Welcome to the Marathon Petroleum Second Quarter 2015 Earnings Conference Call. My name is Adrianne, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Please note this conference is being recorded. I will now turn the call over to Geri Ewing, Director of Investor Relations. Geri Ewing, you may begin.

Thank you, Adrianne. Welcome to Marathon Petroleum Corporation's second quarter 2015 earnings webcast and conference call. The synchronized slides that accompany this call can be found on our website at marathonpetroleum.com under the Investor Center tab. On the call today are Gary Heminger, President and CEO; Don Templin, Executive Vice President of Supply, Transportation and Marketing; Tim Griffith, Senior Vice President and Chief Financial Officer; Mike Palmer, Senior Vice President of Supply, Distribution and Planning; Pam Beall, President of MPLX, and Tony Kenney, President of Speedway. We invite you to read the Safe Harbor statements on slide two. It's a reminder that we will be making forward-looking statements during the call and during the question-and-answer session. Actual results may differ materially from what we expect today. Factors that cause – could cause actual results to differ are included there as well as in our filings with the SEC. Now, I will turn the call over to Gary Heminger for opening remarks and highlights. Gary?

Thank you, Geri, good morning, and thank you for joining our call. We're pleased to report second quarter earnings of $826 million, reflecting a strong performance across to our operating platform. Refining performance was solid with $1.2 billion of income for the quarter as our refineries benefited from the combination of high utilization and favorable market conditions. Crack spreads were strong throughout the quarter, reflecting increased refined products demand in the U.S. We expect demand to continue to be strong in the near term due to the strengthening in the U.S. economy and lower fuel prices, which should continue to benefit our refining and marketing business. The new condensate splitter at our Catlettsburg, Kentucky refinery went online during the second quarter. Along with the splitter recently completed at Canton, we have increased our system's refinery capacity by over 40,000 barrels per day, as well as our ability to process condensate production from the region's emerging shale plays. These two splitters further enhance MPC's extensive high complexity system. Turning to our midstream business, we are pleased to highlight MPLX and MarkWest's recently announced merger agreement. This strategic combination complements our operations and expands MPC's commercial opportunities. It represents a significant step in executing our strategy to grow our higher valued stable cash flow businesses. The combination enables us to increase our participation in the U.S. energy infrastructure buildout and transforms MPLX into a diversified large cap MLP. MPC's strong balance sheet and liquidity will enable MarkWest to accelerate organic growth in some of the nation's most economic and prolific liquids-rich natural gas resource plays. We expect the combination of these projects and MPC's inventory of MLP eligible assets to support a strong distribution growth profile over an extended period of time for the combined partnership. It also defers the need for…

Thanks, Gary. Slide four provides earnings on both an absolute and per share basis. As you can see in the yellow bars in the chart, our financial performance was strong once again in the second quarter of this year. MPC has earnings of $826 million, or $1.51 per diluted share during the second quarter of 2015, compared to $855 million or $1.48 per diluted share in the second quarter of last year. The chart on slide five shows by segment the change in earnings from the second quarter of last year. Earnings were fairly consistent period-over-period with Refining & Marketing's income from operations down $54 million, partially offset by higher income from Speedway and lower income taxes resulting from lower overall taxable income. Turning to slide six, Refining & Marketing segment income from operations was $1.2 billion in the second quarter of 2015, compared to the $1.3 billion in the same quarter last year. The slight decrease was primarily due to less favorable product price realizations compared to the LLS base crack spread, less favorable crude oil acquisition costs relative to our market indicators resulting from narrow crude differentials, and lower dollar base refinery volumetric gains resulting from overall lower commodity prices. Segment results were also affected by a charge of $46 million to recognize increased estimated cost for compliance with the recently proposed renewable fuel standards. All these unfavorable impacts are included in the $458 million of other gross margin on this slide. These negative impacts were partially offset by a $372 million favorable effect of contango in the crude oil market in the second quarter of 2015. This $1.90 per barrel of contribution in the second quarter compared to the detrimental impact of backwardation in the second quarter last year of $0.93 per barrel. Additionally, direct operating costs…

Thanks, Tim. As we open for questions, we ask that you limit yourself to one question plus a follow-up. You may re-prompt for additional questions as time permits. With that, we will now open the call to questions. Adrianne?

