Marathon Petroleum posts bumper profit on soaring fuel prices

Marathon Petroleum posts bumper profit on soaring fuel prices

Marathon Petroleum smashed quarterly profit estimates on Tuesday, the latest U.S. refiner to benefit from a surge in fuel prices sparked by tight capacity and low inventories, said Reuters.

The company's refining and marketing margins tripled to USD37.54 per barrel in the April-June quarter, mirroring similar gains at rivals such as Phillips 66 and sending Marathon's shares 4% higher in premarket trading.

Global refining capacity has declined in the past two years because the pandemic-driven demand hit forced several less profitable operations to shut shop, while Western sanctions against Russia have tightened an already-supplied market.

Marathon's refineries ran at nearly full capacity in the second quarter, resulting in a total throughput of 3.1 MMbpd, compared with utilization of 94% and a total throughput of 2.9 MMbpd a year earlier. For the third quarter, the company expects a throughput of 2.9 MMbpd.

The company posted an adjusted income of USD5.69 B, or USD10.61 per share, the largest in at least five years, according to Refinitiv data. The figure sailed past the average analyst estimate of USD8.04 per share.

We remind, Marathon Petroleum’s first-quarter (Q1) sales and income shot up on the back of healthy operations at its Refining & Marketing (R&M) division. The jump in income and earnings before interest, taxes, depreciation and amortisation (EBITDA) was possible due to healthy results at Marathon's R&M division, with the segment reporting adjusted EBITDA of USD1.4bn compared with USD23m in the Q1 2021.
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How chemical manufacturers can navigate inflation

How chemical manufacturers can navigate inflation

Last year was a bounce-back year for chemicals mergers and acquisitions (M&As) after the challenges of COVID-19, said Hydrocarbonprocessing.

Both deal value and volume returned to historical highs, surpassing pre-pandemic levels. Market valuation multiples also remain elevated. This level of activity has continued in 2022, but there are storm clouds on the horizon beyond the war in Ukraine, including further geopolitical tensions, global supply chain disruptions and inflation levels not seen in more than 40 yr.

Nearly all Q4 2021 chemical sector earnings calls included significant time discussing raw material, packaging, transportation and wage rate cost inflation, as well as pricing action to offset rising costs. It is a topic that is top of mind for most executives. Comparing earnings call transcripts for the top 32 chemical companies from Q1 2019–Q4 2021, the mention of the word “inflation” increased roughly 300%. According to the authors’ company’s 2022 CEO outlook survey, 87% of executives have seen significant increases in input prices. How will inflation affect the chemical M&A market going forward and what should executives do differently?

Winners, losers and due diligence. Nearly all companies are experiencing input cost inflation. The winners will maintain and improve growth and profitability through a combination of dynamic pricing strategy and new productivity initiatives to mitigate cost pressure. While customers are generally receptive to price increases in this environment, strategic pricing is a skillet some companies must relearn. Some sales teams are hesitant to be bold or are restricted by competitive dynamics. Even when customers are receptive to price increases, demand cannot be entirely inelastic to price. On the operational side, many are still struggling with labor scarcity and their innovation model in a post-COVID-19 world, which is restricting productivity initiatives. The losers will witness slower growth and compression in margin and cash flow.

On the M&A front, certain sub-sectors may need to consolidate or sell to survive, resulting in increased activity. Conversely, potential sellers that have been temporarily dislocated by inflation may defer an exit until after they can successfully implement pricing and productivity initiatives to right the ship and improve resiliency in the long term. This is already happening in the market. For example, in March, Spanish energy company Cepsa announced that it has put a planned sale of its chemicals business on hold while it examines the potential impact of spiraling energy prices from the war in Ukraine.

In this new environment, buyers and sellers must refine their approach to due diligence when evaluating a company and its prospects.

As per MRC, the two largest U.S. oil companies, ExxonMobil and Chevron, posted record revenue on Friday, bolstered by surging crude oil and natural gas prices and following similar results for European majors a day earlier.
The U.S. pair, along with UK-based Shell and France's TotalEnergies, combined to earn nearly USD51 B in the most recent quarter, almost double what the group brought in for the year-ago period. All four have ramped up share buybacks in recent months, capitalizing on high margins derived from selling oil and gas.
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India cuts fuel export taxes, hikes tax on local crude

India cuts fuel export taxes, hikes tax on local crude

India has cut fuel export taxes for the second time in less than two weeks and increased a windfall tax on locally produced crude oil, a government notification said, as per Reuters.

India cut export taxes on jet fuel to zero from 4 rupees per liter and diesel to 5 rupees per liter from 11 rupees per liter, the finance ministry notification said. The changes will be effective from Wednesday.

India, which is the world's third largest oil importer, on Tuesday also raised the tax on domestically produced crude to 17,750 rupees (USD226.14) per ton from 17,000 rupees per ton, the government notification said. India imposed a windfall tax on July 1 on crude oil producers, along with levies on gasoline, diesel and aviation fuel exports.

But on July 20 it said it would cut the windfall tax on oil producers and levies on refiners, and fully exempted gasoline from an export duty. A top finance ministry official told Reuters last month that the Indian government will only withdraw the windfall tax for oil producers and refiners if global prices of crude fall as much as $40 a barrel from present levels.

