Welcome to Marathon Petroleum Corporation's first quarter 2024 earnings conference call. The slides that accompany this call can be found on our website at marathonpetroleum.com under the Investor tab.

Joining me on the call today are Mike Hennigan, CEO; Maryann Mannen, President; John Quaid, CFO and other members of the executive team. We invite you to read the Safe Harbor statements on Slide 2.

We will be making forward-looking statements today. Actual results may differ.

Factors that could cause actual results to differ are included there as well as in our filings with the SEC. With that, I will turn the call over to Mike.

Thanks, Kristina. Good morning and thank you for joining our call.

Effective March 1, two new independent directors joined the MPC Board. Eileen Drake and Kimberly Ellison-Taylor have strong records of accomplishment in complex industries, making them outstanding additions, and we're happy to have them join our Board.

As for the macro-refining environment, we remain constructive in our view. Oil demand is at a record high globally, and we expect oil demand to continue to set records into the foreseeable future.

Forecasted outlooks for this year estimate 1.2 million to 2 million barrels per day of incremental demand over 2023, primarily driven by the growing need for transportation fuels. Within our own domestic and export business, we are seeing steady demand year-over-year for gasoline and growth for diesel and jet fuel.

And we continue to believe that 2024 will be another year of record refined product consumption. Global supply remains constrained, anticipated capacity additions have progressed more slowly than expected, and longer term, the level of announced capacity additions remains limited for the rest of the decade.

In the first quarter, high global turnaround activity, the transition to summer gasoline blends, and light product inventories supported refining fundamentals, especially towards the end of the quarter. As we look forward, we believe these fundamentals will support an enhanced mid cycle environment for the refining industry.

We believe the U.S. refining industry will remain structurally advantaged over the rest of the world.

Our system has a locational advantage given the accessibility of nearby crude, which we believe will grow as cost of transportation increases. The availability of low cost natural gas, low cost butane, and our refining systems complexity all increase our competitive advantage over the international sources of supply.

Even with this outlook, we remain focused on capital discipline, while investing to grow earnings at strong returns. In the first quarter, we invested over $1.3 billion in capital expenditures, investments and acquisitions comprised of attractive refining projects and midstream investments including MPLX's $625 million strategic acquisition in the Utica Basin.

In refining, we are investing predominantly at our large competitively advantaged facilities to enhance shareholder value and position MPC well into the future. With a focus on safety and asset reliability, we successfully completed the largest amount of planned maintenance work in MPC's history.

Four of our largest and most profitable refineries were in turnaround during the quarter limiting our financial performance. These assets were in turnaround during a period of lower demand and now we're ready to meet the increased consumption that comes with the summer driving season.

In Midstream, MPLX continues to execute on attractive growth opportunities. The Harmon Creek II gas processing plant was placed into service in late February, bringing processing capacity to 6.5 billion cubic feet per day.

And in the Permian Basin, Preakness II is approaching startup and expected to be online by the end of May. We're also building our 7th gas processing plant in the basin Secretariat, which is expected to be online in the second half of 2025.

Once operational, our total processing capacity in the Delaware Basin will be approximately 1.4 billion cubic feet per day, which would average to a pace of roughly 1 new plant per year since 2018. Additionally, MPLX announced 2 strategic transactions.

First, in the Utica, MPLX enhanced its footprint through the acquisition of additional ownership interest in an existing joint venture and a dry gas gathering system. We've already seen growth in the rich gas window of the Utica and we see new producers moving into the region.

Second, MPLX entered into a definitive agreement to combine the Whistler pipeline and Rio Bravo pipeline projects into a newly formed joint venture. The platform expands MPLX's natural gas value chain and positions MPLX for future growth opportunities.

MPLX is strategic to MPC's portfolio. Its current $2.2 billion annualized cash distribution MPC fully covers MPC's dividend and more than half of our planned 2024 capital program.

We expect MPLX to continue to increase its cash distributions as it pursues growth opportunities, further enhancing the value of this strategic relationship. Our overall capital allocation framework remains consistent.

