Marathon Petroleum Corp.’s first-quarter profit plunged 99 percent from a year earlier, the company reported Thursday.
The company blamed the worldwide glut of fuel, which squeezed the profit margin on fuel it refines and sells, and also forced a big writedown in the value of natural gas assets.
Marathon Petroleum’s profit dropped from $891 million a year earlier to $1 million in the January-March quarter. Earnings translated to 0.3 cent per share.
Refining operations, where Marathon typically earns over 80 percent of its profit, lost $62 million. A year earlier, refining generated $1.3 billion profit.
Marathon’s gross refining profit fell 62 percent to $9.98 per barrel.
Refinery maintenance and upgrades also reduced the amount of fuel sold to retailers.
On the retailing side, Speedway’s operating profit declined by $1 million to $167 million.
Marathon’s pipeline and logistics segment increased operating profit by 86 percent to $167 million. Pipeline and logistics includes the subsidiary MPLX.
Costs not allocated to any single segment reduced operating income by $197 million. They included a $129 million writedown in the value of assets acquired in the purchase of MarkWest, due to reduced natural gas and natural gas liquids prices. Corporate and other expenses reduced operating profit by an additional $68 million.
“Our first-quarter results underscore the importance of our strategy to increase the more stable earnings and cash flow that come from our Speedway and (pipeline and logistics) segments, and we remain committed to growing these parts of the business,” said Gary Heminger, chairman and chief executive officer.
Speedway widened its profit margin on merchandise sold in the store to 29 percent last quarter from 28 percent a year earlier. Gross profit on in-store merchandise was $330 million, or over half of the stations’ gross profit. Gross profit on fuels was about $250 million. The profit margin on fuels slipped 14 percent to 16.82 cents per gallon. Speedway sold 3.5 percent more fuel, or 1.5 billion gallons.
The pipeline and logistics segment’s 86 percent increase in operating profit to $167 million was mainly due to the addition of MarkWest Energy, which MPLX bought in December. MarkWest was the nation’s second-largest processor of natural gas and the largest processor and fractionator in the Marcellus and Utica shale regions.
Marathon Petroleum shares declined 39 cents, or 0.94 percent, in trading Thursday to close at $40.98.
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