Marathon Petroleum Corporation (NYSE:MPC) Q3 2024 Earnings Call Transcript

Marathon Petroleum Corporation (NYSE:MPC) Q3 2024 Earnings Call Transcript November 5, 2024

Marathon Petroleum Corporation beats earnings expectations. Reported EPS is $1.87, expectations were $0.98.

Operator: Welcome to the MPC Third Quarter 2024 Earnings Call. My name is Sheila, and I will be your operator for today’s call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Kristina Kazarian. Kristina, you may begin.

Kristina Kazarian: Welcome to Marathon Petroleum Corporation’s Third Quarter 2024 Earnings Conference Call. The slides that accompany this call can be found on our website at marathonpetroleum.com under the Investor tab. Joining me today on the call; Maryann Mannen, CEO; John Quaid, 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 Maryann.

Maryann Mannen: Thanks, Kristina, and good morning, everyone. We remain committed to peer-leading operational excellence, commercial performance and profitability per barrel in each of the regions in which we operate, while being steadfast in our commitments to safely, reliably operate our assets and protect the health and safety of our employees. The global macro environment continues to exhibit refined product demand growth, and we expect 2024 will be another year of record refined product consumption. Within our domestic and export businesses, we have seen steady year-over-year demand for gasoline and diesel and growth in demand for jet fuels. Refining margins were volatile in the third quarter as the market digested the implications of a light turnaround season, less seasonal supply interruptions than anticipated and the uncertainties around global economic growth, particularly the pace within China.

By leveraging our fully integrated refining system and geographic diversification across the Gulf Coast, Mid-Con and West Coast regions our portfolio of assets is well positioned to perform in this dynamic market environment. Beyond 2024, we expect demand growth to exceed the net impact of capacity additions and rationalizations through the end of the decade. These fundamentals support an enhanced mid-cycle environment for refining. The availability of low-cost energy, the complexity of our facilities and our domestic and international logistical capabilities are further increase our global competitive advantage. The U.S. refining industry will remain structurally advantaged over the rest of the world. Operational excellence and commercial execution have driven sustainable structural benefit.

Our disciplined long-term strategic and quick hit investments are allocated to projects that we believe will achieve attractive returns. These projects are expected to strengthen our competitiveness and position MPC well into the future. We believe prioritization of these capabilities will ensure that our assets will remain the most competitive in each region in which we operate. Positioning us to deliver the strongest through-cycle cash generation and lead in capital allocation. In Midstream, MPLX continues to execute attractive growth opportunities anchored in the Permian and Marcellus basins. In the third quarter, MPLX began operations at Preakness II, a gas processing plant located in the Permian Basin and today announced an additional processing plant in the Northeast.

The Harmon Creek III project will bring Northeast gas processing capacity to 8.1 billion cubic feet per day and fractionation capacity to 800,000 barrels per day once completed in the second half of 2026. Executing its wellhead-to-water strategy, MPLX progressed its natural gas and NGL pipeline projects including the capacity expansion of the BANGL natural gas liquids pipeline and Blackcomb natural gas pipeline in collaboration with its partners. MPLX is strategic to MPC’s portfolio, and therefore, its value proposition. Our Midstream segment, which is primarily comprised of MPLX has grown its adjusted EBITDA by over 6% and on a 3-year annual compound basis through 2023. This growth and the durability of its cash flow profile supported a 12.5% increase to its quarterly distribution increasing the expected annual cash distribution to MPC to $2.5 billion.

As MPLX is able to grow its distribution, the cash flow MPC receives is expected to fully cover MPC’s dividend and all of our capital programs in 2025. MPLX’s growing portfolio and financial flexibility is expected to support this level of annual distribution increases in the future, strengthening the value proposition to MPC. MPC’s total capital return since May 2021 has reduced MPC’s share count by over 50% and following last week’s announced 10% increase to MPC’s dividends. Over the past 3 years, we have grown our quarterly dividend at a compound annual growth rate of approximately 6%. We announced an additional $5 billion share repurchase authorization. This will provide us flexibility to execute our peer-leading capital return commitment.