Thank you. We will now begin the question-and-answer session. And our first question comes from Ed Westlake from Credit Suisse. Please go ahead. Edward G. Westlake - Credit Suisse Securities (USA) LLC (Broker): Hey. Good morning, and congratulations again on the strategic tie-up in the midstream. I guess people are concerned that given the MPLX price response, and the fact that obviously the implied price for MWE has faded, that – and given the strength of the assets that MWE has that you might be forced to defend a bid at perhaps a higher price or sweeten the deal. Maybe just talk us through a little bit about your thought process there?

Well, Ed, good morning. And I understand your question, and we feel this is a very compelling transaction, compelling for both sides. And when you look at the profile of MPLX, one of the things I think investors have not fully been able to understand yet is that our risk profile really hasn't changed from where we were before, because we had – we needed to execute on a number of organic growth projects within MPLX since we started the IPO in October of 2012, and a good part of the growth that we have there was eventually going to become dropdowns, all was going to be dependent upon executing an organic growth profile. And the same thing happens here with MarkWest, and then the key to this transaction is you look at MarkWest today, they are around $1 billion or so of EBITDA. And we're speaking to $1.6 billion, $1.7 billion of EBITDA still sitting in backlog within MPC, MPLX. So that's the great strength or the great combination going forward, but we really believe this is a compelling transaction, understanding the value that MPLX brings to the table. Edward G. Westlake - Credit Suisse Securities (USA) LLC (Broker): Okay. And then a separate follow-on, I mean, you've got a lot of maintenance or some maintenance in the Mid-con if I look at your turnaround costs in the 3Q. Maybe just talk a little bit about any upgrades to the plants that you're planning during that maintenance to perhaps give better EBITDA from self-help off to the turnaround, if there is any?

Yeah, and it is Rich Bedell, Ed. There's two projects going in Catlettsburg, their project is a crude unit upgrade to recover more distillate in gas oil out of those crudes and Robinson has a unicracker or a hydrocracker project to produce more distillate. Edward G. Westlake - Credit Suisse Securities (USA) LLC (Broker): Okay. Do you have any rough numbers on what the EBITDA contribution might be in say – I know diesel is not doing great, but in say current conditions?

I don't have any right in front of me here right now. Edward G. Westlake - Credit Suisse Securities (USA) LLC (Broker): Okay. Thanks so much.

And the next question comes from Chi Chow from Tudor, Pickering. Please go ahead. Chi Chow - Tudor, Pickering, Holt & Co. Securities, Inc.: Great, thanks. This maybe a little bit of a naïve question, but could you walk us through how processing incremental condensate volumes at Canton and Catlettsburg and eventually Robinson will impact refining operations? Is the upside based on yield improvements or higher gasoline blending volumes or is there some other factor? I'm just wondering how to quantify the impacts of the increased condensate you're running through the plants?

It is Rich Bedell again. The overall condensates, I mean, you've got everything from the light straight run material all the way into a distillate-type material. So by running those it gives us more blend stocks and feedstocks for the downstream units. And the Catlettsburg and Canton are pure condensate splitter-type projects. The project that will go in in Robinson is more of a light crude project and that's going in next year, and that will just give us more ability to process the lighter crude slates that are available. Chi Chow - Tudor, Pickering, Holt & Co. Securities, Inc.: Okay, Rich. So essentially you're going to get better yields coming out, is that kind of bottom line?

Yes, yes. Chi Chow - Tudor, Pickering, Holt & Co. Securities, Inc.: Okay.

Well, Chi, it's both yield and it's a low cost feedstock. I mean, you will have a structural advantage to low cost feedstocks in the region via the condensates. And given the location we think that that's an enduring advantage to the business. Chi Chow - Tudor, Pickering, Holt & Co. Securities, Inc.: Right. Okay. Now, does that exasperate the situation you've got going on with the octane differential between premium/regular gasoline? Does it make things worse I guess for them (17:59) or how do you think about that?

Well, I mean we're pretty well-positioned with our reformer capacity to generate the octane to use the lighter blend stock. So I mean it all gets into optimizing the refinery. Chi Chow - Tudor, Pickering, Holt & Co. Securities, Inc.: All right. Okay. And then one question on the MarkWest transaction. I'm not sure if you can answer but this, can you walk through any examples of growth projects that a combined MPLX/MarkWest Energy can undertake but that each entity cannot do on its own?

