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Acquisition of BP’s Texas City Refinery and Related Logistics and Marketing Assets
October 8, 2012
Forward-Looking Statements This presentation contains forward-looking statements within the meaning of the federal securities laws. These forward-
looking statements relate to, among other things, MPC’s current expectations, estimates and projections concerning MPC’s business and operations and the business and operations proposed to be acquired from BP, which we refer to as the BP Texas City assets. You can identify forward-looking statements by words such as “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “project,” “could,” “may,” “should,” “would,” “will” or other similar expressions that convey the uncertainty of future events or outcomes. Such forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond the company’s control and are difficult to predict. Factors that could cause actual results to differ materially from those in the forward-looking statements include: our ability to successfully complete the acquisition of the BP Texas City assets, including, without limitation, the receipt of regulatory approvals and the satisfaction of other customary closing conditions; our ability to successfully integrate the BP Texas Cityassets into our operations; our ability to achieve fully the strategic and financial objectives related to the proposed acquisition of the BP Texas City assets, including the acquisition being accretive to our earnings; and unexpected costs or liabilities thatmay arise from the acquisition ownership, or operation of, the BP Texas City assets; volatility in and/or degradation of market and industry conditions; the availability and pricing of crude oil and other feedstocks; slower growth in domestic and Canadian crude supply; completion of pipeline capacity to areas outside the U.S. Midwest; consumer demand for refined products; changes in governmental regulations; transportation logistics; the availability of materials and labor, delays in obtaining necessary third-party approvals, and other risks customary to construction projects; the reliability of processing units and other equipment; our ability to successfully implement growth opportunities and the integration of acquired assets; other risk factors inherent to our industry; and the factors set forth under the heading “Risk Factors” in MPC’s Annual Report on Form 10-K for the year ended December 31, 2011 filed with the SEC. In addition, the forward-looking statements included herein could be affected by general domestic and international economic and political conditions. Unpredictable or unknown factors not discussed here or in MPC’s Form 10-K could also have material adverse effects on forward-looking statements. Copies of MPC’s Form 10-K are available on the SEC website, at http://www.ir.marathonpetroleum.com or by contacting MPC’s Investor Relations Office.
2
Transaction Overview
3
451 MBPCD (475 MBPSD) high complexity refinery, Nelson Complexity Index of 15.3
1,040 megawatt cogeneration (cogen) facility
Supplies power and steam to the refinery
Surplus power sold into grid
More than 100 miles of NGL pipelines consisting of 3 intrastate systems originating at the refinery
Four light product terminals
Branded contract assignments representing ~1,200 locations with volume of ~64 MBPD
Transaction Highlights
Supports MPC strategy to grow in existing and contiguous markets and expand integrated model
One of the largest and most complex refineries in the U.S.
Well connected to crude and products markets, including exports
Attractive base cash purchase price of $598 million. Equates to estimated net cash refining asset purchase price of $21 per complexity BBL, $328 per capacity BBL.