We will invest in sustaining our asset base, while paying a secure, competitive and growing dividend, and we intend to grow the company's earnings while exercising strict capital discipline. Beyond these three priorities, we are committed to returning excess capital through share repurchases to meaningfully lower our share count.

Demonstrating this commitment, today we announced an additional $5 billion share repurchase authorization. Our total capital return through share repurchases and dividends since May of 2021 now totals $35 billion with MPC share count reduced by nearly 50%.

Let me take a second to share our view on value. We continue to believe share repurchases make sense of the current share price level.

When we purchase MPC stock, we are buying into a premier highly advantaged refining system. We're also buying into a growing midstream business via our ownership in MPLX.

And finally, we are buying strong business execution, disciplined investment and a commitment to capital returns, which will continue to position MPC as an excellent investment. At this point, I'd like to turn the call over to Maryann.

Thank you, Mike. Our team's operational and commercial execution supported our ability to generate earnings per share of $2.58 for the quarter $3.3 billion of adjusted EBITDA, while having 4 of our largest refineries in turnaround.

This quarter, in conjunction with the planned turnaround activity, we took the opportunity to execute incremental, smaller, high return, quick hit projects focused on optimization and reliability initiatives. This planned maintenance activity contributed to a reduction in refinery throughput of nearly 270,000 barrels per day or 9% compared with the fourth quarter.

We plan this turnaround activity to occur in the fourth quarter -- in the first quarter, excuse me, with a focus on safety and asset integrity and in a period of seasonally weaker demand. Now with a large portion of our 2024 activity complete, we are well positioned to run our refining system near full utilization through the summer driving season.

Capture in the quarter was 92% and reflects the seasonal market backdrop. Light product margins were weaker and product inventory builds were both headwinds to quarterly results.

Our commitment to commercial excellence remains foundational. We believe that the capabilities we have built over the last few years provide a sustainable advantage versus our peers, and we expect to continue to see the impact in our quarterly results.

We are successfully progressing our 2024 capital investment plan. This includes executing on a multiyear infrastructure investment at our Los Angeles Refinery and construction of a distillate hydrotreater at our Galveston Bay refinery, both expected to yield returns of approximately 20% or more.

In addition to these large projects, we continue to execute on smaller high return quick hit projects targeted at enhancing refinery yields, improving energy efficiency and lowering our cost. Let me turn the call over to John.

Thanks, Maryann. Slide 6 shows the sequential change in adjusted EBITDA from fourth quarter 2023 to first quarter 2024, as well as the reconciliation between net income and adjusted EBITDA for the quarter.

Adjusted EBITDA was lower sequentially by approximately $300 million, driven primarily by heavy planned turnaround activity resulting in lower R&M throughputs. To assist with year analysis, we thought it helpful to note the company recorded an $89 million or $0.20 per share charge resulting from the quarterly fair value remeasurement of certain long-term incentive compensation.

Aligned with shareholder value creation, the charge was driven by the $53 or 36% increase in our share price, as well as our total shareholder return performance versus our peers during the quarter. Again, this charge, which we did not adjust for, reduced earnings by $0.20 per share.

The tax rate for the quarter was 18%, resulting in a tax provision of $293 million. While this rate is lower than what we'd expect to see for the year, it reflects the permanent tax benefits of net income attributable to non-controlling interest in MPLX, as well as a discrete benefit related to equity compensation realized in the quarter.

Moving to our segment results, Slide 7 provides an overview of our Refining & Marketing segment for the first quarter. Our Refining & Marketing results reflect lower throughputs associated with planned turnaround activity ran at 82% utilization processing over 2.4 million barrels of crude per day.

Refining operating costs were $6.14 per barrel in the first quarter, higher sequentially, primarily due to the lower throughputs. Sequentially, per barrel margins were up slightly as higher crack spreads were offset by lower margin capture.

Slide 9 shows the changes in our midstream segment adjusted EBITDA versus the fourth quarter of 2023. Our Midstream segment is growing and generating strong cash flows.