Well, the question you just asked, Chi – this is Gary – the question you just asked concerning octane is a great example. As you look at the feedstock that MarkWest has today, the – with the butane supply, butane is a great feedstock to put into an Appalachian unit and make octane. And we see going out to meet the CAFE standards of 2022 that the industry is going to be short octane. We have the ability to take this butane, marry it up with a possibly, and this is a conceptual project we have, but one we've been looking at for quite some time and then that is to manufacture octane right near the source. It makes more sense to do that than to distribute the butane to different markets, albeit the Gulf Coast or the harbor, New York Harbor and then manufacture it into a finish product. I think it makes more sense to manufacture it and then distribute that octane into the gasoline pool that is already in this market. That's just one example. We have a number of other examples that we're looking at, possibly batching of refined products to the New York Harbor and when I look at MPC, the dropdowns that we have, some of the pipeline opportunities that we've been looking at, as well some of the terminal opportunities, you combine that volume with volume that MarkWest has I think it can make some feasible projects. Chi Chow - Tudor, Pickering, Holt & Co. Securities, Inc.: Great. Thanks.

And lastly, Chi, we've already announced the Cornerstone pipeline. And so again, you take the feedstock and the initiation station, if you will, of Cornerstone is going to be right at MarkWest Cadiz facility. So we're going to be able to marry up additional products there. Initially we are building this to be able to move condensates up to Canton and our Catlettsburg refinery. You probably have recognized some of your E&P contacts how Marcellus and Utica are continuing to have some very strong results on some wells that have been drilled here recently. We believe that we can take some of those products, put them into Cornerstone and then go into the second phase of Cornerstone that we've talked about in the past, but the second phase to get us all the way back to the Chicago market and maybe even eventually tie-in with some pipelines that we have coming up from the North and considering reversing those getting back down to the Gulf Coast. So we have tremendous flexibility and tremendous options to be able to expand MarkWest and MPLX. Chi Chow - Tudor, Pickering, Holt & Co. Securities, Inc.: Great. Thanks for the color, Gary. On Cornerstone, does the linkup with MarkWest allow you to flow Cornerstone at full capacity?

We – well, it's really not being that we're linking up with MarkWest. It's all going to be about how the drill bit and how the producer continues to bring the stream on. That's why I brought up early. You noticed recently the significant progress and then some of the big wells have come on in the region. We certainly think this is going to help us. Pam, do you have any more color?

Well, I was just going to say, Chi, certainly the – as Gary mentioned – we're going to originate at the MarkWest Cadiz condensate stabilizer facility. We're also going to tie into their Hopedale fractionation operation. So we see the potential to move not just condensate but natural gasoline and butane and different grades as we're going to batch this system. And as Gary said, really we could – we believe we can deliver diluent into a pipeline that will end up going into Canada. We could reach the refineries in a Toledo, Lima, all the way back to our Robinson plant. And then, as Gary mentioned, there is even the potential to go north to Chicago and south to the Gulf Coast. So as the volumes ramp up, that's – we'll be able to step into, kind of lag into the growth in the region. So the reason that we upsized Cornerstone from 12 inches to 16 inches was really to handle what we think will be a very large increase in natural gas liquids coming out of Utica, Marcellus. So we do see a lot of opportunities to leverage a lot of pipe we already have in the ground, a lot right of way that we can access to build out a distribution system from the Utica, Marcellus area, west, south and northwest, and as Gary mentioned, even enough (23:32). Chi Chow - Tudor, Pickering, Holt & Co. Securities, Inc.: Great. Yeah, that makes a lot of sense. Thanks for the comments, Pam. I appreciate it.

And our next question comes from Doug Terreson from Evercore ISI. Please go ahead.

Good morning, everybody.

Hi, Doug.

First, I wanted to see if Tim would repeat the compliance cost item that you highlighted for other gross margin in the quarter?

Sure, Doug. You're talking about the $46 million?

Was it $46 million?

Well, Doug, this is effectively at the end of May, we got the sort of the final proposed standards on renewable fuels, especially for biomass diesel.

Right. Okay.

And so we sort of had built into what we expected that obligation to be. We found out at the end of May what it actually was going to be for calendar 2014 obligations, and so we were immediately in a position where we needed to acquire those RINs to satisfy that obligation. So that...

Okay.

... that these are basically D4 and D5 RINs and there's basically about a $46 million cost in order for us to come current based on the standards released at the end of May.

