Marathon Petroleum Corporation (MPC) Q2 2012 Earnings Report, Transcript and Summary

Pamela K. M. Beall - Vice President of Investor Relations & Government & Public Affairs Gary R. Heminger - Chief Executive Officer, President, Director and Member of Executive Committee Donald C. Templin - Chief Financial Officer and Senior Vice President Garry L. Peiffer - Executive Vice President of Corporate Planning and Investor & Government Relations C. Michael Palmer - Senior Vice President of Supply Distribution & Planning

Paul Y. Cheng - Barclays Capital, Research Division Edward Westlake - Crédit Suisse AG, Research Division Paul Sankey - Deutsche Bank AG, Research Division Arjun N. Murti - Goldman Sachs Group Inc., Research Division Chi Chow - Macquarie Research Evan Calio - Morgan Stanley, Research Division Douglas Terreson - ISI Group Inc., Research Division Roger D. Read - Wells Fargo Securities, LLC, Research Division Blake Fernandez - Howard Weil Incorporated, Research Division Faisel Khan - Citigroup Inc, Research Division Cory J. Garcia - Raymond James & Associates, Inc., Research Division Jeffrey A. Dietert - Simmons & Company International, Research Division

Welcome to the Marathon Petroleum Corporation's Second Quarter 2012 Earnings Conference Call. My name is Donna, and I will be your operator for today's call. [Operator Instructions] Please note that the conference is being recorded. I will now turn the call over to Pam Beall, Vice President of Investor Relations. Ms. Beall, you may begin.

Thank you, Dawn. And welcome, everyone, to Marathon Petroleum Corporation's Second Quarter Conference Call. The synchronized slides that accompany this call can be found on our website, marathonpetroleum.com. On the call today are Gary Heminger, President and Chief Executive Officer; Garry Peiffer, Executive Vice President of Corporate Planning and Investor and Government Relations; Don Templin, Senior Vice President and Chief Financial Officer; and Mike Palmer, Senior Vice President of Supply, Distribution and Planning. Please read the Safe Harbor statement you'll find on Slide 2. It's a reminder that we will be making forward-looking statements during the presentation and during the question-and-answer session. Actual results may differ materially from what we expect today, and factors that could cause actual results to differ are included here as well as in our filings with the Securities and Exchange Commission. Now I'll turn the call over to Gary Heminger for opening remarks. Gary?

