Marathon Petroleum Corp (MPC) — Q1 2021 Earnings Call Transcript

Welcome to Marathon Petroleum Corporation’s first quarter 2021 earnings conference call. The slides that accompany this call can be found on our website at marathonpetroleum.com, under the Investors tab. Joining me on the call today are: Mike Hennigan, CEO; Maryann Mannen, CFO; and other members of the Executive Team. We invite you to read the Safe Harbor statements on Slide 2. We will be making forward-looking statements today. Actual results may differ. Factors that could cause actual results to differ are included there as well as in our SEC filings. With that, I’ll turn the call over to Mike.

Thanks, Kristina, and thank you for joining our call this morning. Before we get into our results for the quarter, we wanted to provide a brief update on the business. During the first quarter, our industry continued to struggle with a reduction in global economic activity and demand for transportation fuels that resulted from the mobility restrictions related to the COVID-19 pandemic. As we started the second quarter, with the rollout of vaccination, we still see industry-wide gasoline demand down around 5% from historical levels and jet demand down around 25% to 30%. To the extent that a pent-up desire to travel starts to brighten the macro-outlook for our business, our team and our assets are poised to take advantage of these opportunities. But in the meantime, as the challenging backdrop holds, we’ll continue to concentrate on the elements of our business that are within our control. Our near-term priorities remain the same. Each quarter, we’re focused on strengthening the competitive position of our assets, improving our commercial performance, and lowering our cost structure. Slide 4 highlights some of our actions around our strategic priorities this quarter. First, we’re close to completion on the sale of our Speedway business. Second, we continue to take steps to reposition our portfolio. Our Board of Directors approved our plans to convert our Martinez assets to a 48,000 barrel per day renewable facility. We expect commissioning of Martinez to begin in the second half of 2022 with approximately 17,000 barrels per day of capacity. Additionally, we expect to reach full capacity of approximately 48,000 barrels a day by the end of 2023. In line with our commitment to lowering the carbon intensity of our operations and products, we’re planning to install wind turbine generators at the Dickinson facility. Sourcing electricity from wind will lower the carbon intensity of the renewable diesel product at that facility. We’ll continue to seek out the right opportunity for investing and partnering on renewables and evolving technologies.

Thanks, Mike. Slide 8 provides a summary of our first quarter financial results. This morning, we reported an adjusted loss per share of $0.20. Adjusted EBITDA was $1,552 million for the quarter. This includes results from both continuing and discontinued operations. Cash from continuing operations, excluding working capital, was $613 million, which is nearly a $500 million increase since the prior quarter. It also marked the first time since the start of the pandemic that cash from continuing operations has been above our quarterly dividend payments, which were $379 million. Slide 9 shows the reconciliation from net income to adjusted EBITDA as well as the sequential change in adjusted EBITDA from fourth quarter 2020 to first quarter 2021. Adjusted EBITDA was nearly $650 million more quarter-over-quarter driven primarily by higher earnings in refining and marketing. As a reminder, both the fourth and first quarter results reflect Speedway as a discontinued operation. Moving to our segment results, Slide 10 provides an overview of our refining and marketing segment. The business reported positive EBITDA for the first time since the start of the COVID pandemic with first quarter adjusted EBITDA of $23 million. This was an increase of $725 million when compared to the fourth quarter of 2020. The increase was driven primarily by higher refining margins, which were considerably improved across all regions in the first quarter, as compared to the fourth quarter. Total utilization for refining was 83%, which was roughly flat with the fourth quarter utilization of 82%.

Thanks, Maryann. As we open the call for your questions, as a courtesy to all participants, we ask that you limit yourself to one question and a follow-up. If time permits, we will re-prompt for additional questions. We will now open the call for questions. Operator?

Thank you. Good morning, everyone. Mike, I wonder if I could ask about the return of cash. I know it’s kind of a routine question that comes up for every quarter. But you talked about the appropriate level of leverage. I’m wondering how that’s changed or what the latest thinking is regarding the outlook. And then, as a kind of follow-on to that, when you think about buybacks, how big of a consideration is lowering the dividend burden on the ex-Speedway refining and midstream business? So I’m just, well – so, basically, debt level and buybacks, I realize MPLX’s share price has been low, so that’s probably off the table anyway.