Sure. Okay, thanks. Okay. And then second on Speedway, I wanted to see if we could get an update on integration of the Hess acquisition, specifically on the major areas of earnings opportunity that you guys have talked about meaning how is then its progress unfolding so far versus expectations on light products, supply and logistics, marketing enhancement, and SG&A cost? And also where were light product breakevens in the quarter, if you have them, and all they following at the rate that you thought that they would originally?

Okay, Tony?

Yeah. On the color around the integration with the Hess assets, actually we're moving along at an accelerated pace in converting the brand to Speedway. We're little over 650 stores, more than halfway complete on that progress right now. But Doug, the important thing there is it's more than just the brand. What's going in inside the store is all of our technology that kind of is the platform for our marketing programs, primarily our loyalty program, all of our inventory management, other things that drives savings and synergies for us as we operate convenience stores. In terms of the synergies itself, I mean the early opportunities have been to capture the savings on the light product supply and logistics part of the business, which as you know we've talked many times about, the integrated benefits of MPC's vast supply system and how we're able to take advantage and extract some value from that. I mean those are basically in place right now in terms supplying the stores. And then the other early opportunities have been to capture the operating expense savings and the G&A savings. So for the quarter and for the year, what we're really saying essentially is that we're expecting to be on pace with what we earlier indicated what the synergies would be in the business for 2015. And then down the road as we begin to bring on all of the marketing enhancements through the conversions inside the store that I described earlier, then we'll start to realize those benefits down the road.

Sure. Great. Thanks a lot, guys.

And your next question comes from Neil Mehta from Goldman Sachs. Please go ahead. Neil S. Mehta - Goldman Sachs & Co.: Good morning.

Hi, Neil. Neil S. Mehta - Goldman Sachs & Co.: Gary, I wonder if you could start off by talking about your capital allocation strategy? You raised the dividend by 28% yesterday. How are you weighing buybacks versus dividends at current levels? And how does MarkWest impact the way you think about capital allocation, if at all?

Sure. And Neil, you'll recall at our sell-side analyst dinner, when we were talking about MPLX, we had – we discussed some of these issues there that in fact we think it enhances things going forward. And let me have Tim go into the details.

Yeah. So, Neil, the question of dividends versus buybacks is I think for us is a relative easy one. Dividends, despite their sort of tax inefficiency, we know are an important part of a lot of investors' thinking around a stock. And so our intention will be to maintain a strong and growing dividend for the long term. That is going to be the approach. I think the way we view the sort of what remains from a capital if there's excess capital or cash in the business is that share purchase is the most efficient way to get that back to shareholders. It has the nice benefit of sorting out the shareholder base and basically returning capital to those people that aren't going to be long in the stock anymore and allows for investors to pick their own liquidity window as opposed to pushing cash to shareholders who may not wish it in the form of a special dividend or other form. So I think that's the way we approach it. I think you should expect to see continued focus on both of these. They are are both part of our overall thinking on the sacred trust that exists with investors, with regard to the capital and cash we've been entrusted with. And that's likely how we'll continue. The addition of the MarkWest business and the combination of MPLX and MarkWest we think provides some very interesting dynamics. One of which we described on the announcement call itself, which is it is true that the GP cash flows are enhanced by the transaction. And the way we view that is that there really is a virtuous capital cycle here. As those GP cash flows come back into the C Corp. it becomes available for further investment in what will…

Yes, Neil. What I said earlier in the year, in fact, at your conference in January, has continued to prove out for the year. I've said I think investors should watch the amount of imports coming into the U.S., namely from the Middle East, not only Saudi Arabia, but others. And that has continued to bear fruit for refining. And as we look at the forward positions and how crude oil is positioned right now as imports into the Gulf Coast, we think this remains. And the other thing I had stated is we were expecting to have a second dip. We did not expect a V-shaped curve here, and it ended up being – I think it's going to be a more of W-shaped curve with the crude price, that we expected this second dip. And but we do expect strength going on down the calendar, end of the year probably into the second quarter of next year before you really I think start to see some strength. The other thing is when I look at the volumes coming in through LOOP, the main oil line volumes continue to be strong, which again suggests strong imports coming into the U.S. And it really takes it back to the question of how is crude situated in the Midwest? And we've had this discussion many times, looking at the amount of sweet crude we run versus sour crude. We have the capacity to run somewhere between 65% and 70% sweet crude, and we're basically on the same number this quarter as second quarter of 2014 at around 54% sour. So that suggests we have a lot more room to run more sweet crude if it is priced right in the marketplace. So I think you're going to continue to see light sweet crude coming in from Middle East producers, landing in the Gulf Coast and being available. And that really is going to come back and tie-in with where do we see the drill bit? Where do we see the production out of the Permian and Eagle Ford? We're not getting much Bakken down into the – into PADD 3 today, some, but not that much. But it's Permian. It's Eagle Ford to really see what's going to happen there. So I think some of the same, Neil, going forward, and I expect to see the Middle East producers want to continue to maintain their market share. Neil S. Mehta - Goldman Sachs & Co.: All right, Gary. Thank you very much.

