-
Rigorous independent committee
review concludes that long-term shareholder value is optimized with
integrated Speedway
-
Company has returned $1.55
billion to MPC shareholders in the first half of 2017 alone and is
committed to returning additional capital as it executes its
strategic plan
-
Company intends to repurchase
$1 billion of additional shares by the end of 2017
FINDLAY, Ohio, Sept. 5, 2017
- Marathon Petroleum Corp. (NYSE: MPC) today announced that the
company's Board of Directors, based on a recommendation from its
independent special committee, has determined that maintaining
Speedway as a fully integrated business within MPC provides the
best opportunity for enhancing long-term shareholder value.
Gary R. Heminger, MPC chairman and chief executive
officer, said: "Our board has a well-established track record of
taking bold and transformative actions to drive value and will
continue to do so when it's in the best interests of shareholders.
Following a rigorous review led by an independent committee of the
Board, the Board has unanimously concluded that shareholder value
is best optimized with Speedway remaining part of our integrated
business. We thank the independent committee for its efforts in
performing a comprehensive review of options to ensure we are best
positioned to deliver the greatest possible long-term value for our
shareholders."
Heminger continued: "MPC has returned $1.55
billion to shareholders including share buybacks and dividends
through June of this year alone. And, we remain committed to
closing the substantial gap between our stock and the intrinsic
value of the business through the execution of the remaining
dropdowns to MPLX, continued share repurchases, and by highlighting
the significant value of our GP interests in MPLX through an
exchange of GP economic interests for LP units."
As a continuing demonstration of that commitment
to shareholders, the company expects to repurchase approximately
$450 million of its shares by the end of the third quarter, funded
partially by after-tax cash proceeds from its Sept. 1 dropdown, and
another $550 million in the fourth quarter. The company plans to
return this additional capital to shareholders prudently and
expeditiously - subject to maintaining its current investment grade
credit profile - and will further consider repurchasing additional
shares in the fourth quarter subject to operating performance and
market conditions. Further return of capital is planned with the
after-tax cash proceeds from the remaining dropdowns expected to be
completed in the first quarter of 2018, again consistent with
maintaining an investment grade credit profile.
Since the company announced its strategic actions
in January, MPC stock has outperformed its peer group by 6 percent.
The Board and management team believe there is still significant
upside to the company's valuation and remain committed to further
capturing value for the benefit of shareholders, and will not
hesitate to act on opportunities to drive shareholder value
wherever those opportunities may exist. "We are confident that our
value creation plan - combined with our proven operational
excellence - will further drive substantial long-term shareholder
value," Heminger said.
"Over the past year, MPC has taken significant
steps to create value for shareholders. Elliott is supportive
of those steps and appreciates the constructive dialogue with the
company," said John Pike, senior portfolio manager at Elliott
Management. "We are encouraged by management's efforts to date,
applaud the intent to repurchase an additional $1 billion in shares
by the end of the year, and look forward to the completion of the
further midstream transactions in the first quarter of 2018. While
we see value in a spin of Speedway, today's decision to maintain an
integrated Speedway came after a full, rigorous and independent
review. We are also confident in the company's commitment to
take further action as needed to realize the upside in the
company's value."
Key factors in the MPC Board's decision to
maintain Speedway as an integrated business within MPC include the
following:
· Substantial integration synergies would be lost
as a result of a spin-off or separation. Following an initial
supply agreement, MPC estimates the synergy loss at between
approximately $270 million and $390 million annually. Any supply
agreement structured in pursuit of a tax-free separation would be
market-based. Such a conventional, arm's length supply agreement
would be limited in term and volume, providing only a temporary
offset to the lost synergies.
· A spin-off or separation of Speedway would
require at least $2.5 billion of incremental debt reduction at MPC
and an additional $1 billion of cash on hand at MPC in order to
manage pro forma leverage targets and maintain MPC's current
investment grade credit profile. This would be a significant use of
MPC cash and likely reduce the future return of capital to
shareholders and investments in the business.
