Refiner Marathon Stumbles (MPC, MRO)

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Oil refiner Marathon Petroleum Corp. (NYSE: MPC) posted a quarterly EPS loss of -$0.21 this morning, way below the consensus estimate of EPS loss of -$0.06. Revenues rose to $19.44 billion, beating estimates of $15.1 billion easily, but the high cost of crude feedstock cut operating income dramatically. Marathon Petroleum spun off from Marathon Oil Corp. (NYSE: MRO) in July last year.

To salve the wound, Marathon Petroleum announced that it would buyback $2 billion in stock and begin to evaluate

strategic alternatives to enhance shareholder value with respect to certain of its midstream assets, including, but not limited to, the possible formation and initial public offering of a master limited partnership (MLP).

The company has interests in about 9,600 miles of crude and refined product pipelines in 15 states. About 2.8 million barrels/day travel through Marathon’s system. Creating an MLP offers tax advantages to pipeline operators and because Marathon Petroleum would surely maintain ownership of the MLP’s general partner and a substantial share of the MLP’s common units, the added revenue could help offset some tough days ahead in the refining business.

Marathon Petroleum’s shares are up nearly 7% at $40.81 after rising to nearly $44 earlier. The 52-week range is $26.35-$47.43.