Marathon Petroleum Corp (MPC) 2025 Q4 法說會逐字稿

(technical difficulty) Welcome to Marathon Petroleum Corporation's fourth-quarter 2025 earnings conference call. The slides that accompany this call can be found on our website at marathonpetroleum.com under the Investor's tab. Joining me on the call today are Maryann Mannen, CEO; Maria Khoury, 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 may differ. Factors that could cause actual results to differ are included there as well as in our filings with the SEC.

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

Good morning, and thank you for joining us. As Kristina shared, Maria Khoury, our CFO, is joining us on this call. She has over 25-years of broad industry experience as a Global Finance Business Executive. Maria's background and operational excellence, cost competitiveness, financial planning and risk management as well as her global background are complementary to our leadership team.

Her experiences will add a unique set of perspectives. I look forward to Maria's contributions to further our commitment to deliver industry-leading cash generation and capital returns. In 2025, MPC delivered results that underscore the strength of our business and the momentum ahead. Our team's disciplined planning, operational rigor and commercial excellence translated into strong performance throughout the year.

For the full year, we achieved margin capture of 105% and refining utilization of 94%, demonstrating the reliability and competitiveness of our fully integrated value chains. Our midstream segment grew adjusted EBITDA year-over-year, reaching a record of nearly $7 billion. We generated $8.3 billion in cash from operations, reinvested back into the business to enhance our competitiveness and advanced high-return investment opportunities. We returned $4.5 billion through the share repurchases and dividends.

Our operational execution provided the foundation for our financial performance. We delivered our strongest company-wide process safety performance in the last four-years. We achieved the lowest OSHA recordable injury rate as well, had our fewest designated environmental incidents this decade. These outcomes reflect our commitment to safe, reliable and environmentally sound operations.

As we look ahead, we remain constructive on refined product demand. Over the past year, global consumption trends have been steady. Gasoline and distillates each grew by roughly 1% and jet fuel demand increased nearly 4%. Based on current global consumption indicators, we expect these patterns to continue into 2026.

The global refining system is expected to remain tight, with limited new capacity coming online in 2026. Regional closures such as the peers facility in California this spring only further tightened the US market. We expect refined product demand growth to outpace the net effect of capacity additions and rationalization through the end of the decade. Nearly 50% of our crude usage is sour crude.

Our refining system is exceptionally well tooled to source and process incremental barrels across sour grades as they come to market. Today, prices for Canadian barrels have been the most compelling. However, we have the ability to quickly pivot to Venezuelan crude at our Garyville refinery as well as other refineries across our system should the economics warranted.

While we continue to see structural demand growth across refined products, our capital strategy remains disciplined. For 2026, we plan to invest roughly $700 million in refining value-enhancing capital, reflecting a nearly 20% reduction year-over-year. Our spend is focused on lowering operating costs and enhancing system reliability while improving our ability to convert lower value inputs into the high-value products the markets continue to demand.

Roughly 85% of our planned refining spend is directed toward multi-year investments at our Galveston Bay, Garyville, Robinson and El Paso refineries. These investments will further strengthen the long-term competitive position of these assets. Within marketing, we plan to invest $250 million to expand the reach and presence of our branded stations in targeted markets.

These investments support long-term secured offtake, drive strong value capture and enhance the performance of our fully integrated value chain. Our integration from crude supply through branded product placement remains a clear differentiator versus our competitors. This morning, we announced three new projects that underscore both the strength of our portfolio and our confidence in the long-term fundamentals of the refining sector.

The first is at Garyville, where the intent is to optimize the refinery's feedstock slate. This should enhance margins by increasing crude throughput by 30,000 barrels per day and reducing our reliance on higher-cost intermediate purchases. We expect to spend about $110 million in 2026. This incremental crude capacity should be online by the end of '27.

The second is another investment at Garyville, which builds on that optimization objective. It increases yield flexibility and enables us to produce an additional 10,000 barrels per day of export-grade premium gasoline, setting our commercial team up to meet strong international demand. Capital spend in 2026 is expected to be $50 million, with start-up also targeted for year-end 2027.

Third, at El Paso, we are advancing work that increases the refinery's ability to produce higher-value products for local markets. We will invest $30 million in 2026 and bring this capacity into service in the second-quarter of this year. Progress continues at our two previously announced jet yield maximization and DHT projects. Anticipated to come online in the third-quarter of 2026 and year-end of 2027, respectively.