Yeah, thanks, Doug. I’ll start and I’ll let Maryann jump in. So throughout this process, we’ve been getting a question about what those appropriate leverage levels mean. When we pick a metric, we’ve been saying one to 1.5 times mid-cycle. And then everybody says, well then what do you think about mid-cycle? And my standard answer is, I don’t think about the 50-yard line, I think about the banks of the river. I try to do scenario planning around what we think could be good times and bad times. Obviously, everybody is excited about vaccine rollouts and getting recovery here, and certainly the market is moving in that direction. At the same time, Doug, in our prepared remarks, we said gasoline demand is still 5% lower year-on-year overall. The West Coast is still considerably down compared to the other areas.

Doug, I think Mike covered it quite comprehensively. Just a couple of other additions, as we continue to say it was our objective and continues to be to maintain an investment-grade balance sheet. As you’ve seen and Mike talked about, Fitch has already confirmed that. So another key variable that we will continue to consider is ensuring that the debt repayment is efficient. But other than that, I think Mike has covered the comments quite well. The only other thing I’d add is, we have committed, we’ve restated it many times that once we get too close, we’ll provide some more details. We’re getting really close. Hopefully, that’s not too far away from now. But we’ve been resistant to doing it ahead of time. We’ll just – as soon as we get close, we’ll give a little more color to the market and then continue to communicate the way we have been.

So, Michael, just for clarity, to be clear on my point about the dividend, we’re obviously losing substantial cash coverage for the dividend. Should we expect some kind of accelerated buyback to reduce the dividend burden, or how are you thinking about that?

Yeah, big picture, Doug, we believe in our dividend and we think we have a competitive dividend. Obviously, we’re going to reduce share count as a result of this. How that gets reduced is still to be seen, as far as you know the way this lays itself out and where the share price is over time. But we are committed to a competitive dividend. That’s something that we’ve had in mind throughout this process. We’ll see at the end of the return, where we end up as far as share count, and then kind of evaluate where we are. But hopefully, the takeaway that you’ve seen from this is we’re committed to our dividend, we do believe in returning capital, we have a nice opportunity here that’s unique as a result of this sale, and that return of capital will be a little bit of a differentiating factor for us for some time.

Today – well, thanks for that, Mike. My follow-up, I want to be respectful to everyone else. I’ll be real quick. The cost structure, most likely you’re making big strides in getting your cost down. But you haven’t talked much about the broader portfolio review or restructuring. One of your competitors suggested the other day that if the RFS doesn’t get resolved one way or another, we could see further rationalization of refining capacity. I just wonder if you could bring us up to date with the overall portfolio review and the stickiness of the cost reductions you’ve achieved so far.

Yeah, Doug, on the portfolio, we decided very early on that two facilities that we idled were not going to be long-term assets for us. We do have an ongoing portfolio assessment. But we did pause a little bit because we want to kind of get through this pandemic and see what the other side looks like and what the new normal looks like. So, we still have ongoing work internally on the portfolio, but nothing that we’re ready to disclose yet. It was a conscious decision on our part to pause during the pandemic and start to see the light at the end of the tunnel. I know everybody’s anxious to get this behind us. Hopefully, we’re getting really close. The vaccine rollouts have gone very well. We’ll get a better sense of what a new normal looks like and do a final check on our portfolio in general. But in the near term, nothing to announce right now. We’ll get through this new normal.

Yeah, Mike brought up the question of what inning we’re in. I’d have to say we’re not in the first inning, and we’re not in the ninth inning. We challenge ourselves every day. What can we do to take more discretionary costs out of our system? The biggest thing that we did early on, and you alluded to that, is we took some of our high-cost facilities out of the system. And on the West Coast, you’ve seen that quarter-over-quarter as we idled the Martinez refinery as an oil refinery. And through the subsequent quarters, we completed a majority of the idling costs. Going forward, Doug, we continue to look at efficiency and cost savings every day while maintaining our emphasis towards safe and reliable operations for our assets. Those are non-negotiable. Discretionary spending is negotiable.

Thanks, guys.

