Marathon Petroleum (MPC) Q4 2023 Earnings Call Transcript

Marathon Petroleum (MPC -0.56%)
Q4 2023 Earnings Call
Jan 30, 2024, 11:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Welcome to the MPC fourth quarter 2023 earnings call. My name is Sheila, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session.

[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 -- Managing Director

Welcome to Marathon Petroleum's fourth quarter 2023 earnings conference call. The slides that accompany this call can be found on our website at marathonpetroleum.com under the investors tab. Joining me on the call today are Mike Hennigan, CEO; Maryann Mannen, president; 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 could differ. Factors that cause actual results to differ are there, as well as in our SEC filings. References to MPC capital during the prepared remarks today reflect stand-alone MPC capital, excluding MPLX.

With that, I'll turn the call over to Mike.

Mike Hennigan -- Chief Executive Officer

Thanks, Kristina. Good morning, everyone, and thank you for joining our call. First, I'd like to recognize some changes we made at our executive management level. Maryann Mannen has been appointed president of MPC.

In this role, she'll be responsible for our refining and marketing, commercial, and HES&S organization. John Quaid, previously CFO of MPLX, succeeds Maryann as CFO of MPC. In addition to these changes, Rick Hessling has been appointed chief commercial officer. Rick will lead our global feedstock and clean products teams with the goal of maximizing margin capture across the entire value chain.

Brian Partee has been appointed chief global optimization officer. Brian will be responsible for assessing and redefining business processes that are critical to improving our performance, including our value chain optimization efforts, and determining investments needed to accelerate the delivery of results. At a high level, these organizational changes put more emphasis on advancing important value-creating initiatives, driving increased performance throughout our entire value chain, and making a step change in our cash flow generation capability. Turning to our 2023 results.

We're pleased to continue to deliver on our strategic commitments. Full year cash provided by operating activities was over $14 billion on a consolidated basis, reflecting our team's strong execution. Our refining and marketing business delivered excellent full year results, generating EBITDA of $12.74 per barrel of throughput and capture of 100%. These results reflect strong utilization of our assets and improved execution against our commercial strategy.

Incremental to our refining and marketing results, our midstream business posted nearly $6.2 billion of EBITDA. EBITDA for the midstream segment grew by approximately 7% year over year or by approximately $400 million. We expect MPC will receive $2.2 billion of annual cash distributions, supported by MPLX's most recent 10% increase to its quarterly distribution. MPLX is strategic to MPC's portfolio.

Its current pace of cash distributions fully covers MPC's dividend and more than half of our planned 2024 capital program. We expect MPLX to increase its cash distributions as it pursues growth opportunities, further enhancing the value of this strategic relationship. We are committed to returning excess capital to shareholders. In 2023, we returned $11.6 billion through share repurchases, bringing total repurchases to over $29 billion since May of 2021.

In addition, we increased MPC's quarterly dividend by 10% in the fourth quarter. Over the past five years, we have grown our quarterly dividend at a compound annual growth rate of over 12%. For the full year 2023, this capital return represents a payout of 92% of our operating cash flow, excluding changes in working capital, highlighting our commitment to superior shareholder returns. Executing on our commitments, combined with a strong macro environment, led to total shareholder returns of approximately 31% for MPC in 2023.

Turning to our view on the refining macro environment as we head into 2024. Global oil demand hit a record high in '23, and we see another year of record oil consumption in '24. The IEA is currently projecting demand growth of over 1.2 million barrels per day, with their projections having been raised higher over the last three consecutive months. In our system, both domestically and within our export business, we are seeing steady demand year over year for gasoline, diesel, and jet fuel.

Global supply remains constrained, and anticipated global capacity additions have progressed slower than expectations. Gasoline and diesel inventories remain tight globally. And as we look into '24, we anticipate that above-average turnaround activity globally in the first quarter, as well as the transition to summer gasoline blends, will be supportive of refining margins. As we look further into 2024, we believe the U.S.

refining industry will experience an enhanced midcycle environment due to global supply demand fundamentals and its relative advantages over international sources of supply, including energy costs, feedstock acquisition cost, and refinery complexity. Our capital allocation priorities remain unchanged. These include, first, sustaining capital. We remain steadfast in our commitment to safely operate our assets, protect the health and safety of our employees, and support the communities in which we operate.

Second, our dividend. We're committed to paying a secure, competitive, and growing dividend. We intend to evaluate the dividend at least annually. Third, growth capital.

We will invest capital but be disciplined where we believe there are attractive returns, which will enhance our competitiveness and position MPC well into the future. Beyond these three objectives, we will return excess capital through share repurchases to meaningfully lower our share count. From May of '21 and through January 2024, we reduced our total share count by approximately 45%, repurchasing approximately 300 million shares at an average price of $97. As we execute in 2024, we remain committed to share repurchases as a key component of our capital allocation priorities.

MPC's stand-alone 2024 capital investment plan, excluding MPLX, totals $1.25 billion. Underpinning our commitment to safety and environmental performance, sustaining capital is approximately 35% of capital spend. In refining and marketing, gross spending is down nearly $200 million compared to 2023, reflecting strong capital discipline. In 2024, we are focused on investments that enhance margin and reduce costs.

In low carbon, we are investing in an opportunity that offers an attractive return, lowers our cost, increases reliability, and reduces emissions. This morning, MPLX also announced its 2024 capital investment plan of $1.1 billion, which is anchored in the Marcellus and Permian Basins. At this point, I'd like to turn the call over to Maryann.

Maryann Mannen -- President

Thanks, Mike. Solid execution of our three strategic pillars remains foundational. We believe the improvements we've made to our cost structure, portfolio, and commercial execution have driven sustainable structural benefits, irrespective of the market environment. We will continue to build on this strong foundation to recognize value throughout our business.

Our refining utilization in 2023 was 92% as we operated our portfolio to meet consumer demand. Recently, we have said we believe our average capture over longer periods of time is approaching 100%. And in 2023, our full year capture was 100%. This commitment to commercial excellence is foundational, and we expect to continue to see these results.

