adoption of ASU 2014-09, Revenue - Revenue from Contracts with Customers (“ASC 606”).
(e)
Includes amounts due within one year.
50
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
All statements in this section, other than statements of historical fact, are forward-looking statements that are
inherently uncertain. See “Disclosures Regarding Forward-Looking Statements” and “Risk Factors” for a
discussion of the factors that could cause actual results to differ materially from those projected in these
statements. The following information concerning our business, results of operations and financial condition
should also be read in conjunction with the information included under Item 1. Business, Item 1A. Risk
Factors, Item 6. Selected Financial Data and Item 8. Financial Statements and Supplementary Data.
CORPORATE OVERVIEW
We are an independent petroleum refining and marketing, retail and midstream company. We own and operate
the nation’s largest refining system through 16 refineries, located in the Gulf Coast, Mid-Continent and West
Coast regions of the United States, with an aggregate crude oil refining capacity of approximately 3.1
mmbpcd. Our refineries supply refined products to resellers and consumers across the United States. We
distribute refined products to our customers through transportation, storage, distribution and marketing
services provided largely by our Midstream segment. We believe we are one of the largest wholesale suppliers
of gasoline and distillates to resellers in the United States.
We have three strong brands: Marathon®, Speedway® and ARCO®. The branded outlets, which primarily
include the Marathon brand, are established motor fuel brands across the United States available through
approximately 6,900 branded outlets operated by independent entrepreneurs in 35 states, the District of
Columbia and Mexico. We believe our Retail segment operates the second largest chain of company-owned
and operated retail gasoline and convenience stores in the United States, with approximately 3,900
convenience stores, primarily under the Speedway brand, and 1,070 direct dealer locations, primarily under
the ARCO brand, across the United States.
We primarily conduct our midstream operations through our ownership interests in MPLX, which owns and
operates crude oil and refined product transportation and logistics infrastructure and natural gas and NGL
gathering, processing, and fractionation assets. As of December 31, 2019, we owned, leased or had ownership
interests in approximately 17,200 miles of crude oil and refined product pipelines to deliver crude oil to our
refineries and other locations and refined products to wholesale and retail market areas. We distribute our
refined products through one of the largest terminal operations in the United States and one of the largest
private domestic fleets of inland petroleum product barges. Our integrated midstream energy asset network
links producers of natural gas and NGLs from some of the largest supply basins in the United States to
domestic and international markets. As of December 31, 2019, our midstream gathering and processing assets
include approximately 9.0 bcf/d of gathering capacity, 11.6 bcf/d of natural gas processing capacity and 831
mbpd of fractionation capacity.
Our operations consist of three reportable operating segments: Refining & Marketing, Retail and Midstream.
Each of these segments is organized and managed based upon the nature of the products and services they
offer. See Item 1. Business for additional information on our segments.
•
•
Refining & Marketing – refines crude oil and other feedstocks at our 16 refineries in the Gulf Coast,
Mid-Continent and West Coast regions of the United States, purchases refined products and ethanol
for resale and distributes refined products through transportation, storage, distribution and marketing
services provided largely by our Midstream segment. We sell refined products to wholesale
marketing customers domestically and internationally, to buyers on the spot market, to our Retail
business segment and to independent entrepreneurs who operate primarily Marathon® branded
outlets.
Retail – sells transportation fuels and convenience products in the retail market across the United
States through company-owned and operated convenience stores, primarily under the Speedway®
brand, and long-term fuel supply contracts with direct dealers who operate locations mainly under
the ARCO® brand.
• Midstream – transports, stores, distributes and markets crude oil and refined products principally for
the Refining & Marketing segment via refining logistics assets, pipelines, terminals, towboats and
barges; gathers, processes and transports natural gas; and gathers, transports, fractionates, stores and
markets NGLs. The Midstream segment primarily reflects the results of MPLX.
51
Recent Developments
Strategic Actions to Enhance Shareholder Value
On October 31, 2019, we announced our intention to separate our retail transportation fuel and convenience
store business, which is operated primarily under the Speedway brand, into an independent, publicly traded
company through a tax-free distribution to MPC shareholders of publicly traded stock in the new independent
retail transportation fuel and convenience store company. This transaction is targeted to be completed in the
fourth quarter of 2020, subject to market, regulatory and certain other conditions, including final approval by
MPC’s board of directors, receipt of customary assurances regarding the intended tax-free nature of the
transaction, and the effectiveness of a registration statement to be filed with the SEC. The Speedway business
is currently a reporting unit within our Retail segment. MPC will retain its direct dealer business, which is also
included in the Retail segment as currently reported.
MPC’s board of directors also formed a special committee to evaluate strategies to enhance shareholder value
through a review of the Midstream business and to analyze, among other things, the strategic fit of assets with
MPC, the ability to realize full valuation credit for midstream earnings and cash flow, balance sheet impacts
including liquidity and credit ratings, transaction tax impacts, separation costs, and overall complexity.
MPLX Acquisition of ANDX
On July 30, 2019, MPLX completed its acquisition of ANDX, and ANDX survived as a wholly-owned
subsidiary of MPLX. At the effective time of the merger, each common unit held by ANDX’s public
unitholders was converted into the right to receive 1.135 MPLX common units. ANDX common units held by
certain affiliates of MPC were converted into the right to receive 1.0328 MPLX common units. Additionally,
600,000 ANDX preferred units were converted into 600,000 preferred units of MPLX (the “Series B preferred
units”). Series B preferred unitholders are entitled to receive, when and if declared by the MPLX board, a
fixed distribution of $68.75 per unit, per annum, payable semi-annually in arrears on February 15 and
August 15, or the first business day thereafter, up to and including February 15, 2023. After February 15,
2023, the holders of Series B preferred units are entitled to receive cumulative, quarterly distributions payable
in arrears on the 15th day of February, May, August and November of each year, or the first business day
thereafter, based on a floating annual rate equal to the three month LIBOR plus 4.652 percent.
The transaction simplified our two sponsored MLPs, MPLX and ANDX, into a single listed entity to create a
leading, large-scale, diversified midstream company anchored by fee-based cash flows. The combined entity
has an expanded geographic footprint that is expected to enhance its long-term growth opportunities and the
sustainable cash flow profile of the business.
As described in Item 8. Financial Statements and Supplementary Data – Notes 5 and 6, we have consolidated
ANDX since October 1, 2018 in accordance with ASC Topic 810, Consolidation (“ASC 810”) and previously
recorded ANDX’s assets and liabilities to our balance sheet at preliminary fair values as of the Andeavor
acquisition date of October 1, 2018.
EXECUTIVE SUMMARY
Results
Select results for 2019 and 2018 are reflected in the following table. The 2018 amounts include the results of
Andeavor from the October 1, 2018 acquisition date forward.
(In millions, except per share data)
Income from operations by segment
Refining & Marketing
Retail
Midstream
Items not allocated to segments
Income from operations
Provision for income taxes
Net income attributable to MPC
Net income attributable to MPC per diluted share
52
2019
2018
$
$
$
$
$
2,367 $
1,582
3,594
(1,967)
5,576 $
1,074 $
2,637 $
3.97 $
2,481
1,028
2,752
(690)
5,571
962
2,780
5.28
Net income attributable to MPC decreased $143 million in 2019 compared to 2018 primarily due to increases
in net interest and other financial costs and provision for income taxes, partially offset by a decrease in net
income attributable to noncontrolling interests in 2019. Income from operations was essentially flat in 2019
compared to 2018 as increases in Retail and Midstream segment income from operations were largely offset
by MPLX goodwill impairment charges, which are reported in Items not allocated to segments. Refer to the
Results of Operations section for a discussion of financial results by segment for the three years ended
December 31, 2019.
MPLX
We received limited partner distributions of $1.82 billion and $1.24 billion from MPLX and ANDX during
2019 and 2018, respectively.
We owned approximately 666 million MPLX common units at December 31, 2019 with a market value of
$16.96 billion based on the December 31, 2019 closing unit price of $25.46. On January 23, 2020, MPLX
declared a quarterly cash distribution of $0.6875 per common unit, which was paid February 14, 2020. As a
result, MPLX made distributions totaling $715 million to its common unitholders. MPC’s portion of this
distribution was approximately $445 million.
See Item 8. Financial Statements and Supplementary Data – Note 4 for additional information on MPLX.
Share Repurchases
During the year ended December 31, 2019, we returned $1.95 billion to our shareholders through repurchases
of 34 million shares of common stock at an average price per share of $58.87.
Since January 1, 2012, our board of directors has approved $18.0 billion in total share repurchase
authorizations and we have repurchased a total of approximately $15.0 billion of our common stock, leaving
approximately $3.0 billion available for repurchases as of December 31, 2019. Under these authorizations, we
have acquired 327 million shares, representing approximately 46 percent of our outstanding common shares
when we became a stand-alone company in June 2011, at an average cost per share of $46.05.
Liquidity
Our liquidity, excluding MPLX, totaled $8.3 billion at December 31, 2019. As of December 31, 2019, we had
cash and cash equivalents of $1.51 billion, excluding MPLX’s cash and cash equivalents of $15 million. We
had no borrowings and $1 million of letters of credit outstanding under our $6.0 billion bank revolving credit
facilities and no borrowings or letters of credit outstanding under our $750 million trade receivables
securitization facility (“trade receivables facility”). As of December 31, 2019, eligible trade receivables
supported borrowings of $750 million under the trade receivable facility.
MPLX’s liquidity totaled $4.42 billion at December 31, 2019. As of December 31, 2019, MPLX had cash and
cash equivalents of $15 million, $3.5 billion available under its $3.5 billion revolving credit agreement and
$906 million available through its intercompany loan agreement with MPC.
See Item 8. Financial Statements and Supplementary Data – Note 19 for information on our new bank
revolving credit facilities.
OVERVIEW OF SEGMENTS
Refining & Marketing
Refining & Marketing segment income from operations depends largely on our Refining & Marketing margin,
refining operating costs, refining planned turnaround and refinery throughputs. Our total refining capacity was
3,067 mbpcd, 3,021 mbpcd and 1,881 mbpcd as of December 31, 2019, 2018 and 2017, respectively. The
increase in 2018 was primarily due to the acquisition of Andeavor on October 1, 2018, which added 10
refineries with approximately 1,117 mbpcd of total refining capacity.
Our Refining & Marketing margin is the difference between the prices of refined products sold and the costs
of crude oil and other charge and blendstocks refined, including the costs to transport these inputs to our
refineries and the costs of products purchased for resale. The crack spread is a measure of the difference
between market prices for refined products and crude oil, commonly used by the industry as a proxy for the
refining margin. Crack spreads can fluctuate significantly, particularly when prices of refined products do not
move in the same relationship as the cost of crude oil. As a performance benchmark and a comparison with
53
other industry participants, we calculate Gulf Coast, Mid-Continent and West Coast crack spreads that we
believe most closely track our operations and slate of products. The following will be used for these crack-
spread calculations:
•
•
•
The Gulf Coast crack spread uses three barrels of LLS crude producing two barrels of USGC CBOB
gasoline and one barrel of USGC ULSD;
The Mid-Continent crack spread uses three barrels of WTI crude producing two barrels of Chicago
CBOB gasoline and one barrel of Chicago ULSD; and
The West Coast crack spread uses three barrels of ANS crude producing two barrels of LA
CARBOB and one barrel of LA CARB Diesel.
Our refineries process a variety of sweet and sour grades of crude oil, which typically can be purchased at a
discount to the crude oils referenced in our Gulf Coast, Mid-Continent and West Coast crack spreads. The
amount of these discounts, which we refer to as the sweet differential and the sour differential, can vary
significantly, causing our Refining & Marketing margin to differ from blended crack spreads. In general,
larger sweet and sour differentials will enhance our Refining & Marketing margin.
Future crude oil differentials will be dependent on a variety of market and economic factors, as well as U.S.
energy policy.
The following table provides sensitivities showing an estimated change in annual net income due to potential
changes in market conditions.
(In millions, after-tax)
Blended crack spread sensitivity(a) (per $1.00/barrel change)
Sour differential sensitivity(b) (per $1.00/barrel change)
Sweet differential sensitivity(c) (per $1.00/barrel change)
Natural gas price sensitivity(d) (per $1.00/MMBtu)
$
910
420
420
325
(a) Crack spread based on 38 percent LLS, 38 percent WTI and 24 percent ANS with Gulf Coast, Mid-Continent and West Coast
(b)
(c)
(d)
product pricing, respectively, and assumes all other differentials and pricing relationships remain unchanged.
Sour crude oil basket consists of the following crudes: ANS, Argus Sour Crude Index, Maya and Western Canadian Select. We
expect approximately 50 percent of the crude processed at our refineries in 2020 will be sour crude.
Sweet crude oil basket consists of the following crudes: Bakken, Brent, LLS, WTI-Cushing and WTI-Midland. We expect
approximately 50 percent of the crude processed at our refineries in 2020 will be sweet crude.
This is consumption based exposure for our Refining & Marketing segment and does not include the sales exposure for our
Midstream segment.
In addition to the market changes indicated by the crack spreads, the sour differential and the sweet
differential, our Refining & Marketing margin is impacted by factors such as:
•
•
•
•
•
•
the selling prices realized for refined products;
the types of crude oil and other charge and blendstocks processed;
our refinery yields;
the cost of products purchased for resale;
the impact of commodity derivative instruments used to hedge price risk; and
the potential impact of LCM adjustments to inventories in periods of declining prices.
Inventories are stated at the lower of cost or market. Costs of crude oil, refinery feedstocks and refined
products are stated under the LIFO inventory costing method and aggregated on a consolidated basis for
purposes of assessing if the cost basis of these inventories may have to be written down to market values. At
December 31, 2019, market values for refined products exceed their cost basis and, therefore, there is no LCM
inventory market valuation reserve at the end of the year. Based on movements of refined product prices,
future inventory valuation adjustments could have a negative effect to earnings. Such losses are subject to
reversal in subsequent periods if prices recover.
Refining & Marketing segment income from operations is also affected by changes in refining operating costs
and refining planned turnaround costs. Changes in operating costs are primarily driven by the cost of energy
used by our refineries, including purchased natural gas, and the level of maintenance costs. Refining planned
turnarounds, requiring temporary shutdown of certain refinery operating units, are periodically performed at
54
each refinery. The following table lists the refineries that had significant planned turnaround and major
maintenance activities for each of the last three years and only reflects the activity for the acquired refineries
after October 1, 2018.
Year
2019
2018
2017
Refinery
Catlettsburg, Gallup, Galveston Bay, Garyville, Los Angeles, Martinez, Robinson and St. Paul Park
Canton, Detroit, Galveston Bay and Martinez
Catlettsburg, Galveston Bay and Garyville
We have various long-term, fee-based commercial agreements with MPLX. Under these agreements, MPLX,
which is reported in our Midstream segment, provides transportation, storage, distribution and marketing
services to our Refining & Marketing segment. Certain of these agreements include commitments for
minimum quarterly throughput and distribution volumes of crude oil and refined products and minimum
storage volumes of crude oil, refined products and other products. Certain other agreements include
commitments to pay for 100 percent of available capacity for certain marine transportation and refining
logistics assets.
Retail
Our Retail fuel margin for gasoline and distillate, which is the price paid by consumers or direct dealers less
the cost of refined products, including transportation, consumer excise taxes and bankcard processing fees
(where applicable), impacts the Retail segment profitability. Gasoline and distillate prices are volatile and are
impacted by changes in supply and demand in the regions where we operate. Numerous factors impact
gasoline and distillate demand throughout the year, including local competition, seasonal demand fluctuations,
the available wholesale supply, the level of economic activity in our marketing areas and weather conditions.
As fleet fuel efficiency gains have taken hold, gasoline demand fell for the first time since 2012 by 0.4 percent
from 2018 despite average annual gasoline prices falling four percent, record level of light trucks’ share of
auto sales (72 percent), and continuing economic growth in 2019. According to current estimates, 2019
gasoline demand fell less than 0.1 million barrels per day, remaining at approximately 9.3 million barrels per
day for the fourth consecutive year. Meanwhile, distillate demand fell for the first time in three years as
weather impacted agricultural uses, and trade tensions weighed on port traffic in 2019. Distillate demand was
down 1.6 percent from 2018, but remained near 4.1 million barrels per day, the fourth highest U.S. demand
level ever. Truck tonnage growth slowed in 2019, rising 3.4 percent year over year in 2019-about half of the
prior year’s growth, while port container traffic (at the 10 largest U.S. ports), was flat year over year in 2019
(through November).
The margin on merchandise sold at our convenience stores historically has been less volatile and has
contributed substantially to our Retail segment margin. Approximately 40 percent of our Retail margin was
derived from merchandise sales in 2019. This percentage decreased from 2018 due to the addition of long-
term fuel supply contracts with direct dealers and fuel only locations as part of the Andeavor acquisition. Our
Retail convenience stores offer a wide variety of merchandise, including prepared foods, beverages and
non-food items.
Inventories are carried at the lower of cost or market value. Costs of refined products and merchandise are
stated under the LIFO inventory costing method and aggregated on a consolidated basis for purposes of
assessing if the cost basis of these inventories may have to be written down to market values. As of
December 31, 2019, market values for refined products exceed their cost basis and, therefore, there is no LCM
inventory market valuation reserve at the end of the year. Based on movements of refined product prices,
future inventory valuation adjustments could have a negative effect to earnings. Such losses are subject to
reversal in subsequent periods if prices recover.
Midstream
Our Midstream segment transports, stores, distributes and markets crude oil and refined products, principally
for our Refining & Marketing segment. The profitability of our pipeline transportation operations primarily
depends on tariff rates and the volumes shipped through the pipelines. The profitability of our marine operations
primarily depends on the quantity and availability of our vessels and barges. The profitability of our light
product terminal operations primarily depends on the throughput volumes at these terminals. The profitability
of our fuels distribution services primarily depends on the sales volumes of certain refined products. The
profitability of our refining logistics operations depends on the quantity and availability of our refining logistics
assets. A majority of the crude oil and refined product shipments on our pipelines and marine vessels and the
55
refined product throughput at our terminals serve our Refining & Marketing segment and our refining logistics
assets and fuels distribution services are used solely by our Refining & Marketing segment.
As discussed above in the Refining & Marketing section, MPLX, which is reported in our Midstream
segment, has various long-term, fee-based commercial agreements related to services provided to our
Refining & Marketing segment. Under these agreements, MPLX has received various commitments of
minimum throughput, storage and distribution volumes as well as commitments to pay for all available
capacity of certain assets. The volume of crude oil that we transport is directly affected by the supply of, and
refiner demand for, crude oil in the markets served directly by our crude oil pipelines, terminals and marine
operations. Key factors in this supply and demand balance are the production levels of crude oil by producers
in various regions or fields, the availability and cost of alternative modes of transportation, the volumes of
crude oil processed at refineries and refinery and transportation system maintenance levels. The volume of
refined products that we transport, store, distribute and market is directly affected by the production levels of,
and user demand for, refined products in the markets served by our refined product pipelines and marine
operations. In most of our markets, demand for gasoline and distillate peaks during the summer driving
season, which extends from May through September of each year, and declines during the fall and winter
months. As with crude oil, other transportation alternatives and system maintenance levels influence refined
product movements.
NGL and natural gas prices are volatile and are impacted by changes in fundamental supply and demand, as
well as market uncertainty, availability of NGL transportation and fractionation capacity and a variety of
additional factors that are beyond our control. Our Midstream segment profitability is affected by prevailing
commodity prices primarily as a result of processing or conditioning at our own or third-party processing
plants, purchasing and selling or gathering and transporting volumes of natural gas at index-related prices and
the cost of third-party transportation and fractionation services. Commodity prices are a significant influence
on the level of natural gas drilling by our producer customers, such prices also affect profitability.
RESULTS OF OPERATIONS
The following discussion includes comments and analysis relating to our results of operations for the years
ended December 31, 2019, 2018 and 2017. These amounts include the results of Andeavor from the
October 1, 2018 acquisition date forward. This discussion should be read in conjunction with Item 8. Financial
Statements and Supplementary Data and is intended to provide investors with a reasonable basis for assessing
our historical operations, but should not serve as the only criteria for predicting our future performance.
56
Consolidated Results of Operations
(In millions)
Revenues and other income:
2019
2018
2019 vs.
2018
Variance
Sales and other operating revenues(a)
Income from equity method investments
Net gain on disposal of assets
Other income
$123,949
394
307
163
$96,504
373
23
202
$
Total revenues and other income
124,813
97,102
Costs and expenses:
Cost of revenues (excludes items below)
Impairment expense
Depreciation and amortization
Selling, general and administrative
expenses
Other taxes
110,243
1,197
3,638
3,408
751
86,066
—
2,490
2,418
557
$
27,445
21
284
(39)
27,711
24,177
1,197
1,148
990
194
2018 vs.
2017
Variance
$
21,771
67
13
(118)
21,733
18,977
—
376
724
103
2017
74,733
306
10
320
75,369
67,089
—
2,114
1,694
454
Total costs and expenses
119,237
91,531
27,706
71,351
20,180
Income from operations
Net interest and other financial costs
Income before income taxes
Provision (benefit) for income taxes
Net income
Less net income attributable to:
Redeemable noncontrolling interest
Noncontrolling interests
5,576
1,247
4,329
1,074
3,255
81
537
5,571
1,003
4,568
962
3,606
75
751
5
244
(239)
112
(351)
6
(214)
4,018
674
3,344
(460)
3,804
65
307
1,553
329
1,224
1,422
(198)
10
444
Net income attributable to MPC
$
2,637
$ 2,780
$
(143)
$
3,432
$
(652)
(a) We adopted ASU 2014-09, Revenue - Revenue from Contracts with Customers (“ASC 606”), as of January 1, 2018, and elected to
report certain taxes on a net basis. We adopted the standard using the modified retrospective method, and, therefore, comparative
2017 information continues to reflect certain taxes on a gross basis. See Item 8. Financial Statements and Supplementary Data - Note
2 for further information.
2019 Compared to 2018
Net income attributable to MPC decreased $143 million primarily due to increases in net interest and other
financial costs and provision for income taxes, partially offset by a decrease in net income attributable to
noncontrolling interests in 2019. See Segment Results for additional information.
Total revenues and other income increased $27.71 billion in 2019 compared to 2018 primarily due to:
•
•
increased sales and other operating revenues of $27.45 billion mainly due to an increase in our
Refining & Marketing segment refined product sales volumes, which increased 1,032 mbpd largely
due to the Andeavor acquisition on October 1, 2018, partially offset by lower averaged refined
product sales prices, which decreased $0.10 per gallon; and
increased net gain on disposal of assets of $284 million mainly due to a $207 million gain
recognized in connection with MPC’s exchange of its undivided interest in the Capline pipeline
system for an equity ownership in Capline LLC. We also recognized a $52 million gain due to the
formation of a new joint venture with The Andersons as the fair value of our interest in the new
venture exceeded our contribution to the venture.
57
Total costs and expenses increased $27.71 billion in 2019 compared to 2018 primarily due to:
•
•
•
•
•
increased cost of revenues of $24.18 billion primarily due to the inclusion of costs related to the
Andeavor operations following the acquisition;
increased impairment expense of $1.20 billion primarily related to MPLX goodwill associated with
the ANDX gathering and processing businesses acquired as part of the Andeavor acquisition;
increased depreciation and amortization of $1.15 billion largely due to the depreciation of the fair
value of the assets acquired in connection with the Andeavor acquisition;
increased selling, general and administrative expenses of $990 million mainly due to the inclusion
of costs related to Andeavor operations following the acquisition and reflecting MPC’s
classification of those costs and expenses; and
increased other taxes of $194 million primarily due to the inclusion of other taxes related to the
acquired Andeavor operations.
Income from operations was flat in 2019 compared to 2018 as a result of the changes noted above. See
Segment Results for additional information.
Net interest and other financial costs increased $244 million mainly due to debt assumed in the acquisition of
Andeavor and increased MPLX borrowings, partially offset by a decrease in pension settlement losses of
$44 million. We capitalized interest of $158 million in 2019 and $80 million in 2018. See Item 8. Financial
Statements and Supplementary Data – Note 19 for further details.
Provision for income taxes increased $112 million primarily due to non-deductible goodwill impairments
partially offset by decreased income before taxes of $239 million. The effective tax rate of 25 percent in 2019
is higher than the U.S. statutory rate of 21 percent, primarily due to permanent tax differences related to
goodwill impairment and state and local tax expense, partially offset by permanent tax differences related to
net income attributable to noncontrolling interests. The effective tax rate of 21 percent in 2018 is consistent
with the U.S. statutory rate of 21 percent, as permanent benefit differences related to income attributable to
noncontrolling interest were offset by state and local tax expense. See Item 8. Financial Statements and
Supplementary Data – Note 12 for further details.
Noncontrolling interests decreased $214 million primarily due lower MPLX net income primarily as a result
of the $1.2 billion goodwill impairment charge recorded in 2019.
2018 Compared to 2017
Net income attributable to MPC decreased $652 million. Increased income from operations was more than
offset by a tax benefit of $1.5 billion resulting from the TCJA in 2017 and increased income attributable to
noncontrolling interests in 2018. See Segment Results for additional information.
Total revenues and other income increased $21.73 billion in 2018 compared to 2017 primarily due to:
•
•
•
increased sales and other operating revenues of $21.77 billion mainly due to an increase in our
Refining & Marketing segment refined product sales volumes, which increased 402 mbpd, and
higher averaged refined product sales prices, which increased $0.34 per gallon. The increase in
volume is largely due to the Andeavor acquisition on October 1, 2018. These increases were
partially offset by our election to present revenues net of certain taxes under ASC 606 prospectively
from January 1, 2018, which resulted in a decrease in revenues of $6.66 billion for the year. See
Item 8. Financial Statements and Supplementary Data – Note 2 for additional information;
increased income from equity method investments of $67 million primarily due to an increase in
income from midstream equity affiliates; and
decreased other income of $118 million primarily due to a decrease in RIN sales.
Total costs and expenses increased $20.18 billion in 2018 compared to 2017 primarily due to:
•
increased cost of revenues of $18.98 billion primarily due to:
O
O
an increase in refined product cost of sales of $24.97 billion, primarily due to increased
operations following the acquisition of Andeavor along with higher raw material costs
attributable to an increase in our average crude oil costs of $13.87 per barrel; and
a decrease in certain taxes of $6.66 billion as a result of our election to present revenues net
of certain taxes under ASC 606 prospectively from January 1, 2018. For the year, certain
58
taxes continue to be presented on a gross basis and are included in cost of revenues. See
Item 8. Financial Statements and Supplementary Data – Note 2 for additional information;
•
•
•
increased depreciation and amortization of $376 million, primarily due to the depreciation of the fair
value of the assets acquired in connection with the Andeavor acquisition;
increased selling, general and administrative expenses of $724 million primarily due to
approximately $197 million of transaction related costs for financial advisors, employee severance
and other costs associated with the Andeavor acquisition in addition to including costs and expenses
for the acquired operations; and
increased other taxes of $103 million primarily due to the inclusion of other taxes related to the
acquired Andeavor operations.
Net interest and other financial costs increased $329 million mainly due to increased MPLX borrowings and
debt assumed in the acquisition of Andeavor.
In addition, MPLX recognized $60 million of debt
extinguishment costs in 2018 in connection with the redemption of its $750 million of senior notes due 2023.
We capitalized interest of $80 million in 2018 and $63 million in 2017. See Item 8. Financial Statements and
Supplementary Data – Note 19 for further details.
Provision for income taxes increased $1.42 billion primarily due to the absence of a tax benefit of $1.5 billion
in 2017 resulting from the TCJA and an increase in our income before income taxes, which increased
$1.22 billion. The effective tax rate of 21 percent in 2018 is consistent with the U.S. statutory rate of
21 percent, as permanent benefit differences related to income attributable to noncontrolling interest were
offset by state and local tax expense. In 2017, our effective tax rate was impacted by 45 percentage points as a
result of the TCJA which decreased our effective tax rate from 31 percent to (14) percent. The effective tax
rate, excluding the TCJA, of 31 percent in 2017 was slightly less than the U.S. statutory rate of 35 percent
primarily due to certain permanent benefit differences, including differences related to net income attributable
to noncontrolling interests and the domestic manufacturing deduction, partially offset by state and local tax
expense. See Item 8. Financial Statements and Supplementary Data – Note 12 for further details.
Noncontrolling interests increased $454 million due to higher MPLX net income resulting primarily from the
February 1, 2018 dropdown transaction, partially offset by the reduced ownership in MPLX held by
noncontrolling interests following the general partner/incentive distribution rights exchange. Noncontrolling
ownership in MPLX decreased to 36.4 percent at December 31, 2018 from 69.6 percent at December 31,
2017. In addition, 2018 reflects $68 million of net income attributable to the noncontrolling interest in ANDX
of 36.4 percent for the period from October 1, 2018 through the end of the year.
59
Segment Results
Our segment income from operations was approximately $7.54 billion, $6.26 billion and $4.39 billion for the
years ended December 31, 2019, 2018 and 2017, respectively. The following shows the percentage of segment
income from operations by segment for the last three years.
2019
2018
2017
Refining &
Marketing
31%
Refining &
Marketing
40%
Retail
21%
Refining &
Marketing
53%
Retail
16%
Midstream
48%
Midstream
44%
Midstream
30%
Retail
17%
Refining & Marketing
The following includes key financial and operating data for 2019, 2018 and 2017. Our results include the
results of Andeavor from the October 1, 2018 acquisition date forward.
We revised our Refining & Marketing segment supplemental reporting in the second quarter of 2019 as shown
in the table on the following page. Costs formerly included in Refining & Marketing’s direct operating costs
category are now presented in three categories: refining operating costs, refining planned turnaround costs and
depreciation and amortization. We also present distribution costs, formerly referred to as other operating
expenses, which are primarily related to transportation and marketing of refined products, including fees paid
to MPLX.
Refining & Marketing Revenues (a)
Refining & Marketing
Income from Operations
2019
2018
2017
$106,742
2019
2018
2017
$82,599
$64,691
In millions
$2,367
$2,481
$2,321
In millions
(a) We adopted ASC 606 (Revenue from Contracts with Customers), as of January 1, 2018, and elected to report certain taxes on a net
basis. We applied the standard using the modified retrospective method, and, therefore, comparative information continues to reflect
certain taxes on a gross basis.
60
Refined Product Sales Volumes (a)
Average Refined Product Sales Prices (b)
2019
2018
2017
3,735
2,703
2,301
mbpd
2019
2018
2017
$1.78
$1.88
$1.54
Dollars per gallon
(a)
(b)
Includes intersegment sales and sales destined for export.
For comparability purposes, these amounts exclude sales taxes for all periods presented. As noted above, Refining & Marketing
revenues in 2019 and 2018 reflect these taxes on a net basis, while 2017 Refining & Marketing revenues continue to reflect these
taxes on a gross basis. The average refined product sales price for 2017 included excise taxes of $0.18 per gallon before this
adjustment.
Refining & Marketing Operating Statistics
Total refinery throughputs (mbpd)
Refining & Marketing margin per barrel(a)(b)
Less:
Refining operating costs per barrel(c)
Distribution costs per barrel(d)
Refining planned turnaround costs per barrel
Depreciation and amortization per barrel
Plus:
Purchase accounting-depreciation and amortization(e)
Biodiesel tax credit(f)
Other per barrel(g)
2019
2018
2017
3,112
14.23
$
2,274
14.25
$
1,944
12.60
$
5.66
4.51
0.65
1.47
0.01
0.08
0.05
4.99
4.23
0.80
1.41
—
—
0.17
5.08
2.38
0.71
1.52
—
—
0.36
3.27
Refining & Marketing segment income per barrel
$
2.08
$
2.99
$
(a)
(b)
(c)
(d)
Sales revenue less cost of refinery inputs and purchased products, divided by total refinery throughputs.
See “Non-GAAP Measures” section for reconciliation and further information regarding this non-GAAP measure.
Includes refining operating and major maintenance costs. Excludes planned turnaround and depreciation and amortization expense.
Includes fees paid to MPLX. On a per barrel throughput basis, these fees were $2.84 and $2.74 for 2019 and 2018, respectively. Fees
paid to MPLX for 2017 are prior to the dropdown of refining logistics and fuels distribution assets and are not comparable. Excludes
depreciation and amortization expense.
(e) Reflects the cumulative effects related to a measurement period adjustment arising from the finalization of purchase accounting.
(f)
Reflects a benefit of $93 million in 2019 for the biodiesel tax credit attributable to volumes blended in 2018.
Includes income from equity method investments, net gain on disposal of assets and other income.
(g)
61
The following table presents certain benchmark prices in our marketing areas and market indicators that we
believe are helpful in understanding the results of our Refining & Marketing segment. Following the
acquisition of Andeavor in October 2018, we expanded the benchmark prices included in these tables to
include market information for the West Coast region of the United States, including LA CARBOB and LA
CARB diesel spot prices, ANS crude prices and a West Coast ANS 3-2-1 crack spread. The results of the
Andeavor businesses are only included in our results from October 1, 2018 forward. The benchmark crack
spreads below do not reflect the market cost of RINs necessary to meet EPA renewable volume obligations for
attributable products under the Renewable Fuel Standard.
Benchmark spot prices (dollars per gallon)
2019
2018
2017
Chicago CBOB unleaded regular gasoline
Chicago ultra-low sulfur diesel
USGC CBOB unleaded regular gasoline
USGC ultra-low sulfur diesel
LA CARBOB
LA CARB diesel
Market Indicators (dollars per barrel)
LLS
WTI
ANS
Crack Spreads
USGC LLS 3-2-1
Mid-Continent WTI 3-2-1
West Coast ANS 3-2-1
Blended 3-2-1(a)
Crude Oil Differentials
Sweet
Sour
$
$
$
$
$
$
$
1.67
1.86
1.63
1.88
1.98
2.01
62.69
57.04
65.04
8.22
14.61
17.30
12.83
$
$
$
1.86
2.07
1.83
2.05
2.06
2.14
69.93
64.10
68.46
7.91
14.02
11.66
10.62
1.58
1.64
1.55
1.62
—
—
54.00
50.85
54.44
8.55
12.71
14.02
10.22
(2.35) $
(3.15)
(3.83) $
(7.60)
(1.04)
(5.02)
(a)
The blended crack spread for 2019 is weighted 38 percent of the USGC crack spread, 38 percent of the Mid-Continent crack spread
and 24 percent of the West Coast crack spread. The blended crack spread for 2018 reflects the average of this same weighting for the
fourth quarter of 2018 and a weighting of 60 percent of the USGC crack spread and 40 percent of the Mid-Continent crack spread for
the first three quarters of 2018. The 2017 blended crack spread is weighted 60 percent of the USGC crack spread and 40 percent of
the Mid-Continent crack spread for the period. These blends are based on MPC’s refining capacity by region in each period.
2019 Compared to 2018
Refining & Marketing segment revenues increased $24.14 billion primarily due to higher refined product sales
volumes, which increased 1,032 mbpd largely due to the acquisition of Andeavor on October 1, 2018, partially
offset by decreased average refined product sales prices of $0.10 per gallon.
Refinery crude oil capacity utilization was 96 percent during 2019 and total refinery throughputs increased
838 mbpd primarily due to the refineries acquired from Andeavor.
Refining & Marketing segment income from operations decreased $114 million primarily driven by higher
operating, distribution and depreciation and amortization costs in addition to a slight decrease in Refining &
Marketing margin on a per barrel basis. The increases in costs and expenses were primarily due to increased
sales and production volumes following the Andeavor acquisition.
Refining & Marketing margin was $14.23 per barrel for 2019 compared to $14.25 per barrel for 2018. Refining
& Marketing margin is affected by our performance against the market indicators shown earlier, which use
spot market values and an estimated mix of crude purchases and product sales. Based on the market indicators
and our crude oil throughput, we estimate a net positive impact of $4.46 billion on Refining & Marketing
margin, primarily due to an approximate $5.35 billion benefit from increased throughput volume, mainly
attributed to the Andeavor acquisition, partially offset by narrower sour and sweet crude oil differentials. Our
62
reported Refining & Marketing margin differs from market indicators due to the mix of crudes purchased and
their costs, the effects of market structure on our crude oil acquisition prices, RIN prices on the crack spread
and other items like refinery yields and other feedstock variances. For 2019, the Refining & Marketing
segment income from operations also reflects a benefit of $93 million for the biodiesel tax credit attributable
to volumes blended in 2018. These factors had an estimated net negative impact on Refining & Marketing
segment income from operations of $33 million in 2019 compared to 2018 resulting in a capture rate of
92 percent in 2019 compared to 91 percent in 2018.
The cost of inventories of crude oil and refinery feedstocks, refined products and merchandise is determined
primarily under the LIFO method. There were no material liquidations of LIFO inventories in 2019 and 2018.
Refining operating costs, excluding depreciation and amortization, increased $0.67 per barrel and distribution
costs, excluding depreciation and amortization, increased $0.28 per barrel primarily due to the inclusion of
costs for the refining operations acquired from Andeavor. The per barrel increases, among other items, reflect
the addition of Andeavor’s West Coast refineries, which generally have higher operating costs than other
regions in which we operate due to specific geographical location and regulatory factors. Distribution costs,
excluding depreciation and amortization, include fees paid to MPLX of $3.22 billion and $2.28 billion for
2019 and 2018, respectively. Refining planned turnaround costs decreased $0.15 per barrel due to the timing
of turnaround activity. Depreciation and amortization per barrel increased by $0.06, primarily due to the fair
value of assets acquired from Andeavor as of October 1, 2018. During 2019, we recorded a $0.01 per barrel
to reduce depreciation and amortization, which reflects the cumulative effects related to a
adjustment
measurement period adjustment arising from the finalization of purchase accounting.
We purchase RINs to satisfy a portion of our RFS2 compliance. Our expenses associated with purchased RINs
were $356 million in 2019 and $316 million in 2018. The increase in 2019 was primarily due to an increase in
our RIN obligations resulting from the acquisition of Andeavor, partially offset by lower weighted average
RIN costs.
2018 Compared to 2017
Refining & Marketing segment revenues increased $17.91 billion in 2018 compared to 2017 primarily due to
higher refined product sales prices and volumes, which increased 402 mbpd, and higher refined product sales
prices, which increased $0.34 per gallon. The increase in sales volumes is largely due to the acquisition of
Andeavor on October 1, 2018. These increases were partially offset by our election to present revenues net of
certain taxes under ASC 606 prospectively from January 1, 2018, which resulted in a decrease in Refining &
Marketing segment revenues of $4.58 billion in 2019. See Item 8. Financial Statements and Supplementary
Data – Note 2 for additional information.
Refining & Marketing segment income from operations increased $160 million primarily due to higher
throughputs as a result of the Andeavor acquisition as well as wider sour and sweet crude differentials. For
comparison purposes, as noted in the Market Indicators table, 2017 indicators have been included which
reflect the new indicators we began using subsequent to the acquisition of Andeavor. Based on this, the
USGC, Mid-Continent and West Coast blended 3-2-1 crack spread was $10.62 in 2018 compared to $10.22 in
2017. These crack spreads are net of RIN crack adjustments of $1.61 and $3.57 for 2018 and 2017,
respectively.
Based on changes in the market indicators shown above and our refinery throughputs, we estimate a positive
impact of $3.40 billion for 2018 compared to 2017 on Refining & Marketing segment
income from
operations, of which $1.81 billion and $1.59 billion are due to the effects of changes in price and volume,
respectively. The market indicators use spot market values and an estimated mix of crude purchases and
product sales. Differences in our results compared to these market indicators,
including product price
realizations, the mix of crudes purchased and their costs, the effects of LCM inventory valuation adjustments,
the effects of market structure on our crude oil acquisition prices, and other items like refinery yields and
other feedstock variances, had an estimated negative impact on Refining & Marketing segment income from
operations of $698 million in 2018 compared to 2017 resulting in a capture rate of 91 percent in 2018
compared to 93 percent in 2017. The significant elements of the negative impact were unfavorable crude
acquisition costs and unfavorable product price realizations relative to the market indicators.
The cost of inventories of crude oil and refinery feedstocks, refined products and merchandise is determined
primarily under the LIFO method. There were no material liquidations of LIFO inventories in 2018 and 2017.
