OREANDA-NEWS. December 12, 2013. Executives from Marathon Petroleum Corporation (NYSE: MPC) and MPLX LP (NYSE: MPLX) outlined the companies' strategic priorities at the MPC and MPLX 2013 Analyst & Investor Day.

MPC President and CEO Gary R. Heminger, who also is chairman and CEO of MPLX, highlighted MPC's greater emphasis on growing stable earnings from the company's midstream and retail businesses to balance earnings and cash flow from its refining and marketing segment. "We recognize that earnings volatility is an issue for long-term investors, and we are addressing that by growing more aggressively the segments of our business that produce more stable cash flows," Heminger said.

He added that the company's Refining & Marketing segment will capitalize on evolving market conditions and likely remain the predominant cash flow generator for the company in the near-term. "We will continue to make investments in refining assets to capture margin improvement opportunities and optimize our operations. Such investments will include conversion projects and light sweet crude processing capabilities," he said.

"We are making meaningful changes in the way we allocate growth capital," Heminger emphasized. "This approach should result in more stable cash flows. Our future performance will reflect the results of our strategy to reposition our portfolio to focus on higher-valued businesses. We believe this will enhance returns to shareholders through an improved combination of growth from our midstream and retail businesses and substantial free cash flow from our refining operations."

MPC Sr. Vice President and Chief Financial Officer Don Templin emphasized the company's balanced approach to business investment and capital returns, and provided investors with a look at the company's 2014-2016 capital investment profile. Templin noted that over the next three years, MPC expects to invest USD640 million in midstream assets that are a part of its Refining & Marketing segment; USD 2.4 billion in Pipeline Transportation, including MPLX; and USD 925 million on growing the Speedway convenience store segment. This represents a USD 2.4 billion increase compared with the amount spent on these segments during the previous three-year period.

Templin also pointed out that MPC intends to return 100 percent of its through-cycle free cash flow to shareholders via dividends and share repurchases. "Our sharp focus on shareholder returns since becoming a publicly traded company in July 2011 has resulted in cumulative capital returns of USD 4.6 billion through the third quarter of this year," said Templin. "This is strong evidence of our commitment to return capital to shareholders through all business cycles, and that commitment continues."

A key component of MPC's strategy will be MPLX, the master limited partnership formed by MPC in October 2012 to be the primary vehicle for MPC to own, operate and grow its midstream business. Garry Peiffer, president of MPLX and executive vice president at MPC, provided insight into MPLX's strategy for sustained, long-term growth. The partnership will focus on fee-based businesses, pursuing organic growth opportunities and also growing through acquisitions, including drop-downs from MPC's substantial and expanding portfolio of midstream assets. Peiffer also reiterated that MPLX intends to grow distributions at an annual rate of 15 to 20 percent for at least the next several years.

Peiffer provided an in-depth look at MPLX's opportunities, as growing North American hydrocarbon production requires new transportation and logistics options. One of the biggest areas of opportunity is the Bakken Shale oil region. While noting potential drop-downs from MPC to MPLX, Peiffer pointed out that MPC has recently committed to be an anchor shipper on Enbridge's Sandpiper and Southern Access Extension pipeline projects, providing MPC additional access to growing crude oil production from this region. These commitments provide MPC the opportunity to acquire equity interests in these major pipeline projects. Peiffer also highlighted another pipeline opportunity in eastern Ohio, where MPLX is evaluating right of way options to construct a USD 140 million pipeline to connect Utica Shale production in southeastern Ohio to MPC's refinery in Canton, Ohio.

Speedway LLC President Tony Kenney provided an overview of Speedway's top-tier performance in the convenience store industry. "This past year, we increased same-store sales and experienced higher gasoline and distillate gross margins," said Kenney, who also outlined capital expenditures and Speedway's expansion into new regions. "Our new locations in Pennsylvania and Tennessee demonstrate investments in Speedway's business to provide for accelerated growth in contiguous markets. We are evaluating opportunities for further organic growth and acquisitions. Speedway is on a path to generate as much as USD 1 billion in EBITDA [earnings before interest, taxes, depreciation and amortization] annually by 2020."

Other presenters at the Analyst & Investor Day event were MPC Sr. Vice President of Supply, Distribution and Planning Mike Palmer and MPC Sr. Vice President of Refining Rich Bedell. Palmer summarized the company's views on expanding crude oil supply in Canada, the Bakken, Eagle Ford, and Utica Shale regions, as well as refined product demand and export prospects. Bedell provided insight into the company's refining operations and processing capabilities and reviewed projects to optimize distillate production and exports. Bedell also highlighted several margin enhancement projects across the company's seven-refinery system, including a special focus on the newly acquired Galveston Bay refinery and a project being evaluated at the Garyville refinery to convert heavy residual oil into ultra-low sulfur diesel.

Heminger said that one of the primary drivers of MPC's and MPLX's success is their focus on ensuring their operations are safe and environmentally sound, noting that these constitute the companies' license to operate. With that commitment in mind, Heminger said MPC will continue its focus on top-tier financial performance through all business cycles, and will continue to pursue growth opportunities in higher-valued businesses that should provide more stable earnings and cash flows.

"Our path ahead is clear, as are the rewards," Heminger concluded. "We are enthusiastic about the future for MPC and MPLX. As we continue to reposition our asset portfolio, we will remain unrelenting in our goal of driving shareholder value through disciplined investments and returning capital to our shareholders."