# Marathon Petroleum Corp: Form 10-Q for the period ended Mar 31, 2012

- Company: [Marathon Petroleum Corp](/companies/mpc.md) (CIK 1510295)
- Form: 10-Q
- Filed: 2012-05-09
- Accepted by EDGAR: May 9, 2012, 16:47 ET
- Period: 2012-03-31
- Accession: 0001193125-12-222274
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1510295/000119312512222274/d320613d10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1510295/000119312512222274/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2012-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2012-01-01 to 2012-03-31 | $20.27bn | us-gaap:Revenues |
| Selling, general and administrative | 3 months, 2012-01-01 to 2012-03-31 | $263.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2012-01-01 to 2012-03-31 | $1.03bn | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2012-01-01 to 2012-03-31 | $338.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2012-01-01 to 2012-03-31 | $596.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2012-01-01 to 2012-03-31 | $1.70 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2012-01-01 to 2012-03-31 | $1.71 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2012-01-01 to 2012-03-31 | 350,000,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2012-01-01 to 2012-03-31 | $347.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2012-01-01 to 2012-03-31 | $309.0m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2012-01-01 to 2012-03-31 | $87.0m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 3 months, 2012-01-01 to 2012-03-31 | $850.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2012-03-31 | $2.21bn | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2012-03-31 | $11.58bn | us-gaap:AssetsCurrent |
| Total assets | at 2012-03-31 | $25.31bn | us-gaap:Assets |
| Current liabilities | at 2012-03-31 | $9.20bn | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2012-03-31 | $16.09bn | us-gaap:Liabilities |
| Long-term debt | at 2012-03-31 | $3.30bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2012-03-31 | $17.0m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2012-03-31 | $9.22bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 50,876 characters.

Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the unaudited financial statements and accompanying footnotes included under Item 1. Financial Statements and in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2011.

Management’s Discussion and Analysis of Financial Condition and Results of Operations includes various forward-looking statements concerning trends or events potentially affecting our business. You can identify our forward-looking statements by words such as “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “plan,” “predict,” “project,” “seek,” “target,” “could,” “may,” “should” or “would” or other similar expressions that convey the uncertainty of future events or outcomes. In accordance with “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, these statements are accompanied by cautionary language identifying important factors, though not necessarily all such factors, which could cause future outcomes to differ materially from those set forth in forward-looking statements. For additional risk factors affecting our business, see Item 1A. Risk Factors in this Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2011.

### The Spinoff and Basis of Presentation

On May 25, 2011, the Marathon Oil board of directors approved the spinoff of its RM&T Business into an independent, publicly traded company, MPC, through the distribution of MPC common stock to the stockholders of Marathon Oil common stock. In accordance with a separation and distribution agreement between Marathon Oil and MPC, the distribution of MPC common stock was made on June 30, 2011, with Marathon Oil stockholders receiving one share of MPC common stock for every two shares of Marathon Oil common stock. Following the Spinoff, Marathon Oil retained no ownership interest in MPC, and each company had separate public ownership, boards of directors and management. On July 1, 2011, our common stock began trading “regular-way” on the NYSE under the ticker symbol “MPC”.

Prior to the Spinoff on June 30, 2011, our results of operations and cash flows consisted of the RM&T Business, which represented a combined reporting entity. Subsequent to the Spinoff, our results of operations and cash flows consist of consolidated MPC activities. All significant intercompany transactions and accounts have been eliminated. The consolidated statements of income for periods prior to the Spinoff include expense allocations for certain corporate functions historically performed by Marathon Oil, including allocations of general corporate expenses related to executive oversight, accounting, treasury, tax, legal, procurement and information technology. Those allocations were based primarily on specific identification, headcount or computer utilization. Our management believes the assumptions underlying the consolidated financial statements, including the assumptions regarding allocating general corporate expenses from Marathon Oil, are reasonable. However, the consolidated financial statements do not include all of the actual expenses that would have been incurred had we been a stand-alone company during those periods presented prior to the Spinoff and may not reflect our consolidated results of operations and cash flows had we been a stand-alone company during the periods presented. Actual costs that would have been incurred if we had been a stand-alone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure. Subsequent to the Spinoff, we are performing these functions using internal resources or services provided by third parties, certain of which are being provided by Marathon Oil during a transition period pursuant to a transition services agreement.

### Corporate Overview

We are an independent petroleum refining, marketing and transportation company. We currently own and operate six refineries, all located in the United States, with an aggregate crude oil refining capacity of approximately 1.2 million barrels per calendar day. Our refineries supply refined products to resellers and consumers within our market areas, including the Midwest, Gulf Coast and Southeast regions of the United States. We distribute refined products to our customers through one of the largest private domestic fleets of inland petroleum product barges, one of the largest terminal operations in the United States, and a combination of MPC-owned and third-party-owned trucking and rail assets. We currently own, lease or have ownership interests in approximately 8,300 miles of crude oil and refined product pipelines to deliver crude oil to our refineries and other locations and refined products to wholesale and retail market areas. We are one of the largest petroleum pipeline companies in the United States on the basis of total volumes delivered.

Our operations consist of three reportable operating segments: Refining & Marketing; Speedway; and Pipeline Transportation. Each of these segments is organized and managed based upon the nature of the products and services they offer.

- Refining & Marketing—refines crude oil and other feedstocks at our six refineries in the Gulf Coast and Midwest regions of the United States, purchases ethanol and refined products for resale and distributes refined products through various means, including barges, terminals and trucks that we own or operate. We sell refined products to wholesale marketing customers domestically and internationally, to buyers on the spot market, to our Speedway segment and to dealers and jobbers who operate Marathon® retail outlets;
- Speedway—sells transportation fuels and convenience products in the retail market in the Midwest, primarily through Speedway® convenience stores; and
- Pipeline Transportation—transports crude oil and other feedstocks to our refineries and other locations, delivers refined products to wholesale and retail market areas and includes, among other transportation-related assets, a majority interest in LOOP, which is the owner and operator of the only U.S. deepwater oil port.

We reported net income of $596 million, or $1.70 per diluted share, for the first quarter of 2012 compared to net income of $529 million, or $1.48 per diluted share, for the first quarter of 2011. The increase was primarily due to our Refining & Marketing segment, which generated income from operations of $943 million in the first quarter of 2012 compared to $802 million in the first quarter of 2011. The increase in Refining & Marketing segment income from operations was due to an improved Refining & Marketing gross margin, which was primarily a result of larger U.S. Gulf Coast (“USGC”) Light Louisiana Sweet crude oil (“LLS”) 6-3-2-1 crack spreads and wider differentials between West Texas Intermediate crude oil (“WTI”) and other light sweet crudes such as LLS.