· Speedway is a proven, best-in-class convenience
store retailer and its value appears to be well understood by the
market. The potential advantages of separation are not compelling
relative to the disadvantages, nor does Speedway remaining part of
MPC present a structural impediment to its long-term growth
prospects.
· There is strong value in cash flow
diversification, particularly in the energy sector. A separation
would leave the remaining business significantly more volatile and
vulnerable to sector downturns.
The independent special committee and the Board
believe the best vehicle to convey the full value of the businesses
is MPC common stock.
In commenting on the engagement with Elliott,
Heminger noted: "Throughout the execution of our plan to deliver
substantial value to MPC shareholders, the Board and management
team have benefitted from our constructive dialogue with, and
valuable input from, Elliott and all of our shareholders."
Value Creation
Actions
MPC is delivering on the value-enhancing actions announced in
January and has increased capital returns. Since January, MPC has
contributed assets to MPLX LP (NYSE: MPLX) with a combined
transaction value of $3.065 billion, netting $1.7 billion in
after-tax cash proceeds and 32 million MPLX units. MPC is on track
to complete the dropdown of remaining identified assets, which
generate approximately $1 billion in annual EBITDA, by the end of
the first quarter of 2018. The company expects to exchange its
general partner economic interest in MPLX for MPLX common units in
conjunction with the completion of the dropdowns - providing a
clear market valuation of MPC's economic interest in the GP and
reducing MPLX's cost of capital.
The independent committee of the Board of
Directors engaged J.P. Morgan Securities LLC as financial advisor
and Jones Day as legal advisor. The company engaged Citigroup
Global Markets Inc. as financial advisor and Ernst & Young LLP
and Crowell & Moring LLP as tax advisors.
Investor Presentation and Conference Call
MPC issued an investor presentation which provides
additional detail on today's announcement. The presentation can be
found by visiting MPC's website at http://www.marathonpetroleum.com
and clicking on the "Events & Presentations" tab.
At 8:30 a.m. EDT today, MPC will hold a webcast
and conference call to discuss today's announcement. Interested
parties may listen to the conference call by
dialing 1-888-282-1746 (confirmation number 8530940) or by
visiting MPC's website at http://www.marathonpetroleum.com by
clicking on the "Strategic Actions Update" link. Replays of the
conference call will be available on the company's website through
Monday, Sept. 18.
###
About Marathon Petroleum Corporation MPC is the
nation's third-largest refiner, with a crude oil refining capacity
of approximately 1.8 million barrels per calendar day in its
seven-refinery system. Marathon brand gasoline is sold through
approximately 5,600 independently owned retail outlets across 19
states. In addition, Speedway LLC, an MPC subsidiary, owns and
operates the nation's second-largest convenience store chain, with
approximately 2,730 convenience stores in 21 states. MPC owns,
leases or has ownership interests in approximately 10,800 miles of
crude and light product pipelines. Through subsidiaries, MPC owns
the general partner of MPLX LP, a midstream master limited
partnership. Through MPLX, MPC has ownership interests in gathering
and processing facilities with approximately 5.6 billion cubic feet
per day of gathering capacity, 8 billion cubic feet per day of
natural gas processing capacity and 570,000 barrels per day of
fractionation capacity. MPC's fully integrated system provides
operational flexibility to move crude oil, NGLs, feedstocks and
petroleum-related products efficiently through the company's
distribution network and midstream service businesses in the
Midwest, Northeast, East Coast, Southeast and Gulf Coast regions.