In this quarter, MPLX's distribution contributed $550 million in cash flow to MPC. As Mike said, MPLX remains a source of durable earnings in the MPC portfolio and is a differentiator for us.

Slide 10 presents the elements of change in our consolidated cash position for the first quarter. Operating cash flow excluding changes in working capital was over $1.9 billion in the quarter, driven by both our refining and midstream businesses.

Working capital was a $389 million use of cash for the quarter, driven primarily by minor builds include in fine product inventories mainly related to the turnaround activity. This quarter, capital expenditures, investments and acquisitions were $1.3 billion including $710 million of growth and maintenance capital and $622 million for MPLX acquisitions, net of cash received.

Highlighting our steadfast commitment to superior shareholder returns, MPC returned $2.5 billion via repurchases and dividends during the quarter. As Mike commented, earlier today, we announced the approval of an additional $5 billion for share repurchases and as of April 26, we have $8.8 billion remaining under our current share repurchase authorizations.

And from May of 2021 through April 26 to this year, we have repurchased 312 million shares or 48% of the shares that were outstanding in May of 2021. At the end of the first quarter, MPC had approximately $7.6 billion in consolidated cash and short-term investments, which includes $385 million of MPLX cash.

Turning to guidance, on Slide 11, we provide our second quarter outlook. With our significant first quarter turnaround activity behind us, we are projecting higher throughput volumes of nearly 2.8 million barrels per day, representing utilization of 94%.

Planned turnaround expense is expected to be approximately $200 million in the second quarter with activity primarily in the Mid-Con region. Operating costs are projected to be $4.95 per barrel in the second quarter, much lower than the first quarter, reflecting the benefit of running our system near full utilization and lower expected operating costs.

For the full year, we expect operating cost per barrel to trend towards a more normalized level of $5 per barrel subject to energy cost volatility. Distribution costs are expected to be approximately $1.5 billion for the second quarter.

Corporate costs are expected to be $200 million. With that, let me pass it back to Mike.

In summary, our unwavering commitment to safety, operational excellence and sustained commercial improvement positions us well. We will continue to prioritize capital investments to ensure the safe and reliable performance of our assets.

We will also invest in projects where we believe there are attractive returns. The enhanced mid cycle environment should continue longer term given our advantages over marginal sources of supply and growing global demand.

MPLX remains a source of growth and a unique competitive advantage in our portfolio. We believe it will continue to grow its cash distributions to cover both MPC's dividend and capital requirements and still generate excess cash before the first dollar of refining EBITDA is earned.

Another way to frame it, MPC has reduced its share count from approximately 650 million in May of 2021 down to approximately 355 million at the end of the first quarter. Over this same timeframe, the MPLX units owned by MPC is held roughly flat at approximately 650 million units.

So the ratio of MPLX units held by MPC to our outstanding shares or the potential value to MPC on a per share basis from MPLX has nearly doubled. The midstream business which continues to grow provides a unique value proposition for MPC shareholders.

We believe MPC is positioned as the refiner investment of choice with the strongest through cycle cash generation and the ability to deliver superior returns supported by our steadfast commitment to return capital. Consistent with our goal to have the strongest through cycle cash generation, even with 4 of our most profitable refineries in turnaround adjusted on a comparable basis, we still generated more cash from operations than our refining peers, very proud of the team's accomplishment.

With that, let me turn the call back to Kristina.

Thanks, Mike. As we open the call up for your questions, as a courtesy to all participants, we ask that you limit yourself to 1 question and a follow-up.

If time permits, we'll reprompt for additional questions. With that, operator, we're ready.

I had 2 questions. The first one is more of an industry one, which is your perspective on the West Coast, we've seen as Rodeo has shut down and Martinez, West Coast margins have really strengthened here, particularly for gasoline.

So what's your outlook as we go into the summer and your thoughts on doing business in California broadly?

I'll let Rick start off with that one.

The market really in California is fundamentally short and it's long diesel. That's kind of the thesis as we look out there.