Across all of these investments, we follow strict capital discipline. We put capital to work where it creates incremental value, and we consistently target returns of 25% or above. This capital deployment reflects our confidence in the long-term opportunities across the energy space and our commitment to delivering durable high-quality returns for our shareholders.

The long-term fundamentals for our Midstream business remains strong. In the US, natural gas demand is anticipated to grow over 15% through 2030, driven by the rapid expansion of LNG export capacity and rising power needs, particularly from data centers. We are also seeing higher gas-to-oil ratios across key shale basins as aging wells produce more associated gas per barrel of oil.

This trend is increasing supplies of NGL-rich gas and underscores the strategic importance of our infrastructure in the Permian. MPLX handles 10% of all the natural gas produced in the US And over the past year, MPLX took meaningful steps to optimize its portfolio through divestitures of non-core assets, ensuring our future capital deployment is aligned with the strongest return opportunities as we build the infrastructure that will fuel tomorrow's energy needs.

This morning, MPLX announced its plans to invest $2.4 billion of growth capital. 90% of MPLX's growth capital will be directed towards natural gas and NGL services segment. These projects are concentrated in the Permian and Marcellus, two of the most prolific and competitive basins in North America and are expected to generate mid-teens returns when they come into service.

These investments reflect our confidence in the long-term fundamentals of the energy markets and in MPLX's ability to continue capturing value as these opportunities unfold, enabling sustained meaningful return of capital. MPLX continues to target a distribution growth rate of 12.5% over the next two-years, which implies expected future annual cash distributions to MPC of over $3.5 billion.

With our competitive integrated value chains and increasing distributions from MPLX, we believe MPC is positioned to deliver industry-leading cash generation through all parts of the cycle.

Now I'll hand it over to Maria to discuss our financial performance.

Thanks, Maryann. Moving to the fourth-quarter and full year highlights. slide 7 provides a summary of our financial results. This morning, we reported adjusted earnings per share of $4.07 for the fourth-quarter and $10.70 for the full year. Adjusted EBITDA was approximately $3.5 billion for the quarter and $12 billion for the year.

Refining & marketing segment adjustment EBITDA per barrel was $7.15 for the quarter and $5.63 for the year. Cash flow from operations, excluding working capital changes, was $2.7 billion for the quarter and $8.7 billion for the year. In 2025, we returned $4.5 billion to shareholders, inclusive of a 6.5% reduction to our shares outstanding.

Slide 8 shows the year-over-year change in adjusted EBITDA from fourth-quarter 2024 to fourth-quarter 2025 and the reconciliation between net income and adjusted EBITDA for the quarter. Adjusted EBITDA was higher year-over-year by approximately $1.4 billion, primarily driven by our refining & marketing segment. Moving to our segment results in slide 9, we provide an overview of our refining & marketing segment.

Our R&M fourth-quarter adjusted EBITDA was $2 billion. Our refineries ran at 95% utilization with total throughput just over 3 million barrels per day. We achieved monthly throughput records at our Garyville and Robinson refineries in the quarter. Regionally, our utilization was 98% in the Gulf Coast, 93% in the Mid-Con, 91% in the West Coast. We capitalized on a strong refining margin environment while executing planned turnarounds, safely and on time.

Turning to slide 10. fourth-quarter capture was 114%. Solid commercial execution contributed towards our strongest capture in 2025. Our fully integrated approach is underpinned by planning, commercial and operational excellence, in addition to our differentiated logistics footprint. This quarter, we delivered a clean product yield of 86% and profitable product placement through our sales channels, resulting in material market uplift.

Typical seasonal tailwinds associated with secondary products such as butane blending also contributed towards our strong capture results. Slide 11 shows our midstream segment performance for the quarter. Year-over-year fourth-quarter results declined primarily due to the divestiture of non-core gathering and processing assets.

Our full year Midstream segment adjusted EBITDA has grown at a three-year compound annual growth rate of 5%. MPLX continues to execute its growth strategy and remains a source of durable cash flow for MPC. Slide 12 shows our renewable segment performance for the quarter. Results reflect 94% utilization and a onetime benefit from the sale of credits by the Martinez joint venture in the fourth-quarter, which were offset by a weaker margin environment compared to the prior year fourth-quarter.

We will continue to optimize our renewable facilities, leveraging logistics and pretreatment capabilities with a first-quarter plan turnaround at Martinez, we anticipate utilization of approximately 70%. Slide 13 presents the elements of change in our consolidated cash position for the fourth-quarter. Operating cash flow, excluding changes in working capital, was $2.7 billion, our strongest quarter result in the past two-years.