You’re welcome, Doug.

Good morning, team. I just want to build on some of your comments in the prepared remarks on the Speedway transaction. Mike, it sounds like you’re really close and just want to get some clarity. What 'really close' means from your perspective? Are we talking days? Are we talking months? Are we talking quarters? And in terms of the gating factors, just maybe you could talk about what we should be monitoring from a closure perspective?

And that’s a good way to frame it. I think the best way to answer it is exactly the way you laid it out. What we believe at this point is that we’re in weeks, not months. We’re not days, it’s not going to be tomorrow or the next day, but we think we are down to weeks. What we’ve tried to do in this process is to be transparent, because it’s really between the FTC and 7-Eleven. Obviously, we’re at the table trying to understand if we can help the process at all. The best way to describe it is that the FTC communicated to us that we’re in the final stage of the process. So with that in mind, we think we’re within weeks. I guess that’s the best way to give you our sense of it. We don’t think we’re months or days, but we think we’re very, very close. I hope that helps you. I know everybody’s anxious for us to get the next set of disclosures related to this. We’re also anxious to do that. This has been a process. It’s taken a long time. I’m hoping the market appreciates our efforts at transparency. We thought for a long time that we were going to hit by the end of the quarter, but that kind of came and went a little bit as processes take longer sometimes when you get into the details at the end. But we are very close.

Yeah, that conviction comes through, so thank you, that’s great, Mike. And the follow-up is on Martinez. Maybe you could step back and talk about the renewable diesel project. If you could level set on how you think about the total capital associated with the project—to the extent you can provide it? I think you’ve given the guidance for $350 million of renewable spend this year, but just sort of the total spend associated with the project? How should we think about the returns associated with this project? There are a lot of moving pieces, but the biggest fear, I guess, is that soybean prices continue to move higher. So how do you manage the feedstock flexibility to ensure this is a good through-the-cycle investment?

Yeah, it’s a great question, Neil. Obviously, we’ve communicated that we’ve gotten full Board support for this project. So I’ll let Ray start off, give you some color on how we’re thinking about it. Then, let Brian and Dave jump in as needed on feedstock, et cetera.

Sure, Mike. From a project standpoint, I’d like to provide a little bit of color on where we stand from a timing schedule. At this point, Phase 1 is targeting completion in the second half of next year 2022. That would be for 17,000 barrels of renewable fuels coming online. That will be followed up by pretreatment in 2023. Finally, the rest of the facility, the back half, at 2023 for a total of 48,000 barrels for renewable diesel and renewable fuels production. Now, if I go back to Doug’s earlier comment or question about OpEx, Martinez was a very high-cost oil refinery. But there are some real advantages at Martinez that make it a very good project for us from a renewable fuel standpoint: 300 processing units, 2 hydrogen plants, the infrastructure that provides us the ability to have a very cost-competitive Brownfield project. I can’t give a lot more CapEx guidance, but we’re very excited about this project. Just what we’ve accomplished in the last quarter in Q1, we progressed our engineering work toward the end of definition engineering and have also made a lot of progress on our permitting efforts regarding getting the environmental impact report kick-started and out for review in the near term.

Neil, I’ll turn it over to the commercial guys in a second. Just another way to think about it is there are 3 major hurdles to consider: do we have the right location and logistics? Obviously, Martinez is sitting on the demand, and Dickinson is very close to supply. So we like our location and renewables facilities. Ray just mentioned the second major hurdle is capital and operating expense, basically assessing the hardware. Ray just described it, the full asset facility was relatively high cost. But the real opportunity, as he noted, is in the hydroprocessing area. It became clear to us that the best use of this asset was to put it into service. The last piece of the puzzle is the one that’s ongoing, and that’s feedstock optimization. That’ll continue, so I’ll let the guys comment a little bit on that.

Okay, hi, it’s Brian Davis here. Regarding the feedstock question, the first thing is that Ray and his team have done a good job in creating sufficient optionality through onsite pretreatment over time, and the capability to receive feedstock by rail as well as by water. This opens our commercial flexibility considerably. We’re evaluating a portfolio of options to give us the right mix of feedstocks, which will deliver value over the life of the project. We have a number of commercial negotiations underway with a wide range of suppliers. We’ve been leveraging our existing capabilities and relationships, as we have been buying these feedstocks for a period for our existing biodiesel and recently for Dickinson.