And an example of that is if you look at gasoline inventories especially right now they're tight. In fact they're below the 5-year average and we're seeing solid demand across the integrated system.

So I generally would say that's the reasoning for the scenario right now and I just want to reiterate the market is short gasoline. And so this is an environment that we expect may persist through summer, and we'll see where it goes from there.

And then the follow-up is just on the return of capital cadence. The buyback this quarter, the 2.2 was a little bit lighter than what I think many in the street were modeling.

Just any thoughts on what was that a reflection of some of the one time working capital and M&A dynamics or valuation sensitivity and how should we think about that over the course of the year?

There is no change in our commitment to returning capital, evidenced by the fact that we got the Board to authorize another $5 billion. So what I would say to you is, don't read into the quarter-by-quarter variability.

To your point, it could have been a little bit higher, but there's a lot of factors that are influencing the activity within the quarter. So, the takeaway should be, we are committed and that hasn't changed.

We believe in returning capital to shareholders. You're going to continue to see us do that.

Mike, in your introductory comments you did mention that some global capacity was supposed to come on. It's challenged, it's not really come on.

I'm trying to understand here, once we go past 2024, like 2025, there is limited capacity expansion that we're aware off. And at this point, I think we understand the 2024 will be above mid cycle, but based on your commentary would it be fair to say given Rodeo shutdown and other Houston refineries shutting down, you could still see 2025 also as a year where cracks are above well above the mid-cycle levels.

I think you said it very well. I'll let Rick add some comments.

But in general, like we said in our prepared remarks, global supply is constrained and we are a believer that demand will continue to set records year-after-year throughout the rest of the decade. So, we're very bullish demand with a constrained supply scenario leads us to the situation that we have in the market today.

We don't see it changing based on everything that we know is available to us, and that's why we have that view. But I'll let Rick add some color.

So I will echo Mike's comments and share what you know and what you're reading is what we're seeing and hearing in the marketplace as well that the expansion appear to be continuously delay and with that Mike mentioned in his opening remarks, we see demand growing by 1.2 million to upwards to 2 million barrels a day. So pick a number even in between there and that exceeds Manav, the expansions that may come online end of year this year or sometime in 2025.

So even with those expansions coming online, we see demand outpacing those expansions and thus why we're so optimistic on this mid-cycle plus environment lasting.

And Manav, let me also add that historically the demand numbers continue to get revised up. I know everybody is real time in their thought process, but it's also good to look back no matter which agency is doing it.

In fact, the U.S. agency, when they put the monthlies out, have continually for a long period of time been underestimating gasoline and diesel demand.

So it's just another factor that should put on people's radar to really look at all the revisions that have occurred, because the demand numbers have been stronger once they get fully corrected and vetted than they are sometimes in the real time disclosures.

My quick follow-up here is, I don't think I remember any time when I've seen a $650 million turnaround expense in a single quarter. So this quarter was truly exceptional in the amount of down time you took.

Now we look at second quarter guidance, it's meaningfully up. But if you look at the rest of the year, should we imagine that 1Q truly was exceptional, because if you were to run harder for the rest of the year, that would mean better capture, lower OpEx per barrel, but it would also translate to higher G&P earnings when you translate it to the MPLX side.

Let me start. So you're absolutely right.

We tried to share as we were on our call last quarter that we expected to have really the largest turnaround in MPC's history in the first quarter and we did. We had four of our largest assets in turnaround.

We think that's important as you well stated given getting that work done ahead of summer driving season. We think we are well poised for that.

You made comment also about the utilization. As you can see from our guidance, utilization is up.

OpEx per barrel similarly when you look quarter-over-quarter, the throughput impacted by the turnaround was certainly a driver. Sequentially, we're down OpEx and you can see from what we guided in the second quarter as well that OpEx per barrel is actually well below the what we printed for the first quarter.

So I think you said it well. We took the opportunity in the quarter, while we had the downtime at those largest plants as I mentioned in my prepared remarks to work on some projects at those same refineries, those same assets that we think will add reliability in the future as well.

Hope that answers your question.