Potential $700 million earnout over six year period
Expected to be immediately accretive to earnings
Incremental EBITDA of $700 million to $1.2 billion based on historical pricing
Accretive to earnings per share by 13% to 27% based on historical pricing
Potential significant economic upside from synergies and process optimization
Expected to close in early 2013, subject to regulatory review and customary closing conditions
Expected to be financed with cash on hand
Continue to balance return of capital to shareholders while capturing incremental value through investments in the business
4
Diversification and Balance in MPC’s Refining Network
55
Midwest Capacity 623,000 BPCD
Louisiana Capacity 490,000 BPCD
Texas Capacity 531,000 BPCD
Canton, OH 78,000Catlettsburg, KY 233,000Detroit, MI 106,000Robinson, IL 206,000BP Texas City, TX 451,000MPC Texas City, TX 80,000Garyville, LA 490,000
Total 1,644,000
Note: BPCD = Barrels Per Calendar Day
Access To Advantaged Crude Supply
6
Texas City
Eagle Ford
Bakken / Canadian
Garyville
WTI
Access to growing WTI, Canadian and Bakken crudes Seaway Reversal 2012 Seaway Expansion 2013 Longhorn 2013 Gulf Coast Access 2014 BridgeTex 2014 Keystone XL 2015
Close proximity to Eagle Ford Opportunity to optimize crude logistics across
MPC’s three USGC refineries
Product Logistics Opportunities
777
Exports toMexico/SA/Europe
PasadenaZachary
SoutheastMidwest
Florida
Flexible product placement
Domestic and export opportunities
Synergies with MPC’s Texas City and Garyville refineries and MPC logistics
Garyville
Texas City
Refinery and Cogen
Light Product Terminals
Intrastate NGL Pipelines
Plantation Pipeline
Colonial Pipeline
Primary Retail Assignment Region
Logistics Assets
Light product terminals Nashville, TN
Charlotte, NC
Selma, NC
Jacksonville, FL
Three intrastate NGL pipelines
Colonial Pipeline space 50 MBPD gasoline shipper
history
8
Marketing Assets and Integration
Integrated acquisition includes Assignment of branded-jobber contracts
representing ~1,200 BP retail sites
~64 MBPD of gasoline sales
Locations primarily in FL, MS, TN and AL
BP trademark to be used during transition process
Strategic step in retail growth Nearly doubles Marathon’s branded site
count in Southeast
Complementary to recent regional growth
Partnership opportunity with premier Southeast jobbers
Opportunity to expand relationship with existing Marathon jobbers
9
World Scale and Highly Complex Refinery
10
0
5
10
15
20
0 100 200 300 400 500 600 700
Nel
son
Com
plex
ity In
dex
Crude Capacity (MBCD)
MPCGary-ville
US Refineries. Source: Oil & Gas Journal Dec 2011
BP Texas City
Texas City Refinery Assets 451,000 BPCD (475,000 BPSD) refinery
consisting of:
233,000 BPCD heavy-sour crude unit
218,000 BPCD medium-sour crude unit
Bottoms upgrading
63,000 BPCD resid hydrocracker
29,700 BPCD coking
Nelson Complexity Index: 15.3
Substantial onsite storage capacity along with marine distribution capability
Significant recent investments by BP
Advantageous petrochemical configuration
1,040 megawatt cogen facility
Excellent crude optionality including access to Canadian, Eagle Ford and mid-continent crudes
Significant product logistics optionality
11
Projected Synergies and Capital Investments
EBITDA Synergies of ~$440 MM thru 2017, ~$130 MM annually thereafter
Feedstock optimization
Florida and export optimization
Refinery processing opportunities
Total Synergy Investments of ~$170MM
Dock upgrades
Storage tank additions and connectivity
(Millions)
12
Projected Synergy Capital Investments
$0
$40
$80
$120
$160
2013E 2014E 2015E 2016E
Projected Incremental Synergies EBITDA
$0
$40
$80
$120
$160
2013E 2014E 2015E 2016E 2017E+
Projected Sustaining Capital Investments*(Millions)
13
$0
$100
$200
$300
$400
$500
2013E 2014E 2015E 2016E 2017E 2018E 2019E
Refinery All Other
* Excludes synergy and other value accretive investments
Cash Purchase Price Excluding Earnout
14
Base cash purchase price (millions) $ 598