Thank you, Pam, and good morning to everyone. The second quarter ended June 30 marked our 1-year anniversary as a standalone public company. During this first year, we have created significant value for our shareholders, and we continue to take steps to do so well into the future. We had a strong second quarter in both our R&M and Speedway segments. Don will review the results in more detail, but I want to say that the strong results are no coincidence. Our geographic footprint and the logistics assets that connect our operations give us unique and significant operational flexibility to capture value wherever it exists throughout the value chain such as allowing us to access -- allowing us access to price-advantage crude. In addition, our Gulf Coast presence gives us the ability to make fuel sales into higher-value export markets where our sales increased 110,000 barrels per day in the second quarter. And we believe these are enduring advantages. Since becoming a standalone company, our shareholder focus and perspective on capital allocation have been consistent. We will continue to carefully manage our projected capitalization and liquidity position to support our long-term strategic intent to maintain an investment grade credit profile and protect our business from volatility in the refining industry and the capital markets. We will also evaluate organic investment opportunities as well as selective acquisitions that complement our existing operations, leverage our knowledge of the markets in which we operate and provide appropriate returns, further enhancing the value proposition to our shareholders. We will continue to balance investments in our business with returning capital to shareholders. We are very pleased that, over the past 12 months, we have returned over $1 billion of capital to shareholders, which represented over 3/4 of our free cash flow. This was accomplished through a combination of a 25% increase to our base dividend last November and a share repurchase program announced in February. We recently completed an $850 million accelerated share repurchase program through which 20.4 million shares or 6% of our initial shares outstanding were acquired at a volume-weighted average price of $41.75 per share. This was the initial phase of our $2 billion share repurchase authorization, leaving us $1.15 billion available under our current authorization. Under this existing authorization, we expect to repurchase shares opportunistically in the open market or through privately negotiated transactions from time to time which are subject to market conditions, corporate, regulatory and other considerations. Part of our capital allocation strategy is to establish a growing base dividend that's sustainable for the economic cycles. We also believe our competitive position, the market dynamics and steps we are taking to further unlock shareholder value will allow us to generate significant free cash flow. It is for these reasons we recently announced another increase in the base dividend, this time by 40%. Based on yesterday's closing share price, our annualized cash dividend yield is approximately 3% and the total annualized capital return to shareholders is nearly 9%. On July 2, we took an important strategic step for MPC and its shareholders. We filed a registration statement in anticipation of our proposed initial public offering of common units of a master limited partnership for MPLX LP. MPLX LP was formed initially with a planned contribution of an interest in certain onshore common carrier pipeline assets located in the Midwest and Gulf Coast regions of the U.S., along with a butane storage cavern near our Catlettsburg refinery. As our own subsidiary, MPLX LP was formed to be MPC's primary vehicle to own, operate, develop and acquire hydrocarbon-based pipelines and other midstream assets. Since the initial filing is preliminary and it has not been reviewed by the SEC, our remarks about the MLP on this call will be limited. One of the key elements of our capital allocation strategy is investing in the business through organic projects and acquisitions. Disciplined investments in the business over many years have positioned MPC with the ability to generate earnings and cash flow throughout economic cycles. We have a number of ongoing investments that provide visibility on continuing growth in earnings and cash flow. The most significant current capital project is the upgrade for our Detroit refinery which was approximately 96% complete as of June 30. This project remains on budget and on schedule, with the completion of the construction phase anticipated in the third quarter. Immediately following completion, a planned 70-day turnaround will enable us to tie in the new units, and we expect that the upgraded and expanded refinery to be online by year end. This investment is focused on enhancing margins by allowing us to process lower-cost crude stock and capturing value from crude oil differentials. We believe this project will enable us to process an incremental 80,000 barrels per day of heavy crude, including Canadian bitumen-type crudes. In addition, this project increases Detroit's crude oil refining capacity about 15% to 120,000 barrels per day. Based on the historical average, heavy Canadian crude differentials from 2006 to 2010 and the average for 2011, this upgrade could add $200 million to the $350 million of EBITDA per year. As we recently announced, we are celebrating the turnaround in our Robinson refinery from July to June, and this turnaround is now complete. One of the benefits of this acceleration was to increase the amount of time available before beginning our Detroit turnaround this fall. Our Speedway retail operations continued to deliver best-in-class results and national recognition. The 2012 Harris Poll EquiTrend survey has named Speedway the Highest Ranked Convenience Store Brand in the nation. Speedway has been honored as the category leader in the survey for the last 3 years. However, this year, the company has been named Convenience Store Brand of the Year. And this is particularly notable as Speedway operates in only 7 states. This is a business we -- in which we intend to invest and grow through acquisitions. Speedway acquired 87 GasAmerica locations in the second quarter and 10 Road Ranger store locations in mid-July. Both of these acquisitions are in Speedway's current markets and will leverage its support infrastructure as well as our field distribution logistics network. We believe global demand for gasoline and distillates will continue to provide an opportunity to sell products into higher-value export markets, including Europe and Latin and South America. The investments we are making should further increase our export capability for diesel and gasoline. As we look forward to the remainder of 2012 and beyond, we believe the U.S. refiners with access to attractively priced crude oil and natural gas will have competitive cost advantages in the global markets for some time to come. And now, I will turn the call over to Don Templin to provide a more detailed financial update on the quarter.