Given our highly advantaged refining business and the $2.5 billion annualized distribution from MPLX, we are positioned to lead peers in capital returns through all parts of the cycle. MPC generated third quarter earnings per share of $1.87. This quarter, we delivered refining utilization at 94%, reflecting our operational excellence and value chain optimization. Utilization in the West Coast and Mid-Con regions was in the upper 90s, demonstrating strong reliability. Utilization in the U.S. Gulf Coast region reflected execution of turnaround activity. The team executed to deliver capture of 96%, reflecting strong commercial performance in a volatile market. Our capture improved by 2%, exceeding the rate of improvement achieved by our closest peers.

This performance drove R&M segment adjusted EBITDA of $3.82 per barrel and cash from operations, excluding the impacts of working capital of $1.9 billion. And in the third quarter, we continue to lead our peers in capital return. The capabilities we have built provide a sustainable advantage, and we expect to continue to see the impact on our quarterly results. Let me turn the call over to John.

John Quaid: Thanks, Maryann. Slide 5 shows the sequential change in adjusted EBITDA from second to third quarter 2024 as well as the reconciliation between net income and adjusted EBITDA for the quarter. Adjusted EBITDA was lower sequentially by approximately $900 million, driven by decreased results in our Refining and Marketing segment. The tax rate for the quarter was 10% reflecting the earnings mix between our R&M and Midstream businesses. Moving to our segment results. Slide 6 provides an overview of our Refining & Marketing segment for the third quarter. Lower crack spreads reduced per barrel margin sequentially, our refineries ran at 94% utilization, processing nearly 2.8 million barrels of crude per day. Refining operating costs for $5.30 per barrel in the third quarter, higher sequentially primarily due to lower throughputs and higher project-related expenses associated with increased turnaround activity.

Slide 7 provides an overview of our Refining and Marketing margin capture of 96% for the quarter, an improvement of 2% from the second quarter. The improvement was primarily driven by our operational and commercial team’s execution of value-driven secondary product strategies as prices strengthened relative to gasoline quarter-over-quarter. This was partially offset by clean product margins declining sequentially, and we also continued to see headwinds from our renewals business during the quarter. Slide 8 shows our Midstream segment performance for the quarter. Our Midstream segment continues to deliver cash flow growth. Segment adjusted EBITDA was flat sequentially but increased approximately 6% year-over-year, primarily due to higher throughputs and rates.

MPLX remains a source of durable earnings growth as it advances projects targeted to enhance our natural gas and NGL value chains. Slide 9 presents the elements of change in our consolidated cash position for the third quarter. Operating cash flow, excluding changes in working capital, was $1.9 billion in the quarter, driven by both our refining and midstream businesses. Working capital was a $179 million use of cash for the quarter, primarily driven by decreases in crude prices. This quarter, capital expenditures, investments and acquisitions were $922 million, including $210 million for MPLX’s acquisition of an additional 20% interest in the BANGL pipeline. MPC utilized cash to repay $750 million of debt due in the quarter, which we plan to refinance.

MPC returned $2.7 billion through share repurchases and $273 million in dividends during the quarter and in October, we repurchased $500 million of MPC shares. At the end of the third quarter, MPC had approximately $5.1 billion in consolidated cash and short-term investments, including MPLX cash of $2.4 billion. Turning to Slide 10. Our capital allocation priorities remain consistent. Our number one priority is sustaining capital. We remain steadfast in our commitment to safely operate our assets and protect the health and safety of our employees and the communities in which we operate. We are committed to paying a secure, competitive and growing dividend. We will invest where we believe there are attractive returns, which will enhance our competitiveness and position MPC well into the future.

After meeting those requirements, we will return all excess capital through share repurchases even as we approach a more normalized balance sheet. And including the additional $5 billion announced this morning, we currently have $8.5 billion remaining under our share repurchase authorizations, highlighting our commitment to superior shareholder returns. As Maryann highlighted earlier, with our highly advantaged refining business and the $2.5 billion annualized distribution from MPLX we are positioned to lead peers and capital returns through all market cycles. Turning to guidance on Slide 11. We provide our fourth quarter outlook. We are projecting crude throughput volumes of just over 2.6 million barrels per day, representing utilization of 90%.

