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DATE

May 5, 2026, 11 a.m. ET

CALL PARTICIPANTS

  • President and Chief Executive Officer — Maryann Mannen
  • Chief Financial Officer — Maria Khoury
  • Executive Vice President, Refining — [Unknown Executive; cited as "Mike" during call]
  • Executive Vice President, Global Feedstocks, Products, and Logistics — Rick Hessling
  • Vice President, Investor Relations — Kristina Kazarian

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TAKEAWAYS

  • Utilization Rate -- 89%, with nearly 100% capture; 40% of full-year planned maintenance activity was completed.
  • Adjusted Earnings Per Share -- $1.65 as reported by management.
  • Adjusted EBITDA -- $2.8 billion, up nearly $800 million year over year, primarily from the Refining & Marketing segment.
  • Refining & Marketing Segment Adjusted EBITDA -- Approximately $1.4 billion.
  • Midstream Segment Adjusted EBITDA -- Decreased by $122 million compared to the prior year due to derivative losses, absence of a prior nonrecurring benefit, and divestiture of assets.
  • Adjusted EBITDA per Barrel (Refining & Marketing) -- $5.37 as directly provided.
  • Operating Cash Flow (excl. working capital) -- $1.7 billion.
  • Shareholder Returns -- Over $1 billion was returned, including $750 million in share repurchases; payout ratio was 62%.
  • Share Repurchase Authorization -- New $5 billion authorization announced.
  • Refining Turnaround Costs -- $530 million incurred, approximately 40% of full-year activity; full-year outlook remains $1.35 billion.
  • Consolidated Cash Position -- $2.2 billion at quarter-end; $645 million attributed to Marathon Petroleum Corporation, over $1.5 billion to MPLX.
  • Refining Segment Regional Utilization -- Gulf Coast 89%, Mid-Continent 88%, West Coast 92%.
  • Gulf Coast Segment Incremental EBITDA -- $596 million increase, driven by higher margins.
  • West Coast Segment Incremental Adjusted EBITDA -- $460 million increase; minimal plant turnaround activity contributed.
  • Refining Project Investments -- Nearly $330 million invested; focus on jet production, with over 30,000 barrels per day added at Garyville and Robinson flexibility poised to bring 10,000 barrels per day more in the third quarter.
  • MPLX Growth Capital -- Over $2.4 billion in investment underway, with 90% focused on natural gas and NGL projects.
  • Permian Basin Capacity Expansion -- Secretariat I processing plant in service; expected 1.4 billion cubic feet per day regional capacity after ramp-up.
  • Sour Gas Treating Capacity -- Titan project on track to exceed 400 million cubic feet per day by year-end.
  • Northeast System Expansion -- Harmon Creek III scheduled for Q3 startup; will bring capacity to 8.1 billion cubic feet per day.
  • International LPG Contract -- Agreement with E1 (South Korea) provides long-term delivered demand for up to 40% of volumes from new Gulf Coast fractionation facilities.
  • Clean Fuel Tax Credits -- Positive impact to renewable diesel segment from regulatory 45 guidance during the period.
  • Derivative Impacts -- $500 million unrealized losses attributed to commodity derivatives for the quarter; $63 million of that in Midstream, $340 million margin calls to working capital.
  • Second Quarter Refining Utilization Guidance -- Targeted at approximately 94% following early completion of 40% of yearly turnarounds.
  • Refining Capture Rate -- 99% for the quarter; would have exceeded 100% if not for secondary products and timing impacts from derivatives.
  • MPLX Distribution Guidance -- Targeting 12.5% distribution growth over the next 2 years with mid-single-digit adjusted EBITDA growth outlook.
  • Refining & Marketing Segment Flexibility -- Company maximized diesel and jet production, benefitting from yield optimization projects and flexibility investments; cited multiple region-specific operational enhancements.

SUMMARY

Management confirmed a strong cash generation profile and supported a higher capital return cadence through a newly authorized $5 billion share repurchase program. Executives outlined strategic progress in value-driven assets, highlighting full utilization of flexibility investments and contractual de-risking of upcoming Gulf Coast LPG fractionation, which is expected to enter service in 2028 and 2029. Geographic and segment-specific commentary provided transparency on refinery output shifts, export growth, and reliability improvements, while cash and operational discipline continue to anchor forward guidance across both refining and midstream.

  • Company emphasized that "A key differentiator" is the MPLX integration, as it enhances value creation, with planned expansions and new contracts directly supporting future distribution and EBITDA growth.
  • Khoury commented, "Operating cash flow excluding changes in working capital, was $1.7 billion," clearly linking cash generation to current shareholder distributions.
  • Management explained that approximately 90% of 2026's growth capital in the Midstream segment is committed to natural gas and NGL infrastructure, aligning capital spend with anticipated end-market growth and North American energy export trends.
  • Segment results reflected regionally optimized operations, with strong export market access and flexibility in crude sourcing cited as market advantages insulating the company from recent global supply disruptions.

INDUSTRY GLOSSARY

  • Capture Rate: The percentage of theoretical gross margin actually realized by the refinery relative to benchmark margins; reflects commercial and operational optimization.
  • MPLX: A master limited partnership operating Midstream assets for Marathon Petroleum Corporation, including pipelines and processing facilities.
  • Frac: Industry term for a natural gas liquids fractionation plant, which separates components of NGL streams.
  • Jet Optionality: The operational flexibility to produce and adjust the volume of jet fuel output in response to changing market demand.
  • D4 RIN: A Renewable Identification Number credit associated with biomass-based diesel under the U.S. Renewable Fuel Standard.
  • VLGC: Very Large Gas Carrier, a type of ship used to transport liquefied petroleum gas on international routes.

