Welcome to the MPC Third Quarter 2021 Earnings Call. My name is Sheila and I will be your Operator for today's call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Please note that this conference is being recorded. I will now turn the call over to Kristina Kazarian. Kristina, you may begin.

Welcome to Marathon Petroleum Corporation's third quarter 2021 earnings conference call. The slides that accompany this call can be found on our website at marathonpetroleum.com under the Investors tab. Joining me on the call today are Mike Hennigan, CEO, Maryann Mannen, CFO, and other members of the executive team. We invite you to read the Safe Harbor statements on slide 2. We will be making forward-looking statements today, actual results may differ. Factors that could cause actual results to differ are included there as well as in our filings with the SEC. With that, I'll turn the call over to Mike.

Thanks, Kristina. Before we get into results for the quarter, we wanted to provide a brief update on the business. Midway through the quarter, we were impacted by Hurricane Ida. The Ida hurricane passed over our Garyville refinery with wind speeds topping 120 miles per hour. Fortunately, all of our employees in the region were safe, but many of them experienced severe damage to their homes and the community around them. Our team was able to shut down our refinery in a controlled manner a day ahead of the storm to ensure operational integrity and safety for all of our employees. It took roughly a week to restore some power, which enabled the first crude unit to restart over the next several days. The remainder of the refinery restarted sequentially over the next 10 days as more power became available. I'd like to recognize our refining team and our support groups for their dedication and efforts. Our commercial teams also did an excellent job in keeping our customers in the region supplied through coordinated efforts across the company. Maryann will cover the specific impacts when she reviews our refining results. In addition to the Louisiana hurricane, our Los Angeles refinery was impacted by an earthquake on September 18th. Again, the major challenge was the loss of power. Once power was restored, the units were restarted, and the refinery was back to normal operations in roughly one week. There has been a gradual increase in demand for our products as mobility continues to recover. Globally, product inventories are at their tightest level in many years, and this improvement has lifted margins. In the U.S., gasoline and diesel inventories have steadily improved and are both at the low end of their 5-year averages. Jet fuel inventories have moved in within a 5-year range, although demand is still well below pre-pandemic levels, which we expect to be a headwind for some time. Our system is currently seeing gasoline demand 2% to 3% below 2019 levels with the West Coast still lagging at about 8% below. Diesel demand is now slightly above 2019 levels. Jet demand has improved but still remains down nearly 15% to 20% below pre-pandemic levels. Natural gas costs steadily rose during the quarter, with an average increase of over $1 from the second to the third quarter. Although there's still some uncertainty as we head into the fourth quarter, lower inventory levels and strong holiday travel could be supportive. Looking ahead to next year, if global product inventories remain tight and demand continues to recover, we would expect the refining sector to rebound in 2022. At the same time, we are monitoring prices to see if there is a consumer demand pullback. In aspects of the business that are within our control, this quarter we advanced several key initiatives. We progressed our renewables initiative with the addition of a new strategic partnership with ADM. This joint venture will own and operate ADM's soybean processing complex in Spearwood, North Dakota. Upon completion, expected in 2023, this facility will source and process local soybeans, supplying approximately 600 million pounds of soybean oil exclusively for MPC, enough feedstock for approximately 75 million gallons of renewable diesel per year. While this joint venture provides a locally advantaged feedstock for our Dickinson project, we continue to evaluate feedstock options for our Martinez facility in California. At Martinez, our renewable fuels facility conversion reached another project milestone when its environmental impact report was issued for public comment in mid-October. This process highlights our extensive efforts in working with local regulators and other stakeholders. Also in October, United Airlines, Marathon and others conducted a successful test flight of a 737, which flew for 90 minutes using drop-in sustainable aviation fuel. The SAF used during the test flight was 100% renewable drop-in fuel made possible by proprietary technology from our wholly-owned subsidiary, which has a demonstration plant in Madison, Wisconsin. As we continue to focus on ways to strengthen our competitive position, we announced today that we are pursuing strategic alternatives for the Kenai refinery, which could include a potential sale. We often share our belief that our business is both a return on and a return of capital business. This quarter, we made progress strengthening our portfolio, continuing our low-cost focus, and progressing our commitment to return capital to our shareholders. As of today, we've completed approximately 25% of our $10 billion share repurchase program, and we're confident in our ability to return the remaining $7.5 billion by the end of 2022. Finally, MPLX announced the third-quarter distribution consisting of a 2.5% increase to its base distribution amount and a special distribution amount as well. MPC will receive a total of $829 million. This announcement reinforces the strategic importance of MPLX as part of MPC's portfolio and its ability to return substantial cash to MPC and all unit holders. Slide 4 provides a framework around some of the ways we are challenging ourselves to lead in sustainable energy. Our approach to sustainability spans the environmental, social, and governance dimensions of our operations. It encompasses strengthening resiliency by lowering our carbon intensity and conserving natural resources, developing for the future by investing in renewables and emerging technologies, and embedding sustainability in decision-making in all aspects of engagement with our people and many stakeholders. We have three company-wide targets many of our investors and stakeholders are familiar with. First, a 30% reduction in our scope 1 and scope 2 greenhouse gas emissions intensity by 2030; second, a 50% reduction in midstream methane intensity by 2025; and lastly, a 20% reduction in our freshwater withdrawal intensity by 2030. The evolving energy landscape presents us with meaningful opportunities for innovation. We have allocated 40% of our growth capital in 2021 to help advance two significant renewable fuels projects. In late 2020, we began renewable diesel production at our Dickinson, North Dakota facility, the second largest of its kind in the U.S., and we're progressing the conversion of our Martinez facility through a renewable diesel facility. I'd also like to highlight a few specific updates from the quarter. We were recently awarded an ESG A rating by MSCI. We are the only U.S.-based refiner that holds this rating. We continue to focus on enhancing our disclosures; in this quarter, we submitted data on our scope three emissions through CDP, and we are the first in our refining sector to do so. We invite you to visit the Sustainability section of our website and learn more about how we are challenging ourselves to lead in sustainable energy. At this point, I'd like to turn it over to Maryann to review the third-quarter results.