Thanks, Gary. Slide 4 provides net income and adjusted net income data both on an absolute and per share basis. Our second quarter 2012 adjusted net income of $867 million reflects a 6% increase from the $819 million we earned in the second quarter of 2011. Adjusted earnings per diluted share was $2.53 for the second quarter 2012 compared to $2.29 during the same period last year. The second quarter 2012 earnings included an $83 million pretax adjustment for cumulative pension settlement expenses resulting from the level of employee lump sum retirement distributions that occurred in 2012. The second quarter 2011 earnings included a $17 million adjustment for the unfavorable tax impact of certain income -- state income tax changes that were enacted in 2011. The waterfall chart on Slide 5 shows by segment the change in adjusted net income from the second quarter of 2011 to the second quarter of 2012. The primary drivers for the increase in our adjusted net income were the increases in income from our Refining & Marketing segment and from our Speedway segment, partially offset by higher interest and other corporate expenses. Before I move to a discussion of the results of our operating segments, I wanted to comment briefly on the change in interest and other expense. The $48 million quarter-over-quarter change in interest and other items primarily relates to the absence of related-party dividend income generated when we were part of Marathon Oil Corporation and higher corporate-related costs associated with being a standalone company. As shown on Slide 6, Refining & Marketing segment income from operations was $1.325 billion in the second quarter of 2012 compared with $1.26 billion in the second quarter of 2011. The change was the result of higher Refining & Marketing gross margin. In explaining the key components of the Refining & Marketing gross margin, I will refer to the changes in market indicators applied to MPC actual volumes to arrive at the quarter-over-quarter variances. First, the blended LLS 6-3-2-1 crack spread was $2.93 per barrel higher in the second quarter of 2012 than the second quarter of 2011, resulting in an estimated favorable variance of $341 million. While the Chicago crack spread was $1.73 per barrel higher than the second quarter of 2011, the Gulf Coast crack spread was substantially higher, up $4.31 per barrel. The sweet/sour differential declined slightly from just over $11 per barrel in the second quarter of 2011 to $10.50 in the second quarter of 2012, resulting in an unfavorable variance of $30 million. WTI price-based crudes accounted for approximately 28% of the crude we processed during the 2012 second quarter, 2 percentage points higher than the second quarter of 2011. This increase in volume more than offset the lower per-barrel LLS-WTI differential and resulted in an estimated $6 million favorable gross margin variance between the 2 quarters. The first 3 market indicators I discussed are calculated by reference to an LLS prompt price. Rapid changes in crude prices can cause significant differences between the LLS prompt prices embedded in the market indicators and the actual amount we pay. On average, the delivered LLS crude cost was $4 per barrel higher than the prompt LLS price during the second quarter of 2012 when compared to the second quarter of 2011. This accounted for an estimated unfavorable variance of $79 million. Market structure also had a quarter-over-quarter effect on our gross margin. It was $0.33 per barrel less contained over the NYMEX WTI market structure in the second quarter of 2012 compared to the second quarter 2011 with an estimated unfavorable impact of $30 million. Direct operating costs had an unfavorable quarter-over-quarter effect of $43 million primarily due to higher turnaround costs in the second quarter of 2012 compared with the second quarter of 2011. The other gross margin column captures a number of other factors that need to be considered when reconciling the market-based metrics to the change in our gross margin. Such items include our actual realized prices, refinery yields and crudes slate variances compared to the market indicators. They also include other factors such as refinery volume metric gains, purchase for resale activity and primary transportation. On the next 2 slides, we provide earnings walks for each of our other operating segments. Turning to Slide 7. Speedway's income from operations was $107 million in the second quarter of 2012 compared with $80 million in the second quarter of 2011. Speedway's light product gross margin was about $15 million higher in the second quarter of 2012 compared with the second quarter of 2011. The increase was primarily due to a nearly 1.4 cents per gallon higher gross margin for the second quarter of 2012. Merchandise margin was $203 million in the second quarter of 2012 compared with $178 million during the same period last year. This $25 million increase was primarily due to margin expansion resulting from increasing merchandise and food sales. Same-store gasoline sales increased 2% and same-store merchandise sales also increased 2% in the second quarter 2012 compared with the 2011 second quarter. Slide 8 shows changes in our Pipeline Transportation segment income. Income from operations was $50 million in the second quarter of 2012 compared with $54 million in the second quarter of 2011. This decrease was primarily attributable to a decrease in earnings from pipeline affiliates. Slide 9 presents the more significant drivers of changes in our cash flows for the second quarter of 2012. At June 30, 2012, our cash balance was just under $1.9 billion. Operating cash flow before changes in working capital was a nearly $1.4 billion source of cash. The use of cash related to working capital of almost $1.1 billion is primarily due to an increase in inventory levels as well as the effect of lower crude prices on our payables and receivables. Inventory levels were higher in the second quarter due to seasonal crude inventory builds and additional product inventory due to the turnaround at our Robinson refinery. Capital expenditures and acquisitions during the quarter totaled $489 million primarily related to Speedway's acquisition of the GasAmerica locations and the continuing investment in our Detroit Heavy Oil Upgrade Project. Slide 10 provides some summary financial statistics. At the end of the second quarter, we had almost $1.9 billion of cash and approximately $3.3 billion of debt. With EBITDA of almost $4.8 billion during our first 12 months as a standalone company, we continue to be in a very manageable debt position with a leverage of 0.7x EBITDA and a debt-to-total capital ratio of 24%. On Slide 11, cash flows provided by operations is shown for the last 12 months. During MPC's first full year as a standalone company, we generated almost $3 billion in cash from operations and $1.5 billion of free cash flow. Consistent with our commitment to return capital to shareholders, we have distributed 76% of our free cash flow in the form of dividends and share repurchases during the past year. And we intend to be one of the leaders of our peer group in terms of total shareholder return going forward. Slide 12 provides outlook information on key operating metrics for MPC for the third quarter of 2012. For comparative purposes, those same metrics for the third quarter of 2011 are also shown. With respect to outlook information, I wanted to mention one other item. As you know, in May of this year, we entered into a settlement agreement with the buyers of our Minnesota assets to finalize a number of matters contained in the original sales agreement. That settlement agreement was contingent upon the buyers' completing a successful IPO. As a result of their recent IPO, we expect to record a gain in the third quarter of 2012. More information on this transaction can be found in our second quarter 10-Q to be filed next week. In addition to this outlook information, the July market data document will be published tomorrow on our investor website. Our mission continues to be value creation for our shareholders. We are committed to pursuing opportunities to create near- and long-term value. Examples of that commitment include the return of capital through 2 increases in our base dividend of the last 9 months and our share repurchase program. We will be balanced in our approach to capital allocation as we continue to assess the opportunities in front of them. Now I will turn the call back to Pam Beall.