The Detroit refinery heavy oil upgrading and expansion project continues to be a significant portion of our 2012 capital spending. As of March 31, 2012, the project was approximately 92 percent complete and on budget and on schedule to complete construction in the third quarter of 2012. Immediately following the completion of construction, there will be a 70-day turnaround with the expanded Detroit refinery anticipated to be online by year end.

Our Speedway segment generated income from operations of $50 million in the first quarter of 2012 compared to income from operations of $33 million in the first quarter of 2011. The higher income from operations was primarily due to an increase in our merchandise gross margin.

On February 9, 2012, we announced that Speedway had signed an agreement in which it will acquire 88 convenience stores situated throughout Indiana and Ohio from GasAmerica. The GasAmerica transaction is anticipated to close by the end of the second quarter of 2012, subject to receipt of regulatory approvals, customary due diligence and satisfaction of other customary closing conditions.

Our Pipeline Transportation segment generated income from operations of $42 million in the first quarter of 2012 compared to income from operations of $51 million in the first quarter of 2011. The decrease primarily reflects a reduction in income from pipeline affiliates due to reduced shipment volumes.

On February 1, 2012, we announced that our board of directors authorized a share repurchase plan, enabling us to purchase up to $2.0 billion of MPC common stock over a two-year period. On February 3, 2012, we entered into an $850 million ASR program with a major financial institution as part of this authorization. Under the ASR program, we received 17,581,344 shares of MPC common stock during the three months ended March 31, 2012. Any remaining shares will be delivered to us upon the termination of the ASR program, which we expect to occur no later than the middle of the third quarter of 2012. After the effects of our ASR program, $1.15 billion of the total authorized amount is available for share repurchase at March 31, 2012.

On February 1, 2012, we announced that we are evaluating strategic alternatives with respect to certain of our midstream assets, including, but not limited to, the possible formation and initial public offering of a master limited partnership (“MLP”). On May 1, 2012, we announced that our board of directors has authorized and directed its evaluation team to further explore the formation and initial public offering of an MLP and to prepare a registration statement.

If an initial offering of an MLP is pursued, the issuer would be a wholly-owned subsidiary, MPLX LP. MPC would contribute a portion of its midstream assets and sell a minority interest in the MLP in an initial public offering. The potential MLP would support MPC’s strategy to grow its midstream business, initially through a contribution of an interest in certain onshore common-carrier pipeline assets located in the Midwest and Gulf Coast regions of the U.S. If pursued, MPC would expect to file a registration statement relating to the common units to be sold in a potential initial public offering with the Securities and Exchange Commission during the third quarter of 2012, subject to final MPC board approval and prevailing market conditions.

The collective bargaining agreement for the hourly workers at our Catlettsburg refinery expired in January 2012. The agreement was temporarily extended while negotiations continued on a new collective bargaining agreement. We have been unable to reach agreement with the union, and having reached impasse in the negotiations, we implemented the final offer presented to the union. While no work stoppage has occurred, we have an increased risk of a temporary work stoppage at this location until such time as a new contract is ratified.

The above discussion includes forward-looking statements with respect to the Detroit refinery heavy oil upgrading and expansion project, the share repurchase plan, the midstream asset evaluation and labor relations at the Catlettsburg refinery. Factors that could affect the Detroit refinery heavy oil upgrading and expansion project include, but are not limited to, transportation logistics, availability of materials and labor, unforeseen hazards such as weather conditions, delays in obtaining or conditions imposed by necessary government and third-party approvals, other risks customarily associated with construction projects. Factors that could affect the share repurchase plan and its timing include, but are not limited to, business conditions, availability of liquidity, and the market price of our common stock. Factors that could affect the midstream asset evaluation and the outcome of such evaluation include, but are not limited to, risks relating to securities markets generally, the impact of adverse market conditions affecting our midstream business, adverse changes in laws including with respect to tax and regulatory matters and other risks. Factors that could affect labor relations at the Catlettsburg refinery include, but are not limited to, risks related to labor matters generally and our ability to obtain a signed agreement with the union. These factors, among others, could cause actual results to differ materially from those set forth in the forward-looking statements.

### Overview of Segments

### Refining & Marketing

Refining & Marketing segment income from operations depends largely on our Refining & Marketing gross margin and refinery throughputs.

Our Refining & Marketing gross margin is the difference between the prices of refined products sold and the costs of crude oil and other charge and blendstocks refined, including the costs to transport these inputs to our refineries, the costs of purchased products and manufacturing expenses, including depreciation and amortization. The crack spread is a measure of the difference between market prices for refined products and crude oil, commonly used by the industry as a proxy for the refining margin. Crack spreads can fluctuate significantly, particularly when prices of refined products do not move in the same relationship as the cost of crude oil. As a performance benchmark and a comparison with other industry participants, we calculate Midwest (Chicago) and USGC crack spreads that we believe most closely track our operations and slate of products. LLS prices and a 6-3-2-1 ratio of products (6 barrels of LLS crude oil producing 3 barrels of unleaded regular gasoline, 2 barrels of ultra-low sulfur diesel and 1 barrel of 3 percent sulfur residual fuel) are used for these crack spread calculations.

Our refineries can process significant amounts of sour crude oil, which typically can be purchased at a discount to sweet crude oil. The amount of this discount, the sweet/sour differential, can vary significantly, causing our Refining & Marketing gross margin to differ from crack spreads based on sweet crude oil. In general, a larger sweet/sour differential will enhance our Refining & Marketing gross margin.

Historically, WTI has traded at prices similar to LLS. In the first quarter of 2012 and 2011, WTI traded at prices significantly less than LLS, which favorably impacted our Refining & Marketing gross margin.

The following table provides sensitivities showing the estimated change in annual net income due to potential changes in market conditions:

*(In millions, after-tax)*

|  |  |
| --- | ---: |
| LLS 6-3-2-1 crack spread sensitivity (a) (per $1.00/barrel change) | $300 |
| Sweet/sour differential sensitivity (b) (per $1.00/barrel change) | 150 |
| LLS-WTI spread sensitivity (c) (per $1.00/barrel change) | 65 |

(a) Weighted 52% Chicago and 48% USGC LLS 6-3-2-1 crack spreads and assumes all other differentials and pricing relationships remain unchanged.