During the quarter, we returned $1.3 billion of capital to shareholders, executing on our capital allocation priorities. At the end of the year, MPC had approximately $3.7 billion of consolidated cash, including MPC's cash of approximately $1.5 billion and MPLX's cash of approximately $2.1 billion. Turning to guidance. On slide 14, we provide our first-quarter outlook.

Additionally, for the full year, turnaround expenses are expected to be lower compared to last year at $1.350 billion and we plan for continued reduction in both 2027 and 2028. Our capital allocation framework is unchanged. Our net debt-to-capital ratio remains in our range of 25% to 30%, and we continue to target an annual cash balance of $1 billion.

Distributions received from MPLX are expected to fund MPC's dividends and stand-alone capital spending in 2026, allowing us to return all excess free cash flow after the needs of the business to shareholders in 2026.

With that, let me pass it back to Maryann.

Our commitments are unwavering. Safe, reliable operations are the foundation of our company. Operational excellence is ingrained in how we run the business every day. Combined with planning and commercial execution, these capabilities position us to deliver leading through-cycle cash generation. In refining & marketing, disciplined investments will further strengthen our competitiveness.

In midstream, capital deployment is aligned with the fastest-growing regions in the country as we build the infrastructure that will fuel tomorrow's energy needs. MPLX is strategic to MPC. The growth of MPLX's distribution over the next two-years translates into more than $3.5 billion in expected future cash distributions to MPC, central to the value proposition we deliver to our shareholders.

Our team is committed to creating exceptional value for our shareholders. With integrated value chains and a geographically diverse asset base, MPC is well positioned to lead in capital return. With that, I'll turn the call back to Kristina.

Thanks, Maryann. (Operator Instructions) Operator, please open the line for questions.

(Operator Instructions) Neil Mehta, Goldman Sachs.

Yes. Maryann and team. Last quarter, we spent a lot of time talking about capture rate that came in a little bit softer. This quarter, capture rate was very strong at 114%. And just wondering if you can kind of build on what you saw there and anything that might have positively surprised, recognizing there's some seasonality here? But even then it beat our expectations.

Thank you. As it relates to capture, first and foremost, I think you've heard me say it, you've heard Rick say it and others on the team, it is clearly a strategy for us when we think about planning and commercial execution to continue to deliver optimization through our commercial team. We are trying to leverage the scale of our integrated system. We think that's an advantage.

And again, really trying to increase the capabilities of the commercial team to deliver sustained results across all three of our regions. You mentioned at 105% for 2025. And if you go back and look over the last few years, while we don't necessarily control every quarter because there are headwinds and things we can't control, if you go back and look over the last few years, over the last three years, we've improved capture in each of those years.

So there were some things in the third-quarter that were not sustained and you see those reverse in the fourth-quarter as well. But we are trying to control the things that we can throughout the year and plan to do so. I'm going to pass it to Rick and let him give you some of the specifics in the fourth-quarter, Neil. Thanks for the question.

Neil, I think what I would add is when you look at our structural improvements that we've made within the commercial organization and the value chain optimization organization, we believe these are sustainable. And simply said, we're not done, Neil. Our commercial team's goal every single day they come into work is to expand the crack, and you're seeing this follow through with our results. So more to come there.

Specific to maybe answering your question, a couple of items that I'd call out, Neil. One is the diesel to jet spread, specifically when you look on the West Coast, in 3Q, it was a headwind. In 4Q, it was a tailwind, and we're continuing to see pretty good signals as we enter the first part of the first-quarter. And I'll leave you with, on the jet side, we are the largest producer of jet fuel in the United States and then within all of our complexes.

When you look at our Los Angeles refinery, it is the largest jet fuel producer within our system, and it resides in one of the three largest demand hubs in the United States, which is certainly going to continue to be a differentiator for us out there on the West Coast. And then maybe lastly, what I'd give you a little color around, Neil, is within the Mid-Con and the West Coast specifically, we had strong utilization.

We ran really well, and we had really strong margin capture because of our strong utilization and because of the connectivity that we've spoken on many times from a product to feedstocks perspective, that weaves in and out between our Mid-Con refineries and optimizes 800,000 barrels a day like no other player in that market can do so.

So that's a Mid-Con reference specifically. But in the West Coast, we have similar optionality when you look at the West Coast and it's tied to our Pacific Northwest. So both of those regions specifically, I wanted to call out to your attention, Neil.