Okay, thanks, guys. Appreciate it.

You’re welcome, Neil.

Yes, hi, good morning. My first question just be on the OpEx results on the West Coast. The OpEx per barrel there was even lower than it was in 2019 despite the fact that utilization is still pretty low here at this point. So maybe you could just, obviously, Martinez, I think is probably out of those numbers now. So maybe that’s the biggest factor. But any other things that we should think about as to the drivers of lower OpEx and how you think about the potential there as utilization ramps back up?

Okay. I’ll go ahead and take this question. This is Ray. You’re right, Martinez is largely out of the OpEx number. There still is some residual OpEx for tank cleaning and work that we’ll carry on to this year, but there is a little bit of Martinez spend. I will say on the West Coast, Q1 was a challenging OpEx quarter, primarily because energy costs put a big demand on us in the last part of February and early March. I will note that on the West Coast, we were partially able to mitigate the impact of those natural gas price spikes by reducing our natural gas purchase requirements to close to balance by producing more internal fuel from our operations. I think this was key for us, as far as managing the winter storm, not just in Texas, but across all of our operations. I really want to give a shout out to our commercial group. Close coordination with our commercial group and the refineries allowed us to pivot quickly on day one when natural gas went up by 100-fold, and adjust our operations to reduce our demand for natural gas and have as minimal an impact on our OpEx as possible. This was across all of our systems and was really impactful on the West Coast as well. Aside from that, I’ll go back to what I said earlier, as far as we challenge ourselves every day on discretionary spending versus necessary spending. That’s starting to show in the numbers.

Okay, great. That’s helpful. Thank you. My follow-up on renewable diesel, I guess, I’ll just try to glue these together very quickly. If you could just talk about how you feel things are going with the startup, so far Dickinson, what you’ve learned from that startup process? And then just on the feedstock side of things, would you consider signing up for some kind of joint venture or something like that for soybean crush capacity, like we’ve seen from one of your peers? Is that one of the things you’re considering? Thank you.

Okay, this is Ray again, and I’ll start off with the first thing as far as what we learned from the startup. One of the things we learned, which we already knew, is that startups are hard. You don’t just push a button and everything works perfectly. But I’ll tell you, in the first quarter, we achieved 90% of our design capacity at Dickinson. We also qualified and got a provisional score for our renewable feedstocks, which are soybean oil and corn oil. That’s a lower number than the temporary score that we start off with. But as you know, we’re not seeking to get to 90%. We want to get to 100% of capacity with lower carbon-intensity score. So work has continued in that regard. We’re working with our licensor for the process and catalyst on a new catalyst formulation. We just completed that work, and it’s come back up. So we’re working towards bettering ourselves in achieving that 100% yield and what we want from the project.

Yeah, and Phil, it’s Brian here. On your question about soybean crush capacity, we’re looking at all options here. Clearly, we’re targeting advantageous feedstocks as much as possible, but we think we’ll also need to use soybean oil in its production as well. So, there are certainly considerations for putting in the commercial mix as we understand the right balance between gaining access to the right feedstock at the right price with security of supply.

Yeah, Phil, it’s Mike. The only thing I’ll add—kind of tying it back to what Neil asked, is we really liked the project. Ray describes it well; we think we got really advantageous hardware from CapEx and OpEx. We’re concentrating on the feedstock side of the equation now. We’re open to several strategies, as Brian mentioned, but we’re anxious to get this project online—believing it's a nice addition to our portfolio. It really does optimize the assets that were available to us at Martinez, where we’re going to use the strong ones for hydroprocessing and eliminate a lot of costs that were part of the facility from a crude processing standpoint.

Great. Thanks.

You’re welcome.

Thank you, and good morning.

Good morning, Roger.

Just come back and take a shot here at the core refining business. As Doug mentioned earlier, the RFS, most of your peers talked about it, RINs are generally quite the headwind to capture. Your capture was actually pretty good. I know, as Speedway is being separated, you’re trying to maintain as much of the owning capacity as possible. I’m just curious if you could kind of break out maybe how your exposure to RINs is today, either pre or post the spin, and what impact you believe it had on Q1?