(b) LLS (prompt) - \[delivered cost of sour crude oil: Arab Light, Kuwait, Maya, Western Canadian Select and Mars\].

(c) Assumes 25% of crude oil throughput volumes are WTI-based domestic crude oil.

In addition to the market changes indicated by the crack spreads, the sweet/sour differential and the discount of WTI to LLS, our Refining & Marketing gross margin is impacted by factors such as:

- the types of crude oil and other charge and blendstocks processed;
- the selling prices realized for refined products;
- the impact of commodity derivative instruments used to manage price risk;
- the cost of products purchased for resale; and
- changes in manufacturing costs, which include depreciation and amortization.

Changes in manufacturing costs are primarily driven by the cost of energy used by our refineries and the level of maintenance costs. Planned major maintenance activities, or turnarounds, requiring temporary shutdown of certain refinery operating units, are periodically performed at each refinery. We had significant planned turnaround and major maintenance activities at our Garyville refinery during the first quarter of 2012. During the first quarter of 2011, significant planned turnaround and major maintenance activities occurred at our Canton refinery and were completed in April 2011.

### Speedway

Our retail marketing gross margin for gasoline and distillates, which is the price paid by consumers less the cost of refined products, including transportation and consumer excise taxes, and the cost of bankcard processing fees, impacts the Speedway segment profitability. Numerous factors impact gasoline and distillates demand throughout the year, including local competition, seasonal demand fluctuations, the available wholesale supply, the level of economic activity in our marketing areas and weather conditions. Market demand increases for gasoline and distillates generally increase the product margin we can realize. The gross margin on merchandise sold at convenience stores historically has been less volatile.

### Pipeline Transportation

The profitability of our pipeline transportation operations primarily depends on tariff rates and the volumes shipped through the pipelines. A majority of the crude oil and refined product shipments on our common-carrier pipelines serve our Refining & Marketing segment. The volume of crude oil that we transport is directly affected by the supply of, and refiner demand for, crude oil in the markets served directly by our crude oil pipelines. Key factors in this supply and demand balance are the production levels of crude oil by producers in various regions or fields, the availability and cost of alternative modes of transportation, the volumes of crude oil processed at refineries and refinery and transportation system maintenance levels. The volume of refined products that we transport is directly affected by the production levels of, and user demand for, refined products in the markets served by our refined product pipelines. In most of our markets, demand for gasoline and distillates peaks during the summer driving season, which extends from May through September of each year, and declines during the fall and winter months. As with crude oil, other transportation alternatives and system maintenance levels influence refined product movements.

### Results of Operations

### Consolidated Results of Operations

*(In millions)*

| Revenues and other income: | Three Months Ended March 31, 2012 | 2011 | Variance |
| --- | ---: | ---: | ---: |
| Sales and other operating revenues (including consumer excise taxes) | $20,264 | $17,819 | $2,445 |
| Sales to related parties | 1 | 23 | (22) |
| Income from equity method investments | 2 | 9 | (7) |
| Net gain on disposal of assets | 2 | 1 | 1 |
| Other income | 6 | 19 | (13) |
| Total revenues and other income | 20,275 | 17,871 | 2,404 |
| **Costs and expenses:** |  |  |  |
| Cost of revenues (excludes items below) | 17,309 | 14,557 | 2,752 |
| Purchases from related parties | 63 | 785 | (722) |
| Consumer excise taxes | 1,380 | 1,209 | 171 |
| Depreciation and amortization | 230 | 216 | 14 |
| Selling, general and administrative expenses | 263 | 217 | 46 |
| Other taxes | 74 | 68 | 6 |
| Total costs and expenses | 19,319 | 17,052 | 2,267 |
| **Income from operations** | 956 | 819 | 137 |
| Related party net interest and other financial income | — | 17 | (17) |
| Net interest and other financial income (costs) | (22) | (14) | (8) |
| **Income before income taxes** | 934 | 822 | 112 |
| Provision for income taxes | 338 | 293 | 45 |
| **Net income** | $596 | $529 | $67 |

Consolidated net income was $67 million higher in the first quarter of 2012 compared to the first quarter of 2011, primarily due to a higher Refining & Marketing gross margin, which increased to $8.36 per barrel in the first quarter of 2012 from $6.73 per barrel in the first quarter of 2011.

Total revenues and other income increased $2.40 billion in the first quarter of 2012 compared to the first quarter of 2011, primarily due to higher refined product selling prices.

Income from equity method investments decreased $7 million in the first quarter of 2012 compared to the first quarter of 2011, primarily due to a $5 million decrease in income from our investment in LOOP and a $2 million increase in losses from our investment in Centennial. Both experienced reductions in shipment volumes in the first quarter of 2012 compared to the first quarter of 2011. At March 31, 2012, Centennial was not shipping product; therefore, we continued to evaluate the carrying value of our equity investment in Centennial and concluded that no impairment was required.

Other income decreased $13 million in the first quarter of 2012 compared to the first quarter of 2011, primarily due to a decrease in income from transition services provided to the buyer of the Minnesota Assets, a decrease in Renewable Identification Numbers (“RINs”) sales and a decrease in dividends from our investment in a pipeline company.

Cost of revenues increased $2.75 billion in the first quarter of 2012 compared to the first quarter of 2011. The increase was primarily due to higher acquisition costs of crude oil in the Refining & Marketing segment, which resulted from higher market prices and increased volumes associated with purchases from Marathon Oil not being classified as related party in periods subsequent to the Spinoff. Crude oil acquisition prices were up 12 percent and crude oil volumes were up 13 percent.

Purchases from related parties decreased $722 million in the first quarter of 2012 compared to the first quarter of 2011. The decrease was primarily due to purchases of crude oil from Marathon Oil after the Spinoff not being classified as related party transactions.

Selling, general and administrative expenses increased $46 million in the first quarter of 2012 compared to the first quarter of 2011. Employee compensation and benefits expenses comprised $28 million of the increase, which is partially due to an increase in the number of administrative employees associated with being a stand-alone public company, higher incentive compensation expenses and increased pension and postretirement benefit costs. Contract services expenses increased $24 million due to higher information technology costs associated with being a separate stand-alone company and higher refinery-related contract services.