And just a follow-up is on return of capital. Last year, you guys put up $4.5 billion between the buyback and the dividend and Maryann, I don't know if you can comment on this, but as you look at consensus numbers and forward cracks, do you think that you can match or beat that number as you go into next year?

Yes. Thanks, Neil. So first and foremost, you know one of our key strategic commitments is to ensure that we're delivering the strongest through cash cycle -- sorry, strongest cash flow through cycle, excuse me, and that was clearly 2025. As you look at that consensus, assuming current market cracks, that would be indicative of us being able to repeat a similar pattern that we did in 2025. So yes, I think that is clearly within our ability to deliver in 2026.

Manav Gupta, UBS.

Maryann and team, congrats. Look, I mean we did not see a $4 EPS, so you definitely surprised us to the upside. So congratulations on that. Maryann, I wanted to talk to you about this, especially because I know, we saw you with the President also, looks like Venezuelan crude production will ramp. And we wanted -- you briefly mentioned Garyville, but just trying to understand how much more incremental Venezuelan waiting barrels, you could absorb in your system?

And then if Rick can also talk about if these barrels do show up on the Gulf Coast, would that also mean that WCS differentials could widen, so your Mid-Con capture could also go up? If you could talk a -- around that topic.

Yes. Thanks, Manav. Thanks for the question. I'd say this first, overall, we view the access to more Venezuelan crude as positive for US energy and even specifically for MPC as well. If you look at our system capabilities, you look at our assets, you mentioned Garyville specifically. We have the most crude optionality, optimization, sophistication, and the ability to address complex refining opportunities and Garyville is an outstanding example of that.

You look at our sour basket, right, we're running approximately 50% sour crude diet across the system. Look, I think that's probably 10% stronger than our closest peer. So if you think about that, if there were to be a dollar movement in sour differentials on an annual basis, that's a $500 million benefit to MPC, just from a dollar movement.

I think you know this, we import more barrels, the Canadian, Mexican and Venezuelan combined, than really all of our peers. And we've got a deep sour basket, WCS, ASCI crude, ANS and Maya. So I think overall, certainly positive for MPC as well. I'm going to pass it to Rick and have him give you a little more color as it relates to the specificity around the diffs.

Manav, your question is quite insightful because when I step back and look at what's happened here over the next -- over the last 30 days-ish. I would say it's a differential story. And when you look at the Venz barrels coming into the US Gulf Coast, there are incremental barrels, so they're putting pressure on the entire complex.

And so if you zoom out and say, okay, what does that mean from an MPC perspective, I think you are well aware, we have incredible flexibility. As an example, we have the ability and have some years run over 100 different flavors of crude oil, and that's due to our optionality and connectivity via pipeline barrels and waterborne barrels.

And I will say and say this strongly, we will not be the largest buyer of Venz crudes because we have more advantageous options, especially as Maryann mentioned, especially as the sweet-sour basket widens, which we've certainly seen, no one has more upside than MPC. And I will tell you, we have purchased two parcels of Venz crude.

Actually, Friday of last week, we purchased two cargoes. But those were the first two cargoes of many, many, many offers that we saw on the screen, Manav, that were in the money. So as you know, we're only going to purchase what is economically -- anything that is economically advantaged for us. So that's just a good example of we have better options, Manav, that's a short way of saying it.

And specifically, when you look at the softening of sour crudes, post the Venezuela announcement and even before the Venezuelan announcement, if you look at WCS specifically, it's widened anywhere from $1 to $2 a barrel. And ironically, I would tell you, when you look at the prompt month, I actually think, as you look at the forward curve, it is showing that it's going to widen out even a bit more because many of these Venezuelan barrels have not reached the market yet and have not been run yet.

So hopefully, that gives you some good color Manav, one, as to our position; two, the impact of Venz barrels and what we feel is a significant advantage for us.

Perfect. I'm going to stick to Garyville. Can you give a little more color on these two projects? And what I'm specifically trying to understand is, let's say, MPLX was pursuing these projects. They will probably be like a five-build multiple for $445 million investment, you could probably even make $90 million in EBITDA. And I'm just trying to understand. I understand it's not MPLX's.

Its MPC pursuing them, but should we think about the returns in a similar way, mid-teen unlevered IRR. If you could talk a little bit about the two projects and what returns can we expect from these projects?