Turnaround expense is projected to be approximately $285 million in the fourth quarter with activity focused in the Mid-Con region. Operating costs are projected to be $5.50 per barrel. Distribution costs are expected to be approximately $1.5 billion and corporate costs are expected to be $200 million in the quarter. In summary, on Slide 13, this quarter, our R&M segment generated $1.1 billion of adjusted EBITDA, and our Midstream segment delivered $1.6 billion of adjusted EBITDA. We invested $922 million in the business and returned $3 billion of capital. With that, let me pass it back to Maryann.

Maryann Mannen: Thanks, John. We are unwavering in our commitment to safe and reliable operations, operational excellence commercial execution and cost competitiveness yields sustainable structural benefits and position us to deliver peer-leading financial performance in each of the regions in which we operate. To deliver this, we will optimize our portfolio to deliver outperformance now and in the future. We’ll leverage our value chain advantages and ensure the competitiveness of our assets while continuing to invest in our people. Our execution of these commitments position us to deliver the strongest through cycle cash generation. Durable midstream growth is expected to deliver cash flow uplift. Investing capital where we believe there are attractive returns will enhance our competitiveness now and for the future.

We are committed to leading capital allocation and will return excess capital through share repurchases. MPC is positioned to create exceptional value through peer-leading performance, execution of our strategic commitments and its compelling value proposition. Let me turn the call back to Kristina.

Kristina Kazarian: Thanks, Maryann. [Operator Instructions] Sheila, we are ready.

Q&A Session

Operator: We will now begin the question-and-answer session. [Operator Instructions] Our first question will come from Neil Mehta with Goldman Sachs.

Neil Mehta: Good morning Maryann and team, thanks for the rundown and good quarter here. I thought on the first topic, it would be good to get your perspective on was capital returns as you — as we thought about 2024, you’ve been kind of run rating to $0.5 billion of buybacks a quarter. And as we — as you think about 2025, the forward curve and your view of enhancement cycle relative to your cash balances. Just curious on your perspective on the level for 2025 it seems like $1.5 billion is what most investors are calibrating to and that ties into the $500 million you did in October, but just your perspective on the quarterly run rate of buybacks would be helpful.

Maryann Mannen: First and foremost, we are committed to leading our peers in capital returns through all parts of the cycle and that means returning all cash after our requirements to shareholders. When we think about mid-cycle, there’s no doubt we see volatility. We’ve seen it in the last quarter and that volatility could continue. But we remain constructive on the long term when we look at the demand profile over the next decade. We look at the net if you will, between capacity additions that are coming online, we don’t see anything beyond 2026 and you look at sort of the capacity that is actually coming offline as well we think over the long term, that remains an extremely constructive environment for us to operate. You mentioned a comment about sort of how we think about share repurchase beyond that period.

Look, one of the things that we are trying to achieve is our peer-leading performance in all of the regions we operate. We’re going to do that through commercial performance, we’re going to do that through our operational excellence Therefore, we should have the strongest cash flow through cycle. And when we do that, we should then have the ability to lead our peers in capital allocation. Contributing to that, as I was mentioning in my comments is the durability of that midstream business. We saw the 12.5% increase in the distribution that we announced a few days ago and that brings about $2.5 billion to MPC on an annual basis, covers the MPC dividend, which, as you know, we just increased. And the capital, although we haven’t given our capital guidance for 2025, highly likely it’s going to cover our capital for 2025 as well.

So again, just summarizing here, we expect that when we perform in this manner, we will have the strongest through-cycle cash flow and we’ll be able to lead our peers in our capital allocation through share repurchase.

Neil Mehta: Okay, Maryann. And then the follow-up is just on the West Coast, very volatile tough environment in Q3. Things seem to be getting better in Q4 and then you had the big announcement in L.A. — in L.A. around retirement. So how do you think about the West Coast setup and some of the moving pieces as we go into the next year?