Full Conference Call Transcript

Maryann Mannen: Good morning. Our first quarter results demonstrated the impact of our strategy, the capability of our integrated system. Operationally, we delivered. Our refineries ran at 89% utilization with nearly 100% capture. This was our strongest first quarter on process safety as well as our lowest level of unplanned downtime this decade, all while completing approximately 40% of our full year planned maintenance activity. Given the constructive macro backdrop for the remainder of 2026, we proactively made decisions to enhance operational readiness. As a result, we are well positioned to respond to the strong level of demand we are seeing across the system. Late in the first quarter, geopolitical events tightened global markets, disrupted trade flows, and drove global cracks higher.

While estimates vary, we believe approximately 6 million barrels per day, representing close to 6% of global refined products capacity has come offline during the conflict in the Middle East. And the time line for return of supply remains dependent on the extent of any damage to facilities and resumption of crude flows to those refineries. Against that backdrop, domestic demand for gasoline, diesel and jet fuel remained strong with exports providing incremental upside. We are largely insulated from global crude supply disruptions given our crude sourcing comes mainly from the United States and Canada. Combined with the depth and sophistication of our highly integrated value chains, we are well positioned to optimize through volatility.

This market environment underscores the strength of our refining system, and it showed in our financial results this quarter. We invested nearly $330 million in our Refining and Marketing business this quarter with near-term projects focused on increasing jet optionality. High expected returns, clear line of sight and disciplined deployment, we are directing capital towards advantage assets with visible demand pool and a clearly defined path to monetization. Approximately 25% of our 2026 refining value-enhancing capital is directed to our Garyville refinery. In March, we brought more than 30,000 barrels per day of incremental jet production capacity online at our Garyville refinery.

This investment strengthens one of the most competitive refining assets in the world and positions us to meet growing global jet demand. As we move into the second quarter, our El Paso yield improvement investment is expected to enhance the refinery's ability to produce specialty gasolines for the El Paso, Phoenix and Mexico markets, reinforcing its geographic advantage and its competitive position. Our Robinson Jet flexibility investment is expected to come online in the third quarter, enabling approximately 10,000 barrels per day of incremental jet fuel production and helping to address growing regional demand. Taken together, these investments strengthen our competitive position and support our commitment to peer-leading profitability across the regions where we operate.

Over the past 2 years, we have meaningfully expanded our international LPG trading footprint, executing delivered business across Europe, Latin America and Asia. Building on that momentum, through an agreement with our South Korean customer, E1, we have secured long-term delivered demand for up to 40% of the volumes MPC will purchase from MPLX's new Gulf Coast fractionation facilities, which are adjacent to MPC's Galveston Bay refinery. Construction of MPLX fractionators as well as the JV export facility progress on time and on budget and are expected to enter service in 2028 and 2029. 2026 is a year of both execution and growth for MPLX.

The business is investing over $2.4 billion with multiple investments anticipated to transition from construction to cash generation in the second half of the year. Approximately 90% of that growth capital is focused on natural gas and NGL opportunities. Against a backdrop of ongoing geopolitical uncertainty, global demand for secure and reliable energy continues to grow with international customers increasingly turning to the United States as a preferred supplier. U.S. natural gas and NGLs offer a compelling combination of supply abundance and demand visibility driven by LNG exports, power generation and industrial growth, supporting disciplined infrastructure investment.

In the Permian, Secretariat I processing plant has entered service and is expected to ramp steadily over the next 9 to 12 months, increasing regional system processing capacity to 1.4 billion cubic feet per day. Building on that progress, MPLX's sour gas trading expansion, Titan remains firmly on schedule with expectations to exit 2026 with more than 400 million cubic feet per day of treating capacity. In the Northeast, Harmon Creek III remains on track for startup in the third quarter bringing regional system processing capacity to 8.1 billion cubic feet per day. Collectively, these investments provide a clear path to distribution growth, strengthen cash flow durability for MPC and demonstrate our leadership in capital returns.

In the first quarter, we returned over $1 billion to shareholders. And today, we announced an additional $5 billion share repurchase authorization, reinforcing our commitment to delivering industry-leading returns through cycle. We will execute safely, invest strategically and generate significant cash, all at the same time. With that, I'll turn it over to Maria to walk through our financial performance.

Maria Khoury: Thank you, Maryann. Our first quarter highlights reflect execution and discipline across the business. We delivered adjusted earnings per share of $1.65 and adjusted EBITDA of $2.8 billion. Refining & Marketing segment, adjusted EBITDA per barrel was $5.37. Cash flow from operations, excluding working capital changes, was $1.7 billion. And consistent with our capital allocation framework will return over $1 billion to shareholders, inclusive of $750 million of share repurchases. Overall, our first quarter illustrated the strength of our financial position and our ability to manage through market dislocations and honor our commitment to shareholder returns with a payout ratio of 62%. The next slide shows the year-over-year change in adjusted EBITDA from first quarter 2025 to first quarter 2026.

It then connects EBITDA to net income providing clarity on key items, including depreciation and amortization, interest and taxes. Adjusted EBITDA was higher year-over-year by nearly $800 million, primarily driven by our Refining and Marketing segment. Refining turnaround costs totaled $530 million in the first quarter. We safely completed roughly 40% of our full year activity. Our full year outlook remains unchanged at $1.35 billion. Our earnings power continues to translate from operational performance into financial results, and we remain focused on what we can control through operations excellence and commercial execution. Moving to our segment results, slide 7 provides an overview of our Refining & Marketing segment, where R&M first quarter adjusted EBITDA was approximately $1.4 billion.