Sure, Manav. We can answer that. A few things on the Garyville projects. First of all, I want to say that's one of our top-performing facilities, so we'll continue to invest in it. The first project is our feedstock optimization at Garyville, basically to improve margin. This will increase crude's rate somewhere around 30,000 barrels while we're displacing higher cost intermediate purchases.

The capital spend in 2026 is right at about $110 million with additional $185 million in 2027, and we have full intentions to have it online year-end '27. The second project at Garyville is our product export flexibility. So basically, we're -- export premium gasoline production at a lower cost. This investment will increase our flexibility to produce export premium gas by about 10,000 barrels and includes equipment upgrades to help our reliability, mainly around compression.

Our capital spend in 2026 is right at about $50 million with an additional $100 million in 2027, and we plan to be wrapped up with that at year-end '27 as well.

And Manav, let me add a little bit more. Mike did a nice job of giving you some of the specifics on those 2 projects. I think one of the questions that you also asked is sort of what are the returns that we should expect, and when we're putting capital to work on the refining side, again, through the lens of strict capital discipline, we're looking for 25% returns here on these projects.

So that's consistent, and as you know, when we're focused on that, we're looking for reliability. We're looking for upgrading capacity that will deliver incremental margin per barrel. That's the reason why we're doing it. We hope that answers your question, Manav.

So even better return than Midstream, so probably even a lower build multiple than five.

Doug Leggate, Wolfe Research.

Thanks. Welcome, Maria. It's good to hear you on the call. I wonder, Maryann, this is probably a refining question, so I don't know if Rick wants to tackle it. But I guess the report in the third-quarter was on the four of November, and you guided us towards 90% refinery utilization, then diesel margins spiked, and we didn't really see a huge blowout in heavy differentials, but you did swing towards a different slate than you guided towards.

I guess I'm trying to understand what is the sensitivity when you can deliver a 4% beat in utilization, a big swing towards heavy oil. What -- should we consider that any time we see blowout margins, marathon is going to tweak the knobs to basically run significantly better into that margin environment? I'm just trying to get a handle as to what changed versus the guidance.

Yes. Thanks for the question, Doug. I'll say, first and foremost, the answer to that is yes. That is really what we are trying to do every day. You hear Rick talk about expanding the crack. You hear about our planning capabilities. We are building them each and every quarter, which gives us the ability to respond very rapidly to market conditions that we see and therefore given the -- I'll say, the capability of our assets, particularly when you look at yield conversion, you mentioned diesel.

I think that is one of the strengths that we have and the complexity and the optimization in our system. When you look at optimization, I think it's critically important for us to be able to continue to demonstrate that. So that's what I would tell you was the capability there in the quarter.

I appreciate the answer. I realize it's not -- there's some sensitivities around this, but I'm grateful for that. My follow-on is on CapEx. Obviously, you've got -- you've dropped the CapEx a little bit this year. You're still covering your CapEx and your dividends with the MPLX distributions. And I guess -- and really, 2026 is great. I'm really trying to think about how do we think about Marathon's spending longer term?

Is the cap on your -- because I'm sure you've got a bunch of projects that you can select. But is the cap to stay below that MPLX distribution threshold? Or should we expect CapEx to drop off at some point? Because obviously, it's only down a little bit in 2026?

Yes. Thanks, Doug. So maybe just to reiterate, in 2026, we are looking at a 20% reduction in the refining spend off of 2025. And as you heard in our prepared remarks, we continue to expect that 2027 and 2028 capital on the refining side will come down. And so we think it's critically important. And I talk about the strategic relationship between MPC and MPLX.

And as that distribution grows, we're covering the CapEx that we are putting to work to ensure that we remain competitive in every region where we operate and deliver, if you will, the utilization that we just discussed. That's critically important to us and also cover the MPC dividend. And then we take that remaining cash, as we said, and we return that via share buyback.

You can see that in 2025. Hopefully, it was responsive to Neil's question as well that, that should be a repeat in 2026. So that is what we are trying to do. We're only putting to work capital investments through that lens of strict capital discipline. We see it coming down again in '27 on the refining side and in '28.

Paul Cheng, Scotiabank.

Maryann, two questions. First, on the stand-alone basis, the CapEx for this year is about $1.5 billion and last year that you end up spending about $1.6 billion, which is higher than what previously expected. On a going-forward basis, is that the (technical difficulty) of good reasonable baseline we should assume going forward? Or that this is a number of new projects that over the next two or three-years that as they roll off that your spending is going to be lower?