And Manav, this is John. Just to build on what Maryann is saying to connect some thoughts as well, those additional projects that we took the time to do, right, you can see some of that in turnaround, some of that in OpEx, but really we felt like given the window we had and getting ready for the rest of the year that was the right thing to do.

Sorry, just wanted to add that.

And just too quickly follow-up, like the higher throughput also results in higher MPLX earnings for the next quarter, right?

I'm not sure this question came up on the MPLX call as well, but I know a little bit about it from my prior role. Remember, there's maybe less sensitivity on the L&S side of that business as refinery utilization moves higher and lower, just given the contractual structure of those contracts.

So, while there is some sensitivity, it may not be as much as you might be thinking.

I just want to add, I think the takeaway is, as Maryann said, is we chose to use the first quarter to take down 4 of our most profitable refineries to lower demand period in the U.S. et cetera.

And our thought process there was spend that money, increase the reliability, get ourselves ready, so that we're able to perform in the second and third quarters as we progress out the year. So we think we positioned ourselves very well despite a heavy spend in the quarter.

We're happy that we've done it. We think the assets are in really good shape and we're looking forward to the rest of the year.

I guess that may be a good answer. If we look at comparing to your guidance from last quarter, your throughput is lower, OpEx and turnaround expense are higher than the guidance.

Is it all contribute by what you characterize as some of these quick hit projects that is not originally in the guidance or that something else is contributing to that? That's the first question.

It's Maryann. So yes, I think you characterized it well.

We took the opportunity while those assets were down in turnaround to work on a few projects, frankly, one of each of them that we felt would improve reliability going forward. When you talk about the guidance throughput, as you said, slightly below that we guided, which contributed to the OpEx per barrel number that you saw slightly higher than what we guided.

But in general, as we're in turnaround and we look at the activity there, we took the opportunity to do what we needed to do to ensure safe reliable operations. And as Mike has already said, given us the opportunity to run hard as we look at the driving season ahead and increased performance.

The second question is that, maybe this is for Rich. With the TMX spot up, how that will impact your West Coast operation?

Will you be able to fully repay the heavy oil and the medium sour that you're currently running over there by the WCS or that we have some kind of configuration limitation, because the WCS is consistent mostly with the bitumen and a lot of comments say, but don't have the middle.

So, on the West Coast specifically, let me maybe back up and share what is public. We do have a TMX commitment on the line and we believe we will be a significant beneficiary, because we will see, we will receive Canadian advantaged crude not only into Paul, our Pacific Northwest system, but also our West Coast system.

And specifically to your question, we'll end up, I believe having a significant amount of opportunities on the spot market within the Westridge dock to take potentially barrels to LA and because of sulfur limitations, because the majority of people out in the West Coast, I believe as you know are running A&S, we believe you'll see somewhat of a dumbbell type blending system where you'll take heavy Canadian with a lighter grade and introduce it into the units out there. But the net, net for us is we believe it will be quite positive for us not only at Anacortes, our Pacific Northwest refinery, but also at LA.

Rick, can you share that how much WCS do you think you may be able to run?

Right now, Paul, that's an unknown. We're continuing to look the system and we'll look at the economics.

So that will vary from month-to-month.

So my question is a follow-up on capital allocation. You drew cash by about $2 billion at the parent level in 1Q.

You now sit at about $7 billion in parent cash. So we're slowly getting closer to the $1 billion minimum cash balance and I know we aren't there yet, but can you talk about how we should think about the buyback once you get to your minimum cash balance?

Should we expect something like 100% of free cash flow paid out given you won't be supplementing with the balance sheet anymore? Just any color on what kind of normal could look like after you've drawn down your cash would be helpful?

I'll start off by saying, we've been fortunate enough to continue to generate cash. That's been a good story for us.

Back to Neil's first question, we want to make sure there's no ambiguity. We're committed to returning capital.