63
Refining operating costs, excluding depreciation and amortization, decreased $0.09 per barrel and
depreciation and amortization decreased by $0.11 per barrel primarily due to higher refinery throughput
resulting from the addition of the refineries acquired from Andeavor. In addition, these costs decreased due to
the dropdown of refining logistics and fuels distribution assets to MPLX on February 1, 2018. Distribution
costs, excluding depreciation and amortization, increased $1.85 per barrel mainly due to fees paid to MPLX of
$2.28 billion in 2018 for services provided related to the dropdown of refining logistics and fuels distribution
assets. The per barrel increase, among other items, also reflects the addition of Andeavor’s West Coast
refineries, which generally have higher operating costs than other regions in which we operate due to specific
geographical location and regulatory factors. Refining planned turnaround costs increased $0.09 per barrel due
to costs related to the additional refineries acquired from Andeavor as well as higher turnaround costs at our
Detroit and Canton refineries, partially offset by lower turnaround costs at our Galveston Bay and Garyville
refineries.
We purchase RINs to satisfy a portion of our RFS2 compliance. Our expenses associated with purchased RINs
were $316 million in 2018 and $457 million in 2017. The decrease in 2018 was primarily due to lower
weighted average RIN costs which more than offset the increase in our RIN obligations resulting from the
acquisition of Andeavor.
Supplemental Refining & Marketing Statistics
Refining & Marketing Operating Statistics
Refined product export sales volumes (mbpd)(a)
Crude oil capacity utilization percent(b)
Refinery throughputs (mbpd):(c)
Crude oil refined
Other charge and blendstocks
Total
Sour crude oil throughput percent
Sweet crude oil throughput percent
Refined product yields (mbpd):(c)
Gasoline
Distillates
Feedstocks and petrochemicals
Asphalt
Propane
Heavy fuel oil
Total
2019
2018
2017
397
96
2,902
210
3,112
48
52
1,560
1,087
315
87
55
49
3,153
334
96
2,081
193
2,274
52
48
1,107
773
288
69
41
38
2,316
297
97
1,765
179
1,944
59
41
932
641
277
63
36
37
1,986
(a) Represents fully loaded export cargoes for each time period. These sales volumes are included in the total sales volumes amounts.
(b) Based on calendar-day capacity, which is an annual average that includes down time for planned maintenance and other normal
(c)
operating activities.
Excludes inter-refinery volumes which totaled 110 mbpd, 61 mbpd and 78 mbpd for 2019, 2018 and 2017, respectively, for all
regions.
64
Retail
2019
2018
2017
s
n
o
l
l
a
G
f
o
s
n
o
i
l
l
i
M
Retail Revenues
Retail Income from Operations
$33,067
2019
$1,582
$23,552
$19,033
In millions
2018
2017
$1,028
$729
In millions
Retail Fuel Sales
10,212
2,554
7,658
5,799
6,937
644
6,293
Retail Fuel Margin (a)(b)
Merchandise Margin (b)
2019
$0.2426
2019
29.0%
2017
2018
2019
2018
$0.2230
2018
28.4%
Speedway
2017
$0.1738
Direct Dealer
Dollars per Gallon
2017
28.7%
(a)
(b)
The price paid by consumers or direct dealers less the cost of refined products, including transportation, consumer excise taxes and
bankcard processing fees (where applicable), divided by gasoline and distillate sales volume. Excludes LCM inventory valuation
adjustments.
See “Non-GAAP Measures” section for reconciliation and further information regarding this non-GAAP measure.
Key Financial and Operating Data
Average fuel sales prices (dollars per gallon)
Merchandise sales (in millions)
Merchandise margin (in millions)(a)(b)
Same store gasoline sales volume (period over period)(c)
Same store merchandise sales (period over period)(c)(d)
Convenience stores at period-end
Direct dealer locations at period-end
2019
2.64
6,305
1,827
$
$
$
2018
2.71
5,232
1,486
$
$
$
2017
2.34
4,893
1,402
$
$
$
(3.3)%
5.4 %
3,898
1,068
(1.5)%
4.2 %
3,923
1,065
(1.3)%
1.2 %
2,744
—
(a)
(b)
(c)
(d)
The price paid by the consumers less the cost of merchandise.
See “Non-GAAP Measures” section for reconciliation and further information regarding this non-GAAP measure.
Same store comparison includes only locations owned at least 13 months.
Excludes cigarettes.
65
2019 Compared to 2018
Retail segment revenues increased $9.52 billion primarily due to increased fuel and merchandise sales
resulting from the Andeavor acquisition on October 1, 2018. Total fuel sales increased 3.28 billion gallons
primarily due to an increase in Speedway fuel sales volumes of 1.37 billion gallons and the addition of direct
dealer fuel sales of 1.91 billion gallons, partially offset by a decrease in average gasoline and distillate selling
prices of $0.07 per gallon. Merchandise sales increased $1.07 billion.
Retail segment income from operations increased $554 million primarily due to higher light product and
merchandise margins largely related to the addition of the Andeavor retail operations. These increases were
partially offset by increases in operating expenses and depreciation primarily resulting from the locations
acquired from Andeavor.
2018 Compared to 2017
Retail segment revenues increased $4.52 billion. The majority of this increase is due to the acquisition of
Andeavor on October 1, 2018, which added company-owned and operated retail locations, which are included
in Speedway fuel sales, and direct dealer locations. The existing Retail business also saw a $1.18 billion
increase in fuel and merchandise sales. Total fuel sales increased $5.21 billion primarily due to an increase in
Speedway fuel sales volumes of 494 million gallons, the addition of direct dealer fuel sales of 644 million
gallons and an increase in average gasoline and distillate selling prices of $0.37 per gallon. Merchandise sales
increased $339 million. The increases in Speedway fuel sales and merchandise sales as well as the addition of
sales to direct dealers were primarily due to the acquisition of Andeavor. These increases were partially offset
by our election to present revenues net of certain taxes under ASC 606 prospectively from January 1, 2018,
which resulted in a decrease in Retail segment revenues of $844 million in 2018. See Item 8. Financial
Statements and Supplementary Data – Note 2 for additional information.
Retail segment income from operations increased $299 million primarily due to contributions from the Retail
operations acquired in the Andeavor acquisition. For locations owned prior to the Andeavor acquisition,
increased gasoline and distillate and merchandise margins were more than offset by increased operating
expenses.
66
Midstream
2019
2018
2017
Midstream Revenues (a)(b)
$3,834
$4,926
$8,760
Midstream Income from Operations
$3,273
$3,387
$6,660
$2,322
$1,443 $3,765
In millions
Third Party
2019
2018
$3,594
$2,752
2017
$1,339
Intersegment - Refining & Marketing
In millions
(a) We adopted ASC 606 (Revenue from Contracts with Customers), as of January 1, 2018, and elected to report certain taxes on a net
basis. We applied the standard using the modified retrospective method, and, therefore, comparative information continues to reflect
certain taxes on a gross basis.
Pipeline Throughputs (a)
Terminal Throughput
2019
2018
2017
2019
2018
2017
5,245
2019
3,279
4,177
3,377
mbpd
2018
2017
1,477
1,901
mbpd
Gathering System
Throughput (b)
Natural Gas Processed (b)
C2 (Ethane) + NGLs
Fractionated (b)
6,094
2019
8,661
4,779
3,608
MMcf/d
2018
2017
7,199
6,460
MMcf/d
2019
2018
2017
534
464
394
mbpd
(a) On owned common-carrier pipelines, excluding equity method investments.
(b)
Includes amounts related to unconsolidated equity method investments on a 100 percent basis.
67
Benchmark Prices
Natural Gas NYMEX HH ($ per MMBtu)
C2 + NGL Pricing ($ per gallon)(a)
2019
2018
2017
$
$
2.53 $
$
0.52
3.07
0.78
$
$
3.02
0.66
(a) C2 + NGL pricing based on Mont Belvieu prices assuming an NGL barrel of approximately 35 percent ethane, 35 percent propane,
six percent Iso-Butane, 12 percent normal butane and 12 percent natural gasoline.
2019 Compared to 2018
Midstream segment revenue increased $2.10 billion primarily due to the inclusion of ANDX revenues
subsequent to the Andeavor acquisition on October 1, 2018. On July 30, 2019, MPLX acquired ANDX. In
addition, 2019 reflects an extra month of fees charged for fuels distribution and refining logistics services
provided to our Refining & Marketing segment following the February 1, 2018 dropdown to MPLX. MPLX
revenues from refining logistics and fuels distribution services provided to MPC were $1.48 billion and
$1.36 billion for the years ended December 31, 2019, and 2018, respectively.
In 2019, Midstream segment income from operations increased $842 million largely due to contributions from
ANDX in addition to growth across MPLX’s businesses.
2018 Compared to 2017
On February 1, 2018, we completed the dropdown of our refining logistics assets and fuels distribution
services to MPLX, which is reported in our Midstream segment. Refining logistics contains the integrated
tank farm assets that support MPC’s refining operations. Fuels distribution is structured to provide a broad
range of scheduling and marketing services as MPC’s agent. These new businesses were reported in the
Midstream segment prospectively from February 1, 2018. No effect was given to prior periods as these
entities were not considered businesses prior to February 1, 2018.
Midstream segment revenue and income from operations increased $2.90 billion and $1.41 billion,
respectively. Revenue increased $1.94 billion primarily due to fees charged for fuels distribution and refining
logistics services following the February 1, 2018 dropdown to MPLX in addition to services provided by
ANDX following the acquisition of Andeavor on October 1, 2018. Revenues also increased by approximately
$502 million due to ASC 606 gross ups. See Item 8. Financial Statements and Supplementary Data – Note 2
for additional information.
In 2018, Midstream segment income from operations includes $230 million due to contributions from ANDX
and $874 million from the refining logistics assets and fuels distribution services contributed to MPLX on
February 1, 2018. Prior period Midstream segment results do not reflect the impact of these new businesses.
The incremental $309 million increase in Midstream segment results in 2018, was driven by record gathered,
processed and fractionated volumes and record pipeline throughput volumes for MPLX.
Items not Allocated to Segments
Key Financial Information (in millions)
2019
2018
2017
Items not allocated to segments:
Corporate and other unallocated items(a)
Equity method investment restructuring gains
Transaction-related costs
Litigation
Impairments
$
$
(805)
259
(160)
(22)
(1,239)
$
(502)
—
(197)
—
9
(365)
—
—
(29)
23
(a) Corporate and other unallocated items consists primarily of MPC’s corporate administrative expenses and costs related to certain
non-operating assets, except for corporate overhead expenses attributable to MPLX, which are included in the Midstream segment.
Corporate overhead expenses are not allocated to the Refining & Marketing and Retail segments.
2019 Compared to 2018
Corporate and other unallocated expenses increased $303 million in 2019 compared to 2018 largely due to the
inclusion of costs and expenses related to Andeavor operations.
Other unallocated items in 2019 include $259 million of equity method investment restructuring gains which
include a $207 million gain resulting from the agreements executed with Capline LLC to contribute our
33 percent undivided interest in the Capline pipeline system in exchange for a 33 percent ownership interest in
68
Capline LLC. We also recognized a $52 million gain due to the formation of a new joint venture with The
Andersons as the fair value of our interest in the new venture exceeded our contribution to the venture. See
Item 8. Financial Statements and Supplementary Data –Note 14 for additional information.
Other unallocated items also include transaction-related costs of $160 million and a litigation reserve
adjustment of $22 million. The transaction-related costs recognized during the year include the recognition of
an obligation for vacation benefits provided to former Andeavor employees in the first quarter as well as
employee retention, severance and other costs. Beginning in the fourth quarter of 2019, transaction costs also
include costs incurred in connection with the Speedway separation, Midstream strategic review and other
related efforts. Effective October 1, 2019, we discontinued reporting Andeavor transaction-related costs
separately as one year has passed since the Andeavor acquisition and any remaining costs are immaterial.
Impairment charges of $1.24 billion primarily relate to MPLX goodwill associated with the ANDX gathering
and processing businesses acquired as part of the Andeavor acquisition. See Item 8. Financial Statements and
Supplementary Data – Note 16 for additional information.
2018 Compared to 2017
Corporate and other unallocated expenses increased $137 million in 2018 compared to 2017 largely due to
increased costs and expenses for the combined company after the Andeavor acquisition on October 1, 2018.
Other unallocated items in 2018 include $197 million of transaction-related costs for financial advisors,
employee severance and other costs associated with the Andeavor acquisition and MPC’s share of gains from
the sale of assets remaining from the canceled Sandpiper pipeline project. Other unallocated items in 2017
include an $86 million litigation charge, a litigation benefit of $57 million and a benefit of $23 million related
to MPC’s share of gains from the sale of assets remaining from the canceled Sandpiper pipeline project.
Non-GAAP Financial Measures
Management uses certain financial measures to evaluate our operating performance that are calculated and
presented on the basis of methodologies other than in accordance with GAAP. We believe these non-GAAP
financial measures are useful to investors and analysts to assess our ongoing financial performance because,
when reconciled to its most comparable GAAP financial measure, they provide improved comparability
between periods through the exclusion of certain items that we believe are not indicative of our core operating
performance and that may obscure our underlying business results and trends. These measures should not be
considered a substitute for, or superior to, measures of financial performance prepared in accordance with
GAAP, and our calculations thereof may not be comparable to similarly titled measures reported by other
companies. The non-GAAP financial measures we use are as follows:
69
Refining & Marketing Margin
Refining margin is defined as sales revenue less the cost of refinery inputs and purchased products and
excludes any LCM inventory market adjustment and other items reflected in the table below.
Reconciliation of Refining & Marketing income from
operations to Refining & Marketing margin
(in millions)
Refining & Marketing income from operations
Plus (Less):
Refining operating costs(a)
Refining depreciation and amortization
Refining planned turnaround costs
Distribution costs(b)
Distribution depreciation and amortization
Income from equity method investments
Net gain on disposal of assets
Other income
Biodiesel tax credit
2019
2018
2017
$
2,367
$
2,481
$
2,321
6,421
1,465
740
5,117
200
(11)
(6)
(43)
(93)
4,137
1,089
664
3,512
85
(15)
(4)
(125)
—
3,612
1,013
501
1,686
69
(17)
5
(249)
—
8,941
Refining & Marketing margin
$
16,157
$
11,824
$
(a)
(b)
Includes refining operating and major maintenance costs. Excludes planned turnaround and depreciation and amortization expense.
Includes fees paid to MPLX of $3.22 billion and $2.28 billion for the years ended December 31, 2019, and 2018, respectively. Fees
paid to MPLX for 2017 are prior to the dropdown of refining logistics and fuels distribution assets and are not comparable. Excludes
depreciation and amortization expense.
Retail Fuel Margin
Retail fuel margin is defined as the price paid by consumers or direct dealers less the cost of refined products,
including transportation, consumer excise taxes and bankcard processing fees (where applicable) and
excluding any LCM inventory market adjustment.
Retail Merchandise Margin
Retail merchandise margin is defined as the price paid by consumers less the cost of merchandise.
Reconciliation of Retail income from operations to
Retail total margin
(in millions)
Retail income from operations
Plus (Less):
Operating, selling, general and administrative
expenses
Depreciation and amortization
Income from equity method investments
Net gain on disposal of assets
Other income
Retail total margin
Retail total margin:
Fuel margin
Merchandise margin
Other margin
Retail total margin
2019
2018
2017
$
1,582
$
1,028
$
729
2,456
528
(82)
(31)
(44)
4,409
2,478
1,827
104
$
$
1,796
353
(74)
(17)
(7)
3,079
1,547
1,486
46
$
$
4,409
$
3,079
$
1,533
275
(69)
(14)
(14)
2,440
1,008
1,402
30
2,440
$
$
$
70
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Our cash and cash equivalents balance was $1.53 billion at December 31, 2019 compared to $1.69 billion at
December 31, 2018. Net cash provided by (used in) operating activities, investing activities and financing
activities for the past three years is presented in the following table.
(In millions)
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Total
2019
2018
2017
$
$
$
9,441
(6,261)
(3,376)
$
6,158
(7,670)
222
(196)
$
(1,290)
$
6,612
(3,398)
(1,091)
2,123
Net cash provided by operating activities increased $3.28 billion in 2019 compared to 2018, primarily due to
an increase in operating results, excluding impairment expenses, and favorable change in working capital of
$458 million. Net cash provided by operating activities decreased $454 million in 2018 compared to 2017,
primarily due to an unfavorable change in working capital of $2.28 billion partially offset by an increase in
operating results. The above changes in working capital exclude changes in short-term debt.
For 2019, changes in working capital were a net $118 million source of cash, primarily due to the effect of
increases in energy commodity prices and volumes on working capital. Accounts payable increased primarily
due to higher crude oil payable price and volumes. Current receivables increased primarily due to increases in
crude and refined product receivable volumes and prices. Inventories increased primarily due to increases in
refined product and materials & supplies inventories partially offset by a decrease in crude inventory.
For 2018, changes in working capital were a net $340 million use of cash, primarily due to the effect of
decreases in energy commodity prices on working capital. Accounts payable decreased primarily due to lower
crude oil payable prices. Inventories decreased primarily due to a decrease in crude and refined product
inventories. Current receivables decreased primarily due to lower crude oil receivable prices. All of these
effects exclude the working capital acquired in connection with the acquisition of Andeavor.
For 2017, changes in working capital were a net $1.94 billion source of cash, primarily due to the effect of
increases in energy commodity prices on working capital. Accounts payable increased primarily due to higher
crude oil payable volumes and prices; current receivables increased primarily due to higher crude oil and
refined product receivable prices and volumes; and inventories decreased primarily due to lower crude oil
inventory volumes.
Cash flows used in investing activities decreased $1.41 billion in 2019 compared to 2018 and increased
$4.27 billion in 2018 compared to 2017.
•
•
•
•
Cash used for additions to property, plant and equipment was primarily due to spending in our
Midstream segment. See discussion of capital expenditures and investments under the “Capital
Spending” section.
Cash used for acquisitions of $3.82 billion in 2018 primarily includes cash paid to Andeavor
stockholders of $3.5 billion in connection with the acquisition of Andeavor on October 1, 2018.
Net investments were a use of cash of $966 million in 2019 compared to $393 million in 2018 and
$743 million in 2017. Investments in 2019 are largely due to investments in connection with the
Gray Oak Pipeline, which began initial start-up in the fourth quarter, the Wink to Webster Pipeline,
the Whistler Pipeline and other Midstream projects. Investments in 2017 primarily include MPLX’s
$500 million investment to acquire a partial interest in the Bakken Pipeline system.
Cash provided by disposal of assets totaled $127 million, $54 million and $79 million in 2019, 2018
and 2017, respectively. The increase in 2019 is primarily due to proceeds from the sale of assets in
our Retail segment.
71
The consolidated statements of cash flows exclude changes to the consolidated balance sheets that did not
affect cash. A reconciliation of additions to property, plant and equipment to total capital expenditures and
investments follows for each of the last three years.
(In millions)
2019
2018
2017
Additions to property, plant and equipment per
consolidated statements of cash flows
$
Asset retirement expenditures
Increase (decrease) in capital accruals
Total capital expenditures
Investments in equity method investees
$
5,374
1
(306)
5,069
1,064
$
3,578
8
309
3,895
409
Total capital expenditures and investments
$
6,133
$
4,304
$
2,732
2
67
2,801
305
3,106
Financing activities were a use of cash of $3.38 billion in 2019, a source of cash of $222 million in 2018 and a
use of cash of $1.09 billion in 2017.
•
•
•
•
•
•
Long-term debt borrowings and repayments, including debt issuance costs, were a net $1.18 billion
source of cash in 2019 compared to a $5.36 billion source of cash in 2018 and a $2.24 billion source
of cash in 2017. During 2019, MPLX issued $2 billion of floating rate notes, the proceeds of which
were used to repay various outstanding MPLX borrowings and for general business purposes, and
had net borrowings of $1 billion under its term loan agreement. In addition, MPLX repaid
$500 million of senior notes. During 2018, MPLX issued $7.75 billion of senior notes, redeemed
$750 million of senior notes, borrowed and repaid $4.1 billion under the MPLX term loan, and
borrowed and repaid $1.41 billion and $1.92 billion, respectively, under the MPLX Credit
Agreement. In addition, MPC redeemed $600 million of senior notes. During 2017, MPLX issued
$2.25 billion of senior notes, borrowed $505 million under the MPLX bank revolving credit
agreement, repaid the remaining $250 million under the MPLX term loan agreement and we repaid
the remaining $200 million balance under the MPC term loan agreement. See Item 8. Financial
Statements and Supplementary Data – Note 19 for additional information on our long-term debt.
Cash used in common stock repurchases totaled $1.95 billion in 2019, $3.29 billion in 2018, and
$2.37 billion in 2017. See the “Capital Requirements” section for further discussion of our stock
repurchases.
Cash used in dividend payments totaled $1.40 billion in 2019, $954 million in 2018 and
$773 million in 2017. The increase in 2019 was primarily due a net increase in the number of shares
outstanding due to the approximate 239.8 million shares issued in connection with the Andeavor
acquisition and a $0.28 per share increase in our base dividend, partially offset by a reduction of
shares resulting from share repurchases. The increase in 2018 was primarily due to an increase in
our base dividend in addition to a net increase in the number of shares of our common stock
outstanding due to issuances related to the Andeavor acquisition, partially offset by share
repurchases. Dividends per share were $2.12 in 2019, $1.84 in 2018 and $1.52 in 2017.
Distributions to noncontrolling interests increased $342 million in 2019 compared to 2018 and
$209 million in 2018 compared to 2017, primarily due to an increases in MPLX units outstanding
and MPLX’s distribution per common unit. Distributions to noncontrolling interests included
ANDX’s distribution per common unit paid in the first and second quarter of 2019, prior to the
merger of ANDX and MPLX, and the fourth quarter of 2018 subsequent to the acquisition of
Andeavor on October 1, 2018.
Cash proceeds from the issuance of MPLX common units were $473 million in 2017. See Item 8.
Financial Statements and Supplementary Data – Note 4 for further discussion of MPLX.
Cash used in financing activities in 2017 included a portion of the payments to the seller of the
Galveston Bay refinery under the contingent earnout provisions of the purchase and sale agreement.
Derivative Instruments
See Item 7A. Quantitative and Qualitative Disclosures about Market Risk for a discussion of derivative
instruments and associated market risk.
72
Capital Resources
MPC, Excluding MPLX
We control MPLX through our ownership of the general partner, however, the creditors of MPLX do not have
recourse to MPC’s general credit through guarantees or other financial arrangements. The assets of MPLX can
only be used to settle its own obligations and its creditors have no recourse to our assets. Therefore, in the
following table, we present the liquidity of MPC, excluding MPLX. MPLX liquidity is discussed in the
following section.
Our liquidity, excluding MPLX, totaled $8.3 billion at December 31, 2019 consisting of:
(In millions)
Bank revolving credit facility(a)
364 day bank revolving credit facility
Trade receivables facility
Total
Cash and cash equivalents(b)
Total liquidity
December 31, 2019
Total
Capacity
Outstanding
Borrowings
Available
Capacity
$
$
$
5,000
1,000
750
$
1
—
—
6,750
$
1
$
$
4,999
1,000
750
6,749
1,512
8,261
(a) Outstanding borrowings include $1 million in letters of credit outstanding under this facility. Excludes MPLX’s $3.5 billion bank
revolving credit facility, which had no borrowings and no of letters of credit outstanding as of December 31, 2019.
Excludes $15 million of MPLX cash and cash equivalents.
(b)
Because of the alternatives available to us, including internally generated cash flow and access to capital
markets, including a commercial paper program, we believe that our short-term and long-term liquidity is
adequate to fund not only our current operations, but also our near-term and long-term funding requirements,
including capital spending programs, the repurchase of shares of our common stock, dividend payments,
defined benefit plan contributions, repayment of debt maturities and other amounts that may ultimately be
paid in connection with contingencies.
Commercial Paper – We established a commercial paper program that allows us to have a maximum of
$2 billion in commercial paper outstanding, with maturities up to 397 days from the date of issuance. We do
not intend to have outstanding commercial paper borrowings in excess of available capacity under our bank
revolving credit facilities. At December 31, 2019, we had no amounts outstanding under the commercial paper
program.
MPC Bank Revolving Credit Facilities – On August 28, 2018, in connection with the Andeavor acquisition,
MPC entered into a credit agreement with a syndicate of lenders providing for a $5 billion five-year revolving
credit facility that expires in 2023. The five-year credit agreement became effective on October 1, 2018. On
July 26, 2019, MPC entered into a credit agreement with a syndicate of lenders providing for a new $1 billion
364-day revolving credit facility that became effective upon the expiration of MPC’s previously existing
$1 billion 364-day revolving credit facility in September 2019. The new 364-day credit agreement contains
substantially the same terms and conditions as our previously existing 364-day revolving credit facility and
will expire in September 2020. There were no borrowings and approximately $1 million of letters of credit
outstanding under these facilities at December 31, 2019.
Trade receivables facility – Our trade receivables facility has a borrowing capacity of $750 million
(depending on the amount of our eligible domestic trade accounts receivable). On July 19, 2019, we amended
our trade receivables facility to extend the maturity date to July 16, 2021. As of December 31, 2019, eligible
trade receivables supported borrowings of $750 million. There were no borrowings outstanding at
December 31, 2019. Availability under our trade receivables facility is primarily a function of refined product
selling prices.
The MPC credit agreements and our trade receivables facility contain representations and warranties,
affirmative and negative covenants and events of default that we consider usual and customary for agreements
of these types. The financial covenant requires us to maintain, as of the last day of each fiscal quarter, a ratio
of Consolidated Net Debt to Total Capitalization (as defined in the MPC credit agreements) of no greater than
0.65 to 1.00. Other covenants restrict us and/or certain of our subsidiaries from incurring debt, creating liens
73
on assets and entering into transactions with affiliates. As of December 31, 2019, we were in compliance with
the covenants contained in the MPC credit agreements and our trade receivables facility, including the
financial covenant with a ratio of Consolidated Net Debt to Total Capitalization of 0.21 to 1.00.
Our intention is to maintain an investment-grade credit profile. As of February 1, 2020, the credit ratings on
our senior unsecured debt are as follows.
Company
MPC
Rating Agency
Moody’s
Standard & Poor’s
Fitch
Rating
Baa2 (negative outlook)
BBB (stable outlook)
BBB (stable outlook)
The ratings reflect the respective views of the rating agencies. Although it is our intention to maintain a credit
profile that supports an investment-grade rating, there is no assurance that these ratings will continue for any
given period of time. The ratings may be revised or withdrawn entirely by the rating agencies if, in their
respective judgments, circumstances so warrant.
None of the MPC credit agreements or our trade receivables facility contains credit rating triggers that would
result in the acceleration of interest, principal or other payments in the event that our credit ratings are
downgraded. However, any downgrades of our senior unsecured debt could increase the applicable interest
rates, yields and other fees payable under such agreements and may limit our flexibility to obtain financing in
the future, including to refinance existing indebtedness. In addition, a downgrade of our senior unsecured debt
rating to below investment-grade levels could, under certain circumstances, decrease the amount of trade
receivables that are eligible to be sold under our trade receivables facility, impact our ability to purchase crude
oil on an unsecured basis and could result in us having to post letters of credit under existing transportation
services or other agreements.
See Item 8. Financial Statements and Supplementary Data – Note 19 for further discussion of our debt.
MPLX
MPLX’s liquidity totaled $4.42 billion at December 31, 2019 consisting of:
(In millions)
MPLX LP - bank revolving credit facility
MPLX Term Loan Agreement
MPC Intercompany Loan Agreement
Total
Cash and cash equivalents
Total liquidity
December 31, 2019
Total
Capacity
Outstanding
Borrowings
Available
Capacity
$
$
3,500
1,000
1,500
$
— $
1,000
594
6,000
$
1,594
$
$
3,500
—
906
4,406
15
4,421
On September 26, 2019, MPLX entered into a term loan agreement which provides for a committed term loan
facility for up to an aggregate of $1 billion available to be drawn in up to four separate borrowings, subject to
the satisfaction or waiver of certain customary conditions. Borrowings under the term loan agreement bear
interest, at MPLX’s election, at either the Adjusted LIBO Rate (as defined in the term loan agreement) plus a
margin or the Alternate Base Rate (as defined in the term loan agreement) plus a margin. The applicable
margins to the benchmark interest rates fluctuate from time-to-time based on our credit ratings. The proceeds
from borrowings under the term loan agreement were used to fund the repayment of MPLX’s existing
indebtedness and for general business purposes. Amounts borrowed under the term loan agreement will be due
and payable on September 26, 2021.
On September 9, 2019, MPLX issued $2 billion aggregate principal amount of floating rate senior notes in a
public offering, consisting of $1 billion aggregate principal amount of notes due September 2021 and $1 billion
aggregate principal amount of notes due September 2022. The proceeds were used to repay various outstanding
MPLX borrowings and for general business purposes. The interest rate applicable to the floating rate senior
notes due September 2021 is LIBOR plus 0.9 percent per annum while the interest rate applicable to the
74
floating rate senior notes due September 2022 is LIBOR plus 1.1 percent per annum. Interest is payable in
March, June, September and December, commencing on December 9, 2019. Both series of floating rate notes
are callable, in whole or in part, at par plus accrued and unpaid interest at any time on or after September 10,
2020.
In connection with MPLX’s acquisition of ANDX on July 30, 2019, MPLX assumed ANDX’s outstanding
senior notes, which had an aggregate principal amount of $3.75 billion, with interest rates ranging from
3.500 percent to 6.375 percent and maturity dates ranging from 2019 to 2047. On September 23, 2019,
approximately $3.06 billion aggregate principal amount of ANDX’s outstanding senior notes were exchanged
for new unsecured senior notes issued by MPLX having the same maturity and interest rates as the ANDX
senior notes in an exchange offer and consent solicitation undertaken by MPLX, leaving approximately
$690 million aggregate principal of outstanding senior notes issued by ANDX. Of this, $500 million was
related to the 5.500 percent unsecured senior notes due 2019. The principal amount of $500 million and
accrued interest of $14 million was paid on October 15, 2019, which included interest through the payoff date.
MPLX Credit Agreement – Upon the completion of MPLX’s acquisition of ANDX on July 30, 2019, the
MPLX bank revolving credit facility was amended and restated to increase the borrowing capacity to
$3.5 billion and to extend the maturity date to July 30, 2024. The ANDX revolving and dropdown credit
facilities were terminated and all outstanding balances were repaid and funded with borrowings under the
amended and restated MPLX $3.5 billion bank revolving credit facility. There were no borrowings or letters
of credit outstanding under this facility at December 31, 2019.
The MPLX credit agreement and term loan agreement contain certain representations and warranties,
affirmative and restrictive covenants and events of default that we consider to be usual and customary for an
agreement of this type. The financial covenant requires MPLX to maintain a ratio of Consolidated Total Debt
as of the end of each fiscal quarter to Consolidated EBITDA (both as defined in the MPLX credit agreement)
for the prior four fiscal quarters of no greater than 5.0 to 1.0 (or 5.5 to 1.0 for up to two fiscal quarters
following certain acquisitions). Consolidated EBITDA is subject to adjustments for certain acquisitions
completed and capital projects undertaken during the relevant period. Other covenants restrict MPLX and/or
certain of its subsidiaries from incurring debt, creating liens on assets and entering into transactions with
affiliates. As of December 31, 2019, MPLX was in compliance with the covenants, including the financial
covenant with a ratio of Consolidated Total Debt to Consolidated EBITDA of 3.9 to 1.0.
Our intention is to maintain an investment-grade credit profile for MPLX. As of February 1, 2020, the credit
ratings on MPLX’s senior unsecured debt are as follows.
Company
MPLX
Rating Agency
Moody’s
Standard & Poor’s
Fitch
Rating
Baa2 (negative outlook)
BBB (stable outlook)
BBB (stable outlook)
The ratings reflect the respective views of the rating agencies. Although it is our intention to maintain a credit
profile that supports an investment-grade rating for MPLX, there is no assurance that these ratings will
continue for any given period of time. The ratings may be revised or withdrawn entirely by the rating agencies
if, in their respective judgments, circumstances so warrant.
Neither the MPLX credit agreement or term loan agreement contains credit rating triggers that would result in
the acceleration of interest, principal or other payments in the event that MPLX credit ratings are downgraded.
However, any downgrades of MPLX senior unsecured debt could increase the applicable interest rates, yields
and other fees payable under such agreements. In addition, a downgrade of MPLX senior unsecured debt
ratings to below investment-grade levels may limit MPLX’s ability to obtain future financing, including to
refinance existing indebtedness.
See Item 8. Financial Statements and Supplementary Data – Note 19 for further discussion of MPLX’s debt.
75
Capital Requirements
Capital Spending
MPC’s capital investment plan for 2020 totals approximately $2.6 billion for capital projects and investments,
excluding MPLX, capitalized interest and acquisitions. MPC’s 2020 capital investment plan includes all of the
planned capital spending for Refining & Marketing, Retail and Corporate as well as a portion of the planned
capital investments in Midstream. The remainder of the planned capital spending for Midstream reflects the
capital investment plan for MPLX. We continuously evaluate our capital plan and make changes as conditions
warrant. The 2020 capital investment plan for MPC and MPLX and capital expenditures and investments for
each of the last three years are summarized by segment below.
(In millions)
2020 Plan
2019
2018
2017
Capital expenditures and investments:(a)
MPC, excluding MPLX
Refining & Marketing
Retail
Midstream - Other
Corporate and Other(b)
Total MPC, excluding MPLX
Midstream - MPLX
$
$
$
1,550
550
300
200
2,600
1,750
$
$
$
1,999
607
360
237
3,203
2,930
$
$
$
1,057
460
70
157
1,744
2,560
$
$
$
832
381
36
138
1,387
1,719
(a) Capital expenditures include changes in capital accruals.
(b)
Includes capitalized interest of $137 million, $80 million and $55 million for 2019, 2018 and 2017, respectively. The 2020 capital
investment plan excludes capitalized interest.
Refining & Marketing
The Refining & Marketing segment’s forecasted 2020 capital spending and investments is approximately
$1.6 billion. This amount
includes approximately $1.1 billion of growth capital focused on refinery
optimization, production of higher value products, increased capacity to upgrade residual fuel oil and
expanded export capacity. Maintenance capital is expected to be $450 million.
Major capital projects completed over the last three years have prepared us to increase our diesel production,
process light crude oil, increase our export capabilities and meet the transportation fuel regulatory mandate
(Tier 3 fuel standards). In addition, the STAR investment project to transform our Galveston Bay refinery into
a world-class refining complex is progressing according to plan and is scheduled to complete in 2022.
Retail
The Retail segment’s 2020 capital forecast of approximately $550 million is focused on continued conversion
of acquired locations to the Speedway brand and systems, growth in existing and new markets, dealer sites,
commercial fueling/diesel expansion, food service through store remodels and high quality acquisitions.
Major capital projects over the last three years included converting recently acquired locations to the
Speedway brand and systems, building new store locations, remodeling and rebuilding existing locations in
core markets and building out our network of commercial fueling lane locations to capitalize on diesel
demand growth.
Midstream
MPLX’s capital
investment plan includes $1.5 billion of organic growth capital and approximately
$250 million of maintenance capital. This growth plan includes the continued expansion of the Mt. Airy
terminal in addition to projects which increase MPLX’s long-haul crude oil, natural gas and NGL pipeline
transportation capabilities. Many of MPLX’s projects also increase its export capabilities which provides for
additional flexibility and competitive advantages. MPLX’s growth plan also includes the addition of
approximately 580 MMcf/d of processing capacity at three gas processing plants, one in the Marcellus and
two in the Southwest, and approximately 80 mbpd of fractionation capacity in the Marcellus and Utica basins.
Major capital projects over the last three years included investments for the development of natural gas and
gas liquids infrastructure to support MPLX’s producer customers, primarily in the Marcellus and Utica shale
regions, development of various crude oil and refined petroleum products infrastructure projects, including a
76
build-out of Utica Shale infrastructure in connection with the Cornerstone Pipeline, a butane cavern in
Robinson, Illinois, and a tank farm expansion in Texas City, Texas.
The remaining Midstream segment’s forecasted 2020 capital spend, excluding MPLX, is approximately
$300 million which primarily relates to investments in equity affiliates.
Corporate and Other
The 2020 capital forecast includes approximately $200 million to support corporate activities. Major projects
over the last three years included an expansion project for our corporate headquarters and upgrades to
information technology systems.
Dividends
On January 27, 2020, we announced our board of directors approved a $0.58 per share dividend, payable
March 10, 2020 to shareholders of record at the close of business on February 19, 2020.
Share Repurchases
Since January 1, 2012, our board of directors has approved $18.0 billion in total share repurchase
authorizations and we have repurchased a total of $15.0 billion of our common stock, leaving approximately
$3.0 billion available for repurchases as of December 31, 2019. Under these authorizations, we have acquired
327 million shares at an average cost per share of $46.05. The table below summarizes our total share
repurchases. See Item 8. Financial Statements and Supplementary Data – Note 9 for further discussion of the
share repurchase plans.
(In millions, except per share data)
Number of shares repurchased
Cash paid for shares repurchased
Average cost per share
2019
2018
2017
34
1,950
58.87
$
$
47
3,287
69.46
$
$
44
2,372
53.85
$
$
We may utilize various methods to effect the repurchases, which could include open market repurchases,
negotiated block transactions, tender offers, accelerated share repurchases or open market solicitations for
shares, some of which may be effected through Rule 10b5-1 plans. The timing and amount of future
repurchases, if any, will depend upon several factors, including market and business conditions, and such
repurchases may be discontinued at any time.
Other Capital Requirements
In 2019, we made contributions totaling $270 million to our funded pension plans. For 2020, we have an
immaterial amount of required funding, but we may also make voluntary contributions to our funded pension
plans at our discretion.
We may, from time to time, repurchase notes in the open market, in tender offers, in privately-negotiated
transactions or otherwise in such volumes, at such prices and upon such other terms as we deem appropriate.
77
Contractual Cash Obligations
The table below provides aggregated information on our consolidated obligations to make future payments
under existing contracts as of December 31, 2019. The contractual obligations detailed below do not include
our contractual obligations to MPLX under various fee-based commercial agreements as these transactions are
eliminated in the consolidated financial statements.
(In millions)
Long-term debt(a)
Finance lease obligations(b)
Operating lease obligations
Purchase obligations:(c)
Crude oil, feedstock, refined
product and renewable fuel
contracts(d)
Transportation and related
contracts
Contracts to acquire property,
plant and equipment
Service, materials and other
contracts(e)
Total purchase obligations
Other long-term liabilities reported in
the consolidated balance sheet(f)
Total contractual cash
obligations
Total
2020
2021-2022
2023-2024
Later Years
$
46,013 $
987
2,833
1,971 $
96
698
7,711 $
182
992
7,051 $
182
509
29,280
527
634
10,011
9,645
2,298
468
1,617
1,558
2,693
644
225
829
59
779
47
532
—
505
94
469
—
765
16,619
12,315
1,892
1,084
1,328
2,889
311
552
555
1,471
$
69,341 $
15,391 $
11,329 $
9,381 $
33,240
(a)
(b)
(c)
(d)
(e)
(f)
Includes interest payments of $17.21 billion for our senior notes and the MPLX senior notes, commitment and administrative fees for
our credit agreements, the MPLX credit agreement and term loan agreement and our trade receivables facility.
Finance lease obligations represent future minimum payments.
Includes both short- and long-term purchases obligations.
These contracts include variable price arrangements. For purposes of this disclosure we have estimated prices to be paid primarily
based on futures curves for the commodities to the extent available.
Primarily includes contracts to purchase services such as utilities, supplies and various other maintenance and operating services.
Primarily includes obligations for pension and other postretirement benefits including medical and life insurance, which we have
estimated through 2029. See Item 8. Financial Statements and Supplementary Data – Note 23.
Off-Balance Sheet Arrangements
Off-balance sheet arrangements comprise those arrangements that may potentially impact our liquidity, capital
resources and results of operations, even though such arrangements are not recorded as liabilities under
accounting principles generally accepted in the United States. Our off-balance sheet arrangements are limited
to indemnities and guarantees that are described below. Although these arrangements serve a variety of our
business purposes, we are not dependent on them to maintain our liquidity and capital resources, and we are
not aware of any circumstances that are reasonably likely to cause the off-balance sheet arrangements to have
a material adverse effect on liquidity and capital resources.
We have provided various guarantees related to equity method investees. In conjunction with our spinoff from
Marathon Oil, we entered into various indemnities and guarantees to Marathon Oil. These arrangements are
described in Item 8. Financial Statements and Supplementary Data – Note 26.
TRANSACTIONS WITH RELATED PARTIES
We believe that
transactions with related parties were conducted on terms comparable to those with
unaffiliated parties. See Item 8. Financial Statements and Supplementary Data – Note 7 for discussion of
activity with related parties.
