Marathon Petroleum Says Refinery Sale Proceeds Go Mostly To Gulf Coast, With 2027 Spending Likely Above Normal
CEO Maryann Mannen says the $4.2 billion sale of two refineries to CVR Energy is not a retreat from refining.
Marathon Petroleum plans to put the money from selling two refineries mainly into the U.S. Gulf Coast, CEO Maryann Mannen said on the company's third-quarter earnings call Tuesday, and its 2027 capital budget will likely run higher than usual.
A $4.2 billion sale to CVR
Marathon Petroleum, which refines crude into gasoline, diesel and other fuels and owns the MPLX pipeline partnership, agreed to sell its St. Paul Park and Mandan refineries to CVR Energy, Mannen said. MPLX is selling the associated midstream assets in the same $4.2 billion deal. Marathon Petroleum receives $3.4 billion and MPLX $750 million.
Mannen said the sale should close by the end of the fourth quarter. MPLX plans to redeploy its share into growth anchored in the Permian and Marcellus basins.
Chief Financial Officer Maria Khoury told a Piper Sandler analyst the refining proceeds will be taxable. MPLX has a different structure, she said, with different tax implications.
Asked by a Goldman Sachs analyst why now, Mannen said leadership has talked since August 2024 about building a portfolio for today and for the future. She called the valuations "very attractive."
Reinvesting, not shrinking
A TD Cowen analyst noted that Marathon's growth spending has run about a billion dollars a year, and asked whether the proceeds might defend the stock or fund acquisitions. Mannen said the company has averaged a little over a billion dollars a year and will give detailed capital plans on its fourth-quarter call in February. If more goes to the Gulf Coast, she said, the 2027 plan is likely to be higher than usual.
In the same answer she said, "We really are not intending to to reduce or shrink our refining footprint."
Mannen said capital put to work across the company over the last five years has added about 175,000 barrels a day of capacity. Projects already coming online by year-end 2027 include a 90,000 barrel-per-day distillate hydrotreater at Galveston Bay and Garyville upgrades that add 30,000 barrels a day of crude throughput. Mike Hennigan, executive vice president of refining, said the company is weighing more conversion, yield and throughput investment on the Gulf Coast.
Cash piling up, buybacks stay
A UBS analyst said cash could balloon past $20 billion by year-end, before any sale proceeds are counted. Mannen said capital allocation priorities have not changed, and that includes share buybacks. Marathon bought back $3 billion of stock in the third quarter and raised its dividend 10%, she said.
The company ended the quarter with roughly $13.6 billion of consolidated cash and short-term investments, Khoury said. Third-quarter adjusted EBITDA, the company's earnings before interest, taxes, depreciation and amortization, was $11.7 billion, with earnings of $26.93 per share.
Mannen said about 10 million barrels per day of global refining capacity is offline, roughly 3 million above historical norms. She said she expects elevated margins through at least mid-2027.
Marathon will lay out its 2027 capital plans and specific Gulf Coast projects on its fourth-quarter call in February.
Sources
- Marathon beats Q3 estimates, sells two refineries to CVR — Bloomberg
- Marathon Petroleum Raises Dividend 10% and Approves $5 Billion Buyback — benzinga.com
- Marathon Petroleum (MPC) Q3 Earnings: How Key Metrics Compare to Wall Street Estimates — Yahoo Finance
- Marathon Petroleum to sell Minnesota, North Dakota refineries to CVR Energy in $4.2B deal (MPC:NYSE) | Seeking Alpha — seekingalpha.com
- Marathon Petroleum (MPC) Q3 Earnings and Revenues Surpass Estimates — Yahoo Finance