Related party net interest and other financial income decreased $17 million in the first quarter of 2012 compared to the first quarter of 2011 due to our short-term investments in PFD Preferred Stock being redeemed prior to the Spinoff. See Note 3 to the unaudited consolidated financial statements for further discussion of our investment in PFD Preferred Stock.

Net interest and other financial costs increased $8 million in the first quarter of 2012 compared to the first quarter of 2011, primarily reflecting increased interest expense associated with the $3.0 billion of long-term debt we issued in February 2011. We capitalized third-party interest of $30 million in the first quarter of 2012 compared to $20 million in the first quarter of 2011. The capitalized interest is primarily associated with the Detroit refinery heavy oil upgrading and expansion project. See Note 14 to the unaudited consolidated financial statements for further details relating to our debt.

Provision for income taxes increased $45 million in the first quarter of 2012 compared to the first quarter of 2011, primarily due to the $112 million increase in income before income taxes. The effective income tax rate was 36 percent in the first quarter of 2012 and 2011. The provision for income taxes for the first quarter of 2011, which was prior to the Spinoff, was computed as if we were a stand-alone company. See Note 9 to the unaudited consolidated financial statements for further details.

### Segment Results

Revenues are summarized by segment in the following table:

*(In millions)*

|  | Three Months Ended March 31, 2012 | 2011 |
| --- | ---: | ---: |
| Refining & Marketing | $18,923 | $16,605 |
| Speedway | 3,285 | 2,985 |
| Pipeline Transportation | 99 | 93 |
| Segment revenues | 22,307 | 19,683 |
| Elimination of intersegment revenues | (2,042) | (1,841) |
| Total revenues | $20,265 | $17,842 |
| Items included in both revenues and costs: |  |  |
| Consumer excise taxes | $1,380 | $1,209 |

Refining & Marketing segment revenues increased $2.32 billion in the first quarter of 2012 compared to the first quarter of 2011, primarily due to increased refined product selling prices. Our average refined product selling prices were $3.07 per gallon in first quarter of 2012 compared to $2.75 per gallon in the first quarter of 2011. The table below shows the average refined product benchmark prices for our marketing areas.

| (Dollars per gallon) | Three Months Ended March 31, 2012 | 2011 |
| --- | ---: | ---: |
| Chicago spot unleaded regular gasoline | $2.88 | $2.57 |
| Chicago spot ultra-low sulfur diesel | 2.96 | 2.80 |
| USGC spot unleaded regular gasoline | 2.98 | 2.60 |
| USGC spot ultra-low sulfur diesel | 3.16 | 2.84 |

31

Refining & Marketing intersegment sales to our Speedway segment were $1.96 billion in the first quarter of 2012 compared to $1.76 billion in the first quarter of 2011. Intersegment refined product sales volumes were 608 million gallons in the first quarter of 2012 compared to 614 million gallons in the first quarter of 2011, with the decreased volumes primarily due to higher refined product selling prices.

Speedway segment revenues increased $300 million in the first quarter of 2012 compared to the first quarter of 2011, mainly due to higher gasoline and distillates selling prices, which averaged $3.51 per gallon in the first quarter of 2012 compared to $3.20 per gallon in the first quarter of 2011.

Income before income taxes and income from operations by segment are summarized in the following table:

*(In millions)*

| Income from operations by segment: | Three Months Ended March 31, 2012 | 2011 |
| --- | ---: | ---: |
| Refining & Marketing | $943 | $802 |
| Speedway | 50 | 33 |
| Pipeline Transportation | 42 | 51 |
| Items not allocated to segments (a) | (79) | (67) |
| Income from operations | 956 | 819 |
| Net interest and other financial income (costs) (b) | (22) | 3 |
| Income before income taxes | $934 | $822 |

(a) Items not allocated to segments consists primarily of MPC’s corporate administrative expenses, including allocations from Marathon Oil for the three months ended March 31, 2011, and costs related to certain non-operating assets.

(b) Includes related party net interest and other financial income.

The following table presents certain market indicators that we believe are helpful in understanding the results of our Refining & Marketing segment’s business.

| (Dollars per barrel) | Three Months Ended March 31, 2012 | 2011 |
| --- | ---: | ---: |
| Chicago LLS 6-3-2-1 (a) (b) | $0.33 | $0.16 |
| USGC LLS 6-3-2-1 (a) | 5.25 | 1.32 |
| Blended 6-3-2-1 (c) | 2.69 | 0.71 |
| LLS | 119.66 | 107.66 |
| WTI | 103.03 | 94.60 |
| LLS—WTI differential | 16.63 | 13.06 |
| Sweet/Sour differential (a) (d) | 13.70 | 12.40 |

(a) All spreads and differentials are measured against prompt LLS.

(b) Calculation utilizes USGC 3% Bunker value as a proxy for Chicago residual fuel price.

(c) Blended Chicago/USGC crack spread is 52%/48% in 2012 and 53%/47% in 2011 based on MP C’s refining capacity by region in each period.

(d) LLS (prompt)—\[delivered cost of sour crude oil: Arab Light, Kuwait, Maya, Western Canadian Select and Mars\].

Refining & Marketing segment income from operations increased $141 million in the first quarter of 2012 compared to the first quarter of 2011, primarily due to a higher Refining & Marketing gross margin per barrel, which averaged $8.36 per barrel in the first quarter of 2012 compared to $6.73 per barrel in the first quarter of 2011. Our realized Refining & Marketing gross margin for the first quarter of 2012 improved from the first quarter of 2011 primarily due to larger USGC LLS 6-3-2-1 crack spreads and wider differentials between WTI and other light sweet crudes such as LLS. The USGC LLS 6-3-2-1 crack spread increased $3.93 per barrel and we estimate this had a $229 million positive impact on our Refining & Marketing gross margin. The discount of WTI to LLS increased $3.57 per barrel as a result of logistical constraints in the U.S. mid-continent markets which prevented the price of WTI from rising with the prices of crudes produced in other regions. We estimate this had a $198 million positive impact on our Refining & Marketing gross margin. These positive impacts were partially offset by a reduced contango market structure and other incremental crude acquisition costs. Within our refining system, sour crude accounted for 47 percent and 54 percent of our crude oil processed in the first quarter of 2012 and 2011, respectively.