ENVIRONMENTAL MATTERS AND COMPLIANCE COSTS
We have incurred and may continue to incur substantial capital, operating and maintenance, and remediation
expenditures as a result of environmental laws and regulations. If these expenditures, as with all costs, are not
ultimately reflected in the prices of our products and services, our operating results will be adversely affected.
78
We believe that substantially all of our competitors must comply with similar environmental laws and
regulations. However, the specific impact on each competitor may vary depending on a number of factors,
including the age and location of its operating facilities, marketing areas, production processes and whether it
is also engaged in the petrochemical business or the marine transportation of crude oil and refined products.
Legislation and regulations pertaining to fuel specifications, climate change and greenhouse gas emissions
have the potential to materially adversely impact our business, financial condition, results of operations and
cash flows, including costs of compliance and permitting delays. The extent and magnitude of these adverse
impacts cannot be reliably or accurately estimated at this time because specific regulatory and legislative
requirements have not been finalized and uncertainty exists with respect to the measures being considered, the
costs and the time frames for compliance, and our ability to pass compliance costs on to our customers. For
additional information see Item 1A. Risk Factors.
Our environmental expenditures, including non-regulatory expenditures, for each of the last three years were:
(In millions)
Capital
Compliance:(a)
Operating and maintenance
Remediation(b)
Total
2019
2018
2017
$
555
$
380
$
580
78
525
52
$
1,213
$
957
$
343
413
36
792
(a) Based on the American Petroleum Institute’s definition of environmental expenditures.
(b)
These amounts include spending charged against remediation reserves, where permissible, but exclude non-cash provisions recorded
for environmental remediation.
We accrue for environmental remediation activities when the responsibility to remediate is probable and the
amount of associated costs can be reasonably estimated. As environmental remediation matters proceed
toward ultimate resolution or as additional remediation obligations arise, charges in excess of those previously
accrued may be required.
New or expanded environmental requirements, which could increase our environmental costs, may arise in the
future. It is not possible to predict all of the ultimate costs of compliance, including remediation costs that
may be incurred and penalties that may be imposed.
Our environmental capital expenditures accounted for 11 percent, 10 percent and 12 percent of capital
expenditures, for 2019, 2018 and 2017, respectively, excluding acquisitions. Our environmental capital
expenditures are expected to approximate $160 million, or 4 percent, of total planned capital expenditures in
2020. Actual expenditures may vary as the number and scope of environmental projects are revised as a result
of improved technology or changes in regulatory requirements and could increase if additional projects are
identified or additional requirements are imposed.
For more information on environmental regulations that impact us, or could impact us, see Item 1. Business –
Environmental Matters, Item 1A. Risk Factors and Item 3. Legal Proceedings.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with GAAP requires us to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets
and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and
expenses during the respective reporting periods. Accounting estimates are considered to be critical if (1) the
nature of the estimates and assumptions is material due to the levels of subjectivity and judgment necessary to
account for highly uncertain matters or the susceptibility of such matters to change; and (2) the impact of the
estimates and assumptions on financial condition or operating performance is material. Actual results could
differ from the estimates and assumptions used.
Fair Value Estimates
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. There are three approaches for measuring the fair value
of assets and liabilities: the market approach, the income approach and the cost approach, each of which
includes multiple valuation techniques. The market approach uses prices and other relevant information
79
generated by market transactions involving identical or comparable assets or liabilities. The income approach
uses valuation techniques to measure fair value by converting future amounts, such as cash flows or earnings,
into a single present value amount using current market expectations about those future amounts. The cost
approach is based on the amount that would currently be required to replace the service capacity of an asset.
This is often referred to as current replacement cost. The cost approach assumes that the fair value would not
exceed what it would cost a market participant to acquire or construct a substitute asset of comparable utility,
adjusted for obsolescence.
The fair value accounting standards do not prescribe which valuation technique should be used when
measuring fair value and does not prioritize among the techniques. These standards establish a fair value
hierarchy that prioritizes the inputs used in applying the various valuation techniques. Inputs broadly refer to
the assumptions that market participants use to make pricing decisions, including assumptions about risk.
Level 1 inputs are given the highest priority in the fair value hierarchy while Level 3 inputs are given the
lowest priority. The three levels of the fair value hierarchy are as follows:
•
•
•
Level 1 – Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities in
active markets as of the measurement date. Active markets are those in which transactions for the
asset or liability occur in sufficient frequency and volume to provide pricing information on an
ongoing basis.
Level 2 – Observable market-based inputs or unobservable inputs that are corroborated by market
data. These are inputs other than quoted prices in active markets included in Level 1, which are
either directly or indirectly observable as of the measurement date.
Level 3 – Unobservable inputs that are not corroborated by market data and may be used with
internally developed methodologies that result in management’s best estimate of fair value.
Valuation techniques that maximize the use of observable inputs are favored. Assets and liabilities are
classified in their entirety based on the lowest priority level of input that is significant to the fair value
measurement. The assessment of the significance of a particular input to the fair value measurement requires
judgment and may affect the placement of assets and liabilities within the levels of the fair value hierarchy.
We use an income or market approach for recurring fair value measurements and endeavor to use the best
information available. See Item 8. Financial Statements and Supplementary Data – Note 17 for disclosures
regarding our fair value measurements.
Significant uses of fair value measurements include:
•
•
•
•
•
•
assessment of impairment of long-lived assets;
assessment of impairment of intangible assets:
assessment of impairment of goodwill;
assessment of impairment of equity method investments;
recorded values for assets acquired and liabilities assumed in connection with acquisitions; and
recorded values of derivative instruments.
Impairment Assessments of Long-Lived Assets, Intangible Assets, Goodwill and Equity Method Investments
Fair value calculated for the purpose of testing our long-lived assets, intangible assets, goodwill and equity
method investments for impairment is estimated using the expected present value of future cash flows method
and comparative market prices when appropriate. Significant judgment is involved in performing these fair
value estimates since the results are based on forecasted financial information prepared using significant
assumptions including:
•
•
Future margins on products produced and sold. Our estimates of future product margins are based
on our analysis of various supply and demand factors, which include, among other things, industry-
wide capacity, our planned utilization rate, end-user demand, capital expenditures and economic
conditions. Such estimates are consistent with those used in our planning and capital investment
reviews.
Future volumes. Our estimates of future refinery, retail, pipeline throughput and natural gas and NGL
processing volumes are based on internal forecasts prepared by our Refining & Marketing, Retail
and Midstream segments operations personnel. Assumptions about our customers’ drilling activity
are inherently subjective and contingent upon a number of variable factors (including future or
80
expected pricing considerations), many of which are difficult to forecast. Management considers
these volume forecasts and other factors when developing our forecasted cash flows.
Discount rate commensurate with the risks involved. We apply a discount rate to our cash flows
based on a variety of factors, including market and economic conditions, operational risk, regulatory
risk and political risk. This discount rate is also compared to recent observable market transactions,
if possible. A higher discount rate decreases the net present value of cash flows.
Future capital requirements. These are based on authorized spending and internal forecasts.
•
•
We base our fair value estimates on projected financial information which we believe to be reasonable.
However, actual results may differ materially from these projections.
The need to test for impairment can be based on several indicators, including a significant reduction in prices
of or demand for products produced, a poor outlook for profitability, a significant reduction in pipeline
throughput volumes, a significant reduction in natural gas or NGLs processed, a significant reduction in
refining or retail fuel margins, other changes to contracts or changes in the regulatory environment.
Long-lived assets used in operations are assessed for
impairment whenever changes in facts and
circumstances indicate that the carrying value of the assets may not be recoverable based on the expected
undiscounted future cash flow of an asset group. For purposes of impairment evaluation, long-lived assets
must be grouped at the lowest level for which independent cash flows can be identified, which generally is the
refinery and associated distribution system level for Refining & Marketing segment assets, company-owned
convenience store locations for Retail segment assets, and the plant level or pipeline system level for
Midstream segment assets. If the sum of the undiscounted estimated pretax cash flows is less than the carrying
value of an asset group, fair value is calculated, and the carrying value is written down if greater than the
calculated fair value.
Unlike long-lived assets, goodwill is subject to annual, or more frequent if necessary, impairment testing at
the reporting unit level. A goodwill impairment loss is measured as the amount by which a reporting unit’s
carrying value exceeds its fair value, without exceeding the recorded amount of goodwill. As of December 31,
2019, we had a total of $20.04 billion of goodwill recorded on our consolidated balance sheet, which was
associated with eight of our ten reporting units.
Prior to performing our annual impairment assessment as of November 30, 2019, MPC had goodwill totaling
approximately $21.28 billion associated with nine reporting units. As part of this assessment, MPLX recorded
approximately $1.2 billion of impairment expense in the fourth quarter of 2019 related to its Western
Gathering & Processing (“G&P”) reporting unit, which brought the amount of goodwill recorded within this
reporting unit to zero. The impairment was primarily driven by updated guidance related to the slowing of
drilling activity, which has reduced production growth forecasts from MPLX’s producer customers. For the
eight remaining reporting units with goodwill, we determined that no significant adjustments to the carrying
value of goodwill were necessary. The annual impairment assessment for these eight reporting units resulted
in the fair value of the reporting units exceeding their carrying value by percentages ranging from
approximately 8 percent to 457 percent. The reporting unit for which fair value exceeded its carrying amount
by 8 percent, our Midstream Crude Gathering reporting unit, had goodwill
totaling $1.1 billion at
December 31, 2019. The operations which make up this reporting unit were acquired through our acquisition
of Andeavor and were subsequently acquired by MPLX on July 30, 2019 through a common control
transaction. We accounted for the October 1, 2018 acquisition of Andeavor, including acquiring control of
ANDX, using the acquisition method of accounting, which required Andeavor assets and liabilities to be
recorded by us at the acquisition date fair value. As such, given the short amount of time from when fair value
was established to the date of the annual impairment test, the amount by which the fair value exceeded the
carrying value within this reporting unit is not unexpected. Also, our Midstream Eastern G&P reporting unit
had fair value exceeding its carrying value of approximately 18 percent and had goodwill totaling $1.8 billion
as of December 31, 2019. An increase of one percentage point to the discount rate used to estimate the fair
value of this reporting unit would not have resulted in goodwill impairment as of November 30, 2019. No
other MPC reporting units had fair values exceeding carrying values of less than 19 percent.
Significant assumptions used to estimate the reporting units’ fair value included estimates of future cash flows
and market information for comparable assets. If estimates for future cash flows, which are impacted by
producer customers’ development plans, which impact future volumes and capital requirements, were to
decline, the overall reporting units’ fair value would decrease, resulting in potential goodwill impairment
charges. Fair value determinations require considerable judgment and are sensitive to changes in underlying
81
assumptions and factors. As a result, there can be no assurance that the estimates and assumptions made for
purposes of the impairment tests will prove to be an accurate prediction of the future.
Equity method investments are assessed for impairment whenever factors indicate an other than temporary
loss in value. Factors providing evidence of such a loss include the fair value of an investment that is less than
its carrying value, absence of an ability to recover the carrying value or the investee’s inability to generate
income sufficient to justify our carrying value. During the fourth quarter of 2019, two of the joint ventures in
which MPLX has an interest recorded impairments, which impacted the amount of income from equity
method investments during the period by approximately $28 million. For one of the joint ventures, MPLX
also had a basis difference which was being amortized over the life of the underlying assets. As a result of the
impairment recorded by the joint venture, MPLX also assessed this basis difference for impairment and
recorded approximately $14 million of impairment during the quarter related to this investment, which was
recorded through “Income from equity method investments”. This impairment was largely due to a reduction
in forecasted volumes of the joint venture related to the loss of one of its customers. At December 31, 2019,
we had $6.90 billion of investments in equity method investments recorded on our consolidated balance sheet.
An estimate of the sensitivity to net income resulting from impairment calculations is not practicable, given
the numerous assumptions (e.g., pricing, volumes and discount rates) that can materially affect our estimates.
That is, unfavorable adjustments to some of the above listed assumptions may be offset by favorable
adjustments in other assumptions.
See Item 8. Financial Statements and Supplementary Data – Note 14 for additional information on our equity
method investments. See Item 8. Financial Statements and Supplementary Data – Note 16 for additional
information on our goodwill and intangibles, including a table summarizing our recorded goodwill by
segment.
Acquisitions
In accounting for business combinations, acquired assets, assumed liabilities and contingent consideration are
recorded based on estimated fair values as of the date of acquisition. The excess or shortfall of the purchase
price when compared to the fair value of the net tangible and identifiable intangible assets acquired, if any, is
recorded as goodwill or a bargain purchase gain, respectively. A significant amount of judgment is involved in
estimating the individual fair values of property, plant and equipment,
intangible assets, contingent
consideration and other assets and liabilities. We use all available information to make these fair value
determinations and, for certain acquisitions, engage third-party consultants for valuation assistance.
The fair value of assets and liabilities, including contingent consideration, as of the acquisition date are often
estimated using a combination of approaches, including the income approach, which requires us to project
future cash flows and apply an appropriate discount rate; the cost approach, which requires estimates of
replacement costs and depreciation and obsolescence estimates; and the market approach which uses market
data and adjusts for entity-specific differences. The estimates used in determining fair values are based on
assumptions believed to be reasonable but which are inherently uncertain. Accordingly, actual results may
differ materially from the projected results used to determine fair value.
See Item 8. Financial Statements and Supplementary Data – Note 5 for additional information on our
acquisitions. See Item 8. Financial Statements and Supplementary Data – Note 17 for additional information
on fair value measurements.
Derivatives
We record all derivative instruments at fair value. Substantially all of our commodity derivatives are cleared
through exchanges which provide active trading information for identical derivatives and do not require any
assumptions in arriving at fair value. Fair value estimation for all our derivative instruments is discussed in
Item 8. Financial Statements and Supplementary Data – Note 17. Additional information about derivatives
and their valuation may be found in Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
Variable Interest Entities
We evaluate all legal entities in which we hold an ownership or other pecuniary interest to determine if the entity
is a VIE. Our interests in a VIE are referred to as variable interests. Variable interests can be contractual,
ownership or other pecuniary interests in an entity that change with changes in the fair value of the VIE’s assets.
When we conclude that we hold an interest in a VIE we must determine if we are the entity’s primary
beneficiary. A primary beneficiary is deemed to have a controlling financial interest in a VIE. This controlling
financial interest is evidenced by both (a) the power to direct the activities of the VIE that most significantly
82
impact the VIE’s economic performance and (b) the obligation to absorb losses that could potentially be
significant to the VIE or the right to receive benefits that could potentially be significant to the VIE. We
consolidate any VIE when we determine that we are the primary beneficiary. We must disclose the nature of
any interests in a VIE that is not consolidated.
Significant judgment is exercised in determining that a legal entity is a VIE and in evaluating our interest in a
VIE. We use primarily a qualitative analysis to determine if an entity is a VIE. We evaluate the entity’s need
for continuing financial support; the equity holder’s lack of a controlling financial interest; and/or if an equity
holder’s voting interests are disproportionate to its obligation to absorb expected losses or receive residual
returns. We evaluate our interests in a VIE to determine whether we are the primary beneficiary. We use a
primarily qualitative analysis to determine if we are deemed to have a controlling financial interest in the VIE,
either on a standalone basis or as part of a related party group. We continually monitor our interests in legal
entities for changes in the design or activities of an entity and changes in our interests, including our status as
the primary beneficiary to determine if the changes require us to revise our previous conclusions.
Changes in the design or nature of the activities of a VIE, or our involvement with a VIE, may require us to
reconsider our conclusions on the entity’s status as a VIE and/or our status as the primary beneficiary. Such
reconsideration requires significant judgment and understanding of the organization. This could result in the
deconsolidation or consolidation of the affected subsidiary, which would have a significant impact on our
financial statements.
Variable Interest Entities are discussed in Item 8. Financial Statements and Supplementary Data – Note 6.
Pension and Other Postretirement Benefit Obligations
Accounting for pension and other postretirement benefit obligations involves numerous assumptions, the most
significant of which relate to the following:
•
•
•
•
•
the discount rate for measuring the present value of future plan obligations;
the expected long-term return on plan assets;
the rate of future increases in compensation levels;
health care cost projections; and
the mortality table used in determining future plan obligations.
We utilize the work of third-party actuaries to assist in the measurement of these obligations. We have
selected different discount rates for each of our pension plans and retiree health and welfare based on the
projected benefit payment patterns of each individual plan. The selected rates are compared to various similar
bond indexes for reasonableness. In determining the assumed discount rates, we use our third-party actuaries’
discount rate models. These models calculate an equivalent single discount rate for the projected benefit plan
cash flows using yield curves derived from Aa or higher bond yields. The yield curves represent a series of
annualized individual spot discount rates from 0.5 to 99 years. The bonds used have an average rating of Aa or
higher by a recognized rating agency and generally only non-callable bonds are included. Outlier bonds that
have a yield to maturity that deviate significantly from the average yield within each maturity grouping are not
included. Each issue is required to have at least $250 million par value outstanding.
Of the assumptions used to measure the year-end obligations and estimated annual net periodic benefit cost,
the discount rate has the most significant effect on the periodic benefit cost reported for the plans. Decreasing
the discount rates of 3.20 percent for our pension plans and 3.25 percent for our other postretirement benefit
plans by 0.25 percent would increase pension obligations and other postretirement benefit plan obligations by
$90 million and $37 million, respectively, and would increase defined benefit pension expense and other
postretirement benefit plan expense by $12 million and $3 million, respectively.
The long-term asset rate of return assumption considers the asset mix of the plans (currently targeted at
approximately 42 percent equity securities and 58 percent fixed income securities for the primary funded
pension plan), past performance and other factors. Certain components of the asset mix are modeled with
various assumptions regarding inflation and returns. In addition, our long-term asset rate of return assumption
is compared to those of other companies and to historical returns for reasonableness. We used the 6.15 percent
long-term rate of return to determine our 2019 defined benefit pension expense. After evaluating activity in
the capital markets, along with the current and projected plan investments, we decreased the asset rate of
return for our primary plan to 6.00 percent effective for 2020. Decreasing the 6.00 percent asset rate of return
assumption by 0.25 percent would increase our defined benefit pension expense by $5 million.
83
Compensation change assumptions are based on historical experience, anticipated future management actions
and demographics of the benefit plans.
Health care cost trend assumptions are developed based on historical cost data, the near-term outlook and an
assessment of likely long-term trends.
We utilized the 2019 mortality tables from the U.S. Society of Actuaries.
Item 8. Financial Statements and Supplementary Data – Note 23 includes detailed information about the
assumptions used to calculate the components of our annual defined benefit pension and other postretirement
plan expense, as well as the obligations and accumulated other comprehensive loss reported on the year-end
balance sheets.
ACCOUNTING STANDARDS NOT YET ADOPTED
As discussed in Item 8. Financial Statements and Supplementary Data – Note 3 to our audited consolidated
financial statements, certain new financial accounting pronouncements will be effective for our financial
statements in the future.
84
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
General
We are exposed to market risks related to the volatility of crude oil and refined product prices. We employ
various strategies, including the use of commodity derivative instruments, to hedge the risks related to these
price fluctuations. We are also exposed to market risks related to changes in interest rates and foreign
currency exchange rates. As of December 31, 2019, we did not have any financial derivative instruments to
hedge the risks related to interest rate fluctuations; however, we have used them in the past, and we
continually monitor the market and our exposure and may enter into these agreements again in the future. We
are at risk for changes in fair value of all of our derivative instruments; however, such risk should be mitigated
by price or rate changes related to the underlying commodity or financial transaction.
We believe that our use of derivative instruments, along with our risk assessment procedures and internal
controls, does not expose us to material adverse consequences. While the use of derivative instruments could
materially affect our results of operations in particular quarterly or annual periods, we believe that the use of
these instruments will not have a material adverse effect on our financial position or liquidity.
See Item 8. Financial Statements and Supplementary Data – Notes 17 and 18 for more information about the
fair value measurement of our derivatives, as well as the amounts recorded in our consolidated balance sheets
and statements of income. We do not designate any of our commodity derivative instruments as hedges for
accounting purposes.
Commodity Price Risk
Refining & Marketing
Our strategy is to obtain competitive prices for our products and allow operating results to reflect market price
movements dictated by supply and demand. We use a variety of commodity derivative instruments, including
futures and options, as part of an overall program to hedge commodity price risk. We also do a limited amount
of trading not directly related to our physical transactions.
We use commodity derivative instruments on crude oil and refined product inventories to hedge price risk
associated with inventories above or below LIFO inventory targets. We also use derivative instruments related
to the acquisition of foreign-sourced crude oil and ethanol blended with refined petroleum products to hedge
price risk associated with market volatility between the time we purchase the product and when we use it in
the refinery production process or it is blended. In addition, we may use commodity derivative instruments on
fixed price contracts for the sale of refined products to hedge risk by converting the refined product sales to
market-based prices. The majority of these derivatives are exchange-traded contracts but we also enter into
over-the-counter swaps, options and over-the-counter options. We closely monitor and hedge our exposure to
market risk on a daily basis in accordance with policies approved by our board of directors. Our positions are
monitored daily by a risk control group to ensure compliance with our stated risk management policy.
Midstream
NGL and natural gas prices are volatile and are impacted by changes in fundamental supply and demand, as
well as market uncertainty, availability of NGL transportation and fractionation capacity and a variety of
additional factors that are beyond MPLX’s control. A portion of MPLX’s profitability is directly affected by
prevailing commodity prices primarily as a result of processing or conditioning at its own or third-party
processing plants, purchasing and selling or gathering and transporting volumes of natural gas at index-related
prices and the cost of third-party transportation and fractionation services. To the extent that commodity
prices influence the level of natural gas drilling by MPLX’s producer customers, such prices also indirectly
affect profitability. MPLX has a committee comprised of senior management that oversees risk management
activities, continually monitors the risk management program and adjusts its strategy as conditions warrant.
Derivative contracts utilized for crude oil, natural gas and NGLs are swaps and options traded on the OTC
market and fixed price forward contracts.
MPLX would be exposed to additional commodity risk in certain situations such as if producers under-deliver
or over-deliver products or if processing facilities are operated in different recovery modes. In the event that
MPLX has derivative positions in excess of the product delivered or expected to be delivered, the excess
derivative positions may be terminated.
85
MPLX management conducts a standard credit review on counterparties to derivative contracts, and it has
provided the counterparties with a guaranty as credit support for its obligations. A separate agreement with
certain counterparties allows MarkWest Liberty Midstream to enter into derivative positions without posting
cash collateral. MPLX uses standardized agreements that allow for offset of certain positive and negative
exposures in the event of default or other terminating events, including bankruptcy.
Open Derivative Positions and Sensitivity Analysis
The following table includes the composition of net losses/gains on our commodity derivative positions for
the years ended December 31, 2019 and 2018, respectively.
(In millions)
Realized gain (loss) on settled derivative positions
Unrealized loss on open net derivative positions
Net loss
2019
2018
$
$
48
(144)
(96)
$
$
(11)
(35)
(46)
See Item 8. Financial Statements and Supplementary Data – Note 18 for additional information on our open
derivative positions at December 31, 2019.
Sensitivity analysis of the incremental effects on income from operations (“IFO”) of hypothetical 10 percent
and 25 percent increases and decreases in commodity prices for open commodity derivative instruments as of
December 31, 2019 is provided in the following table.
(In millions)
As of December 31, 2019
Crude
Refined products
Blending Products
Embedded derivatives
Change in IFO from a
Hypothetical Price
Increase of
10%
25%
Change in IFO from a
Hypothetical Price
Decrease of
10%
25%
$
$
(39)
22
(8)
(6)
$
(98)
56
(20)
(15)
$
41
(22)
8
6
103
(56)
20
15
We remain at risk for possible changes in the market value of commodity derivative instruments; however,
such risk should be mitigated by price changes in the underlying physical commodity. Effects of these offsets
are not reflected in the above sensitivity analysis.
We evaluate our portfolio of commodity derivative instruments on an ongoing basis and add or revise
strategies in anticipation of changes in market conditions and in risk profiles. Changes to the portfolio after
December 31, 2019 would cause future IFO effects to differ from those presented above.
Interest Rate Risk
Our use of fixed or variable-rate debt directly exposes us to interest rate risk. Fixed rate debt, such as our
senior notes, exposes us to changes in the fair value of our debt due to changes in market interest rates. Fixed
rate debt also exposes us to the risk that we may need to refinance maturing debt with new debt at higher rates
or that our current fixed rate debt may be higher than the current market. Variable-rate debt, such as
borrowings under our revolving credit facilities, exposes us to short-term changes in market rates that impact
our interest expense. See Item 8. Financial Statements and Supplementary Data – Note 19 for additional
information on our debt.
Sensitivity analysis of the effect of a hypothetical 100-basis-point change in interest rates on long-term debt,
including the portion classified as current and excluding finance leases, as of December 31, 2019 is provided
in the following table. Fair value of cash and cash equivalents, receivables, accounts payable and accrued
interest approximate carrying value and are relatively insensitive to changes in interest rates due to the short-
term maturity of the instruments. Accordingly, these instruments are excluded from the table.
86
(In millions)
Long-term debt
Fixed-rate
Variable-rate
Fair
Value(a)
Change in
Fair Value(b)
Change in Net Income for the
Twelve Months Ended
December 31, 2019(c)
$
27,387
1,000
$
2,548
n/a
n/a
20
(a)
Fair value was based on market prices, where available, or current borrowing rates for financings with similar terms and maturities.
(b) Assumes a 100-basis point decrease in the weighted average yield-to-maturity at December 31, 2019.
(c) Assumes a 100-basis-point change in interest rates. The change in net income was based on the weighted average balance of debt
outstanding for the year ended December 31, 2019.
See Item 8. Financial Statements and Supplementary Data – Note 17 for additional information on the fair
value of our debt.
Foreign Currency Exchange Rate Risk
We are impacted by foreign exchange rate fluctuations related to some of our purchases of crude oil
denominated in Canadian dollars. We did not utilize derivatives to hedge our market risk exposure to these
foreign exchange rate fluctuations in 2019.
Counterparty Risk
We are subject to risk of loss resulting from nonpayment by our customers to whom we provide services,
lease assets, or sell natural gas or NGLs. We believe that certain contracts would allow us to pass those losses
through to our customers, thus reducing our risk, when we are selling NGLs and acting as our producer
customers’ agent. Our credit exposure related to these customers is represented by the value of our trade
receivables or lease receivables. Where exposed to credit risk, we analyze the customer’s financial condition
prior to entering into a transaction or agreement, establish credit terms and monitor the appropriateness of
these terms on an ongoing basis. In the event of a customer default, we may sustain a loss and our cash
receipts could be negatively impacted.
We are subject to risk of loss resulting from nonpayment or nonperformance by counterparties to our
derivative contracts. Our credit exposure related to commodity derivative instruments is represented by the
fair value of contracts with a net positive fair value at the reporting date. Outstanding instruments expose us to
credit
loss in the event of nonperformance by the counterparties to the agreements. Should the
creditworthiness of one or more of our counterparties decline, our ability to mitigate nonperformance risk is
limited to a counterparty agreeing to either a voluntary termination and subsequent cash settlement or a
novation of the derivative contract to a third party. In the event of a counterparty default, we may sustain a
loss and our cash receipts could be negatively impacted.
87
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index
MANAGEMENT’S RESPONSIBLITIES FOR FINANCIAL STATEMENTS
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
AUDITED CONSOLIDATED FINANCIAL STATEMENTS:
CONSOLIDATED STATEMENTS OF INCOME
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF CASH FLOWS
CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMABLE
NONCONTROLLING INTEREST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Page
89
89
90
93
94
95
96
97
98
150
88
MANAGEMENT’S RESPONSIBILITIES FOR FINANCIAL STATEMENTS
The accompanying consolidated financial statements of Marathon Petroleum Corporation and its subsidiaries
(“MPC”) are the responsibility of management and have been prepared in conformity with accounting
principles generally accepted in the United States of America. They necessarily include some amounts that are
based on best judgments and estimates. The financial information displayed in other sections of this Annual
Report on Form 10-K is consistent with these consolidated financial statements.
MPC seeks to assure the objectivity and integrity of its financial records by careful selection of its managers,
by organizational arrangements that provide an appropriate division of responsibility and by communications
programs aimed at assuring that its policies and methods are understood throughout the organization.
The board of directors pursues its oversight role in the area of financial reporting and internal control over
financial reporting through its Audit Committee. This committee, composed solely of independent directors,
regularly meets (jointly and separately) with the independent registered public accounting firm, management
and internal auditors to monitor the proper discharge by each of their responsibilities relative to internal
accounting controls and the consolidated financial statements.
/s/ Gary R. Heminger
/s/ Donald C. Templin
Gary R. Heminger
Chairman of the Board and
Chief Executive Officer
Donald C. Templin
Executive Vice President and
Chief Financial Officer
/s/ John J. Quaid
John J. Quaid
Vice President and
Controller
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
MPC’s management is responsible for establishing and maintaining adequate internal control over financial
reporting (as defined in Rules 13a-15(f) under the Securities Exchange Act of 1934, as amended). An
evaluation of the design and effectiveness of our internal control over financial reporting, based on the
framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission, was conducted under the supervision and with the participation
of management, including our chief executive officer and chief financial officer. Based on the results of this
evaluation, MPC’s management concluded that its internal control over financial reporting was effective as of
December 31, 2019.
The effectiveness of MPC’s internal control over financial reporting as of December 31, 2019 has been
audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their
report which is included herein.
/s/ Gary R. Heminger
/s/ Donald C. Templin
Gary R. Heminger
Chairman of the Board and
Chief Executive Officer
Donald C. Templin
Executive Vice President and
Chief Financial Officer
89
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Marathon Petroleum Corporation
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Marathon Petroleum Corporation and its
subsidiaries (the “Company”) as of December 31, 2019 and 2018, and the related consolidated statements of
income, of comprehensive income, of equity and redeemable noncontrolling interest and of cash flows for
each of the three years in the period ended December 31, 2019, including the related notes (collectively
referred to as the “consolidated financial statements”). We also have audited the Company’s internal control
over financial reporting as of December 31, 2019, based on criteria established in Internal Control -
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects,
the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and
its cash flows for each of the three years in the period ended December 31, 2019 in conformity with
accounting principles generally accepted in the United States of America. Also in our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of December 31,
2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining
effective internal control over financial reporting, and for its assessment of the effectiveness of internal
control over financial reporting, included in the accompanying Management’s Report on Internal Control
Over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial
statements and on the Company’s internal control over financial reporting based on our audits. We are a
public accounting firm registered with the Public Company Accounting Oversight Board (United States)
(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we
plan and perform the audits to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement, whether due to error or fraud, and whether effective internal
control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of
material misstatement of the consolidated financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over
financial reporting included obtaining an understanding of internal control over financial reporting, assessing
the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audits also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our
opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements
in accordance with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company; and
90
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the
consolidated financial statements that was communicated or required to be communicated to the audit
committee and that (i) relates to accounts or disclosures that are material to the consolidated financial
statements and (ii)
subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated financial
statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a
separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
involved our especially challenging,
Goodwill Impairment Tests - Certain Midstream Reporting Units
As described in Notes 2 and 16 to the consolidated financial statements, the Company’s consolidated goodwill
balance was $20.0 billion as of December 31, 2019. As disclosed by management, within the midstream
segment, the goodwill associated with the Eastern Gathering and Processing reporting unit amounted to
$1.8 billion and goodwill associated with the Crude Gathering reporting unit amounted to $1.1 billion. In
addition, an impairment charge of $1.2 billion was recorded in 2019 related to the Western Gathering and
Processing reporting unit, which brought the amount of goodwill recorded within this reporting unit to zero.
Management conducts impairment tests as of November 30 of each year or more frequently if events or
circumstances indicate that reporting unit carrying values of goodwill may be impaired. As a result of a
change in reporting units during 2019, management performed impairment tests on these reporting units prior
to and immediately following the change in reporting units. The fair value of each reporting unit is determined
using a combination of income and market approach methods. The significant assumptions that were used to
develop the estimates of the fair values of each reporting unit under the income approach include the discount
rate as well as estimates of future cash flows, which are impacted primarily by producer customers’
development plans, which impact future volumes and capital requirements.
The principal considerations for our determination that performing procedures relating to the goodwill
impairment tests of the Company’s Eastern Gathering and Processing, Western Gathering and Processing, and
Crude Gathering reporting units, as well as certain related reporting units prior to the change, is a critical audit
matter are there was significant judgment by management when estimating the fair values of the reporting
units. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing audit
procedures and evaluating evidence related to management’s fair value estimates and significant assumptions
related to producer customers’ development plans, which impact future volumes and capital requirements.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with
forming our overall opinion on the consolidated financial statements. These procedures included testing the
effectiveness of controls relating to management’s goodwill impairment tests, including controls over the
estimation of the fair values of the Eastern Gathering and Processing, Western Gathering and Processing, and
Crude Gathering reporting units. These procedures also included, among others, testing management’s process
for developing the fair value estimates; evaluating the appropriateness of the valuation methods used; testing
the completeness and accuracy of underlying data used by management; and evaluating the reasonableness of
significant assumptions related to producer customers’ development plans, which impact future volumes and
capital requirements used in determining the fair values of each reporting unit under the income approach.
Professionals with specialized skill and knowledge were utilized to assist in evaluating the appropriateness of
the Company’s income and market approach methods. Evaluating the assumptions related to producer
customers’ development plans, which impact future volumes and capital requirements involved (i) considering
whether the assumptions used were reasonable based on past performance of each reporting unit, producer
customers’ historical and future production volumes, historical and approved future capital projects, and
91
industry outlook reports, and (ii) considering whether the assumptions were consistent with evidence obtained
in other areas of the audit.
/s/ PricewaterhouseCoopers LLP
Toledo, Ohio
February 28, 2020
We have served as the Company’s auditor since 2010.
92
MARATHON PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share data)
Revenues and other income:
Sales and other operating revenues(a)
Income from equity method investments
Net gain on disposal of assets
Other income
Total revenues and other income
Costs and expenses:
Cost of revenues (excludes items below)(a)
Impairment expense
Depreciation and amortization
Selling, general and administrative expenses
Other taxes
Total costs and expenses
Income from operations
Net interest and other financial costs
Income before income taxes
Provision (benefit) for income taxes
Net income
Less net income attributable to:
Redeemable noncontrolling interest
Noncontrolling interests
Net income attributable to MPC
Per Share Data (See Note 8)
Basic:
Net income attributable to MPC per share
Weighted average shares outstanding
Diluted:
Net income attributable to MPC per share
Weighted average shares outstanding
2019
2018
2017
$
123,949
394
307
163
124,813
110,243
1,197
3,638
3,408
751
119,237
5,576
1,247
4,329
1,074
3,255
81
537
96,504
373
23
202
97,102
86,066
—
2,490
2,418
557
91,531
5,571
1,003
4,568
962
3,606
75
751
$
74,733
306
10
320
75,369
67,089
—
2,114
1,694
454
71,351
4,018
674
3,344
(460)
3,804
65
307
2,637
$
2,780
$
3,432
$
$
4.00
659
3.97
664
$
$
5.36
518
5.28
526
6.76
507
6.70
512
$
$
$
$
(a)
The 2019 and 2018 periods reflect an election to present certain taxes on a net basis concurrent with our adoption of ASU 2014-09,
Revenue - Revenue from Contracts with Customers (“ASC 606”). See Note 2 for further information.
The accompanying notes are an integral part of these consolidated financial statements.
93
MARATHON PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Millions of dollars)
Net income
Other comprehensive income (loss):
Defined benefit plans:
Actuarial changes, net of tax of ($40), $14 and $17, respectively
Prior service credit, net of tax of ($17), $12 and ($16), respectively
Other, net of tax of ($1), $1 and $0, respectively
Other comprehensive income (loss)
Comprehensive income
Less comprehensive income attributable to:
Redeemable noncontrolling interest
Noncontrolling interests
2019
2018
2017
$
3,255
$
3,606
$
3,804
(147)
(27)
(2)
(176)
75
8
4
87
29
(26)
—
3
3,079
3,693
3,807
81
537
75
751
65
307
Comprehensive income attributable to MPC
$
2,461
$
2,867
$
3,435
The accompanying notes are an integral part of these consolidated financial statements.
94
MARATHON PETROLEUM CORPORATION
CONSOLIDATED BALANCE SHEETS
(Millions of dollars, except share data)
Assets
Current assets:
Cash and cash equivalents
Receivables, less allowance for doubtful accounts of $17 and $9, respectively
Inventories
Other current assets
$
Total current assets
Equity method investments
Property, plant and equipment, net
Goodwill
Right of use assets(a)
Other noncurrent assets
Total assets
Liabilities
Current liabilities:
Accounts payable
Payroll and benefits payable
Accrued taxes
Debt due within one year
Operating lease liabilities(a)
Other current liabilities
Total current liabilities
Long-term debt
Deferred income taxes
Defined benefit postretirement plan obligations
Long-term operating lease liabilities(a)
Deferred credits and other liabilities
Total liabilities
Commitments and contingencies (see Note 26)
Redeemable noncontrolling interest
Equity
MPC stockholders’ equity:
Preferred stock, no shares issued and outstanding (par value $0.01 per share,
30 million shares authorized)
Common stock:
Issued – 978 million and 975 million shares (par value $0.01 per share,
2 billion shares authorized)
Held in treasury, at cost – 329 million and 295 million shares
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Total MPC stockholders’ equity
Noncontrolling interests
Total equity
December 31,
2019
2018
1,527
7,872
10,243
528
20,170
6,898
45,615
20,040
2,459
3,374
$
1,687
5,853
9,837
646
18,023
5,898
45,058
20,184
—
3,777
$
98,556
$
92,940
$
11,623
1,126
1,186
711
604
897
16,147
28,127
6,392
1,643
1,875
1,265
55,449
$
9,366
1,152
1,446
544
—
708
13,216
26,980
4,864
1,509
—
1,318
47,887
968
1,004
—
—
10
(15,143)
33,157
15,990
(320)
33,694
8,445
42,139
10
(13,175)
33,729
14,755
(144)
35,175
8,874
44,049
Total liabilities, redeemable noncontrolling interest and equity
$
98,556
$
92,940
(a) We adopted ASU No. 2016-02, Leases (“ASC 842”), as of January 1, 2019. See Notes 3 and 25 for further information.
The accompanying notes are an integral part of these consolidated financial statements.
95
MARATHON PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions of dollars)
2019
2018
2017
Operating activities:
Net income
Adjustments to reconcile net income to net cash provided by
operating activities:
Amortization of deferred financing costs and debt discount
Impairment expense
Depreciation and amortization
Pension and other postretirement benefits, net
Deferred income taxes
Net gain on disposal of assets
Income from equity method investments
Distributions from equity method investments
Changes in the fair value of derivative instruments
Changes in operating assets and liabilities, net of effects of
businesses acquired:
Current receivables
Inventories
Current accounts payable and accrued liabilities
Right of use assets and operating lease liabilities, net
All other, net
Net cash provided by operating activities
Investing activities:
Additions to property, plant and equipment
Acquisitions, net of cash acquired
Disposal of assets
Investments – acquisitions, loans and contributions
– redemptions, repayments and return of capital
All other, net
Net cash used in investing activities
Financing activities:
Commercial paper – issued
– repayments
Long-term debt – borrowings
– repayments
Debt issuance costs
Issuance of common stock
Common stock repurchased
Dividends paid
Issuance of MPLX LP common units
Distributions to noncontrolling interests
Contributions from noncontrolling interests
Contingent consideration payment
All other, net
Net cash provided by (used in) financing activities
Net increase (decrease) in cash, cash equivalents and
restricted cash
Cash, cash equivalents and restricted cash at beginning of
period
$
3,255
$
3,606
$
3,804
33
1,197
3,638
(64)
1,023
(307)
(394)
662
(8)
(2,024)
(366)
2,502
14
280
9,441
(5,374)
(129)
127
(1,064)
98
81
(6,261)
—
—
14,274
(13,073)
(22)
10
(1,950)
(1,398)
—
(1,245)
97
—
(69)
(3,376)
70
—
2,490
90
47
(23)
(373)
519
(62)
1,589
931
(2,798)
—
72
6,158
(3,578)
(3,822)
54
(409)
16
69
(7,670)
—
—
13,476
(8,032)
(86)
24
(3,287)
(954)
—
(903)
12
—
(28)
222
64
—
2,114
47
(1,233)
(10)
(306)
391
116
(1,093)
106
2,814
—
(202)
6,612
(2,732)
(249)
79
(805)
62
247
(3,398)
300
(300)
2,911
(642)
(33)
46
(2,372)
(773)
473
(694)
129
(89)
(47)
(1,091)
(196)
(1,290)
2,123
1,725
3,015
892
Cash, cash equivalents and restricted cash at end of period
$
1,529
$
1,725
$
3,015
The accompanying notes are an integral part of these consolidated financial statements.