Less: Cogen facility (290)
Less: Terminals and other logistics assets (120)
Less: Retail marketing (40)
Estimated Net Refining Asset Price $ 148 (Excludes ~$1,200 MM initial inventory purchase)
EBITDA Multiple* 0.5x - 0.9x
Capacity (MBPCD) 451
Nelson Complexity Index 15.3
Estimated Price per Capacity Bbl $ 328
Estimated Price per Complexity Bbl $ 21
*See slide 16 for EBITDA
Indicative Purchase Price Comparison
15
*MPC-BP Texas City is based on a $148MM net refinery purchase price and full $700MM earnout. See appendix for calculation**PBF-Toledo is based on a $400MM net refinery purchase price and $125 MM earnout Source: MPC calculations based on transaction announcements and OGJ data (barrels per calendar day)
$0 $100 $200 $300 $400
PBF-Toledo (12/2010) with earnout**
PBF-Toledo (12/2010) without earnout
VLO-Pembroke (3/2011)
VLO-Meraux (10/2011)
PBF-Paulsboro (12/2010)
MPC-BP Texas City with earnout*
Delta-Trainer (4/2012)
PBF- Del City (6/2010)
Alon-Bakersfield (6/2010)
MPC-BP Texas City without earnout
TSO-Carson (8/2012) $16
$21
$66
$109
$122
$123
$151
$218
$241
$290
$381
Price per refinery complexity barrel
Expected Accretive Transaction (MM unless otherwise indicated)
16
MPC Base EBITDA - analyst 2013 consensus estimates(1) $ 4,759 $ 4,759 Assets to be acquired EBITDA using 2006-2010 pricing(2)(4) 1,200 Assets to be acquired EBITDA using 2011 pricing(2)(5) 700 Total EBITDA $ 5,959 $ 5,459
Improvement 25% 15%
MPC Base Net Income - analyst 2013 consensus estimates $ 2,425 $ 2,425 Assets to be acquired Net Income using 2006-2010 pricing(2)(4) 650 Assets to be acquired Net Income using 2011 pricing(2)(5) 325
Total Net Income $ 3,075 $ 2,750
MPC Base EPS(3) $7.11 $7.11 MPC + Assets to be acquired EPS(3) $9.02 $8.06
Accretion 27% 13%
(1) Consensus estimates as of October 4, 2012(2) Based on MPC 2013 operating estimates and applicable historical price information(3) Assumes 341 million shares outstanding(4) Argus Sour Crude Price Index (ASCI) 3-2-1 crack spread of $15.10 used as pricing metric for 2006-2010 (5) ASCI crack spread of $11.57 used as pricing metric for 2011
Earnout Provision Summary
Term: 6 years
Overall earnout cap: $700 million
Earnout margin: (actual crude volume plus 50% feedstock volume processed) x (ASCI 3-2-1 crack)
Margin sharing 50/50 above the earnout margin threshold up to annual cap
17
Year Earnout Margin Threshold (MM) Annual Cap (MM)
1 $1775 $200
2 $1775 $200
3 $1775 $200
4 $1650 $250
5 $1650 $250
6 $1650 $250
MPC Operations
Refinery Terminal Coastal Water Terminal
Inland Water Terminal
Refinery and Cogen
Light ProductTerminals
Primary Retail Assignment Region
Transaction Complements MPC’s Integrated System
18
Refinery 451,000 BPCD (475,000 BPSD) refinery Nelson Complexity Index: 15.3 Significant recent investments Excellent crude optionality Substantial products logistics opportunities Advantageous petrochemical configuration
Cogen Facility 1040 megawatts of electrical capacity and 4.6 million
lbs/hr steam Supplies power and steam to the refinery
Light Product Terminals Nashville, TN Charlotte, NC Selma, NC Jacksonville, FL
Pipelines More than 100 miles of NGL pipelines consisting of
three intrastate systems originating at the refinery 50 MBPD gasoline shipper history on Colonial Pipeline
Retail Assignments ~64 MBPD of BP brand gasoline contracts ~1,200 locations
Connecting Pipelines
Appendix
19
Cash Purchase Price Including Full Earnout
20
Base cash purchase price (millions) $ 598 Full earnout 700
Total purchase price with full earnout $ 1,298
Less: Cogen facility (290)Less: Terminals and other logistics assets (120)
Less: Retail marketing (40)
Estimated Net Refining Asset Price $ 848 (Excludes ~$1,200 MM initial inventory purchase)
EBITDA multiple* 1.1x - 1.9x Capacity (MBPCD) 451Nelson Complexity Index 15.3
Estimated Price per Capacity Bbl $ 1,880
Estimated Price per Complexity Bbl $ 123 *See slide 16 for EBITDA