Thanks, Mike. Slide 5 provides a summary of our third-quarter financial results. This morning, we reported earnings per share of $1.09 and adjusted earnings per share of $0.73. Adjusted earnings exclude $48 million of pre-tax charges primarily related to Hurricane Ida impairments and idling costs. Additionally, the adjustments include an incremental $272 million of tax expense, which adjusts all results to a 24% tax rate. Our year-to-date effective rate is just under 2%. Therefore, we expect to retain the tax benefits realized in 2021. We will continue to make this tax rate adjustment for the fourth quarter of 2021. Adjusted EBITDA was $2.4 billion for the quarter, which is approximately $500 million higher than the prior quarter. Cash from operations, excluding working capital and a voluntary pension contribution, was nearly $1.8 billion, which is an increase of $230 million from the prior quarter. During the quarter, we paid $575 million into our pension plan. We elected to contribute this additional amount as it was beneficial from a tax perspective. This amount covers nearly three years of estimated contributions, and we forecast that the plan will be fully funded at year-end. This also increased the CARES Act benefit to a total of $2.3 billion. Similar to last quarter, we generated ongoing operating cash flow that exceeded the needs of the business and capital commitments, as well as covered our dividend and distribution. Finally, we returned nearly $1.3 billion of capital to shareholders this quarter through dividend payments and share repurchases. Slide 6 illustrates the progress we have made towards lowering our cost structure. Since the beginning of 2020, we have taken almost $1.5 billion out of the Company's total costs. Refining costs have been lowered by approximately $1 billion, midstream reduced by $300 million, and corporate costs by about $100 million. Regardless of the margin environment, our EBITDA is directly improved by this $1.5 billion. We continue to emphasize our safe, reliable, and low-cost focus across the organization. While we do not see further cost reductions of the same magnitude that we have already taken out, there are still opportunities for us to reduce costs. Natural gas prices were higher in the third quarter and continue into the fourth quarter. For every $1 change in natural gas prices, we anticipate an approximate $360 million impact to annual EBITDA in our R&M segment. Based on current prices, we estimate that in the fourth quarter, higher natural gas prices will potentially impact our business by an incremental $0.30 per barrel. As we previously mentioned, our refining cost in 2020 began at $6 per barrel and are now trending at a quarterly average of roughly $5 per barrel for 2021. We continue to believe these are structural reductions. Our results reflect our focus on cost discipline, and every day we remain steadfast in our commitment to safely operate our assets and protect the health and safety of our employees, customers, and the communities in which we operate. As we have shared with you previously, our cost reductions should be sustainable, should not impact revenue opportunities, and should not in any way jeopardize the safety of our people or our operations. Slide 7 shows the reconciliation from net income to adjusted EBITDA as well as the sequential change in adjusted EBITDA from the second quarter of 2021 to the third quarter of 2021. Adjusted EBITDA was approximately $500 million higher quarter-over-quarter, driven primarily by refining and marketing, but also benefiting from our strength in midstream. The $48 million of pre-tax charges during the quarter are reflected in the adjustment column. Moving to our segment results, slide 8 provides an overview of our refining and marketing segment. The business reported continuing improvement from last quarter with adjusted EBITDA of $1.2 billion. This was an increase of $444 million compared to the second quarter of 2021. The increase was driven primarily by higher refined margins, especially in the Gulf Coast region, as that regions' cracks improved 34% from the second quarter. As Mike mentioned, our Garyville refinery was impacted by Hurricane Ida. We estimate the cost impact was $19 million this quarter, with an additional $11 million to be incurred in the fourth quarter. We estimate the lost opportunity from the hurricane to be approximately $80 million. The Garyville refinery was down for about 10 days and took another 10 days to ramp back up to full production. The throughput impact was approximately 8.3 million barrels. We also believe there was an additional $10 million of lost opportunity impact associated with the earthquake at our Los Angeles refinery, which returned to the planned rate after roughly one week. Utilization was 93% for the quarter, flat with the second quarter. We saw lower utilization in the Gulf Coast compared to the second quarter due to hurricane impacts. The Mid-Con region continued its strong utilization, and the West Coast strengthened as reopening in California continues to increase demand. If adjusted to include capacity which was idled in 2020, utilization would have been approximately 88% in the third quarter of 2021. Operating expenses were higher in the third quarter, primarily due to higher natural gas prices. Slide 