Welcome to the MPC Fourth Quarter 2019 Earnings Call. My name is Jacqueline, and I will be your operator for today's call. Please note that this conference is being recorded. I will now turn the call over to Doug Wendt. Doug, you may begin.

Thank you, Jacqueline. Welcome to Marathon Petroleum Corporation's fourth quarter 2019 earnings conference call. The slides that accompany this call can be found on our website at marathonpetroleum.com under the Investors tab. On the call today are Gary Heminger, Chairman and CEO; Don Templin, CFO; Mike Hennigan, CEO of MPLX, as well as other members of the executive team.

Thanks, Doug, and good morning, and thank you everyone for joining us. I too would like to congratulate Kristina and look forward to her return in a few weeks. If you please return to Slide number 3. Earlier today, we reported adjusted net income of $1 billion or $1.56 per diluted share. This quarter's performance demonstrates our continued ability to execute across all aspects of our business and capture incremental synergies at an accelerated pace. In Refining and Marketing, the team's commercial document coupled with our geographically diverse footprint drove tremendous capture results of 105%. Key drivers of capture for the quarter included strong gasoline price realizations, leveraging our integrated assets and scale to capture geographic base prices dislocations compared to broader market benchmarks and the impact of our strong synergy delivery. Our Refining team executed turnarounds, performed engineering projects, and completed major maintenance at multiple refineries. At Garyville, the crude revamp project and the first phase of the coker expansion project were commissioned, allowing us to realize higher coker unit rates from the expanded drum size. The second phase of the coker project is on schedule to be completed in the first quarter of 2020. Early operating results in the first quarter, coker, have been very positive and we have been able to achieve a 17% capacity increase, exceeding our original project expectations. We expect - anticipate the second phase of the project to achieve a similar rate increase. Our Speedway team also executed well this quarter. They delivered strong results while also exceeding our cumulative store conversion target with over 700 stores converted to the Speedway platform since the combination. In the Midstream segment, we progressed strategic long haul pipeline projects that are key to the development of our integrated Permian-to-Gulf Coast logistics system. Additionally, Northeast gathered, processed and fractionated volumes were up 18%, 14%, and 12% respectively in 2019 versus 2018, demonstrated continued growth and strong performance in this region.

Thanks Gary. Turning to Slide 4. Today we updated MPLX's 2020 growth capital target to approximately $1.5 billion, down from the approximately $2 billion target shared last quarter. This reduction shows our ongoing commitment to high grade, our project portfolio. We are also targeting growth capital of approximately $1 billion for 2021. We continue to emphasize the growth of the L&S segment. We also remain focused on advancing our strategy of creating integrated crude oil and natural gas logistics systems from the Permian to the U.S. Gulf Coast.

Thanks Mike. Slide 5 provides a summary of our fourth quarter financial results. Earlier today, we reported adjusted earnings of $1.56 per share. Adjusted EBITDA was $3.2 billion for the quarter. Operating cash flow before working capital was approximately $2.7 billion. We returned $409 million to shareholders in the fourth quarter, bringing the total to $3.3 billion of capital return to shareholders in 2019, including approximately $2 billion in share repurchases. Slide 6 shows the sequential change in adjusted EBITDA from third quarter to fourth quarter. Adjusted EBITDA was up approximately $100 million quarter-over-quarter, driven by higher earnings in all segments of the business. Fourth quarter results included a non-cash impairment charge of approximately $1.2 billion related to goodwill associated with gathering and processing businesses acquired as part of the Andeavor combination. Our reported effective tax rate for the quarter was 51%. This is significantly higher than our historical rate due to the effects of the non-taxable deduct - non-tax deductible midstream goodwill impairments and a biodiesel tax credit included in pretax income. Excluding these items, our overall adjusted tax rate for the quarter would have been approximately 17.5%. This adjusted rate was also lower than our normal 21% effective tax rate, primarily as a result of discrete tax benefits recognized in the fourth quarter.

