We have maintained our Outperform recommendation on Findlay,
Ohio-based independent oil refiner and marketer
Marathon Petroleum Corporation
(
MPC
).
The company, in its current form, came into existence following
the 2011 spin-off of Houston, Texas-based
Marathon Oil Corporation
's (
MRO
) refining/sales business into a separate, independent and
publicly traded entity. Marathon Petroleum operates in three
segments: Refining and Marketing, Speedway (Retail) and Pipeline
Transportation.
It is the fifth largest domestic refiner with a combined crude
oil processing capacity of approximately 1,193,000 barrels per
day through its portfolio of six refineries. A major advantage
for the company is its proprietary access to pipelines, which
inhibits lower-cost competitors from supplying Marathon
Petroleum's key markets.
Our bullish investment theme stems from Marathon Petroleum's
scale advantage, impressive asset quality, and an extensive
midstream/retail network that diversifies its portfolio and
provides more stable revenue streams.
The company's financial flexibility and strong balance sheet are
also real assets in this highly uncertain economic period.
Marathon Petroleum remains in excellent financial health, with
nearly $2 billion in cash/cash equivalents and an
investment-grade credit rating with a debt-to-capitalization
ratio of 24%. Furthermore, an attractive dividend yield and the
$2 billion share buyback program - that commenced recently -
highlight the company's commitment to create value for
shareholders.
Marathon Petroleum is almost through with its $2.2 billion
Detroit Heavy Oil Upgrading Project. Ongoing since 2008, the
initiative - on budget and on schedule - is expected to finish
later this year. The completion of the project will not only
deliver an extra 80,000 barrels a day of heavy oil processing
capacity but also free up capital expenditures and boost the
company's free cash flow.
Marathon Petroleum is looking at strategic alternatives for some
of its pipeline assets, including the possible formation of a
master limited partnership by way of an initial public offering.
We believe this potential spin-off could further enhance the
company's shareholder worth and valuation.
These factors, coupled with the relatively inexpensive valuation,
make Marathon Petroleum an attractive investment.
MARATHON PETROL (MPC): Free Stock Analysis
Report
MARATHON OIL CP (MRO): Free Stock Analysis
Report
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