Investor Relations
Contacts:
Lisa Wilson (419) 421-2071
Denice Myers (419) 421-2965
Doug Wendt (419) 421-2423
Media Contacts:
Chuck Rice (419) 421-2521
Katie Merx (419) 672-5159
Forward-looking
Statements
This press release contains
forward-looking statements within the meaning of federal securities
laws regarding Marathon Petroleum Corporation ("MPC") and MPLX LP
("MPLX"). These forward-looking statements relate to, among other
things, expectations, estimates and projections concerning the
business and operations of MPC and MPLX, including proposed
strategic initiatives and our value creation plans. You can
identify 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. Such
forward-looking statements are not guarantees of future performance
and are subject to risks, uncertainties and other factors, some of
which are beyond the companies' control and are difficult to
predict. Factors that could cause MPC's actual results to differ
materially from those implied in the forward-looking statements
include: the time, costs and ability to obtain regulatory or other
approvals and consents and otherwise consummate the strategic
initiatives discussed herein; the satisfaction or waiver of
conditions in the agreements governing the strategic initiatives
discussed herein; our ability to achieve the strategic and other
objectives related to the strategic initiatives discussed herein;
our ability to generate sufficient income and cash flow to effect
the intended share repurchases, including within the expected
timeframe; our ability to manage disruptions in credit markets or
changes to our credit rating; the potential impact on our share
price if we are unable to effect the intended share repurchases;
adverse changes in laws including with respect to tax and
regulatory matters; inability to agree with the MPLX conflicts
committee with respect to the timing of and value attributed to
assets identified for dropdown; continued/further volatility in
and/or degradation of market and industry conditions; MPC's ability
to successfully implement growth opportunities; the impact of
adverse market conditions affecting MPC's and MPLX's midstream
businesses; modifications to MPLX earnings and distribution growth
objectives, and other risks described below with respect to MPLX;
changes to MPC's capital budget; other risk factors inherent to
MPC's industry; and the factors set forth under the heading "Risk
Factors" in MPC's Annual Report on Form 10-K for the year ended
Dec. 31, 2016, filed with Securities and Exchange Commission (SEC).
Factors that could cause MPLX's actual results to differ materially
from those implied in the forward-looking statements include:
negative capital market conditions, including an increase of the
current yield on common units, adversely affecting MPLX's ability
to meet its distribution growth guidance; the time, costs and
ability to obtain regulatory or other approvals and consents and
otherwise consummate the strategic initiatives discussed herein;
the satisfaction or waiver of conditions in the agreements
governing the strategic initiatives discussed herein; our ability
to achieve the strategic and other objectives related to the
strategic initiatives discussed herein; adverse changes in laws
including with respect to tax and regulatory matters; inability to
agree with respect to the timing of and value attributed to assets
identified for dropdown; the adequacy of MPLX's capital resources
and liquidity, including, but not limited to, availability of
sufficient cash flow to pay distributions and access to debt to
fund anticipated dropdowns on commercially reasonable terms, and
the ability to successfully execute its business plans and growth
strategy; the timing and extent of changes in commodity prices and
demand for crude oil, refined products, feedstocks or other
hydrocarbon-based products; continued/further volatility in and/or
degradation of market and industry conditions; changes to the
expected construction costs and timing of projects; completion of
midstream infrastructure by competitors; the suspension, reduction
or termination of MPC's obligations under MPLX's commercial
agreements; modifications to earnings and distribution growth
objectives; the level of support from MPC, including dropdowns,
alternative financing arrangements, taking equity units, and other
methods of sponsor support, as a result of the capital allocation
needs of the enterprise as a whole and its ability to provide
support on commercially reasonable terms; changes to MPLX's capital
budget; other risk factors inherent to MPLX's industry; and the
factors set forth under the heading "Risk Factors" in MPLX's Annual
Report on Form 10-K for the year ended Dec. 31, 2016, filed with
the SEC. In addition, the forward-looking statements included
herein could be affected by general domestic and international
economic and political conditions. Unpredictable or unknown factors
not discussed here, in MPC's Form 10-K or in MPLX's Form 10-K could
also have material adverse effects on forward-looking statements.
Copies of MPC's Form 10-K are available on the SEC website, MPC's
website at http://ir.marathonpetroleum.com or by contacting MPC's
Investor Relations office. Copies of MPLX's Form 10-K are available
on the SEC website, MPLX's website at http://ir.mplx.com or by
contacting MPLX's Investor Relations office.
Non-GAAP Financial
Measures
The EBITDA forecasts were determined on an
EBITDA-only basis. Accordingly, information related to the elements
of net income, including tax and interest, are not available and,
therefore, reconciliations of these non-GAAP financial measures to
the nearest GAAP financial measures have not been provided.
MPC Sept. 5 release
This
announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Marathon Petroleum Corporation via
Globenewswire
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