Marathon Petroleum Corporation (MPC) Earnings

Management highlights

- Core Operational & Safety Performance * Year-to-date 2026 unplanned downtime is the lowest recorded this decade; the Gulf Coast refinery system achieved 100% utilization in the second quarter. * Two high-return yield-enhancing refining projects were completed: the Robinson Product Flexibility Investment adds ~10,000 barrels per day of incremental jet fuel production, and the El Paso Yield Improvement Investment enhances specialty gasoline production for key markets. All new investments target returns of 25% or higher. * MPC's integrated system accesses economically advantaged crude barrels, reducing exposure to more volatile Brent-price crudes impacted by the Persian Gulf conflict. - Midstream (MPLX) Operational Progress * The Secretariat One natural gas processing plant entered service in April 2026; the Blackcomb natural gas pipeline began commissioning in July 2026 and is expected to reach full commercial service in the fourth quarter 2026. * The Harmon Creek III processing plant began operations in the third quarter 2026, bringing MPLX's total processing capacity to 8.1 billion cubic feet per day and de-ethanization capacity to over 800,000 barrels per day. * Permian Sour gas treating volumes exceeded 150 million cubic feet per day for the second consecutive quarter, and capacity is on track to expand to over 400 million cubic feet per day by the end of 2026. - Capital Allocation & Shareholder Returns * MPC returned $2.8 billion of capital to shareholders in the second quarter 2026, including $2.5 billion in share repurchases, maintaining a disciplined balance sheet framework. * MPLX increased its 2026 capital growth spending outlook by $500 million to $2.9 billion, primarily to pull forward construction of the Gulf Coast Fractionation Project previously planned for early 2027.

Guidance

- Refining market outlook: Management expects the current constructive enhanced mid-cycle refining environment to persist through the end of 2026 and into 2027, driven by sustained global market tightness. - MPLX growth outlook: MPLX is on track to deliver mid-single-digit adjusted EBITDA growth in 2026 (weighted to the second half of the year), with strong adjusted EBITDA growth expected in 2027. MPLX is positioned to deliver 12.5% annual distribution growth in both 2026 and 2027. - Renewable diesel outlook: Management expects the current constructive margin environment for renewable diesel to continue through the remainder of 2026. - Capital allocation guidance: There is no change to MPC's core capital allocation priorities, with returning excess capital to shareholders via share repurchases remaining the top priority after funding required investments.

Segment performance

1. Refining and Marketing (R&M): Second quarter 2026 adjusted EBITDA was $6.7 billion on total throughput of nearly 3 million barrels per day, with a system-wide utilization rate of 94%. The Gulf Coast region achieved 100% utilization with $27 of adjusted EBITDA per barrel; the MidCon region achieved 87% utilization (due to planned turnaround and maintenance) with nearly $21 of adjusted EBITDA per barrel; the West Coast region achieved 93% utilization with over $27 of adjusted EBITDA per barrel. R&M margin capture hit 112% in the second quarter, bringing year-to-date capture to 108%. R&M contributed ~78.8% of consolidated adjusted EBITDA. 2. Midstream (MPLX): Second quarter 2026 adjusted EBITDA increased $137 million year-over-year, driven by higher rates and throughputs, partially offset by non-core asset divestitures. MPLX contributed a small single-digit percentage of consolidated adjusted EBITDA. 3. Renewable Diesel: Following the first quarter 2026 Martinez turnaround, utilization increased to 95%. Segment adjusted EBITDA increased approximately $277 million year-over-year, supported by a more constructive margin environment, feedstock optimization, and improved regulatory credit values. Renewable diesel contributed ~3.3% of consolidated adjusted EBITDA. Consolidated total adjusted EBITDA for the second quarter 2026 was $8.5 billion, an increase of ~$5.2 billion year-over-year, driven primarily by the R&M segment.

Risks & headwinds

- Geopolitical risk: Ongoing conflicts in the Persian Gulf and Ukraine have created major global refining capacity disruptions (over 9 million barrels per day of total planned/unplanned downtime, 4 million barrels per day above historical norms), leading to sustained market volatility and tight product inventories. - Inventory risk: U.S. gasoline inventories are well below the five-year average range, and distillate inventories are at the bottom of the five-year range, amplifying the impact of any additional supply disruptions. - Market volatility risk: Any additional refining outages (including during hurricane season and elevated third quarter turnaround activity) are expected to cause large outsized market price moves, which will continue through the end of 2026. - Working capital risk: Working capital is highly sensitive to crude price movements, with a $10 per barrel change in crude prices resulting in a $550 million swing in working capital in either direction. - Regulatory policy risk: Renewable diesel margins are heavily dependent on Renewable Identification Number (RIN) and Renewable Volume Obligation (RVO) policy, which creates uncertainty around long-term market balance.

Analyst Q&A

• Q: What drove MPC's very strong 112% Q2 capture rate, and what should investors expect for sustainable capture going forward? /

  A: Management attributed the strong result to both market tailwinds and sustained internal capabilities. Key Q2 specific drivers included strict inventory discipline in a backwardated market, advantaged crude sourcing (including direct SPR barrels, doubled Venezuelan crude runs, record Canadian heavy crude on the Gulf Coast, and doubled advantaged California crudes on the West Coast), unwind of Q1 derivative losses, incremental jet production in a strong jet margin environment, and record operational reliability. Sustainable capabilities include cross-functional collaboration across planning, commercial, and operations teams, embedded digital and data analytics that enable faster value-driven decision making, and integrated system-wide optimization that allows rapid yield shifts (such as between jet and diesel) to match market conditions. Jet yield capability has increased from 8% to 12% since 2024, supporting ongoing value capture.

• Q: With a large cash build on the balance sheet this quarter, do you have any hesitancy about aggressive share repurchases amid uncertainty about the durability of current margins? /

  A: Management confirmed there is no change to MPC's capital allocation priorities, with returning capital to shareholders via share repurchases remaining the top priority. The current elevated cash balance is partially due to timing of working capital benefits and the obligation to repay SPR crude barrels received this quarter, but this does not change the company's target cash holding of ~$1 billion for baseline operations. Management maintains that MPLX's stable growing distribution will continue to support sustained shareholder returns, regardless of near-term market volatility.

• Q: Given current structural global refining capacity disruptions, could the enhanced mid-cycle environment persist for a decade or longer? /

  A: Management noted that current market tightness is driven by sustained capacity outages: over 2.8 million barrels per day (a third of Russia's total capacity) is offline due to Ukrainian attacks, and Russian diesel exports are fully banned, while Middle Eastern refineries have been slow to bring capacity back online after Persian Gulf conflict disruptions. Global product inventories remain at multi-decade lows, and demand remains resilient across gasoline, diesel, and jet domestically and internationally. Management confirmed it expects the constructive environment to persist well into 2027, with ongoing near-term volatility expected through the end of the year from hurricane season and planned third quarter turnarounds.

• Q: What is MPC's approach to new refining and renewable diesel capital growth amid current structural product shortages? /

  A: Management said MPC already has extensive crude slate flexibility, with the ability to run over 100 different crude types across its system, so no additional investment in crude processing capacity is needed. For conventional refining, MPC will only deploy capital to reliability improvements and yield-enhancing small projects that meet its strict 25%+ return hurdle, rather than large new greenfield capacity builds. For renewable diesel, MPC will only allocate capital for efficiency improvements at existing assets, with no plans for new incremental renewable diesel capacity at this time.