We capitalized on a strong refining margin environment while safely executing planned maintenance. Our refineries ran at 89% utilization with total throughput of nearly 3 million barrels per day. Regionally, our utilization was 89% in the Gulf Coast, 88% in the Mid-Con, 92% in the West Coast region. Strong domestic and international demand drove increased Gulf Coast margins, resulting in an incremental $596 million of adjusted EBITDA. In the Mid-Con, increased margins were offset by lower volumes as well as costs that occurred during our planned maintenance activity, resulting in an adjusted EBITDA decline year-over-year.

On the West Coast, we delivered an incremental $460 million of adjusted EBITDA as we capitalize on a strong market environment and had minimal plant turnaround activity. This quarter, our Los Angeles refinery run with the benefit of the completed investments on utility systems, improving reliability and efficiency. These improvements are expected to strengthen the sustainability of our refinery position is to be one of the most competitive players in the region. In an environment where market conditions can shift quickly a strong planning and tight operational control matters, and our teams deliver. Importantly, we are not just optimizing for the quarter. We're focused on sustaining performance through reliability, discipline spending and continuous improvement across our refineries.

That's how we protect margins and position the business to perform across cycles. Turning to Slide 8. First quarter capture was 99%. Executing on our commercial strategy and integrated logistics gives us the ability to respond dynamically adjusting geos, optimizing feedstocks and placing products into the highest value markets. Favorable distillate margins were a key tailwind to capture performance. We maximize diesel and jet production to align with the market demand. As Maryann mentioned, our jet production capabilities will further expand with the Robinson Jet flexibility investment expected to come online in the third quarter. was also impacted by market-driven headwinds, primarily secondary products and derivatives used to manage price volatility.

Our flexibility is a meaningful advantage, and we remain confident in the durability of the remaining -- the Refining & Marketing segment. Slide 9 shows our Midstream segment performance for the quarter. Segment adjusted EBITDA decreased $122 million compared to the first quarter of 2025. The decrease was primarily driven by derivative losses, the absence of a nonrecurring benefit in the first quarter of 2025 and the divestiture of non-core gathering and processing assets. MPLX continues to execute its value chain growth strategy and remains a source of durable cash flow for NPC. Now moving to our renewable diesel segment performance for the quarter on Slide 10.

Results were uplifted by a stronger margin environment and recognition of clean fuel production tax credits from 45 regulatory guidance. As planned, we completed a successful turnaround at Martinez. We will continue to optimize our renewable facilities, leveraging logistics and pretreatment capabilities. Slide 11 presents the elements of change in our consolidated cash position for the first quarter, underscoring the contributions from both refining and midstream and reinforcing the strength of our business model. Operating cash flow excluding changes in working capital, was $1.7 billion. Working capital was at $573 million use of cash for the quarter, primarily driven by inventory build lower throughput partially offset by higher crude pricing.

During the quarter, we returned over $1 billion of capital to shareholders, executing our capital allocation priorities. At the end of the quarter, MPC had roughly $2.2 billion of consolidated cash, including MPC's cash of $645 million and MPLX cash of over $1.5 billion. In this dynamic environment, we continue to generate substantial cash that supports reinvestment in the business and returns to shareholders, central to how we create value over the long term. Now turning to guidance on Slide 12. We provide our second quarter outlook for the Refining & Marketing segment. Our focus is to execute growing safely and reliably, managing costs, staying responsive to market conditions. With that, let me pass it back to Maryann.

Maryann Mannen: Thank you, Maria. Safety and reliability are foundational to everything we do. They are ingrained in our decision-making and underpin the performance of our assets across the system. We are constructive on the outlook for U.S. refining and midstream. Structural advantages continue to support strong fundamentals and durable returns. We strive for excellence every day by leveraging our planning, commercial and operational capabilities to optimize our fully integrated value chains. This approach allows us to remain competitive, resilient through cycles and positioned to deliver peer-leading profitability in each region where we operate. A key differentiator for us is MPLX, which continues to enhance MPC's value creation opportunities.

MPLX's advantage natural gas and NGL footprint combined with disciplined growth, strengthens our through-cycle cash flow profile and reinforces the integrated strength of our enterprise. MPLX expects to deliver 12.5% distribution growth for the next 2 years, underpinned by mid-single-digit adjusted EBITDA growth. This performance provides growing cash flow uplift to MPC and further supports our ability to deliver industry-leading capital returns. Confidence in the durability of our cash generation profile is reflected in our actions. In addition to returning significant capital this quarter, we announced an incremental $5 billion share repurchase authorization, reinforcing our commitment to lead the industry and capital returns through cycle.

I'm confident in our ability to deliver improving results through our planning, commercial and operational capabilities. With that, I'll turn the call back to Kristina.

Kristina Kazarian: Thanks, Maryann. 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. We'll now open the questions. Operator? .

Operator: [Operator Instructions] Our first question comes from Neil Mehta with Goldman Sachs.

Neil Mehta: I just want to start off on Slide 12, the second quarter outlook. And Maryann, the utilization guide looked very good here at 94%, but maybe you can unpack the numbers a little bit more, give a sense of your plans for each of the regions. And to the extent uptime is surprising to the upside here, anything underneath the hood that would give us some sense of -- give us more confidence and reliability.

