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Annual Report 2017 | ANNUAL REPORT 58280.indd 1 3/7/18 10:08 AM MARATHON PETROLEUM CORPORATIONORPO | 2017 ANNUAL REPORT DELIVERING SIGNIFICANT RETURNS FOR OUR SHAREHOLDERS Since becoming an independent company July 1, 2011, to year-end 2017 MPC Has$13 Returned More Than BILLION To Shareholders CONTENTS 1 CHAIRMAN AND CEO LETTER 2 REFINING AND MARKETING 4 SPEEDWAY 6 MIDSTREAM 10 FINANCIAL AND OPERATIONAL HIGHLIGHTS 11 BOARD OF DIRECTORS 12 CORPORATE OFFICERS On cover: MPC’s refinery in Garyville, Louisiana On this page: MPC’s Speedway store in Delaware, Ohio 58280.indd 2 3/7/18 10:08 AM From the Chairman and CEO Fellow shareholders, Marathon Petroleum Corporation delivered a strong operational and financial performance across the business for our shareholders in 2017. Our Refining and Marketing segment substantially increased earnings, and $16.5 26.5% our Speedway and Midstream segments each turned in record results. COMPOUND ANNUAL Our earnings in 2017 were $3.43 billion, or $6.70 per diluted share, BILLION GROWTH RATE including a tax benefit of approximately $1.5 billion, or $2.93 per diluted CUMULATIVE NET INCOME IN BASE DIVIDEND share, resulting from the Tax Cuts and Jobs Act. ATTRIBUTABLE TO MPC FROM SPINOFF SINCE SPINOFF THROUGH FIRST Our Refining and Marketing segment’s exceptional yearar was driven QUARTERQUARTER 20182 by higher crack spreads and high utilization rates, and our refineries achieved numerous monthly process unit and productiontion records. MPC is now the second-largest U.S. refiner on a crude-throughputughput basis, and our Galveston Bay and Garyville refineries are the nation’sion’s second- and third-largest refineries, respectively. Speedway achieved another record performance, withh strong earnings from light product sales, an increase in same-store merchandiseerchandise sales, lower operating expenses and contributions from its travelravel centecenterr joint venture. MPC’s Midstream segment, which primarily reflects thee results ofof our sponsored master limited partnership, MPLX LP, reportedeported record-setting results, driven largely by gathered, processedcessed and fractionated volume growth. Additionally, we executed on our previously announcedd strategicstrategegiceg actions throughout 2017, completing them on Feb. 1, 2018. Theseese actions nearly double the size of MPLX, improve its costst of capital,capital, and provide shareholders a clear valuation for MPC’s interests.interests. MPC returned more than $3 billion of capital to MPC shareholdersshareholders through dividends and share repurchases in the year, supportedsupported in part by proceeds from the year’s dropdowns. On Jan.an. 29, 2012018,8, we announced a 15 percent increase in the quarterly dividend,dividend, representing a 26.5 percent compound annual growthh rate in the dividend since 2011. MPC has tremendous momentum going into 2018. Wee expect the globalglobal and U.S. macroeconomic picture to be solid and supportort strong demand TOTALTOTAL SHAREHOLDERSHAREHOLDE RETURN for our products. SINCESINCE SPINOFFSPINO Since becomingbecoming an independentindepend company As we continue our critical work of providing the fuels and petrochemicals JulyJuly 1, 2011, to year-endyear-en 2017 275% that make modern life possible, we never lose sight of our resrespresponsibilityesponsibility to 252252%% operate safely and efficiently. As investors who care aboutbout environmentalenvirvironmentalvir stewardship and the welfare of future generations, wee invite youu toto read 175%175% 133% our Perspectives on Climate-Related Scenarios report,t, which enhancesenhancncesnce our disclosures around climate-related strategies, riskss and opportunitieopportunities.itieties. Our experienced board and leadership team remain ccommittedommitted to MPC Peer RefiningRefinin S&P delivering long-term value for the benefit of all investors.ors. We thank you GrouGroupp(1) PeersPeers(2) 500 (1)PeerP eer Group represents averageaverage TSRT of Andeavor for investing in MPC and contributing to our success. (formerly(formerly Tesoro),Tesoro), BP,BP, Chevron,Chevron, ExxonMobil,E HollyFrontier,HollyFrontier, Phillips 66, Royal DutchD Shell and ValeroValero Sincerely, (2)RefiR efi ning Peers represents averaaverageg TSR of Andeavor, HollyFrontier,HollyFrontier, PBF EnerEnergy,gy, PhillipsPhillip 66 and Valero Gary R. Heminger Chairman and Chief Executive Officer MARATHON PETROLEUM CORPORATION • 2017 ANNUAL REPORT 1 58280.indd 1 3/7/18 10:08 AM INCREASING EXPORT CAPACITY Thousand Barrels Per Day 510* 395 395 345 150 Export dock at MPC’s Galveston Bay refinery 2012 2014 2016 2017 2020 *Estimated REFINING AND MARKETING MPC remains focused on continuing to capture and Galveston Bay and Garyville are the nation’s the competitive advantages of our flexible and second- and