9 shows the change in our midstream EBITDA versus the second quarter of 2021. Our midstream segment continues to demonstrate earnings resiliency and stability with consistent results from the previous quarter. The strong cash flow profile and lower capital spending supported the decision to return more cash to unit holders. Today, MPLX announced a 2.5% increase in the partnership's base quarterly distribution and a special distribution amount of approximately $600 million. As I mentioned earlier, this quarter our midstream assets in the region were also impacted by Hurricane Ida. We estimate the cost impact was $4 million this quarter, with an additional $7 million to be incurred in the fourth quarter. Slide 10 presents the elements of change in our consolidated cash position for the third quarter. Operating cash flow was $1,765,000,000 in the quarter. As I mentioned earlier, this excludes changes in working capital and an incremental payment of approximately $575 million into our pension plans. Also, this amount does not include changes to our CARES tax receivable in the quarter, which was a $500 million source of cash and is included in the income taxes bar of this chart. Working capital was effectively flat this quarter. During the quarter, MPLX reduced its third-party debt by $1 billion funded by borrowing an additional $877 million under the MPC or Marathon interCompany loan agreement. Our income tax balances represented a use of cash primarily driven by a decrease in accrued taxes. We made a tax payment due for the Speedway gain of $2.9 billion out of a total of $4.2 billion we have accrued. We were able to offset about $400 million of the amount using our CARES tax receivable. There were about $100 million of other charges in our tax balances. During the quarter, we adjusted our tax refund up to $2.3 billion from $2.1 billion last quarter. We have identified a total of about $700 million that can be offset against our Speedway tax obligation, including the $400 million we used this quarter and $300 million that we expect to use in the fourth quarter of 2021 to offset remaining balances for taxes due from our Speedway transaction. We received $1.55 billion of the CARES Act refund in October. There is about $60 million of the refund remaining, which we expect to receive in the first half of 2022. With respect to capital return, MPC returned $370 million to shareholders through our dividend and repurchased $928 million worth of shares in the quarter using Speedway's proceeds. At the end of the quarter, MPC had $13.2 billion in cash and higher returning short-term investments, such as commercial paper and certificates of deposit. Last quarter, we promised to continue to provide status updates on our progress deploying Speedway proceeds. We have repurchased an incremental $1.5 billion in shares since the end of the second quarter. This is comprised of $928 million of repurchase in the third quarter plus additional shares purchased through the end of October. As Mike indicated, we are approximately 25% complete with our $10 billion share repurchase program. We are continuing to use a program that allows us to buy on an ongoing basis, and we will provide updates on the progress during our earnings calls. To meet our $10 billion share repurchase commitment, we are progressing steps to be able to complete the remaining repurchases of approximately $7.5 billion by the end of 2022. The options we have previously discussed remain available to us to complete this objective. Today, we also announced that we intend to redeem an additional $2.1 billion of debt. This entails two tranches of notes that mature in 2023. Given the current interest rate environment as well as our cash position, it makes economic sense to redeem these notes early, and we anticipate this will lead to roughly $20 million in savings. This short-term cash management provides immediate interest payment savings, and we will have the ability to reissue notes at the appropriate time. With this redemption, we have no maturities over the next three years. Our third-quarter debt-to-capital ratio for MPC, excluding MPLX, was approximately 24%. The redemption of these notes will continue to lower this ratio. As we manage our balance sheet, we continue to ensure that we maintain our investment-grade credit portfolio. Turning to guidance on Slide 12, we provide our fourth-quarter outlook. We expect total throughput volumes of roughly 2.8 million barrels per day. Planned turnaround costs are projected to be approximately $200 million in the fourth quarter. The majority of the activity will be in the Mid-Con region. Total operating costs are projected to be $5.40 per barrel for the quarter. Based on the current prices, we estimate that in the fourth quarter, higher natural gas prices will potentially impact our business by an incremental $0.30 per barrel. As previously mentioned, our turnaround activity is back half-weighted this year. Other operating expenses are coordinated to occur during these time periods, as well. Distribution costs are expected to be approximately $1.3 billion for the fourth quarter. Corporate costs are expected to be $170 million reflecting the approximately $100 million in costs that have been removed on an annual basis. With that, let me turn the call back over to Kristina.