You're welcome.

And our next question comes from Paul Cheng from Barclays. Please go ahead.

Hey, guys. Good morning.

Hey, Paul.

Gary, I was wondering, there's a number of report talking about the tightness in the alkylate market and also at the high octane component. I think one of your competitors even said in the (33:59) talking about they may have difficulty that to produce output. I want to see that what is your view that how tight is the alkylate and high octane component right now in the marketplace? And how that impact that what you can see is on the gasoline supply and the corresponding crack?

As Rich said earlier, Paul, we're very balanced on the outlook because of our reforming capacity. So – but you are right. There have been some wide spreads between the New York Harbor and Chicago and the Gulf Coast on alkylate and therefore octane. We're very balanced at this point in time, but we really see this growing into the future. Again, as I say, getting out to meet the CAFE standard with higher compression engines going many years from now – not many years, but into the latter part of this decade, we're going to need to be able to have more octane in the system. And I think you're going to be able to see this grow over time, these spreads, and this is why we have this interest and why we think it's a natural benefit between MarkWest and MPC going forward.

Will you contemplate to build some new alkali unit in your refining system?

And that's what I had said earlier, Paul, that and as – we're very balanced right now, but the – one of the very strong synergies, operational synergies, from a conceptual standpoint, I don't want anybody to think that we have FID'd an alkylate unit, but from a very conceptual standpoint, with MarkWest being long butane, the producers being long butane in a very strategic area of the country, I think it really tees it up well for us to consider additional alkylation manufacturing capacity. And we're looking at that very strongly. And then I think it makes sense to manufacture it within the region. Don't transport the feedstock to different markets, but rather manufacture it where you need it in order to be able to put it into the final blend stock.

Gary, you have very heavy – I have to apologize, because I came in late, so you may already address it. In the third quarter, looking at your outlook, you have very heavy turnaround in the Midwest. I'm wondering can you share that – how is that outlook maybe for the fourth quarter? And also then in the third quarter is there heavy downtime? Is that primary in the front end of the refinery or the back end of the refinery?

Sure, let me have Rich cover that for you, Paul.

Well, Paul, the turnarounds we have in our Robinson refinery starting in August are really around our hydrocracker and reformer areas and not so much the crude. And then in Catlettsburg that's one of the crude units we'll be taking down to do modifications.

Okay. And then, how about in the fourth quarter, Rich? Are you going to expect that you have a pretty heavy downtime also or is that just going to be more similar to the first half of the year where you don't have a lot of maintenance?

Say Paul, you know our history. We don't like to talk beyond what's going on right now as far as turnarounds. It's just too competitive to get into that going forward.

Okay, that's fair. A final one, maybe this for Tim. Tim any preliminary 2016 budget you can share?

Well, Paul, we would love to be able to give you a look at the year, but we're not in position do so and if we were, we probably wouldn't be sharing it at this point. We – I think as we get closer to the end of the year you can look to us to give some indication for – from some of the metrics, but as you know we're not going to give any sort of full-year guidance at this point.

Can you at least tell us that whether it's going to be more likely, going to be flat, up or down comparing to this year?

Yeah, Paul, it's just too early to say, I think we'll – you will hopefully shortlist your invitation to our December Analyst conference, and if we provide any information it will be in that forum.

All right. All right, we'll do it. Thank you.

Hey, Paul, let me back up to your question about butane and how it fits in with the market and the structure going forward. Don has talked about this when – Don's been on the road, and let me ask him to share as far as some of the producers and consumers.

Thank you.