third-largest refineries, respectively. integrated refining system, enhancing margins February 2018 marked the five-year anniversary through investment and process improvements. of our acquisition of the Galveston Bay refinery. In 2017, Refining and Marketing delivered a Since 2013, MPC has dramatically improved the substantial increase in full-year segment income environmental and safety performance of the from operations of $2.32 billion, a nearly $1 billion refinery and advanced its operational excellence, increase over 2016. We operated exceptionally while cutting unplanned downtime in half and well throughout 2017 and were able to capture lowering operating expenses nearly 25 percent. strong crack spreads and wider crude differentials In 2018, we plan significant investment in our across our system. We also achieved numerous Refining and Marketing segment, including monthly process unit and production records approximately $400 million in growth capital throughout the year, including monthly records focused on optimizing the Galveston Bay refinery, for crude throughput, and gasoline and distillate upgrading residual fuel oils to higher-value production. As a result, MPC is now the second- products, maximizing distillate production, and largest U.S. refiner on a crude-throughput basis 2 MARATHON PETROLEUM CORPORATION • 2017 ANNUAL REPORT 58280.indd 2 3/7/18 10:08 AM TOTAL REFINERY MECHANICAL THROUGHPUTS AVAILABILITY* Million Barrels Per Day Percentage of Combined Unit Capacity 1.94 1.89 1.85 95.5 94.9 95.7 MPC’s refinery in Catlettsburg, Kentucky 2015 2016 2017 2015 2016 2017 * Rated capacity of all MPC operations, less lost capacity due to planned and unplanned outages, divided by rated capacity expanding light product placement flexibility, including exports. Looking ahead, we are also pursuing several projects at our Garyville refinery that we believe further enhance our ability to benefit from the adoption of low-sulfur fuels requirements scheduled to take effect in 2020, and to take advantage of robust and growing export opportunities. Employees at MPC’s refinery in Robinson, Illinois MARATHON PETROLEUM CORPORATION • 2017 ANNUAL REPORT 3 58280.indd 3 3/7/18 10:08 AM SPEEDWAY In 2017, Speedway, the second-largest chain of company-owned and -operated retail gasoline and convenience stores in the United States, achieved a record full-year performance. This was driven by strong earnings from light product sales, an increase in same-store merchandise sales, lower operating expenses and contributions from its travel center joint venture. It was Speedway’s sixth straight year of record results and second consecutive year generating $1 billion of annual EBITDA, reinforcing the strategic value of this high-performing, stable cash-flow business. In September 2017, MPC’s board of directors A Speedway store in Hartland, Michigan concluded, after a rigorous review led by an independent committee of the board, that long- term shareholder value is best optimized by Speedway remaining an integrated part of MPC. Throughout Speedway, we are building new ~6 MILLION stores, as well as remodeling and rebuilding ACTIVE MEMBERS OF THE existing stores. In 2017, we opened 24 new SPEEDY REWARDS® PROGRAM IN 2017* stores and five rebuilds, and completed 315 *12-month rolling average remodel projects, with more of these high-return investments planned for 2018. ~2,740 convenience stores in 21 states A Speedway store in Enon, Ohio 4 MARATHON PETROLEUM CORPORATION • 2017 ANNUAL REPORT 58280.indd 4 3/7/18 10:08 AM In 2018, we plan to invest approximately SPEEDWAY SPEEDWAY $530 million in Speedway, a $150 million MERCHANDISE SALES MERCHANDISE MARGIN increase from last year. This significant $ Billion $ Billion increase in capital allocation is primarily 1.44 4.88 5.01 4.89 1.37 1.40 targeted for construction of new store locations, as well as remodeling and rebuilding existing locations, consistent with MPC’s 975* commitment to aggressively grow the business and build upon its industry-leading position. Speedway finished the year with approximately 2,740 convenience stores in 21 states. Speedway’s Speedy Rewards loyalty program averaged approximately 6 million active 2015 2016 2017 2015 2016 2017 members in 2017. We believe Speedy Rewards is among the key reasons customers choose Speedway over competitors, and it continues to drive significant value for both Speedway SPEEDWAY RECONCILIATION SEGMENT EBITDA and our Speedy Rewards members. TO SEGMENT INCOME FROM OPERATIONS (in millions) 2017 2016 Speedway income from operations $ 732 $ 734 Plus: depreciation and amortization 275 273 Speedway segment EBITDA $ 1,007 $ 1,007 MARATHON PETROLEUM CORPORATION • 2017 ANNUAL REPORT 5 58280.indd 5 3/7/18 10:08 AM AS PART OF ITS 2017 STRATEGIC ACTIONS,
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