Thanks, Maryann. As we open the call for your questions, as a courtesy to all participants, we ask that you limit yourselves to one question and a follow-up. If time permits, we will re-prompt for additional questions. I will now open the call for questions, operator.

Our first question will come from Neil Mehta with Goldman Sachs. Your line is open.

Good morning, team. Thanks for taking the question. The first question is around capital return. You still have $7.5 billion of stock, which is all stock to buyback by the end of '22. Based on what we know right now, is it fair to assume that you're going to be buying this back ratably at $1.5 billion a quarter, or do you see yourself leaning into it? And then tie that into your capital return strategy at MPLX; we saw the special dividend that came through this morning. Is that something that we should think of as potentially more likely to happen going forward, or was that one-time in nature?

Sure. Thanks, Neil. Let me talk about the share buyback program and your question around ratability. As a quick reminder, we did not get into the market until the completion of our second-quarter earnings call. So we really didn't have a full quarter, if you will, and hopefully you've seen what we've been doing in the remaining weeks post our earnings call. We believe that we have the opportunity as we go forward, given the timing of our earnings, to be a little more opportunistic. So I would not assume that ratably is the only plan we have. I think you can see that if that were to be the case, we certainly would have the full ability to complete our program, as we say, no later than the end of 2022, but that is certainly not the only available set of opportunities for us. I will turn the call over to Mike on MPLX.

Good morning, Neil. I'll address your second point. I want to give you a bit of a long-winded answer, but hopefully it will get to the meat of your question. At MPLX, one of the things we decided to do was to move the business model such that we would have free cash after distributions and after growth capital. That puts us in a financially flexible situation where we could have options. We achieved that around the third quarter of 2020. As a result of that, we now have capital for deployment at MPLX that can be growth capital, buybacks, additional distribution for the base, as you saw us bump that up today, and additional distribution amounts in the form of a special, which we've talked about a little bit here. But the bottom line is, we're going to be dynamic and evaluating what's the best opportunity for us on that side of the house, based on market conditions and business needs. An important point though from the MPC side of it is we often get asked the question: how does MPLX provide value to MPC shareholders? We've tried to enumerate many different ways, but this is one example where this is additional cash that's coming from MPLX to MPC. So at the base distribution amount, MPC gets about $1.8 billion. That’s been pretty ratable since 2020. With this special distribution amount, it will now be $2.2 billion because it's about $400 million MPC's take of the special that went to all unit holders. So instead of an $1.8 billion EBITDA addition from MPC, you're now looking at $2.2 billion, and we'll continue to evaluate that going forward. It's clearly our intent to grow earnings at MPLX. As a result of that, there's going to be more cash available to come to MPC over time, whether it's through distributions to the base or special, while we also continue to look at buybacks at MPC as well. So hopefully everybody sees this as a nice strategic importance of MPLX to MPC shareholders as part of our overall scheme here. Does that make sense to you, Neil?

No. That's really helpful, Mike. And my follow-up is kind of a housekeeping modeling type of question, which is in two parts. One is, the tax rate came in a little bit lower than expected this quarter. Should we think about the tax rate going forward, given that midstream is such a big part of the earnings, lower than the 24% effective tax rate that we've been basing?

Neil, on the tax question. You're absolutely right, in the quarter, we recorded about an $18 million benefit from continuing operations. Part of that is driven by our ability to carry back the incremental pension contribution and some other favorable discrete items in the quarter. The second part of your question is whether or not we would migrate towards the statutory rate of 24%. I think you articulated that well; as we look at the amount of non-controlling interest, we would most likely not see a statutory rate of 24%, but as the level of R&M continues to improve against that, we'll see that rate get higher than the 2% you were seeing on a year-to-date basis. We will migrate from 2% trending toward, but we would not reach the statutory rate. We have continued to make this adjustment since the first quarter of 2020, and we will do that in the fourth quarter for consistency. Most likely going forward, beginning in the first quarter of 2022, we will not be making a tax adjustment to bring all of our earnings to 24%. I hope that answered the question. On the subject of your second question around capital, we had a significant reduction from 2020 to 2021 and we're largely on track to reach that capex number for 2021. We have not provided guidance for 2022 as yet and we will do that on our fourth-quarter earnings call, as we normally do. But as you know, one of the key strategic pillars, along with cost reduction, is strict capital discipline. We've begun to outline the amount of capital we're targeting or committing to renewables, and we would expect to be able to share that as well when we give our guidance.