And secondly, that you guys is representing the industry to negotiate with the USW and they just reject the last offer, I think, last Friday. So can you give us an update what's the deadline and what's the next step? And also that what are the most sticky points between the industry and the union? What's the biggest differences that -- in order to strike a deal.

Yes. Thank you, Paul. So first and foremost, on refining spending, in 2025, to your first part of the question, we did spend slightly more than we had initially guided to. And one of those key spending areas on the El Paso project, I spoke about it. Mike gave a little more color, and we can certainly do that again, if that would be helpful.

We started that project in 2025, given the returns on that project and the benefit for the local region. So that, that project will actually complete in 2026 as you heard me say. Then for our '27 spend and our '28 spend for refining, we expect both of those years to be below 2026 spending. So again, a lens of strict capital discipline there, reducing that spend.

We've got -- as you know, a couple of projects that we were completing like the LAR project. We've got DHT that will complete. And that's part of our capital spend this year, taking high sulfur diesel and being able to convert it to ultra-low sulfur diesel for broader market and margin opportunity. And so that's the story, if you will, on our commitment to lowering capital spend in the refining side and why we saw a little bit of a higher spend in '25.

I'm going to pass it to Mike, who's at the tip of the spear there, if you will, on the negotiations, and I'll have him share with you the status of that. Thanks, Paul.

We continue to meet with the steelworkers at the international level, and we're continuing to negotiate at a pattern agreement for all of our facilities in the industry. You're correct. Our contracts did expire in January 31. But we do have a rolling 24-hour extensions based on our previous contracts, which, in my opinion, is a good thing. It's a positive sign that we're making progress.

As you know, we're committed to bargaining in good faith, working together to mutually come up with a satisfactory agreement for both us and the USW, but the discussions have went well. I'm not going to get into the sticky points at all, but I will say we're having open and good dialogue.

Maryann can I ask as a follow-up on 2027-'28, should we assume the CapEx is going to be closer to $1 billion or that is still going to be somewhat higher? But less than $1.5 billion.

Yes. Thanks, Paul. I think it's a little bit early for us to give guidance on '27 and '28, but you do have the commitment, as we've said, that '27 and '28 will be below the spending for 2026. And you can see the refining spend that we've outlined for 2026, which would help with that. We're still a little early for specific guidance on '27 and '28, but it will be lower.

Theresa Chen, Barclays.

I wanted to ask about your comments, Maryann, on global consumption patterns. And if you could walk us through your views of demand going forward across the key products and specifically, what underlies your view that demand supply for the year ahead and maybe beyond is indeed going to be positive for refining economics taking into account the significant capacity expansions we're seeing coming online in Asia.

Yes. Thank you, Theresa. I appreciate the question. I'd say, first and foremost, when we look at 2026, as we mentioned, we continue to believe that '26 is going to be another year of strong refined product demand when you look at the estimates out over the next five, frankly, over the next 10-years, really, and you look at demand expectations you see that growth year-on-year, 1% to 1.2% growth over that time period.

That's just not domestically right. We look at it on a global basis. Specifically to your question around '26, I think there is supply coming online. You've got an Indian refinery and an Asian refinery. I think that's probably somewhere in the range of about 1 million a day but the lion's share of that capacity is really pointed toward the Pet-chem market.

And I'd also say, and we've seen this with some other capacity additions even when you look at (technical difficulty) or Dangote the pace at which that capacity comes online is typically a bit slower than what we would otherwise have expected. So long-term fundamentals support stronger margins demand over the long term.

This may be for 2026, we saw a little bit of this in '25, maybe a little more back-end loaded, notwithstanding some of the macro volatility when we look at OPEC, when we look at Iran, we look at Venezuela volatility. This could be a little more back-end loaded in 2026. But they would be the reasons why we have a strong conviction in the macro and the refining outlook not only for '26, obviously, but for a longer period of time. So our view really is unchanged.

And maybe going back to some of Rick's comments about your jet production capabilities. And really on the heels of consistent commentary across the industry about threshold jet demand tailwinds. To what extent can you augment your jet yields further over time to capture this benefit?

Great question, Theresa. I will tell you that, first of all, we're enhancing our customer base out in the LA region we're actually seeing significant demand signals from our Department of Energy, Department of War, and we are leaning into those as well. And as you look forward, we will continue to even lean into producing more jet. I won't give you specific volume increases, Theresa, just for competitive reasons, but it's safe to say we have very good upside there.

