In a surprising turn of events, Ohio-based oil refiner Marathon Petroleum (MPC) has announced that its fourth-quarter profits for 2023 exceeded analyst predictions, thanks in part to strategic production cuts by OPEC (Organization of the Petroleum Exporting Countries).
MPC reported a net income of $3.84 per share, amounting to $1.5 billion for the last quarter of 2023. This notable achievement surpassed analyst estimates, which had pegged the figure at a more conservative $2.20 per share. The positive outcome was achieved despite a global increase in refining capacity, attributed to OPEC+’s production cuts combined with sustained demand, effectively offsetting challenges posed by fluctuating fuel prices.
For Q4, Marathon’s crude oil capacity utilization reached an impressive 91%, resulting in a total throughput of 2.9 million barrels per day (bpd). The net income attributable to the company settled at $1.45 billion, a decrease from the $3.32 billion reported in Q4 2022.
The backdrop to this success lies in OPEC+’s decision in June to extend oil production cuts by 3.66 million bpd, equivalent to approximately 5% of global demand. Saudi Arabia additionally committed to voluntarily reducing production by an extra million bpd, while Russia pledged a voluntary cut of 300,000 bpd in exports. This concerted effort led to a constrained fuel supply, providing a favorable environment for U.S. refiners, including Marathon Petroleum.
On the financial front, MPC disclosed a 3.8% reduction in capital spending, lowering it to $1.25 billion. Michael Hennigan, MPC’s CEL, commented on the strong operational performance and commercial execution in 2023, generating $14.1 billion in net cash from operations. This success enabled the return of $12.8 billion of capital to shareholders.
Looking ahead, Marathon Petroleum forecasts a total throughput of 2.685 million bpd for the first quarter of 2024, with direct operating costs estimated at $5.85 billion. The company is set to make improvements at its Los Angeles refinery, the largest on the West Coast with a capacity of 363,000 bpd. The facility refines a variety of crude sources, producing cleaner CARB gasoline and diesel, alongside traditional gasoline and distillates.
Meanwhile, OPEC+ has extended its 2023 production cuts into the first quarter of 2024, signaling a continued commitment to stabilizing global oil markets.