Marathon Petroleum Beats Profit Estimates, Plans Maintenance Slowdown in Q1 2024

(Reuters) — Marathon Petroleum beat quarterly profit estimates on Tuesday, supported by strong refined product margins and high refinery utilization rates, but expects to cut back plant activity sharply at the start of this year for maintenance.

The company's fourth-quarter revenue of $36.82 billion topped Wall Street's expectations of $35.25 billion, according to LSEG data, backed by higher sales volumes.

The refiner expects another year of record global oil demand growth in 2024 will support U.S. refiners, despite projections for new global refining capacity to come online this year.

"In our system, both domestically and within our export business, we're seeing steady demand year over year for gasoline, diesel and jet fuel," said Michael Hennigan, chief executive of Marathon.

Last quarter, Marathon ran its refineries at about 91% utilization, resulting in a total throughput of 2.9 million barrels per day (bpd).

Maintenance costs in the refining segment fell to $299 million, from $442 million in the year-ago quarter.

However, the company only plans to operate its plants at 83% capacity in the first quarter of 2024 due to turnarounds at four of its major plants - Galveston Bay in Texas, Los Angeles in California, Garyville in Louisiana and Robinson in Illinois.

Refining earnings came in at $12.74 per barrel, according to company executives, supported by demand for light products such as jet fuel, which executives said sold at a strong premium to diesel.

But total refined product margins declined from the previous quarter due to lower crack spreads.

Its refining and marketing margins fell 38.3%, to $17.79 per barrel for the October to December quarter, as fuel prices scaled back from 2022 peaks.

Last week, rival Valero Energy beat profit estimates on the back of resilient margins.

The company reported adjusted net income of $3.98 per share for the three months ended Dec. 31, compared with analysts' average estimate of $2.20 per share.

Despite an increase in global refining capacity, supplies of fuel remain tight amid production cuts by OPEC+ countries and the ongoing war in Ukraine.

"As we look further into 2024, we believe the U.S. refining industry will experience an enhanced mid-cycle environment," said Hennigan.

The company is planning capital spending of $1.25 billion in 2024, lower than 2023.

Part of its capital spend is to build a 90,000-bpd high-pressure distillate hydrotreater, which removes impurities like sulfur, at the Galveston Bay refinery in Texas. The project is expected to be completed by the end of 2027.

"Marathon is in the enviable position of being on the downside of a capital spending cycle... Management is able to be selective in where it invests capital," said Third Bridge analyst Peter McNally.

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