One of the questions that Neil asked was it a little lower in the quarter and I tried to explain to not read into that quarter-to-quarter variability because a lot of factors that impact that. So I think the biggest takeaway is, we're huge believers in returning capital to shareholders and depending on the market conditions et cetera, we evaluated every single quarter and we trying for the program in place to prioritizes that.

At the same time, we're also looking at where should we invest, you heard Maryann just talk about we decided to spend a little bit more money in the first quarter to enhance the reliability of our assets. That's a good decision on our part.

It's the first decision in our capital framework. But going forward, I think the big takeaway is, you'll continue to see us be a leader in returning capital to shareholders, that's something we believe in.

You'll see us be a leader in generating cash among our peers, as I said in my prepared remarks, very happy despite the situation we were in the first quarter with 4 of our largest most profitable assets down. We still generated more cash than our peers.

So we think that was a good accomplishment. And over time, you're going to see that we'll remain committed to our capital framework of which when will we get to that $1 billion, that's a good question.

I don't know that I can predict it depending on how the market treats us, but I think the biggest takeaway is we're committed to returning capital and as long as we continue to generate cash, we'll continue to do that and reduce the share count going forward.

And then so my follow-up is just on long-term captures. I don't think you're officially calling 100% your long-term capture, but that's certainly where the business has trended.

And you've talked a lot about sources of improvements to date. My question is, what are the key drivers going forward of driving that capture from 100% to something like 105% or something larger on a sustainable basis?

Are there more singles and doubles you can hit on the commercial side? Is it some of the capital projects you're working at the refineries?

I'm just trying to get a sense for where we should be looking for the next wave of improvements on the capture side?

As we've been sharing, our commercial performance remains foundational. You heard us talk about last quarter some changes that we made in the organization to continue to focus on value chain optimization.

That's clearly an objective that Mike has for the organization. We're not done.

We think a lot of the things that we have put in place are sustainable, but we do believe there is opportunities going forward. We like to say that we're approaching 100% over a longer period of time.

As you've seen, we did it last year. And as you know, there's things from the market that we can't control, look at our performance this quarter.

As you know we had weaker like product margins as I shared and obviously the portion team took some decisions pretty late in the quarter on product inventory build as well. But we will continue to focus on the things that we can, and we do believe there are opportunities that will allow us to continue to improve commercial performance.

But we say we're approaching 100%, and we hope you've seen us use that as a deliverable going forward. Ultimately, at the end of the day, as Mike has shared with you, our objective is to deliver the strongest EBITDA per barrel and cash generation relative to our peers, and that remains a key focus when we look at our capture performance.

Yes, John, I can't help myself to jump in here. I know this capture metric gets a lot of discussion and Kristina has been steadfast that we need to report on it.

I just want to caution, as I always do, that there's a lot of factors, market factors, etcetera, that hit on that. The market should know we're committed to improving our commercial performance, that's obviously a goal here.

But the metric that I want you to look at the most is cash. At the end of the day, go to the bottom of the sheet as opposed to all the very different variables throughout it.

The most important thing is, are we generating the most cash. So that's the metric that I start with as we analyze the performance of the assets et cetera.

So, I just want to reiterate that I know a lot of people like to talk capture. It's not the one that I think tells the story of the business that much.

I wanted to first ask about the Martinez biofuel projects. It looks like the other income line was close to, in refining was close to $200 million this quarter.

I think that includes the impact from Martinez. So I was hoping to get an idea of how much that contributed to earnings this quarter and then how you think about the ramp up in capacity to 100% from current 50%?

Let me take the first part of that and then I'll turn it over to Maryann. But just to clarify, that other that you're seeing on the R&M walk, it is not related to Martinez.

Largely, what you're seeing there are and you see in the prior quarters are some of the insurance proceeds we've recognized in regards to a claim we had at some of our refineries. But I'll turn it over to Maryann to talk about Martinez, but I want to clarify it's not in that bar.

So let me give you an update on Martinez. As you stated, we are currently operating at about 50% of our nameplate capacity.

In November, we had a heater tube failure at Martinez. And as I shared with you last quarter, we continue to work with all the regulators to align on what repairs are necessary and ensure safe reliable operation going forward.