Maryann Mannen: Yes. Thanks, Neil. First, I think as we’ve been sharing over the last several quarters, we believe in our West Coast, we have one of the most competitive assets in the region. If you take a look at our performance in this quarter, we think the results on the West Coast demonstrate that. We’ve got a fairly sophisticated set of assets in that region it’s a region where we have been monitoring for a long period of time. Frankly, if you go back to as early as 2020, we have been assessing the performance in that region and our ability to be profitable. We made a decision at that point in time to shutter the Martinez asset as a traditional fossil fuel refinery. So again, when we look at the capability of that asset, we look at the access waterborne, we look at our crude sourcing.

We look at the capability for Canadian coming out of TMX. We think over the long term, those decisions that others are making as well bode well for us, and we remain committed to that West Coast region.

Operator: Next, we will hear from Doug Leggate with Wolfe Research.

Douglas George Blyth Leggate: Maryann, I apologize for following up on the cash return question. But post-2026 is 2 years away for a rebalancing of global capacity, let’s assume things remain soft on a margin outlook for a period of time, how much tolerance are you prepared to have on your balance sheet at the MPC level to fund your cash returns? I wonder if you could put a limit on where you would allow your balance sheet to get to?

Maryann Mannen: Yes, one of the things we’ve shared for a period of time is the comfort that we have with our cash balance. And we remain comfortable, as we’ve shared in the past that about $1 billion is where we think our cash balances need to be on the MPC side. And again, part of that comfort comes from historically as we weathered other things like COVID, et cetera, and liquidity evaluations. Second, as I mentioned, we do have the benefit of our midstream cash flow, that durability of that stream, $2.5 billion coming to MPC. When we think about cash allocation, therefore, capital allocation, again, we intend to lead in capital allocation as we execute on the things that I mentioned, we should be able to have the strongest performance peer leading in each of the regions we operate, generating strongest cash flow and then we’ll return that cash not necessary for other requirements via share buyback.

So again, while the total may look different the commitment and the framework that we have been implementing doesn’t change as we watch that mid-cycle return.

Douglas George Blyth Leggate: So just to be clear, where would you like to see your net debt? Is there a limit?

Maryann Mannen: Yes. On the MPC side, we’ve always talked about being in a range of 25% to 30% debt to capital, and that’s a gross number and we remain comfortable in that position. Today, we’re sitting on under $6.5 billion of debt. That’s simply because we’ve got about a $750 million refinance, and we intend to refinance that. We felt like when we looked at market environment and other volatility happening, it was beneficial for us to evaluate that. So that $750 million is intended to be refinanced it was a shorter-term decision as we look for opportunities to put that debt back on the balance sheet at their rates.

Douglas George Blyth Leggate: Thanks for the clarification, Maryann. I guess my follow-up is related to your prepared remarks. I don’t think I’ve heard you say this before, so I wonder if I could ask you to elaborate. We will optimize our portfolio to obviously maximize returns. It sounds like under your leadership, there’s — there’s a portfolio review underway? Is there something that you’re not happy with in the asset base? And I guess specifically, you still have additional amount of equity interest in multiple pipelines, I guess, could potentially be monetized. So I wonder if you could just elaborate on what you meant by optimize our portfolio.

Maryann Mannen: Yes. Certainly, Doug. No, nothing different. One of our strategic pillars for a long time is ensuring the competitive nature of all of the assets in our portfolio. And so my comment there is our commitment that we are going to continue to evaluate those assets in the portfolio. Today, all of those assets are cash flow positive. But we’ll ensure that, that competitive nature of those assets continues both today and in the future. So it is merely our commitment to ensure the competitive nature of our assets not anything different intended by that comment.

Operator: Our next question will come from Manav Gupta with UBS.

Manav Gupta: My question is around the capital investment you’re making. You’ve highlighted high return investments in Los Angeles and Galveston Bay refineries. Can you help us remind exactly what kind of projects you’re doing over there? And obviously, to follow up a little bit on Neil’s question. Your competitors are looking to shut refineries on the West Coast, and you’re actually making an investment in Los Angeles. So help us understand that.