Our crude oil capacity utilization was lower in the first quarter of 2012 compared to the first quarter of 2011. However, our total refinery throughputs of 1,320 thousand barrels per day (“mbpd”) in the first quarter of 2012 was relatively unchanged from the 1,321 mbpd in the first quarter of 2011. Crude oil refined increased 3 percent in the first quarter of 2012 compared to the first quarter of 2011, while other charge and blendstock throughputs decreased 16 percent over the same period.

The following table includes certain key operating statistics for the Refining & Marketing segment:

|  | Three Months Ended March 31, 2012 | 2011 |
| --- | ---: | ---: |
| Refining & Marketing gross margin (dollars per barrel) (a) | $8.36 | $6.73 |
| Direct operating costs in Refining & Marketing gross margin (dollars per barrel): (b) |  |  |
| Planned turnaround and major maintenance | $1.05 | $1.24 |
| Depreciation and amortization | 1.38 | 1.32 |
| Other manufacturing (c) | 3.16 | 3.54 |
| Total | $5.59 | $6.10 |
| Refined products sales volumes (thousands of barrels per day) (d) | 1,532 | 1,541 |

(a) Sales revenue less cost of refinery inputs, purchased products and manufacturing expenses, including depreciation and amortization, divided by Refining & Marketing segment refined product sales volumes.

(b) Per barrel of total refinery throughputs.

(c) Includes utilities, labor, routine maintenance and other operating costs.

(d) Includes intersegment sales.

Speedway segment income from operations increased $17 million in the first quarter of 2012 compared to the first quarter of 2011, primarily due to an increased merchandise gross margin, which was $179 million in the first quarter of 2012 compared to $158 million in the first quarter of 2011. The change in the merchandise gross margin was primarily due to increased sales of higher margin foodservice and other beverage items, in part associated with the unseasonable warm weather throughout the Midwest, and the May 2011 acquisition of 23 convenience stores.

Speedway’s gasoline and distillates gross margin per gallon averaged 10.96 cents in the first quarter of 2012, compared with 10.64 cents in the first quarter of 2011. Same-store gasoline sales volume decreased 1.1 percent in the first quarter of 2012 compared to the first quarter of 2011. The primary factor affecting lower same store gasoline sales volume was the higher average retail price of gasoline.

Pipeline Transportation segment income from operations decreased $9 million in the first quarter of 2012 compared to the first quarter of 2011. The decrease primarily reflects a reduction in income from pipeline affiliates due to reduced shipment volumes. Refined product trunk line volumes decreased 6 percent in the first quarter of 2012 compared to the first quarter of 2011, while crude oil trunk line volumes decreased 5 percent in the same period.

Corporate and other unallocated expenses increased $12 million in the first quarter of 2012 compared to the first quarter of 2011 due to higher employee benefits, incentive compensation and information technology expenses, which is partially the result of additional costs associated with being a stand-alone company.

### Liquidity and Capital Resources

### Cash Flows

Our cash and cash equivalents balance was $2.21 billion at March 31, 2012 compared to $3.08 billion at December 31, 2011. The change in cash and cash equivalents was due to the factors discussed below.

Net cash provided by operating activities totaled $347 million in the first quarter of 2012, compared to $915 million in the first quarter of 2011. The $568 million decrease was primarily due to changes in working capital, partially offset by lower income tax payments. Changes in working capital were a net $761 million use of cash in the first quarter of 2012 compared to a net $137 million source of cash in the first quarter of 2011. The $761 million use of cash in the first quarter of 2012 was primarily due to an increase in accounts receivable caused by higher refined product prices as well as lower crude oil payable volumes as a result of changes in crude supply. The $137 million source of cash in the first quarter of 2011 was primarily due to the impact of increased crude oil prices on accounts payable and decreased refined product and crude oil inventory volumes, partially offset by the impact of increased refined product prices on accounts receivable.

Net cash used in investing activities totaled $311 million in the first quarter of 2012, compared to $484 million in the first quarter of 2011. The $173 million decrease was primarily due to net purchases of related party debt securities in 2011, partially offset by decreased asset disposals.

Net investments in related party debt securities was a use of cash of $361 million in the first quarter of 2011. All such activity reflected the net cash flow from redemptions and purchases of PFD Preferred Stock. Prior to the Spinoff, all investments in PFD Preferred Stock were redeemed, and the agreement with PFD was terminated. See Note 3 to the unaudited consolidated financial statements for further discussion of our investments in PFD Preferred Stock.

Disposal of assets totaled $2 million in the first quarter of 2012 and $125 million in the first quarter of 2011. The $125 million of cash from asset disposals in the first quarter of 2011 primarily included the collection of a receivable associated with the December 2010 sale of our Minnesota Assets.

The consolidated statements of cash flows exclude changes to the consolidated balance sheets that did not affect cash. The following table reconciles additions to property, plant and equipment to reported total capital expenditures and investments:

*(In millions)*

|  | Three Months Ended March 31, 2012 | 2011 |
| --- | ---: | ---: |
| Additions to property, plant and equipment | $309 | $243 |
| Decrease in capital accruals | (76) | (43) |
| Total capital expenditures | 233 | 200 |
| Investments in equity method investees | 7 | 4 |
| Total capital expenditures and investments | $240 | $204 |

Capital expenditures and investments are summarized by segment below:

*(In millions)*

|  | Three Months Ended March 31, 2012 | 2011 |
| --- | ---: | ---: |
| Refining & Marketing | $153 | $156 |
| Speedway | 11 | 5 |
| Pipeline Transportation | 38 | 14 |
| Corporate and Other (a) | 38 | 29 |
| Total | $240 | $204 |

(a) Includes capitalized interest of $30 million and $29 million for the three months ended March 31, 2012 and 2011, respectively.

The Detroit refinery heavy oil upgrading and expansion project comprised 65 percent and 59 percent (excluding capitalized interest associated with this project) of our Refining & Marketing segment capital spending in the first quarter of 2012 and 2011, respectively.

Net cash used in financing activities totaled $910 million in the first quarter of 2012 and $330 million in the first quarter of 2011. The use of cash in the first quarter of 2012 was primarily due to the common stock repurchases under our ASR program and dividend payments. The use of cash in the first quarter of 2011 was primarily due to the net repayment of debt payable to Marathon Oil and its subsidiaries, partially offset by cash provided from the issuance of long-term debt and net contributions from Marathon Oil. These activities were undertaken to effect the Spinoff. See Note 14 to the unaudited consolidated financial statements for additional information on our long-term debt.