We would expect to continue to operate at 50% for the second quarter. And then somewhere mid third quarter, we would expect to see our capacity increase to about 75% of that nameplate.

And again, when I talk about nameplate, I'm talking about 48,000 barrels a day, by the way, just for clarity. And then we do expect to ramp up to full capacity on Martinez by year-end.

So again 50% second quarter, ramping to 75% mid third quarter with full rate capacity by year-end.

And that means, I guess, that you got approval for the fixes that you need to make in the unit? And then is there any cost, OpEx associated with the improvements you need to make at the plant?

So in our second quarter guidance, we do not have any cost yet included in that second quarter guidance. Sorry about that.

Yes, we continue to work with regulators to align on the path forward. So we believe again, continue to work with them, but we believe we understand the work that needs to be done and we are aligning with our regulators to achieve that.

And then my other question is sorry, Mike, I'm going to go back to this capture metric. And you include just $392 million headwind on Slide 8 of capture impact.

Some of that is from product inventory and derivatives. I'm wondering if that amount, if you could share what that is and if that reverses in 2Q?

So you'll notice that we try to give you on that slide we show you the impact that is from crude and the impact from product. And what you saw this quarter is what was normally a very positive impact from product margins really narrowed quite a bit in the first quarter.

Alternatively, that crude is typically a key driver. It always pulls capture and that will ebb and flow just depending on a series of things.

But the key driver in this first quarter, as you see, were product margins and the inventories. We made some commercial decisions, which we think were the right ones and we made those decisions sort of late in the quarter.

But as those market dynamics change, we'll be able to share that with you going forward.

I guess I'd like to dig into here maybe your expectations on crude. We've heard from some of the other companies what's going on in terms of available barrels out there.

And you've talked a little bit about the positives on the West Coast. But how should we think about the impact in the Mid-Con down to the Gulf Coast, Mid-Con thinking the WCS going west instead of south and then along Gulf Coast, just what you're seeing in terms of available barrels on the heavy medium to heavy side and thoughts on the light heavy spreads?

So I'll start with light heavy spreads. We continue to see them right about where they're at today.

Obviously, we've seen the WCS spread come in a few bucks. And ironically, if you look out on the forward curve towards the end of this year, it actually starts to move back out $2 to $3 due to strong Canadian production and diluent blending.

So we see this as a little bit of a near term blip. Specifically in the Mid-Con, I do believe there is a misconception that the Mid-Con will be short and heavy.

We don't believe that to be the case. As you know, we're a big buyer in the Mid-Con.

And when we look at TMX coming online, we believe the marginal Canadian barrel that's going to get backed out of the system first is the U.S. Gulf Coast export barrel.

And so with that being said, when we're looking forward here and whether it's PADD 2, 3 or 5, we expect to generally run about the same mix of Canadian barrels that we have run here the past several quarters.

And I guess if we do see fewer barrels on the Gulf Coast, Canadian or otherwise, what's your anticipation there relative to what you have been running at either Galveston Bay or Garyville?

Yes, we don't see it changing a lot. I will tell you when we look at Brazilian growth, when we look at Guyana production and then Canadian even with some barrels getting backed out, we don't see our mix changing that much Roger.

And then we certainly have barrels that could potentially come from the Middle East if we get the right economic signals. So I would say, all in, I really don't expect a significant change.

One final clarification on the West Coast. We've heard some say that the acidity of the WCS barrel could be a headwind for running some.

And I think when people ask about your ability to run max barrels of WCS, maybe that's what they're getting at. Is there any limitation from a metallurgic kind of physical capacity issue for you on the West Coast?

It is something that will balance, Roger. I believe I said earlier, ANS, the biggest difference is ANS.

It has about 5x lower sulfur than WCS. So that's why we believe there will be a lot of blending going on, on the West Coast.

But I do believe, in general, you will see it limit other's toolkits on what the amount is that they can run but we've yet to see -- we need to see that play out.