Maryann Mannen: Yes. Thank you, Neil. So for our second quarter guidance, you're right. As you can see, we are planning for utilization at about 94% that comes off of a really strong turnaround in the first quarter. I mentioned in my comments that we pulled forward some of our turnarounds so that we've actually completed roughly 40% in the first quarter. And we did that because, obviously, we had a good view on what we saw the macro to be. And I'm sure we'll talk more about that here going forward. We didn't change scope. This is not a reduction of scope at all.

This was just our intent to bring that cost forward so that we are prepared as we are running strong in the second quarter, given the demand that we're seeing. Also, you hear me talk about planning and commercial execution as well. We have been, as you know, for a long period of time, really leaning in on our commercial performance. The team is really optimizing on ensuring that we're expanding the crack in the quarter. And then more importantly, that we are developing sustainable changes through our organizational effectiveness through our technology use and the commercial planning opportunities that we have as well, trading also. And you'll see that come through.

If you look at the quarterly performance first quarter, our capture would have exceeded 100%. And had it not been for as Maria mentioned in her comments, the timing impact of derivatives, all expected to unwind as we think about through the second quarter as that physical comes. And then frankly, given the volatility in the market from the commodity, we had headwinds coming on the secondary. So -- and then from a regional perspective, you see planning around our U.S. Gulf Coast clearly, export opportunities there continue to be strong. We can lean in on that as well.

We made some changes in Garyville on expanding our jet flexibility there having yield capability around distillates and obviously having GBR running well. And then on the West Coast, obviously, when you look at the environment there, you look at our positioning, you look at the challenges being caused in the region as a result of lack of flows into the state from the Iran conflict. You can see, as you look at our regional performance that we should be able to lean in very strong there. So hopefully, that gives you a sense. We're really looking at our execution being sustainable.

I mentioned in my comments that we had the lowest unplanned downtime in the first quarter along with outstanding safety and recognize Mike and the rest of the refining team there. It has been a core objective of this organization, and they truly delivered this quarter, and I think you can expect to see that sustainable through the year. Let me pause there, Neil, and see if I've got it your questions.

Neil Mehta: No, you got it the question, Maryann, and that kind of brings us to the follow-up, which is what do you do with the cash. And if I think about some of the comments that you made on the last quarterly call, you said you did $4.5 billion of return of capital last year, 2025, and current market conditions, you think you could be higher this year. This first quarter, you did about $1 billion I guess the math would imply an acceleration of return of capital through the balance of the year. But any of your perspective on the cadence at the forward curve would be great.

Maryann Mannen: Yes. Sure, Neil. I would say, look, we have no change to our capital allocation priorities. I mentioned we look at the strength of the MPLX growth and the distribution that it provides to MPC. This covers the $1.5 billion that we've committed to capital on the MPC side and our growing dividend. So it gives us the ability to truly lead in return of capital, you see the strength of that second quarter. My guess is your view on the long term is pretty consistent with ours.

We should be able to generate cash flows as a result of this market, and we would continue to see return of capital via share buyback is -- as the vehicle to return capital to our shareholders.

Operator: Our next question comes from Manav Gupta with UBS.

Manav Gupta: I'm actually trying to get a little bit of handle on elevated earnings for the near term or medium term. And the two aspects I'm looking at is, one, is global refining macro, as you mentioned, a lot of capacity still offline. And eventually, even when it does come online, storage of products globally is depleted. So my hope is that cracks will be elevated for a longer period. But the other thing I also wanted to talk to you a bit about is there's a bear thesis which is floated around that as the refining crack tends to spike. There's a proportionate drop in capture.

Now when I look at your 1Q results, your beat would not have been possible if March capture was not strong. So can you talk a little bit about a refining macro among the cracks? And then capturing as it capturing the higher track as it relates to your system? If you could talk a little bit about those two things.

Maryann Mannen: Yes, Manav, thank you for the question. So maybe just our refining macro to begin with. So as you know, we've been saying, we've been very constructive, the refining macro for a longer period of time. When you look at demand that we see over the decade continues to be strong. When we look at supply, particularly past 2026. We think there's a true balance there. Actually, demand will ultimately outpace supply, a bit of supply coming online, as you know, some of that actually in the pet chem space.

So even heading into -- before the Iran conflict, of course, we've been extremely constructive over the refining macro for the long term. then you add the impact of the Iran conflict to that. As I mentioned, obviously, estimates vary at least 6 million barrels off-line Middle East, China and then there's another 1 million Russia. I think you said it in your question to me. It will take time even if the straits were to be open rather immediately for global flows to normalize. I think this gives U.S. refineries in particularly MPC, an advantage.

One, as we've mentioned, we are leaning in particularly on our export capabilities, and I'll pass it to Rick here in a moment and share a little bit more about that, we'll flex there when those economics are there, but we've been building capabilities there for a period of time. we source the majority of our crude, U.S. and Canada. So we're largely insulated. So as you can see from our guidance for the second quarter and frankly, we have confidence as we look throughout the year, we remain extremely constructive given the macro backdrop, long-term supply/demand and then most importantly, our commercial planning and operational excellence to be able to optimize in these crack environments.

So let me pass it to Rick and he can give you more color.

Rick Hessling: Yes. Manav, just a few comments. When we look at this unprecedented situation and scenario we're in, you're seeing extreme volatility. And I really want to make that point because that leads to incredible capture generation if and when we execute, and I think you're going to -- you've seen here in 1Q and you'll see going forward, our team is extremely energized in this environment and our ability to expand the crack was quite evident. And I think you'll continue to see that going forward. So just a few examples to give you and things I want to leave you with mainly by products.