Thanks. Good morning, everybody. Guys, you've given a lot of details about cost reductions, price of gasoline, and so on. I wonder if I could ask you to simplify it down for us a little bit. As we transition back to, for want of a better expression, mid-cycle, what do you see as the mid-cycle EBITDA for the portfolio after all the changes? Specifically, what does it stand like today, and I'm talking specifically about the refining business and the MLP consolidation? Is that something you can quantify?

Doug, it's Mike. As you know from some of our previous conversations, I think it's very hard to call the mid-cycle. I often say I use the football analogy that just getting it between the 40's is tough enough, let alone trying to find mid-cycles. Most importantly, we're not concerned about calling the 50 versus the 40. I'd like to think about the two end zones. How do we feel about a low environment and a high environment? How are we set up from a portfolio standpoint if either of those scenarios materialize? Because invariably over time, as you've seen, you'll see cyclical high margin environments and then, obviously, we've seen some pretty low ones, especially with the pandemic. So I don't really have a number for you. That's not something we spend a lot of time with. Obviously, internally, we also like to think about where our balance sheet and leverage are, etc. As Maryann talked about, right now we're in a different situation with a lot of cash on the balance sheet. We did a short-term optimization around that cash management. Ultimately, I think our leverage to a normal mid-cycle would be higher in the future. But we'll keep debating that and ultimately try to frame ourselves that we're in a good position. At the end of the day, I don't have a crystal ball to tell you exactly what I think mid-cycle is going to be, but I do think that we're going to manage the Company such that we're prepared for either end of it.

Doug, Maryann here, at the risk of repeating that, as we always say, we're going to control the things we can, and whatever that mid-cycle brings, as I was sharing, we're $1.5 billion better than we otherwise would've been from the cost reductions that we've been able to achieve. We still believe we have some opportunities in our low-cost culture, but certainly we're $1.5 billion better than we otherwise would have been regardless of what that market brings us.

Thank you. I was in the office, but my follow-up is that we've discussed this every other quarter, Mike, and the portfolio changes, with Kenai being the most recent. It seems these changes are mostly flat or happening slowly over an extended period. I'm curious if you could provide us with a baseball analogy to illustrate where we currently stand in that process. Additionally, could you elaborate on whether there are any similar studies or developments regarding the portfolio at the MPLX level? There have been ongoing discussions about gathering and processing and whether that aligns with a midstream business model.

Doug, to your first part, I don't know that we think about it as dribbling. I mean, from the portfolio standpoint, we've executed the sale of the Speedway business, which took a long time to get through that process. We made early moves to idle some high-cost facilities in our refining system, converted Martinez to renewable diesel—that's in progress, completed a feedstock JV, and an equity position in the feedstock situation for Dickinson. We continue to examine the portfolio; I think we've done some things that show the market that it is a high priority for us. It's one of my three main initiatives that I stated from the start. I would tell you, Doug, normally, I'm not a big fan of announcing stuff until things are done or not; it's a general rule for me. In this particular case, we've done an analysis. The reason we disclosed it now is we're in pretty advanced discussions with several parties. Because of the timing of this call, we didn't want to hold this call. If something progresses to closure in the near future, we didn't want everybody saying, ‘Hey, why didn't you tell us about it?’ So we decided to go off our normal path a little bit and disclose that we may be able to execute something here in the short term, but it may not happen either. We're trying to be as open and transparent as we can be. We're evaluating it—it is advanced discussions—and that's the main reason we've decided to inform the market that's where we are.

Mike, I wonder if I could just press you on the MPLX start-up question. I guess drip feed was the better expression I should have used, but does that extend to MPLX?

Yes, it does. We've said for some time, and maybe to our detriment, we're open about that. We believe that there are parts of the portfolio that are very core and are going to continue getting capital deployment. There are parts of the portfolio that we do not think long term are core, yet at the same time, we're generating free cash from those areas. We'll continue to keep those parts of the portfolio unless we see something that adds more value. The bid-ask on the non-core has been wide. Maybe no good deed goes unpunished. The fact that we've been open about that option has led people to try and low-ball us as far as some of the bids, but we know what the value of the assets are in our mind. We're not going to move them for numbers less than that. We're happy with the execution of the assets at this point. So we're in what I call a good position; we're generating free cash. The portfolio is working for us. We'll look for opportunities. If it makes sense at some point to divest something that we think can be more useful to someone else in the long term, we will do so; but if not, we will manage the capital into those areas and continue to generate free cash and deploy capital where we think there is more long-term value. So long answer to your question, but yes, the portfolio is something that matters at both MPC and MPLX.

Yes. Hey, good morning. My first question is around the balance sheet. In the past, you've talked about parent leverage of I think 1 to 1.5 times. Obviously, you have a lot of cash coming in the door. The macro appears to be leaning toward mid-cycle faster. Does this impact in any way the way you're thinking about the right level of consolidated or parent leverage that you want to maintain moving forward?