We're seeing octane spreads at record levels. Is that a function of the Tier 3 low sulfur gasoline specs and perhaps any dynamics in the NAFTA market?

Could you talk about the drivers here? And how much of MPC's gasoline production is high octane?

Yes, Matt, it's Rick again. So I will tell you, good call out.

We're seeing octane values be extremely high. And as you know, we have a lot of reforming capacity.

So we are a large octane producer, so we're seeing the benefit. Certainly, you hit on a couple of the reasons.

Specs is certainly a region. But I will also tell you, we're seeing strong signals on the export side.

And when you think about the export market, we're sending over volume there that generally does not have ethanol in it. So that is eating up a lot of octane long product.

And then there is persistent length in the NAFTA market due to poor petchem margins. So that's helping us out on the octane side.

And then lastly, more recently here, you're certainly seeing the impact of high turnarounds, just taking octane off the market here in Q1, and it's carrying into Q2, and we see it persisting for a while, Matt.

And then circling back to an earlier question, I think you mentioned you were long diesel in California. Is that a function of RD share approaching 60% or so?

And if so, what do you do with those extra diesel barrels? Are they exported to like Mexico or Canada or Asia?

Yes. So great comment.

And my comment earlier, the industry, I would say, is long diesel, and we're not alone in that category, we are as well. And you're right, we've got to find export opportunities, Matt, whether anything waterborne where we can find a home to clear the product is what we and others are doing.

When we think about your marketing merchants within R&M, the direction of wholesale gasoline prices benefiting Q4 as they came off and then acting as a headwind in Q1 as prices shot up, how can that move the broader R&M capture quarter-to-quarter or the cash generation from the segment and how should we think about the [indiscernible] into second quarter?

Theresa, can you restate the back half of your question, I'm not sure I caught that part, please. This is Rick.

Sure, Rick. Related to your marketing margins and the move of the flat wholesale plain prices benefited sitting Q4 as prices declined and then acting as a headwind as they came up on how much of that can really bring noise to the R&M capture quarter-to-quarter?

Yes, good question. So it can be significant.

And depending on the region it's just tough, as you pointed out, in an upward market. If you look at Q1 to your point, Theresa, I think we had a $14 flat price increase throughout the quarter.

So it definitely was a headwind, and it can be significant. We, amongst all of our competitors need to be competitive at our racks and in an up market, it continues to be a headwind.

So I don't have a specific number that I can share with you. But it's definitely a factor in our capture.

And Mike, going to your earlier comments about MPLX as a strategic investment and with the announcement at the partnership over the past few months and just migration of more and more third-party cash flows, do you have a long-term target for the breakdown of third-party to GP driven EBITDA cash flows over time? And would a shift towards more third-party cash flows help MPC possibly have more flexibility in the upcoming contracting events to take place over the next few years?

Yes, Theresa, we don't have a target per se using that term. We do have the goal of generating increasing cash flows from third parties as well as optimizing within our own system as well.

The point I was trying to make is where we stand today, that distribution from MPLX covers the MPC dividend and more than half of the capital. But going out, and again, this isn't guidance, but if you look at the trend, we're going to continue to increase the MPLX distribution over time.

And as you see that occurring and depending on the capital needs at the refining side of the business, the statement I said was there'll be a point where MPLX's distribution will cover the dividend and all of the capital and still have excess cash. That's how unique the competitive advantages of that business.

And we've been bullish natural gas growth for a long time. And I always caution, I'm not saying natural gas price, I'm saying natural gas growth volume.

We continue to believe that, that has tailwinds behind it whether it's all the topics that have been talked about recently. But as that continues to occur, that ability for MPLX cash generation increase will just continue, and it will get to a point where it's covering the dividend at MPC, the capital at MPC and still generate excess cash.

That's where we're headed. So I don't know that we have a target other than that target, and we'll try and keep growing that.

All right. With that, thank you so much for your interest in Marathon Petroleum Corporation.

Should you have additional questions or would you like clarification on topics discussed this morning, please reach out in the IR team will be available to help with your call today. Thank you for joining us.