96
MARATHON PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMABLE NONCONTROLLING INTEREST
(Shares in millions;
amounts in millions of dollars)
Balance as of December 31, 2016
Net income
Dividends declared on common stock ($1.52 per share)
Distributions to noncontrolling interests
Contributions from noncontrolling interests
Other comprehensive income
Shares repurchased
Stock-based compensation
Equity transactions of MPLX
Balance as of December 31, 2017
Cumulative effect of adopting new accounting standards
Net income
Dividends declared on common stock ($1.84 per share)
Distributions to noncontrolling interests
Contributions from noncontrolling interests
Other comprehensive income
Shares repurchased
Stock based compensation
Equity transactions of MPLX & ANDX
Issuance of shares for Andeavor acquisition
Noncontrolling interest acquired from Andeavor
Balance as of December 31, 2018
Net income
Dividends declared on common stock ($2.12 per share)
Distributions to noncontrolling interests
Contributions from noncontrolling interests
Other comprehensive loss
Shares repurchased
Stock based compensation
Equity transactions of MPLX & ANDX
Balance as of December 31, 2019
MPC Stockholders’ Equity
Common Stock
Treasury Stock
Shares
Amount
Shares
Amount
Additional
Paid-in
Capital
(203) $ (7,482) $11,060
—
—
—
—
—
—
—
—
—
—
—
(2,372)
92
(15)
110
—
—
—
—
—
—
(44)
(1)
—
(248) $ (9,869) $11,262
—
—
—
—
—
—
—
—
—
—
—
—
—
(3,287)
345
(18)
2,357
—
19,765
(1)
—
—
—
—
—
—
—
—
(47)
—
—
—
—
Retained
Earnings
$10,206
3,432
(774)
—
—
—
—
—
—
$12,864
66
2,780
(955)
—
—
—
—
—
—
—
—
(295) $(13,175) $ 33,729 $14,755
—
2,637
— (1,402)
—
—
—
—
—
—
—
—
—
112
—
(684)
—
—
—
—
—
(1,950)
(18)
—
—
—
—
—
—
(34)
—
—
Accumulated
Other
Comprehensive
Income (Loss)
Non-
controlling
Interests
Total
Equity
Redeemable
Non-
controlling
Interest
$
$
$
(234)
—
—
—
—
3
—
—
—
(231)
—
—
—
—
—
87
—
—
—
—
—
(144)
—
—
—
—
(176)
—
—
—
$20,203
$ 6,646
3,739
307
(774)
—
(629)
(629)
129
129
3
—
— (2,372)
85
8
444
334
$20,828
$ 6,795
68
2
3,531
751
(955)
—
(832)
(832)
12
12
—
87
— (3,287)
342
14
(570)
(2,927)
— 19,766
5,059
5,059
$44,049
$ 8,874
537
3,174
— (1,402)
(1,164)
(1,164)
97
97
(176)
—
— (1,950)
101
7
(590)
94
$ 1,000
65
—
(65)
—
—
—
—
—
$ 1,000
—
75
—
(71)
—
—
—
—
—
—
—
$ 1,004
81
—
(81)
—
—
—
—
(36)
(329) $(15,143) $33,157
$15,990
$
(320)
$ 8,445
$42,139
$
968
731
—
—
—
—
—
—
3
—
734
—
—
—
—
—
—
—
1
—
240
—
975
—
—
—
—
—
—
3
—
978
$
$
7
—
—
—
—
—
—
—
—
7
—
—
—
—
—
—
—
1
—
2
—
$ 10
—
—
—
—
—
—
—
—
$ 10
The accompanying notes are an integral part of these consolidated financial statements.
97
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION
Description of the Business
We are a leading, integrated, downstream energy company headquartered in Findlay, Ohio. We operate the
nation’s largest refining system with more than 3 million barrels per day of crude oil capacity across 16
refineries. We sell refined products to wholesale marketing customers domestically and internationally, to
buyers on the spot market,
to consumers through our Retail business segment and to independent
entrepreneurs who operate approximately 6,900 branded outlets. Our retail operations own and operate
approximately 3,900 retail transportation fuel and convenience stores across the United States and also sell
transportation fuel to consumers through approximately 1,070 direct dealer locations under long-term supply
contracts. MPC’s midstream operations are primarily conducted through MPLX LP (“MPLX”), which owns
and operates crude oil and refined product transportation and logistics infrastructure and natural gas and NGL
gathering, processing, and fractionation assets. We own the general partner and a majority limited partner
interest in MPLX.
Refer to Note 5 for further information on the Andeavor acquisition, which closed on October 1, 2018, and to
Notes 4 and 10 for additional information about our operations.
On October 31, 2019, we announced plans to separate our retail transportation fuel and convenience store
business, which is operated primarily under the Speedway brand, into an independent, publicly traded
company through a tax-free distribution to MPC shareholders of publicly traded stock in the new independent
retail transportation fuel and convenience store company. This transaction is targeted to be completed by
year-end 2020, subject to market, regulatory and certain other conditions, including final approval by the
MPC Board of Directors, receipt of customary assurances regarding the intended tax-free nature of the
transaction, and the effectiveness of a registration statement to be filed with the SEC. The Speedway business
is currently a reporting unit within our Retail segment. Subsequent to the completion of the separation, the
historical results of the Speedway business will be presented as discontinued operations in our consolidated
financial statements.
Basis of Presentation
All significant intercompany transactions and accounts have been eliminated.
Certain prior period financial statement amounts have been reclassified to conform to current period
presentation.
2.
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES
Principles Applied in Consolidation
These consolidated financial statements include the accounts of our majority-owned, controlled subsidiaries
and MPLX. As of December 31, 2019, we owned the general partner and 63 percent of the outstanding MPLX
common units. Due to our ownership of the general partner interest, we have determined that we control
MPLX and therefore we consolidate MPLX and record a noncontrolling interest for the interest owned by the
public. Changes in ownership interest in consolidated subsidiaries that do not result in a change in control are
recorded as equity transactions.
Investments in entities over which we have significant influence, but not control, are accounted for using the
equity method of accounting. This includes entities in which we hold majority ownership but the minority
shareholders have substantive participating rights. Income from equity method investments represents our
proportionate share of net income generated by the equity method investees.
Differences in the basis of the investments and the separate net asset values of the investees, if any, are amortized
into net income over the remaining useful lives of the underlying assets and liabilities, except for any excess
related to goodwill. Equity method investments are evaluated for impairment whenever changes in the facts
and circumstances indicate an other than temporary loss in value has occurred. When the loss is deemed
to be other than temporary, the carrying value of the equity method investment is written down to fair value.
98
Use of Estimates
The preparation of financial statements in accordance with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the respective reporting periods.
Revenue Recognition
We recognize revenue based on consideration specified in contracts or agreements with customers when we
satisfy our performance obligations by transferring control over products or services to a customer.
Concurrent with our adoption of ASU 2014-09, Revenue from Contracts with Customers (“ASC 606”), as of
January 1, 2018, we made an accounting policy election that all taxes assessed by a governmental authority
that are both imposed on and concurrent with a revenue-producing transaction and collected from our
customers will be recognized on a net basis within sales and other operating revenues.
The adoption of ASC 606 did not materially change our revenue recognition patterns, which are described
below by reportable segment:
•
•
Refining & Marketing - The vast majority of our Refining & Marketing contracts contain pricing
that is based on the market price for the product at the time of delivery. Our obligations to deliver
product volumes are typically satisfied and revenue is recognized when control of the product
transfers to our customers. Concurrent with the transfer of control, we typically receive the right to
payment for the delivered product,
the customer accepts the product and the customer has
significant risks and rewards of ownership of the product. Payment terms require customers to pay
shortly after delivery and do not contain significant financing components.
Retail - Revenue is recognized when our customers receive control of the transportation fuels or
merchandise. Payments from customers are received at the time sales occur in cash or by credit or
debit card at our company-owned and operated retail locations and shortly after delivery for our direct
dealers. Speedway offers a loyalty rewards program to its customers. We defer a minor portion of
revenue on sales to the loyalty program participants until the participants redeem their rewards. The
related contract liability, as defined in ASC 606, is not material to our financial statements.
• Midstream - Midstream revenue transactions typically are defined by contracts under which we sell
a product or provide a service. Revenues from sales of product are recognized when control of the
product transfers to the customer. Revenues from sales of services are recognized over time when
the performance obligation is satisfied as services are provided in a series. We have elected to use
the output measure of progress to recognize revenue based on the units delivered, processed or
transported. The transaction prices in our Midstream contracts often have both fixed components,
related to minimum volume commitments, and variable components, which are primarily dependent
on volumes. Variable consideration will generally not be estimated at contract inception as the
transaction price is specifically allocable to the services provided at each period end.
Refer to Note 20 for disclosure of our revenue disaggregated by segment and product line and to Note 10 for a
description of our reportable segment operations.
Crude Oil and Refined Product Exchanges and Matching Buy/Sell Transactions
We enter into exchange contracts and matching buy/sell arrangements whereby we agree to deliver a
particular quantity and quality of crude oil or refined products at a specified location and date to a particular
counterparty and to receive from the same counterparty the same commodity at a specified location on the
same or another specified date. The exchange receipts and deliveries are nonmonetary transactions, with the
exception of associated grade or location differentials that are settled in cash. The matching buy/sell purchase
and sale transactions are settled in cash. No revenues are recorded for exchange and matching buy/sell
transactions as they are accounted for as exchanges of inventory. The exchange transactions are recognized at
the carrying amount of the inventory transferred.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and on deposit and investments in highly liquid debt
instruments with maturities of three months or less.
99
Restricted Cash
Restricted cash consists of cash and investments that must be maintained as collateral for letters of credit
issued to certain third-party producer customers. The balances will be outstanding until certain capital projects
are completed and the third party releases the restriction.
Accounts Receivable and Allowance for Doubtful Accounts
Our receivables primarily consist of customer accounts receivable. Customer receivables are recorded at the
invoiced amounts and generally do not bear interest. Allowances for doubtful accounts are generally recorded
when it becomes probable the receivable will not be collected and are booked to bad debt expense. The
allowance for doubtful accounts is the best estimate of the amount of probable credit losses in customer
accounts receivable. We review the allowance quarterly and past-due balances over 180 days are reviewed
individually for collectability.
We mitigate credit risk with master netting agreements with companies engaged in the crude oil or refinery
feedstock trading and supply business or the petroleum refining industry. A master netting agreement
generally provides for a once per month net cash settlement of the accounts receivable from and the accounts
payable to a particular counterparty.
Inventories
Inventories are carried at the lower of cost or market value. Cost of inventories is determined primarily under
the LIFO method. Costs for crude oil, refinery feedstocks and refined product inventories are aggregated on a
consolidated basis for purposes of assessing if the LIFO cost basis of these inventories may have to be written
down to market value.
Derivative Instruments
We use derivatives to economically hedge a portion of our exposure to commodity price risk and, historically,
to interest rate risk. We also have limited authority to use selective derivative instruments that assume market
risk. All derivative instruments (including derivative instruments embedded in other contracts) are recorded at
fair value. Certain commodity derivatives are reflected on the consolidated balance sheets on a net basis by
counterparty as they are governed by master netting agreements. Cash flows related to derivatives used to
hedge commodity price risk and interest rate risk are classified in operating activities with the underlying
transactions.
Derivatives not designated as accounting hedges – Derivatives that are not designated as accounting hedges
may include commodity derivatives used to hedge price risk on (1) inventories, (2) fixed price sales of refined
products, (3) the acquisition of foreign-sourced crude oil, (4) the acquisition of ethanol for blending with
refined products, (5) the sale of NGLs and (6) the purchase of natural gas. Changes in the fair value of
derivatives not designated as accounting hedges are recognized immediately in net income.
Concentrations of credit risk – All of our financial instruments, including derivatives, involve elements of
credit and market risk. The most significant portion of our credit risk relates to nonperformance by
counterparties. The counterparties to our financial instruments consist primarily of major financial institutions
and companies within the energy industry. To manage counterparty risk associated with financial instruments,
we select and monitor counterparties based on an assessment of their financial strength and on credit ratings,
if available. Additionally, we limit the level of exposure with any single counterparty.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost and depreciated on a straight-line basis over the estimated
useful lives of the assets, which range from two years to 51 years. Such assets are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be
recoverable. If the sum of the expected undiscounted future cash flows from the use of the asset group and its
eventual disposition is less than the carrying amount of the asset group, an impairment assessment is performed
and the excess of the book value over the fair value of the asset group is recorded as an impairment loss.
When items of property, plant and equipment are sold or otherwise disposed of, any gains or losses are
reported in net income. Gains on the disposal of property, plant and equipment are recognized when earned,
which is generally at the time of closing. If a loss on disposal is expected, such losses are recognized when the
assets are classified as held for sale.
100
Interest expense is capitalized for qualifying assets under construction. Capitalized interest costs are included
in property, plant and equipment and are depreciated over the useful life of the related asset.
Goodwill and Intangible Assets
Goodwill represents the excess of the purchase price over the estimated fair value of the net assets acquired in
the acquisition of a business. Goodwill is not amortized, but rather is tested for impairment annually and when
events or changes in circumstances indicate that the fair value of a reporting unit with goodwill has been
reduced below carrying value. The impairment test requires allocating goodwill and other assets and liabilities
to reporting units. The fair value of each reporting unit is determined using an income and/or market approach
which is compared to the carrying value of the reporting unit. The fair value under the income approach is
calculated using the expected present value of future cash flows method. Significant assumptions used in the
cash flow forecasts include future net operating margins, future volumes, discount rates, and future capital
requirements. If the carrying amount of the reporting unit exceeds its fair value, an impairment loss would be
recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that
reporting unit.
Amortization of intangibles with definite lives is calculated using the straight-line method, which is reflective
of the benefit pattern in which the estimated economic benefit is expected to be received over the estimated
useful life of the intangible asset. Intangibles subject to amortization are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of the intangible may not be recoverable.
If the sum of the expected undiscounted future cash flows related to the asset is less than the carrying amount
of the asset, an impairment loss is recognized based on the fair value of the asset. Intangibles not subject to
amortization are tested for impairment annually and when circumstances indicate that the fair value is less
than the carrying amount of the intangible. If the fair value is less than the carrying value, an impairment is
recorded for the difference.
Major Maintenance Activities
Costs for planned turnaround and other major maintenance activities are expensed in the period
incurred. These types of costs include contractor repair services, materials and supplies, equipment rentals and
our labor costs.
Environmental Costs
Environmental expenditures for additional equipment that mitigates or prevents future contamination or
improves environmental safety or efficiency of the existing assets are capitalized. We recognize remediation
costs and penalties when the responsibility to remediate is probable and the amount of associated costs can be
reasonably estimated. The timing of remediation accruals coincides with completion of a feasibility study or
the commitment to a formal plan of action. Remediation liabilities are accrued based on estimates of known
environmental exposure and are discounted when the estimated amounts are reasonably fixed and
determinable. If recoveries of remediation costs from third parties are probable, a receivable is recorded and is
discounted when the estimated amount is reasonably fixed and determinable.
Asset Retirement Obligations
The fair value of asset retirement obligations is recognized in the period in which the obligations are incurred
if a reasonable estimate of fair value can be made. The majority of our recognized asset retirement liability
relates to conditional asset retirement obligations for removal and disposal of fire-retardant material from
certain refining facilities. The remaining recognized asset retirement liability relates to other refining assets,
the removal of underground storage tanks at our leased convenience stores, certain pipelines and processing
facilities and other related pipeline assets. The fair values recorded for such obligations are based on the most
probable current cost projections.
Asset retirement obligations have not been recognized for some assets because the fair value cannot be
reasonably estimated since the settlement dates of the obligations are indeterminate. Such obligations will be
recognized in the period when sufficient information becomes available to estimate a range of potential
settlement dates. The asset retirement obligations principally include the hazardous material disposal and
removal or dismantlement requirements associated with the closure of certain refining, terminal, retail,
pipeline and processing assets.
Our practice is to keep our assets in good operating condition through routine repair and maintenance of
component parts in the ordinary course of business and by continuing to make improvements based on
technological advances. As a result, we believe that generally these assets have no expected settlement date
101
for purposes of estimating asset retirement obligations since the dates or ranges of dates upon which we would
retire these assets cannot be reasonably estimated at this time.
Income Taxes
Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to
differences between the financial statement carrying amounts of assets and liabilities and their tax
bases. Deferred tax assets are recorded when it is more likely than not that they will be realized. The
realization of deferred tax assets is assessed periodically based on several factors, primarily our expectation to
generate sufficient future taxable income.
Stock-Based Compensation Arrangements
The fair value of stock options granted to our employees is estimated on the date of grant using the Black-
Scholes option pricing model. The model employs various assumptions based on management’s estimates at
the time of grant, which impact the calculation of fair value and ultimately, the amount of expense that is
recognized over the vesting period of the stock option award. Of the required assumptions, the expected life of
the stock option award and the expected volatility of our stock price have the most significant impact on the
fair value calculation. The average expected life is based on our historical employee exercise behavior. The
assumption for expected volatility of our stock price reflects a weighting of 50 percent of our common stock
implied volatility and 50 percent of our common stock historical volatility.
The fair value of restricted stock awards granted to our employees is determined based on the fair market
value of our common stock on the date of grant. The fair value of performance unit awards granted to our
employees is estimated on the date of grant using a Monte Carlo valuation model.
Our stock-based compensation expense is recognized based on management’s estimate of the awards that are
expected to vest, using the straight-line attribution method for all service-based awards with a graded vesting
feature. If actual forfeiture results are different than expected, adjustments to recognized compensation
expense may be required in future periods. Unearned stock-based compensation is charged to equity when
restricted stock awards are granted. Compensation expense is recognized over the vesting period and is
adjusted if conditions of the restricted stock award are not met.
Business Combinations
We recognize and measure the assets acquired and liabilities assumed in a business combination based on
their estimated fair values at the acquisition date. Any excess or surplus of the purchase consideration when
compared to the fair value of the net tangible assets acquired, if any, is recorded as goodwill or gain from a
bargain purchase. For material acquisitions, management engages an independent valuation specialist to assist
with the determination of fair value of the assets acquired, liabilities assumed, noncontrolling interest, if any,
and goodwill, based on recognized business valuation methodologies. An income, market or cost valuation
method may be utilized to estimate the fair value of the assets acquired,
liabilities assumed, and
noncontrolling interest, if any, in a business combination. The income valuation method represents the present
value of future cash flows over the life of the asset using: (i) discrete financial forecasts, which rely on
management’s estimates of revenue and operating expenses; (ii) long-term growth rates; and (iii) appropriate
discount rates. The market valuation method uses prices paid for a reasonably similar asset by other
purchasers in the market, with adjustments relating to any differences between the assets. The cost valuation
method is based on the replacement cost of a comparable asset at prices at the time of the acquisition reduced
for depreciation of the asset. If the initial accounting for the business combination is incomplete by the end of
the reporting period in which the acquisition occurs, an estimate will be recorded. Subsequent to the
acquisition date, and not later than one year from the acquisition date, we will record any material adjustments
to the initial estimate based on new information obtained that would have existed as of the date of the
acquisition. Any adjustment that arises from information obtained that did not exist as of the date of the
acquisition will be recorded in the period of the adjustment. Acquisition-related costs are expensed as incurred
in connection with each business combination.
Environmental Credits and Obligations
In order to comply with certain regulations, specifically the RFS2 requirements implemented by the EPA and
the cap-and-trade emission reduction program and low carbon fuel standard implemented by the state of
California, we are required to reduce our emissions, blend certain levels of biofuels or obtain allowances or
credits to offset the obligations created by our operations. In regard to each program, we record an asset,
included in other current or other noncurrent assets on the balance sheet, for allowances or credits owned in
102
excess of our anticipated current period compliance requirements. The asset value is based on the product of
the excess allowances or credits as of the balance sheet date, if any, and the weighted average cost of those
allowances or credits. We record a liability, included in other current or other noncurrent liabilities on the
balance sheet, when we are deficient allowances or credits based on the product of the deficient amount as of
the balance sheet date, if any, and the market price of the allowances or credits at the balance sheet date. The
cost of allowances or credits used for compliance is reflected in cost of revenues on the income
statement. Any gains or losses on the sale or expiration of allowances or credits are classified as other income
on the income statement. Proceeds from the sale of allowances or credits are reported in investing activities—
all other, net on the cash flow statement.
3. ACCOUNTING STANDARDS
Recently Adopted
ASU 2016-02, Leases
We adopted ASU No. 2016-02, Leases (“ASC 842”), as of January 1, 2019, electing the transition method
which permits entities to adopt the provisions of the standard using the modified retrospective approach
without adjusting comparative periods. We also elected the package of practical expedients permitted under
the transition guidance within the new standard, which among other things, allowed us to grandfather the
historical accounting conclusions until a reassessment event is present. We have also elected the practical
expedient to not recognize short-term leases on the balance sheet, the practical expedient related to right of
way permits and land easements which allows us to carry forward our accounting treatment for those existing
agreements, and the practical expedient to combine lease and non-lease components for the majority of our
underlying classes of assets except for our third-party contractor service and equipment agreements and boat
and barge equipment agreements in which we are the lessee. We did not elect the practical expedient to
combine lease and non-lease components for arrangements in which we are the lessor. In instances where the
practical expedient was not elected, lease and non-lease consideration is allocated based on relative standalone
selling price.
Right of use (“ROU”) assets represent our right to use an underlying asset in which we obtain substantially all
of the economic benefits and the right to direct the use of the asset during the lease term. Lease liabilities
represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and lease
liabilities are recognized at commencement date based on the present value of lease payments over the lease
term. We recognize ROU assets and lease liabilities on the balance sheet for leases with a lease term of greater
than one year. Payments that are not fixed at the commencement of the lease are considered variable and are
excluded from the ROU asset and lease liability calculations. In the measurement of our ROU assets and lease
liabilities, the fixed lease payments in the agreement are discounted using a secured incremental borrowing
rate for a term similar to the duration of the lease, as our leases do not provide implicit rates. Operating lease
expense is recognized on a straight-line basis over the lease term.
Adoption of the new standard resulted in the recording of ROU assets and lease liabilities of approximately
$2.8 billion and $2.9 billion, respectively, as of January 1, 2019. The standard did not materially impact our
consolidated statements of income, cash flows or equity as a result of adoption.
As a lessor under ASC 842, MPLX may be required to re-classify existing operating leases to sales-type leases
upon modification and related reassessment of the leases. Modifications may result in the de-recognition of
existing assets and recognition of a receivable in the amount of the present value of fixed payments expected
to be received by MPLX under the lease.
ASU 2017-04, Intangibles - Goodwill and Other - Simplifying the Test for Goodwill Impairment
In connection with our annual goodwill impairment test, we adopted ASU 2017-04 prospectively during the
fourth quarter of 2019. Under ASU 2017-04, the recognition of an impairment charge is calculated based on
the amount by which the carrying amount exceeds the reporting unit’s fair value, which could be different
from the amount calculated under the former method using the implied fair value of the goodwill; however,
the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. During the
fourth quarter of 2019, we recorded certain goodwill impairment charges as described in Note 16.
103
We also adopted the following ASUs during 2019, none of which had a material impact to our financial
statements or financial statement disclosures:
ASU
Effective Date
2018-02 Reporting Comprehensive Income -Reclassification of Certain Tax Effects from
January 1, 2019
Accumulated Other Comprehensive Income
2017-12 Derivatives and Hedging - Targeted Improvements to Accounting for Hedging
January 1, 2019
Activities
Not Yet Adopted
ASU 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes
In December 2019, the FASB issued new guidance to simplify the accounting for income taxes. Amendments
include removal of certain exceptions to the general principles of ASC 740 and simplification in several other
areas such as accounting for a franchise tax or similar tax that is partially based on income. The change is
effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.
Early adoption is permitted in any interim or annual period, with any adjustments reflected as of the beginning
of the fiscal year of adoption. We do not expect the application of this ASU to have a material impact on our
consolidated financial statements.
ASU 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments
In June 2016, the FASB issued an ASU related to the accounting for credit losses on certain financial
instruments. The guidance requires that for most financial assets, losses be based on an expected loss
approach which includes estimates of losses over the life of exposure that considers historical, current and
forecasted information. Expanded disclosures related to the methods used to estimate the losses as well as a
specific disaggregation of balances for financial assets are also required. The change is effective for fiscal
years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption
permitted for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years.
The application of this ASU will not have a material impact on our consolidated financial statements.
4. MASTER LIMITED PARTNERSHIP
We own the general partner and a majority limited partner interest in MPLX, which owns and operates crude
oil and refined product transportation and logistics infrastructure and natural gas and NGL gathering,
processing, and fractionation assets. We control MPLX through our ownership of the general partner interest
and as of December 31, 2019, we owned approximately 63 percent of the outstanding MPLX common units.
MPLX’s Acquisition of ANDX
On July 30, 2019, MPLX completed its acquisition of Andeavor Logistics LP (“ANDX”), and ANDX
survived as a wholly-owned subsidiary of MPLX. At the effective time of the merger, each common unit held
by ANDX’s public unitholders was converted into the right to receive 1.135 MPLX common units. ANDX
common units held by MPC were converted into the right
to receive 1.0328 MPLX common units.
Additionally, 600,000 ANDX preferred units were converted into 600,000 preferred units of MPLX (“Series
B preferred units”). Series B preferred unitholders are entitled to receive, when and if declared by the MPLX
board, a fixed distribution of $68.75 per unit, per annum, payable semi-annually in arrears on February 15 and
August 15, or the first business day thereafter, up to and including February 15, 2023. After February 15,
2023, the holders of Series B preferred units are entitled to receive cumulative, quarterly distributions payable
in arrears on the 15th day of February, May, August and November of each year, or the first business day
thereafter, based on a floating annual rate equal to the three month LIBOR plus 4.652 percent.
MPC accounted for this transaction as a common control transaction, as defined by ASC 805, which resulted in
an increase to noncontrolling interest and a decrease to additional paid-in capital of approximately $55 million,
net of tax. During the third quarter of 2019, we pushed down to MPLX the portion of the goodwill attributable to
ANDX as of October 1, 2018. Due to this push down of goodwill, we also recorded an incremental $642 million
deferred tax liability associated with the portion of the non-deductible goodwill attributable to the noncontrolling
interest in MPLX with an offsetting reduction of our additional paid-in capital balance.
As described in Notes 5 and 6, we have consolidated ANDX since the acquisition date of October 1, 2018 in
accordance with ASC 810.
104
Dropdowns to MPLX and GP/IDR Exchange
On February 1, 2018, we contributed our refining logistics assets and fuels distribution services to MPLX in
exchange for $4.1 billion in cash and approximately 112 million common units and 2 million general partner
units from MPLX. MPLX financed the cash portion of the transaction with its $4.1 billion 364-day term loan
facility, which was entered into on January 2, 2018. We agreed to waive approximately one-third of the first
quarter 2018 distributions on the common units issued in connection with this transaction. The contributions
of these assets were accounted for as transactions between entities under common control and we did not
record a gain or loss.
Immediately following the February 1, 2018 dropdown to MPLX, our IDRs were cancelled and our economic
general partner interest was converted into a non-economic general partner interest, all in exchange for
275 million newly issued MPLX common units (“GP/IDR Exchange”). As a result of this transaction, the
general partner units and IDRs were eliminated, are no longer outstanding and no longer participate in
distributions of cash from MPLX.
On September 1, 2017, we contributed our joint-interest ownership in certain pipelines and storage facilities to
MPLX in exchange for $420 million in cash and approximately 19 million MPLX common units and
378 thousand general partner units from MPLX. We also agreed to waive approximately two-thirds of the
third quarter 2017 common unit distributions, IDRs and general partner distributions with respect to the
common units issued in this transaction. The contributions of these assets were accounted for as transactions
between entities under common control and we did not record a gain or loss.
On March 1, 2017, we contributed certain terminal, pipeline and storage assets to MPLX in exchange for total
consideration of $1.5 billion in cash and approximately 13 million common units and 264 thousand general
partner units from MPLX. We also agreed to waive two-thirds of the first quarter 2017 common unit
distributions, IDRs and general partner distributions with respect
to the common units issued in the
transaction. The contributions of these assets were accounted for as transactions between entities under
common control and we did not record a gain or loss.
Agreements
We have various long-term, fee-based commercial agreements with MPLX. Under these agreements, MPLX
provides transportation, storage, distribution and marketing services to us. With certain exceptions, these
agreements generally contain minimum volume commitments. These transactions are eliminated in
consolidation but are reflected as intersegment transactions between our Refining & Marketing and Midstream
segments. We also have agreements with MPLX that establish fees for operational and management services
provided between us and MPLX and for executive management services and certain general and
administrative services provided by us to MPLX. These transactions are eliminated in consolidation but are
reflected as intersegment transactions between our Corporate and Midstream segments.
Noncontrolling Interest
As a result of equity transactions of MPLX and ANDX, we are required to adjust non-controlling interest and
additional paid-in capital to reflect these changes in ownership. Changes in MPC’s additional paid-in capital
resulting from changes in its ownership interest in MPLX and ANDX were as follows:
(In millions)
2019
2018
2017
Increase due to the issuance of MPLX common units and general
partner units to MPC
Increase due to GP/IDR Exchange
Increase (decrease) due to the issuance of MPLX & ANDX
common units
Increase (decrease) in MPC’s additional paid-in capital
Tax impact
$
— $
—
1,114 $
1,808
(51)
(51)
(633)
6
2,928
(571)
Increase (decrease) in MPC’s additional paid-in capital, net of tax
$
(684) $
2,357 $
114
—
25
139
(29)
110
105
5. ACQUISITIONS
Acquisition of Andeavor
On October 1, 2018, we acquired Andeavor. Under the terms of the merger agreement, Andeavor stockholders
had the option to choose 1.87 shares of MPC common stock or $152.27 in cash per share of Andeavor
common stock. The merger agreement included election proration provisions that resulted in approximately
22.9 million shares of Andeavor common stock being converted into cash consideration and the remaining
128.2 million shares of Andeavor common stock being converted into stock consideration. Andeavor
stockholders received in the aggregate approximately 239.8 million shares of MPC common stock and
approximately $3.5 billion in cash in connection with the Andeavor acquisition. The fair value of the MPC
shares issued was determined on the basis of the closing market price of MPC’s common shares on the
acquisition date. The cash portion of the purchase price was funded using cash on hand.
At the time of the acquisition, all Andeavor equity awards, with the exception of non-employee director units,
were converted to MPC equity awards. The converted equity awards will continue to be governed by the same
terms and conditions as were applicable to such Andeavor equity awards immediately prior to the acquisition.
We recognized $203 million of purchase consideration to reflect the portion of the fair value of the time-based
converted equity awards attributable to pre-combination service completed by the award holders. The
non-employee director units were accelerated in full and cancelled and the holders of such units received an
amount of cash equal to the number of shares of Andeavor common stock subject to such non-employee
director units multiplied by the cash consideration per share.
Our financial results reflect the results of Andeavor from October 1, 2018, the date of the acquisition.
The components of the fair value of consideration transferred are as follows:
(In millions)
Fair value of MPC shares issued
Cash payment to Andeavor stockholders
Cash settlement of non-employee director units
Fair value of converted equity awards
Total fair value of consideration transferred
$
$
19,766
3,486
7
203
23,462
We accounted for the Andeavor acquisition using the acquisition method of accounting, which requires
Andeavor assets and liabilities to be recorded to our balance sheet at fair value as of the acquisition date. The
size and the breadth of the Andeavor acquisition necessitated the use of the one year measurement period
provided under ASC 805 to fully analyze all the factors used in establishing the asset and liability fair values
as of the acquisition date. We completed a final determination of the fair value of certain assets and liabilities
during the three months ended September 30, 2019 and recorded final adjustments to our preliminary
purchase price allocation. These adjustments reflect the completion of valuation studies of the acquired
property, plant and equipment
in order to finalize assumptions used in their cost approach valuation
methodology and finalization of specific valuation assumptions and data inputs for other individual asset
valuation models. The fair value estimates of assets acquired and liabilities assumed as of the acquisition date
are noted in the table below.
(In millions)
Cash and cash equivalents
Receivables
Inventories
Other current assets
Equity method investments
Property, plant and equipment, net
Other noncurrent assets(a)
Total assets acquired
As originally
reported
Adjustments
As adjusted
$
$
382
2,744
5,204
378
865
16,545
3,086
29,204
— $
(5)
37
(6)
(113)
(1,021)
(11)
(1,119)
382
2,739
5,241
372
752
15,524
3,075
28,085
106
(In millions)
Accounts payable
Payroll and benefits payable
Accrued taxes
Debt due within one year
Other current liabilities
Long-term debt
Deferred income taxes
Defined benefit postretirement plan obligations
Deferred credit and other liabilities
Noncontrolling interests
Total liabilities and noncontrolling interest assumed
Net assets acquired excluding goodwill
Goodwill
Net assets acquired
(a)
Includes intangible assets.
As originally
reported
Adjustments
As adjusted
4,003
348
590
34
392
8,875
1,609
432
714
5,059
22,056
7,148
16,314
(41)
9
(110)
—
27
1
(60)
—
33
3
(138)
(981)
981
$
23,462
$
— $
3,962
357
480
34
419
8,876
1,549
432
747
5,062
21,918
6,167
17,295
23,462
Details of our valuation methodology and significant inputs for fair value measurements are included by asset
class below. The fair value measurements for equity method investments, property, plant and equipment,
intangible assets and long-term debt are based on significant inputs that are not observable in the market and,
therefore, represent Level 3 measurements.
Goodwill
The purchase consideration allocation resulted in the recognition of $17.3 billion in goodwill, of which
$1.0 billion is tax deductible due to a carryover basis from Andeavor. Our Refining & Marketing, Midstream
and Retail segments recognized $5.2 billion, $8.1 billion and $3.9 billion of goodwill. The recognized
goodwill represents the value expected to be created by further optimization of crude supply, a nationwide
retail and marketing platform, diversification of our refining and midstream footprints and optimization of
information systems and business processes.
Inventory
The fair value of inventory was determined by recognizing crude oil and feedstocks at market prices as of
October 1, 2018 and recognizing refined product inventory at market prices less selling costs and profit
margin associated with the remaining distribution process.
Equity Method Investments
The fair value of the equity method investments was determined based on applying income and market
approaches. The income approach relied on the discounted cash flow method and the market approach relied
on a market multiple approach considering historical and projected financial results. Discount rates for the
discounted cash flow models were based on capital structures for similar market participants and included
various risk premiums that account for risks associated with the specific investments. For more information
about our equity method investments, see Note 14.
Property, Plant and Equipment
The fair value of property, plant and equipment was based primarily on the cost approach. Key assumptions in
the cost approach included determining the replacement cost by evaluating recent purchases of similar assets
or published data, and adjusting replacement cost for economic and functional obsolescence, location, normal
useful lives, and capacity (if applicable).
Acquired Intangible Assets
The fair value of the acquired identifiable intangible assets is $2.8 billion, which represents the value of various
customer contracts and relationships, brand rights and tradenames and other intangible assets. The fair value of
customer contracts and relationships is $2.5 billion, which was valued by applying the multi-period excess
107
earnings method, which is an income approach. Key assumptions in the income approach include the
underlying contract cash flow estimates, remaining contract term, probability of renewal, growth rates and
discount rates. Brand rights and tradenames were valued by applying the relief of royalty method, which is an
income approach. The intangible assets are all definite lived and will be amortized over 2 to 10 years.
Debt
The fair value of the Andeavor and ANDX unsecured notes was measured using a market approach, based
upon the average of quotes for the acquired debt from major financial institutions and a third-party valuation
service. Additionally, borrowings under revolving credit agreements and other debt were assumed to
approximate fair value.
Noncontrolling Interest
Through the Andeavor acquisition, we acquired the general partnership interest of ANDX, which was a VIE
because the limited partners of ANDX did not have substantive kick-out or substantive participating rights
over the general partner. We were the primary beneficiary of ANDX because in addition to our significant
economic interest, we also had the ability, through our 100 percent ownership of the general partner, to
control the decisions that most significantly impact ANDX. The fair value of the noncontrolling interest in
ANDX was based on the unit price, units outstanding and the percent of public unitholders of ANDX on
October 1, 2018.
Acquisition Costs
We recognized $47 million in acquisition costs. Additionally, we recognized various other transaction-related
costs, including employee-related costs associated with the Andeavor acquisition. All of these costs are
reflected in selling, general and administrative expenses. The employee-related costs are primarily due to
pre-existing Andeavor change in control and equity award agreements that create obligations and accelerated
equity vesting upon MPC notifying employees of significant changes to or elimination of
their
responsibilities.
Andeavor Revenues and Income from Operations
Andeavor’s results have been included in MPC’s financial statements for the period subsequent to the date of
the acquisition on October 1, 2018. Andeavor contributed revenues of approximately $11.3 billion for the
period from October 1 through December 31, 2018. We do not believe it is practical to disclose Andeavor’s
contribution to earnings for the period from October 1, 2018 through December 31, 2018 as our integration
efforts have resulted in the elimination of Andeavor stand-alone discrete financial information due mainly to
our inclusion of Andeavor inventory in our consolidated LIFO inventory pools, which does not allow us to
objectively distinguish the cost of sales between the two historical reporting entities.
Pro Forma Financial Information
The following unaudited pro forma financial information presents consolidated results assuming the Andeavor
acquisition occurred on January 1, 2017.
(In millions, except per share data)
Sales and other operating revenues(a)
Net income attributable to MPC
2018
2017
$
131,921
4,218
$
118,179
4,712
(a)
The 2018 period reflects an election to present certain taxes on a net basis concurrent with our adoption of ASC 606.
The pro forma information includes adjustments to align accounting policies, an adjustment to depreciation
expense to reflect the increased fair value of property, plant and equipment, increased amortization expense
related to identifiable intangible assets and the related income tax effects. The pro forma information does not
reflect the $727 million effect on net income attributable to MPC related to purchase accounting related
inventory effects and transaction-related costs as these charges do not have a continuing impact on the
consolidated results.
Acquisition of Terminal and Retail Locations in New York
During the third quarter of 2019, we acquired a 900,000-barrel capacity light product and asphalt terminal and
33 NOCO Express retail stores in Buffalo, Syracuse and Rochester, New York, from NOCO Incorporated for
total consideration of $135 million.
108
Based on the final fair value estimates of assets acquired and liabilities assumed at the acquisition date,
$38 million of the purchase price was allocated to property, plant and equipment, $3 million to inventory and
$94 million to goodwill. Goodwill is tax deductible and represents the value expected to be created by
geographically expanding our retail platform and the assembled workforce. The terminal is accounted for
within the R&M segment and the retail stores are accounted for within the Retail segment.
The amount of revenue and income from operations associated with the acquisition from the acquisition date
to December 31, 2019 did not have a material impact on the consolidated financial statements. In addition,
assuming the acquisition had occurred on January 1, 2018, the consolidated pro forma results would not have
been materially different from the reported results.
Acquisition of Express Mart
During the fourth quarter of 2018, Speedway acquired 78 transportation fuel and convenience store locations
from Petr-All Petroleum Consulting Corporation for total consideration of $266 million. These stores are
located primarily in the Syracuse, Rochester and Buffalo markets in New York and operate under the Express
Mart brand.
Based on the final fair value estimates of assets acquired and liabilities assumed at the acquisition date,
$97 million of the purchase price was allocated to property, plant and equipment, $9 million to inventory,
$2 million to intangibles and $158 million to goodwill. Goodwill is tax deductible and represents the value
expected to be created by geographically expanding our retail platform and the assembled workforce.
The amount of revenue and income from operations associated with the acquisition from the acquisition date
to December 31, 2018 did not have a material impact on the consolidated financial statements. In addition,
assuming the acquisition had occurred on January 1, 2017, the consolidated pro forma results would not have
been materially different from the reported results.