It's Maryann. I'd say no, it does not. We are certainly committed to maintaining our investment-grade ratings on both MPC and MPLX. Our decision in the short term on the incremental debt is based on the $20 million worth of interest rate savings. As I mentioned on the call, we're sitting at about 24% debt-to-capital that will lower that obviously as we take that incremental debt out. But it's short-term. We'll continue to look at the cash position. Of course, as we complete the share repurchase, we'll see that leverage move up a bit as well. But this in no way changes the way that we are thinking about the optimal capital structure for MPC and MPLX. We remain comfortable with what we've been talking about, 4 times at the MPLX. And as John mentioned on the call earlier this morning, we're sitting at about 3.7 at the end of this quarter.

But just to clarify, Mike?

I just want to add to what Maryann said to ensure the market doesn't over-interpret this short-term move. We have cash sitting on the balance sheet. The market has moved such that we can take out that a little earlier, putting $20 million in our pocket. The interest rate we’re getting on the cash in the short-term is obviously small basis points compared to putting $20 million in our pockets. So as an optimization, we look to take that debt out, but don't read into it as an indication of where we think our debt should be on a long-term basis. Does that make sense to you?

It does. I just want to make sure, Maryann, did I clarify or qualify that correctly at 1 to 1.5 times for the parent leverage as well, or just sort of make sure I'm thinking about that the right way?

Yeah, I think that's a fair assessment, so yes.

Hey, Mike. Given the cash build we're seeing quarter-over-quarter, I know since you have taken over, you've been very focused on cost reductions, what you can control, and optimizing the portfolio. But just because the cash is building, is there a possibility you could accelerate your renewable fuel development through more JVs or actually acquire some assets under development, or even other forms of renewable energy? I'm just trying to understand if that part of the portfolio can be accelerated here through inorganic means, is that something you could be open to?

Yeah. We're certainly open to it. We have a team of people that's constantly looking at the opportunities out there inorganically. Obviously, we don't count on that in our base plan and we focus on the things we control as you mentioned, but we have a team looking at opportunities in renewables, as well as all the other alternative energy options. In the short-term, we have not found anything that we believe is worthy of deployment, but we'll continue to look at it. Some other technologies are going to develop over time, and I think we'll have opportunities in the future, but up until now, we have not found anything that we thought was worthwhile. We’re certainly open to it, and like I said, we have a lot of people looking at all parts of this energy evolution that's going to continue to grow over time.

And a quick follow-up here is that during the quarter in refining, obviously, the widening sour differentials were a meaningful tailwind for you. Obviously, I think it's $150 million quarter-over-quarter. We are seeing OPEC raise some volumes there, we're seeing some widening of the Canadian differentials. So if you could help us understand the outlook for medium and heavy sour differentials and how that plays into MPC, thank you.

Yes. Hi, Manav. It's Rick. I can help you there. So you're absolutely correct; here in the near term, medium sours and heavy differentials have widened, so you're seeing that in the marketplace. Going forward, what I would share is there's a lot of puts and takes out there in the marketplace. We've certainly got the OPEC plus decision here that's expected on Thursday that will pivot the market certainly a bit. We've got political intervention, such as SPR releases that always weigh on the outlook. So it makes it very tough to call what will happen beyond that—you have production, Gulf of Mexico production, Canadian production recently looking robust—but then on the flip side, you have consumer demand. Where will that go? How will the demand play out? Lastly, there are several other wildcards on how it will affect these differentials, including Line 3 and Capline reversals in a few months. So a lot of risks, Manav; it's really hard to call going forward.

Thank you so much.

Thank you. Good morning.

Good morning, Roger.

Good morning, guys. Let's dive into it here. First one on the Martinez conversion. Just to make sure you talked a little bit about feedstock earlier—how you're looking at where you are relative to secured feedstock and how that would compare to the normal process. In other words, if you don't have 100%, that's not a surprise because we're still what, 2 years away essentially from full run rates or a year-and-a-half. Are there any specific regulatory hurdles remaining, permitting, etc. that needs to go on there?

Sure, Roger. I'll let Ray talk about the regulatory side, then I'll come back on the feedstocks.

Good morning, Roger. The big hurdle for us was the environmental impact report, which was issued for public comment a few weeks ago on October 18th. That’s a 60-day comment period. I want to emphasize this is a major milestone for us and not an insignificant piece of work. It's a 450-page document answering questions and scenarios and so forth. There was initially some misinterpretation, but I was very pleased to see that some of our key stakeholders, particularly CARB, came out in strong support for our projects, which is encouraging. We'll monitor any comments that we receive over the next 60 days and address those accordingly. The end result is we are hopeful to get a land-use permit, which is a big deal because what that does is allows us to get construction going. The project is ready for phase one; we've finished engineering, we have material ready, and we're prepared to put the trades to work on getting phase one started. As for the outlook, we remain fortunate to believe the second half of 2022 will see phase one of the renewable diesel project going online.