[Operator Instructions] And with that, I'll turn the call over to Dawn to take your questions.

[Operator Instructions] Our first question comes from Paul Cheng from Barclays.

Real quick, Don, can you give me, what is the working capital and the market value of inventory overall?

Sure. Current assets were $10.7 billion, current liabilities were $7.6 billion for a working capital of $3.1 billion, and the excess of fair value of inventory was $5 billion.

Okay. And Don, and maybe this is the -- for Gary, and that -- you have a nice bump in your dividend just several weeks ago, but that absolute dividend payout comparing to your earning power, it seems like is still quite affordable. So question is that, with that in mind, is that -- with this increase that -- that means that the dividend in December we're not going to see, or is not being consider or for a potential increase? Or we should not read anything on that? And also from a cash flow standpoint, your second quarter, you have about $1.1 billion on the negative working capital usage of cash. Otherwise, that -- your cash is going to be, say, close to $3 billion. So is there any reason why that you didn't announce another share buyback or another actual program like what you did in the last quarter?

Paul, I think you covered a number of subjects there about returning capital or repatriating capital to shareholders. I guess our commitment continues to be, to the extent that we have excess cash, we will return that to shareholders and we will look to the best form of doing that. We obviously did announce a dividend increase this quarter, and we will regularly review the dividend both with our board and with our management team. So I don't think you should read anything into a third quarter dividend. I mean, that's a quarterly evaluation that we do. With respect to share repurchase, we will continue to evaluate what the best opportunities are and what the best timing is for returning capital to shareholders, Paul, but I think our commitment remains steadfast in terms of returning excess cash.

Our next question comes from Ed Westlake from Credit Suisse. Edward Westlake - Crédit Suisse AG, Research Division: I guess, looking at the filings, it may appear that you were interested in the Sunoco acquisition. Obviously, if I -- my math is correct, that's something like -- obviously a big transaction but something like 10x EBITDA. Could you maybe outline the levers which you think you would be able to use to create value from a large transaction of this type? And then I have a follow-on.

Ed, this is Garry. [indiscernible], but obviously, we can't comment on what things we are or we are not looking at, but I think we've been pretty consistent in the past saying that, for us to pursue an acquisition, it would have to be some synergistic effect or leverage which we could have with our existing assets. So I think, from our perspective, when we look at any potential opportunity to enhance shareholder value, it's really driven by what we can leverage our existing assets and infrastructure to create more value which then allows us to be able to afford the price needed to pay the type of multiples that are being commanded, say, in the marketplace. So I think our consistent message is it's basically a synergistic effect with our existing asset base, is what we primarily focus on when we're looking at acquisitions or other investments in the business. Edward Westlake - Crédit Suisse AG, Research Division: And in terms of the multiples, and maybe there are some synergies which lower those, but that presumably would mean that your own retail system probably is undervalued. You've seen the announcement this morning. Any thoughts about spinning out or crystallizing the value that you have in the retail business?

I think -- this is Garry again, Ed. We're continuing to look at any way we can to increase value. I think what we've been also fairly consistent in saying, though, is we believe in the integrated approach to the downstream business. We happen to be at a point in the business cycle when refining is doing relatively well. That always isn't the case. And we like to have the advantage of having 2 or 3, in this case, 3 businesses -- the Pipeline Transportation, the Speedway and the R&M business -- to give us a very good complement of cash flows and assets to meet what our #1 objective is, and that is to have a investment-grade credit profile. So we're going to look at these things, we'll continue to look at these things. And I think, though, at the moment, our objective and our goal is still the integrated approach to how we run our business.

Our next question is from Paul Sankey from Deutsche Bank.

If I could just follow up to Gary on the acquisition question. So you've been very consistent, firstly, in your message about what would interest you and, secondly, I guess, about the prioritization which has come through on this call of cash return to shareholders. I guess it's just notable that you've raised acquisitions on your opening slide, Gary, and I wondered if you could just talk a little bit more about why you did that. You said you're not interested in non-synergistic assets, which I think rules out Europe and I assume it rules out the West Coast. One obvious candidate which BP was talking about this morning is Texas City. Could you make any comments about, firstly, that specific asset and, secondly, what else comprises synergy? Because I'm aware that you're also referring to the potential for retail acquisitions.