So if I start with crude, think of the theme on crude that we are utilizing our inland connectivity to buy advantaged barrels versus high-priced waterborne barrels that are being bid up throughout the world. So those who have access to inland barrels are the big winner in these events, such as the one we're in. We more than doubled our U.S. Gulf Coast Canadian volumes in response to the rising premiums on the U.S. Gulf Coast that we've seen. And April actually is going to be a record volume of Canadian volumes for us system-wide. We've never hit volumes like we've seen now. And as you know, the differentials are quite attractive. So it's a double win for us.

But then as you maybe move a little bit more into the heartland of where we're at, we've increased Bakken volumes in the Mid-Con and we're actually taking Bakken to the Pacific Northwest, which is backing out higher-cost waterborne barrels. And then even a little closer home here to Finley, Ohio, when you look at what's in our backyard with the Utica Marcellus, we are blessed to have condensate right in our backyard, and we are running record amounts of local crudes at Canton and Catlettsburg. In addition, Manav, we purchased 5 Advantage Ven cargoes in 1Q. And the Ven cargoes are getting a lot of press.

And what I would leave you with there is we would have bought more but we had better alternatives leaning into heavy Canadian. So we didn't have the need to buy any more than 5 cargoes of vents crude. But I will say the Vans crude being on the market, Manav, is quite a tailwind for us because it's putting pressure on other grades. And then on the crude side, I'll leave you with, lastly, you've probably seen in print that we've purchased approximately 10 million barrels of advantaged SPR crude directly from the DOE, taking out the middleman, we're we are advantageously working with the DOE to run those barrels in 2Q.

And we're hopeful we may even get some barrels to run in with the bid -- SPR bid that came out yesterday. Moving on to products. I'll leave you with really a couple of comments that are in line with what Maryann previously mentioned. We're MAX diesel, as you would guess, and Jet across our system. And boy, the Garyville project came online at the absolute perfect time for us. And it's really a classic example of our strategic capital deployment to enhance our yields and our competitiveness to create capture tailwinds. Jet was a big story for us. As you know, we're large producers of Jet, not only on the Gulf Coast, Mid-Con, but especially in L.A.

Manav, where you see the ULSD to jet differentials blow out. Then when you look at the Jones Act waiver, we leaned into that in a big way as well. We took jet from the Gulf Coast to Alaska. We took alkylate from the Gulf Coast to L.A. and we had various Jones Act waiver moves around L.A. and PNW amongst many other moves. And Maryann, I guess, said and mentioned exports in her prepared remarks. So I'll touch on that a bit as well. We really were creative and made some unique movements on the export glass of trade this past quarter. We moved ULSD from LAR to Australia. First time ever we've done that.

I give the team huge kudos on creativity and capturing a market opportunity, and we moved naphtha to Asia, first time we've done that. So from a jet export gas, diesel export opportunity, we continue to see strong markets, I would say, especially Manav in Europe and in Latin America. So I guess, moving forward, if I were to kind of say what should you look for in 2Q, I think the tailwinds are going to be butane blending with the RVP waivers. Certainly, the JET ULSD spreads that we're seeing. We continue to expect those to persist.

As Maryann and Maria have mentioned, we are ready to run in 2Q, and we postured this quite well going into driving season. And now with the conflict remaining, we continue to be in a great spot to capture margin. And then we have incredible optionality on our crude diet with our Mid-Con avails. And then the SPR barrels will be a nice shot in the arm for us as well. And then lastly, Manav, maybe from a headwinds perspective, we're going to watch backwardation very closely. Obviously, it is extremely steep. So we're keeping a very close eye on our inventories, making sure we don't have any more than we need.

But I think what you've seen, Manav, there is the prompt month keeps rolling up and rolling up. So we do expect that to continue to happen as long as the conflict persists. And then certainly, we're going to keep our eye on the secondary products market with how cracks move and how WTI and Brent moved. So hopefully, that gives you some color, Manav, maybe the more color than we had given you in the past, but I really felt like it was appropriate for me to lean into it this quarter because our commercial team really responded well.

Manav Gupta: This is a very detailed response. I'll be quick with my follow-up. First, thank you for providing adjusted EBITDA per barrel by region. So if you could talk a little bit about those additional disclosures you provided. But as I understand, some part of the management compensation is also linked to these. So you're trying to be top in terms of EBITDA per barrel, but now you're taking it a step further where you want to be top -- in the top end of the range for each specific region. So can you talk a little bit about that?

Maryann Mannen: Yes, of course, Manav. Thank you. So you're absolutely right. We wanted to provide incremental visibility to our regional performance. As you know, for a while, we've been saying that we continue as an objective to have as a target for us to be the most competitive in every region where we operate. And you're absolutely right. Our executive compensation, the annual cash bonus element of that. It's a portion of that, about 20% actually is focused on the delivery of being the most competitive in every region where we operate. So we think this covers cost competitiveness.

So as Mike and his team are making decisions about turnaround and making decisions about OpEx, that played through in our EBITDA per barrel. Similarly, as we think about capital allocation, I mentioned, right, we need to have returns of 25% in order to put capital to work on the refining side. Projects like Robinson Jet, Garyville Jet, the DHT all of those decisions should be yielding incremental returns and improving EBITDA per barrel. So we think this gives you the visibility that you need to see the performance in each of those regions, and have the ability to assess our planning, commercial and operational excellence as it plays through in our EBITDA. I hope that helps.

Operator: Our next question comes from Sam Margolin with Wells Fargo.

Sam Margolin: So this might be an elaboration on the last answer, but -- your refining capital is directed to all these optimization projects and yield enhancements. And so I wonder if there's any commercial constraints that come with the yield benefits. And it doesn't sound like there are based on the last answer, but maybe just to hammer the point home. And if so, how does MPLX potentially address those in the context of -- it seems like MPLX has an imperative to invest in the gas value chain. So I guess, to sum it all up, competition for capital across logistics with the backdrop of all these yield benefits coming to the refinery level?