Maryann Mannen: Certainly. So let me start with the West Coast. We talked earlier this year about an investment that we are making in our L.A. assets. We think that investment with roughly a 20% return. One helps us reduce Scope 1, Scope 2 emissions, gives us operational efficiency, reduces cost and ultimately will improve our competitiveness in that region in addition to giving us compliance for NOx emissions. But a 20% return, given the strength of that asset in the West Coast and what we believe to be certainly a competitive asset, we think, is an appropriate commitment to capital in that region. The other question that you were referencing our project — excuse me, monopolize the project, the DHT in Galveston Bay. And again, another one that we talked about this year follow-on to our STAR project.

This allows us with a similar return in that 20% range allows us to convert high sulfur diesel to ultra-low sulfur diesel. And particularly when you look at the curves going forward, again, we think will give us further competitive advantage on the U.S. Gulf Coast, given the strength of our asset there in that region. Let me pause and see if that answers your question.

Manav Gupta: No, that’s perfect, Maryann. And my follow up a little bit on the midstream side, 12% — 12.5% distribution growth. It kind of is getting to a point where you can grow MPC distribution as well as cover the CapEx. Just I’m trying to understand, are the opportunities you’re looking in exclusively organic. Your press release is saying you can grow at 5% EBITDA organically, but are you also open to small bolt-on deals or JVs, minority interest in projects to grow your midstream business?

Maryann Mannen: Yes. Thank you for the question. So you’re correct. We increased that MPLX distribution, as you say, 12.5% just a few days ago, really on the strength, the durability of our cash flows based on — over the last 3 years, we’ve seen EBITDA grow at just under 7%. We’ve seen our distributable cash flow just under 8%. We believe there are a series of organic projects that can help us fuel that mid-single-digit growth. One of the things that we — you don’t see necessarily when you look at the amount of capital that we’re putting to work in MPLX is the strength of our JVs. And as we grow those JVs that allocation is not included in the capital. So that’s another source of continued growth for us. The other comment that you made also was really around our growth strategy that what we call our wellhead-to-water strategy and we think we’ve provided examples here, the increase in the BANGL ownership as we’re looking at our NGL and nat gas and frankly, crude value chains as well.

That wellhead water strategy is anchored in the Permian, we think those opportunities there to continue to capture the full value chain are extremely supportive of our ability to continue to support mid-single-digit growth in MPLX. And then the comment about whether or not we would look at other bolt-ons. If you look at the decision we made in the Utica, we think the opportunity for the Utica to increased utilization we made — we did a transaction to buy out the rest of our JV partner there in the first quarter Summit. So we think we’ve got good examples of where we can continue to grow in mid-single-digit growth.

Operator: Next, you will hear from Paul Cheng with Scotiabank.

Paul Cheng: Maryann look like in the third quarter, your full [indiscernible] is really good, much better than your previous guide and then your turnaround expenses. Just curious that do you have a breakdown? How much of the better than expected throughput is due to better execute the turnaround? And how much is just the base operation or lesser unpinned downtime than you expected? And also from that standpoint, is the turnaround have you changed the process, how you’re doing? In other words, that the improvement we see in the third quarter, is that repeatable?

Maryann Mannen: Yes. Thanks for the question, Paul. One of the things that I wanted to be sure that we talk about is our commitment to our operational performance. And you can see, as we’ve shared our commitment to peer-leading operational performance as well. We talk about commercial performance, giving us sustainable benefits, clearly, our operational performance, including our safe and reliable operations has given us sustainable benefits as well. I’m going to ask Tim to talk a little bit about the strengths of those capabilities and what it’s done, frankly, with respect to our turnaround capabilities.

Timothy Aydt: Hello Paul. We’re routinely in the first quartile of Solomon on the turnaround performance. I think you probably recognized that in the past. And that’s really based on our best-in-class procedures and processes that we have. But we’re not standing still at all. we’re continuing to improve and tweak these processes over time. And what we found really is that our — when we execute our turnaround outages using this consistent approach, we do so across all of the facilities, and that leads to good results. I’d also point out that our large scale really allows us to assist the smaller plants, which then enables us the consistent performance regardless of the location. So I think that’s another key benefit that you’re seeing come through.