While our capture results will fluctuate based on market dynamics, we believe that the capabilities we have built over the last few years and expect to enhance further will provide a sustainable advantage. Turning to our operations in the Gulf Coast. The Galveston Bay reformer repairs progressed as planned. We started the unit back up in mid-November and returned to full operating rates by mid-December.

At our Martinez facility, we will be operating at approximately 22,000 barrels per day in the short term. We have been working closely with the regulators to proceed with repairs to ensure safe and reliable operations. Let me move to Slide 7, which shows our capital investment plan for 2024 in a bit more detail. MPC's investment plan, excluding MPLX, totals $1.25 billion.

The plan includes $1.2 billion for refining and marketing segment. Our growth capital plan is approximately $825 million, but between traditional projects and low carbon. We are investing primarily at our large competitively advantaged facilities to enhance shareholder value and position MPC well into the future. Within traditional refining and marketing, $100 million is associated with a multiyear project to increase finished distillate yield at the Galveston Bay refinery; $375 million is focused on smaller projects targeted at enhancing yields at our refineries, improving energy efficiency, and lowering our costs, as well as investments in our branded marketing footprint.

Within low carbon, approximately $330 million is allocated to a multiyear infrastructure investment at our Los Angeles refinery, which will improve energy efficiency and lower facility emissions; and $20 million for smaller projects, focused on emerging opportunities. Slide 8 provides an overview of the multiyear investment at our Los Angeles refinery. The Los Angeles refinery is a core asset in our West Coast value chain and is one of the most competitive refineries in the region. This investment, once completed, is expected to further enhance its cost competitiveness by integrating and modernizing utility systems, which will improve reliability and increase energy efficiency.

Additionally, a portion of this improvement addresses a new regulation mandating further reductions in emissions. This regulation applies to all Southern California refineries. The improvements are expected to be completed by the end of 2025. We expect to generate a return on our investment of approximately 20%.

Turning to Slide 9. At Galveston Bay, we are investing to construct a 90,000-barrels-per-day high-pressure distillate hydrotreater. This project is planned to strengthen the competitiveness of the refinery through increased production of higher-value finished products. Once in service, the new distillate hydrotreater will upgrade high-sulfur distillate to ultra-low sulfur diesel, eliminating the need for third-party processing or sales into shrinking lower-value, high-sulfur export markets.

This strategic investment ensures we provide the clean burning fuels the world demands and further enhances the competitive position of our U.S. Gulf Coast value chain. The project is expected to be complete by year-end 2027 and generate a return of over 20%. Turning to our low-carbon initiatives.

We challenge ourselves to lead in sustainable energy by setting meaningful targets to reduce greenhouse gas emissions, methane emissions, and freshwater intensity targets, which we believe we can demonstrate a tangible pathway to accomplish. In our 2024 capital outlook, we are investing to significantly lower energy intensity and emissions at Los Angeles, one of our largest refineries. Additionally, we are investing small amounts of capital in early stage developments like RNG, which could significantly aid in greenhouse gas emission reductions in the future. Overall, we're taking disciplined steps to advance our goal to lower the carbon intensity of our operations and the products we manufacture, while continuing to supply a growing and evolving market by safely operating our current asset base with the objective to deliver superior cash flow.

Let me turn the call over to John.

John Quaid -- Chief Financial Officer

Thanks, Maryann. Moving to fourth quarter highlights, Slide 11 provides a summary of our financial results. This morning, we reported adjusted earnings per share of $3.98 for the fourth quarter and $23.63 for the full year. This quarter's results were adjusted to exclude the $0.14 per share net effect of three items: a $145 million LIFO inventory charge, $47 million of net recoveries related to MPLX's Garyville incident response, and a $92 million gain recognized by MPLX.

Adjusted EBITDA was over $3.5 billion for the quarter and almost $19 billion for the year. Cash flow from operations, excluding working capital changes, was nearly $2.3 billion for the quarter and $13.9 billion for the year. During the quarter, we returned $311 million to shareholders through dividend payments and repurchased over $2.5 billion of our shares. Slide 12 shows the sequential change in adjusted EBITDA from the third quarter to fourth quarter of 2023, as well as the reconciliation between net income and adjusted EBITDA for the quarter.

Adjusted EBITDA was lower sequentially by approximately $2.2 billion, driven by lower R&M margins. The tax rate for the quarter was 18%, reflecting the impacts of the MPLX structure and a discrete benefit largely related to state taxes. For 2024, we expect our tax rate to be around 21%. Moving to our segment results.

Slide 13 provides an overview of our refining and marketing segment for the fourth quarter. Our 13 refineries ran at a 91% utilization, processing nearly 2.7 million barrels of crude per day. Sequentially, per-barrel margins were lower across all regions, driven by lower crack spreads. Capture for the quarter was 122%.

Refining operating costs were $5.67 per barrel in the fourth quarter, higher sequentially due to higher energy costs, particularly on the West Coast, as well as higher project-related expenses associated with planned turnaround activity. Slide 14 provides an overview of our refining and marketing margin capture of 122% for the quarter. We ran well, and our commercial teams executed effectively to deliver strong results. Capture this quarter benefited from light product margin tailwinds and particularly for jet fuel, as well as less of a headwind from secondary product prices.

Slide 15 shows the changes in our midstream segment adjusted EBITDA versus the third quarter of 2023. Our midstream segment delivered strong fourth quarter results. For the full year 2023, our midstream segment EBITDA is up 7% compared to the prior year. Our midstream business is growing and generating strong cash flows as we advance high-return growth projects anchored in the Marcellus and Permian Basins.

Slide 16 presents the elements of change in our consolidated cash position for the fourth quarter. Operating cash flow, excluding changes in working capital, was nearly $2.3 billion in the quarter, driven by both our refining and midstream businesses. Working capital was a $1.1 billion use of cash for the quarter, driven primarily by declining crude prices. Cash from ops for the quarter was also impacted by a $320 million headwind from changes in our income tax receivable, which you might usually expect to see as a working capital change.