Maryann Mannen: Yes. Thanks, Sam. So maybe two parts to my answer for you. Let me focus first on MPLX. You're absolutely correct. Our capital program is targeted as you well know, toward nat gas and NGL. It's roughly 90% of the spend in 2026. And had a similar allocation in 2025 as we invested in the Titan North Wind processing treatment as we are progressing our 2 fractionation and U.S. Gulf Coast export dock. So we'll continue to allocate capital that meet our strategic objectives, and optimize our ability to deliver mid-teens returns and again, continue to support our mid-single-digit growth.

As we move to the refining side, our target there, as I mentioned in the past, we're looking at returns in about 25%. We want yield optimization we want cost reduction. We want to continue to focus on those assets that are delivering the best profitability over the long term. You often hear us say our asset portfolio for the short term in our asset portfolio for the long term. These projects have high hurdles. But as you can see, when we put these to work, you look at Garyville, 30,000 incremental barrels a day of Jet. And then again, we got another one coming online in Robinson.

And this has flexibility as well so that if we were to see changes in the Jet pattern, we can revert back to other distillates. And we think these projects give us outstanding capabilities. So again, both of these businesses, both MPLX and MPC have very specific mandates strategic focus, financial hurdles for which they need to allocate capital. I hope that helps.

Sam Margolin: Yes, it does. And then this is a follow-up within kind of this gas theme. These gas exposure is very thematic. As you know, there's end market growth across the natural gas value chain in every category. And so the question is whether would ever want to participate in those end markets and leverage MPLX's growing exposure into that vertical?

Maryann Mannen: Yes, Sam, it's interesting. Let me give you some thoughts, and then I'll pass it to Rick to give you some incremental color. You hear us often talk about this concept of value chain. When you look at our refining side as a house, so to speak, right? We have a natural short, so to speak, or assets, demand, natural gas every single data to operate. And then you look at the flip side of that on MPLX and you look at our exposure, we're processing, touching, if you will, over 10% of U.S. natural gas every single day and expanding that footprint.

Rick and his team have a nat gas organization now, and we're looking how to optimize that focus on the U.S. Gulf Coast project that we're talking about. As you know, we've said MPC and MPLX will have a contract, meaning MPC will take all of the product from that -- those two fractionators. And then Rick and his team then takes a marketing of that, as I mentioned in my prepared remarks, right, we just concluded a potential contract here for 40% of our demand with E1. So we see this opportunity growing. I'm going to pass it to Rick and he can give you a little more color on how we're thinking through that.

Rick Hessling: Yes, Sam, I think Maryann said it very well. Think of on the R&M side, we have a massive nat gas short. And so as you know, with the substantial footprint, we have through MPLX with our pipeline commitments and the equity they have in pipelines, that is absolutely complementary to our U.S. Gulf Coast refineries, especially. So -- we look to parlay those positions into advantageous nat gas for our refineries, especially along the U.S. Gulf Coast. And then I'll just give you another little nugget. On the power side, we have several cogens across our footprint that we participate in those markets commercially. And they supply us certainly with power for our refining assets.

And so there are opportunities and synergies there that we're really pressing into. So a lot of opportunity in this space, Sam.

Operator: Our next question comes from Doug Leggate with Wolfe Research.

Douglas George Blyth Leggate: Maryann, I think we've got a very thorough answer on capture, but it's never enough, sorry. I wonder if I could just ask a really simple characterization question. You guys have run -- you've got a target of 100% capture your trading businesses, obviously had a big impact, especially in this kind of market. But there's a lot of moving parts. And particularly on secondary products and you already talked about physical crude markets and how you're swinging your portfolio. My simple question is this, if we look forward at the extraordinary indicator margins and acknowledge there's going to be some offsets. Do you believe you can sustain your 100% target in this extraordinary environment? That's my first question.

My second question is really more -- I understand your comments about the macro and all the rest of it. I think none of us expected the situation we have currently. My question is, do you see this as a windfall as we secure currently. In which case, how does that inform the pacing or the decisions you make on Neil's question about cash returns. My point is simply this. couple of weeks ago, the Foreign Minister of Iran turnaround at the straightness reopened. Oil prices fell $17 that day and everything got hit pretty hard. I think missed time buybacks at this point in the cycle.

The risk is a lot of that windfall cash flow goes away with a decline in the share price. So my question is how does that factor into your thinking? The first one capture and the second on the pacing of your cash returns.

Maryann Mannen: Yes. Of course, Doug, sure. So on capture, first and foremost, we have been working on our commercial performance for a period of time. And the objective for the commercial team, as you know, in any quarter is really to expand the crack regardless of the market that we're given. So every quarter, the macro, they are diligently working to expand that crack and address all issues in the prompt. At the same time, the commercial team is working on sustainable changes for the long term, right? To your point, can we continue to say, capture should be improving period-over-period.

Organizational changes, Rick has talked about those in the past or access to markets outside of the U.S., so that we've got, if you will, round-the-clock coverage. We're using other digital and other technology capabilities. We've got a planning organization now that is critical to identifying where those opportunities exist in the organization so that both commercial and Mike's team operationally can execute those and deliver the incremental value. So creating sustainable as well. But if we look at just the first quarter alone, our capture would have been in excess of 100% this quarter, if not for two things that you mentioned. One, secondaries; and two, the impact of derivatives.