Jason Gabelman, TD Cowen.

I wanted to go back to the CapEx guide. And I guess two questions around it. One, the 2025 total MPC CapEx came in above the initial expectations and now that we're done with the year. I'm wondering what exactly drove that? It looked like some of the amount of the increase was on sustaining spend. So was there some work that needed to be done there? Was it around inflation and workforce costs? And have you seen that creep into the '26 budget at all?

Jason, thanks for the question. So let's first talk about 2025. One of the projects that was not initially in our 2025 guide, that we talked about today is our El Paso project. And we started spend in 2025. It will complete in 2026. I think we talked about the benefits of that, particularly when you look at regional benefits there. So that project will come online in 2026.

Also -- and now I think it's reasonable to say that you could have had a little bit of inflation creep. Obviously, LAR was a critical project, as you know, that we completed in 2026, and that should -- and came up online in the fourth-quarter, as Mike has alluded to. When we give our guidance for 2026, we take those things into consideration.

So to the extent that inflation estimates stay where we have anticipated, we don't necessarily see that there is inflation uptick in 2026. And again, when we look at that, refining is down 20%, '26 versus '25, and we continue to say that '27 and '28 will be below that as well.

Great. And my follow-up, Maria, welcome to the team. We haven't met yet, but I look forward to working together. But I'm wondering if the team can talk about, maybe elaborate a bit on some of the comments you made in your opening remarks about how her background is a nice fit and a nice add to the MPC C-suite. And then maybe you could touch a bit about the Board process to find a new CFO because it did come as a bit of a surprise for investors.

Jason. So look, first and foremost, I'd say we come from a position of strength. And it is my belief that when we are looking at ensuring we deliver our objectives, both in the short term and the long term, that we have a set of complementary skills and capability and the absolute best leadership team to deliver those shareholder expectations that we continue to talk about.

And first and foremost, that's the reason what any leadership team, and certainly, this leadership team would make a change. When I think about the things that we MPC have been trying to deliver, in fact, I should say, have delivered. When we think about cost competitiveness, we never stop that, when you look at Maria's background over the last 25-years in her career.

That lean mindset and the work she's done there is a really nice dovetail to what we try to ensure that we are the most competitive in every region where we operate. So her experience there is important. Strict capital discipline and capital deployment, I think are another piece of Maria's background that fits so nicely into the things that are critically important for us to deliver shareholder value.

When you make any change, as you think about our Board, particularly on strategic decisions is always a part of those decisions as well. So I hope that answers your question, Jason.

Phillip Jungwirth, BMO Capital Markets.

The West Coast had a really heavy year as far as turnaround goes, representing about 40% of total spend. At least in 1Q, West Coast turnaround is minimal. But as we see additional closures in California, just wondering, do you think the West Coast is set up to run pretty hard in '26 and that you're past a lot of the downtime?

And separately, just with the closure and outage is more concentrated in NorCal. Do you see much divergence between NorCal and SoCal product prices? And if so, can you take advantage of that?

Sure, Phil. I'll take a shot at that. As we've talked about, the new project we just put in place in the fourth-quarter of last year, really put ourselves in a competitive position. One, we had intertie project, to actually decrease our energy costs. And the second piece of that was we installed two new boilers and we got rid of six old boilers.

I think we're in a really good position to run hard in LA. The FCC alky outage completed. We did a ton of reliability work during that, along with the new boilers from a steam system and the intertie project also allows us to utilize our co-gen plant to feed both sides, Wilmington and Carson. On the other side of your question, I'll turn you over to Rick for that.

Yes, Phil. So we certainly see the closure as a significant tailwind for us. In fact, most prognosis were that the closure of our competitor would not happen until March, April, and we're hearing now it's closing truly as we speak. So we're seeing this as a nice tailwind. And as you know, we continue to have a competitive advantage out there with our size, our scale, our fully integrated logistics system, not only on the West Coast but in the Pacific Northwest.

And it's the Pacific Northwest where maybe I want to dive in a little bit because we have the ability to your NorCal question to take products from our PNW system and take advantage of the NorCal dislocation should they occur. So we're in a great position, and we look forward to being the primary supplier in the LA region and in the Pacific Northwest.

We see it as quite a competitive advantage versus the alternative, which is imports. And we always used to say, Phil, that the region was short one refinery. Well, now it's short several refineries. So we view that as a significant positive tailwind. I hope that answers your question, Phil.

