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Marathon’s earnings up, miss estimate

FINDLAY — Aided by lower crude oil prices and growth in its Speedway retail chain, Marathon Petroleum Corp. said Thursday that its earnings rose 41 percent in the third quarter.

The Findlay-based refining and marketing company reported profits of $948 million, or $1.76 a share, in the quarter which compared with $672 million, or $1.18 a share, for the same period a year ago.

Despite the strong increase, Marathon’s earnings missed Wall Street’s estimates. A consensus of analysts at Zacks Equity Research had expected $1.80 a share.

Marathon said its earnings were hampered by a $144 million write-off reflecting its cancellation of upgrades to its Garyville, La., refinery.

However, Marathon’s $18.8 billion in revenues for the quarter beat analysts’ estimate of $18.2 billion. Last year, Marathon had third-quarter revenues of $25.5 billion.

In a conference call Thursday with analysts, Chief Executive Gary Heminger said the third quarter numbers reflected a “solid performance across all our businesses.”

The refining and marketing segment’s income rose to $1.5 billion from $971 million a year ago. The rise was because of a $2.72 a barrel increase in profit margins caused by lower crude oil prices and higher “crack spreads” — the difference between the price of crude and the cost to make or “crack” petroleum products from it.

Speedway income was $243 million, up from $119 million a year ago. Marathon attributed the increase to the 1,200 Hess stores it acquired a year ago. So far, more than 240 Hess stores have been converted to Speedways.

In related news, Occidental slips to Q3 loss, quits North Dakota oil patch.

Marathon said Speedway income increased also as lower fuel prices spurred demand and strong profits on merchandise sold in its stores.

“The new (Hess) locations are performing well and are on track to more than double the $75 million in synergies we expected,” Mr. Heminger said.

The Garyville refinery expansion, called the Roux project, was a $2.2 billion upgrade so the refinery could turn heavy residual oil into ultra-low sulfur diesel. Marathon put the project on hold while it studies market conditions.

“While we still believe the Roux project is an excellent investment, at this time we have decided to cancel the project …” and reallocate the $2.2 billion elsewhere, the CEO said.

Mr. Heminger said the market continues to indicate crude oil and gas prices will remain lower for a longer period. With more supplies from Africa and the Middle East, particularly Iraq crude being transported to ports in the Gulf of Mexico, imports are rising on top of continued strong domestic production.

“We believe we are looking at a $50 to $55 a barrel [of crude] range for most of 2016 and the first part of 2017,” Mr. Heminger said.

On the New York Stock Exchange on Thursday, Marathon shares rose $1.40 to close at $51.24. On Wednesday, the company declared a 32-cent dividend, payable Dec. 10.

On Thursday, Marathon’s pipeline subsidiary MPLX reported third-quarter profits of $41.5 million, or 41 cents per share, up 43 percent from $29.1 million, or 37 cents a share, a year ago. Its revenues were $148.6 million versus $138 million last year.

MPLX’s stock gained $1.68 Thursday, closing at $36.89 a share on the NYSE. Last week, the subsidiary declared a dividend of 47 cents per share, payable Nov. 13 to shareholders of record as of Nov. 3.

Contact Jon Chavez at: jchavez@theblade.com or 419-724-6128.

This article was written by Jon Chavez from The Blade and was legally licensed through the NewsCred publisher network.