Capital expenditures and investments totaled $896 million this quarter. This includes MPLX's acquisition of full ownership of a gathering and processing joint venture in the Delaware Basin for approximately $270 million. MPC returned $2.8 billion via share repurchases and dividends during the quarter. This represents an approximate 125% payout of the $2.3 billion of operating cash flow, excluding changes in working capital, highlighting our commitment to deliver superior shareholder returns.

As of January 26th, we have approximately $5.9 billion remaining under our current share repurchase authorization. And at the end of the fourth quarter, MPC had approximately $10.2 billion in consolidated cash and short-term investments, including approximately $1 billion of MPLX cash. Turning to guidance on Slide 17, we provide our first quarter outlook. We expect crude throughput volumes of almost 2.5 million barrels per day, representing utilization of 83%.

Utilization is forecasted to be lower than fourth quarter levels due mainly to higher turnaround activity. Planned turnaround expense is projected to be approximately $600 million. We are executing turnarounds at four of our largest refineries, Galveston Bay, Garyville, Los Angeles, and Robinson, all in the first quarter when margins are typically lower to minimize the financial impact of these outages. Turnaround expense for the full year is anticipated to be similar to last year at about $1.3 billion.

Operating costs in the first quarter are expected to be $5.85 per barrel, higher sequentially due mainly to lower throughput volumes associated with the significant planned turnaround activity. Distribution costs are expected to be approximately $1.45 billion for the quarter. Corporate costs are expected to be $185 million. And with that, let me pass it back to Mike.

Mike Hennigan -- Chief Executive Officer

Thanks, John. We've delivered strong execution on our strategic commitments again this year. This includes running reliably with high utilization, structural improvements to our commercial performance, fostering a low-cost culture, and strengthening the competitive position of our assets. At MPLX, the partnership has continued to grow, increasing its cash flow and its cash distribution to MPC.

We've invested capital to grow earnings while exercising strict capital discipline. This has resulted in superior cash flow generation and supported the repurchase initiatives. Looking forward, we will continue to prioritize capital investments to ensure the safe and reliable performance of our assets, and we will also invest in projects where we believe there are attractive returns. We believe our focus on safety, environmental -- I'm sorry, operational excellence, and sustained commercial improvement will position us to capture this enhanced midcycle environment, which we expect to continue longer term given our advantages over marginal sources of supply and growing global demand.

MPC's midstream segment, consisting primarily of MPLX, has grown EBITDA by $1.3 billion since 2019, which is a 6% compound annual growth rate over the last four years. As MPLX continues to grow its free cash flow, we believe it's in a strong position to continue to consistently grow its distribution. As a result of MPLX increasing its distribution 10% over each of the last two years, MPC expects to receive $2.2 billion of cash distributions, which reflects a $400 million increase since 2020. Each 10% distribution increase is approximately $200 million of additional cash flow that MPC receives through its ownership in the partnership.

In summary, this year, we generated $14 billion of cash from operations, we increased our dividend 10%, repurchased $11.6 billion of shares, resulting in a 92% payout ratio. In 2023, MPC's total shareholder return was 31%. We believe MPC is positioned as the refiner investment of choice with the strongest through-the-cycle cash generation and the ability to deliver superior returns to our shareholders. With that, let me turn it back over to Kristina.

Kristina Kazarian -- Managing Director

Thanks, Mike. As we open the call for your questions, as a courtesy to all participants, we ask that you limit yourself to one question and a follow-up. If time permits, we will reprompt for additional questions. Sheila, we're ready.

Questions & Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator instructions] Our first question will come from Neil Mehta with Goldman Sachs. Your line is open.

Neil Mehta -- Goldman Sachs -- Analyst

Yeah. Good morning, Mike. Good morning, team. Thanks for doing this.

Great quarter. The first question is really on Slide 14, and this is what we're getting from investors this morning, which is the 122% system capture and that $885 million of margin uplift. And I recognize there are some sensitivities about what you can say and can't say here, but just can you talk about what drove that strength and how much of this feels one-time-ish versus stuff we want to carry forward?

Maryann Mannen -- President

Hey, Neil. Good morning. It's Maryann. Thanks for the question.

So, you know, first and foremost, as you know, commercial performance has been and will continue to be a foundational pillar for us in terms of delivering outstanding execution and meeting the goals and objectives that Mike shared with you around delivering best through-the-cycle cash flow throughout the cycles. In the quarter, we generated about 122% capture, as we shared. Overall, as you know, we've been talking about our ability to continue to drive toward 100%. Over the last couple of quarters, Rick and Brian have been sharing with you some of the key elements around structural changes that we believe are sustainable.

And then Mike announced this morning a couple of other changes which we think will continue to drive our ability to identify and deliver against that foundational principle. In the quarter, we had a couple of benefits that delivered the 122%. So, first of all, you know, strong light product margins and, frankly, a more favorable secondary products impact. You know, this is not abnormal for this period of time.

Having said that, you know, we also saw stronger jet fuel premiums to diesel and the benefit of diesel blending -- excuse me, of butane blending in the quarter as well. To your question, how much of this is repeatable? Obviously, some of those things are not repeatable, particularly when you look at the sharper drop in crude oil and refined product prices. We also did have the ability of having, as I shared with you, you know, our reformer at GBR and other benefits of projects that we completed fully operating in the quarter. So, let me pause there and see if that's -- that helps to answer your question at all.

Neil Mehta -- Goldman Sachs -- Analyst

That's great, Maryann. That's a lot of good color there. And the follow-up is just on Slide 17, sticking with the deck here, which is it does seem like a period of heavier turnaround in Q1, particularly in the West Coast region. Just maybe you could talk about, you know, the decision around where you took maintenance, how that fits into the full year plan, and anything we should be thinking about as you approach this turnaround season?

