By Tanay Dhumal, Nicole Jao
(Reuters) -U.S. refiner Marathon Petroleum posted a sharp decline in fourth-quarter earnings on Tuesday but still beat Wall Street estimates, as strength in its midstream segment helped offset a steep decline in refining margins amid a challenging market environment.
U.S. refiner profits have been under pressure since late 2023 due to new refining capacity coming online and margins returning to normal levels, following two years of high profits driven by supply shortages from Russia’s invasion of Ukraine and post-pandemic recovery.
On an adjusted basis, the Findlay, Ohio-based company reported a profit of 77 cents per share in the quarter, beating analysts’ average estimate of 2 cents per share, according to data compiled by LSEG.
The company’s refining profit for the quarter slumped to $559 million, down 75% from $2.25 billion a year ago.
For the fourth quarter, Marathon’s refining margin was $12.93 per barrel, down more than 27% from a year ago, but beat expectations of several brokerages.
Lower crack spreads, mainly in the Midwest, were the primary driver for lower refining margins in the fourth quarter, executives said during a call with analysts on Tuesday.
Its midstream segment, however, reported adjusted earnings of $1.71 billion in the quarter, up 8.7% from a year earlier, largely due to higher rates and higher volumes of liquids transported through its system.
In the fourth quarter, Marathon returned around $1.6 billion of capital to shareholders, in line with analyst estimates. As of the end of the year, the refiner had $7.8 billion remaining under its share repurchase authorization.
Shares rose 6.8% at midday.
In 2025, Marathon Petroleum expects to spend about $1.25 billion on investments at Los Angeles, Galveston Bay and Robinson refineries, surpassing brokerage TD Cowen’s $900 million estimate.
Its midstream business expects to spend around $2 billion in 2025 on growth projects.
Executives said they expect margins to improve in the second half of this year as refinery closures offset recent capacity additions.
The refiner expects crude capacity utilization of 85% for the current quarter, compared with 82% from a year earlier.
(Reporting by Nicole Jao in New York and Tanay Dhumal in Bengaluru; Editing by Tasim Zahid and Nick Zieminski)