Thanks Don. As we open the call for your questions, as a courtesy to all participants, we ask that you limit yourself to one question and a follow-up. If time permits, we will re-prompt for additional questions. With that, we will now open the call to questions.

Thank you. Our first question comes from Phil Gresh of JPMorgan.

First question, Gary, you shared a lot of helpful color on your thoughts on how things are going to progress here from a macro perspective. Just wanted your additional thoughts on high sulfur fuel oil. You talked about your expectations that prices would continue to come down there and then pressure the sweet sour spreads, but obviously recently you've seen a rather strong improvement or strengthening in the high sulfur fuel oil crack. So what do you think is happening there and how do you foresee this playing out?

Yes. Phil, let me turn that to Ray Brooks. He will give you some color on this.

Hi, Phil. As far as high sulfur fuel oil, we have seen - we have seen that incentive and we've taken advantage of the fact with our system. I kind of want to break that into two pieces. The first is, our internal production of high sulfur fuel oil where we don't have coking capacity. What we've done through our investments at our coking refineries has have the logistics that essentially we're taking all back material and we're taking it to our coastal refineries with cokers and destructing that. The other thing is, we're configured for additional high sulfur fuel oil and we're taking advantage. The biggest thing thus far is out on the West Coast between LAR and Martinez, we're in the 20,000 to 30,000 barrels a day range of purchased feedstock. We talked earlier on the call about our work in the first quarter with Garyville, completing that coker work. Once that's done, we'll have similar opportunities at Garyville.

And then just from a macro perspective, maybe Gary your thoughts as to why the cracks have strengthened so much, and do you see a re-weakening of high sulfur fuel oil cracks coming?

This has really been our strategy all along that we didn't see that we will see a increase in the cracks due to higher distiller prices on the front end. We really saw it as a feedstock advantage on the front end as Ray just discussed. Now as we go forward and it appears to us, we're getting - the market is starting to strengthened and we're seeing pretty strong compliance with the shipping companies and switching over to the low sulfur fuel oil and we think that bodes well. We never expected in the first three, four weeks of January to have a acceleration in the distillate cracks. We thought this would come and we'll be stair-step into the year and that's still how we feel, Phil.

Second question would just be on the capital spending where obviously we've seen some reduction in the planned spending here. The refining growth CapEx is still fairly elevated in 2020, and I know in the past, Gary, I think you've talked about some potential for that to come down further especially as we look beyond 2020. So is that something that you would still expect? And then if I could tie in, just - the turnaround spending number is also up quite a bit year-over-year. Is this just an elevated turnaround year and is that something you would also expect to come down more in future years? Thanks.

Yes, Phil. This is Don. Let me address, sort of, CapEx first, and then I'll have Ray talk a little bit about the turnaround spending. So you'll recall that in December 2018 at our Investor Day, we targeted about $2.8 billion of capital for MPC, excluding MPLX, our target and we also targeted basically flat capital spending in 2020 from that $2.8 billion. So our total capital budget for MPC excluding MPLX is down. And as you rightly say, there are some projects that are multi-year projects. So about 40% of our refining growth capital is related to the STAR project. So that's the one at GBR and the Dickinson Renewable Diesel project. The Dickinson Renewable Diesel project will essentially be complete at the end of the year. So all of that capital will fall off, and the STAR project, it's spending will be substantially less in 2021 than in 2020. So your comment about some of those ongoing capital projects tapering off is absolutely correct. So let me turn it over then to Ray to talk a little bit about turnarounds.