Mike Hennigan -- Chief Executive Officer

Yeah, Neil. It's Mike. Yeah, I think, you know, we said in our prepared remarks that our turnaround spend this year is about the same as last year. But the way you should think about it is, as, you know, Maryann mentioned, in the first quarter, we're pretty heavy at four of our largest facilities, our largest financial generating facility.

So, we're taking advantage of the fact that, you know, margins are down in the first quarter. So, we're spending 600 in the first quarter, which is a high number, you know, relative to the full year. And I know we don't traditionally give, you know, quarter to quarter, but I'll just tell you that, you know, next quarter, the turnaround number drops down to like 200 or so, somewhere in that range. So, you know, we're being opportunistic in some regard.

You know, a lot of the activity does get planned. But at the same time, you know, we want to take advantage of the fact that the margin environment now is constructive for us to be offline so that, you know, when margins, we think, are going to be a lot stronger in the second quarter, you know, we'll have our four largest facilities, you know, turned around and ready to deliver results.

Neil Mehta -- Goldman Sachs -- Analyst

Thanks, Mike.

Mike Hennigan -- Chief Executive Officer

You're welcome, Neil.

Operator

Our next question will come from Manav Gupta with UBS. Your line is open.

Manav Gupta -- UBS -- Analyst

First of all, congrats, guys. I know one of the goals was to get to 100% capture. Although Mike always says to focus on EBITDA per barrel margin and free cash, I know one of the goals was to get to 100% capture, so congrats on overshooting that mark. My question here is on the two growth projects.

Los Angeles, some of the people out there are looking to exit the state given the tougher laws. You are actually going back and investing in this project, so help us understand what's driving that. And again, on the Galveston Bay moving from, you know, upgrading high-sulfur to ULSD, what kind of realization uplift could you get if you do execute this project?

Mike Hennigan -- Chief Executive Officer

Yeah, Manav. This is Mike. I'll start. First of all, thank you for the comment on capture, and as you said, it's not my favorite metric, but, you know, I'm a big believer in how much cash are we generating, how much cash per share are we generating.

And I want to lead in those categories is the metric that I spend the most time, you know, looking at. But it does give some good indication, as Maryann said. It's hard just to differentiate, you know, the question Neil asked between what's happening in the market and, you know, what are some of the structural improvements that we've implemented over the last couple of years here. But anyway, thanks for the comment.

As far as our capital investment, I'm hoping everybody sees a couple of things. You know, one is, yes, we are investing in our LA facility. It's an area where we believe that we can put a decent amount of investment in there and really improve the competitiveness of that facility. But we already believe it's, you know, one of the top facilities, you know, on the West Coast.

So, it is an area that we want to invest in. Now, that particular investment is about efficiency, reliability, and lowering our cost. And to your point, you know, being a very reliable supplier out there is an important part of the equation. The other project that we've announced is a margin enhancement project.

And in our view, you know, things are not going to get easier for unhydrotreated distillate into the future. And if you look at the spreads today, even today, they're pretty wide. So, at the end of the day, what's driving us the most in both of those when we put this in the slides is we think both of these projects are north of 20% returns. And hopefully, we're conservative on that, but we think they're very good investments.

And again, in two of our largest, highest financial generating facilities. So, one of the themes that you've heard from us is we're going to invest in projects that we feel really strong about on a return basis, but they're also enhancing the competitive positions of some of our biggest facilities. And I think you've heard the theme from us for a while here. It's margin enhancement, lower costs, and efficiencies.

And out on the West Coast, the other driver is, you know, there's an emissions reduction goals that are going to occur over time, and this project will take care of that in a large way. And that's why we grouped it into our low-carbon area. So, hopefully, that gives you a little bit more color.

Manav Gupta -- UBS -- Analyst

Perfect. My quick follow-up here is you were looking to ramp toward the nameplate capacity at your renewable diesel project on the West Coast. If you can give us some update over there. How is that project progressing?

Maryann Mannen -- President

Certainly. It's Maryann. Currently, we are running at about 22,000 barrels a day, versus our nameplate at 48,000. We're going to continue to run at that level as we work with the regulators to determine what repairs need to be complete in order to be able to get to that nameplate at 48,000.

You know, as we think about that, as you know, we've got our JV partnership with Neste. So, you know, really, what we're looking at is the differential for MPC of about 13,000 barrels a day. So, you know, not meaningful to the, you know, 3 million barrel system that we run. But again, running at 22,000 overall for the facility, and we'll continue to work with our regulators to determine when we can bring it to full 48,000.

Manav Gupta -- UBS -- Analyst

Thank you so much.

Mike Hennigan -- Chief Executive Officer

You're welcome, Manav.

Operator

Thank you. Next, we will hear from Doug Leggate with Bank of America Securities. You may proceed.

Doug Leggate -- Bank of America Merrill Lynch -- Analyst

Thank you. Good morning, everyone. Mike, I hate to do this, I wonder if I could try to capture a question in a slightly different way because we, I guess, have a slightly different view of this. If we look at your system as more of an LP, we see a great deal of linearity between the indicator margin and what you're delivering.

I think I agree with you. I think capture is a terrible metric to try and measure a linear program business, frankly. But what we do see, however, is that the mix of inputs seems to be changing some, which is allowing you to capture more of the margin. So, my question is really that.

What are you doing in your commercial business or operations that is changing the optimization of the slate that you're running in your system? Obviously, there are a lot of moving parts around crude in the U.S. right now with TMX and a few other things. Is that a factor?

Rick Hessling -- Chief Commercial Officer

Yeah. Hi, Doug. This is Rick. So, I'll take a stab at that.

So, we are significantly -- I would say, every day, Doug, we are optimizing our slate. And we look at this regionally. We look at this by plant. But in the end, Doug, I think what we do better than others in the industry is we optimize for the betterment of our total return at the end of the day.

So, we are not -- we could sub-optimize one plant for the benefit of another, and we have worked years, decades, as a matter of fact, to give ourselves optionality within our mid-con system. We are currently juggling optionality with TMX and our West Coast and Pacific Northwest system, as well as we've worked on it for quite a while on the Gulf Coast. So, you are onto something from a crude slate perspective. It's constantly changing.