And I’d also like to maybe take the opportunity to give a shout out to our teams as we had outstanding safety and environmental performance during our 4 fall turnarounds. So we had like zero OSHA recordables, zero lost time injuries, no significant environmental events all during these turnarounds this fall. So I think this is just yet another example of our safe and reliable focus and our operational excellence mindset. So hopefully, that helps.

Paul Cheng: That’s great. Maryann, can I ask the renewable diesel business. I think you are probably not making money in Martinez at least. And if we assume the margin environment remains flat at this level, what’s the — and after we take into consideration of the margin loss due to some BTC transition to PTC, what’s the path to profitability? I mean what in term of you are doing that will be able to allow you to actually bridge the gap and be able to push it back up to making money?

Maryann Mannen: Yes. Thanks for the question, Paul. So on Martinez, first of all, as we have shared, we expect that by the end of the fourth quarter, we will have Martinez returning to full nameplate capacity on plan, right, and that’s in the range of about 48,000 barrels a day. When you talk about profitability, actually make a comment here on the West Coast, as we are ramping up the challenges of profitability are there. If you exclude the impact of Martinez in our West Coast performance, our West Coast performance is actually positive in the quarter. As we go forward, we certainly believe that at full nameplate, we will be profitable, frankly, one of the more profitable renewable diesel facilities I’m going to pass to John because I think you had some questions also around BTC, and John is going to take you through that.

John Quaid: Yes. Thanks, Maryann. Maryann really hit on it. The main factor for our Martinez facility and we’re on track to do this is to get it back up to full capacity, again, running the advantaged feedstocks we can run there. So — and Paul, as we look at that transition rate as BTC right now is set to expire here comes PTC. We’re still waiting on regulations, et cetera. We’ll prepare for all scenarios. But we would see longer term, the market will balance that out. But the key for us to be profitable on the West Coast is where we are now and being on track to getting back up to full capacity.

Operator: Our next question will come from Roger Read with Wells Fargo.

Roger Read: Yes, thanks. Maybe a couple of operational questions with some of the changes here. As we look at the West Coast and the changes coming here in, I guess, early ’26 but maybe even a little sooner with some sort of unplanned downtime type items. How do you think about the incremental barrels coming to California. We’ve heard talk about it would be an Asian barrel. Historically, I would have said maybe Gulf Coast or even parts of Europe can bring California spec in but we’ve got closures coming in both of those locations. California, though, relative to the rest of your fleet and really the U.S. in general is pretty expensive place to operate. So what do you think about in terms of an incremental margin as California becomes more dependable or more dependent, excuse me, on an imported barrel?

Rick Hessling: Roger, it’s Rick. So if you — I won’t speak for our competitors, but when you look at what has happened in the past, we believe it will most likely be an Asian barrel. South Korea is a logical choice. And I will tell you, Roger, that, that will introduce some new nuances to the state of California. We believe that could cause more volatility. You have increased transit time and you have market disruptors in terms of additional transportation costs to bring a barrel in. But specifically, I would tell you, South Korea/Asia will be the primary market where we believe imports would come from.

Roger Read: Okay. And then on the Gulf Coast, we do have a company that’s going to be closed in one of their units in January. They’ve pretty much confirmed that here in the last few days. Any thoughts on what that means for crude availability on the Gulf Coast? I mean, generally, a heavy crude unit, you’ve got heavy crude units on the Gulf Coast. Does it matter? Does the crude just go elsewhere and it doesn’t really affect differentials? Just any thoughts along those lines?

Rick Hessling: Yes. Great question, Roger. So they are a big buyer of Canadian crudes. And as you know, the Gulf Coast market has a large appetite for it. When you rebalance the market, there will be winners and losers, and I will say that more incremental capacity into the Gulf Coast is a very good thing for the spread, we believe, and we should reap the benefits of that, especially at our Galveston Bay refinery.