And you know secondary is not necessarily something that we've got complete control over. As that commodity volatility moves rapidly up or down, our ability to capture or hold pricing on the way down or respond to pricing on a rapid rise is a challenge, and we saw headwinds this quarter coming from that secondary market. Derivatives. Derivatives are a normal and ordinary course through our risk lens. We use hedges to protect a certain portion of our inventory, and that's a normal ordinary course and frankly, this quarter was absolutely no different. What was different was the volatility in the commodity.

And so the timing of that, meaning when that physical barrel was actually received be it first quarter or second quarter also had a headwind. Now that will unwind in the second quarter, but that had an impact on our capture headwinds in the quarter. So I guess to try to answer your question, there are things that we cannot control, as you well know, and that volatility will create variability. We even try to look at tight correlations for -- so that we can actually do some projections ourselves.

But the things that we can control the quarterly addressing the prompt market and responding and the long-term sustainability, we believe we have more opportunity to deliver incremental performance on an EBITDA per barrel across our regions, Doug. I hope that answers the question.

Douglas George Blyth Leggate: Yes, it's very clear. And maybe on the windfall question, allocation of cash.

Maryann Mannen: Yes, certainly. So on the windfall question. As you know, our capital allocation hasn't changed. We continue to believe that MPLX supporting our capital plan and covering the distribution gives us the ability to lead in capital returns. That should not change. Obviously, as the volatility persists. We will watch our balance sheet. We will be very disciplined in the manner in which we allocate capital, both through our capital return as well as across the system when we're thinking about projects, et cetera. But overall, our return of capital, if you will, philosophy hasn't changed.

Douglas George Blyth Leggate: I think that's clear. Maybe just to clarify, would you pace the share buyback? Or is it ratable?

Maryann Mannen: We try to do our very best across the system to make the best decisions that we can and be as disciplined as we can when we are returning capital, Doug.

Operator: Our next question comes from Theresa Chen with Barclays.

Unknown Analyst: Given the upside volatility in slot prices that we've seen, I would love to get an update on your demand observations and outlook across the products within your footprint. Are there any regions or areas that you're seeing any resistance as far as demand goes, any areas where we're testing that point of inflection for demand elasticity?

Rick Hessling: Theresa, it's Rick. So I would say resilient is the word I would leave you with. We continue to see resilient demand for both gas and diesel across Mid-Con, Gulf Coast and the West Coast. And one ironic piece is even when you look at the differing prices throughout the United States, -- on the West Coast, we've actually seen a small increase in our wholesale class of trade with other players exiting that market. So -- we've seen the benefit of that, and we're seeing new markets for exports, such as diesel to Australia, as I mentioned earlier. And then I would say from a Jet perspective, we are not seeing any decline in the jet demand.

We see strong jet demand in L.A., Gulf Coast and Mid-Con Chicago area. So across the board, we're not seeing any impacts yet, Theresa.

Unknown Analyst: And turning to the LPG export project. Great to see the commercialization progress there in terms of getting third-party offtake for that facility. I'm curious as far as your plans for the remaining 60%, is the strategy or plan that you will farm that out to an off-taker to like a consumer on the other end? Or are you planning to keep a certain portion of that capacity for your own marketing purposes? And beyond the initial 200,000 barrels per day, given the call on U.S. resources and export infrastructure in general at large and this growing stores of volumes from a supply push perspective from the producing basins.

What are your thoughts on incremental phases of expansion on that facility?

Rick Hessling: Yes. So maybe I'll start with that, Theresa. So when you look at our strategy to continue to move LPG through our docs E1, as Maryann stated in her opening remarks, that's just the start. So that's a delivered barrel that will go to South Korea. We are looking at other Asian and other Asian and European markets, African markets. And so our ultimate plan is to contract up a significant portion more of those barrels before the project goes live in 2028 with Frac 1. So you'll see us lock down more volumes. We're leaning into both the delivered and FOB option. And you've heard me say this a lot over the years.

We're going to look to what we believe is the best economic signal. Right now, we believe that's delivered with our expertise and with the VLGCs that we have on time charter and those that we will procure. So I would say it will be a combination of FOB, Delivered and then we'll leave some to the spot market just to make sure we're able to take advantage of volatile markets when those fracs come online, which we expect to be in our favor with the Qatar LNG facility going down as well as the other projects around the world being delayed, we believe the timing of our asset coming online couldn't be better.

Maryann Mannen: And Theresa, it's Maryann. To the first part of your question, maybe just around the potential beyond that. When we announced this project, we did say that we saw this as a growth platform. We've been saying Frac 1 and Frac 2. So one that comes online in '28 and 2029, we've got a high degree of confidence, right, that both of those fracs will be full. We'll continue to evaluate that opportunity. But certainly, this is a growth platform for us.

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

Jason Gabelman: I wanted to start on what you're seeing kind of in the inland markets and West Coast and kind of we've seen a bit of inverse performance there in land was, I'd say, weaker than normal seasonality in 1Q. What do you think drove that? And do you see that kind of reversing back to normal seasonality as we move to 2Q and then kind of the inverse of the West Coast, which was very strong for 1Q, but has been volatile since 2Q started?

Rick Hessling: Yes. Jason, it's Rick. So I will start with the Mid-Con and tell you in Q1, the Mid-Con was really performed exactly how we thought it would perform, and that's in line with seasonal trends. It was a tough Jan and Fab, but that's not to be unexpected. As we leaned into March, though, we saw the Mid-Con start to widen out. And as we look at the Mid-Con today, it is absolutely the best market we have right now within our system. We're seeing extreme tightness on gas and diesel inventories. EIA stats went from length on inventory in Jan and Feb to abnormally low levels now.