We're constantly pushing the norm on what we should run, what crudes we look at, what assays we look at, updating our system. So, this is just an ongoing exercise that's been happening now for several years now. And I've said it before, we're unpacking everything from A to Z, Doug. We're leaving no rock unturned in terms of capturing value.

And that not only goes certainly on the crude slate side, but it goes throughout our entire value chain.

Mike Hennigan -- Chief Executive Officer

Hey, Doug. It's Mike. I know it's been a source of frustration since we don't give a lot of detail in this area, you know, for competitive reasons, but to Rick's point, you know, we've made some changes. And to be honest with you, I'm more excited about what's in the future for us.

You know, Brian's new role as head of global optimization for us, I think, is going to, you know, make a step change for where we're going. So, we've had a lot of momentum in this area, and, you know, it's showing up in the results. As we discussed, you know, capture is not my favorite, but generating cash is. And at the end of the day, I think we have more opportunity in the whole area.

You know, if we run well and then deliver commercially, we'll continue to generate cash and be a good source of return for shareholders.

Doug Leggate -- Bank of America Merrill Lynch -- Analyst

LPs are a complicated beast, and you guys seem to have figured it out. So, thank you for the answer, guys. My follow-up is probably for -- maybe for Maryann. I'm not sure.

Congratulations, everyone, in their new roles. But, Maryann, if I look at Slide 21, you're showing your debt maturity profile at the MPC level, obviously, you know, sitting with a net cash position at the MPC level. What are your thoughts on where you want your balance sheet to be as those debt maturities come due?

John Quaid -- Chief Financial Officer

Yeah. Hey. Good morning, Doug. It's John.

I'll go ahead and take that one.

Doug Leggate -- Bank of America Merrill Lynch -- Analyst

Thanks, John. I wasn't sure if you'd take it or not. Thank you.

John Quaid -- Chief Financial Officer

No, no, no. Not a problem at all. And I think you kind of were hinting at it as you were getting there. We've got a lot of financial flexibility right now.

We're very comfortable with the gross amount of debt that MPC has, but certainly have the balance sheet to be very thoughtful about the right timing of refinancing that debt and really optimizing our cost of capital and really that cost of debt. And I think longer term, right, we've laid out a target of kind of the gross debt to cap at 25% to 30%. We're a good bit a ways from that, but that's something we'll continue to monitor as we look out into the future.

Doug Leggate -- Bank of America Merrill Lynch -- Analyst

And, John, remind me, is that consolidated for MPLX or stand-alone?

John Quaid -- Chief Financial Officer

It's stand-alone.

Doug Leggate -- Bank of America Merrill Lynch -- Analyst

OK. Great. Thank you very much.

John Quaid -- Chief Financial Officer

MPLX is in a much different position. I can probably speak to that one pretty well given the seat I was in before where you've got a really stable company running at, you know, sub-3.5% leverage. But the cash flows there can probably support a debt-to-EBITDA ratio of four times. Again, they've got some financial flexibility to be smart about what they're doing as well.

So, I think both balance sheets are in a really strong place.

Doug Leggate -- Bank of America Merrill Lynch -- Analyst

Thank you very much.

Operator

Our next question comes from Paul Cheng with Scotiabank. Your line is open.

Paul Cheng -- Scotiabank -- Analyst

Hey, guys. Good morning.

Mike Hennigan -- Chief Executive Officer

Good morning, Paul.

Paul Cheng -- Scotiabank -- Analyst

Mike, I think in the past, you have shown that you are not really interested in acquisition of refining assets. But one can argue that, I mean, given how well you are running your facility, do you think that there's a value to be added if you have some additional assets to your platform so you can apply your technical know-how to even a bigger profile? And also, in the Gulf Coast, you have two huge refinery. If we add additional facility, would that further diversify and reduce the operating risk, having multiple facility. And also, frankly, that will perhaps even increase the commercial and optimization opportunities.

So, just want to see that. I mean, how you guys look at that questions internally?

Mike Hennigan -- Chief Executive Officer

Yeah, Paul. First off, you know, Dave Heppner's group is constantly looking at the market and what assets are available. I always say never say never. But in the meantime, you know, while Dave is working on that side of the equation, we're also looking at the footprint we have in the assets we have, and that's part of the reason that we came out with the announcement today.

You know, two of our key facilities we think we can make a meaningful change. And we've been more transparent than normal to try and explain to people, you know, we think we got north of 20% return projects here on the assets that we own ourselves. So, there's always a balance, Paul, between, obviously, the assets you own, you know inside and out, whereas the ones you're evaluating externally, there's a little bit of, you know, concern from diligence, etc. But I will tell you, you know, I think people know my DNA, in general, but at the same time, you know, Dave and his team are challenging, you know, where can we make investments that are outside of our portfolio.

We haven't done a lot, as you mentioned, on the refining side, but we have made some investments, you know, in what we're calling low carbon. You know, we've made some investments in some pre-treat facilities on the low-carbon side. We've invested in our RNG facilities. So, Dave and his team are looking at both refining and outside of refining and we just, you know, constantly talk about that and decide where do we think we want to put our capital.

And for right -- for today, we were pleased to report that we think we have two pretty good projects. But the other part -- let me just mention this one last thing because this is kind of important. On this slide where we talk about our capital, we say in traditional refining, we're investing 475 million. Maryann mentioned that 100 million of that is related to the DHT project.

But 375 million of that is what we don't typically talk about on earnings calls. These are projects in all of our facilities that are higher return, really good projects for us, but they don't have the sexy headline about them. But if you look at it, though, 375 out of the 475 in traditional are these smaller, high-return projects. So, you know, the team does a nice job.

You know, Tim and his organization are constantly looking for areas where we can make margin improvement, lower costs, increase reliability. And as you said, you know, this all starts with you got to run reliably and then you've got to be smart commercially, and I think we've demonstrated that a little bit, and then we just try to invest capital to keep bolstering, you know, that equation. So, hopefully, that gives you a little more color.

