Marathon Petroleum Updates on Refinery Shutdown - Analyst Blog

Findlay, OH-based independent oil refiner and marketer Marathon Petroleum Corp. MPC provided an update on its Garyville, LA refinery, which was partially shut down. The reason behind this was the tornado on May 28 that affected the refinery considerably.

The company expects the refinery's crude unit to commence operation by the middle of June. Moreover, Marathon Petroleum stated that the shutdown should not lower performance in any major way. The company expects throughput to decline less than 5% from the earlier guidance for the quarter.

Following the inclement weather and resultant electricity disruption in the region early on May 28, the company had shuttered one of the two crude units at the 522,000 barrels-per-day (bpd) refinery.  

Marathon Petroleum, which came into existence following the 2011 spin-off of Marathon Oil Corp.'s MRO refining/sales business, has an impressive asset quality and extensive midstream/retail network. A major advantage for the company is its proprietary access to pipelines, which restricts lower-cost competitors from supplying to Marathon Petroleum's key markets.   

Last month, Marathon Petroleum's affiliate, Speedway LLC, entered into an agreement to acquire the retail arm of integrated energy firm Hess Corp. HES for about $2.87 billion. Following the completion of the transaction, Speedway will become one of the major gas convenience stores operators along the U.S. East Coast.

Despite being a leading oil refiner, Marathon Petroleum has been unable to generate steady and stable cash flows from its refining operations, owing to the inherent volatility in the business. The company's expansion into retail operations should act as a cushion against this volatility.

Marathon Petroleum currently has a Zacks Rank #3 (Hold), implying that it is expected perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can consider a better-ranked player from the downstream energy space like CVR Refining L.P. CVRR, which sports a Zacks Rank #1 (Strong Buy).