Yeah, Roger, this is Brian Partee; I can address that question. Consistent with the past, we self-generate about 70% to 75% of our RIN through either generation or biofuel refining assets. So Q1 was pretty similar to that historical average, which relates to the separation and Speedway with no real impact. The RIN is something that’s pretty transparent in the marketplace; it’s a real expense we all have to face. It’s not something we can control. We think of it like a commodity; we deal with commodity prices that are volatile and move dramatically up and down. One thing I’d leave you with on the RIN and the RIN expense is that while there’s a lot of hyper-focus on it in the current environment, there’s also a good opportunity to optimize in that space, so depending on how you’re modeling and what you’re looking at, think about RIN in terms of true obligated volume; obviously, not all gains are obligated. If you think about stripping off exports, jet fuel, and some other fuels, Alaska is also not an obligated state from an RVO perspective. The other thing that played out interestingly in the first quarter was the year-on-year carry-in. You can meet obligations in the prompt here with up to 20% of carry-ins from the prior year. We think there’s far less carry-in from 2020 to 2021, largely due to uncertainty around the election last fall.

Okay. Thanks. Another question I had, again, kind of sticking with the refining side of things. We’re hearing that some of the maintenance in Canada may not happen at quite the same pace because of COVID issues. Which implies it’s drawn out. If you think about light, heavy, whether it’s in the U.S. or coastal U.S., what sort of updates can you offer there in terms of crude availability? What are your expectations on crude differentials?

Yeah. Hi, Roger. This is Rick Hessling. The intel you’re getting from Canada is spot on; we’re hearing the same thing. They’ve experienced some startup issues with a couple of their maintenance projects, and we’re also hearing one of the producers specifically is having some COVID issues. So that’s certainly not good for production in Canada. We’ll continue to watch that specifically regarding Canada. In terms of differentials there, the general forward market is roughly plus or minus $12. The incremental barrel in Canada is moving out via rail as the pipes are full, so we expect that to continue. When you look worldwide and more closely on the Gulf Coast, there’s a lot of conversation around OPEC and the barrels they’re releasing into the market. I’m a bit more measured on OPEC and what we might expect on the Gulf Coast than others. Looking at what OPEC has done in the past months, they’ve been very measured on how they’re managing their production with demand. Currently, we have this tug of war, where there’s slight optimism coming from the West, but then there’s a lot of fear of the unknown, which is well-publicized in India. We’ll just have to see how that plays out.

Great. Thank you.

You’re welcome.

Hi, in your prepared remarks, you did indicate that while demand is recovering, the pace of recovery is lower on the West Coast. California is going for a full reopen around mid-June. So I’m just trying to understand going forward; do you see an improved demand recovery based on a full reopen in California?

Yeah, Manav, this is Brian Partee, I can take that one. What I would say reiterates Mike’s points from the opening remarks. We have seen gasoline demand grind back across the entire portfolio. Certainly, the West Coast has lagged. In the East, we’ve been running over the last several weeks 2% to 5% off of 2019 comps. In the West, it’s been more in the high teens to low twenties. We’ve seen a gradual grind back from the early part of this year, and you’re spot on; California is preparing to reopen here in mid-June. From looking at vaccination data and anecdotal discussions in the market, we do expect meaningful recoveries through the summer months. To what extent is very difficult to estimate. COVID has been a very dynamic environment for us, and California has been very aggressive. I’m cautious about predicting where we might end up. However, we’ve seen favorable trends in other markets as we’ve opened up economies, so we’d expect to see something similar out on the West Coast.

Manav, it’s Mike. The other thing I would add—kind of what I said earlier—is, once we get through this and a lot of these states open up, California, as Brian just mentioned, is a major indicator of where that market is heading. Similarly, Florida, New Jersey, and New York—others are also in the process of reopening. The question becomes, where do we end up after that point? What we need to see is whether there’s potential pent-up demand. Is that one of the things we’re going to see coming out of this? Will there be a new normal with how people operate, such as remote work? We’re excited that we continue to see improvement, but we’re also cautious about what it will mean once we reach the other side of this. I would suggest the way we're concentrating is to focus on what we control, keep our eye on what we don’t control, and learn as much as we can about what the new normal looks like.