Paul Cheng -- Scotiabank -- Analyst

Absolutely. Can I just go back into the commercial question? In the fourth quarter, you guys definitely done well and you [Inaudible] And if we're looking at versus the margin capture, the 100%, the additional 22%, is there a number that you can share, how much of that is coming from the commercial side of the business that you have done really well and that's why that you are seeing that much better in the capture? And also that I think in the past, you're saying that one of the maybe Holy Grail for commercial operations is that you will be able to optimize based on breakdown design and optimize based on the total company. Where we in that process? Do you think that you're already there or that you're just still scratching the surface on that process?

Mike Hennigan -- Chief Executive Officer

Yeah. Paul, I'll start with the second part. As I said, I'll repeat myself a little bit, but we still think there's quite a ways to go where we can do better, and that was part of the reasoning behind the organizational change. You know, Brian's role as global optimization lead is going to -- his team is going to work with the commercial guys, with our refining guys.

And you heard me say redefine process, find places to invest, change what we're doing today. So, I think we've made a lot of progress. You know, people always ask, you know, what inning, or I guess it's football season, so what quarter are we in? And that's always hard to ascertain because I think we keep, you know, peeling the onion back and seeing that we can make another step change. So, I'm optimistic that we got a lot of road to go.

And I think at the end of the day, you know, our mantra is, you know, just keep watching our results, and you'll see the -- you know, what comes out of it. As far as the first part, it's always hard. That's why I'm not the biggest fan of that metric. It's always hard to differentiate some of the market factors that Maryann mentioned.

Obviously, in the fourth quarter, you get butane blending, you know, as one thing that, you know, enhances capture. But there is a significant -- if I want to give some kudos to our team, there is a significant change in the way we're approaching the business. You know, you heard from Rick earlier. And so, I think it is additive to whatever the market's given us.

And my thought is the way we have to run the company is, you know, we don't control the margin environment, but whatever margin environment is given to us, you know, we just got to deliver more results and generate more cash and more cash per share. So, while everybody outside and inside wants to talk about that capture metric, I just keep looking at the one that matters the most to me.

Paul Cheng -- Scotiabank -- Analyst

Thank you.

Mike Hennigan -- Chief Executive Officer

You're welcome.

Maryann Mannen -- President

Hey, Paul. It's Maryann. I just might try to add a bit more around some of the things that we're doing specifically around commercial performance without necessarily trying to give you a percentage. But, you know, we've been talking over the last several quarters about the capabilities we've built regionally, obviously, at the Houston Office, at the Singapore office, the London office, that has helped us.

You know, Doug was laughingly saying to Mike about, you know, cracking the code on linear programming. But, you know, some of the capabilities that Rick and Brian and their respective teams have built historically give us very robust tools and data analytics that allow us to assess the decisions that we've made and know how good or bad those decisions were and what we might do with that to change it. So, it is building -- these capabilities are building, you know, sustainable learnings and capabilities in the organization that we think will continue to drive our performance. I hope that's a bit more helpful, too.

Paul Cheng -- Scotiabank -- Analyst

Absolutely. Thank you, Maryann.

Operator

Next, we will hear from Roger Read with Wells Fargo. You may proceed.

Roger Read -- Wells Fargo Securities -- Analyst

Yeah. Good morning. Congratulations on the quarter.

Mike Hennigan -- Chief Executive Officer

Thank you, Roger.

Roger Read -- Wells Fargo Securities -- Analyst

Maybe just if we could address the changes here on the management team and whether or not that portend -- or what it does portend about the future. I know, Mike, you're approaching the point at which the board has to make a decision to extend, if I understood correctly from the meetings back in late November. So, anything you can offer us up on any updates there?

Mike Hennigan -- Chief Executive Officer

Yeah, Roger. I'll start off with, you know, the changes are driven by two things. You know, results. You know, one of the things that I feel my responsibility is to reward the results that we're getting because the team has done a very nice effort across the whole team.

And the second part is development. You know, putting people in positions such that they grow more personally so that they can contribute to the team. So, you know, both of those factors, I think, played into a lot of these assessments that occurred at the executive level, but it's also occurring, you know, below that and not everybody gets to see. So, I'm a big believer in the team approach.

You know, practically all decisions that we make, all of our team is involved in. So, you know, there's a heavy component of development on top of, you know, the results that have occurred the last couple of years. You know, as far as me personally, you know, I think you've heard in the past, that's a board decision. The board's very aware of that.

You know, that'll play itself out in time. But boards, you know, if it's not their top priority, it's, you know, obviously at the very top of the first couple of what their responsibility is. So, that's just a work in progress. It's been in progress for quite some time, and, you know, it'll play itself out as time goes by.

Roger Read -- Wells Fargo Securities -- Analyst

OK. And then my other question was to follow up a little bit on the balance sheet question I think Doug asked about -- in debt to cap guidance given. But if you keep buying shares back, theoretically you could end up shrinking the equity side, which could get you to the 25%, even if you held debt flat. So, none of us can predict the future exactly where all this will shake out, but would that sort of math imply that you could actually end up, you know, staying at the same debt level? In other words, simply refinance the debt, implying that all the cash that's on there would be eligible for share repurchases or some other sort of return to shareholders and that's the right math to follow?

John Quaid -- Chief Financial Officer

Yeah. Hey, Roger. It's John. You read through my subtle comments very, very well.

And certainly, the other part of that equation, right, is what we're doing on the equity side. So, that was my comment. Hey, we were -- we think our gross levels of debt are appropriate as we look forward because that'll be part of the math. We'll take a look at that, but I think you're pretty spot on.

I'm not sure I can add much from what you said, to be honest.

Mike Hennigan -- Chief Executive Officer

Yeah. Roger, the only thing I would add is -- I'm sorry, I just wanted to just add. As a general rule, you know, my belief is, you know, we don't want to be under-levered. We don't want to be over-levered.