Roger, it's Mike. I'll just add, as Ray said, on your question regarding feedstocks, we continue to have commercial discussions around that. We've kept that close to the vest for now, and we'll maintain that while we're having some of these discussions. What I want to emphasize is, as Ray stated, we are at an important point in the project. We're out for public comment, as he said, and we're ready to go to construction. I know the market has been asking us to disclose the capital; we're looking forward to doing that. We've been holding that back to get through this regulatory process. Once we're through that, hopefully we'll provide a lot more details regarding capital and feedstocks and our progress. This is a critical part of the process as Ray mentioned. We expect by the next time we talk, we'll have more information.

I appreciate that. The other question I had, just to go the opposite direction of the discussion earlier on, potentially coming up with a different solution for the Kenai Unit. A lot of units are for sale out there from various operators on refining, and I was just curious. You did a big transaction shortly before you took this role; understandable, you'd want to clean up some of what you bought and some of what you already had. But as you look out over the next 3 to 5 years, is there any interest in expanding the refining footprint? Or do you see the issues with CAFE standards, EVs, etc. and say generally speaking, we’re probably shrinking refining from here? I'm just curious how you're looking at it strategically.

Roger, it's Mike again. I don't want to say never, but it's not a high priority for us to increase our refining position. I think the higher priority is to increase our opportunities in the energy evolution. You see us taking some steps in renewables. We have a few ideas that we're working on that hopefully will advance the portfolio in time. But I think, in general, we want to balance the portfolio and lean a bit more toward what’s likely to grow over a couple of decades if we get the right opportunity.

Hi. Thanks for taking the question. If I could follow up on Martinez a bit, you talked about where you are with feedstocks and obviously I appreciate keeping that close to the vest right now. However, could you help us with maybe thinking about the CI score or a range of CI scores or sort of bandwidth you're considering that's feasible or realistic for what's going to be produced out of Martinez? And maybe if I could tie that into recent news on sustainable aviation fuel, where it looks like not only is the blenders' tax credit higher, but it ties in an emissions reduction factor. Is that also sort of on the table? Given where we are, it will be coming on-stream, and you'll have at least the BTC credit as well. How does that change how you think about repurposing the asset?

I’ll start, Prashant, and then Ray can provide additional details on SAF, etc. When we sanction this project, we assumed a 100% soybean, the highest CI in theory, which provides the worst feed imaginable. Over a long period, the market will adjust. Obviously, in the short term, we are looking to provide some better opportunity regarding feedstocks for Dickinson and for Martinez. But as I said, we will keep discussions somewhat close to the vest until we go through the regulatory period. As for SAF, we are open to that opportunity, but it comes with some considerations, and I will let Ray give you a little more detail on it.

Sure, Mike. I just want to emphasize that in the first phase of Martinez—phases 1, 2, and 3—SAF isn't in the base scope of what we are engineering and building. However, we believe that SAF will present an opportunity for Martinez. We are currently doing engineering work at Martinez to identify CapEx for adding that to the portfolio. Everybody knows that SAF economics will compete with renewable diesel; we believe that the economic drivers for SAF aren’t there right now but will build up as regulatory and product demand increases. Thus, we’re evaluating Martinez for that, but I want to reiterate: our near-term focus in Martinez is not on SAF, but that's definitely a future enhancement to the plant.

Thanks. That's very helpful. And my second question is just to return to the capital allocation. You are making great progress on the debt, and the buyback is now 25% through on the Speedway proceeds. Can we expect that there should be a framework for return to shareholders out of organic cash flows in the future? Is it timing for when that might get announced? What do you need to see to give us clearer definitions on that? Do you need to be maybe midway through the Speedway proceeds buyback with good visibility into 2022, or would you want to get through the $10 billion first? Is this more of a 2023 or further out of question? I know it’s a bit specific, but you can help us gauge expectations on that.

Sure. Thanks for the question. Just a couple of things to state here: You're right, 25% of that share repurchase is on track, as we shared, of that $10 billion—we're on our way to complete no later than the end of 2022. Hopefully as you've heard, in terms of debt reduction, that remains consistent with what we've been sharing with you and it's certainly short-term in nature. What we've discussed is we’d love to see more progress around our $10 billion share repurchase completed before we begin to provide a little more structured content on how we think about the remaining use of that cash. We'd want to get a little further along in that $10 billion before we give any more specifics around that. I'll pass it back to Mike; I think he wants to add a little more detail for you.