Well, Paul, as we've always been consistent, when we look at our portfolio, acquisitions are a part of that portfolio, return of capital to shareholders is a part of that portfolio. And further as we look down, whether it's dividends, whether it's buying back shares, all those go into consideration. As we look at acquisitions and what we -- the result has been, we've made 2 -- in fact, 3 if we include the Gas City stores last summer, we've made 3 retail acquisitions. And we continue to look at those types of opportunities in the marketplace. So we just wanted to highlight that we look at everything that is available in the marketplace and we will continue to do that. But that is one of the possibilities that we have is to look at those acquisitions as we go forward. And then of course, I already outlined, and Don and I hope we're very clear in our message, that returning cash to -- or capital, I should say, not just cash but returning capital to the shareholders and exercising discipline in acquisitions will continue to be front and center.

Yes, I guess, with respect to this, that you've been through a major CapEx cycle that really isn't complete quite yet with Detroit but obviously with Garyville as well. And it would be -- I think it would be encouraging if the language on acquisitions was more -- less aggressive, if you like, than it seems to come across.

Well, that's fair enough, then. And I've stated several times on these calls that it is time to harvest on the acquisitions that we've made. I know that there was some conjecture at the time that we did Garyville and it has proven to be a very, very strong asset and cash flow provider. And we're just on the heels of -- to about complete Detroit and then we'll complete the turnaround and start it up late in this year. A $2.2 billion acquisition -- excuse me, $2.2 billion of capital expenditure that we've had on the books for some time, we don't believe that any of market has reflected the opportunity yet of that asset as it comes to market. So we would expect to see that as we finish up this year and get into early next year and have it fully operating. But I understand what you're saying, and we -- as I said, we will continue to exercise a very strong discipline around any CapEx.

Our next question comes from Arjun Murti from Goldman Sachs.

Gary, one of the questions out there is all these pipelines are taking the shale oil to the Gulf Coast area where, of course, most of the refiners are more medium sour or heavy coking. Can you talk about how you see that dynamic playing out? And maybe specific to your assets, is there a practical limit on how much light sweet you can run, or at the right discount, could Garyville, as an example, run all light sweet if you so chose to?

All right, Mike Palmer will handle that.

Sure, be happy to. We constantly get questions that ask about how much sweet crude we can actually run at a particular refinery around our system. And it's a difficult question to answer because it really depends on pricing. But the answer is that we can run a lot of sweet light crude. I think we've estimated that, in our whole system, as a real rough ballpark number, it's something around 75% that we can run is very light crude. But it really does depend upon the market circumstances because, if the advantage is with this light sweet crude, then we can make adjustments to the refineries. Our engineers can do that such that we could even run more. So there's just a lot of flexibility.

And is it your sense that your system is representative? Or you all have invested more over time to ensure you have this flexibility?

Well, no. And In fact, if you look at our -- especially at our Midwest system, I mean, we have been predominantly a light sweet refiner through time. Obviously, we've made a change to Detroit to give us the option of running heavy Canadian crude, which is the intent. But it's -- really, you have to think of it in terms of an option because if the light sweet crude is really the most attractive, that's what we'll run. And in fact, when you look at our operation right now at Garyville, we're running a lot more light sweet crude than we'd ever forecast in the past. So we have a lot of flexibility to go where we can earn the best margin.

That's terrific. And just to follow up on the retail spinoff question. Again, I don't mean to make you repeat yourself, but when we looked at Marathon over a long period of time, it seems like you have generated very good returns on capital by being integrated, whether it's the pipelines into the refineries and the gas stations, and that business model has served you well for a long period of time. I think you more or less were concurring with that type of sentiment, but just wanted to clarify that.

This is Garry again. Yes, no, that's exactly right. And it's not to say that things don't change, either. I think we're continuously looking at the marketplace, looking at what makes the most sense from a optimization of operation standpoint. And as we said, when we talked about MLPs in the past, never say never, so -- but at the moment, we think the present configuration that we have of Refining & Marketing and pipelines is the best for us given our objectives in terms of shareholder -- creating shareholder value.

Our next question comes from Chi Chow from Macquarie Capital.

I'd like to get your thoughts near term on the possible waiver of the RFS mandate for ethanol given the recent request from the livestock producers. Is that something you think will come through? What's the probability of that?

Mike?

Yes. I guess, to be honest, our thought with that is that the -- we understand that the -- what the situation is with the expensive corn right now. And there are some ethanol plants that certainly have closed down. But honestly, I guess our thought is that it's very difficult to understand what the government might do with regard to any waiver on ethanol. And in fact, the EPA has stated that they're not interested in considering an RFS waiver. So I guess that would be our thought.

And then, Don, maybe a couple of cash flow questions. What's the remaining CapEx on DHOUP at the end of the second quarter? And then do you expect additional builds in inventories in the third quarter for the DHOUP turnaround? Is that going to cause ongoing pull [ph] on working capital that's going to impact cash here in the third quarter?