You know, we want to find what we think is the appropriate level, and we think we've been there and we've been consistent there, and that's why people should read into our cash position as, you know, that's going to be targeted for return to shareholders. You know, I think our job is to generate the most cash we can; run the balance sheet properly, which, you know, we've done over the past; and then at the end of the day, return excess capital to shareholders.

Roger Read -- Wells Fargo Securities -- Analyst

Thanks.

Mike Hennigan -- Chief Executive Officer

You're welcome.

Operator

Thank you. Our next question will come from John Royall with J.P. Morgan. Your line is open.

John Royall -- JPMorgan Chase and Company -- Analyst

Hi. Good morning. Thanks for taking my question. So, I just had a follow-up on the balance sheet.

You had another strong quarter for the buyback at 2.5 billion. But with the crack environment turning down, you did end up drawing almost 3 billion of cash. And despite the big maintenance coming up in 1Q, it looks like January is off to a really healthy pace at 900 million. So, my question is would you expect to maintain a similar pace throughout 1Q as you progress these turnarounds and what could that mean for the cash draw and where balances could be at the end of 1Q?

John Quaid -- Chief Financial Officer

Yeah. Hey. Good morning, John. It's John here.

I'll take that one and let Mike add some other comments as well. But let me just start by saying as I roll into this seat, I want to be clear, there's no change in how we're viewing return of capital, as you heard even in Mike's prepared remarks. Again, really strong performance last year again as we're looking to drive strong returns to our investors. And that'll continue to be a key part of our capital allocation priorities in 2024.

And as we look at that, we're going to look at lots of things. One, we want to be opportunistic in the overall capital allocation, and we'll consider the refining macro environment, along with lots of other items, but -- and the balance sheet and where it is. But ultimately, I just want to be clear, we're going to be steadfast in our commitment to return of capital.

Mike Hennigan -- Chief Executive Officer

And, John, it's Mike. The only thing that I'll add is, you know, we think it's part of our DNA and duty to return capital as part of our mantra. So, you know, we've been saying for quite some time and we've been fortunate, as you said, you know, the margin environment has been, you know, conducive to generating more cash. But we've targeted all along to, you know, return that capital to shareholders.

We're going to continue to do that. And then again, whatever market environment we get handled -- or get handed, I'm sorry, we will -- we'll make that still a priority for us. It's on our capital allocation priority. You know, we'll start off with maintaining the assets, growing the dividend, investing in the business.

So, that's still, you know, part of our DNA as well. But at the end, I'm a huge believer of give that capital back to shareholders and then let shareholders decide where they want to invest longer term. We want to be the vehicle where we generate cash and return capital. And as people have seen that over time, you know, that isn't going to change regardless of what the margin environment is.

John Royall -- JPMorgan Chase and Company -- Analyst

Great. Thank you. And then I apologize ahead of time to Mike for this, but I do have another question on capture, but, you know, the commercial stuff aside. Can you help us think about some of the moving pieces in the first quarter and particularly how should we think about the impact of the heavy maintenance in the quarter? Is this still, you know, potential to be a 100%-type quarter given you have so much maintenance, and any other moving pieces that we should think about that might move you away from that 100% in either direction in 1Q?

Maryann Mannen -- President

Hey, John. It's Maryann, and let me see if I can take that for you and address your question. So, you know, first and foremost, as we say, we continue to think, for 2024, our objective is to drive toward that 100%. You're absolutely right.

In the quarter, as we said, we've got about 600 million. But, you know, we're touching crude units, so we're not expecting a significant amount of negative impact on our capture, you know, despite the fact that, you know, we are seeing, you know, that level of turnaround. Now, as you know, we do have variables, you know, that impact the capture rate from quarter to quarter. But right now, we are not expecting turnaround to have a substantially negative impact on that drive toward 100%.

John Royall -- JPMorgan Chase and Company -- Analyst

Great. Thank you very much.

Maryann Mannen -- President

You are welcome.

Operator

Our next question will come from Theresa Chen with Barclays. Your line is open.

Theresa Chen -- Barclays -- Analyst

Hi. I wanted to ask about the outlook from a product supply perspective, just so on the domestic front, there does seem to be a good amount of planned work this quarter, including within your own system, which should be constructive for inventories going to summer. But internationally, there is quite a bit of new supply coming online, and one of your competitors has, you know, talked about a 1.5 million barrels per day number. Would you agree with that and how much do you think, you know, could be realistically utilized?

Rick Hessling -- Chief Commercial Officer

Hi, Theresa. This is Rick. I'll attack the new refining capacity first. So, we see that coming on later versus sooner.

And when I say later, I would say second half of this year and then some. You know, over the years, when you bring on new greenfield facilities, which are being brought on, it's been proven difficult to bring them on in a timely fashion. And these specific facilities, like others, will face challenges with logistics and supply. So, I won't specifically comment on the 1.5, but I will say we believe it'll be later versus earlier.

And then for the demand piece specifically, certainly you've seen, as you referenced, utilization even here recently down 7% in the last week due to turnarounds and weather-related events. When we look at that and look going forward, we're continuing to see steady demand. As Mike mentioned in his opening remarks, our export book on gas and diesel has been very solid. It was solid in 2023, and we're off to a very good start in '24.

So, when we look at all of this together, we see it setting up very well, Theresa, for a very supportive spring and summer season.

Mike Hennigan -- Chief Executive Officer

Theresa, it's Mike. I'll just add. I mean, it's pretty well documented. I mean, last year, oil demand globally was over 2 million barrels a day.

I know some of the forecasters are calling it, you know, one-plus-ish. You know, we'll see how that plays itself out for this year. But I think the bigger picture, even though, you know, there's been a lot of attention, particularly to these two refineries that are, you know, coming up, as Rick mentioned, later in the year, the reason we believe it's more constructive over time is we're still believers in demand is going to continue to rise. And absent this short-term issue with, you know, some of the supply coming on, we just see it very constructive where demand is going to continue to outpace.