Acquisition of Mt. Airy Terminal
On September 26, 2018, MPLX acquired an eastern U.S. Gulf Coast export terminal (“Mt. Airy Terminal”)
from Pin Oak Holdings, LLC for total consideration of $451 million. At the time of the acquisition, the
terminal included tanks with 4 million barrels of third-party leased storage capacity and a dock with 120 mbpd
of capacity. The Mt. Airy Terminal is located on the Mississippi River between New Orleans and Baton
Rouge, near several Gulf Coast refineries, including our Garyville Refinery, and numerous rail lines and
pipelines. The Mt. Airy Terminal is accounted for within the Midstream segment. In the first quarter of 2019,
an adjustment to the initial purchase price was made for approximately $5 million related to the final
settlement of the acquisition. This reduced the total purchase price to $446 million and resulted in
$336 million of property, plant and equipment, $121 million of goodwill and the remainder being attributable
to net liabilities assumed.
Goodwill represents the significant growth potential of the terminal due to the multiple pipelines and rail lines
which cross the property, the terminal’s position as an aggregation point for liquids growth in the region for
both ocean-going vessels and inland barges, the proximity of the terminal to our Garyville refinery and other
refineries in the region as well as the opportunity to construct an additional dock at the site. All of the
goodwill recognized related to this transaction is tax deductible.
The amount of revenue and income from operations associated with the acquisition from the terminal
impact on the consolidated financial
acquisition date to December 31, 2018 did not have a material
statements. In addition, assuming the terminal acquisition had occurred on January 1, 2017, the consolidated
pro forma results would not have been materially different from the reported results.
Acquisition of Ozark Pipeline
On March 1, 2017, MPLX acquired the Ozark pipeline from Enbridge Pipelines (Ozark) LLC for
approximately $219 million, including purchase price adjustments made in the second quarter of 2017. Based
on the fair value of assets acquired and liabilities assumed at the acquisition date, the final purchase price was
primarily allocated to property, plant and equipment. The Ozark pipeline is a 433-mile, 22-inch crude oil
pipeline originating in Cushing, Oklahoma, and terminating in Wood River, Illinois, capable of transporting
approximately 230 mbpd. We present the Ozark pipeline within the Midstream segment.
The amount of revenue and income from operations associated with the acquisition from the acquisition date
to December 31, 2017 did not have a material impact on the consolidated financial statements. In addition,
109
assuming the acquisition of the Ozark pipeline had occurred on January 1, 2016, the consolidated pro forma
results would not have been materially different from reported results.
Investment in Pipeline Company
On February 15, 2017, MPLX acquired a partial, indirect equity interest in the Dakota Access Pipeline
(“DAPL”) and Energy Transfer Crude Oil Company Pipeline (“ETCOP”) projects, collectively referred to as
the Bakken Pipeline system, through a joint venture with Enbridge Energy Partners L.P. (“Enbridge Energy
Partners”). MPLX contributed $500 million of the $2 billion purchase price paid by the joint venture, MarEn
Bakken Company LLC (“MarEn Bakken”), to acquire a 36.75 percent indirect equity interest in the Bakken
Pipeline system from Energy Transfer Partners, L.P. (“ETP”) and Sunoco Logistics Partners, L.P. (“SXL”).
MPLX holds, through a subsidiary, a 25 percent interest in MarEn Bakken, which equates to an approximate
9.2 percent indirect equity interest in the Bakken Pipeline system. We account for the investment in MarEn
Bakken as part of our Midstream segment using the equity method of accounting.
Formation of Gathering and Processing Joint Venture
Effective January 1, 2017, MPLX and Antero Midstream formed a joint venture, Sherwood Midstream LLC
(“Sherwood Midstream”), to support the development of Antero Resources Corporation’s Marcellus Shale
acreage in West Virginia. MPLX has a 50 percent ownership interest in Sherwood Midstream. In connection
with this transaction, MPLX contributed assets then under construction at the Sherwood Complex with a fair
value of approximately $134 million and cash of approximately $20 million. Antero Midstream made an
initial capital contribution of approximately $154 million.
Also effective January 1, 2017, MPLX converted all of its ownership interests in MarkWest Ohio
Fractionation Company, L.L.C. (“Ohio Fractionation”), a previously wholly-owned subsidiary, to Class A
Interests and amended its LLC Agreement to create Class B-3 Interests, which were sold to Sherwood
Midstream for $126 million in cash. The Class B-3 Interests provide Sherwood Midstream with the right to
fractionation revenue and the obligation to pay expenses related to 20 mbpd of capacity in the Hopedale 3
fractionator.
Effective January 1, 2017, MPLX and Sherwood Midstream formed a joint venture, Sherwood Midstream
Holdings LLC (“Sherwood Midstream Holdings”), for the purpose of owning, operating and maintaining all
of the shared assets for the benefit of and use in the operation of the gas plants and other assets owned by
Sherwood Midstream and the gas plants and de-ethanization facilities owned by MPLX. MPLX contributed
certain real property, equipment and facilities with a fair value of approximately $209 million to Sherwood
Midstream Holdings in exchange for a 79 percent initial ownership interest. Sherwood Midstream contributed
cash of approximately $44 million to Sherwood Midstream Holdings in exchange for a 21 percent initial
ownership interest. The net book value of the contributed assets was approximately $203 million. The
contribution was determined to be an in-substance sale of real estate. As such, MPLX only recognized a gain
for the portion attributable to Antero Midstream’s indirect interest of approximately $2 million.
We account for our direct interests in Sherwood Midstream and Sherwood Midstream Holdings as part of our
Midstream segment using the equity method of accounting. We continue to consolidate Ohio Fractionation
and have recognized a noncontrolling interest for Sherwood Midstream’s interest in that entity.
See Note 6 for additional information related to the investments in Sherwood Midstream and Sherwood
Midstream Holdings.
6. VARIABLE INTEREST ENTITIES
Consolidated VIE
We control MPLX through our ownership of the general partner. MPLX is a VIE because the limited partners
do not have substantive kick-out or substantive participating rights over the general partner. We are the
primary beneficiary of MPLX because in addition to our significant economic interest, we also have the
ability, through our ownership of the general partner, to control the decisions that most significantly impact
MPLX. We therefore consolidate MPLX and record a noncontrolling interest for the interest owned by the
public. We also record a redeemable noncontrolling interest related to MPLX’s Series A preferred units.
The creditors of MPLX do not have recourse to MPC’s general credit through guarantees or other financial
arrangements, except as noted. MPC has effectively guaranteed certain indebtedness of LOOP LLC (“LOOP”)
and LOCAP LLC (“LOCAP”), in which MPLX holds an interest. See Note 26 for more information. The
110
assets of MPLX can only be used to settle its own obligations and its creditors have no recourse to our assets,
except as noted earlier.
On July 30, 2019, MPLX acquired ANDX. We have consolidated ANDX since the acquisition date of
October 1, 2018 in accordance with ASC 810. The ANDX balances at December 31, 2018 reflected in the
table below are ANDX’s historical balances as the preliminary purchase accounting adjustments related to
ANDX’s assets and liabilities in connection with the Andeavor acquisition had not yet been pushed down to
ANDX. The MPLX balances at December 31, 2019 reflect the inclusion of ANDX’s balances at fair values
determined in connection with MPC’s acquisition of Andeavor on October 1, 2018. See Notes 4 and 5 for
additional information.
The following table presents balance sheet information for the assets and liabilities of MPLX and ANDX,
which are included in our balance sheets.
(In millions)
Assets
Cash and cash equivalents
Receivables, less allowance for doubtful accounts
Inventories
Other current assets
Equity method investments
Property, plant and equipment, net
Goodwill
Right of use assets
Other noncurrent assets
Liabilities
Accounts payable
Payroll and benefits payable
Accrued taxes
Debt due within one year
Operating lease liabilities
Other current liabilities
Long-term debt
Deferred income taxes
Long-term operating lease liabilities
Deferred credits and other liabilities
Non-Consolidated VIEs
Crowley Coastal Partners
December 31,
2019
December 31,
2018
MPLX
MPLX
ANDX
$
$
$
$
15
615
110
110
5,275
22,174
9,536
365
1,323
744
5
80
9
66
259
19,704
12
302
409
$
$
68
425
77
45
4,174
14,639
2,586
—
458
776
2
48
1
—
177
13,392
13
—
276
10
199
22
57
602
6,845
1,051
—
1,242
215
10
23
504
—
77
4,469
1
—
68
In May 2016, Crowley Coastal Partners LLC (“Crowley Coastal Partners”) was formed to own an interest in
both Crowley Ocean Partners LLC (“Crowley Ocean Partners”) and Crowley Blue Water Partners LLC
(“Crowley Blue Water Partners”). We have determined that Crowley Coastal Partners is a VIE based on the
terms of the existing financing arrangements for Crowley Blue Water Partners and Crowley Ocean Partners
and the associated debt guarantees by MPC and Crowley. Our maximum exposure to loss at December 31,
2019 was $440 million, which includes our equity method investment in Crowley Coastal Partners and the
debt guarantees provided to each of the lenders to Crowley Blue Water Partners and Crowley Ocean Partners.
We are not the primary beneficiary of this VIE because we do not have the ability to control the activities that
significantly influence the economic outcomes of the entity and, therefore, do not consolidate the entity.
MPLX VIEs
As a result of MPLX’s acquisition of ANDX, MPLX acquired an ownership interest in Rendezvous Gas
Services, L.L.C. (“RGS”), Minnesota Pipe Line Company, LLC and Andeavor Logistics Rio Pipeline LLC
(“ALRP”), among others. RGS and ALRP have been deemed to be VIEs, however, neither MPLX nor any of
111
its subsidiaries have been deemed to be the primary beneficiary due to voting rights on significant matters. For
all of the investments acquired through the merger, MPLX has the ability to exercise influence through
participation in the management committees which make all significant decisions. However, since MPLX has
equal or proportionate influence over each committee as a joint interest partner and all significant decisions
require the consent of the other investors without regard to economic interest, we have determined that these
entities should not be consolidated and we apply the equity method of accounting with respect to MPLX’s
investment in each entity.
In addition to the investments above, MarkWest Utica EMG, L.L.C., Sherwood Midstream, MarkWest EMG
Jefferson Dry Gas Gathering Company, L.L.C. and Sherwood Midstream Holdings are also deemed to be
VIEs. Consistent with the investments above, neither MPLX nor any of its subsidiaries are deemed to be the
primary beneficiary due to voting rights on significant matters. Sherwood Midstream has been deemed the
primary beneficiary of Sherwood Midstream Holdings due to its controlling financial interest through its
authority to manage the joint venture. As a result, Sherwood Midstream consolidates Sherwood Midstream
Holdings.
MPLX’s maximum exposure to loss as a result of its involvement with equity method investments includes its
equity investment, any additional capital contribution commitments and any operating expenses incurred by
the subsidiary operator in excess of its compensation received for the performance of the operating services.
We account for our ownership interest in each of these investments as an equity method investment. See Note
14 for ownership percentages and investment balances related to these VIEs.
7. RELATED PARTY TRANSACTIONS
Transactions with related parties were as follows:
(In millions)
Sales to related parties
Purchases from related parties
2019
2018
2017
$
$
768
763
$
754
610
629
570
Sales to related parties, which are included in sales and other operating revenues, consist primarily of sales of
refined products to PFJ Southeast, an equity affiliate which owns and operates travel plazas primarily in the
Southeast region of the United States.
Purchases from related parties are included in cost of revenues. We obtain utilities, transportation services and
purchase ethanol from certain of our equity affiliates.
8. EARNINGS PER SHARE
We compute basic earnings per share by dividing net income attributable to MPC less income allocated to
participating securities by the weighted average number of shares of common stock outstanding. Since MPC
grants certain incentive compensation awards to employees and non-employee directors that are considered to
be participating securities, we have calculated our earnings per share using the two-class method. Diluted
income per share assumes exercise of certain stock-based compensation awards, provided the effect is not
anti-dilutive.
112
(In millions, except per share data)
2019
2018
2017
Basic earnings per share:
Allocation of earnings:
Net income attributable to MPC
Income allocated to participating securities
Income available to common stockholders – basic
Weighted average common shares outstanding
Basic earnings per share
Diluted earnings per share:
Allocation of earnings:
Net income attributable to MPC
Income allocated to participating securities
Income available to common stockholders – diluted
Weighted average common shares outstanding
Effect of dilutive securities
Weighted average common shares, including dilutive effect
$
$
$
$
$
$
$
2,637
1
2,636
659
$
$
2,780
1
2,779
518
4.00
$
5.36
$
$
$
2,637
1
2,636
659
5
664
$
$
2,780
1
2,779
518
8
526
3,432
2
3,430
507
6.76
3,432
2
3,430
507
5
512
Diluted earnings per share
$
3.97
$
5.28
$
6.70
The following table summarizes the shares that were anti-dilutive, and therefore, were excluded from the
diluted share calculation.
(In millions)
2019
2018
2017
Shares issuable under stock-based compensation plans
3
—
1
9. EQUITY
As of December 31, 2019, we had $2.96 billion of remaining share repurchase authorizations from our board
of directors. We may utilize various methods to effect the repurchases, which could include open market
repurchases, negotiated block transactions,
tender offers, accelerated share repurchases or open market
solicitations for shares, some of which may be effected through Rule 10b5-1 plans. The timing and amount of
future repurchases, if any, will depend upon several factors, including market and business conditions, and
such repurchases may be discontinued at any time.
Total share repurchases were as follows for the respective periods:
(In millions, except per share data)
Number of shares repurchased
Cash paid for shares repurchased
Average cost per share
10. SEGMENT INFORMATION
2019
2018
2017
34
1,950
58.87
$
$
47
3,287
69.46
$
$
44
2,372
53.85
$
$
We have three reportable segments: Refining & Marketing, Retail and Midstream. Each of these segments is
organized and managed based upon the nature of the products and services it offers.
• Refining & Marketing – refines crude oil and other feedstocks at our 16 refineries in the Gulf Coast,
Mid-Continent and West Coast regions of the United States, purchases refined products and ethanol
for resale and distributes refined products through transportation, storage, distribution and marketing
services provided largely by our Midstream segment. We sell refined products to wholesale marketing
customers domestically and internationally, to buyers on the spot market, to our Retail business
segment and to independent entrepreneurs who operate primarily Marathon® branded outlets.
• Retail – sells transportation fuels and convenience products in the retail market across the United States
through company-owned and operated convenience stores, primarily under the Speedway® brand, and
113
long-term fuel supply contracts with direct dealers who operate locations mainly under the ARCO®
brand.
• Midstream – transports, stores, distributes and markets crude oil and refined products principally for
the Refining & Marketing segment via refining logistics assets, pipelines, terminals, towboats and
barges; gathers, processes and transports natural gas; and gathers, transports, fractionates, stores and
markets NGLs. The Midstream segment primarily reflects the results of MPLX.
On October 1, 2018, we acquired Andeavor and its results are included in each of our segments from the date
of the acquisition. Also, on February 1, 2018, we contributed certain refining logistics assets and fuels
distribution services to MPLX. The results of these new businesses are reported in the Midstream segment
prospectively from February 1, 2018, resulting in a net reduction to Refining & Marketing segment results and
a net increase to Midstream segment results of the same amount. No effect was given to prior periods as these
entities were not considered businesses prior to February 1, 2018.
Segment income from operations represents income from operations attributable to the reportable segments.
Corporate administrative expenses, except for those attributable to MPLX, and costs related to certain
non-operating assets are not allocated to the Refining & Marketing and Retail segments. In addition, certain
items that affect comparability (as determined by the chief operating decision maker) are not allocated to the
reportable segments.
(In millions)
Year Ended December 31, 2019
Revenues:
Third party(a)
Intersegment
Segment revenues
Segment income from operations
Supplemental Data
Depreciation and amortization(b)
Capital expenditures and investments(c)
(In millions)
Year Ended December 31, 2018
Revenues:
Third party(a)
Intersegment
Segment revenues
Segment income from operations
Supplemental Data
Depreciation and amortization(b)
Capital expenditures and investments(c)
Refining &
Marketing
Retail
Midstream
Total
33,059
8
33,067
1,582
$
$
$
528
607
3,834
4,926
8,760
3,594
1,267
3,290
$
$
$
123,949
24,620
148,569
7,543
3,460
5,896
Retail
Midstream
Total
23,546
6
23,552
1,028
$
$
$
353
460
3,273
3,387
6,660
2,752
885
2,630
$
$
$
96,504
16,307
112,811
6,261
2,412
4,147
$
$
$
$
$
$
$
$
$
$
$
$
87,056
19,686
106,742
2,367
1,665
1,999
Refining &
Marketing
69,685
12,914
82,599
2,481
1,174
1,057
114
(In millions)
Year Ended December 31, 2017
Revenues:
Third party(a)
Intersegment(d)
Segment revenues
Segment income from operations
Supplemental Data
Refining &
Marketing
Retail
Midstream
Total
$
$
$
53,382
11,309
64,691
2,321
$
$
$
19,029
4
19,033
729
$
$
$
$
$
$
2,322
1,443
3,765
1,339
699
1,755
74,733
12,756
87,489
4,389
2,056
2,968
Depreciation and amortization(b)
Capital expenditures and investments(c)
1,082
832
275
381
(a)
Includes related party sales. See Note 7 for additional information.
(b) Differences between segment totals and MPC totals represent amounts related to unallocated items and are included in items not
allocated to segment in the reconciliation below.
(c)
Includes changes in capital expenditure accruals and investments in affiliates.
(d) Management believes intersegment transactions were conducted under terms comparable to those with unaffiliated parties.
The following reconciles segment income from operations to income before income taxes as reported in the
consolidated statements of income:
(In millions)
Segment income from operations
Items not allocated to segments:
Corporate and other unallocated items(a)
Equity method investment restructuring gains(b)
Transaction-related costs(c)
Litigation
Impairments(d)
Income from operations
Net interest and other financial costs
2019
2018
2017
$
7,543
$
6,261
$
4,389
(805)
259
(160)
(22)
(1,239)
5,576
1,247
(502)
—
(197)
—
9
5,571
1,003
(365)
—
—
(29)
23
4,018
674
3,344
Income before income taxes
$
4,329
$
4,568
$
(a) Corporate and other unallocated items consists primarily of MPC’s corporate administrative expenses and costs related to certain
non-operating assets, except for corporate overhead expenses attributable to MPLX, which are included in the Midstream segment.
Corporate overhead expenses are not allocated to the Refining & Marketing and Retail segments.
(b)
(c)
(d)
Includes gains related to The Andersons Marathon Holdings LLC and Capline Pipeline Company LLC. See Note 14.
2019 includes costs incurred in connection with the proposed Speedway separation, Midstream strategic review and other related
efforts. Both 2019 and 2018 include employee severance, retention and other costs related to the acquisition of Andeavor. Effective
October 1, 2019, we have discontinued reporting Andeavor transaction-related costs as one year has passed since the Andeavor
acquisition. The post October 1, 2019 transaction costs are immaterial and reported in corporate and other unallocated items.
2019 reflects impairments of goodwill and equity method investments. See Notes 16 and 14. 2018 and 2017 includes MPC’s share of
gains from the sale of assets remaining from the Sandpiper pipeline project, which was cancelled and impaired in 2016.
115
The following reconciles segment capital expenditures and investments to total capital expenditures:
(In millions)
Segment capital expenditures and investments
Less investments in equity method investees
Plus items not allocated to segments:
Corporate
Capitalized interest
2019
2018
2017
$
$
5,896
1,064
$
4,147
409
2,968
305
100
137
77
80
83
55
Total capital expenditures(a)
$
5,069
$
3,895
$
2,801
(a)
Includes changes in capital expenditure accruals. See Note 21 for a reconciliation of total capital expenditures to additions to
property, plant and equipment as reported in the consolidated statements of cash flows.
No single customer accounted for more than 10 percent of annual revenues for the years ended December 31,
2019, 2018 and 2017. See Note 20 for the disaggregation of our revenue by segment and product line.
We do not have significant operations in foreign countries. Therefore, revenues in foreign countries and long-
lived assets located in foreign countries, including property, plant and equipment and investments, are not
material to our operations.
11. NET INTEREST AND OTHER FINANCIAL COSTS
Net interest and other financial costs was:
(In millions)
2019
2018
2017
Interest income
Interest expense
Interest capitalized
Pension and other postretirement non-service costs(a)
Loss on extinguishment of debt
Other financial costs
$
$
(40)
1,396
(158)
3
—
46
$
(87)
1,026
(80)
53
64
27
Net interest and other financial costs
$
1,247
$
1,003
$
(27)
688
(63)
49
—
27
674
(a)
See Note 23.
12. INCOME TAXES
Income tax provision (benefit) was:
(In millions)
Current:
Federal
State and local
Foreign
Total current
Deferred:
Federal
State and local
Foreign
Total deferred
2019
2018
2017
$
$
(3)
53
1
51
898
116
9
1,023
$
715
178
22
915
2
61
(16)
47
681
98
(6)
773
(1,270)
33
4
(1,233)
Income tax provision (benefit)
$
1,074
$
962
$
(460)
116
A reconciliation of the federal statutory income tax rate applied to income before income taxes to the
provision for income taxes follows:
2019
2018
2017
Statutory rate applied to income before income taxes
State and local income taxes, net of federal income tax
effects
Goodwill impairment
Noncontrolling interests
TCJA legislation
Other
Provision for income taxes
Deferred tax assets and liabilities resulted from the following:
(In millions)
Deferred tax assets:
Employee benefits
Environmental remediation
Debt financing
Net operating loss carryforwards
Foreign currency
Tax credit carryforwards
Other
Total deferred tax assets
Deferred tax liabilities:
Property, plant and equipment
Inventories
Investments in subsidiaries and affiliates
Intangibles
Other
Total deferred tax liabilities
Net deferred tax liabilities
21%
4
—
(4)
—
—
35%
2
—
(4)
(45)
(2)
21%
(14)%
December 31,
2019
2018
21%
3
3
(3)
—
1
25%
$
$
693
99
17
18
15
14
57
913
3,444
652
3,114
56
19
7,285
660
111
39
17
28
21
88
964
2,830
678
2,130
97
64
5,799
4,835
$
6,372
$
Net deferred tax liabilities were classified in the consolidated balance sheets as follows:
(In millions)
Assets:
Other noncurrent assets
Liabilities:
Deferred income taxes
Net deferred tax liabilities
December 31,
2019
2018
$
$
20
$
29
6,392
6,372
$
4,864
4,835
At December 31, 2019 and 2018, federal operating loss carryforwards were $7 million and $7 million,
respectively, which expire in 2022 through 2038. As of December 31, 2019 and 2018, state and local operating
loss carryforwards were $11 million and $10 million, respectively, which expire in 2020 through 2038.
As of December 31, 2019 and 2018, $11 million and $10 million of valuation allowances have been recorded
against foreign tax credits and state net operating losses due to the expectation that these deferred tax assets
are not likely to be realized.
117
MPC is continuously undergoing examination of its U.S. federal income tax returns by the Internal Revenue
Service (“IRS”). Since 2012, we have continued to participate in the Compliance Assurance Process (“CAP”).
CAP is a real-time audit of the U.S. Federal income tax return that allows the IRS, working in conjunction
with MPC, to determine tax return compliance with the U.S. Federal tax law prior to filing the return. This
program provides us with greater certainty about our tax liability for years under examination by the IRS.
While Andeavor also underwent continual IRS examination, it did not participate in the CAP for tax periods
prior to the October 1, 2018 acquisition of Andeavor.
MPC’s IRS audits have been completed through the 2010 tax year. Andeavor and its subsidiaries’ IRS audits
have been completed through the 2010 tax year. We believe adequate provision has been established for
potential tax in periods not closed to examination. Further, we are routinely involved in U.S. state income tax
audits. We believe all other audits will be resolved with the amounts provided for these liabilities. As of
December 31, 2019, our income tax returns remain subject to examination in the following major tax
jurisdictions for the tax years indicated:
United States Federal
States
2011
2006
-
-
2018
2018
The following table summarizes the activity in unrecognized tax benefits:
(In millions)
January 1 balance
Additions for tax positions of prior years
Reductions for tax positions of prior years
Settlements
Statute of limitations
Acquired from Andeavor
December 31 balance
2019
2018
2017
$
$
211
2
(2)
(19)
(160)
—
$
32
$
19
—
(5)
—
(12)
209
211
$
$
7
13
—
(1)
—
—
19
If the unrecognized tax benefits as of December 31, 2019 were recognized, $23 million would affect our
effective income tax rate. There were $2 million of uncertain tax positions as of December 31, 2019 for which
it is reasonably possible that the amount of unrecognized tax benefits would significantly decrease during the
next twelve months. For tax years 2009 and 2010, Andeavor had asserted a federal income tax claim for
$159 million resulting from the income tax effect of the receipt of the ethanol blender’s excise tax credit, for
which the tax benefit was not recorded. The statute of limitations for the IRS appeal process was allowed to
expire during the fourth quarter 2019 since the ability to obtain a refund was remote.
Prior to its spinoff on June 30, 2011, Marathon Petroleum Corporation was included in the Marathon Oil
Corporation (“Marathon Oil”) U.S. federal income tax returns for all applicable years. During the third quarter
of 2017, Marathon Oil received a notice of Final Partnership Administrative Adjustment (“FPAA”) from the
IRS for taxable year 2010, relating to certain partnership transactions. Marathon Oil filed a U.S. Tax Court
petition disputing these adjustments during the fourth quarter of 2017. We received an FPAA for taxable years
2011-2014 for items resulting from the Marathon Oil IRS dispute discussed above. We filed a U.S. Tax Court
petition in the fourth quarter of 2017 for tax years 2011-2014 to dispute these corollary adjustments. In the
third quarter of 2019, the U.S. Tax court entered a decision in favor of both Marathon Oil and us for all
material items and the U.S. Internal Revenue Service is in the process of preparing the final reports for these
tax years.
Pursuant to our tax sharing agreement with Marathon Oil, the unrecognized tax benefits related to pre-spinoff
operations for which Marathon Oil was the taxpayer remain the responsibility of Marathon Oil and we have
indemnified Marathon Oil accordingly. See Note 26 for indemnification information.
Interest and penalties related to income taxes are recorded as part of the provision for income taxes. Such
interest and penalties were net expenses (benefits) of $(2) million, $1 million and $3 million in 2019, 2018
and 2017, respectively. As of December 31, 2019 and 2018, $7 million and $18 million of interest and
penalties were accrued related to income taxes.
118
13. INVENTORIES
(In millions)
Crude oil
Refined products
Materials and supplies
Merchandise
Total
December 31,
2019
2018
$
$
3,472
5,548
996
227
$
10,243
$
3,655
5,234
720
228
9,837
The LIFO method accounted for 90 percent and 92 percent of total inventory value at December 31, 2019 and
2018, respectively. Current acquisition costs of inventories were estimated to exceed the LIFO inventory
value at December 31, 2019 by $871 million. There was no excess of replacement or current cost over our
stated LIFO cost at December 31, 2018. There were no material liquidations of LIFO inventories in 2019,
2018 and 2017.
14. EQUITY METHOD INVESTMENTS
The Andersons Marathon Holdings LLC
Effective October 1, 2019, The Andersons, Inc. and MPC contributed jointly owned equity interests in three
ethanol entities into a new legal entity, The Andersons Marathon Holdings LLC (“TAMH”). Concurrently,
The Andersons, Inc. contributed a wholly-owned ethanol facility to TAMH. In accordance with ASC 845, we
derecognized the historical cost of our equity method investments in the legacy entities amounting to
$123 million and recognized the new equity method investment
in TAMH at fair value. We used a
combination of market, income and cost approaches to determine the fair value of our ownership interest in
TAMH with more reliance on the market and income approaches. The estimated cash flows used in the
income approach were discounted using a weighted average cost of capital estimate and the market approach
utilized EBITDA and capacity multiples for similar companies and transactions. This is a nonrecurring fair
value measurement and is recognized in Level 3 of the fair value hierarchy. We estimated the fair value of our
ownership interest to be $175 million. The excess of the estimated fair value of our ownership interest over
the carrying value of the derecognized net assets resulted in a $52 million non-cash net gain recorded as a net
gain on disposal of assets in the accompanying consolidated statements of income.
Capline LLC
During the three months ended March 31, 2019, we executed agreements with Capline Pipeline Company
LLC (“Capline LLC”) to contribute our 33 percent undivided interest in the Capline pipeline system in
exchange for a 33 percent ownership interest in Capline LLC. In connection with our execution of these
agreements, Capline LLC initiated a binding open season for southbound service from Patoka, Illinois to St.
James, Louisiana or Liberty, Mississippi with an additional origination point at Cushing, Oklahoma. Service
from Cushing, Oklahoma is part of a joint tariff with Diamond pipeline. Crude oil service is expected to begin
in the first half of 2021.
In accordance with ASC 810, we derecognized our undivided interest amounting to $143 million of net assets
and recognized the Capline LLC ownership interest we received at fair value. We used an income approach to
determine the fair value of our ownership interest under a Monte Carlo simulation method. We estimated the
fair value of our ownership interest to be $350 million. This is a nonrecurring fair value measurement and is
categorized in Level 3 of the fair value hierarchy. The Monte Carlo simulation inputs include ranges of tariff
rates, operating volumes, operating cost and capital expenditure assumptions. The estimated cash flows were
discounted using a Monte Carlo market participant weighted average cost of capital estimate. None of the
inputs to the Monte Carlo simulation are individually significant. The excess of the estimated fair value of our
ownership interest over the carrying value of the derecognized net assets resulted in a $207 million non-cash
net gain recorded as a net gain on disposal of assets in the accompanying consolidated statements of income.
As the Capline system is currently idled, Capline LLC is unable to fund its operations without financial support
from its equity owners and is a VIE. MPC is not deemed to be the primary beneficiary, due to our inability to
unilaterally control significant decision-making rights. Our maximum exposure to loss as a result of our
119
involvement with Capline LLC includes our equity investment, any additional capital contribution
commitments and any operating expenses incurred by Capline LLC in excess of compensation received for
performance of the operating services.
Impairments
During the fourth quarter of 2019, two joint ventures in which MPLX has an interest recorded impairments,
which impacted the amount of income from equity method investments during the period by approximately
$28 million. For one of the joint ventures, MPLX also had a basis difference which was being amortized over
the life of the underlying assets. As a result of the impairment recorded by the joint venture, MPLX also
assessed this basis difference for impairment and recorded approximately $14 million of impairment expense
during the fourth quarter related to this investment.
Investments in Equity Method Affiliates
(Dollars in millions)
Refining & Marketing
The Andersons Marathon Holdings LLC
Watson Cogeneration Company
Other(a)
Refining & Marketing Total
Retail
PFJ Southeast LLC
Retail Total
Midstream
MPLX
Andeavor Logistics Rio Pipeline LLC
Centrahoma Processing LLC
Explorer Pipeline Company
Illinois Extension Pipeline Company, L.L.C
LOOP LLC
MarEn Bakken Company LLC
MarkWest EMG Jefferson Dry Gas Gathering Company, L.L.C.
MarkWest Utica EMG, L.L.C.
Minnesota Pipe Line Company, LLC
Rendezvous Gas Services, L.L.C.
Sherwood Midstream Holdings LLC
Sherwood Midstream LLC
Whistler Pipeline LLC
Wink to Webster Pipeline LLC
Other
MPLX Total
MPC-Retained
Capline Pipeline Company LLC
Crowley Coastal Partners, LLC
Gray Oak Pipeline, LLC
LOOP LLC
Other
MPC-Retained Total
Midstream Total
Total
Ownership as of
December 31,
2019
Carrying value at
December 31,
2019
2018
50%
51%
29%
67%
40%
25%
35%
41%
25%
67%
56%
17%
78%
53%
50%
38%
15%
33%
50%
25%
10%
$
$
$
$
$
$
$
$
$
$
177
26
—
203
330
330
202
153
83
265
238
481
302
1,984
190
170
157
537
134
126
253
5,275
374
188
298
59
171
1,090
6,365
6,898
$
$
$
$
$
$
$
$
$
$
—
84
121
205
341
341
181
160
90
275
226
498
236
2,039
197
248
157
366
—
—
228
4,901
—
190
73
56
132
451
5,352
5,898
(a)
2018 represents our investment in three ethanol entities jointly owned with The Andersons, Inc. In 2019, these entities were
contributed into a new legal entity, The Andersons Marathon Holdings, LLC.
120
Summarized financial information for all equity method investments in affiliated companies, combined, was
as follows:
(In millions)
Income statement data:
Revenues and other income
Income from operations
Net income
Balance sheet data – December 31:
Current assets
Noncurrent assets
Current liabilities
Noncurrent liabilities
2019
2018
2017
$
6,235
1,075
922
$
$
$
$
7,718
1,472
1,284
1,333
17,216
1,006
2,772
7,726
1,375
1,242
1,443
12,408
1,857
1,788
As of December 31, 2019, the carrying value of our equity method investments was $1.4 billion higher than
the underlying net assets of investees. This basis difference is being amortized into net income over the
remaining estimated useful lives of the underlying net assets, except for $700 million of excess related to
goodwill and other non-depreciable assets. The basis difference reflects the preliminary purchase price
allocation of Capline LLC, which will be completed in the one year measurement period as required by ASC
805, “Business Combinations”.
Dividends and partnership distributions received from equity method investees (excluding distributions that
represented a return of capital previously contributed) were $662 million, $519 million and $391 million in
2019, 2018 and 2017.
15. PROPERTY, PLANT AND EQUIPMENT
(In millions)
Refining & Marketing
Retail
Midstream
Corporate and Other
Total
Less accumulated depreciation
Property, plant and equipment, net
Estimated
Useful Lives
4 - 30 years
4 - 25 years
2 - 51 years
4 - 40 years
$
December 31,
2019
2018
29,037
7,104
27,193
1,289
64,623
19,008
$
27,590
6,637
25,692
1,294
61,213
16,155
$
45,615
$
45,058
Property, plant and equipment includes gross assets acquired under finance leases of $806 million and
$786 million at December 31, 2019 and 2018, respectively, with related amounts in accumulated depreciation
of $226 million and $202 million at December 31, 2019 and 2018. Property, plant and equipment includes
construction in progress of $3.48 billion and $3.49 billion at December 31, 2019 and 2018, respectively,
which primarily relates to capital projects at our refineries and midstream facilities.
16. GOODWILL AND INTANGIBLES
Goodwill
Goodwill is tested for impairment on an annual basis and when events or changes in circumstances indicate
the fair value of a reporting unit with goodwill has been reduced below the carrying value of the net assets of
the reporting unit. In 2019, we recorded an impairment of goodwill as outlined below based on MPLX’s
annual evaluation. There were no other impairments of goodwill required based on our annual test of goodwill
in 2019. In 2018, our annual testing did not indicate any impairment of goodwill.
121
MPLX annually evaluates goodwill for impairment as of November 30, as well as whenever events or changes
in circumstances indicate it is more likely than not that the fair value of a reporting unit with goodwill is less
than the carrying amount. As a result of the merger of MPLX and ANDX and subsequent changes to MPLX’s
internal organization structure, the number of reporting units within our Midstream segment was reduced from
16 to 7 in conjunction with the annual impairment test, however, this change in structure did not have any
impact on MPC’s operating segments. Reporting units are determined based on the way in which segment
management operates and reviews each operating segment. MPLX performed a goodwill
impairment
assessment prior to the change in reporting units in addition to performing an impairment assessment
immediately following the change in their reporting units. Significant assumptions used to estimate the
reporting units’ fair value include the discount rate as well as estimates of future cash flows, which are
impacted primarily by producer customers’ development plans, which impact future volumes and capital
requirements. After MPLX performed its evaluations related to the impairment of goodwill, we recorded an
impairment of $1,156 million prior to the change in reporting units and additional impairment of $41 million
subsequent to the change in reporting units. The remainder of the reporting units fair values were in excess of
their carrying values. The impairment was primarily driven by the updated guidance related to the slowing of
drilling activity which has reduced production growth forecasts from MPLX’s producer customers.
The fair value of the reporting units for the annual goodwill impairment analysis described above was
determined based on applying both a discounted cash flow or income approach as well as a market approach.
The discounted cash flow fair value estimate is based on known or knowable information at the measurement
date. The significant assumptions that were used to develop the estimates of the fair values under the
discounted cash flow method included management’s best estimates of the expected future results and
discount rates, which range from 9.0 percent to 10.0 percent. Fair value determinations require considerable
judgment and are sensitive to changes in underlying assumptions and factors. As a result, there can be no
assurance that the estimates and assumptions made for purposes of the annual goodwill impairment test will
prove to be an accurate prediction of the future. The fair value measurements for the individual reporting
units’ overall
represent Level 3
measurements.
fair values, and the fair values of the goodwill assigned thereto,
The changes in the carrying amount of goodwill for 2018 and 2019 were as follows:
(In millions)
Balance at January 1, 2018
Acquisitions
Dropdowns to MPLX
Balance at December 31, 2018
Acquisitions
Purchase price allocation adjustments
Impairments
Dispositions
Refining &
Marketing
Retail
Midstream
Total
$
$
519 $
4,717
(216)
5,020 $
38
514
—
—
791
4,050
—
4,841
56
54
—
—
$
$
$
$
2,276
7,831
216
10,323
—
408
(1,197)
(17)
3,586
16,598
—
20,184
94
976
(1,197)
(17)
Balance at December 31, 2019
$
5,572 $
4,951
$
9,517
$
20,040
Intangible Assets
Our definite lived intangible assets as of December 31, 2019 and 2018 are as shown below.
(In millions)
Gross
December 31, 2019
Accumulated
Amortization
Net
Gross
December 31, 2018
Accumulated
Amortization
Net
Customer contracts and
relationships
Brand rights and
tradenames
Royalty agreements
Other
Total
$
$
3,273 $
610 $
2,663 $
3,184 $
261 $
2,923
155
133
147
55
78
37
100
55
110
208
129
190
33
70
33
175
59
157
3,708 $
780 $
2,928 $
3,711 $
397 $
3,314
122
At December 31, 2019 and 2018, we had indefinite lived intangible assets of $94 million and $94 million,
respectively, which are primarily emission allowance credits and trademarks.
Amortization expense for 2019 and 2018 was $372 million and $134 million, respectively. Estimated future
amortization expense related to the intangible assets at December 31, 2019 is as follows:
(In millions)
2020
2021
2022
2023
2024
17. FAIR VALUE MEASUREMENTS
Fair Values – Recurring
$
387
380
379
363
305
The following tables present assets and liabilities accounted for at fair value on a recurring basis as of
December 31, 2019 and 2018 by fair value hierarchy level. We have elected to offset the fair value amounts
recognized for multiple derivative contracts executed with the same counterparty, including any related cash
collateral as shown below; however, fair value amounts by hierarchy level are presented on a gross basis in
the following tables.
(In millions)
Assets:
Commodity contracts
Liabilities:
Commodity contracts
Embedded derivatives in commodity
contracts
(In millions)
Assets:
Commodity contracts
Liabilities:
Commodity contracts
Embedded derivatives in commodity
contracts
Fair Value Hierarchy
December 31, 2019
Level 1
Level 2
Level 3
Netting and
Collateral(a)
Net Carrying
Value on
Balance Sheet(b)
Collateral
Pledged
Not Offset
$
$
$
$
57
95
—
6
$ — $
(55) $
11
—
$ — $
(106) $
60
—
December 31, 2018
Fair Value Hierarchy
8 $
— $
60
73
—
—
Level 1
Level 2
Level 3
Netting and
Collateral(a)
Net Carrying
Value on
Balance Sheet(b)
Collateral
Pledged
Not Offset
$
$
370
255
—
$
$
31
37
—
$ — $
(323) $
$ — $
(284) $
61
—
78 $
8 $
61
2
—
—
(a) Represents the impact of netting assets, liabilities and cash collateral when a legal right of offset exists. As of December 31, 2019,
$51 million was netted with mark-to-market liabilities. As of December 31, 2018, cash collateral of $52 million was netted with
mark-to-market derivative assets and $13 million was netted with mark-to-market derivative liabilities.
(b) We have no derivative contracts which are subject to master netting arrangements reflected gross on the balance sheet.
Commodity derivatives in Level 1 are exchange-traded contracts for crude oil and refined products measured
at fair value with a market approach using the close-of-day settlement prices for the market. Commodity
derivatives are covered under master netting agreements with an unconditional right to offset. Collateral
deposits in futures commission merchant accounts covered by master netting agreements related to Level 1
commodity derivatives are classified as Level 1 in the fair value hierarchy.
123
Level 2 instruments are valued based on quoted prices for similar assets and liabilities in active markets, and
inputs other than quoted prices, such as liquidity, that are observable for the asset or liability. Commodity
derivatives in Level 2 are OTC contracts, which are valued using market quotations from independent price
reporting agencies, third-party brokers and commodity exchange price curves that are corroborated with
market data.