Mike, one quick follow-up here: we saw you’re putting in some wind turbines at the Dickinson refinery to lower carbon intensity. Clearly, you’re focusing a lot on carbon intensity, and one thing that some of your peers are doing is pursuing carbon capture and sequestration. Is it something which MPC could look at potentially to further lower the carbon intensity of gasoline and diesel produced in its refineries?

Yeah, Manav. I think I’ll let Brian and Dave jump in on that, but we are obviously cognizant of the value in lowering the carbon intensity of our operations and products. The wind situation is one piece; if you want to provide more color there, or Dave if you want to provide total color on lowering carbon.

Just to provide a little bit more detail on Dickinson and what we’re doing regarding carbon intensity. The first thing you mentioned is the wind turbine, so that’s a project we plan to go ahead with in 2022, to produce enough wind turbines to provide about 50% of our electricity demand using renewable electricity—that lowers the carbon intensity. We are also treating feedstocks now down at Beatrice, and that plant has started up. This material has been incorporated into Dickinson. We have pretreated corn oil that’s significantly lower in carbon intensity than soybean oil.

Yes, this is David Heppner. Just another comment would be that whether through wind turbines or carbon capture and sequestration, those are all complementary technologies to increase the value of the Dickinson project by lowering carbon intensity. There are additional technologies we’re continuing to evaluate and will implement those if and when they make sense for us.

Thank you.

Hi. Thank you. Good morning, guys.

Good morning, Paul.

I have two questions. If we’re looking at your cost structure, what do you put in refining OpEx, the distribution costs, and the corporate costs together or individually? They worked really well in the first quarter, and you’ve done a great job there. I’m curious if, considering your total throughput guidance is higher with natural gas costs lower in the second quarter, is there any reason you said just being conservative or does it involve some one-off issues? That’s why you expect the unit cost on a per-barrel throughput to be higher, whereas one would imagine with higher throughput volume and lower energy costs, the per-unit cost should be lower, not higher.

Yeah, Paul. It’s Maryann again. So you’re right. When we talk about total operating costs based on that demand, it's about $5.20 versus the quarter, which was about $5.16. I was saying about flat, but you’re right, there is a slight kick-up when we think about those total operating costs. When looking at distribution costs, hopefully, I’ve tried to address the key elements that were drivers to the higher cost.

Paul, it’s Mike. On your second point, I think it’s a combination of cost and portfolio. As Ray mentioned earlier, we accomplished to kill two birds with one stone, as Martinez was one of our highest cost facilities, and we wanted to ensure we had a very competitive low-cost system. It’s going to be around for a long time. We want to ensure we create value. At the same time, the energy evolution is going to kick into renewables and other technologies as they develop. We’re pleased with the efforts going on at Dickinson. As Dave just mentioned, we’re trying to focus on both. We’re committed to maximizing profitability, whether it’s lowering carbon intensity, the operation, or product feedstocks.

Sure. Thanks, Mike. Yes, as we build out the feedstock procurement strategy and create more options, we’re certainly looking at partners along the entire value chain, all the way from the procurement of feedstock onwards. We are considering where we can do more with partners than just only commercial arrangements. But we want to let discussions play out. Whatever we do needs to make sense for both sides from a value perspective.

And, Mike, you also address that on the longer term. Do you see the energy transition creating a new line of business for you, or are you just focusing on reducing your own emissions in carbon intensity for your existing operation?

Yeah, I don’t think of it as either, Paul. I think it’s both. We’re going to have an opportunity as this transition evolves. There are going to be some technologies we can implement in our existing fossil fuel facilities that will add value. There are other technologies that we implement in truly renewable facilities. Over time, you’re going to see us grow in both areas, and the end game is to have a competitive refining offering of fossil fuels, and a competitive offering of renewable fuels, while looking for ways to grow our earnings. We’re evaluating and will act on any good opportunities that present themselves.

Thank you.

You’re welcome.

