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Marathon Petroleum reported earnings per share of US$0.58 for the third quarter, versus analyst expectations of US$0.81, with revenues also missing the consensus estimate, coming in at US$16.46 billion. Analysts had projected revenues of US$17.18 million.
The refiner, which yesterday said it will distribute a third-quarter dividend of US$0.36 per share, said the results were affected by a US$267-million impairment charge on its Sandpiper pipeline project, which the company exited earlier this year, after spending US$301 million on its construction. The project was later canceled when the lead partner in the joint venture for its construction, Enbridge, withdrew its application documents, saying it would delay it until market conditions make it viable.
When Marathon Petroleum opted out of Sandpiper, however, it entered another, much more controversial pipeline project – the Dakota Access – which has been in the public eye for months now, with large-scale protests and a White House veto delaying the construction works.
Pipelines are a vital part of Marathon Petroleum’s business: in the quarterly report announcement, CEO Gary H. Heminger said that midstream operations, along with its Speedway chain of convenience stores, had contributed more than US$450 million to the gross third-quarter income figure. The net stood at US$145 million.
Deprived of potential revenue streams from the Dakota Access, at least temporarily, Marathon has started work on another pipeline project – the Cornerstone pipeline, which would transport condensate and natural gas from the Utica and Marcellus shale plays to Marathon’s Ohio refinery. The construction began on schedule earlier this month, and with lower than the initially planned investments.
Going forward, Marathon said it will focus all its efforts on further enhancing shareholder value by undertaking aggressive dropdowns of assets to its master limited partnership, MPLX. By the end of next year, Marathon plans to dropdown to MLPX assets accounting for US$350 million in annual contributions to the parent company’s earnings before interest, tax, depreciation and amortization.
By Irina Slav for Oilprice.com
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Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.