Level 3 instruments are OTC NGL contracts and embedded derivatives in commodity contracts. The
embedded derivative liability relates to a natural gas purchase agreement embedded in a keep-whole
processing agreement. The fair value calculation for these Level 3 instruments at December 31, 2019 used
significant unobservable inputs including: (1) NGL prices interpolated and extrapolated due to inactive
markets ranging from $0.43 to $1.23 per gallon and (2) the probability of renewal of 94 percent for the first
five-year term and 83 percent for the second five-year term of the gas purchase agreement and the related
keep-whole processing agreement. For these contracts, increases in forward NGL prices result in a decrease in
the fair value of the derivative assets and an increase in the fair value of the derivative liabilities. Increases or
decreases in the fractionation spread result in an increase or decrease in the fair value of the embedded
derivative liability. An increase in the probability of renewal would result in an increase in the fair value of
the related embedded derivative liability.
The following is a reconciliation of the net beginning and ending balances recorded for net liabilities
classified as Level 3 in the fair value hierarchy.
(In millions)
Beginning balance
Unrealized and realized losses included in net income
Settlements of derivative instruments
Ending balance
The amount of total losses for the period included in earnings attributable to the
change in unrealized losses relating to assets still held at the end of period:
See Note 18 for the income statement impacts of our derivative instruments.
Fair Values – Reported
2019
2018
61
5
(6)
60
5
$
$
$
66
3
(8)
61
8
$
$
$
We believe the carrying value of our other financial instruments, including cash and cash equivalents,
receivables, accounts payable and certain accrued liabilities approximate fair value. Our fair value assessment
incorporates a variety of considerations, including the short-term duration of the instruments and the expected
insignificance of bad debt expense, which includes an evaluation of counterparty credit risk. The borrowings
under our revolving credit facilities, which include variable interest rates, approximate fair value. The fair
value of our fixed rate long-term debt is based on prices from recent trade activity and is categorized in
Level 3 of the fair value hierarchy. The carrying and fair values of our debt were approximately $28.3 billion
and $30.1 billion at December 31, 2019, respectively, and approximately $27.0 billion and $26.5 billion at
December 31, 2018, respectively. These carrying and fair values of our debt exclude the unamortized issuance
costs which are netted against our total debt.
18. DERIVATIVES
For further information regarding the fair value measurement of derivative instruments, including any effect
of master netting agreements or collateral, see Note 17. See Note 2 for a discussion of the types of derivatives
we use and the reasons for them. We do not designate any of our commodity derivative instruments as hedges
for accounting purposes.
The following table presents the fair value of derivative instruments as of December 31, 2019 and 2018 and
the line items in the balance sheets in which the fair values are reflected. The fair value amounts below are
presented on a gross basis and do not reflect the netting of asset and liability positions permitted under the
terms of our master netting arrangements including cash collateral on deposit with, or received from, brokers.
We offset the recognized fair value amounts for multiple derivative instruments executed with the same
counterparty in our financial statements when a legal right of offset exists. As a result, the asset and liability
amounts below will not agree with the amounts presented in our consolidated balance sheets.
124
(In millions)
Balance Sheet Location
Commodity derivatives
Other current assets
Other current liabilities(a)
Deferred credits and other liabilities(a)
(In millions)
Balance Sheet Location
Commodity derivatives
Other current assets
Other current liabilities(a)
Deferred credits and other liabilities(a)
(a)
Includes embedded derivatives.
December 31, 2019
Asset
Liability
$
63
—
—
106
5
55
December 31, 2018
Asset
Liability
$
400
1
—
283
16
54
$
$
The table below summarizes open commodity derivative contracts for crude oil, refined products and blending
products as of December 31, 2019.
(Units in thousands of barrels)
Exchange-traded(a)
Crude oil
Refined products
Blending products
Percentage of
contracts that expire
next quarter
Position
Long
Short
85.7%
94.7%
99.5%
26,287
15,298
1,976
27,237
12,519
3,770
(a)
Included in exchange-traded are spread contracts in thousands of barrels: Crude oil - 5,130 long and 330 short; Refined products -
950 long and 450 short
The following table summarizes the effect of all commodity derivative instruments in our consolidated
statements of income:
(In millions)
Income Statement Location
Sales and other operating revenues
Cost of revenues
Total
2019
Gain (Loss)
2018
2017
$
$
(19)
(77)
(96)
$
$
13
(59)
(46)
$
$
5
(26)
(21)
125
19. DEBT
Our outstanding borrowings at December 31, 2019 and 2018 consisted of the following:
(In millions)
Marathon Petroleum Corporation:
Senior notes
Notes payable
Finance lease obligations
MPLX LP:
Term loan facility
Senior notes
Finance lease obligations
ANDX LP:(a)
Revolving and dropdown credit facilities
Senior notes
Finance lease obligations
Total debt
Unamortized debt issuance costs
Unamortized discount
Amounts due within one year
Total long-term debt due after one year
December 31,
2019
December 31,
2018
$
$
$
$
$
8,474
10
679
1,000
19,100
19
—
—
—
29,282
(134)
(310)
(711)
28,127
$
8,474
11
629
—
13,850
6
1,245
3,750
15
27,980
(128)
(328)
(544)
26,980
(a) On July 30, 2019, MPLX acquired ANDX and assumed its debt obligations. See Note 4 and the discussion below for additional
information.
MPC Senior Notes
(In millions)
Marathon Petroleum Corporation:
Senior notes, 3.400% due December 2020
Senior notes, 5.125% due March 2021
Senior notes, 5.375% due October 2022
Senior notes, 4.750% due December 2023
Senior notes, 5.125% due April 2024
Senior notes, 3.625%, due September 2024
Senior notes, 5.125% due December 2026
Senior notes, 3.800% due April 2028
Senior notes, 6.500% due March 2041
Senior notes, 4.750% due September 2044
Senior notes, 5.850% due December 2045
Senior notes, 4.500% due April 2048
Andeavor senior notes, 3.800% - 5.375% due 2022 - 2048
Senior notes, 5.000%, due September 2054
Total
December 31,
2019
2018
$
$
650
1,000
337
614
241
750
719
496
1,250
800
250
498
469
400
8,474
$
$
650
1,000
337
614
241
750
719
496
1,250
800
250
498
469
400
8,474
In connection with the acquisition of Andeavor on October 1, 2018, we assumed an aggregate principal amount
of $3.374 billion senior notes issued by Andeavor, with interest rates ranging from 3.800 percent to 5.375
percent and maturity dates ranging from 2022 to 2048. In October 2018, approximately $2.905 billion aggregate
126
principal amount of Andeavor’s outstanding senior notes were exchanged for new unsecured senior notes
issued by MPC having the same maturity and interest rates as the Andeavor senior notes and cash in an
exchange offer and consent solicitation undertaken by MPC and Andeavor. After giving effect to the exchange
offer, approximately $469 million aggregate principal of outstanding senior notes issued by Andeavor remain
outstanding.
Interest on each series of senior notes is payable semi-annually in arrears. The MPC senior notes are
unsecured and unsubordinated obligations of MPC and rank equally with all of MPC’s other existing and
future unsecured and unsubordinated indebtedness. The MPC senior notes are non-recourse and structurally
subordinated to the indebtedness of our subsidiaries, including the outstanding indebtedness of Andeavor,
MPLX and ANDX. The Andeavor senior notes are unsecured, unsubordinated obligations of Andeavor and
are non-recourse to MPC and any of MPC’s subsidiaries other than Andeavor.
On March 15, 2018, we redeemed all of the $600 million outstanding aggregate principal amount of our
2.700 percent senior notes due on December 14, 2018. The 2018 senior notes were redeemed at a price equal
to par plus a make whole premium and accrued and unpaid interest. The make whole premium of $2.5 million
was calculated based on the market yield of the applicable treasury issue as of the redemption date as
determined in accordance with the indenture governing the 2018 senior notes.
MPLX Term Loan
On September 26, 2019, MPLX entered into a term loan agreement which provides for a committed term loan
facility for up to an aggregate of $1 billion available to be drawn in up to four separate borrowings, subject to
the satisfaction or waiver of certain customary conditions. Borrowings under the term loan agreement bear
interest, at MPLX’s election, at either the Adjusted LIBO Rate (as defined in the term loan agreement) plus a
margin or the Alternate Base Rate (as defined in the term loan agreement) plus a margin. The applicable
margins to the benchmark interest rates fluctuate from time-to-time based on our credit ratings. The proceeds
from borrowings under the term loan agreement were used to fund the repayment of MPLX’s existing
indebtedness and/or for general business purposes. Amounts borrowed under the term loan agreement will be
due and payable on September 26, 2021. As of December 31, 2019, MPLX had drawn $1 billion on the term
loan at an average interest rate of 2.561 percent.
The term loan agreement contains representations and warranties, affirmative and negative covenants and
events of default that we consider to be customary for an agreement of this type and are substantially similar
to MPLX’s existing revolving credit facility, including a covenant that requires MPLX’s ratio of Consolidated
Total Debt to Consolidated EBITDA (as both terms are defined in the term loan agreement) for the four prior
fiscal quarters not to exceed 5.0 to 1.0 as of the last day of each fiscal quarter (or during the six-month period
following certain acquisitions, 5.5 to 1.0). Consolidated EBITDA is subject to adjustments for certain
acquisitions completed and capital projects undertaken during the relevant period.
On January 2, 2018, MPLX entered into a term loan agreement with a syndicate of lenders providing for a
$4.1 billion, 364-day term loan facility. MPLX drew the entire amount of the term loan facility in a single
borrowing to fund the cash portion of the consideration for the February 1, 2018 dropdown. On February 8,
2018, MPLX used $4.1 billion of the net proceeds from the issuance of MPLX senior notes to repay the
364-day term-loan facility.
127
MPLX Senior Notes
(In millions)
MPLX LP:
Floating rate notes due September 2021
Floating rate notes due September 2022
Senior notes, 6.250% due October 2022
Senior notes, 3.500% due December 2022
Senior notes, 3.375% due March 2023
Senior notes, 4.500% due July 2023
Senior notes, 6.375% due May 2024
Senior notes, 4.875% due December 2024
Senior notes, 5.250% due January 2025
Senior notes, 4.000% due February 2025
Senior notes, 4.875% due June 2025
MarkWest senior notes, 4.500% - 5.500% due 2023 - 2025
Senior notes, 4.125% due March 2027
Senior notes, 4.250% due December 2027
Senior notes, 4.000% due March 2028
Senior notes, 4.800% due February 2029
Senior notes, 4.500% due April 2038
Senior notes, 5.200% due March 2047
Senior notes, 5.200% due December 2047
ANDX senior notes, 3.500% - 6.375% due 2019 - 2047
Senior notes, 4.700% due April 2048
Senior notes, 5.500% due February 2049
Senior notes, 4.900% due April 2058
Average
Rate
December 31,
2019
2018
2.948%
3.148%
$
$
1,000
1,000
266
486
500
989
381
1,149
708
500
1,189
23
1,250
732
1,250
750
1,750
1,000
487
190
1,500
1,500
500
—
—
—
—
500
989
—
1,149
—
500
1,189
23
1,250
—
1,250
750
1,750
1,000
—
—
1,500
1,500
500
Total
$
19,100
$
13,850
On September 9, 2019, MPLX issued $2 billion aggregate principal amount of floating rate senior notes in a
public offering, consisting of $1 billion aggregate principal amount of notes due September 2021 and
$1 billion aggregate principal amount of notes due September 2022. Net proceeds from the issuance of the
floating rate senior notes were used to repay MPLX’s existing indebtedness and/or for general business
purposes. The interest rate applicable to the floating rate senior notes due September 2021 is LIBOR plus
0.9 percent per annum while the interest rate applicable to the floating rate senior notes due September 2022 is
LIBOR plus 1.1 percent per annum. Interest
is payable in March, June, September and December,
commencing on December 9, 2019. Both series of floating rate notes are callable, in whole or in part, at par
plus accrued and unpaid interest at any time on or after September 10, 2020.
In connection with MPLX’s acquisition of ANDX on July 30, 2019, MPLX assumed ANDX’s outstanding
senior notes, which had an aggregate principal amount of $3.75 billion, with interest rates ranging from
3.500 percent to 6.375 percent and maturity dates ranging from 2019 to 2047. On September 23, 2019,
approximately $3.06 billion aggregate principal amount of ANDX’s outstanding senior notes were exchanged
for new unsecured senior notes issued by MPLX having the same maturity and interest rates as the ANDX
senior notes in an exchange offer and consent solicitation undertaken by MPLX, leaving approximately
$690 million aggregate principal of outstanding senior notes issued by ANDX. Of this, $500 million was
related to the 5.500 percent unsecured senior notes due 2019. The principal amount of $500 million and
accrued interest of $14 million was paid on October 15, 2019, which included interest through the payoff date.
128
On November 15, 2018, MPLX issued $2.25 billion in aggregate principal amount of senior notes in a public
offering. On December 10, 2018, a portion of the net proceeds from the offering was used to redeem the
$750 million in aggregate principal amount of 5.500 percent unsecured notes due February 2023 issued by
MPLX and MarkWest. These notes were redeemed at 101.833 percent of the principal amount. The make
whole premium plus the write off of unamortized deferred financing costs resulted in a loss on extinguishment
of debt of $60 million. The remaining net proceeds were used to repay borrowings under MPLX’s revolving
credit facility and intercompany loan agreement with MPC and for general partnership purposes.
On February 8, 2018, MPLX issued $5.5 billion in aggregate principal amount of senior notes in a public
offering. On February 8, 2018, $4.1 billion of the net proceeds were used to repay the 364-day term-loan
facility entered into on January 2, 2018. The remaining proceeds were used to repay outstanding borrowings
under MPLX’s revolving credit facility and intercompany loan agreement with MPC and for general
partnership purposes.
Interest on each series of MPLX fixed rate senior notes is payable semi-annually in arrears. The MPLX senior
notes are unsecured, unsubordinated obligations of MPLX and are non-recourse to MPC and its subsidiaries
other than MPLX and MPLX GP LLC, as the general partner of MPLX except as otherwise noted.
Schedule of Maturities
Principal maturities of long-term debt, excluding finance lease obligations, as of December 31, 2019 for the
next five years are as follows:
(In millions)
2020
2021
2022
2023
2024
Available Capacity under our Facilities
$
650
3,008
2,275
2,350
2,652
Total
Capacity
Outstanding
Borrowings
Outstanding
Letters
of Credit
Available
Capacity
Weighted
Average
Interest
Rate
Expiration
$
1,000
$
— $
— $
1,000 — September 2020
5,000
750
3,500
—
—
—
1
—
—
4,999 — October 2023
750 — July 2021
3,500 — July 2024
(Dollars in millions)
MPC 364-day bank
revolving credit facility
MPC bank revolving
credit facility
MPC trade receivables
securitization facility
MPLX bank revolving
credit facility
Commercial Paper
On February 26, 2016, we established a commercial paper program that allows us to have a maximum of
$2 billion in commercial paper outstanding, with maturities up to 397 days from the date of issuance. We do
not intend to have outstanding commercial paper borrowings in excess of available capacity under our bank
revolving credit facilities. During 2019, we had no borrowings or repayments under the commercial paper
program. At December 31, 2019, we had no amounts outstanding under the commercial paper program.
MPC Revolving Credit Agreements
On August 28, 2018, in connection with the Andeavor acquisition, MPC entered into a credit agreement with a
syndicate of lenders providing for a $5 billion five-year revolving credit facility that expires in 2023. The five-
year credit agreement became effective on October 1, 2018. On July 26, 2019, MPC entered into a credit
agreement with a syndicate of lenders providing for a new $1 billion 364-day revolving credit facility that
became effective upon the expiration of MPC’s previously existing $1 billion 364-day revolving credit facility
129
in September 2019. The new 364-day credit agreement contains substantially the same terms and conditions
as our previously existing 364-day revolving credit facility and will expire in September 2020.
to, among other conditions,
MPC has an option under its $5 billion five-year credit agreement to increase the aggregate commitments by
up to an additional $1 billion, subject
the consent of the lenders whose
commitments would be increased. In addition, MPC may request up to two one-year extensions of the
maturity date of the five-year credit agreement subject to, among other conditions, the consent of lenders
holding a majority of the commitments, provided that the commitments of any non-consenting lenders will
terminate on the then-effective maturity date. The five-year credit agreement includes sub-facilities for swing-
line loans of up to $250 million and letters of credit of up to $2.2 billion (which may be increased to up to
$3 billion upon receipt of additional letter of credit issuing commitments).
Borrowings under the MPC credit agreements bear interest, at our election, at either the Adjusted LIBO Rate
or the Alternate Base Rate (both as defined in the MPC credit agreements), plus an applicable margin. We are
charged various fees and expenses under the MPC credit agreements, including administrative agent fees,
commitment fees on the unused portion of the commitments and fees related to issued and outstanding letters
of credit. The applicable margins to the benchmark interest rates and the commitment fees payable under the
MPC credit agreements fluctuate based on changes, if any, to our credit ratings.
The MPC credit agreements contain certain representations and warranties, affirmative and restrictive
covenants and events of default that we consider to be usual and customary for arrangements of this type,
including a financial covenant that requires us to maintain a ratio of Consolidated Net Debt to Total
Capitalization (each as defined in the MPC credit agreements) of no greater than 0.65 to 1.00 as of the last day
of each fiscal quarter. The covenants also restrict, among other things, our ability and/or the ability of certain
of our subsidiaries to incur debt, create liens on assets or enter into transactions with affiliates. As of
December 31, 2019, we were in compliance with the covenants contained in the MPC credit agreements.
Trade Receivables Securitization Facility
The trade receivables facility consists of one of our wholly-owned subsidiaries, Marathon Petroleum
Company LP (“MPC LP”), selling or contributing on an on-going basis all of its trade receivables (including
trade receivables acquired from Marathon Petroleum Trading Canada LLC, a wholly-owned subsidiary of
MPC LP), together with all related security and interests in the proceeds thereof, without recourse, to another
wholly-owned, bankruptcy-remote special purpose subsidiary, MPC Trade Receivables Company LLC
(“TRC”), in exchange for a combination of cash, equity and/or borrowings under a subordinated note issued
by TRC to MPC LP. TRC, in turn, has the ability to sell undivided ownership interests in qualifying trade
receivables, together with all related security and interests in the proceeds thereof, without recourse, to the
purchasing group in exchange for cash proceeds. The trade receivables facility also provides for the issuance
of letters of credit up to $750 million, provided that the aggregate credit exposure of the purchasing group,
including outstanding letters of credit, may not exceed the lesser of $750 million or the balance of qualifying
trade receivables at any one time.
To the extent that TRC retains an ownership interest in the receivables it has purchased or received from MPC
LP, such interest will be included in our consolidated financial statements solely as a result of the
consolidation of the financial statements of TRC with those of MPC. The receivables sold or contributed to
TRC are available first and foremost to satisfy claims of the creditors of TRC and are not available to satisfy
the claims of creditors of MPC. TRC has granted a security interest in all of its assets to the purchasing group
to secure its obligations under the Receivables Purchase Agreement.
Proceeds from the sale of undivided percentage ownership interests in qualifying receivables under the trade
receivables facility are reflected as debt on our consolidated balance sheet. We remain responsible for
servicing the receivables sold to the purchasing group. TRC pays floating-rate interest charges and usage fees
on amounts outstanding under the trade receivables facility, if any, unused fees on the portion of unused
commitments and certain other fees related to the administration of the facility and letters of credit that are
issued and outstanding under the trade receivables facility.
The receivables purchase agreement and receivables sale agreement contain representations and covenants that
we consider usual and customary for arrangements of this type. Trade receivables are subject to customary
criteria, limits and reserves before being deemed to qualify for sale by TRC pursuant to the trade receivables
facility. In addition, further purchases of qualified trade receivables under the trade receivables facility are
subject to termination, and TRC may be subject to default fees, upon the occurrence of certain amortization
130
events that are included in the receivables purchase agreement, all of which we consider to be usual and
customary for arrangements of this type. As of December 31, 2019, we were in compliance with the covenants
contained in the receivables purchase agreement and receivables sale agreement.
MPLX Credit Agreement
Upon the completion of the merger of MPLX and ANDX on July 30, 2019, the MPLX bank revolving credit
facility was amended and restated to increase the borrowing capacity to $3.5 billion and to extend the maturity
date to July 30, 2024. The ANDX revolving and dropdown credit facilities were terminated and all
outstanding balances were repaid and funded with borrowings under the amended and restated MPLX
$3.5 billion bank revolving credit facility.
The MPLX credit agreement includes letter of credit issuing capacity of up to approximately $300 million and
swingline loan capacity of up to $150 million. The revolving borrowing capacity may be increased by up to an
additional $1 billion, subject to certain conditions, including the consent of the lenders whose commitments
would increase.
Borrowings under the MPLX credit agreement bear interest, at MPLX’s election, at the Adjusted LIBO Rate
or the Alternate Base Rate (both as defined in the MPLX credit agreement) plus an applicable margin. MPLX
is charged various fees and expenses in connection with the agreement, including administrative agent fees,
commitment fees on the unused portion of the commitments and fees with respect to issued and outstanding
letters of credit. The applicable margins to the benchmark interest rates and the commitment fees payable
under the MPLX credit agreement fluctuate based on changes, if any, to MPLX’s credit ratings.
The MPLX credit agreement contains certain representations and warranties, affirmative and restrictive
covenants and events of default that we consider to be usual and customary for an agreement of this type,
including a financial covenant that requires MPLX to maintain a ratio of Consolidated Total Debt as of the
end of each fiscal quarter to Consolidated EBITDA (both as defined in the MPLX credit agreement) for the
prior four fiscal quarters of no greater than 5.0 to 1.0 (or 5.5 to 1.0 for up to two fiscal quarters following
certain acquisitions). Consolidated EBITDA is subject to adjustments for certain acquisitions completed and
capital projects undertaken during the relevant period. The covenants also restrict, among other things,
MPLX’s ability and/or the ability of certain of its subsidiaries to incur debt, create liens on assets and enter
into transactions with affiliates. As of December 31, 2019, MPLX was in compliance with the covenants
contained in the MPLX credit agreement.
20. REVENUE
The following table presents our revenues disaggregated by segment and product line:
(In millions)
Year Ended December 31, 2019
Refined products
Merchandise
Crude oil
Midstream services and other
Refining &
Marketing
Retail
Midstream
Total
$
82,169
4
4,402
481
$
$
26,681
6,281
—
97
$
809
—
—
3,025
109,659
6,285
4,402
3,603
Sales and other operating revenues
$
87,056
$
33,059
$
3,834
$
123,949
(In millions)
Year Ended December 31, 2018
Refined products
Merchandise
Crude oil
Midstream services and other
Refining &
Marketing
Retail
Midstream
Total
$
65,916
11
3,345
413
$
$
18,279
5,227
—
40
$
887
—
—
2,386
85,082
5,238
3,345
2,839
Sales and other operating revenues
$
69,685
$
23,546
$
3,273
$
96,504
131
(In millions)
Year Ended December 31, 2017
Refined products
Merchandise
Crude oil
Midstream services and other
Refining &
Marketing
Retail
Midstream
Total
$
$
50,193
4
2,862
323
$
14,113
4,893
—
23
$
889
—
—
1,433
65,195
4,897
2,862
1,779
Sales and other operating revenues
$
53,382 $
19,029
$
2,322
$
74,733
We do not disclose information on the future performance obligations for any contract with expected duration
of one year or less at inception. As of December 31, 2019, we do not have future performance obligations that
are material to future periods.
Receivables
On the accompanying consolidated balance sheets, receivables, less allowance for doubtful accounts primarily
consists of customer
receivables at
December 31, 2019 include matching buy/sell receivables of $2.24 billion.
receivables. Significant, non-customer balances included in our
21. SUPPLEMENTAL CASH FLOW INFORMATION
(In millions)
2019
2018
2017
Net cash provided by operating activities included:
Interest paid (net of amounts capitalized)
Net income taxes paid to taxing authorities
Cash paid for amounts included in the measurement of lease
liabilities
Payments on operating leases(a)
Interest payments under finance lease obligations(a)
Net cash provided by financing activities included:
Principal payments under finance lease obligations(a)
Non-cash investing and financing activities:
Capital leases
Right of use assets obtained in exchange for new operating lease
obligations(a)
Right of use assets obtained in exchange for new finance lease
obligations(a)
Contribution of assets(b)
Fair value of assets acquired(c)
Acquisition:
Fair value of MPC shares issued
Fair value of converted equity awards
(a) Disclosure added in 2019 following the adoption of ASC 842.
$
$
1,174
491
$
887
424
525
904
764
34
55
—
352
96
266
525
—
—
—
—
—
172
—
—
—
—
19,766
203
—
—
—
71
—
—
337
45
—
—
(b)
(c)
2019 includes the contribution of net assets to The Andersons Marathon Holdings LLC and Capline LLC. See Note 14. 2017 includes
MPLX’s contribution of assets to Sherwood Midstream and Sherwood Midstream Holdings. See Note 5.
2019 includes the recognition of The Andersons Marathon Holdings LLC and Capline LLC equity method investments. See Note 14.
2017 represents emission allowance credits received as part of a litigation settlement agreement.
132
(In millions)
Cash and cash equivalents
Restricted cash(a)
Cash, cash equivalents and restricted cash
December 31,
2019
December 31,
2018
$
$
1,527
2
1,529
$
$
1,687
38
1,725
(a)
The restricted cash balance is included within other current assets on the consolidated balance sheets.
The consolidated statements of cash flows exclude changes to the consolidated balance sheets that did not
affect cash. The following is a reconciliation of additions to property, plant and equipment to total capital
expenditures:
(In millions)
2019
2018
2017
Additions to property, plant and equipment per the
consolidated statements of cash flows
Asset retirement expenditures
Increase (decrease) in capital accruals
Total capital expenditures
$
$
$
5,374
1
(306)
$
3,578
8
309
5,069
$
3,895
$
2,732
2
67
2,801
22. ACCUMULATED OTHER COMPREHENSIVE LOSS
The following table shows the changes in accumulated other comprehensive loss by component.
(In millions)
Balance as of December 31, 2017
Other comprehensive income (loss)
before reclassifications, net of tax of $23
Amounts reclassified from
accumulated other comprehensive loss:
Amortization – prior service credit(a)
– actuarial loss(a)
– settlement loss(a)
Other
Tax effect
Other comprehensive income (loss)
Pension
Benefits
Other
Benefits
Gain on
Cash Flow
Hedge
Workers
Compensation
Total
$
(190) $
(48) $
4 $
3 $
(231)
14
(33)
31
53
—
(7)
58
27
(3)
(1)
—
—
2
25
(1)
—
—
—
—
(1)
(2)
9
—
—
—
(5)
2
6
49
(36)
30
53
(5)
(4)
87
Balance as of December 31, 2018
$
(132) $
(23) $
2 $
9 $
(144)
133
(In millions)
Balance as of December 31, 2018
Other comprehensive income (loss)
before reclassifications, net of tax of ($52)
Amounts reclassified from
accumulated other comprehensive loss:
Amortization – prior service credit(a)
– actuarial loss(a)
– settlement loss(a)
Other
Tax effect
Other comprehensive loss
Pension
Benefits
Other
Benefits
Gain on
Cash Flow
Hedge
Workers
Compensation
Total
$
(132) $
(23) $
2
$
9 $
(144)
(71)
(92)
—
1
(162)
(45)
22
9
—
5
(80)
—
(1)
—
—
—
(93)
—
—
—
(1)
—
(1)
—
—
—
(4)
1
(2)
(45)
21
9
(5)
6
(176)
(320)
Balance as of December 31, 2019
$
(212) $
(116) $
1
$
7 $
(a)
These accumulated other comprehensive loss components are included in the computation of net periodic benefit cost. See Note 23.
23. PENSION AND OTHER POSTRETIREMENT BENEFITS
We have noncontributory defined benefit pension plans covering substantially all employees. Benefits under
these plans have been based primarily on age, years of service and final average pensionable earnings. The
years of service component of this formula was frozen as of December 31, 2009. Benefits for service
beginning January 1, 2010 are based on a cash balance formula with an annual percentage of eligible pay
credited based upon age and years of service. Eligible employees in our Retail segment accrue benefits under
a defined contribution plan for service years beginning January 1, 2010.
We also have other postretirement benefits covering most employees. Health care benefits are provided
through comprehensive hospital, surgical and major medical benefit provisions subject to various cost-sharing
features. Retiree life insurance benefits are provided to a closed group of retirees. Other postretirement
benefits are not funded in advance.
In connection with the Andeavor acquisition, we assumed a number of additional qualified and nonqualified
noncontributory benefit pension plans, covering substantially all former Andeavor employees. Benefits under
these plans are determined based on final average compensation and years of service through December 31,
2010 and a cash balance formula for service beginning January 1, 2011. These plans were frozen as of
December 31, 2018. Further, as of December 31, 2019, the qualified plans were merged with our existing
qualified plans in which the actuarial assumptions were materially the same between the plans. We also
assumed a number of additional postretirement benefits covering eligible employees. These benefits were
merged with our existing benefits beginning January 1, 2019.
Obligations and Funded Status
The accumulated benefit obligation for all defined benefit pension plans was $3,031 million and
$2,632 million as of December 31, 2019 and 2018.
The following summarizes our defined benefit pension plans that have accumulated benefit obligations in
excess of plan assets.
(In millions)
Projected benefit obligations
Accumulated benefit obligations
Fair value of plan assets
December 31,
2019
2018
$
$
3,239
3,031
2,531
2,779
2,632
2,089
134
The following summarizes the projected benefit obligations and funded status for our defined benefit pension
and other postretirement plans:
(In millions)
Change in benefit obligations:
Benefit obligations at January 1
Service cost
Interest cost
Actuarial (gain) loss
Benefits paid
Plan amendments
Acquisitions
Benefit obligations at December 31
Change in plan assets:
Fair value of plan assets at January 1
Actual return on plan assets
Employer contributions
Benefits paid from plan assets
Acquisitions
Fair value of plan assets at December 31
Funded status of plans at December 31
Amounts recognized in the consolidated
balance sheets:
Current liabilities
Noncurrent liabilities
Accrued benefit cost
Pretax amounts recognized in
accumulated other comprehensive loss:(a)
Net actuarial loss
Prior service cost (credit)
Pension Benefits
Other Benefits
2019
2018
2019
2018
$
$
$
$
$
$
2,779
234
108
401
(283)
—
—
3,239
2,089
436
289
(283)
—
2,531
2,164
159
83
(159)
(273)
(90)
895
2,779
1,840
(115)
115
(273)
522
2,089
$
884
31
37
125
(45)
(1)
—
1,031
—
—
45
(45)
—
—
(708)
$
(690)
$ (1,031)
$
$
$
(49)
(659)
(708)
579
(250)
(21)
(669)
(690)
$
(47)
(984)
$ (1,031)
517
(295)
$
135
33
$
$
$
$
$
826
30
30
(71)
(36)
34
71
884
—
—
36
(36)
—
—
(884)
(44)
(840)
(884)
9
35
(a) Amounts exclude those related to LOOP and Explorer, equity method investees with defined benefit pension and postretirement
plans for which net losses of $17 million and less than $1 million were recorded in accumulated other comprehensive loss in 2019,
reflecting our ownership share.
135
Components of Net Periodic Benefit Cost and Other Comprehensive Loss
The following summarizes the net periodic benefit costs and the amounts recognized as other comprehensive
loss for our defined benefit pension and other postretirement plans.
(In millions)
Components of net periodic benefit
cost:
Pension Benefits
2018
2019
2017
2019
Other Benefits
2018
2017
Service cost
Interest cost
Expected return on plan assets
Amortization – prior service credit
– actuarial (gain) loss
– settlement loss
$
$
$
234
108
(127)
(45)
22
9
159
83
(109)
(33)
31
53
$
132
75
(100)
(39)
36
52
Net periodic benefit cost(a)
$
201
$
184
$
156
$
31
37
—
—
(1)
—
67
Other changes in plan assets and
benefit obligations recognized in other
comprehensive loss (pretax):
Actuarial (gain) loss
Prior service cost (credit)
Amortization of actuarial gain (loss)
Amortization of prior service credit
$
$
93
—
(31)
45
$
64
(90)
(84)
33
$
(20)
—
(88)
39
125
(1)
1
—
$
$
$
$
$
$
30
30
—
(3)
(1)
—
56
(71)
34
1
3
25
30
—
(3)
(2)
—
50
61
—
2
3
66
$
107
$
(77)
$
(69)
$
125
$
(33)
$
Total recognized in other
comprehensive loss
Total recognized in net periodic
benefit cost and other
comprehensive loss
$
308
$
107
$
87
$
192
$
23
$
116
(a) Net periodic benefit cost reflects a calculated market-related value of plan assets which recognizes changes in fair value over three
years.
For certain of our pension plans, lump sum payments to employees retiring in 2019, 2018 and 2017 exceeded
the plan’s total service and interest costs expected for those years. Settlement losses are required to be
recorded when lump sum payments exceed total service and interest costs. As a result, pension settlement
expenses were recorded in 2019, 2018 and 2017.
The estimated net actuarial loss and prior service credit for our defined benefit pension plans that will be
amortized from accumulated other comprehensive loss into net periodic benefit cost in 2020 are $33 million
that will be amortized from accumulated other
and $45 million, respectively. The estimated amount
comprehensive loss into net periodic benefit cost in 2020 is $3 million for net actuarial loss and less than
$1 million for prior service cost for our other defined benefit postretirement plans.
136
Plan Assumptions
The following summarizes the assumptions used to determine the benefit obligations at December 31, and net
periodic benefit cost for the defined benefit pension and other postretirement plans for 2019, 2018 and 2017.
Pension Benefits
2018
2019
2017
Other Benefits
2018
2019
2017
Weighted-average assumptions used to determine
benefit obligation:
Discount rate
Rate of compensation increase
Weighted-average assumptions used to determine
net periodic benefit cost:
Discount rate
Expected long-term return on plan assets
Rate of compensation increase
Expected Long-term Return on Plan Assets
3.03% 4.21% 3.55% 3.00% 4.26% 3.70%
4.90% 5.00% 5.00% 4.90% 5.00% 5.00%
4.05% 3.88% 3.85% 4.30% 3.72% 4.25%
6.00% 6.15% 6.50%
—%
4.90% 4.80% 5.00% 4.90% 5.00% 5.00%
—%
—%
The overall expected long-term return on plan assets assumption is determined based on an asset rate-of-return
modeling tool developed by a third-party investment group. The tool utilizes underlying assumptions based on
actual returns by asset category and inflation and takes into account our asset allocation to derive an expected
long-term rate of return on those assets. Capital market assumptions reflect the long-term capital market
outlook. The assumptions for equity and fixed income investments are developed using a building-block
approach, reflecting observable inflation information and interest rate information available in the fixed
income markets. Long-term assumptions for other asset categories are based on historical results, current
market characteristics and the professional judgment of our internal and external investment teams.
Assumed Health Care Cost Trend
The following summarizes the assumed health care cost trend rates.
Health care cost trend rate assumed for the following year:
Medical: Pre-65
Prescription drugs
Rate to which the cost trend rate is assumed to decline (the ultimate
trend rate):
Medical: Pre-65
Prescription drugs
Year that the rate reaches the ultimate trend rate:
Medical: Pre-65
Prescription drugs
December 31,
2018
6.80%
9.50%
4.50%
4.50%
2027
2027
2019
6.20%
8.10%
4.50%
4.50%
2027
2027
2017
6.75%
8.75%
4.50%
4.50%
2026
2026
Increases in the post-65 medical plan premium for the Marathon Petroleum Health Plan and the Marathon
Petroleum Retiree Health Plan are the lower of the trend rate or four percent.
Assumed health care cost trend rates effect the amounts reported for defined benefit retiree health care plans.
A one percentage point change in assumed health care cost trend rates would have the following effects:
(In millions)
Effect on total of service and interest cost components
Effect on other postretirement benefit obligations
1-Percentage-
Point Increase
1-Percentage-
Point Decrease
$
$
6
52
(5)
(45)
137
Plan Investment Policies and Strategies
The investment policies for our pension plan assets reflect the funded status of the plans and expectations
regarding our future ability to make further contributions. Long-term investment goals are to: (1) manage the
assets in accordance with the legal requirements of all applicable laws; (2) diversify plan investments across
asset classes to achieve an optimal balance between risk and return and between income and growth of assets
through capital appreciation; and (3) source benefit payments primarily through existing plan assets and
anticipated future returns.
The investment goals are implemented to manage the plans’ funded status volatility and minimize future cash
contributions. The asset allocation strategy will change over time in response to changes primarily in funded
status, which is dictated by current and anticipated market conditions, the independent actions of our
investment committee, required cash flows to and from the plans and other factors deemed appropriate. Such
changes in asset allocation are intended to allocate additional assets to the fixed income asset class should the
funded status improve. The fixed income asset class shall be invested in such a manner that its interest rate
sensitivity correlates highly with that of the plans’ liabilities. Other asset classes are intended to provide
additional return with associated higher levels of risk. Investment performance and risk is measured and
monitored on an ongoing basis through quarterly investment meetings and periodic asset and liability studies.
At December 31, 2019, the primary plan’s targeted asset allocation was 42 percent equity, private equity, real
estate, and timber securities and 58 percent fixed income securities.
Fair Value Measurements
Plan assets are measured at fair value. The following provides a description of the valuation techniques
employed for each major plan asset category at December 31, 2019 and 2018.
Cash and cash equivalents – Cash and cash equivalents include a collective fund serving as the investment
vehicle for the cash reserves and cash held by third-party investment managers. The collective fund is valued
at net asset value (“NAV”) on a scheduled basis using a cost approach, and is considered a Level 2 asset. Cash
and cash equivalents held by third-party investment managers are valued using a cost approach and are
considered Level 2.
Equity – Equity investments includes common stock, mutual and pooled funds. Common stock investments
are valued using a market approach, which are priced daily in active markets and are considered Level 1.
Mutual and pooled equity funds are well diversified portfolios, representing a mix of strategies in domestic,
international and emerging market strategies. Mutual funds are publicly registered, valued at NAV on a daily
basis using a market approach and are considered Level 1 assets. Pooled funds are valued at NAV using a
market approach and are considered Level 2.
Fixed Income – Fixed income investments include corporate bonds, U.S. dollar treasury bonds and municipal
bonds. These securities are priced on observable inputs using a combination of market, income and cost
approaches. These securities are considered Level 2 assets. Fixed income also includes a well diversified bond
portfolio structured as a pooled fund. This fund is valued at NAV on a daily basis using a market approach
and is considered Level 2. Other investments classified as Level 1 include mutual funds that are publicly
registered, valued at NAV on a daily basis using a market approach.
Private Equity – Private equity investments include interests in limited partnerships which are valued using
information provided by external managers for each individual investment held in the fund. These holdings
are considered Level 3.
Real Estate – Real estate investments consist of interests in limited partnerships. These holdings are either
appraised or valued using the investment manager’s assessment of assets held. These holdings are considered
Level 3.
Other – Other investments include two limited liability companies (“LLCs”) with no public market. The LLCs
were formed to acquire timberland in the northwest U.S. These holdings are either appraised or valued using
the investment manager’s assessment of assets held. These holdings are considered Level 3. Other
investments classified as Level 1 include publicly traded depository receipts.
138
The following tables present the fair values of our defined benefit pension plans’ assets, by level within the
fair value hierarchy, as of December 31, 2019 and 2018.