Hi, thanks for taking the question. My questions are both on refining and marketing, and specifically on CapEx. First on Martinez, I know you can’t disclose an overall cost, but Mike, I was wondering, in terms of cadence, you mentioned $350 million this year and it sounds like you're targeting the first diesel hydrotreater next year. The 3 other hydros and the pretreat come on in 2023. So, is it right to think of this as a stair step that the CapEx for that, and therefore the R&M growth CapEx, kind of steps up across renewables next year, and in 2023? Or is it more evenly spread out? And related to that, would it be funded purely from internally generated cash or would you look to what your financing options are if you had to fund the project?

Yeah, Prashant, I think you’re thinking it right. It is a phased approach to the activity out there, but it dovetails with what Paul just asked. Roughly 40% or about half of the growth capital this year is directed towards renewables, but half is still directed to our fossil fuel business. There will be continuing funds spent across both segments, with the expectation that the capital will be managed strictly. As Ray mentioned, we’ll get things online early next year, pretreatment comes on, full capacity comes on. So, there will be stair-stepping of capital.

Great. And then sort of related to the second part of my question there was on how you expect to fund projects. It sounds like it’s going to be a very large facility at Martinez, but you have a ramp in cash flow generation, so how are you broadly thinking about funding Martinez out of operating cash generated, or are you looking at project financing?

Yeah, Prashant. Our base plan is, assuming the market cooperates, to fund it out of operating cash. We don’t want to be discolored with the Speedway earnings, and we’ll provide more information on that, but we believe we can comfortably fund our capital program through operating cash flow.

Okay, great. And just one last follow-up: On the maintenance side, I think you guided to about $250 million this year in R&M. It’s a little early, I know to answer, but any color on how you think about that maintenance number on a through-cycle basis? If we get volumes back up and looking ahead, is that $250 million in line with your maintenance costs, knowing you’ve rationalized cost across your structure?

Yeah, let me take a shot at that. This is Ray. When I talked earlier about looking at needs versus wants, the maintenance CapEx is certainly within that line. Our goal is not to go grossly up on maintenance CapEx.

Perfect. Thank you very much for the time. I appreciate it.

You’re welcome.

Great. Thanks. Maybe just one quick one on the refining side. Your utilization guidance for the second quarter is probably a little more conservative in terms of sequential improvement relative to some of your peers. I mean, your commentary has maybe been a little more cautious. How do you think about ramping utilization over the next couple of months? Is there a potential upside to your Q2 guidance?

Yeah. I think Brian alluded to it early on: we have these states that have a significant impact on gasoline, the West Coast being one. They’re all discussing the next phase of opening up. We just don’t know how to gauge that accurately. Manav mentioned June for the West Coast, but we need to get through the rest of May. We’re doing our best to forecast that, however, we can’t control these variables. While we give our best assessments, there are many key states in play. We’ve provided guidance, but we will do a post-audit once the results come in.

Thanks. Maybe a quick follow-up on Dickinson. As you think about the—I know you have the pretreatment up and going for some of the corn oil. Do you have an idea of what the average mix will look like in terms of vegetable oil versus corn oil? And an estimate of what you think the average carbon intensity value of the product will be once the wind facilities are up and running?

Sure, this is Ray. The design basis for the project is 10,000 barrels a day of soybean oil, and 2000 barrels of corn oil—treated corn oil. That’s the goal, and we aim to get there as we get into the second quarter. As for the carbon intensity value, the target for soybean oil is in the mid-50s, subtracting about 30 numbers for corn oil. That’s the range to consider from a carbon intensity standpoint.

How meaningful is the wind energy in terms of—is that assuming the wind energy, or can we expect to see a few more points shaved off with that project?

Brian, I’d suggest we hold off until we get that online. We’re excited about the opportunity, but we don’t want to predetermine how effective we’re going to be. However, we’re looking forward to seeing how it plays out once we get it up and running.

Awesome. Thanks, guys.

You’re welcome.

Operator, are there any other questions today?

Perfect. Well, thank you all for your interest in Marathon Petroleum Corporation. Should you have additional questions or would you like clarification on topics discussed this morning, please reach out to our team and we’ll be available to take your calls. Thank you so much for joining us this afternoon.