Yeah, Paul. I think Gary mentioned the benefits to MPC and having the opportunity to have alkylate and octane, the benefit to MPLX of a combined project with MarkWest around this. But I think it's also important to make sure that we're not forgetting about the producer customers of MarkWest or the MPLX combined entity because it is our objective to make sure that they are getting the highest netback that they possibly can get. So these kinds of projects as we think forward are opportunities to benefit the producer customers, opportunities to benefit MPLX, the combined entity and opportunities to benefit MPC the C Corp.

Thank you.

And our next question comes from Brad Heffern with RBC Capital Markets. Please go ahead.

Hey, Good morning, everyone.

Good morning, Brad.

Just looking at yields during the quarter, I noticed that gasoline yield was the lowest I've seen, at least far back as my model goes. I would have thought that during the quarter you guys would have been running max gasoline. Was there any particular reason around that: Was it maintenance or turnaround-related and have you ramped up gasoline yield since then?

Yeah, Brad, this is Tim, and Rich can certainly supplement. I mean I don't think there was any particular focus one way or another. As you know, we will – we run LPs every day and every month in terms of what optimizes the system with regard to product yields from a total value maximization perspective, and then we'll make those decisions as appropriate. We did – exports for the quarter were strong, and those are generally diesel-focused for the most part. So that there – those markets continue to be receptive and robust from a earnings opportunity perspective, but Rich, I don't know if you had any supplements?

I'm looking through. I don't have anything to add to that.

Hey, Brad, this is Don. I mean, exports were 330,000 barrels a day, so a super strong quarter from an export perspective, and as Tim mentioned about 70% of those exports were diesel or distillate. So there was a reason for – we were able to optimize the value in the netback of that diesel production.

Okay. That makes sense. Thanks for that. And then looking at Galveston Bay, I was wondering if you had any update on the synergies that have been achieved to-date, how much there is left to achieve, and then where we stand on the earn-out?

Brad, I'll – this is Gary. In December this is going to be part of the centerpiece. We now have another centerpiece that we're going to talk about at the analyst meeting in December, being MarkWest. But Galveston Bay is going to be a big part of that. To really give you more detail, we're very pleased with where we stand. We're ahead of schedule on the synergies. We just made the second earn-out payment this year. So we paid out $369 million. We have $331 million left in the earn-out, and things are performing out very well this year. I'm very pleased to state that the strike that went on, it has been settled. We've had a great return to work, great productivity from our employees, and very pleased to welcome them back. So things are moving very well at Galveston Bay. But as I said, we will give you, along with Paul Cheng's question concerning the budget, we're going to give you more detail and where we see a lot of low hanging fruit going forward.

Okay I'll leave it there. Thank you.

And your next question comes from Doug Leggate from Bank of America. Please go ahead.

Thanks, good morning everyone. Good morning, Gary.

Good morning, Doug. Where have you been? I haven't talked to you in a long time.

Well, let's just say we're working out of the Scottish office this week. But I got a couple of questions, if I may? First of all, I don't want to label the MarkWest deal too much, but to kind of get straight to the point, there seems to be some chatter in the market that the MarkWest side of the equation may not be terribly happy with the currency anymore. I'm just – I understand the commitment of both sides, but I'm just curious if you feel that there would be a need to change the terms somewhat in order to cement the transaction? And I know it's a tough question to answer, but I do have a follow-up as well please. Thank you.

Yes, Doug and Ed Westlake had the same question earlier on here, and as I've said it's – we believe we're – it's a very compelling transaction and you need to look beyond just MPLX. So we announced this the day after the Iranian nuclear accord was announced and there's been a lot of macro headwinds in the marketplace. And if you look at the large cap MLPs, gathering and processing MLPs, even the high drop-down MLPs, there's been tremendous volatility and headwinds on those. But if you combine the – where the units are trading for both MarkWest and MPLX and take into account the headwinds in the marketplace, we still think that we are in a very compelling business. The relative performance, as I said, looking at MarkWest and look at those G&P units or the large cap units, if you take into account that that tough backdrop along with that, I think it further supports that this is a compelling transaction at this time. We're getting ready to – it won't be long that we'll have the HSR filed, and that'll be followed by the S-4. So there will be more details to come, and I think that's going to further support that this is a compelling transaction.