(In millions)
Cash and cash equivalents
Equity:
Common stocks
Mutual funds
Pooled funds
Fixed income:
Corporate
Government
Pooled funds
Private equity
Real estate
Other
Total investments, at fair value
(In millions)
Cash and cash equivalents
Equity:
Common stocks
Mutual funds
Pooled funds
Fixed income:
Corporate
Government
Pooled funds
Private equity
Real estate
Other
Total investments, at fair value
December 31, 2019
Level 1
Level 2
Level 3
Total
$
— $
22
$
— $
125
188
—
160
113
—
—
—
58
644
135
—
442
815
217
229
—
—
(46)
$
1,814
$
December 31, 2018
—
—
—
—
—
—
30
24
19
73
89
159
—
176
98
—
—
—
45
567
86
—
297
684
141
201
—
—
—
$
1,434
$
—
—
—
—
—
—
41
29
18
88
22
260
188
442
975
330
229
30
24
31
25
175
159
297
860
239
201
41
29
63
$
2,531
$
2,089
Level 1
Level 2
Level 3
Total
— $
25
$
— $
$
$
$
139
The following is a reconciliation of the beginning and ending balances recorded for plan assets classified as
Level 3 in the fair value hierarchy:
(In millions)
Beginning balance
Actual return on plan assets:
Realized
Unrealized
Purchases
Sales
Ending balance
(In millions)
Beginning balance
Actual return on plan assets:
Realized
Unrealized
Purchases
Sales
Ending balance
Cash Flows
2019
Private
Equity
Real Estate
Other
Total
$
41
$
29
$
18
—
1
—
—
19
$
$
88
7
(4)
2
(20)
73
2
(2)
1
(6)
$
24
$
2018
5
(3)
1
(14)
30
$
Private
Equity
Real Estate
Other
Total
$
51
$
34
$
20
$
105
9
2
1
(22)
41
$
2
(1)
1
(7)
$
29
$
—
—
—
(2)
18
$
11
1
2
(31)
88
Contributions to defined benefit plans – Our funding policy with respect to the funded pension plans is to
contribute amounts necessary to satisfy minimum pension funding requirements, including requirements of
the Pension Protection Act of 2006, plus such additional, discretionary, amounts from time to time as
determined appropriate by management. In 2019, we made contributions totaling $270 million to our funded
pension plans. For 2020, we have an immaterial amount of required funding, but we may also make voluntary
contributions to our funded pension plans at our discretion. Cash contributions to be paid from our general
assets for the unfunded pension and postretirement plans are estimated to be approximately $49 million and
$47 million, respectively, in 2020.
Estimated future benefit payments – The following gross benefit payments, which reflect expected future
service, as appropriate, are expected to be paid in the years indicated.
(In millions)
2020
2021
2022
2023
2024
2025 through 2029
Pension Benefits
Other Benefits
$
$
248
216
218
220
233
1,187
47
49
50
51
52
283
Contributions to defined contribution plans – We also contribute to several defined contribution plans for
eligible employees. Contributions to these plans totaled $217 million, $144 million and $116 million in 2019,
2018 and 2017, respectively.
140
Multiemployer Pension Plan
We contribute to one multiemployer defined benefit pension plan under the terms of a collective-bargaining
that covers some of our union-represented employees. The risks of participating in this
agreement
multiemployer plan are different from single-employer plans in the following aspects:
•
•
•
Assets contributed to the multiemployer plan by one employer may be used to provide benefits to
employees of other participating employers.
If a participating employer stops contributing to the plan, the unfunded obligations of the plan may
be borne by the remaining participating employers.
If we choose to stop participating in the multiemployer plan, we may be required to pay that plan an
amount based on the underfunded status of the plan, referred to as a withdrawal liability.
Our participation in this plan for 2019, 2018 and 2017 is outlined in the table below. The “EIN” column provides
the Employee Identification Number for the plan. The most recent Pension Protection Act zone status available
in 2019 and 2018 is for the plan’s year ended December 31, 2018 and December 31, 2017, respectively. The
zone status is based on information that we received from the plan and is certified by the plan’s actuary. Among
other factors, plans in the red zone are generally less than 65 percent funded. The “FIP/RP Status Pending/
Implemented” column indicates a financial improvement plan or a rehabilitation plan has been implemented. The
last column lists the expiration date of the collective-bargaining agreement to which the plan is subject. There
have been no significant changes that affect the comparability of 2019, 2018 and 2017 contributions. Our portion
of the contributions does not make up more than five percent of total contributions to the plan.
Pension
Protection
Act Zone
Status
Pension Fund
EIN
2019
2018
FIP/
RP Status
Pending/
Implemented
MPC Contributions
(In millions)
2018
2017
2019
Expiration Date of
Collective –
Bargaining
Agreement
Surcharge
Imposed
Central States,
Southeast and
Southwest Areas
Pension Plan(a)
366044243
Red
Red
Implemented
$
4
$
4
$
4
No
January 31, 2024
(a)
This agreement has a minimum contribution requirement of $328 per week per employee for 2020. A total of 263 employees
participated in the plan as of December 31, 2019.
Multiemployer Health and Welfare Plan
We contribute to one multiemployer health and welfare plan that covers both active employees and retirees.
Through the health and welfare plan employees receive medical, dental, vision, prescription and disability
coverage. Our contributions to this plan totaled $6 million, $6 million and $7 million for 2019, 2018 and
2017, respectively.
24. STOCK-BASED COMPENSATION
Description of the Plans
Effective April 26, 2012, our employees and non-employee directors became eligible to receive equity awards
under the Amended and Restated Marathon Petroleum Corporation 2012 Incentive Compensation Plan (“MPC
2012 Plan”). The MPC 2012 Plan authorizes the Compensation Committee of our board of directors
(“Committee”) to grant non-qualified or incentive stock options, stock appreciation rights, stock awards
(including restricted stock and restricted stock unit awards), cash awards and performance awards to our
employees and non-employee directors. Under the MPC 2012 Plan, no more than 50 million shares of our
common stock may be delivered and no more than 20 million shares of our common stock may be the subject
of awards that are not stock options or stock appreciation rights. In the sole discretion of the Committee,
20 million shares of our common stock may be granted as incentive stock options. Shares issued as a result of
awards granted under these plans are funded through the issuance of new MPC common shares.
Prior to April 26, 2012, our employees and non-employee directors were eligible to receive equity awards
under the Marathon Petroleum Corporation 2011 Second Amended and Restated Incentive Compensation Plan
(“MPC 2011 Plan”).
In connection with the Andeavor acquisition in October of 2018, we converted the outstanding option and
equity incentive awards (other than awards held by non-employee directors of Andeavor, which awards were
paid out in connection with the acquisition) under the Andeavor plans to awards that provide for rights to
141
acquire (in the case of options) or be settled in or otherwise determined in reference to shares of MPC
common stock in place of shares of Andeavor common stock (in the case of equity incentive awards). As part
of that conversion, we used an exchange ratio for the respective share prices of Andeavor common stock and
MPC common stock to ensure that the award holders’ economic opportunity remained constant, and for
converted awards, which included a performance component, performance was determined at the time of the
conversion and the awards became subject to a time-based vesting only design. The converted awards
otherwise continue to be subject to the terms and conditions of their award agreements and the applicable
Andeavor plan under which such awards were granted.
Stock-Based Awards under the Plans
We expense all share-based payments to employees and non-employee directors based on the grant date fair
value of the awards over the requisite service period, adjusted for estimated forfeitures.
Stock Options – We grant stock options to certain officer and non-officer employees. All of the stock options
granted in 2019 were granted under the MPC 2012 Plan. Stock options awarded under the MPC 2011 Plan and
the MPC 2012 Plan represent the right to purchase shares of our common stock at its fair market value, which
is the closing price of MPC’s common stock on the date of grant. Stock options have a maximum term of ten
years from the date they are granted, and vest over a requisite service period of three years. We use the Black
Scholes option-pricing model to estimate the fair value of stock options granted, which requires the input of
subjective assumptions.
Restricted Stock and Restricted Stock Units – We grant restricted stock and restricted stock units to
employees and non-employee directors. In general, restricted stock and restricted stock units granted to
employees vest over a requisite service period of three years. Restricted stock and restricted stock unit awards
granted after 2011 to officers are subject to an additional one year holding period after the three-year vesting
period. Restricted stock recipients who received grants in 2012 and after have the right to vote such stock;
however, dividends are accrued and will be paid upon vesting. Restricted stock units granted to non-employee
directors are considered to vest immediately at the time of the grant for accounting purposes, as they are
non-forfeitable, but are not issued until the director’s departure from the board of directors. Restricted stock
unit recipients do not have the right to vote such shares and receive dividend equivalents payable upon
vesting. The non-vested shares are not transferable and are held by our transfer agent. The fair values of
restricted stock are equal to the market price of our common stock on the grant date.
Performance Units – We grant performance unit awards to certain officer employees. Performance units are
dollar denominated. The target value of all performance units is $1.00, with actual payout up to $2.00 per unit
(up to 200 percent of target). Performance units issued under the MPC 2012 Plan have a 36-month requisite
service period. The payout value of these awards will be determined by the relative ranking of the total
shareholder return (“TSR”) of MPC common stock compared to the TSR of a select group of peer companies,
as well as the Standard & Poor’s 500 Energy Index fund over an average of four measurement periods. These
awards will be settled 25 percent in MPC common stock and 75 percent in cash. The number of shares actually
distributed will be determined by dividing 25 percent of the final payout by the closing price of MPC common
stock on the day the Committee certifies the final TSR rankings, or the next trading day if the certification is
made outside of normal trading hours. The performance units paying out in cash are accounted for as liability
awards and recorded at fair value with a mark-to-market adjustment made each quarter. The performance units
that settle in shares are accounted for as equity awards and do not receive dividend equivalents.
Total Stock-Based Compensation Expense
The following table reflects activity related to our stock-based compensation arrangements, including the
converted awards related to the acquisition of Andeavor:
(In millions)
Stock-based compensation expense
Tax benefit recognized on stock-based compensation expense
Cash received by MPC upon exercise of stock option awards
Tax (expense)/benefit received for tax deductions for stock
awards exercised
2019
2018
2017
$
$
$
161
37
10
(3)
133
32
24
14
51
19
46
25
142
Stock Option Awards
The Black Scholes option-pricing model values used to value stock option awards granted were determined
based on the following weighted average assumptions:
Weighted average exercise price per share
Expected life in years
Expected volatility
Expected dividend yield
Risk-free interest rate
Weighted average grant date fair value of stock option
awards granted
2019
2018
2017
$
$
61.92
6.0
32%
3.4%
2.4%
$
67.71
6.2
34%
3.0%
2.7%
50.57
6.3
35%
3.0%
2.1%
$
13.65
$
17.21
$
13.42
The expected life of stock options granted is based on historical data and represents the period of time that
options granted are expected to be held prior to exercise. The 2019 assumption for expected volatility of our
stock price reflects a weighting of 50 percent of our common stock implied volatility and 50 percent of our
common stock historical volatility. The risk-free interest rate for periods within the expected life of the option
is based on the U.S. Treasury yield curve in effect at the time of the grant.
The following is a summary of our common stock option activity in 2019:
Outstanding at December 31, 2018
Granted
Exercised
Forfeited or expired
Outstanding at December 31, 2019
Vested and expected to vest at December 31,
2019
Exercisable at December 31, 2019
Number of
Shares
8,724,595
1,952,324
(529,706)
(128,846)
10,018,367
9,987,326
7,404,952
Weighted
Average
Remaining
Contractual
Terms
(in years)
Aggregate
Intrinsic
Value
(in millions)
Weighted
Average
Exercise
Price
$
37.07
61.92
19.12
61.29
42.55
26.84
35.85
5.2
4.0
$
187
183
The intrinsic value of options exercised by MPC employees during 2019, 2018 and 2017 was $23 million,
$44 million and $75 million, respectively.
As of December 31, 2019, unrecognized compensation cost related to stock option awards was $14 million,
which is expected to be recognized over a weighted average period of 1.4 years.
Restricted Stock and Restricted Stock Unit Awards
The following is a summary of restricted stock award activity of our common stock in 2019:
Unvested at December 31, 2018
Granted
Vested
Forfeited
Unvested at December 31, 2019
Restricted Stock
Restricted Stock Units
Weighted
Average
Grant Date
Fair Value
Number of
Shares
$
989,019
1,059,837
(595,440)
(103,618)
1,349,798
57.19
61.14
52.16
61.20
62.20
Weighted
Average
Grant Date
Fair Value
$
82.40
58.30
81.84
82.37
82.39
Number of
Units
3,120,116
36,391
(1,527,145)
(147,616)
1,481,746
143
The following is a summary of the values related to restricted stock and restricted stock unit awards held by
MPC employees and non-employee directors:
Restricted Stock
Restricted Stock Units
Intrinsic Value of
Awards Vested
During the Period
(in millions)
Weighted Average
Grant Date Fair
Value of Awards
Granted During
the Period
Intrinsic Value of
Awards Vested
During the Period
(in millions)
Weighted Average
Grant Date Fair
Value of Awards
Granted During
the Period
2019
2018
2017
$
$
32
49
28
$
61.14
71.19
50.25
$
120
39
5
58.30
72.43
53.19
As of December 31, 2019, unrecognized compensation cost related to restricted stock awards was $56 million,
which is expected to be recognized over a weighted average period of 1.46 years. Unrecognized compensation
cost related to restricted stock unit awards was $28 million, which is expected to be recognized over a
weighted average period of 0.66 years.
Performance Unit Awards
The following table presents a summary of the 2019 activity for performance unit awards to be settled in
shares:
Unvested at December 31, 2018
Granted
Vested
Forfeited
Unvested at December 31, 2019
Number of
Units
8,607,250
6,256,250
(3,494,000)
(170,000)
11,199,500
Weighted
Average Grant
Date Fair Value
$
0.79
0.72
0.62
0.81
0.80
The number of shares that would be issued upon target vesting, using the closing price of our common stock
on December 31, 2019 would be 206,216 shares.
As of December 31, 2019, unrecognized compensation cost related to equity-classified performance unit
awards was $2 million, which is expected to be recognized over a weighted average period of 0.82 years.
Performance units to be settled in MPC shares have a grant date fair value calculated using a Monte Carlo
valuation model, which requires the input of subjective assumptions. The following table provides a summary
of these assumptions:
Risk-free interest rate
Look-back period (in years)
Expected volatility
Grant date fair value of performance units granted
2019
2018
2017
2.5%
2.8
29.7%
0.72
$
2.3%
2.8
34.0%
0.83
$
1.5%
2.8
36.1%
0.92
$
The risk-free interest rate for the remaining performance period as of the grant date is based on the U.S.
Treasury yield curve in effect at
the time of the grant. The look-back period reflects the remaining
performance period at the grant date. The assumption for the expected volatility of our stock price reflects the
average MPC common stock historical volatility.
MPLX and ANDX Awards
Compensation expense for awards of MPLX and ANDX units are not material to our consolidated financial
statements for 2019.
144
25. LEASES
For further information regarding the adoption of ASC 842, including the method of adoption and practical
expedients elected, see Note 3.
Lessee
We lease a wide variety of facilities and equipment including land and building space, office and field
equipment, storage facilities and transportation equipment. Our remaining lease terms range from less than
one year to 59 years. Most long-term leases include renewal options ranging from less than one year to 50
years and, in certain leases, also include purchase options. The lease term included in the measurement of
right of use assets and lease liabilities includes options to extend or terminate our leases that we are
reasonably certain to exercise. Options were included in the lease term primarily for retail store sites where we
constructed property, plant and equipment on leased land that is expected to exist beyond the initial lease
term.
Under ASC 842, the components of lease cost were as follows:
(In millions)
Finance lease cost:
Amortization of right of use assets
Interest on lease liabilities
Operating lease cost
Variable lease cost
Short-term lease cost
Total lease cost
Supplemental balance sheet data related to leases were as follows:
(In millions)
Operating leases
Assets
Right of use assets
Liabilities
Operating lease liabilities
Long-term operating lease liabilities
Total operating lease liabilities
Weighted average remaining lease term (in years)
Weighted average discount rate
Finance leases
Assets
Property, plant and equipment, gross
Accumulated depreciation
Property, plant and equipment, net
Liabilities
Debt due within one year
Long-term debt
Total finance lease liabilities
Weighted average remaining lease term (in years)
Weighted average discount rate
145
$
$
$
$
$
$
$
$
$
2019
64
43
793
91
746
1,737
December 31,
2019
2,459
604
1,875
2,479
6.2
4.02%
807
227
580
62
636
698
11.9
6.50%
As of December 31, 2019, maturities of lease liabilities for operating lease obligations and finance lease
obligations having initial or remaining non-cancellable lease terms in excess of one year are as follows:
(In millions)
2020
2021
2022
2023
2024
2025 and thereafter
Gross lease payments
Less: imputed interest
Total lease liabilities
Operating
Finance
$
$
698
590
402
287
222
634
2,833
354
$
2,479
$
96
87
95
98
84
527
987
289
698
Presented in accordance with ASC 840, future minimum commitments as of December 31, 2018 for operating
lease obligations and capital lease obligations having initial or remaining non-cancellable lease terms in
excess of one year were as follows:
(In millions)
2019
2020
2021
2022
2023
2024 and thereafter
Total minimum lease payments
Less: imputed interest costs
Present value of net minimum lease payments
Lessor
Operating
Capital
$
709
619
553
389
295
858
$
3,423
$
$
70
71
66
75
82
586
950
301
649
MPLX has certain natural gas gathering, transportation and processing agreements in which it is considered to
be the lessor under several operating lease arrangements in accordance with GAAP. MPLX’s primary natural
gas lease operations relate to a natural gas gathering agreement in the Marcellus region for which it earns a
fixed-fee for providing gathering services to a single producer using a dedicated gathering system. As the
gathering system is expanded, the fixed-fee charged to the producer is adjusted to include the additional
gathering assets in the lease. The primary term of the natural gas gathering arrangement expires in 2038 and
will continue thereafter on a year-to-year basis until terminated by either party. Other significant natural gas
implicit leases relate to a natural gas processing agreement in the Marcellus region and a natural gas
processing agreement in the Southern Appalachia region for which MPLX earns minimum monthly fees for
providing processing services to a single producer using a dedicated processing plant. The primary terms of
these natural gas processing agreements expire during 2023 and 2033 and will continue thereafter on a
year-to-year basis until terminated by either party.
MPLX did not elect to use the practical expedient to combine lease and non-lease components for lessor
arrangements. The tables below represent the portion of the contract allocated to the lease component based
on relative standalone selling price. Lessor agreements are currently deemed operating, as MPLX elected the
practical expedient to carry forward historical classification conclusions. If and when a modification of an
existing agreement occurs and the agreement is required to assessed under ASC 842, MPLX assesses the
amended agreement and makes a determination as to whether a reclassification of the lease is required.
146
revenue from implicit
Under ASC 840, our
totaled
approximately $254 million, $221 million and $218 million in 2019, 2018 and 2017, respectively. The
following is a schedule of minimum future rentals on the non-cancellable operating leases as of December 31,
2019:
lease arrangements, excluding executory costs,
(In millions)
2020
2021
2022
2023
2024
2025 and thereafter
Total minimum future rentals
$
$
186
179
177
170
167
1,072
1,951
The following schedule summarizes our investment in assets held for operating lease by major classes as of
December 31, 2019:
(In millions)
Natural gas gathering and NGL transportation pipelines and facilities
Natural gas processing facilities
Terminals and related assets
Land, building, office equipment and other
Property, plant and equipment
Less accumulated depreciation
Total property, plant and equipment, net
26. COMMITMENTS AND CONTINGENCIES
$
$
1,121
686
83
45
1,935
327
1,608
We are the subject of, or a party to, a number of pending or threatened legal actions, contingencies and
commitments involving a variety of matters, including laws and regulations relating to the environment. Some
of these matters are discussed below. For matters for which we have not recorded an accrued liability, we are
unable to estimate a range of possible loss because the issues involved have not been fully developed through
pleadings and discovery. However, the ultimate resolution of some of these contingencies could, individually
or in the aggregate, be material.
Environmental Matters
We are subject to federal, state, local and foreign laws and regulations relating to the environment. These laws
generally provide for control of pollutants released into the environment and require responsible parties to
undertake remediation of hazardous waste disposal sites and certain other locations including presently or
formerly owned or operated retail marketing sites. Penalties may be imposed for noncompliance.
At December 31, 2019 and 2018, accrued liabilities for remediation totaled $433 million and $455 million,
respectively. It is not presently possible to estimate the ultimate amount of all remediation costs that might be
incurred or the penalties if any that may be imposed. Receivables for recoverable costs from certain states,
under programs to assist companies in clean-up efforts related to underground storage tanks at presently or
formerly owned or operated retail marketing sites, were $29 million and $35 million at December 31, 2019
and 2018, respectively.
Governmental and other entities in California, New York, Maryland and Rhode Island have filed lawsuits
against coal, gas, oil and petroleum companies, including the Company. The lawsuits allege damages as a
result of climate change and the plaintiffs are seeking unspecified damages and abatement under various tort
theories. Similar lawsuits may be filed in other jurisdictions. At this early stage, the ultimate outcome of these
matters remain uncertain, and neither the likelihood of an unfavorable outcome nor the ultimate liability, if
any, can be determined.
We are involved in a number of environmental enforcement matters arising in the ordinary course of business.
While the outcome and impact on us cannot be predicted with certainty, management believes the resolution
147
of these environmental matters will not, individually or collectively, have a material adverse effect on our
consolidated results of operations, financial position or cash flows.
Asset Retirement Obligations
Our short-term asset retirement obligations were $24 million and $30 million at December 31, 2019 and 2018,
respectively, which are included in other current liabilities in our consolidated balance sheets. Our long-term
asset retirement obligations were $206 million and $222 million at December 31, 2019 and 2018, respectively,
which are included in deferred credits and other liabilities in our consolidated balance sheets.
Lawsuits
In May 2015, the Kentucky attorney general filed a lawsuit against our wholly-owned subsidiary, MPC LP, in
the United States District Court for the Western District of Kentucky asserting claims under federal and state
antitrust statutes, the Kentucky Consumer Protection Act, and state common law. The complaint, as amended
in July 2015, alleges that MPC LP used deed restrictions, supply agreements with customers and exchange
agreements with competitors to unreasonably restrain trade in areas within Kentucky and seeks declaratory
relief, unspecified damages, civil penalties, restitution and disgorgement of profits. At this stage, the ultimate
outcome of this litigation remains uncertain, and neither the likelihood of an unfavorable outcome nor the
ultimate liability, if any, can be determined, and we are unable to estimate a reasonably possible loss (or range
of loss) for this matter. We intend to vigorously defend ourselves in this matter.
We are also a party to a number of other lawsuits and other proceedings arising in the ordinary course of
business. While the ultimate outcome and impact to us cannot be predicted with certainty, we believe that the
resolution of these other lawsuits and proceedings will not have a material adverse effect on our consolidated
financial position, results of operations or cash flows.
Guarantees
We have provided certain guarantees, direct and indirect, of the indebtedness of other companies. Under the
terms of most of these guarantee arrangements, we would be required to perform should the guaranteed party
fail to fulfill its obligations under the specified arrangements. In addition to these financial guarantees, we also
have various performance guarantees related to specific agreements.
Guarantees related to indebtedness of equity method investees – MPC and MPLX hold interests in an offshore
oil port, LOOP, and MPLX holds an interest in a crude oil pipeline system, LOCAP. Both LOOP and LOCAP
have secured various project financings with throughput and deficiency agreements. Under the agreements, MPC,
as a shipper, is required to advance funds if the investees are unable to service their debt. Any such advances are
considered prepayments of future transportation charges. The duration of the agreements vary but tend to follow
the terms of the underlying debt, which extend through 2037. Our maximum potential undiscounted payments
under these agreements for the debt principal totaled $171 million as of December 31, 2019.
In connection with our 25 percent interest in Gray Oak Pipeline, LLC (“Gray Oak Pipeline”), we have entered
into an Equity Contribution Agreement obligating us to make certain equity contributions to Gray Oak
Pipeline to support its obligations under a construction loan facility. Gray Oak oil pipeline is a crude oil
transportation system from West Texas and the Eagle Ford formation to destinations in the Ingleside, Corpus
Christi and Sweeney, Texas markets. Gray Oak Pipeline entered into the construction loan facility with a
syndicate of banks to finance a portion of the construction costs of the pipeline project.
The Equity Contribution Agreement requires us to contribute our pro rata share of any amounts necessary to
allow Gray Oak Pipeline to cure any payment defaults under the construction loan facility or to repay all
amounts outstanding under the facility, including principal, accrued interest, fees and expenses, in certain
circumstances, including the failure of Gray Oak Pipeline to repay or refinance the construction loan facility
prior to its scheduled maturity date of June 3, 2022. Gray Oak may borrow up to $1.43 billion under the
construction loan facility (after giving effect to the exercise of all options to increase its borrowing capacity).
As of December 31, 2019, our maximum potential undiscounted payments under the Equity Contribution
Agreement for the debt principal totaled $292 million.
In connection with MPLX’s approximate 9 percent indirect interest in a joint venture that owns and operates
the Dakota Access Pipeline and Energy Transfer Crude Oil Pipeline projects, collectively referred to as the
Bakken Pipeline system, MPLX entered into a Contingent Equity Contribution Agreement. MPLX, along with
the other joint venture owners in the Bakken Pipeline system, have agreed to make equity contributions to the
148
joint venture upon certain events occurring to allow the entities that own and operate the Bakken Pipeline
system to satisfy their senior note payment obligations. The senior notes were issued to repay amounts owed
by the pipeline companies to fund the cost of construction of the Bakken Pipeline system. As of December 31,
2019, our maximum potential undiscounted payments under the Contingent Equity Contribution Agreement
was approximately $230 million.
In connection with our 50 percent ownership in Crowley Ocean Partners, we have agreed to conditionally
guarantee our portion of the obligations of the joint venture and its subsidiaries under a senior secured term
loan agreement. The term loan agreement provides for loans of up to $325 million to finance the acquisition of
four product tankers. MPC’s liability under the guarantee for each vessel is conditioned upon the occurrence
of certain events, including if we cease to maintain an investment-grade credit rating or the charter for the
relevant product tanker ceases to be in effect and is not replaced by a charter with an investment-grade
company on certain defined commercial
terms. As of December 31, 2019, our maximum potential
undiscounted payments under this agreement for debt principal totaled $130 million.
In connection with our 50 percent indirect interest in Crowley Blue Water Partners, we have agreed to provide
a conditional guarantee of up to 50 percent of its outstanding debt balance in the event there is no charter
agreement in place with an investment-grade customer for the entity’s three vessels as well as other financial
support in certain circumstances. As of December 31, 2019, our maximum potential undiscounted payments
under this arrangement was $122 million.
Marathon Oil indemnifications – The separation and distribution agreement and other agreements with
Marathon Oil to effect our spinoff provide for cross-indemnities between Marathon Oil and us. In general,
Marathon Oil is required to indemnify us for any liabilities relating to Marathon Oil’s historical oil and gas
exploration and production operations, oil sands mining operations and integrated gas operations, and we are
required to indemnify Marathon Oil for any liabilities relating to Marathon Oil’s historical refining, marketing
and transportation operations. The terms of these indemnifications are indefinite and the amounts are not
capped.
Other guarantees – We have entered into other guarantees with maximum potential undiscounted payments
totaling $121 million as of December 31, 2019, which consist primarily of a commitment to contribute cash to
an equity method investee for certain catastrophic events in lieu of procuring insurance coverage, a
commitment to fund a share of the bonds issued by a government entity for construction of public utilities in
the event that other industrial users of the facility default on their utility payments and leases of assets
containing general lease indemnities and guaranteed residual values.
General guarantees associated with dispositions – Over the years, we have sold various assets in the normal
course of our business. Certain of the related agreements contain performance and general guarantees,
including guarantees regarding inaccuracies in representations, warranties, covenants and agreements, and
environmental and general indemnifications that require us to perform upon the occurrence of a triggering
event or condition. These guarantees and indemnifications are part of the normal course of selling assets. We
are typically not able to calculate the maximum potential amount of future payments that could be made under
such contractual provisions because of the variability inherent in the guarantees and indemnities. Most often,
the nature of the guarantees and indemnities is such that there is no appropriate method for quantifying the
exposure because the underlying triggering event has little or no past experience upon which a reasonable
prediction of the outcome can be based.
Contractual Commitments and Contingencies
At December 31, 2019 and 2018, our contractual commitments to acquire property, plant and equipment and
advance funds to equity method investees totaled $1.6 billion and $1.8 billion, respectively.
Certain natural gas processing and gathering arrangements require us to construct natural gas processing
plants, natural gas gathering pipelines and NGL pipelines and contain certain fees and charges if specified
construction milestones are not achieved for reasons other than force majeure. In certain cases, certain
producer customers may have the right to cancel the processing arrangements if there are significant delays
that are not due to force majeure.
149
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(In millions, except per share data)
March 31
June 30
September
30
December
31
2019
Quarter Ended
Sales and other operating revenues(a)
Income from operations
Net income
Net income (loss) attributable to MPC
Net income (loss) attributable to MPC per share(b):
Basic
Diluted
(In millions, except per share data)
Sales and other operating revenues(a)
Income from operations
Net income
Net income attributable to MPC
Net income attributable to MPC per share(b):
Basic
Diluted
Includes sales to related parties.
(a)
(b)
$
$
$
$
$
28,267
669
259
(7)
33,547 $
2,042
1,367
1,106
31,043 $
2,024
1,367
1,095
(0.01) $
(0.01)
1.67 $
1.66
1.67 $
1.66
31,092
841
262
443
0.68
0.68
2018
Quarter Ended
March 31
June 30
September
30
December
31
18,866
440
235
37
0.08
0.08
$
$
22,317 $
1,711
1,235
1,055
22,988 $
1,403
941
737
2.30 $
2.27
1.63 $
1.62
32,333
2,017
1,195
951
1.38
1.35
The sum of the per-share amounts for the four quarters may not always equal the annual per-share amounts due to differences in the
average number of shares outstanding during the respective periods.
150
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as
defined in Rules 13a-15(e) under the Securities Exchange Act of 1934, as amended, was carried out under the
supervision and with the participation of our management, including our chief executive officer and chief
financial officer. Based upon that evaluation, the chief executive officer and chief financial officer concluded
that the design and operation of these disclosure controls and procedures were effective as of December 31,
2019, the end of the period covered by this Annual Report on Form 10-K.
Internal Control over Financial Reporting and Changes in Internal Control over Financial Reporting
During the quarter ended December 31, 2019, we completed the integration of Andeavor into our internal
control environment. See Item 8. Financial Statements and Supplementary Data – Management’s Report on
Internal Control over Financial Reporting and – Report of Independent Registered Public Accounting Firm,
which reports are incorporated herein by reference. During the quarter ended December 31, 2019, there have
been no other changes in our internal control over financial reporting that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
151
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERANCE
Information concerning our executive officers is included in Part I, Item 1 of this Annual Report on
Form 10-K. Information concerning our directors is incorporated by reference to “Corporate Governance—
Proposal 2. Election of Directors” in our Proxy Statement for the 2020 Annual Meeting of Shareholders, to be
filed with the SEC within 120 days of December 31, 2019 (the “Proxy Statement”).
Our Code of Business Conduct, which applies to all of our directors, officers and employees, defines our
expectations for ethical decision-making, accountability and responsibility. Our Code of Ethics for Senior
Financial Officers, which is specifically applicable to our Chief Executive Officer, Chief Financial Officer,
Vice President and Controller, Treasurer, and other leaders performing similar roles, affirms the principle that
the honesty, integrity and sound judgment of our senior executives with responsibility for preparation and
certification of our financial statements is essential to the proper functioning and success of our company.
These codes are available on our website at www.marathonpetroleum.com/Investors/Corporate-Governance/.
We will post on our website any amendments to, or waivers from, either of these codes requiring disclosure
under applicable rules within four business days following the amendment or waiver.
The other information required by this Item is incorporated by reference to “Corporate Governance—How the
Information—Stock Ownership
“Other
Board Conducts
Information—Delinquent Section 16(a) Reports” in our Proxy Statement.
Its Business—Board Committees”
and
ITEM 11. EXECUTIVE COMPENSATION
Information required by this Item is incorporated by reference to “Executive Compensation Discussion and
Analysis,” “Executive Compensation Tables” and “Corporate Governance—Director Compensation” in our
Proxy Statement.
152
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Information concerning security ownership of certain beneficial owners and management required by this
Item is incorporated by reference to “Other Information—Stock Ownership Information” in our Proxy
Statement.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table provides information as of December 31, 2019 with respect to shares of our common
stock that may be issued under the MPC 2012 Plan, the MPC 2011 Plan and the Andeavor Plans:
Number of
securities to be
issued upon exercise
of outstanding
options, warrants
and rights(a)
Weighted-
average exercise
price of
outstanding
options, warrants
and rights(b)
Number of securities
remaining available
for future issuance
under equity
compensation
plans (excluding
securities reflected
in the first column)(c)
10,325,230
$
43.63
36,951,244
—
10,325,230
—
N/A
—
36,951,244
Plan category
Equity compensation plans approved
by stockholders
Equity compensation plan not
approved by stockholders
Total
(a) Includes the following:
1)
2)
3)
9,721,013 stock options granted pursuant to the MPC 2012 Plan and the MPC 2011 Plan and not forfeited, cancelled or expired
as of December 31, 2019. The amounts in column (a) do not include 297,354 stock options granted under the Andeavor Plans
and not forfeited, cancelled or expired as of December 31, 2019.
191,785 restricted stock units granted pursuant to the MPC 2012 Plan and the MPC 2011 Plan for shares unissued and not
forfeited, cancelled or expired as of December 31, 2019. The amounts in column (a) do not include 1,984,657 restricted stock
units granted under the Andeavor Plans and not forfeited, cancelled or expired as of December 31, 2019.
412,432 shares as the maximum potential number of shares that could be issued in settlement of performance units outstanding
as of December 31, 2019 pursuant to the MPC 2012 Plan, based on the closing price of our common stock on December 31,
2019 of $60.25 per share. The number of shares reported for this award vehicle may overstate dilution. See Note 24 for more
information on performance unit awards granted under the MPC 2012 Plan.
(b) Restricted stock, restricted stock units and performance units are not taken into account in the weighted-average exercise price as
such awards have no exercise price. Further, the outstanding stock options granted under the Andeavor Plans were not taken into
account in the weighted-average exercise price.
(c) Reflects the shares available for issuance pursuant to the MPC 2012 Plan. All granting authority under the MPC 2011 Plan was
revoked following the approval of the MPC 2012 Plan by shareholders on April 25, 2012, and all granting power under the Andeavor
Plans was revoked at the time of the Andeavor Merger. No more than 14,981,042 of the shares reported in this column may be issued
for awards other than stock options or stock appreciation rights. The number of shares reported in this column assumes 412,432 as
the maximum potential number of shares that could be issued pursuant to the MPC 2012 Plan in settlement of performance units
outstanding as of December 31, 2019, based on the closing price of our common stock on December 31, 2019, of $60.25 per share.
The number of shares assumed for this award vehicle may understate the number of shares available for issuance pursuant to the
MPC 2012 Plan. See Note 24 for more information on performance unit awards granted pursuant to the MPC 2012 Plan. Shares
related to grants made pursuant to the MPC 2012 Plan that are forfeited, cancelled or expire unexercised become immediately
available for issuance under the MPC 2012 Plan.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE
Information required by this Item is incorporated by reference to “Other Information—Related Party
Transactions”
and “Corporate Governance—Board Composition and Director Selection—Director
Independence” in our Proxy Statement.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information required by this Item is incorporated by reference to “Audit Matters—Auditor Fees and Services”
in our Proxy Statement.
153
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
A. Documents Filed as Part of the Report
1. Financial Statements (see Part II, Item 8. of this Annual Report on Form 10-K regarding financial
statements)
2. Financial Statement Schedules
Financial statement schedules required under SEC rules but not included in this Annual Report on
Form 10-K are omitted because they are not applicable or the required information is contained in the
consolidated financial statements or notes thereto.
3. Exhibits:
Exhibit
Number
2
2.1 †
2.2 †
2.3
2.4
2.5 †
2.6
2.7
2.8 †
3
3.1
3.2
4
Exhibit Description
Form Exhibit
Filing
Date
SEC
File No.
Filed
Herewith
Furnished
Herewith
Incorporated by Reference
Plan of Acquisition, Reorganization, Arrangement,
Liquidation or Succession
Separation and Distribution Agreement, dated as of
May 25, 2011, among Marathon Oil Corporation,
Marathon Oil Company and Marathon Petroleum
Corporation
Agreement and Plan of Merger, dated as of July 11,
2015, by and among MPLX LP, Sapphire Holdco LLC,
MPLX GP LLC, MarkWest Energy Partners, L.P. and,
for certain limited purposes set forth therein, Marathon
Petroleum Corporation.
Amendment to Agreement and Plan of Merger, dated
as of November 10, 2015, by and among MPLX LP,
Sapphire Holdco LLC, MPLX GP LLC, MarkWest
Energy Partners, L.P. and Marathon Petroleum
Corporation.
Amendment Number 2 to Agreement and Plan of
Merger, dated as of November 16, 2015, by and among
MPLX LP, Sapphire Holdco LLC, MPLX GP LLC,
MarkWest Energy Partners, L.P. and Marathon
Petroleum Corporation.
Agreement and Plan of Merger, dated as of April 29,
2018, by and among Marathon Petroleum Corporation,
Andeavor, Mahi Inc. and Mahi LLC
Amendment to Agreement and Plan of Merger, dated
as of July 3, 2018, by and among Andeavor, Marathon
Petroleum Corporation, Mahi Inc. and Mahi LLC.
Second Amendment to Agreement and Plan of Merger,
dated as of September 18, 2018, by and among
Andeavor, Marathon Petroleum Corporation, Mahi Inc.
and Mahi LLC.
Agreement and Plan of Merger, dated as of May 7,
2019, by and among Andeavor Logistics LP, Tesoro
Logistics GP, LLC, MPLX LP, MPLX GP LLC and
MPLX MAX LLC.
Articles of Incorporation and Bylaws
Restated Certificate of Incorporation of Marathon
Petroleum Corporation, dated October 1, 2018.
10
2.1
5/26/2011
001-35054
8-K
2.1
7/16/2015
001-35054
8-K
2.1
11/12/2015 001-35054
8-K
2.1
11/17/2015 001-35054
8-K
2.1
4/30/2018
001-35054
S-4/A
2.2
7/5/2018
333-225244
8-K
2.1
9/18/2018
001-35054
8-K
2.1
5/8/2019
001-35054
8-K
3.2
10/1/2018
001-35054
Amended and Restated Bylaws of Marathon Petroleum
Corporation dated as of February 27, 2019
10-K
3.2
2/28/2019
001-35054
Instruments Defining the Rights of Security
Holders, Including Indentures
154
Exhibit
Number
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11
4.12
4.13
4.14
Exhibit Description
Form Exhibit
Filing
Date
SEC
File No.
Filed
Herewith
Furnished
Herewith
Incorporated by Reference
Indenture dated as of February 1, 2011 between
Marathon Petroleum Corporation and The Bank of New
York Mellon Trust Company, N.A., as Trustee
Form of the terms of the 3 1/2% Senior Notes due 2016,
5 1/8% Senior Notes due 2021 and 6 1/2% Senior Notes
due 2041 of Marathon Petroleum Corporation (including
Form of Notes)
First Supplemental Indenture, dated as of September 5,
2014, by and between Marathon Petroleum Corporation
and The Bank of New York Mellon Trust Company,
N.A., as trustee (including Form of Notes)
Second Supplemental Indenture, dated as of
December 14, 2015, by and between Marathon
Petroleum Corporation and the Bank of New York
Mellon Trust Company, N.A., as trustee (including
Form of Notes)
Indenture, dated February 12, 2015, between MPLX LP
and The Bank of New York Mellon Trust Company,
N.A., as Trustee
First Supplemental Indenture, dated February 12, 2015,
between MPLX LP and The Bank of New York Mellon
Trust Company, N.A., as Trustee (including Form of
Notes)
Third Supplemental Indenture, dated as of December 22,
2015, by and between MPLX LP and the Bank of New
York Mellon Trust Company, N.A. (including Form of
Note)
Fourth Supplemental Indenture, dated as of
December 22, 2015, by and between MPLX LP and the
Bank of New York Mellon Trust Company, N.A.
(including Form of Note)
Fifth Supplemental Indenture, dated as of December 22,
2015, by and between MPLX LP and the Bank of New
York Mellon Trust Company, N.A. (including Form of
Note)
Sixth Supplemental Indenture, dated as of February 10,
2017, by and between MPLX LP and the Bank of New
York Mellon Trust Company, N.A. (including Form of
Note)
Seventh Supplemental Indenture, dated as of
February 10, 2017, by and between MPLX LP and the
Bank of New York Mellon Trust Company, N.A.