Net borrowings and repayments under our long-term debt payable to Marathon Oil and its subsidiaries was a use of cash of $3.57 billion in the first quarter of 2011. The agreements with Marathon Oil and its subsidiaries were terminated in 2011. See Note 3 to the unaudited consolidated financial statements for further discussion of these financing agreements.

Contributions from Marathon Oil totaled $287 million in the first quarter of 2011, primarily related to income taxes it incurred on our behalf.

### Derivative Instruments

See Item 3. Quantitative and Qualitative Disclosures about Market Risk for a discussion of derivative instruments and associated market risk.

### Capital Resources

As of March 31, 2012, our liquidity totaled $5.21 billion consisting of:

*(In millions)*

|  | March 31, 2012 |
| --- | ---: |
| Cash and cash equivalents | $2,205 |
| Revolving credit agreement | 2,000 |
| Trade receivables securitization facility | 1,000 |
| Total | $5,205 |

At March 31, 2012, we had no borrowings or letters of credit outstanding under our revolving credit agreement or our trade receivables securitization facility.

Because of the alternatives available to us, including internally generated cash flow and access to capital markets, we believe that our short-term and long-term liquidity is adequate to fund not only our current operations, but also our near-term and long-term funding requirements, including capital spending programs, the repurchase of shares of our common stock, dividend payments, defined benefit plan contributions, repayment of debt maturities and other amounts that may ultimately be paid in connection with contingencies.

Our revolving credit agreement, as amended and effective July 1, 2011 (the “Credit Agreement”), contains covenants that we consider usual and customary for an agreement of this type, including a maximum ratio of Net Consolidated Indebtedness as of the end of each fiscal quarter to Consolidated EBITDA (as defined in the Credit Agreement) for each consecutive four fiscal quarter period of 3.0 to 1.0 and a minimum ratio of Consolidated EBITDA to Consolidated Interest Expense (as defined in the Credit Agreement) for each consecutive four fiscal quarter period of 3.5 to 1.0. As of March 31, 2012, we were in compliance with these debt covenants with a ratio of Net Consolidated Indebtedness to Consolidated EBITDA (as defined in the Credit Agreement) of 0.6 to 1.0 and a ratio of Consolidated EBITDA to Consolidated Interest Expense (as defined in the Credit Agreement) of 74.6 to 1.0.

As of March 31, 2012, the credit ratings on our senior unsecured debt were at or above investment grade level as follows:

|  |  |
| --- | --- |
| Rating Agency | Rating |
| Moody’s | Baa2 (stable outlook) |
| Standard & Poor’s | BBB (stable outlook) |

The ratings reflect the respective views of the rating agencies. Although it is our intention to maintain a credit profile that supports an investment grade rating, there is no assurance that these ratings will continue for any given period of time. The ratings may be revised or withdrawn entirely by the rating agencies if, in their respective judgments, circumstances so warrant.

Neither our Credit Agreement nor our trade receivables securitization facility contains credit rating triggers that would result in the acceleration of interest, principal or other payments in the event that our credit ratings are downgraded. However, any downgrades of our senior unsecured debt to below investment grade ratings would increase the applicable interest rates, yields and other fees payable under our Credit Agreement and trade receivables securitization facility. In addition, a downgrade of our senior unsecured debt rating to below investment grade levels could, under certain circumstances, decrease the amount of trade receivables that are eligible to be sold under our trade receivables securitization facility.

### Debt-to-Total-Capital Ratio

Our debt-to-total-capital ratio (total debt to total debt plus stockholders’ equity) was 26 percent at March 31, 2012 and December 31, 2011 as shown in the calculation below.

*(In millions)*

|  | December 31, March 31, 2012 | December 31, December 31, 2011 |
| --- | ---: | ---: |
| Long-term debt due within one year | $17 | $15 |
| Long-term debt | 3,304 | 3,292 |
| Total debt | $3,321 | $3,307 |
| **Calculation of debt-to-total-capital ratio:** |  |  |
| Total debt | $3,321 | $3,307 |
| Plus stockholders’ equity | 9,216 | 9,505 |
| Total debt plus stockholders’ equity | $12,537 | $12,812 |
| Debt-to-total-capital ratio | 26% | 26% |

### Capital Requirements

We have a capital and investment budget of $1.42 billion, excluding capitalized interest, for 2012. Approximately 25% of the 2012 budget is for continuation of the Detroit refinery heavy oil upgrading and expansion project, which is expected to complete construction in the third quarter of 2012 with full integration into the refinery by year-end 2012. The budget also includes spending on other refining, transportation, logistics and marketing projects, spending for new construction and acquisitions to expand our Speedway segment, and amounts designated for corporate activities. There have been no material changes to our 2012 capital and investment budget since our Annual Report on Form 10-K for the year ended December 31, 2011 was filed. We continuously evaluate our capital and investment budget and make changes as conditions warrant.

As of March 31, 2012, we plan to make additional contributions of approximately $120 million to our funded pension plans in 2012.

On April 25, 2012, our board of directors approved a 25 cents per share dividend, payable June 11, 2012 to stockholders of record at the close of business on May 16, 2012.

On February 1, 2012, we announced that our board of directors authorized a share repurchase plan, enabling us to purchase up to $2.0 billion of MPC common stock over a two-year period. We may utilize various methods to effect the repurchases, which could include open market purchases, negotiated block transactions, ASRs or open market solicitations for shares. On February 3, 2012, we entered into an $850 million ASR program with a major financial institution as part of this authorization. The total number of shares to be repurchased under the ASR will be based generally on the volume-weighted average price of MPC common stock during the repurchase period, subject to provisions that set a minimum and maximum number of shares. Under the ASR program, we received 17,581,344 shares of MPC common stock during the three months ended March 31, 2012. Any remaining shares will be delivered to us upon the termination of the ASR program, which we expect to occur no later than the middle of the third quarter of 2012. The ASR program is accounted for as treasury stock purchase transactions, reducing the weighted average number of basic and diluted common shares outstanding by the shares repurchased, and as a forward contracts indexed to our common stock. After the effects of our ASR program, $1.15 billion of the total authorized share repurchase plan amount was available for share repurchase at March 31, 2012. The timing of repurchases, if any, outside of the current ASR program will depend upon several factors, including market and business conditions, and such repurchases may be discontinued at any time.