As you know, Gary, we like the deferral of the refinery drop, so congratulations again on the deal. One follow-up if I may? It's really more a macro question. So there's two things seem to be kind of dominating the second half outlook. One is obviously strong gasoline demand and the other is the remarkable buildup of distillate. I'm just kind of curious as – because of your unique exposure on retail you tend to have a pretty good handle as to whether the 6% EIA gasoline demand growth is really translating on a same-store sales basis. So I wondered if you could comment on your view of sustainability of gasoline demand growth. And I guess the byproduct which is strong refinery runs means more distillate production going into winter and we seem to be starting from a fairly high level of inventory. So real more of a macro question. I'd just love to get your perspective on those two things and I'll leave it there, Gary. Thank you.

Sure, if you look at the overall gasoline demand and the 6% EIA, the last number I saw was 5.1% but maybe you have a new number from what I had yesterday, but and that's why we gave a little more color in Tim's presentation here on Speedway's gasoline being a market leader in many of the markets. With that, as we are trying to move these, as you recall, in the second quarter crude oil prices went up significantly over that period of time and with that trying to reflect that incremental cost to the Street is difficult. So that's why we gave more color this time to look at overall Speedway legacy assets versus – or legacy stores versus the new stores they acquired on the East. But we think that we performed very well on incremental gasoline, and we're continuing to see that as Tim outlined here in – early in the third quarter. We're continuing to see that move forward and move up very nicely. On distillate, as Mike Palmer and Tim spoke as well, our distillate exports continued to be very strong. And as I look at our book going into the third quarter they continue to be robust. So I think we're very well balanced on distillate. I think as the fall – you have two things, the fall harvest and secondly the fall turnaround schedule especially the ones that we've already talked about this morning, I think is going to soak up some of the distillate in the market. But the key, you're absolutely right Doug, the key to watch is how the exports continue forward on distillate.

Thanks a lot, Gary. Appreciate the answers.

You're welcome.

Our next question comes from Ryan Todd from Deutsche Bank. Please go ahead.

Hey, good morning, guys, it's actually Igor Grinman here.

Good morning, Ryan.

It's Igor here chiming in for Ryan. Hi, Gary. Just a question on the refining side your – so the other gross margin bucket contributed, I think it was $19 million in the quarter or call it a little bit higher if you're adding back the RFS-related hit you called out, either way it's a bit of a drop-off versus recent quarterly levels. So just curious as – I know it's notoriously fairly volatile but – and there are lot of moving factors in there, just curious is there anything that you can kind of point to the drop-off?

Yeah, sure let me have Tim take that.

Yeah, Igor, thanks. Certainly what we've seen on a run rate basis around this has been higher but we've had – we had a couple of things in the quarter that sort of are all part of that other gross margin. I think you're probably referring to the slide in the appendix that shows it as $19 million. But within the quarter we had, as I had mentioned in my comments, we had volumetric gains which were an impact on the quarter. That's frankly just the scale impact. Volumes were slightly lower, but just with lower absolute prices you're going to see a lower impact there. So that was a hit on the quarter. Product price realizations again, as you said, we've picked up the 46. That's part of that. But we did see a little bit softer gas margins in the quarter, and frankly, just less favorable than where they were for second quarter last year. Second quarter last year was a very strong quarter. You've probably heard us say on multiple occasions that we really perform best in volatile environments. That's where we have the greatest opportunity to sort of optimize the system, and frankly, second quarter last year was a very good quarter on that basis. And then we had some impact to some of the incremental crude costs, some of which we've already described, and some that had an impact on the quarter. So those are probably the biggest drivers and I think the things we'll highlight, and we'll see how this is looking forward.

Great. Thanks, guys. Just one more, and apologies if this was discussed already, but on Speedway, fuel margins dropped off a good amount quarter-on-quarter. And I understand the crude price movement was upward and/kind of stabilizing over the quarter, but anything else there that we should note? Or is this kind of a feeling (50:28) of a level more or less on the margin side?

Gary, let me answer that, please.

All right.

Yeah. I mean it goes back to Gary's comment he just made a little earlier. Crude ran up our wholesale cost increase, and that's kind of the pressure you're under when you're trying to pass on increasing cost. And that's what we saw in the second quarter. It's as simple as that.

All right. Great. Thanks, guys.

And our next question comes from Phil Gresh from JPMorgan. Please go ahead.

Hi. Good morning. First question, just any update on the cap line reversal analysis? I know it's something you had put a press release out a couple of quarters ago, so I was just looking for any recent thoughts?

Phil, there's nothing new from what we've talked in the past. Still think it makes sense, but it takes a unanimous approval by all the owners but no update from the last time.