On the first question, Chi, $200 million is the remaining expenditures on DHOUP. And, I guess, with respect to working capital, but there's a lot of moving pieces around working capital. Yes, we will build some working capital related to DHOUP, but when Robinson came back online, that will have a positive effect in terms of reducing our working capital.

Our next question comes from Evan Calio from Morgan Stanley.

Everybody, I appreciate the comments on cash returns and I applaud the selective buyback approach similar to HFC and OXY. And I also thought the approach for Sun [ph] looked smart relating to an MLP uplift potential. And then my question, my first question, really, is a follow-up on the dividend discussion. I mean, how do you analyze your maximum dividend commitment for dividend that you'd obviously rather never cut? I mean, do you run varied case margin scenarios, say, 2009 crack plus some more nominal crude spread through your current system that defines how high you could go on a longer-term supportable dividend? Or how do you analyze that level?

Yes, Evan, this is Garry Peiffer. That's -- obviously, trying to forecast this business is a difficult process. And I'm not even sure -- if you look back to 2009, as a most recent example, it was a tough year for all refiners. So I think what we've obviously did last week in increasing our dividend to $0.35 a quarter, demonstrates, at least our opinion, that, through those cycles, that we think we can afford to continue that type of dividend pay to shareholders. So I don't think we can get -- we try to run all kind of models to estimate what is -- from a cash requirement standpoint, what is our minimum cash requirements. But I think that the 40% increase in regular dividend we announced last week is our demonstration of our belief that we can sustain that through the cycles. And as -- 2009 did not include Garyville, the impact of the benefit we've been able to enjoy from the Garyville expansion. And hopefully going forward, we'll have the benefit of DHOUP contributing substantially to our cash flows in the future as well. So those things all add on top of our confidence and why we did what we did last week in terms of increasing our dividend.

Great, that's helpful. Can you also provide an update on Utica crude runs, status of your infrastructure developments there? And really, I guess, whether you're -- I guess, you're blending the condensate there. And maybe kind of related to Arjun's question, what sort of theoretic run max, at least in the Ohio refineries, the 2 refineries based upon yield in Utica configuration?

Mike?

The Utica has probably progressed a little slower than some of the original production forecast would've led people to believe. But there's a lot of activity that's going on right now in terms of new permits and rigs that are running. We continue to process on the order of about 1,500 barrels a day of a mix of crude and condensate. We do expect that that will start to ramp up in the second half of the year, and then in '13 and '14, it'll start to ramp up even more. And we can, again, run a lot of this crude and condensate within our plants in the Midwest. We have the permanent truck rack that is now complete at Canton. It has a capacity of 12,000 barrels a day right now. We've got a truck rack at Catlettsburg and it's got a capacity, I think, of about 18,000 barrels a day. We have opportunities to expand those. We're working on a truck-to-barge operation that we've talked to you guys about before. And I guess I would make the same comment with regard to the volume that we can actually refine that I did before. We have a lot of flexibility in these plants to run both the condensate and the crude oil, again depending upon -- on how it's priced. So it's going to be quite some time before the Utica production actually catches up to a point where we're going to have difficulty running it in the plants.

Our next question comes from Doug Terreson from ISI Group.

Most of my questions were answered, and I apologize if I missed this, but I just wanted to get the update on when the Detroit turnaround began and also how long you expect that to last in the second half.

Yes, Doug, this is Garry Peiffer. We're expecting the turnaround to start shortly after Labor Day. And we would expect it to last about 70 days, so that puts you into early November 'til it'd be complete. So that's the present plan. Now I think, for modeling purposes, we've been pretty consistent all along that we wouldn't expect to see any contribution -- or any major contribution to our bottom line 'til next year from a cash or earnings standpoint. So the goal is to get everything online by the end of the year and operational, up in a safe and efficient manner.

Our next question comes from Roger Read from Wells Fargo.

Quick question I guess I had, kind of following on with the questions on the light sweet crude. As you ramp up the volumes of light sweet, or if you're able to ramp up the volumes of light sweet, what are -- how should we think about the impact on volumes? I mean, generally, I would expect they'd come in a little bit. Is that the right way to think about it? Is there any sort of rule of thumb we can use?

Mike?

So this is Garry here. I guess -- unless we get to the beyond 75% range that Mike referred to, I guess we wouldn't expect to see any major impact on total volumes. Now if the price became so attractive that all of Garyville's throughputs were light sweet crude, then there would be an impact on probably what we would be able to run in total. But that's going to be a long way down the road, I think, because we would try to balance the slate with heavy crudes as well as the light crudes such that we would hopefully have a fairly minimal impact on total inputs and outputs. But to have any input, there's got to be a lot of light sweet crude before we'd have any total output impact.

