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Marathon Petroleum: Handling COVID-19, Strong Potential


  • Marathon Petroleum has an impressive portfolio of assets. The company has made some good decisions in handling COVID-19.
  • It has managed to raise a respectable amount of debt at a great interest rate. That means the company can handle the downturn.
  • The company pays a respectable dividend rate of near 6%. That, combined with a multiple expansion, will result in strong shareholder returns.
  • I do much more than just articles at The Energy Forum: Members get access to model portfolios, regular updates, a chat room, and more. Get started today »

Marathon Petroleum Corporation (NYSE: NYSE:MPC) is a more than $25 billion petroleum and natural gas exploration company. The company has an impressive portfolio of assets, and it's been focused on handling COVID-19 and growing its cash flow. Its impressive portfolio of assets positions the company to generate strong cash flow during the downturn.

(Marathon Petroleum Assets - Marathon Petroleum)

Business Update

Marathon Petroleum has been focused on updating its business to handle a COVID-19 world.

(Marathon Petroleum Business Update - Company Investor Presentation)

Marathon Petroleum has been focused an addressing the business impacts from COVID-19. It cut capital spending by $1.4 billion, or ~30%, to improve its financial position. At the same time, the company has reduced annual operating expenses by $950 million, resulting in a near-$2.5 billion in financial positioning improvements.

The company is continued to focus on improving its facilities. It has increased its revolver capacity by $1 billion and issued $2.5 billion in senior notes to improve liquidity. We'll discuss Marathon Petroleum's financial position in more detail later, however, the company's rate on these $2.5 billion in notes in late April is impressive.

(Marathon Petroleum Note Issuance - Company Press Release)

Marathon Petroleum issued $1.25 billion in notes at 4.5% due in 2023 and another $1.25 billion in 4.7% notes due 2025. That financial position is significant - being able to get 3-5 year debt at 4.5% in the downturn gives the company the financial position to handle the worst of the downturn. It can handle the recession and continue to perform.

Overall, Marathon Petroleum can handle the worst of the downturn.

1Q 2020 Updates

Marathon Petroleum 1Q 2020 results indicate the strength of the company's financial position.

(Marathon Petroleum 1Q 2020 Results - Company Investor Presentation)

It had a $0.16 / share loss for the quarter, a fairly minimal loss

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This article was written by

The Value Portfolio profile picture

The Value Portfolio specializes in building retirement portfolios and utilizes a fact-based research strategy to identify investments. This includes extensive readings of 10Ks, analyst commentary, market reports, and investor presentations. He invests real money in the stocks he recommends.

He is the leader of the investing group The Retirement Forum with features including: model portfolios, macro overviews, in-depth company analysis and retirement planning information. Learn more.

Analyst’s Disclosure: I am/we are long MPC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (17)

purplemountaingirl profile picture
How is MPC valued with the sale of Speedway? Canadian company specializes in convenience, so they know the value of Speedway.
hope you are still long MPC pmg...

nice bump this morning
purplemountaingirl profile picture
@65wildcat Still have my shares and holding on!
@The Value Portfolio

Your presentation isn't technically correct but is still sound enough because there is a lot of value in Marathon. If we can get past this virus Marathon will do well with the long term. However, Marathon, like many companies make me cringe as I see them taking on more and more debt which can only dampen dividends and earnings in the long run. Marathon will likely continue to lose money for the next couple quarters at least until demand and traffic hopefully return close to 2019 levels.
BM Cashflow Detective profile picture
The prospects in this sector are very attractive. The gap between the current price and the average price target of the analysts who follow the company is relatively large and suggests a significant potential increase in value. It's not reasonable to be afraid of a sucker rally. Stocks never wait for clarity. It's time to own shares. And $MPC is the right company for me to benefit from it.
ephud profile picture

"it's worth noting that the MPLX holding is incredibly valuable. The company earns more than a billion in cash flow from Marathon Petroleum annually from the dividends and has a stake worth many billions"

You have it wrong twice. Marathon earns distributions, not dividends, from MPLX, not the other way around.
Value Portfolio,
MPC is NOT a petroleum and natgas exploration company! They do zero exploration They are America's largest refiner, with hugh midstream pipelines and retail gasoline holdings.
Thanks for that, Nathan. I thought I was losing my memory. This was the result of the MPC/MRO adjustments. Like some others, I hope MPC resists pressure to sell off Speedway. It has several sources of revenue stream.

I always stay fully invested, so I wasn't able to pick up any more during the Corona-plunge, but did get a good dividend reinvestment in Q1.
@Nathan5, Thanks. I really question this analyst's knowledge of his report. In one of his first reports, ET, he said ET was an exploration company?? All he does is take a company's presentation, re-format it, and present it to us as "research." Each of us could do the same thing!
I have the same impressions. As well, the large majority of his reports are too rosey for me, and don't display critical analysis- a good way to lose money
so is MPLX a good buy as well?
I hope they keep Speedway and MPLX , Elliot continues to be wrong with his past moves. MPC is a good one to own . I do think the 2nd quarter will be much worse than the first, because the shutdown was longer than the first. Buy , hold and forget. Will get back to where it was prior to CV-19.
Marathon sure has been fun to trade for the last week. It will be interesting to see if the price reverts back to the May levels. It sure didn't look good today or yesterday.
What are they going to do with Speedway ?
Long and Short of It profile picture
Still in talks to spin it off as far as I know. There was the 7/11 deal and then the one with the private equity company. 7/11 would have been a good deal; the other one not so much.

Speedway spun off would likely retain favorable pricing of gasoline from Marathon, but would be insulated from commodity prices. It would basically be a pure play on consumer demand, and I expect strong seasonality with the driving season.

Disclosure: I am long MPC, MPLX.

Additional disclosure: I am an involved party in the Marathon reorganization, which is a conflict of interest.
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