Maryann summed that up very well. We're just trying not to get ahead of ourselves in the program. We’re looking at some opportunities that might be inorganic. We continue to look at that. We definitely have excess cash. As margins recover, we hope to continue generating more cash through our business. So we're just trying not to let the cash burn ahead of ourselves. We know we have cash beyond our commitments made today. We know there will be opportunities available, and while I understand your question, we don't want to rush things—even though we're in a good spot with some time to execute. As we move along, we’ll disclose more and more. Ultimately, we want to grow earnings. We're looking for opportunities. I keep saying it's about a return of and a return on capital business. We want to balance those things; we’re very committed to the return of capital as you’ve seen us execute. We'd like to find more opportunities in return on capital as we pursue growth, so it's all about that balance as we move forward, not rushing ahead of ourselves.

Hi there. First, I want to follow up on the discussion about Kenai. Mike, is your expectation that once the transaction happens, Kenai will remain as a petroleum refinery, or is the operating environment so difficult out there leading to your own decision to exit that it could be used for a different purpose once it changes hands?

Yes, Theresa, I don’t want to get ahead of the discussions we’re having, so I can't comment on that yet. We're just, as I stated earlier, in advanced discussions with a couple of different interested parties that have different views of the marketplace. We just didn’t feel it was right to ignore this on today’s call; if something progresses, I will try to give you insight then. If it doesn’t happen, we’ll revisit at that point. But it’s just the timing of the call and where we are in those discussions where we thought it was worth disclosing.

Got it. And going back to Rick's earlier comments about Line 3 and the Capline reversal coming online, I believe the fully coming on in a couple of months. As part owner and the operator of the system, the initial reverse was pretty low, and I was just wondering if you have expectations it will grow over time based on Line 3 replacement bringing 300,000 incremental barrels per day to Patoka. What do you think it could run rate as in aggregate on the repurchase differential from that?

Yes. Hi, Theresa, it's Rick. To your point, a lot of the answer depends on what grades are put on the line. Capline can move either heavy or light, and those truly depend on demand from us and others. Econ is driving the volumes. From our perspective, we're excited about Capline and we have Garyville right at the coast of the Eastern Gulf, which can be a recipient. However, ultimately, volumes will be based on demand from us and others, plus the grades as previously stated.

Okay. Maybe if I could clarify, so the initial reverse I believe with reconfiguring three out of the sixteen pumps—if you had to reconfigure more to allow for more volumes, can that be done pretty quickly?

I'd have to defer to MPLX on that, Theresa.

Theresa, it's Mike. We could ramp up if necessary. As previously mentioned, the purpose of the project is that Eastern Gulf is looking for more grades, as Rick pointed out. Over time, I believe there will be more interest there. The bottleneck will be getting supply to that pipe. Whether it comes from the north or from other sources, whatever can ensure supply to that pipeline will be a huge advantage for people interested as more grades come to the Gulf Coast. Our facility in Garyville is actively looking for some grades. The rest of the Eastern Gulf refining area would also be interested in different types of opportunities as far as grade selection as well. I personally believe that over time, we'll eliminate the bottleneck and provide increased access to the system as crude availability improves.

Thanks for squeezing me in. I've got two questions, but I think they're relatively related, so I'll just ask them at once. One question we’ve been trying to figure out is you obviously have significant savings that you've flagged already from OpEx, but I think you've also flagged some operational improvements as well that might flow through more in terms of the capture rate or throughput margin, however you want to define it. Do you have any framework for how people can think about it? I know you don't want to go to the mid-cycle framework, but just any thoughts on improvements that we should look for over the next year or two here? The related question is, given that you have a lot of capital freeing up here, are there any major upgrades or enhancements to your legacy refining business that you're considering over the next couple of years?

Hey, Connor, it's Maryann. Maybe I'll start with this. I think what you're referring to is the commercial opportunities we've shared as part of those three key pillars. We’ve done considerable work on cost reduction; as we've said, we're hopeful you see that Kenai is another instance of our asset optimization. Moving forward, we believe there are opportunities for us to improve on the commercial opportunities you mentioned, with capture being one. As we shared, we keep some of that close to the vest for competitive reasons. As we proceed into the following quarters, we will demonstrate the actual realization of these ongoing efforts from the commercial team, which you'll see manifest through earnings in the coming quarters.

Connor, this is Rick. I'll briefly address your second question regarding refining spending. The biggest project we have out there is the Galveston Bay Star project. We still have some remaining spending on that to be completed into '22 and '23 for modifications to the refinery, specifically with the remaining scope of the hydrocracker and one of the crude units, the sour crude unit. That's the biggest project in refining on the go-forward.

Operator, are there any other questions in the queue?

We are showing no further questions at this time.

Thank you, everyone for your interest in Marathon Petroleum Corporation. Should you have additional questions or would you like clarification on topics discussed this morning? Please reach out and our IR team will be available to take your calls. Thank you so much for joining us today.

That does conclude today's conference. Thank you again for your participation. You may disconnect at this time.