So is there a particular timeline on it or not really at this point in terms of trying to make a decision?

I would say, as we said last fall I believe, that we did a study from an engineering standpoint of what it was going to take. But it – from an engineering perspective, it's – I won't say it's easy, but it's just kind of a normal engineering project to be able to reverse the pumps and be able to reverse the flow. The biggest thing that I think you need to understand and the market needs to understand is where do you get the heavy crude supply into Patoka? In order to be able to reverse this you need a static heavy crude supply into Patoka so that you can have a good heavy supply and a ratable supply to the Eastern Gulf. And I would say that that is the issue, and with the downturn in crude prices and looking at the Canadian supply coming forward, I think the incremental Canadian supply is probably being pushed back a few years.

Sure, okay. And then just in terms of, I mean you've done the Hess deal, MWE, I mean is it fair to say that the organization at this point becomes kind of organically and inwardly focused in terms of execution in that further M&A anywhere across the portfolio is probably more limited likelihood?

Yeah, I would say we have a lot to say grace over right now.

Fair enough. Thanks.

And the next question comes from Roger Read from Wells Fargo. Please go ahead.

Yeah, good morning.

Hey, Roger.

Gary, I'd like if we could be maybe the differential question, following up on the comments on the Canadian crude, and just the fact the differential is being narrower, kind of trimmed Q2 margins a little bit, any quantification you can give us or maybe just as we think Q2 to Q3 is especially WCS diffs have opened up, how that may impact realizations?

Yeah. Let me ask Mike to cover the current markets.

Yeah Roger. I guess what I can tell you, and it's obviously market information, but the wildfires in the Coal Lake area are behind us. And in addition to that, when you look at the differentials today, the Canadian heavy dip is up around that $16 level. We've got – we do have some projects that are coming on in Canada that were sanctioned some time ago before oil prices fell. So we've got some additional supply coming on from several projects. In addition to that, when you look to this this fall period, we do have some heavy refineries that have turnaround. So this $16-ish kind of differential, this wider differential that we're seeing, is likely to be with us for a while. So it looks very positive.

Okay, thanks. And then Gary, you mentioned earlier on the question regarding diesel and the need to focus on exports, is it, as simple as we should just watch the arbs to the various international regions? Or is there something else where we will actually notice a change in volumes first and change in arbs second? I was just kind of curious, chicken or egg question there.

So I think you've got it right. That's chicken or the egg. And I wasn't saying that to give a hint on anything. It's just we have continued to see very strong and very robust demand on diesel into Latin America, Europe and South America with continued increases in the request for gasoline cargos. So I find both export products being very strong going into the third quarter and so I was just saying continue to watch that because I think that underpins the strength of refining going forward.

Okay. Thank you.

You bet, Roger.

And your next question comes from Faisel Khan from Citigroup. Please go ahead.

Hi, good morning. Thank you, guys.

Hi, Faisel.

Hi, Gary. I'd sort of go back to some of the comments around octane. So are you saying that the octane market is getting – is it getting shorter just because we've had this big uptick in gasoline demand so we need to fill that gap? Or is it – you also talked about the CAFE standards having impacts on octane, but I would think about the CAFE standards is actually having a negative effect on gasoline demand and therefore having a negative effect on octane demand. But can you just sort of elaborate a little bit more on what your – on how you see the octane market over the next year or two, especially given where gasoline demand is today?

Let me have Rich cover that and then I'll take the longer term strategy part of octane.

I think what we're seeing is as we run the lighter crudes and the crudes with the diluent you're using those light straight run materials to blend off your octane, and that's raising the overall cost of the octane. So it's a function of some of the lighter feed stocks that we're dealing with.

Okay.

And what I was saying long term is it's not just – and it's going to – octane demand going forward is going to go with the changeover of the fleet. It's a changeover of the fleet and the manufacturers are starting to put out higher compression engines. So that will gradually grow with the changeover of the fleet that you're going to need higher octane as really the base gasoline to power these – the new cars coming off the line. So it's not going to be a drop in MPG that is going to hurt. It's going to be the incremental demand from the new fleet coming in with the higher compression engines.

I will now turn the call back over to Geri Ewing for closing comments.

Thank you for joining us today, and thank you for your interest in Marathon Petroleum Corporation. Should you have additional questions or would like clarifications on topics discussed this morning, Teresa Homan and I will be available to take your calls. Thank you.

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