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Msg  130321 of 132040  at  8/10/2021 6:55:06 AM  by



Adjusting 3Q 21 estimates. We are adjusting 3Q21 EPS to $0.60 vs. Street expectations of $0.57. We believe both Gulf Coast and West Coast will deliver strong results in 3Q 21 offsetting planned downtime in Mid-Con.
▪ Adjusting 4Q 21 estimates. We are adjusting 4Q21 EPS to $0.48 vs Street of $0.01. Within our coverage MPC’s refining is the least impacted by higher RIN prices. We expect strong 2H21 results from MPC as demand improves in key markets including West Coast. ▪ 2022 estimates. We are adjusting 2022 EPS to $3.05 from $3.12. Lower in-land diffs drive slight adjustment to estimates.
▪ MPC refining – excellent turnaround story. In our opinion, MPC reported the strongest refining segment results in 2Q 21. Refining reported adjusted EBITDA of $751M, with capex of only $176M. We view generation of over $550M in FCF from refining in a tough macro very favorably. From the start of the pandemic, SU has been the most profitable North American refiner, consistently generating FCF (2Q 20 FCF CAD $389M, 3Q 20 FCF CAD $438M, 4Q 20 FCF CAD$234M and 1Q 21 FCF CAD$842), even as US independent refiners struggled. In 2Q 21 however, MPC ended up generating more FCF in refining (+US$550M) than SU (2Q 21 FCF of CAD$206M). Early in the pandemic MPC took some tough decisions (closing Martinez and Gallup) and now are seeing the full benefit of those decisions.
▪ Stock thoughts. While bears were indicating MPC might have to cut the dividend post Speedway spinoff, we actually think MPC is in a position to grow its dividend. MPC currently has $9Bn authorized in buybacks; they can further lower the annual dividend burden by $320M -$340M through these buybacks, then raise the dividend just to keep the total payout the same. 

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