Operator: [Operator Instructions] Our next question comes from John Royall with JPMorgan.

John Royall: So my first question is just on seasonality within capture rates. You’re tracking somewhere in the mid-90s on capture year-to-date. And when I look at the past couple of years, there’s obviously always some quarter-to-quarter volatility, but that’s not out of the ordinary for 1Q through 3Q. But 4Q has historically tended to be a big quarter from a capture perspective. So my question is, do you consider the year-to-date capture to be generally in line with what you would typically expect. And recognizing that there are a lot of moving pieces, but if you have a more kind of seasonally normal 4Q, could we expect the full year to average somewhere around that 100% range, so?

Maryann Mannen: Yes. John, thanks for your question. I think you know when we talk about capture, we think our commercial performance is a key deliverable particularly as we try to execute to be the most competitive in each region where we operate. To your point, if you look at the last several fourth quarters of our performance, our capture in the fourth quarter has been greater than the capture in the prior 3 quarters. There is nothing in the fourth quarter of 2024 that would tell us that, that behavior should be anything different at this point in time.

John Royall: Great. That’s exactly what I was looking for. And next one is maybe for John. If you could maybe talk a little bit about the potential timing for refinancing of the debt that you took out at the MPC level and what the use of proceeds could be there. Should we think about the 3Q buyback as maybe being held back a bit by that cash outflow and therefore, by the same token, maybe we could expect the proceeds to go back to buyback?

John Quaid: Yes. Thanks for the question, John. I mean, as we discussed before, that was a maturity. We took the advantage of the flexibility of our balance sheet to opportunistically look to refinance that at the right time. We want to get maybe past an election and some other things before we — we look to do that, but we’ll do that at the right time. Again, to the earlier comments, we’ll be comfortable with that level of debt as we look out longer term. So again, just trying to leverage some of the flexibility of the balance sheet to get the most optimal cost of that debt and we look to refinance it.

Operator: Our next question will come from Jason Gabelman with TD Cowen.

Jason Gabelman: I want to go back — I wanted to go back to the shareholder returns and focus on this minimum $1 billion of cash balance. And I guess the question is more about timing of getting to that $1 billion and as we think about heading into a weaker environment next year, are you looking to maybe retain a bit more cash above that cash balance so that you can deploy the excess cash on the balance sheet towards the buyback in a weaker environment? Or how do you exactly think about the timing of drawing that down?

John Quaid: Jason, it’s John. I’ll take that. Look, when we look at that $1 billion target, that’s — that’s what we look at minimum cash through a down cycle, right? That’s what we’re analyzing. So we remain very comfortable with that amount. And there’s a couple of reasons why. You’ve heard a lot on the call today how we’re confident in the competitiveness of our operations in each of the regions we operate and the things we’re working on to drive positive cash flow. And then we’ve got this fantastic midstream investment in MPLX that continues to grow — grow its distribution and drive $2.5 billion right now of annualized distributions back to MPC. So all of those factors are why we’re very comfortable with that $1 billion, and it might differentiate us from maybe some of our peers that don’t have that same business set. Hopefully, that helps.

Jason Gabelman: Yes, it does. The other question just on the quarterly results, you had mentioned that your capture trended better than peers. Just wondering if there’s anything specific that drove that, that you could call out in the quarter or if it’s something more structural?

Rick Hessling: This is Rick. I really would have to give a huge shout out to our Specialty Products teams. So oftentimes, Specialty Products is a headwind but when a market turns it’s only as good as your team executing on the market turning. And when I think of some specific commodities that we don’t often talk about, when I think of asphalt, pet chems, butane, and propane, we really did a great job. The team was phenomenal at capturing that market when it was there within the quarter. And I really am proud of them, and I truly believe they outperformed our competition. That, I would say, is the largest single call out.

Operator: And that is all the time that we have for questions today.

Kristina Kazarian: Great. Thank you so much for joining us on our call today. If you should have follow-up questions, please reach out. The IR team is available all day to help you with your questions. Thank you, everybody.

Operator: That does conclude today’s conference. Thank you for participating. You may disconnect at this time.