And then the only other question I had, on the export side. If I heard correctly, I think you said it was up 110,000 barrels a day, Q2.

It was up to 110,000 barrels a day in Q2.

Okay. Where do you think that can go over the next several years? Or what's your goal on that front?

Well, that is pretty much stretching the system. All the stars were aligned for us to be able to do that in the second quarter. I think, our previous best month -- or quarter, excuse me, quarter, was somewhere in the 80,000 barrel a day range. So we're making investments now at Garyville that will probably not increase the total throughput capacity much beyond that 110,000 barrel a day range but will allow us additional tankage such that we can sell different products, principally gasoline. So we're making investments at Garyville to allow us to sell additional products, but probably the total isn't going to change much, at least in the near term.

Our next question comes from Blake Fernandez from Howard Weil.

A couple of questions for you. One, I wanted to go back on the buybacks. If I recall, when the program was originally authorized, it was $2 billion over a 2-year period. Obviously, you've exhausted the accelerated portion, but I'm just trying to understand the mindset on the balance, the $1.15 billion. If things were to stay where they are today, should we assume that you'd plan to fully execute that $2 billion over the next 1.5 years?

I think, Blake, what -- this is Don. I think what we have said and we as a management team and board believe is that, to the extent that we have excess cash, we want to return it to, and we expect to return it to, our shareholders in one form or another. We will make evaluations around our current authorization and we have discussions regularly with our board about that. So it's hard to know what the cash position will be and forecast it out every quarter out for the next 1.5 years. But I think our track record over the last year, 12 months, has demonstrated that, to the extent there is excess cash, we will look for ways to repatriate it back to our shareholders.

Don, the second one, for you. This may be premature, but I was just hoping for CapEx potentially into '13. Any broad strokes on where you see that shaking out compared to this year?

We have not provided that information, Blake. But I guess, in terms of thinking about capital expenditures, we've consistently said that our maintenance CapEx is somewhere in the $600 million to $800 million range per year. And that is really focused on maintaining our assets at their current cash-generation capabilities. So that would be -- in a Speedway example, that would include rebuilds and remodels. We've also said that, at any point in time, we have probably a portfolio of projects in the $200 million to $500 million range that we believe are easy to implement. They're under our control, they have high rates of return. And if you think about even sort of our profile in 2012, how we spend capital, our capital expenditure budget was $1.4 billion and that included roughly $350 million for DHOUP, so the remainder really fit nicely in the -- kind of that range, $600 million to $800 million for maintenance CapEx, $200 million to $500 million for growth projects.

Our next question comes from Faisel Khan from Citigroup.

On the 110,000 barrels a day of exports, which I believe is an uptick from the first quarter, what kind of pricing uplift do you get on that -- on those products vis-à-vis what we see in the Gulf Coast? And then I have a follow-up on crude oil.

This is Garry Peiffer. We don't really want to disclose what type of uptick we get. But we do obviously get a better price than we would otherwise get, and our next best alternative is in the spot market. So we're able to achieve returns better than the smart -- spot market values, net of all the other considerations we have to go to through, whether it be time, value or money and what-have-you. So it is a benefit to running an overall alternative to the spot market.

Okay. And then on the crude oil side, can you give us an idea of how much WCS you ran across your entire system? And there were some reports that Canadian bitumen was being railed down to the Gulf Coast, and if that's something you'd be running through your system, too?

We -- Mike Palmer can confirm this. We don't -- we haven't railed any Canadian bitumen. We have been running somewhere around 50,000 barrels a day from the Patoka, north of St. Louis area down to Garyville. So our major Gulf Coast WCS is that 50,000 barrels a day or so of WCS we put on the barge and shipped from Patoka to Garyville.

Our next question comes from Cory Garcia from Raymond James. Cory J. Garcia - Raymond James & Associates, Inc., Research Division: I apologize if I missed this earlier. But clearly, your same-store sales in your Speedway system is improving [ph] pretty strong, I think, up 2%, you guys, in the prior quarter. Just wondering what it looked like through July, particularly in light of the recent run-up in prices? I think that the DOE data is showing down just slightly, so I'm wondering if you guys could reconcile that for me.

Well, in fact -- this is Gary. Cory, July has been a little soft because of the run-up in price and we have seen demand fall a little bit here in July. But again, we're comparing against one of the difficult things when you're looking at same-store sales, I guess, same month last year. This year, Fourth of July was midweek. Last year, it attached to a weekend. So July was much better for that point last year. And this year, the extreme hot weather, we think, has curtailed some driving as well. So on a same-store basis, it's more difficult to be able to put in some of those concerns. But I would say it's a little bit of soft this year as we start July than we saw in June.