And really, what's causing this is you have some turnaround us included at locations such as Robinson. But really what's driving this, Jason, is we're seeing good demand and you're seeing a lot of unplanned maintenance in the region. So the marker as we look today is very strong because of the supply/demand any qualities that exist in the market. And I would also say that everyone in max diesel mode, as you well know, to meet the demand signal, and we're seeing strong ag demand, which is positive. But that has led to tightness now on gas inventories as we head into driving season.

So we feel very good about where we're at from a Mid-Con perspective and where we're headed as we enter into driving season. On the West Coast, I will tell you, you signaled a bit that it's fallen off a bit, but it has, but it's still at very robust cracks and we believe that will continue to persist because the West Coast is structurally short. As you know, from a refining perspective, and the volumes coming over from Asia, the import volumes coming over from Asia have been significantly reduced due to all of the refining issues that Maryann mentioned in her prepared remarks.

So we continue to feel very confident that the West Coast will stay in a good ZIP code area that it is generally in at this 10 seconds as well.

Jason Gabelman: Got it. That's a color. My follow-up is on the intercompany contracts between and MPLX. And I think over the next couple of years, you'll see a number of those contracts come up for renewal. Should we expect those contracts to get renewed at kind of similar terms as what they're currently at? And can you just talk through the process that you go through in renewing those contracts. And if I could just sneak one last one in for any voting of doubt, can you provide the derivative impact that you've alluded to a few times that you've incurred for 1Q?

Maryann Mannen: Yes. Sure, Jason. It's Maryann. And then I'll pass it to Maria to give you the specifics on the derivatives in the quarter. On the MPLX MPC contracts, absolutely, you should expect us to renew those contracts. We typically, as we get within an 18-month period, we'll get those renewed. But we have all intentions of those contracts being renewed. As you know, the relationship between MPC and MPLX continues to be extremely important. When we look at the strategic focus of both of those organizations and, if you will, the inextricable relationship, so to speak, that we have and the ability, frankly, for us to use that overall, integrated system, it's critically important.

So yes, you should expect that those contracts will get renewed. And then on the derivative side, I'll pass it to Maria in a moment, but let me just comment again. Our derivative program in the first quarter is no different than any quarter that we have ever executed. We use derivatives to cover a portion of those inventories to protect physical -- protect the price, obviously, the challenge in this quarter is just the extreme volatility of the commodity. I mean you can even go back and look at the crisis when Russia-Ukraine war, we would have seen similar except the change in volatility or the change in the commodity wasn't as severe.

A portion of that physical came through in the first quarter and then the balance of that -- are largely balance of that, we would expect to unwind. Let me pass it to Maria. She can give you a little more color.

Maria Khoury: Jason, so from a derivative perspective, in the first quarter, we had about $500 million of unrealized losses. And if you think about midstream was about $63 million. and then the impact on margin calls to working capital was about $340 million overall use of cash.

Operator: Our next question comes from Joe Laetsch with Morgan Stanley.

Joseph Laetsch: So I wanted to start on the renewable fuel -- so want to start on the renewable fuel side, with the rallying bins, I suspect we'll see results continue to improve in that business. Can you just talk about how you're thinking about the path for D4 RINs and margins broadly here in the outlook for the release segment? I know it's a smaller piece of the business, but it could flip to a tailwind here.

Maryann Mannen: Yes, I'm going to have Maria give you that color, Joe. Thanks.

Maria Khoury: Thanks, Joe. As you noted, the macro environment is improving with the higher rents and also higher diesel values. But most importantly for us, it's really focusing on what we control. You just saw that we completed our first major turnaround in the Martinez facility in the first quarter. And we are ready to run here in the second quarter, and we are looking to have utilization levels in the second quarter of low 90%. So that's really where we are going to anchor ourselves for performing in the second quarter in this environment.

Joseph Laetsch: That's helpful. And then I wanted to follow up on some of the opening comments on refining and utilization in particular. First quarter came in 89% above the 85% guidance level. Can you just talk to some of the drivers of the performance during the quarter? Was that more efficient turnarounds or higher uptime when the assets were running? I think you also mentioned Lowes unplanned downtime, which is probably a factor here as well.

Maryann Mannen: Yes, Joe, of course, and thank you. I think you did a nice job of answering the question. Our loss capacity, if you will, or unplanned downtime was at our lowest in a long period of time, and that clearly had a benefit over our operations. I'm actually going to ask Mike to give you a little bit more color. He and his refining team have been working diligently on operational effectiveness and excellence and ensuring their reliability. And I'd like to have him give you a little bit more color on what happened in the quarter.

Unknown Executive: Sure. Thanks, Maryann. The biggest thing that we've been working on from a utilization standpoint or reliability and obviously reducing our is primarily of reliability projects. We had talked about some that we had pulled forward into the first quarter. In addition to that, we have a continued reliability focus program along with human reliability and upskilling our operations and the main focus for us around utilization has also been targeting just the basic operation steps, making sure we are the best operator. That has really -- the first quarter has been our primary, I guess, changes that we're making.

But in the second quarter, we're just continuing on with that as we go through the additional growth projects that we have in our reliability projects, and that's really been target -- the biggest target for our utilization numbers.

Kristina Kazarian: There are no other questions. Thank you for your interest in Marathon Petroleum Corporation today. Should you have more questions or want clarification on topics discussed this morning, please contact us, and our team will be available to take your calls. Thank you for joining us.

Operator: Thank you for your participation. Participants, you may disconnect at this time.