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Morningstar | Marathon Petroleum Can Deliver Earnings Growth independent of Macro Conditions

With the acquisition of Andeavor closing late last year, Marathon is turning its attention to fully integrating the company's operations and delivering on its synergy targets that should provide earnings growth independent of macro conditions. Management expects to deliver $1.4 billion in annual run-rate synergies by year-end 2021, with nearly half coming from the refining and marketing segment. The combination of the two companies created the U.S.' largest refiner with 3.0 mmbd of refining capacity spread across the Mid-Continent, Gulf Coast, and West Coast. Marathon plans to leverage this geographically diverse footprint to optimize its crude supply from Canada, the Permian, and Bakken to reduce feedstock cost while also improving its operating cost structure and investing in growth. Additionally, Marathon expects to deliver $1.1 billion in EBITDA growth by year-end 2022 through investments in upgrading, yield flexibility, and conversion capacity.Despite its large refining footprint, the segment will contribute only about half of total company EBITDA in 2019 as a result of both Marathon's and Andeavor’s past efforts to diversify earnings streams. Both companies have done so by primarily focusing on growing their midstream operations through their respective MLPs (MPLX and ANDX, slated to merge later in 2019). Meanwhile, growth will be focused on gathering processing assets in across the Permian, Bakken, and Marcellus with plans to create an integrated Permian network ranging from gathering and processing assets to export terminals.Both companies also invested in growing their retail footprints as part of a diversification and integration strategy. The acquisition of Andeavor also nearly doubles Marathon's retail footprint to 5,000 locations (company-owned convenience stores and direct dealer contracts) from which management is targeting $300 million in synergies through reduced costs and purchasing leverage. Past growth has largely driven by acquisition and will likely continue to play a role in the future along with upgrading offerings of existing locations and integration of technology.