And that's why we think margins will stay, you know, in an above midcycle is the term everybody's using. I think at the end of the day, you know, we'll obviously keep a watch out. And there may be some short-term, you know variations to that. But I think part of the reason that we remain bullish is if we look over time, we're just big believers in demand is going to stay robust.

And on paper, aside from the short-term issue, we don't see a whole lot of supply response trying to match that. Hopefully, that makes sense to you.

Theresa Chen -- Barclays -- Analyst

Thank you.

Mike Hennigan -- Chief Executive Officer

You're welcome.

Operator

Thank you. Our next question will come from Ryan Todd with Piper Sandler. Your line is open.

Ryan Todd -- Piper Sandler -- Analyst

Good. Thanks. Maybe as a follow-up on that last question, you -- in your prepared remarks, I mean, you mentioned that you -- what you view as an enhanced midcycle environment for U.S. refineries in the coming years.

I mean, I think you were just talking about some of the broader global supply and demand that I think would feed into that. But can you maybe talk a little bit more about what you view as the primary drivers of that uplift to margins, particularly for U.S. refiners? And when you think about the go-forward environment versus -- go-forward midcycle versus past mid-cycle, you know, do you -- what sort of uplift can -- you know, do you think about $1 a barrel, $2 a barrel? Is there -- and, you know -- and how do you underpin that in terms of kind of U.S. advantages for you and your system?

Rick Hessling -- Chief Commercial Officer

Yeah, Ryan. It's Rick. So, for U.S. advantages, they're quite significant.

You know, Mike touched on early on in his prepared remarks, we have a feedstock advantage here in North America, with feedstock at our doorstep, and we have access to crude from around the world. So, we believe that's a significant advantage. And it's been very well documented, we have an energy advantage with the U.S. being extremely long in nat gas and we have cheap nat gas prices.

But in addition to that, when we look at our workforce and our assets and our refinery complexity, when you start layering all of those on top of one another, Ryan, it adds up significantly to an advantage, which is why Mike referenced earlier we believe in an enhanced midcycle. Now, when you think of it from our perspective, this is where our scale really comes into play. So, we run a billion barrel a system -- a billion barrel system annually. So, you can pick the number.

We won't give you a number, but it's easy math. If it's midcycle plus a buck that adds $1 billion to MPC's bottom line. A two-buck incentive or enhancement over midcycle, 2 billion. So, that's where our scale really comes into play.

Now, we are bullish because of a lot of the reasons Mike mentioned. Global demand, we believe, will hit a record consumption in '24. '23 was a record. We believe '24 will be a record.

IEA believes '24 will be a record. In fact, IEA continues to revise up their demand forecasts month after month and have done so for the last three months. In addition, we referenced turnarounds. Globally, turnarounds are high when you're looking at history, and we are set up well here for a strong spring and summer.

I hope that helps you.

Mike Hennigan -- Chief Executive Officer

Hey, Ryan. It's Mike. Let me just add. You know, we don't pick a number.

We do scenario planning, you know, like Rick gave you some examples. But -- so we do scenario planning, what if it's two bucks, what if it's four bucks, what if it's six bucks, and take a look at it from that perspective rather than trying to estimate what the number is. I'm a big believer and it's hard to call the 50-yard line, but if we get the banks of the river, we get the two end zones, right? You know, then we'll be able to run the business properly for the long term.

Operator

And we do have time for just one more question. Our last question will come from Jason Gabelman with TD Cowen. Your line is open.

Jason Gabelman -- TD Cowen -- Analyst

Yeah. Hey. Good morning. Thanks for squeezing me in.

I wanted to ask about the West Coast project that you disclosed today and a two-part question on it. First, when you reference the returns, how much? Is there a decent chunk of that that's related to avoided regulatory penalties that you would incur if you didn't do the project? And then how do you get comfortable with the demand outlook on the West Coast and the potential regulations that can limit MPC's ability to capture periods where product prices are higher?

Mike Hennigan -- Chief Executive Officer

So, Jason, on the -- on your first part, there's nothing that you said was avoiding costs or whatever. So, nothing's related to that. So, it's a -- you know, think of it as a reliability project, a modernization project, an efficiency project, a lower-cost project, and reducing greenhouse gas, which we need to do out there. There's regulations out there that are going to occur over time.

You know, we could have made the choice to wait until that regulatory requirement was there, but we saw an opportunity to enhance the facility ahead of time. And we've kind of disclosed already, we think there's greater than 20% return there. You know, how do we get comfortable, you know, in the overall macro? It's -- there's going to be a tough environment for California if things get, you know, more and more competitive out there, but we think we have a very competitive asset. So, we think we're in it for the long term.

We don't think all the facilities out there will survive in the long term. But as that volatility occurs out there, we want to have a really, you know, strong competitive, reliable, efficient, low-cost facility.

Rick Hessling -- Chief Commercial Officer

Jason, I'll just add to that. We believe our integrated system in California is a competitive advantage over the merchant refiner as well. So, when you look across our entire value chain, from feedstocks and all the way through to the station level, that's a competitive advantage over the merchant refinery when you have demand declines.

Kristina Kazarian -- Managing Director

All right. And with that, thank you for your interest in Marathon Petroleum Corporation. Should you have additional questions or would like clarification on any of the topics discussed this morning, please reach out and a member of the investor relations team will be here to help you. Thank you for joining us.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Kristina Kazarian -- Managing Director

Mike Hennigan -- Chief Executive Officer

Maryann Mannen -- President

John Quaid -- Chief Financial Officer

Neil Mehta -- Goldman Sachs -- Analyst

Manav Gupta -- UBS -- Analyst

Doug Leggate -- Bank of America Merrill Lynch -- Analyst

Rick Hessling -- Chief Commercial Officer

Paul Cheng -- Scotiabank -- Analyst

Roger Read -- Wells Fargo Securities -- Analyst

John Royall -- JPMorgan Chase and Company -- Analyst

Theresa Chen -- Barclays -- Analyst

Ryan Todd -- Piper Sandler -- Analyst

Jason Gabelman -- TD Cowen -- Analyst

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