Hey, when we did the combination back in 2018, the turnaround spend, go-forward spend was not as ratable as we would preferred. 2019, even though we did a lot of work at Los Angeles, Martinez and St. Paul Park was a little lighter than average. 2020 will be a little heavier in average, particularly in the first quarter, but we're working that our go-forward schedule is going to be more even year-in and year-out. Our biggest work is in the first quarter at 2020. We're currently in the latter stages at El Paso doing a turnaround on the south side of that refinery and then we'll follow that up with a pretty much full plant refinery at Salt Lake City, and both of these are seven year cycle ending turnaround. So not a whole lot of options to work with there. And then the other piece, that's major in this quarter, is we have the second phase of our Garyville Coker Max project, just starting in a couple of weeks, coupled with the catalyst change. So higher first quarter but when margins are low, that's when we really want to load our turnaround spend.

Our next question comes from Doug Legate from Bank of America. Your line is open.

Gary, I have a feeling this might be your last earnings call. And so I just want to wish you all the best, but also ask you to maybe frame your outlook for the macro going forward. Specifically, is IMO playing out as you expected. I know you touched on it a few minutes ago, but it seems things are a little softer at least on the product side. And I wonder if I could have you elaborate on your confidence, let's say, that the new capacity additions going forward might be met with run cuts and less advantaged areas? And I've got a follow-up for Don please. But again, I hope to run into you again, Gary, and thanks for everything you've done over the years.

Thank you, Doug. Maybe in the future you can take me through a proper dinner. That's a long history with Doug. So Doug, the - yes, as I just stated, we think IMO is starting off like we had anticipated and we were conservative in our views on IMO, did not expect a significant run-up in crack spreads. Now, of course, this has been a bit of a downward move recently with the coronavirus, but I think that will - I think distillate demand will certainly pick up quickly the aftermath of this. But as I said, first, we are looking at feedstocks to be depressed and it gave us higher margins being able to run the feedstocks. That is happening. We are being able to eradicate all of the resid in our own system by moving it into our coastal refineries as Ray just mentioned. That's right on target of what we expected. And as I said, we never expected a immediate run up in distillate pricing. We think this is going to be more steady and stair-step over the year. And I think the most positive thing that we're seeing is what appears to be the compliance of the shipping companies. And so, yeah, I would say, Doug, it's right on target where we expected. Ray wants to add another comment.

Yes, the other thing regarding run cuts, the thing that I would offer, we talked about resid destruction, we talked a little bit about diesel. The other factor with IMO is VGO and how it plays into it. So what we've seen is a very, very strong VGO market and so we pivoted on that. So mainly in the U.S. Gulf Coast where we've taken about 50,000 barrels a day out of our cat crackers and putting that in the VGO market.

And Doug, I would say the last part --

Go ahead, Gary.

Those coastal refineries of what we believe we have the highest leverage to anyone in the industry, but the coastal refineries that have the processing ability to handle the heavy resid and destroy that in our coking system. When you look across the globe, those refineries that have that processing are going to be advantaged, and we expect probably some East Coast and European refiners who do not have that capability will have a hard time competing on the front end here.

I appreciate all your comments. I do not want to elaborate on this question too much, but Ray, could I just touch on your VGO comment. I mean, we've all been hoping that may happen, but do you think it's enough to perhaps cleanup the gasoline weakness that we've been seeing here in the last several quarters.

I think, Doug, I would say - I mean the thing that you're going to see immediately to clean up the gasoline inventories is the RVP changeover, that will be starting here in just a couple of weeks and that vector will accelerate anything then in VGO. Dave, do you agree with that comment?

Yes, we get started actually out West with the RVP turn in a few days really, but additional to the RVP turn, Gary, is the shutdown scheduled coming up. That also tends to put a draw on not only Gasper diesel inventories.

Well, thanks a lot of fellows. Yeah, it does indeed, Gary. My follow-up very quickly and I will hopefully keep it quick, because I've been talking a long time about the stuff already. Just the capture rates and synergies. I'm just wondering if the synergies are flowing through just obviously a little bit quicker, are we now seeing upside risk or permanent reset in your capture rates or maybe the likelihood that you are going to go out with the buying, Gary, and reset the synergies, higher sometime this year. That seems to be really