Our next question comes from Jeff Dietert from Simmons & Company. Jeffrey A. Dietert - Simmons & Company International, Research Division: My question is related to Detroit. I expected to see maybe a tick-up in turnaround expenses in the third quarter when we got a quick look at the guidance slide, but it didn't appear to be there. Is that mainly going to fall in the fourth quarter as far as the increase in turnaround cost?

Jeff, we'll have turnaround costs in both third quarter and fourth quarter. And the guidance information that we did provide, the outlook information, includes the costs related to the Detroit turnaround that will be incurred in the third quarter. So the $1.15 that we have in our outlook information includes that. If you look at the comparative period last year, it was only $0.36, so there's some heavy activity in this third quarter.

We have a follow-up from Paul Cheng from Barclays.

Actually, 2 quick ones. One, there's a interesting one, one of your old refinery now that is a MLP. Have you guys looked at that and think whether that this is something you could be interested?

Yes, Paul, this is Garry Peiffer. I think, as you know, we try to keep our eye on what's ever new and different going on out there, but I guess our focus at the moment obviously is MPLX and what we can do there to increase shareholder value. But we look at everything and we're -- but at the moment, though, we're focused on MPLX.

I understand that, Garry. And I guess my question is more that, fundamentally, do you guys object to have your refinery to be in an MLP and you are concerned losing control or that after your study in the MLP for the pipeline that you don't really have that fundamental concern?

Well, I think this is a fairly new idea or a fairly new mode they're going about to create an MLP. So I think we just have to understand what it means not only in maybe the good part of the cycle but also what it could mean in the bad part of the cycle. So we -- it's fairly new. We're starting it and we're watching it closely. So I think we -- at this point, we're just trying to understand the benefits of any type of opportunity to increase shareholder value.

We have a follow-up question from Paul Sankey from Deutsche Bank.

Guys, I just wanted to ask you about product trade and the dynamics that we're seeing there. Is there any kind of a shift going on between who's buying all the products? Can you just remind us how much you're exporting and where the major destinations are?

Yes, Paul. This is Mike Palmer. A lot of what we export out of Garyville, we sell FOB Garyville. So there's a lot of the cargoes that we can't be certain where they go. I mean, it is a mix between South America, Latin America and Europe, and it changes from time to time depending upon what the arbitrages look like.

We have a follow-up from Ed Westlake from Credit Suisse. Edward Westlake - Crédit Suisse AG, Research Division: I was -- I apologize for traveling last call [ph], so I'll ask another question. Just on the MLP, obviously, you've disclosed EBITDA, sorry, and the assets for MPLX, so I won't ask about that. But you've obviously got a massive chunk of assets still within the MPC umbrella. If I look at those assets, I mean, is it fair to say that we can just gross up sort of EBITDA in terms of the capacity? Or are there some other things that we should be thinking about when we're trying to forecast the EBITDA for your overall logistics footprint?

I think -- this is Garry Peiffer, Ed. I think we're obviously into the quiet period with our S-1 here so we really can't comment on what is the remainder of the assets. We gave a high-level summary of our MPC assets in the S-1, and to this point, that's really all we can go, we can really talk about regarding the other assets that we have that are qualified for an MLP.

Our last question comes from Faisel Khan from Citigroup.

Just a follow-up on the same-store gasoline sales volumes being up 2% -- or 2.1% in the quarter. Can you go -- can you elaborate a little bit more what drove that, you think, in the quarter? Because the economy was still kind of sluggish and so seeing the 2% sort of same-store sales growth seems a little bit less intuitive given what we saw in the economy in the second quarter.

Well, in our market, Faisel, what we've continued to see is some increases. I believe the -- early in the second quarter, the weather was very, very positive in PADD II, and our same store is really around Speedway and as well PADD II. So the weather was generally very good. Early part of the second quarter that helped us, as I said. As we got into late June and early July, the weather seemed to be a bit of a detriment. But -- and prices came down in the second quarter in a couple of different time frames. So therefore, you didn't have to push the increased crude oil price. You didn't have to push it back into the marketplace as much as we've seen early here in the third quarter. But I would say those would be the -- probably the key themes. Again, very difficult to be able to chart each component and what happens in markets and what happens in regions and markets on a same-store basis.

Thank you. I will now turn the call over to Gary Heminger for final remarks.

Well, thank you, Dawn. And as we complete today, I just wanted to emphasize one more time that all the questions that pertain to our capital allocation, how we may or may not repatriate capital, what our investment posture might be, we will continue to be very disciplined as we consider those opportunities going forward. And I think, as Don and Garry and I alluded in many of our questions -- or answers to questions here, capital repatriation and having the confidence to continue such repatriation in the future is first and foremost in our mind. So I thank you, Dawn, for your help today. And thanks, everyone on the call.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.