We remind, BASF completed the installation and start-up of a state-of-the-art acrylic dispersions production line in Dahej, India, serving the coatings, construction, adhesives, and paper industries for the South Asian markets.
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Several refining projects are scheduled in Asia and the Middle East

Several refining projects are scheduled in Asia and the Middle East

In Asia and the Middle East, at least nine refinery projects are beginning operations or are scheduled to come online before the end of 2023, said Hydrocarbonprocessing.

At their current planned capacities, they will add 2.9 MMbpd of global refinery capacity once fully operational. In the International Energy Agency’s (IEA) June 2022 Oil Market Report, the IEA expects net global refining capacity to expand by 1.0 MMbpd in 2022 and by an additional 1.6 MMbpd in 2023. Net capacity additions reflect total new capacity minus capacity that has closed.

The scheduled expansions follow a period of reduced global refining capacity. Net global capacity declined in 2021 for the first time in 30 years, according to the IEA. The new refinery projects would increase production of refined products, such as gasoline and diesel, and in turn, they might reduce the current high prices for these products.

China’s refinery capacity is scheduled to increase significantly this year. The Shenghong Petrochemical facility in Lianyungang has an estimated capacity of 320,000 bpd, and they report that trial crude oil-processing operations began in May 2022. In addition, PetroChina’s 400,000 bpd Jieyang refinery is expected to come online in the third quarter of 2022. A planned 400,000 bpd Phase II capacity expansion also began operations earlier this year at Zhejiang Petrochemical Corporation’s (ZPC) Rongsheng facility.

Outside of China, the 300,000 bpd Malaysian Pengerang refinery (also known as the RAPID refinery) restarted in May 2022 after a fire forced the refinery to shut down in March 2020. In India, the Visakha Refinery is undergoing a major expansion, scheduled to add 135,000 bpd by 2023.

New projects in the Middle East are also likely to be an important source of new refining capacity. The 400,000 b/d Jizan refinery in Saudi Arabia reportedly came online in late 2021 and began exporting petroleum products earlier this year. More recently, the 615,000 b/d Al Zour refinery in Kuwait—the largest in the country when it becomes fully operational—began initial operations earlier this year. A new 140,000 bpd refinery is scheduled to come online in Karbala, Iraq, this September, targeting fully operational status by 2023. A new 230,000 bpd refinery is set to come online in Duqm, Oman, likely in early 2023.

These estimates do not necessarily include all ongoing refinery capacity expansions. Moreover, many of these projects have already been subject to major delays, and the possibility of partial starts or continued delays related to logistics, construction, labor, finances, political complications, or other factors may cause these projects to come online later than estimated. Although the potential for project complications and cancellations is always a significant risk, these projects could otherwise account for an increase of nearly 3.0 MMbpd of new refining capacity by the end of 2023.

As per MRC, PetroChina Urumqi Petrochemical is planning to revamp and upgrade its refining facilities by adding some new refining as well as petrochemical units. A 450,000 tonne/year polypropylene (PP), a 300,000 tonne/year styrene monomer (SM), a 200,000 tonne/year polystyrene (PS), and a 1.2m tonne/year purified phthalate acid (PTA) unit will be installed as the petrochemical part. The refining part will mainly include a new 1.2m tonne/year solvent deasphalting (SDA), a 2.2m tonne/year fluid catalytic cracking (FCC), and a 1m tonne/year gas fractionation units.
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Huntsman reports jump in Q2 earnings despite global challenges

Huntsman reported a jump in earnings despite challenges it said it faced during the second quarter related to high natural gas prices in Europe, shutdowns in China and a contracting U.S. economy, said the company.

The Woodlands-based chemical and materials company said its profit jumped 41 percent to USD242 million from USD172 million in the same period last year. Revenues increased 17 percent to USD2.4 billion compared to USD2 billion last year.

"We remain well ahead or on track to meet the targets that we presented at our Investor Day in November 2021,” said the company’s CEO Peter Huntsman, "despite an increasingly challenging economic environment due to extremely high European natural gas prices, headwinds in China associated with government-mandated shutdowns and monetary tightening in the United States."

Every dollar of price increase adds around USD10 million in annual costs for the company, Peter Huntsman said. "During these past two weeks, European gas prices moved nearly 20 percent upwards, costing us in excess of USD100 million on an annualized basis of added cost," he said.

The company may decide to reduce production at some of its European facilities in response to the crisis and increase its imports from Asia and North America. "It has become fairly clear to us that Europe's energy problems will not likely be fixed anytime soon," Huntsman said. "We will look at further consolidation and site rationalizations as we calibrate our business around what may be a more permanent reality for Europe."

Also during the quarter, the company began operating its new USD180 million splitter of MDI, or methylene diphenyl diisocyanate, in Louisiana. It expects the splitter to add USD45 million a year to the company's earnings before interest, taxes, depreciation and amortization.

We remind, Huntsman Corporation announced the start of commercial operation of a new methylene diphenyl diisocyanate (MDI) splitter at its Geismar site in Louisiana. The USD180 million splitter gives Huntsman the ability to produce more high value, differentiated grades from the crude MDI manufactured at the plant, thereby enabling growth in key customer applications.
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