The above discussion includes forward-looking statements with respect to the share repurchase plan. Factors that could affect the share repurchase plan and its timing include, but are not limited to, business conditions, availability of liquidity, and the market price of our common stock.

### Contractual Cash Obligations

As of March 31, 2012, our contractual cash obligations included long-term debt, capital and operating lease obligations, purchase obligations and other long-term liabilities. During the three months ended March 31, 2012, contracts to acquire property, plant and equipment increased $163 million, consistent with our 2012 capital budget program. There were no other material changes to these obligations outside the ordinary course of business.

### Off-Balance Sheet Arrangements

Off-balance sheet arrangements comprise those arrangements that may potentially impact our liquidity, capital resources and results of operations, even though such arrangements are not recorded as liabilities under accounting principles generally accepted in the United States. Although off-balance sheet arrangements serve a variety of our business purposes, we are not dependent on these arrangements to maintain our liquidity and capital resources, and we are not aware of any circumstances that are reasonably likely to cause the off-balance sheet arrangements to have a material adverse effect on liquidity and capital resources.

We have provided various guarantees related to equity method investees. In conjunction with the Spinoff, we entered into various indemnities and guarantees to Marathon Oil. These arrangements are described in Note 18 to the unaudited consolidated financial statements.

Our opinions concerning liquidity and capital resources and our ability to avail ourselves in the future of the financing options mentioned in the above forward-looking statements are based on currently available information. If this information proves to be inaccurate, future availability of financing may be adversely affected. Factors that affect the availability of financing include, but are not limited to, our performance (as measured by various factors, including cash provided by operating activities), the state of worldwide debt and equity markets, investor perceptions and expectations of past and future performance, the global financial climate, and, in particular, with respect to borrowings, the levels of our outstanding debt and credit ratings by rating agencies. The discussion of liquidity and capital resources above also contains forward-looking statements regarding expected capital and investment spending. The forward-looking statements about our capital and investment budget are based on current expectations, estimates and projections and are not guarantees of future performance. Actual results may differ materially from these expectations, estimates and projections and are subject to certain risks, uncertainties and other factors, some of which are beyond our control and are difficult to predict. Some factors that could cause actual results to differ materially include, but are not limited to, prices of and demand for crude oil and refinery feedstocks, natural gas and refined products, actions of competitors, delays in obtaining necessary third-party approvals, disruptions or interruptions of our refining operations due to the shortage of skilled labor and unforeseen hazards such as weather conditions, acts of war or terrorist acts and the governmental or military response, and other operating and economic considerations.

### Transactions with Related Parties

Following completion of the Spinoff on June 30, 2011, Marathon Oil retained no ownership interest in us and is no longer a related party.

For the three months ended March 31, 2011, purchases of crude oil and natural gas from Marathon Oil accounted for five percent or less of the combined total of cost of revenues and purchases from related parties. Related party purchases of crude oil and natural gas from Marathon Oil were at market-based contract prices. The crude oil prices were based on indices that represented market value for time and place of delivery and that were also used in third-party contracts. The natural gas prices equaled the price at which Marathon Oil purchased the natural gas from third parties plus the cost of transportation.

We believe that transactions with related parties, other than certain transactions with Marathon Oil to effect the Spinoff and related to the provision of administrative services, were conducted under terms comparable to those with unrelated parties.

On May 25, 2011, we entered into a separation and distribution agreement and several other agreements with Marathon Oil to effect the Spinoff and to provide a framework for our relationship with Marathon Oil. Because the terms of our separation from Marathon Oil and these agreements were entered into in the context of a related party transaction, the terms may not be comparable to terms that would be obtained in a transaction between unaffiliated parties.

### Environmental Matters and Compliance Costs

We have incurred and may continue to incur substantial capital, operating and maintenance, and remediation expenditures as a result of environmental laws and regulations. If these expenditures, as with all costs, are not ultimately reflected in the prices of our products and services, our operating results will be adversely affected. We believe that substantially all of our competitors must comply with similar environmental laws and regulations. However, the specific impact on each competitor may vary depending on a number of factors, including the age and location of its operating facilities, marketing areas, production processes and whether it is also engaged in the petrochemical business or the marine transportation of crude oil and refined products.

There have been no significant changes to our environmental matters and compliance costs during the three months ended March 31, 2012.

### Critical Accounting Estimates

There have been no significant changes to our critical accounting estimates during the three months ended March 31, 2012.

### Accounting Standards Not Yet Adopted

In December 2011, the FASB issued an accounting standards update that requires disclosure of additional information related to recognized financial and derivative instruments that are offset or are not offset but are subject to an enforceable netting agreement. The purpose of the requirement is to help users evaluate the effect or potential effect of offsetting and related netting arrangements on an entity’s financial position. The update is to be applied retrospectively and is effective for annual periods that begin on or after January 1, 2013 and interim periods within those annual periods. Adoption of this update is not expected to have an impact on our consolidated results of operations, financial position or cash flows.

## Market risk

As filed, 3,330 characters.

For a detailed discussion of our risk management strategies and our derivative instruments, see Item 7A. Quantitative and Qualitative Disclosures about Market Risk in our Annual Report on Form 10-K for the year ended December 31, 2011.

See Notes 12 and 13 to the unaudited consolidated financial statements for more information about the fair value measurement of our derivatives, as well as the amounts recorded in our consolidated balance sheets and statements of income. We do not designate any of our commodity derivative instruments as hedges for accounting purposes. During the three months ended March 31, 2012, we terminated our interest rate swap agreements, which we had designated as fair value hedges.

Sensitivity analysis of the incremental effects on income from operations (“IFO”) of hypothetical 10 percent and 25 percent increases and decreases in commodity prices for open commodity derivative instruments as of March 31, 2012 is provided in the following table.

|  | Incremental Change in IFO from a Hypothetical Price Increase of |  | Incremental Change in IFO from a Hypothetical Price Decrease of |  |
| --- | ---: | ---: | ---: | ---: |
| (In millions) | 10% | 25% | 10% | 25% |
| As of March 31, 2012 |  |  |  |  |
| Crude | $(141) | $(348) | $158 | $393 |
| Refined products | 3 | 10 | 3 | 7 |

We remain at risk for possible changes in the market value of commodity derivative instruments; however, such risk should be mitigated by price changes in the underlying physical commodity. Effects of these offsets are not reflected in the above sensitivity analysis.