(including Form of Note)
Eighth Supplemental Indenture, dated as of February 8,
2018, between MPLX LP and The Bank of New York
Mellon Trust Company, N.A., as Trustee (including
Form of Note)
Ninth Supplemental Indenture, dated as of February 8,
2018, between MPLX LP and The Bank of New York
Mellon Trust Company, N.A., as Trustee (including
Form of Note)
Tenth Supplemental Indenture, dated as of February 8,
2018, between MPLX LP and The Bank of New York
Mellon Trust Company, N.A., as Trustee (including
Form of Note)
10
4.1
3/29/2011 001-35054
10
4.2
3/29/2011 001-35054
10-Q
4.1
11/3/2014 001-35054
8-K
4.1
12/14/2015 001-35054
8-K
4.1
2/12/2015 001-35714
8-K
4.2
2/12/2015 001-35714
8-K
4.3
12/22/2015 001-35714
8-K
4.4
12/22/2015 001-35714
8-K
4.5
12/22/2015 001-35714
8-K
4.1
2/10/2017 001-35714
8-K
4.2
2/10/2017 001-35714
8-K
4.1
2/8/2018
001-35714
8-K
4.2
2/8/2018
001-35714
8-K
4.3
2/8/2018
001-35714
155
Exhibit
Number
4.15
4.16
4.17
4.18
4.19
4.20
4.21
4.22
4.23
4.24
4.25
4.26
4.27
4.28
Exhibit Description
Form Exhibit
Filing
Date
SEC
File No.
Filed
Herewith
Furnished
Herewith
Incorporated by Reference
Eleventh Supplemental Indenture, dated as of
February 8, 2018, between MPLX LP and The Bank of
New York Mellon Trust Company, N.A., as Trustee
(including Form of Note)
Twelfth Supplemental Indenture, dated as of February 8,
2018, between MPLX LP and The Bank of New York
Mellon Trust Company, N.A., as Trustee (including
Form of Note)
Third Supplemental Indenture, dated as of October 2,
2018, by and between MPC and the Bank of New York
Mellon Trust Company, N.A. (including Form of Note).
Fourth Supplemental Indenture, dated as of October 2,
2018, by and between MPC and the Bank of New York
Mellon Trust Company, N.A. (including Form of Note).
Fifth Supplemental Indenture, dated as of October 2,
2018, by and between MPC and the Bank of New York
Mellon Trust Company, N.A. (including Form of Note).
Sixth Supplemental Indenture, dated as of October 2,
2018, by and between MPC and the Bank of New York
Mellon Trust Company, N.A. (including Form of Note).
Seventh Supplemental Indenture, dated as of October 2,
2018, by and between MPC and the Bank of New York
Mellon Trust Company, N.A. (including Form of Note).
Eighth Supplemental Indenture, dated as of October 2,
2018, by and between MPC and the Bank of New York
Mellon Trust Company, N.A. (including Form of Note).
Indenture (including form of note), dated as of
September 27, 2012, among Tesoro Corporation, the
guarantors named therein and U.S. Bank National
Association, as trustee, relating to the 4.250% Senior
Notes due 2017 and the 5.375% Senior Notes due 2022
Indenture (including form of note), dated as of
March 18, 2014, among Tesoro Corporation, the
guarantors named therein and U.S. Bank National
Association, as trustee, relating to the 5.125% Senior
Notes due 2024
Indenture (including form of Notes), dated as of
December 22, 2016, among Tesoro Corporation, the
guarantors named therein and U.S. Bank National
Association, as trustee, relating to the 4.750% Senior
Notes due 2023 and the 5.125% Senior Notes due 2026
Indenture, dated as of December 21, 2017 among
Andeavor and U.S. Bank National Association, as
trustee, relating to the 3.800% Senior Notes due 2028
and the 4.500% Senior Notes due 2048
First Supplemental Indenture, dated as of December 21,
2017 among Andeavor and U.S. Bank National
Association, as trustee, relating to the 3.800% Senior
Notes due 2028 and the 4.500% Senior Notes due 2048
Indenture, dated as of October 29, 2014, among Tesoro
Logistics LP, Tesoro Logistics Finance Corp., the
guarantors named therein and U.S. Bank National
Association, as trustee , relating to the 5.50% Senior
Notes due 2019 and the 6.25% Senior Notes due 2022
8-K
4.4
2/8/2018
001-35714
8-K
4.5
2/8/2018
001-35714
8-K
4.1
10/5/2018 001-35054
8-K
4.2
10/5/2018 001-35054
8-K
4.3
10/5/2018 001-35054
8-K
4.4
10/5/2018 001-35054
8-K
4.5
10/5/2018 001-35054
8-K
4.6
10/5/2018 001-35054
8-K
4.1
10/2/2012 001-03473
(Andeavor)
8-K
4.1
3/18/2014 001-03473
(Andeavor)
8-K
4.1
12/22/2016 001-03473
(Andeavor)
8-K
4.1
12/21/2017 001-03473
(Andeavor)
8-K
4.2
12/21/2017 001-03473
(Andeavor)
10-Q
4.3
10/31/2014 001-03473
(Andeavor)
156
Exhibit
Number
4.29
4.30
4.31
4.32
4.33
4.34
4.35
4.36
4.37
4.38
4.39
4.40
4.41
4.42
Exhibit Description
Indenture, dated as of May 12, 2016, among Tesoro
Logistics LP, Tesoro Logistics Finance Corp., the
guarantors named therein and U.S. Bank National
Association, as trustee, relating to the 6.375% Senior
Notes due 2024
Indenture, dated as of December 2, 2016, among Tesoro
Logistics LP, Tesoro Logistics Finance Corp., the
guarantors named therein and U.S. Bank National
Association, as trustee, relating to the 5.25% Senior
Notes due 2025
Indenture, dated as of November 28, 2017, among
Tesoro Logistics LP, Tesoro Logistics Finance Corp.,
the guarantors named therein and U.S. Bank National
Association, as trustee, relating to the 3.500% Senior
Notes due 2022, 4.250% Senior Notes due 2027 and
5.200% Senior Notes due 2047
Supplemental Indenture, dated as of September 13,
2018, to Indenture dated as of September 27, 2012
between Andeavor and U.S. Bank National Association,
as trustee.
Supplemental Indenture, dated as of September 13,
2018, to Indenture, dated as of March 18, 2014 between
Andeavor and U.S. Bank National Association, as
trustee.
First Supplemental Indenture, dated as of September 13,
2018, to Indenture, dated as of December 22, 2016
between Andeavor and U.S. Bank National Association,
as trustee.
Second Supplemental Indenture, dated as of
September 13, 2018, to Indenture, dated as of
December 21, 2017 between Andeavor and U.S. Bank
National Association, as trustee.
Thirteenth Supplemental Indenture, dated as of
November 15, 2018, between MPLX LP and The Bank
of New York Mellon Trust Company, N.A., as Trustee
(including form of note)
Fourteenth Supplemental Indenture, dated as of
November 15, 2018, between MPLX LP and The Bank
of New York Mellon Trust Company, N.A., as Trustee
(including form of note)
Fifteenth Supplemental Indenture, dated as of
September 9, 2019, between the Issuer and The Bank of
New York Mellon Trust Company, N.A., as Trustee
(including form of note)
Sixteenth Supplemental Indenture, dated as of
September 9, 2019, between the Issuer and The Bank of
New York Mellon Trust Company, N.A., as Trustee
(including form of note)
Seventeenth Supplemental Indenture, dated as of
September 23, 2019, between MPLX LP and the Bank
of New York Mellon Trust Company, N.A.
Eighteenth Supplemental Indenture, dated as of
September 23, 2019, between MPLX LP and the Bank
of New York Mellon Trust Company, N.A.
Nineteenth Supplemental Indenture, dated as of
September 23, 2019, between MPLX LP and the Bank
of New York Mellon Trust Company, N.A.
157
Incorporated by Reference
Form Exhibit
10-K
4.33
Filing
Date
SEC
File No.
Filed
Herewith
Furnished
Herewith
2/21/2017 001-03473
(Andeavor)
10-K
4.34
2/21/2017 001-03473
(Andeavor)
8-K
4.1
11/28/2017 001-35143
(Andeavor
Logistics
LP)
8-K
4.1
9/14/2018 001-03473
(Andeavor)
8-K
4.2
9/14/2018 001-03473
(Andeavor)
8-K
4.3
9/14/2018 001-03473
(Andeavor)
8-K
4.4
9/14/2018 001-03473
(Andeavor)
8-K
4.1
11/15/2018 001-35714
8-K
4.2
11/15/2018 001-35714
8-K
4.5
9/9/2019
001-35714
8-K
4.6
9/9/2019
001-35714
8-K
4.1
9/27/2019 001-35714
8-K
4.2
9/27/2019 001-35714
8-K
4.3
9/27/2019 001-35714
Exhibit
Number
4.43
4.44
4.45
4.46
4.47
4.48
4.49
4.50
10
10.1
10.2
10.3
10.4
Exhibit Description
Form Exhibit
Filing
Date
SEC
File No.
Filed
Herewith
Furnished
Herewith
Incorporated by Reference
8-K
4.4
9/27/2019 001-35714
8-K
4.5
9/27/2019 001-35714
8-K
4.6
9/27/2019 001-35714
8-K
4.1
9/9/2019
001-35714
8-K
4.2
9/9/2019
001-35714
8-K
4.3
9/9/2019
001-35714
8-K
4.4
9/9/2019
001-35714
X
8-K
10.1
12/23/2013 001-35054
8-K
10.2
12/23/2013 001-35054
8-K
10.1
11/6/2012 001-35054
8-K
10.2
11/6/2012 001-35054
Twentieth Supplemental Indenture, dated as of
September 23, 2019, between MPLX LP and the Bank
of New York Mellon Trust Company, N.A.
Twenty-First Supplemental Indenture, dated as of
September 23, 2019, between MPLX LP and the Bank
of New York Mellon Trust Company, N.A.
Twenty-Second Supplemental Indenture, dated as of
September 23, 2019, between MPLX LP and the Bank
of New York Mellon Trust Company, N.A.
Sixth Supplemental Indenture, dated as of September 6,
2019, to Indenture dated as of October 29, 2014, among
Andeavor Logistics LP (f/k/a Tesoro Logistics LP),
Tesoro Logistics Finance Corp. and U.S. Bank National
Association, as Trustee
Fourth Supplemental Indenture, dated as of
September 6, 2019, to Indenture dated as of May 12,
2016, among Andeavor Logistics LP (f/k/a Tesoro
Logistics LP), Tesoro Logistics Finance Corp. and U.S.
Bank National Association, as Trustee
Fourth Supplemental Indenture, dated as of
September 6, 2019, to Indenture dated as of
December 2, 2016, among Andeavor Logistics LP (f/k/a
Tesoro Logistics LP), Tesoro Logistics Finance Corp.
and U.S. Bank National Association, as Trustee
Second Supplemental Indenture, dated as of
September 6, 2019, to Indenture dated as of
November 28, 2017, among Andeavor Logistics LP (f/k/
a Tesoro Logistics LP), Tesoro Logistics Finance Corp.
and U.S. Bank National Association, as Trustee
Description of Securities
Material Contracts
Receivables Purchase Agreement, dated as of
December 18, 2013, by and among MPC Trade
Receivables Company, LLC, Marathon Petroleum
Company LP, The Bank of Tokyo-Mitsubishi UFJ, Ltd.,
New York Branch, as administrative agent and sole lead
arranger, certain committed purchasers and conduit
purchasers that are parties thereto from time to time and
certain other parties thereto from time to time as
managing agents and letter of credit issuers.
Second Amended and Restated Receivables Sale
Agreement, dated as of December 18, 2013, by and
between Marathon Petroleum Company LP and MPC
Trade Receivables Company LLC
Contribution, Conveyance and Assumption Agreement,
dated as of October 31, 2012, among MPLX LP, MPLX
GP LLC, MPLX Operations LLC, MPC Investment
LLC, MPLX Logistics Holdings LLC, Marathon Pipe
Line LLC, MPL Investment LLC, MPLX Pipe Line
Holdings LP and Ohio River Pipe Line LLC.
Omnibus Agreement, dated as of October 31, 2012,
among Marathon Petroleum Corporation, Marathon
Petroleum Company LP, MPL Investment LLC, MPLX
Operations LLC, MPLX Terminal and Storage LLC,
MPLX Pipe Line Holdings LP, Marathon Pipe Line
LLC, Ohio River Pipe Line LLC, MPLX LP and MPLX
GP LLC.
158
Exhibit
Number
10.5 *
10.6 *
10.7 *
10.8 *
10.9 *
Exhibit Description
Form Exhibit
Filing
Date
SEC
File No.
Filed
Herewith
Furnished
Herewith
Incorporated by Reference
Marathon Petroleum Corporation Second Amended and
Restated 2011 Incentive Compensation Plan
S-3
4.3
12/7/2011 333-175286
Marathon Petroleum Corporation Policy for
Recoupment of Annual Cash Bonus Amounts
Marathon Petroleum Corporation Deferred
Compensation Plan for Non-Employee Directors
Marathon Petroleum Amended and Restated Excess
Benefit Plan
Marathon Petroleum Amended and Restated Deferred
Compensation Plan
10-K
10.10
2/29/2012 001-35054
10-K
10.13
2/28/2013 001-35054
10-K
10.14
2/24/2017 001-35054
10-K
10.13
2/29/2012 001-35054
10.10 *
Marathon Petroleum Corporation Executive Tax, Estate,
and Financial Planning Program
10-K
10.14
2/29/2012 001-35054
10.11 *
Speedway Excess Benefit Plan
10-K
10.15
2/29/2012 001-35054
10.12 *
Speedway Deferred Compensation Plan
10-K
10.16
2/29/2012 001-35054
10.13 *
10.14 *
10.15 *
10.16 *
10.17 *
10.18 *
10.19 *
10.20 *
10.21 *
10.22 *
10.23 *
10.24 *
10.25 *
10.26 *
10.27 *
Form of Marathon Petroleum Corporation Amended and
Restated 2011 Incentive Compensation Plan
Nonqualified Stock Option Award Agreement –
Section 16 Officer
Form of Marathon Petroleum Corporation 2011
Incentive Compensation Plan Supplemental
Nonqualified Stock Option Award Agreement –
Section 16 Officer
Form of Marathon Petroleum Corporation 2011
Incentive Compensation Plan Supplemental Restricted
Stock Unit Award Agreement – Non-Employee Director
Marathon Petroleum Corporation Amended and
Restated Executive Change in Control Severance
Benefits Plan
Form of Marathon Petroleum Corporation Restricted
Stock Award Agreement – Officer
8-K
10.6
7/7/2011
001-35054
8-K
10.2
12/7/2011 001-35054
10-K
10.22
2/29/2012 001-35054
10-K
10.21
2/28/2018 001-35054
10-Q
10.4
5/9/2012
001-35054
Form of Marathon Petroleum Corporation Nonqualified
Stock Option Award Agreement – Officer
10-Q
10.5
5/9/2012
001-35054
Amended and Restated Marathon Petroleum
Corporation 2012 Incentive Compensation Plan
MPC Non-Employee Director Phantom Unit Award
Policy
Form of Marathon Petroleum Corporation Restricted
Stock Award Agreement – Officer
10-Q
10.1
5/1/2017
001-35054
10-K
10.32
2/28/2013 001-35054
10-Q
10.2
5/9/2013
001-35054
Form of Marathon Petroleum Corporation Nonqualified
Stock Option Award Agreement – Officer
10-Q
10.3
5/9/2013
001-35054
MPLX LP – Form of MPC Officer Phantom Unit Award
Agreement
10-Q
10.4
5/9/2013
001-35054
MPLX LP – Form of MPC Officer Performance Unit
Award Agreement – 2013-2015 Performance Cycle
10-Q
10.5
5/9/2013
001-35054
First Amendment to the Marathon Petroleum
Corporation Amended and Restated 2011 Incentive
Compensation Plan
First Amendment to the Marathon Petroleum
Corporation 2012 Incentive Compensation Plan
Form of Modification to Performance Unit Award
Agreements for the 2016-2018 and 2017-2019
Performance Cycles
10-Q
10.1
8/3/2015
001-35054
10-Q
10.2
8/3/2015
001-35054
10-K
10.33
2/28/2018 001-35054
159
Exhibit
Number
Exhibit Description
Form Exhibit
Filing
Date
SEC
File No.
Filed
Herewith
Furnished
Herewith
10.28 *
Marathon Petroleum Thrift Plan
10-K
10.45
2/24/2017 001-35054
Incorporated by Reference
10.29
10.30 *
10.31 *
10.32 *
10.33 *
10.34 *
First Amendment to Receivables Purchase Agreement,
dated July 20, 2016, by and among MPC Trade
Receivables Company LLC, Marathon Petroleum
Company LP, The Bank of Tokyo-Mitsubishi UFJ.,
Ltd., New York Branch, as administrative agent and sole
lead arranger, certain committed purchasers and conduit
purchasers that are parties thereto from time to time and
certain other parties thereto from time to time as
managing agents and letter of credit issuers.
Form of Marathon Petroleum Corporation Performance
Unit Award Agreement
Form of Marathon Petroleum Corporation Restricted
Stock Award Agreement - Officer
Form of Marathon Petroleum Corporation Nonqualified
Stock Option Award Agreement - Officer
Form of MPLX LP Performance Unit Award Agreement
- Marathon Petroleum Corporation Officer
Form of MPLX LP Phantom Unit Award Agreement -
Marathon Petroleum Corporation Officer
8-K
10.3
7/26/2016 001-35054
10-Q
10.1
5/2/2016
001-35054
10-Q
10.2
5/2/2016
001-35054
10-Q
10.3
5/2/2016
001-35054
10-Q
10.3
5/1/2017
001-35054
10-Q
10.5
5/2/2016
001-35054
10.35 *
Form of MPLX LP Performance Unit Award Agreement
10-Q
10.2
5/1/2017
001-35054
10.36 *
10.37
MPLX LP Executive Change in Control Severance
Benefits Plan
Partnership Interests Restructuring Agreement, dated as
of December 15, 2017, among MPLX GP LLC and
MPLX LP
10-Q
10.4
10/30/2017 001-35054
8-K
10.1
12/19/2017 001-35054
10.38
10.39
10.40
10.41
10.42
10.43
10.44
10.45
10.46
MPLX LP 2018 Incentive Compensation Plan
8-K
10.1
3/5/2018
001-35714
Form of Marathon Petroleum Corporation Performance
Unit Award Agreement
Form of Marathon Petroleum Corporation Restricted
Stock Award Agreement - Officer
10-Q
10.3
4/30/2018 001-35054
10-Q
10.4
4/30/2018 001-35054
Form of MPLX LP Performance Unit Award Agreement
- Marathon Petroleum Corporation Officer
10-Q
10.5
4/30/2018 001-35054
Form of MPLX LP Phantom Unit Award Agreement -
Marathon Petroleum Corporation Officer
10-Q
10.6
4/30/2018 001-35054
Form of MPLX LP Performance Unit Award Agreement
10-Q
10.7
4/30/2018 001-35054
Form of MPLX LP Phantom Unit Award Agreement -
Officer
Form of MPLX LP Phantom Unit Award Agreement -
Officer - Three Year Cliff Vesting
Voting and Support Agreement, dated as of April 29,
2018, by and among Marathon Petroleum Corporation,
Andeavor, Mahi Inc. Mahi LLC, Paul L. Foster and
Franklin Mountain Investments, LP.
10-Q
10.8
4/30/2018 001-35054
10-Q
10.9
4/30/2018 001-35054
8-K
10.1
4/30/2018 001-35054
160
Exhibit
Number
10.47
10.48 *
10.49 *
10.50 *
10.52 *
10.53 *
10.55 *
10.56 *
10.57 *
10.58 *
10.59 *
10.60 *
10.61 *
10.62 *
10.63 *
10.64 *
Exhibit Description
Form Exhibit
Filing
Date
SEC
File No.
Filed
Herewith
Furnished
Herewith
Incorporated by Reference
Five Year Revolving Credit Agreement, dated as of
August 28, 2018, among MPC, as borrower, JPMorgan
Chase Bank, N.A., as administrative agent, each of
JPMorgan Chase Bank, N.A., Wells Fargo Securities,
LLC, Barclays Bank PLC, Citibank, Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Mizuho Bank,
Ltd., MUFG Bank, Ltd. and RBC Capital Markets, as
joint lead arrangers and joint bookrunners, Wells Fargo
Bank, National Association, as syndication agent, each
of Bank of America, N.A., Barclays Bank PLC,
Citibank N.A., Mizuho Bank, Ltd., MUFG Bank, Ltd.,
and Royal Bank of Canada, as documentation agents,
and the other lenders and issuing banks that are parties
thereto.
Letter Agreement between Marathon Petroleum
Corporation and Gregory J. Goff, dated as of April 29,
2018 and effective as of October 1, 2018.
8-K
10.1
8/31/2018
001-35054
8-K
10.1
10/1/2018
001-35054
Tesoro Corporation 2006 Long-Term Incentive Plan
(as amended and restated)
8-K
10.4
12/18/2008 001-03473
(Andeavor)
Andeavor 2011 Long-Term Incentive Plan (as
amended and restated)
10-K
10.68
2/21/2018
10.51 *
Andeavor 2018 Long-Term Incentive Plan
S-8
99.1
5/4/2018
Amended and Restated Northern Tier Energy LP 2012
Long Term Incentive Plan
S-8
99.1
6/1/2017
Nonqualified stock option inducement award letters,
dated as of May 6, 2010, by and between Tesoro
Corporation and Gregory J. Goff
S-8
99.2
5/11/2011 333-174132
(Andeavor)
10.54 *
Marathon Petroleum Annual Cash Bonus Program
10-K
10.59
2/28/2019
001-35054
Form of Executive Officer Synergy Incentive Award
Agreement
Form of Chief Executive Officer Synergy Incentive
Award Agreement
8-K
10.1
1/30/2019
001-35054
8-K
10.2
1/30/2019
001-35054
Tesoro Corporation 2016 Performance Share Award
Grant Letter
8-K
10.4
2/3/2016
Tesoro Corporation 2017 Performance Share Grant
Letter
8-K
10.1
2/21/2017
Tesoro Corporation 2016 Market Stock Unit Award
Grant Letter
8-K
10.5
2/3/2016
Tesoro Corporation 2017 Market Stock Unit Grant
Letter
8-K
10.3
2/21/2017
Tesoro Corporation Performance Share Awards
Granted in 2016 Summary of Key Provisions
8-K
10.6
2/3/2016
Tesoro Corporation Performance Share Awards
Granted in 2017 Summary of Key Provisions
8-K
10.2
2/21/2017
Tesoro Corporation Market Stock Unit Awards
Granted in 2016 Summary of Key Provisions
8-K
10.7
2/3/2016
Tesoro Corporation Market Stock Unit Awards
Granted in 2017 Summary of Key Provisions
8-K
10.4
2/21/2017
10.65 *
Andeavor 2018 Performance Share Award Grant Letter
8-K
10.1
2/20/2018
161
001-03473
(Andeavor)
333-224688
(Andeavor)
333-218424
(Andeavor)
001-03473
(Andeavor)
001-03473
(Andeavor)
001-03473
(Andeavor)
001-03473
(Andeavor)
001-03473
(Andeavor)
001-03473
(Andeavor)
001-03473
(Andeavor)
001-03473
(Andeavor)
001-03473
(Andeavor)
Exhibit
Number
10.66 *
Exhibit Description
Andeavor Performance Share Awards Granted in 2018
Summary of Key Provisions
Form Exhibit
8-K
10.2
10.67 *
Andeavor 2018 Market Stock Unit Award Grant Letter
8-K
10.3
Filing
Date
SEC
File No.
Filed
Herewith
Furnished
Herewith
2/20/2018 001-03473
(Andeavor)
2/20/2018 001-03473
(Andeavor)
Incorporated by Reference
10.68 *
Andeavor Market Stock Unit Awards Granted in 2018
Summary of Key Provisions
8-K
10.4
2/20/2018 001-03473
(Andeavor)
8-K
10.1
1/4/2018
001-35054
10.69
Term Loan Agreement, dated as of January 2, 2018, by
and among MPLX LP, as borrower, Mizuho Bank, Ltd.,
as administrative agent, each of Mizuho Bank, Ltd.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated,
The Bank of Tokyo-Mitsubishi UFJ, Ltd., Barclays
Bank PLC, JPMorgan Chase Bank, N.A. and Wells
Fargo Securities, LLC, as joint lead arrangers and joint
bookrunners, each of Bank of America, N.A., The Bank
of Tokyo-Mitsubishi UFJ, Ltd., Barclays Bank PLC,
JPMorgan Chase Bank, N.A. and Wells Fargo Bank,
National Association, as syndication agents, and the
lenders that are parties thereto
10.70
Marathon Petroleum Corporation Deferred
Compensation Plan for Non-Employee Directors, as
amended and restated January 1, 2019
10-K
10.75
2/28/2019 001-35054
10.71 *
Conversion Notice for Andeavor Awards
10-K
10.76
2/28/2019 001-35054
10.72
10.73
10.74
10.75
10.76
10.77
First Amendment to Fourth Amended and Restated
Omnibus Agreement, dated as of January 30, 2019,
among Andeavor LLC, Marathon Petroleum Company
LP, Tesoro Refining & Marketing Company LLC,
Tesoro Companies, Inc., Tesoro Alaska Company LLC,
Andeavor Logistics LP and Tesoro Logistics GP, LLC
Fourth Amended and Restated Omnibus Agreement,
dated as of October 30, 2017, among Andeavor, Tesoro
Refining & Marketing Company LLC, Tesoro
Companies, Inc., Tesoro Alaska Company LLC, Tesoro
Logistics LP and Tesoro Logistics GP, LLC
Third Amended and Restated Schedules to Fourth
Amended and Restated Omnibus Agreement, effective
August 6, 2018, by and among Andeavor, Tesoro
Refining & Marketing Company LLC, Tesoro
Companies, Inc., Tesoro Alaska Company LLC,
Andeavor Logistics LP and Tesoro Logistics GP, LLC
Third Amended and Restated Senior Secured Revolving
Credit Agreement, dated as of January 29, 2016, among
Tesoro Logistics LP, Bank of America, N.A., as
administrative agent, and the other lenders party thereto
Senior Secured Revolving Credit Agreement, dated as of
January 29, 2016, among Tesoro Logistics LP, Bank of
America, N.A., as administrative agent, and the other
lenders party thereto
Amendment No. 1 to Third Amended and Restated
Credit Agreement, dated as of January 5, 2018, among
Andeavor Logistics LP, certain subsidiaries of Andeavor
Logistics LP party thereto, the lenders party thereto, and
Bank of America, N.A.
10-K
10.77
2/28/2019 001-35054
8-K
10.2
10/31/2017 001-35143
(ANDX)
10-Q
10.2
11/17/2018 001-35143
(ANDX)
8-K
10.1
2/3/2016
8-K
10.2
2/3/2016
8-K
10.1
1/5/2018
001-35143
(ANDX)
001-35143
(ANDX)
001-35143
(ANDX)
162
Exhibit
Number
10.78
10.79
10.80
10.81
10.82 *
10.83
10.84
10.85
10.86
10.87
10.88
10.89
10.90
Exhibit Description
Form Exhibit
Filing
Date
SEC
File No.
Filed
Herewith
Furnished
Herewith
Incorporated by Reference
Amendment No. 1 to Credit Agreement, dated as of
January 5, 2018, among Andeavor Logistics LP, certain
subsidiaries of Andeavor Logistics LP party thereto, the
lenders party thereto, and Bank of America, N.A.
Amendment No. 2 to Third Amended and Restated
Credit Agreement, dated as of December 20, 2018,
among Andeavor Logistics LP, as borrower, certain of
its subsidiaries party thereto, as guarantors, the lenders
party thereto, and Bank of America, N.A., as
administrative agent
Amendment No. 2 to the Credit Agreement, dated as of
December 20, 2018, among Andeavor Logistics LP, as
borrower, certain of its subsidiaries party thereto, as
guarantors, the lenders party thereto, and Bank of
America, N.A., as administrative agent
MPLX LP 2018 Incentive Compensation Plan MPC
Non-Employee Director Phantom Unit Award Policy
Amended and Restated Marathon Petroleum
Corporation 2012 Incentive Compensation Plan
Support Agreement, dated as of May 7, 2019, by and
among MPLX LP, Andeavor Logistics LP, Tesoro
Logistics GP, LLC, Western Refining Southwest, Inc.
and Marathon Petroleum Corporation.
First Amendment to the Amended and Restated
Marathon Petroleum Corporation 2012 Incentive
Compensation Plan
Cooperation Agreement, dated as of December 15,
2019, by and among Marathon Petroleum Corporation,
MPLX LP, Elliott Associates, L.P., Elliott International,
L.P. and Elliott International Capital Advisors Inc.
8-K
10.2
1/5/2018
001-35143
(ANDX)
8-K
10.1
12/27/2018 001-35143
(ANDX)
8-K
10.2
12/27/2018 001-35143
(ANDX)
10-K
10.86
2/28/2019 001-35054
10-K
10.87
2/28/2019 001-35054
8-K
10.1
5/8/2019
001-35054
X
8-K
10.1
12/16/2019 001-35054
Restricted Stock Award Agreement - Officer
10-Q
Nonqualified Stock Option Award Agreement - Officer
10-Q
Performance Unit Award Agreement 2019 - 2021
Performance Cycle
10-Q
10.1
10.2
10.3
5/9/2019
001-35054
5/9/2019
001-35054
5/9/2019
001-35054
8-K
10.1
7/25/2019 001-35054
8-K
10.1
8/1/2019
001-35054
Second Amendment to Receivables Purchase
Agreement, dated July 19, 2019, by and among MPC
Trade Receivables Company LLC, as seller, Marathon
Petroleum Company LP, as servicer, MUFG Bank, Ltd.,
as administrative agent, certain committed purchasers
and conduit purchasers that are parties thereto from time
to time and certain other parties thereto from time to
time as managing agents and letter of credit issuers.
364-Day Revolving Credit Agreement, dated as of
July 26, 2019, among MPC, as borrower, JPMorgan
Chase Bank, N.A., as administrative agent, each of
JPMorgan Chase Bank, N.A., Wells Fargo Securities,
LLC, Barclays Bank PLC, Citibank, N.A., BofA
Securities, Mizuho Bank, Ltd., MUFG Bank, Ltd. and
Royal Bank of Canada, as joint lead arrangers and joint
bookrunners, Wells Fargo Bank, National Association,
as syndication agent, each of Bank of America, N.A.,
Barclays Bank PLC, Citibank, N.A., Mizuho Bank, Ltd.,
MUFG Bank, Ltd., and Royal Bank of Canada, as
documentation agents, and the other lenders and issuing
banks that are parties thereto.
163
Exhibit Description
Form Exhibit
Filing
Date
SEC
File No.
Filed
Herewith
Furnished
Herewith
Incorporated by Reference
Amended and Restated Credit Agreement, dated as of
July 26, 2019, by and among MPLX, as borrower, Wells
Fargo Bank, National Association, as administrative
agent, each of Wells Fargo Securities, LLC, JPMorgan
Chase Bank, N.A., Barclays Bank PLC, BofA Securities,
Inc., Citigroup Global Markets Inc., Mizuho Bank, Ltd.,
MUFG Bank, Ltd. and Royal Bank of Canada, as joint
lead arrangers and joint bookrunners, JPMorgan Chase
Bank, N.A., as syndication agent, each of Bank of
America, N.A., Barclays Bank PLC, Citigroup Global
Markets Inc., Mizuho Bank, Ltd., MUFG Bank, Ltd. and
Royal Bank of Canada, as documentation agents, and the
other lenders and issuing banks that are parties thereto.
Waiver and Second Amendment to Fourth Amended and
Restated Omnibus Agreement, dated as of July 29, 2019,
by and among MPC, Andeavor Logistics LP, Tesoro
Logistics GP, LLC, Tesoro Refining & Marketing
Company LLC, Tesoro Companies, Inc., Tesoro Alaska
Company LLC and Marathon Petroleum Company LP.
Term Loan Agreement, dated as of September 26, 2019,
by and among MPLX LP, as borrower, Wells Fargo
Bank, National Association, as administrative agent, each
of Wells Fargo Securities, LLC, BofA Securities, Inc. and
Mizuho Bank, Ltd., as joint lead arrangers and joint
bookrunners, and the syndication agents, documentation
agents and lenders that are parties thereto
8-K
10.2
8/1/2019 001-35054
8-K
10.3
8/1/2019 001-35054
8-K
10.1
9/27/2019 001-35714
Code of Ethics for Senior Financial Officers
10-K
14.1
2/24/2017 001-35054
Exhibit
Number
10.91
10.92
10.93
14.1
21.1
23.1
24.1
31.1
31.2
32.1
32.2
List of Subsidiaries
Consent of Independent Registered Public Accounting
Firm
Power of Attorney of Directors and Officers of Marathon
Petroleum Corporation
Certification of Chief Executive Officer pursuant to Rule
13(a)-14 and 15(d)-14 under the Securities Exchange Act
of 1934.
Certification of Chief Financial Officer pursuant to Rule
13(a)-14 and 15(d)-14 under the Securities Exchange Act
of 1934.
Certification of Chief Executive Officer pursuant to 18
U.S.C. Section 1350.
Certification of Chief Financial Officer pursuant to 18
U.S.C. Section 1350.
101.INS
Inline XBRL Instance Document - the instance document
does not appear in the Interactive Data File because its
XBRL tags are embedded with the Inline XBRL
document.
101.SCH
Inline XBRL Taxonomy Extension Schema Document.
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase
Document.
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase
Document.
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase
Document.
164
X
X
X
X
X
X
X
X
X
X
X
X
Exhibit
Number
Exhibit Description
Incorporated by Reference
Form Exhibit
Filing
Date
SEC
File No.
Filed
Herewith
Furnished
Herewith
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document.
X
104
Cover Page Interactive Data File (formatted as Inline XBRL
and contained in Exhibit 101).
†
*
The exhibits and schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K and will be provided to the Securities
and Exchange Commission upon request.
Indicates management contract or compensatory plan, contract or arrangement in which one or more directors or executive officers of
the Registrant may be participants.
165
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
February 28, 2020
MARATHON PETROLEUM CORPORATION
By:
/s/ John J. Quaid
John J. Quaid
Vice President and Controller
166
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on February 28, 2020 on behalf of the registrant and in the capacities indicated.
Signature
Title
/s/ Gary R. Heminger
Gary R. Heminger
/s/ Donald C. Templin
Donald C. Templin
Chairman of the Board and Chief Executive Officer
(principal executive officer)
Executive Vice President and Chief Financial Officer
(principal financial officer)
/s/ John J. Quaid
John J. Quaid
Vice President and Controller
(principal accounting officer)
*
Abdulaziz F. Alkhayyal
*
Evan Bayh
*
Charles E. Bunch
*
Jonathan Z. Cohen
*
Steven A. Davis
*
Edward G. Galante
*
James E. Rohr
*
Kim K.W. Rucker
*
J. Michael Stice
*
John P. Surma
*
Susan Tomasky
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
167
* The undersigned, by signing his name hereto, does sign and execute this report pursuant to the Power of
Attorney executed by the above-named directors and officers of the registrant, which is being filed herewith
on behalf of such directors and officers.
By:
/s/ Gary R. Heminger
Gary R. Heminger
Attorney-in-Fact
February 28, 2020
168
[THIS PAGE INTENTIONALLY LEFT BLANK]
[THIS PAGE INTENTIONALLY LEFT BLANK]
CORPORATE INFORMATION
Corporate Headquarters
539 South Main St.
Findlay, OH 45840
Marathon Petroleum Corporation Website
www.marathonpetroleum.com
Investor Relations Office
539 South Main St.
Findlay, OH 45840
ir@marathonpetroleum.com
Kristina Kazarian
Vice President, Investor Relations
(419) 421-2071
Notice of Annual Meeting
The 2020 Annual Meeting of Shareholders
will be held in Findlay, Ohio, on April 29, 2020.
Independent Accountants
PricewaterhouseCoopers LLP
406 Washington St., Suite 200
Toledo, OH 43604
Stock Exchange Listing
New York Stock Exchange
Common Stock Symbol
MPC
Principal Stock Transfer Agent
Computershare
Shareholder correspondence should be mailed to:
P.O. Box 505000
Louisville, KY 40233-5000
Overnight correspondence should be mailed to:
462 South 4th St., Suite 1600
Louisville, KY 40202
(866) 820-7494 (toll free – U.S., Canada,
Puerto Rico)
(781) 575-2176 (other non-U.S. jurisdictions)
web.queries@computershare.com
Annual Report on Form 10-K
Additional copies of the Marathon Petroleum
Corporation 2019 Annual Report may be obtained
by contacting:
Public Affairs
539 South Main St.
Findlay, OH 45840
(419) 421-3577
Dividends
Dividends on common stock, as may be
declared by the Board of Directors, are typically
paid mid-month in March, June, September and
December.
Dividend Checks Not Received / Electronic
Deposit
If you do not receive your dividend check on the
appropriate payment date, we suggest that you
wait at least 10 days after the payment date to
allow for any delay in mail delivery. After that time,
advise Computershare by phone or in writing
to issue a replacement check. You may contact
Computershare to authorize electronic deposit of
your dividends into your bank account.
Dividend Reinvestment and Direct Stock Purchase Plan
The Dividend Reinvestment and Direct Stock Purchase Plan
provides stockholders with a convenient way to purchase
additional shares of Marathon Petroleum Corporation common
stock through investment of cash dividends or through
optional cash payments. Stockholders of record can request
a copy of the Plan Prospectus and an authorization form
from Computershare. Beneficial holders should contact
their brokers.
Book-entry Form of Stock Ownership
Marathon Petroleum Corporation exclusively maintains book-
entry form of stockholder ownership. Account statements
issued by stock transfer agent, Computershare, shall serve as
stockholders’ record of ownership. Questions regarding stock
ownership should be directed to Computershare.
Taxpayer Identification Number
Federal law requires that each stockholder provide a certified
taxpayer identification number (TIN) for his/her stockholder
account. For individual stockholders, your TIN is your Social
Security number. If you do not provide a certified TIN,
Computershare may be required to withhold 24% for federal
income taxes from your dividends.
Address Change
It is important that you notify Computershare immediately, by
phone, in writing or by fax, when you change your address.
Seasonal addresses can be entered for your account.
Stock Return Performance Graph
The following performance graph compares the cumulative
total return, assuming the reinvestment of dividends, of a
$100 investment in our common stock from Dec. 31, 2014, to
Dec. 31, 2019, compared to the cumulative total return of a
$100 investment in the S&P 500 Index and an index of peer
companies (selected by us) for the same period. Our peer
group consists of the following companies that engage in
domestic refining operations: BP plc, Chevron Corporation,
Exxon Mobil Corporation, HollyFrontier Corporation, PBF
Energy Inc., Phillips 66 and Valero Energy Corporation.
The following performance graph is not “soliciting material” and will not be
deemed to be filed with the Securities and Exchange Commission (SEC) or
incorporated by reference into any of MPC’s filings with the SEC, except to the
extent that we specifically incorporate it by reference into any such filings.
Comparison of 5 Year Cumulative Total Return*
Among Marathon Petroleum Corporation, The S&P 500 Index,
and a Peer Group
$180
$160
$140
$120
$100
$80
$60
$40
$20
$0
12/14
12/15
12/16
12/17
12/18
12/19
Marathon Petroleum Corporation
S&P 500
2019 Peer Group
* $100 invested on Dec. 31, 2014 in stock or index, including reinvestment of dividends.
Fiscal year ending Dec. 31.
74380Cover.indd 3
3/9/20 11:07 AM
MARATHON PETROLEUM CORPORATION I 2019 ANNUAL REPORT
MARATHON PETROLEUM CORPORATION | 539 South Main St. | Findlay, OH 45840
Disclosures Regarding Forward-Looking Statements
This summary annual report wrap includes forward-looking statements. You can identify our forward-looking statements by words such as “anticipate,” “believe,”
“design,” “estimate,” “expect,” “forecast,” “goal,” “guidance,” “imply,” “intend,” “objective,” “opportunity,” “outlook,” “plan,” “position,” “pursue,” “prospective,”
“predict,” “project,” “potential,” “seek,” “strategy,” “target,” “could,” “may,” “should,” “would,” “will” or other similar expressions that convey the uncertainty of future
events or outcomes. We have based our forward-looking statements on our current expectations, estimates and projections about our industry and our company. We
caution that these statements are not guarantees of future performance and you should not rely unduly on them, as they involve risks, uncertainties and assumptions
that we cannot predict. In addition, we have based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate.
While our management considers these assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and
other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. Accordingly, our actual results may differ
materially from the future performance that we have expressed or forecast in our forward-looking statements. In accordance with “safe harbor” provisions of the Private
Securities Litigation Reform Act of 1995, we have included in our attached Form 10-K for the year ended Dec. 31, 2019, cautionary language identifying important
factors, though not necessarily all such factors, that could cause future outcomes to differ materially from those set forth in the forward-looking statements.
74380Cover.indd 4
3/9/20 11:07 AM