Over the past several months, Marathon Petroleum's (NYSE:MPC) executive team has been going through a flurry of work. After activist investors started calling for some big changes, Marathon seems to be acquiescing as it plans to make some major strategic shifts with both its midstream subsidiary MPLX (NYSE:MPLX) and its retail assets under the Speedway brand. This was on full display in the company's most recent earnings release.

Here's a quick breakdown of the results as well as a look at some of the irons management has in the fire for 2017.

A refinery reflecting off water

Image source: Getty Images.

By the numbers

Results*Q4 2016Q3 2016Q4 2015
Revenue $17,284 $16,460 $15,679
EBITDA $1,118 $1,266 $807
Net income $227 $145 $187
Earnings per share $0.43 $0.27 $0.35

Data source: Marathon petroleum earnings. *In millions, except per-share data.

Looking at the year-over-year quarterly numbers, it would look like Marathon had a decent year. There were increases across all segments and its midstream segment showed strong growth. A larger portion of that growth was due to MPLX's acquisition of MarkWest in the fourth quarter of 2015, so that gain is a reflection of having those assets for an entire quarter.

Chart of Marathon's segment earnings for Q4 2015, Q3 2016, and Q4 2016.

Data source: Marathon Petroleum earnings release. Author's chart.

The quarter was an improvement, but let's not assume that this was a great quarter or year for Marathon. If you look at the fiscal year results, you can see that refining margins in 2016 were considerably lower while the company made modest gains with its Speedway retail segment and a stronger showing from midstream thanks to the MarkWest acquisition.

Chart of Marathon's segment earnings for 2015 and 2016

Data source: Marathon Petroleum earnings release. Author's chart.

Marathon generated $991 million in cash from its operations in the fourth quarter. It ended the fiscal year with $887 million in cash and equivalents. 

Times they are a-changin'

Over the past quarter, Marathon has been going back and forth with activist investor Elliot Management, which has taken a substantial stake in the company. Elliolt has been pushing for the company to accelerate its dropdown schedule to MPLX and to even spin off its Speedway segment.

In response to these proposals, Marathon announced on Jan. 3 its plan to enhance shareholder value. As part of the process, Marathon will accelerate its dropdowns to MPLX that equate to assets generating an estimated $1.4 billion in EBITDA annually. Also, Marathon will exchange its incentive distribution rights (IDRs) in exchange for a higher limited partner stake in the subsidiary partnership. The goal of eliminating those IDRs is to lower the company's cost of capital because IDRs make it more expensive to raise capital through equity. 

Management also announced that it had reduced its capital spending plan for its South Texas  Asset Repositioning (STAR) plan from $2 billion to $1.5 billion. According to management, the $500 million was removed from the plan because the projected rates of return weren't satisfactory.

Finally, management also noted it was looking at potential alternatives for its Speedway business and expects to report its findings in the middle of the year.

What management had to say

Along with all of the corporate changes going on, CEO Gary Heminger went into some of the details for capital spending in 2017:

Our capital investment plan for MPC for 2017, excluding the MPLX, is $1.7 billion. This planned spending for MPC is roughly in line with MPC's capital spending and investments in 2016 and includes nearly $1.2 billion for Refining & Marketing, $380 million for Speedway, $90 million for Midstream investments at MPC, and $100 million to support corporate activities.

The Refining & Marketing segment includes $325 million for margin-enhancing investments, including the Garyville distillate maximization projects, the Galveston Bay export capacity expansion, and approximately $85 million for the South Texas Asset Repositioning project.

This is pretty much in line with non-MPLX spending from 2016, but the increased capital spending at MPLX makes for a significant jump. 

10-second takeaway

Based on all of the changes going on at the corporate level, Marathon will probably look like a very different company between now and the end of 2017. It looks as though the plans for MPLX have codified, but those for Speedway are still under review. If it is spun off into its own business, that would leave Marathon as a pure refining company that will wax and wane on the whims of refining margins. So until we get a definitive decision on what the company plans to do with Speedway, it's best to take a wait-and-see approach.