Yes, that's helpful. And then on midstream, there's some interesting ethane market dynamics occurring this year. I mean, Permian takeaway increasing significantly. You're a big part of that. You had a couple of export facilities come on in second half and through '26 plus a new cracker startup in the Gulf Coast this year. So the question is more around do you see these changes, or how do you see these changes influencing ethane prices? And then also just impacting your NGL plant production and BANGL volumes?

Phil, yes, let me try to take that for you. So on MPLX, as you know, we've been talking for quite some time now about our wellhead-to-water strategy. You've seen some of the investments that we've made, both organic and inorganic, in particular, when we talk about our US Gulf Coast fractionation and export dock, we believe strongly in the pull there.

The -- I should say, the demand pull, particularly when you look at growth coming from LNG. Our project fractionation one comes online 2028, second one, '29. Those fracs will be completely full, we just started our Secretariat online brings 1.4 Bcf into the region. And then we announced Secretariat II, which will take it up to about 1.7 when that investment is complete.

And then over the export dock, obviously, we see the demand for LPGs growing, and you look at those markets. So I think all of that points to strength over the long term in our position, even where we look at the amount of capital that we're putting to work into the NGL and nat-gas base. We talked about some of those earlier today.

So I think that's all extremely positive, particularly when you look at the demand pull there and a positive for MPC and MPLX. MPLX doesn't take on any of that commodity risk and MPC will contract with MPLX, and that commercial opportunity is important for MPC going forward as well. I hope that helps.

Matthew Blair, TPH & Co.

If we could circle back to the Venezuela discussion. You mentioned you're buying two cargoes in the first-quarter here. It looks like your sour guide for Q1, is 50% versus the 47% in Q4. So the takeaway that your whole system is now moving heavier and that you're pushing out mostly lights with these new Venezuelan barrels?

Matthew, yes, this is Rick. Yes, that's the guidance. We are leaning into these differentials widening. And as Maryann stated earlier, every day, we're looking to optimize. And right now, the signals are pointing towards a heavy, more sour slate. And so we're leaning into it significantly.

Sounds good. And then, Maryann, I heard you mention those focus. It looks like run rates have improved quite a bit recently at the refinery, which is reducing Mexico's net product imports. Is this impacting MPC at all? Or are you having to find new markets for your product exports in general, could you talk about the trends for MPC's product exports in 2025 versus 2024?

Yes. Thanks for the question. So as I mentioned, we run roughly -- and we just talked about roughly a 50% sour slate. WCS being one of them. We run the ASCI crudes and ANS as well. Maya for us, as you can see, is typically a very small portion of that sour basket. So as an overall impact to us, really not a concern for us. I think your assessment, frankly, (technical difficulty) is accurate.

I think as that reliability has improved, I think there is less Maya available as they are consuming, obviously consuming that. But I'm going to pass it to Rick because I'm sure Rick will want to add a little more color on some of the specifics for us.

So Matthew, what I would add from an export perspective. So we are taking less to Mexico. However, we're seeing really good demand from other Latam countries, specifically Brazil. So we are not seeing a falloff in exports at all. In fact, we had a really strong fourth-quarter, and we're having a really good start to the first quarter. So while we are seeing less from Mexico per se, we're seeing others pick up the slack and to more than offset that decline.

Conor Fitzpatrick, BofA.

The Enbridge mainline pipeline has seen some apportionment and pipe volume rationing rising a bit lately. Our Canadian pipeline bottlenecks affecting Canadian crude pricing or realized crude costs for the R&M segment at all?

Conor, it's Rick. Absolutely, they are. This is a tailwind for us. In fact, it's encouraging to see and hear people following the apportionment because it used to get followed a lot, and I think it's kind of fallen out of common knowledge for people to track, but it's quite important. So I commend you for following it. I'll start there.

I will tell you this, in January, even before the Venezuelan announcements and headlines, you started to see the heavy and the Canadian differentials start to widen and a couple of reasons they were widening. One, production is pretty darn strong in Canada, but two, it's apportionment, your exact point. So when you think of a portion, it backs in inventory into Canada, and forces barrels to clear to more expensive routes.

So that in of itself puts pressure on the differential, which we've certainly seen, as I said, before the Venz announcement and now even after. So significant tailwind and one that I would encourage you to keep watching. Thank you for the question.

All right. With that, thank you for joining our call today and for your interest in Marathon Petroleum Corporation. Should you have more questions, or want clarifications on topics discussed this morning, please contact us and our team will be available to take your calls. Thank you.

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