We evaluate our portfolio of commodity derivative instruments on an ongoing basis and add or revise strategies in anticipation of changes in market conditions and in risk profiles. Changes to the portfolio after March 31, 2012 would cause future IFO effects to differ from those presented above.

Sensitivity analysis of the projected incremental effect of a hypothetical 100-basis-point shift in interest rates on financial assets and liabilities as of March 31, 2012 is provided in the following table.

*(In millions)*

| Financial assets (liabilities)(a) | Fair Value |  | Incremental Change in Fair Value |  |
| --- | ---: | --- | ---: | --- |
| Long-term debt(b) | (3,238 | )(c) | 318 | (d) |

(a) Fair value of cash and cash equivalents, receivables, accounts payable and accrued interest approximate carrying value and are relatively insensitive to changes in interest rates due to the short-term maturity of the instruments. Accordingly, these instruments are excluded from the table.

(b) Excludes capital leases.

(c) Fair value was based on market prices, where available, or current borrowing rates for financings with similar terms and maturities

(d) Assumes a 100-basis-point decrease in the weighted average yield-to-maturity at March 31, 2012.

At March 31, 2012, our portfolio of long-term debt was substantially comprised of fixed-rate instruments. Therefore, the fair value of the portfolio is relatively sensitive to interest rate fluctuations. Our sensitivity to interest rate declines and corresponding increases in the fair value of our debt portfolio unfavorably affects our results of operations and cash flows only when we elect to repurchase or otherwise retire fixed-rate debt at prices above carrying value.

## Controls and procedures

As filed, 4,444 characters.

### Disclosure Controls and Procedures

An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13(a)-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934, as amended) was carried out under the supervision and with the participation of our management, including our chief executive officer and chief financial officer. Based upon that evaluation, the chief executive officer and chief financial officer concluded that the design and operation of these disclosure controls and procedures were effective as of March 31, 2012, the end of the period covered by this report.

### Internal Control Over Financial Reporting and Changes in Internal Control Over Financial Reporting

During the quarter ended March 31, 2012, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

### Supplementary Statistics (Unaudited)

|  |  |  |
| --- | ---: | ---: |
|  | $0000000 | $0000000 |
|  | Three Months Ended March 31, |  |
| (In millions) | 2012 | 2011 |
| **Income from Operations by segment** |  |  |
| Refining & Marketing | $943 | $802 |
| Speedway | 50 | 33 |
| Pipeline Transportation | 42 | 51 |
| Items not allocated to segments | (79) | (67) |
| **Income from operations** | $956 | $819 |
| **Capital Expenditures and Investments(a)** |  |  |
| Refining & Marketing | $153 | $156 |
| Speedway | 11 | 5 |
| Pipeline Transportation | 38 | 14 |
| Corporate and Other(b) | 38 | 29 |
| Total | $240 | $204 |

(a) Capital expenditures include changes in capital accruals.

(b) Includes capitalized interest of $30 million and $29 million for the three months ended March 31, 2012 and 2011, respectively.

### Supplementary Statistics (Unaudited)

|  | Three Months Ended March 31, 2012 | 2011 |
| --- | ---: | ---: |
| **MPC Consolidated Refined Product Sales Volumes (thousands of barrels per day)(a)** | 1,558 | 1,562 |
| **Refining & Marketing Operating Statistics** |  |  |
| Refinery Throughputs (thousands of barrels per day): |  |  |
| Crude oil refined | 1,146 | 1,114 |
| Other charge and blendstocks | 174 | 207 |
| Total | 1,320 | 1,321 |
| Crude Oil Capacity Utilization percent(b) | 96 | 98 |
| Refined Product Yields (thousands of barrels per day): |  |  |
| Gasoline | 717 | 731 |
| Distillates | 397 | 408 |
| Propane | 25 | 24 |
| Feedstocks and special products | 130 | 116 |
| Heavy fuel oil | 15 | 21 |
| Asphalt | 54 | 49 |
| Total | 1,338 | 1,349 |
| Refining & Marketing Refined Product Sales Volume (thousands of barrels per day)(c) | 1,532 | 1,541 |
| Refining & Marketing Gross Margin (dollars per barrel)(d) | $8.36 | $6.73 |
| Direct Operating Costs in Refining & Marketing Gross Margin (dollars per barrel):(e) |  |  |
| Planned turnaround and major maintenance | $1.05 | $1.24 |
| Depreciation and amortization | 1.38 | 1.32 |
| Other manufacturing(f) | 3.16 | 3.54 |
| Total | $5.59 | $6.10 |
| **Speedway Operating Statistics** |  |  |
| Convenience stores at period-end | 1,370 | 1,353 |
| Gasoline & distillates sales (millions of gallons) | 706 | 693 |
| Gasoline & distillates gross margin (dollars per gallon)(g) | $0.1096 | $0.1064 |
| Merchandise sales (in millions) | $695 | $663 |
| Merchandise gross margin (in millions) | $179 | $158 |
| **Pipeline Transportation Operating Statistics** |  |  |
| Pipeline Barrels Handled (thousands of barrels per day)(h): |  |  |
| Crude oil trunk lines | 1,121 | 1,174 |
| Refined products trunk lines | 917 | 972 |
| Total | 2,038 | 2,146 |

(a) Total average daily volumes of refined product sales to wholesale, branded and retail (Speedway segment) customers.

(b) Based on calendar day capacity.

(c) Includes intersegment sales.

(d) Sales revenue less cost of refinery inputs, purchased products and manufacturing expenses, including depreciation and amortization, divided by Refining & Marketing segment refined product sales volumes.

(e) Per barrel of total refinery throughputs.

(f) Includes utilities, labor, routine maintenance and other operating costs.

(g) The price paid by consumers, less the cost of refined products, including transportation and consumer excise taxes, and the cost of bankcard processing fees, divided by gasoline and distillates sales volumes.

(h) On owned common-carrier pipelines, excluding equity method investments.

## Risk factors

As filed, 208 characters.

We are subject to various risks and uncertainties in the course of our business. The discussion of such risks and uncertainties may be found under Item 1A. Risk Factors in our 2011 Annual Report on Form 10-K.

Filed May 9, 2012.
Source: SEC EDGAR, the filing index for accession 0001193125-12-222274. Last ingested by Listed: Nov 3, 2026, 14:28 ET. No prices; not investment advice.