Welcome to the MPC first quarter 2023 earnings call. My name is Sheila, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Press star one on your touchtone phone to enter the queue. Please note that this conference is being recorded. I will now turn the call over to Kristina Kazarian. Kristina, you may begin. Welcome to Marathon Petroleum Corporation's first quarter 2023 earnings conference call. The slides that accompany this call can be found on our website at marathonpetroleum.com under the Investor 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 two. 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 filings with the SEC. With that, I'll turn it over to Mike. Thanks, Kristina. Good morning, everyone. Let me first share our view on the macro environment. In the first quarter, volatility in the global energy market remained high, driven by uncertainties around the potential for recession, the pace of China's economic recovery, and the impact of sanctions on Russian products. At the same time, supply remains tight, supported by nearly 4 million barrels per day of global refining capacity that has come offline in the last couple years. Global demand continues to grow as the need for affordable, reliable energy increases throughout the world. IEA is projecting 2 million barrels a day increase in 2023. Since last quarter, distillate cracks have come down, gasoline cracks have improved as expected, given the onset of the summer driving season. Overall, we believe supply constraints and growing demand will support strong refining margins throughout 2023. Cracks have decreased from 2022 levels, but are still above historic mid-cycle levels. In alignment with what we said last quarter, we remain bullish into the driving season, and gasoline strength is expected to improve the diesel situation while jet demand continues to improve. As we continue throughout the year, much will depend on the ongoing recovery in China and the extent, if any, of recessionary impacts. We continue building out our global presence, supported by our offices in Houston, London, and Singapore as we invest in our global commercial strategy, and our cost-advantaged refining system is well-positioned to supply growing markets. This quarter, despite significant planned turnaround work at several key facilities, in particular in our Gulf Coast region at Galveston Bay and Garyville, we delivered the strongest first quarter results in the company's history. Planned maintenance activities reduced refinery throughput by 11 million barrels compared with the fourth quarter. Our team's operational and commercial execution supported our ability to generate refining and marketing segment adjusted EBITDA of nearly $4 billion or $15.09 per barrel. MPLX remains a strategic part of MPC's portfolio as it continues to grow its cash flows and capital returns. Our midstream segment delivers durable and growing earnings. This quarter, it generated adjusted EBITDA of $1.5 billion, which is up 9% year-over-year. MPLX distribution to MPC was roughly $500 million this quarter and an annualized rate of over $2 billion, which fully covers MPC's dividend as well as half of our planned 2023 capital program. During the first quarter, we advanced value-creating projects. At Galveston Bay, we completed the STAR project. Rather than expand the GBR cokers, we elected to upgrade the resid hydrocracker unit as it offers better conversion and increased liquid volume yield. Fractionation modifications offer increased diesel recovery. The refinery will be able to process significantly more discounted heavy crude. Overall, STAR is expected to add 40,000 barrels per day of incremental crude capacity and 17,000 barrels a day of resid processing capacity. Startup activities are progressing. We expect STAR to ramp through the second quarter of 2023. The incremental profitability from this project will primarily be determined by the spread between heavy crude and untreated diesel over the incremental 40,000 barrels a day of crude capacity. At the Martinez Renewable Fuels facility, we reached full phase one production capacity of 260 million gallons per year of renewable fuels, ramping to design rates and yields as planned. Phase II construction activities are on schedule. Pre-treatment capabilities are expected to come online in the second half of 2023, which will enable the facility to ramp to its full expected capacity of 730 million gallons per year by the end of 2023. Martinez will be among the largest renewable diesel facilities in the world, underpinned by a competitive operating and capital cost profile, robust inbound and outbound logistics flexibility, an advantaged feedstock slate, and our strategic relationship with Neste. In the first quarter, we returned over $3.5 billion to MPC shareholders via dividends and share repurchases. Today, we announced an additional $5 billion share repurchase authorization, reinforcing our commitment to strong capital returns. Let me share some of the progress on our low carbon initiatives. The Martinez and Dickinson facilities are competitively advantaged. They're supported by upstream value creation integration with our Beatrice and Cincinnati pretreatment plants and downstream integration with our vast marketing footprint. The strategic partnerships we're cultivating with Neste, ADM, and The Andersons creates platforms for additional collaboration within renewables. This quarter, we made an investment in an emerging producer of dairy farm-based renewable natural gas, providing the ability to participate in early-stage development at an attractive entry point. Our Virent subsidiary is progressing a commercially feasible assessment for converting bio-based feedstocks into gasoline and sustainable aviation fuel. We believe through these projects and opportunities, we are taking steps to advance our goal to lower the carbon intensity of our operations and the products we manufacture and supply to a growing market. At this point, I'd like to turn the call over to Maryann Mannen. Thanks, Mike. Moving to first quarter results, slide five provides a summary of our financial results. This morning, we reported earnings per share of $6.09. Adjusted EBITDA was $5.2 billion for the quarter, and cash flow from operations, excluding unfavorable working capital changes, was nearly $4.2 billion. During the quarter, we returned $337 million to shareholders through dividend payments and repurchased nearly $3.2 billion of our shares. Slide 6 shows the reconciliation between net income and Adjusted EBITDA, as well as the sequential change in Adjusted EBITDA from fourth quarter 2022 to first quarter 2023. Adjusted EBITDA was lower sequentially by approximately $600 million. This decrease was driven by refining and marketing as refining margins per barrel were down quarter-over-quarter. As we indicated last quarter, throughputs were lower, primarily due to the significant planned turnaround activity. Corporate expenses were roughly in line with our guidance. Despite general inflationary pressures, we have maintained cost discipline since taking $100 million out of corporate costs since 2020. The tax rate for the first quarter was 21%, resulting in a tax provision of approximately $800 million. Moving to our segment results, slide seven provides an overview of our refining and marketing segment. Like many in the industry, several of our refineries were impacted by Winter Storm Elliott at the end of December. These impacts carried into the first quarter, reducing our crude throughput by 3 million barrels. Winter Storm Elliott and higher planned maintenance in the Gulf Coast region reduced overall refining utilization, which was down 5% to 89%. Sequentially, per barrel margins were lower in all regions compared with the fourth quarter. Capture was 98%, reflecting a strong result from our commercial team, particularly given the extensive turnaround activity this quarter. Refining operating costs per barrel were roughly flat sequentially in the first quarter at $5.68. Lower throughput compared to the fourth quarter impacted operating costs per barrel. This was partially offset by lower energy costs, primarily in the Gulf Coast and MidCon regions. Although we experienced higher natural gas prices in the West Coast, we expect operating costs per barrel to be lower in the second quarter as reflected in our guidance. Slide eight provides an overview of our refining and marketing margin capture this quarter, which was 98%. Our commercial teams executed effectively in a volatile market environment. Light product margin tailwinds were balanced against impacts associated with inventory builds and planned maintenance activity. Capture results will fluctuate based on market dynamics. We believe through our commercial efforts, our capture baseline has moved closer to 100%. As our strategic pillar indicates, we have been committed to improving our commercial performance and believe that the capabilities we have built over the last 18 months will provide a sustainable advantage. We have meaningfully changed the way we go to market from a commercial perspective throughout our entire company. We believe these capabilities will provide incremental value beyond what we have realized to date. Slide nine shows the change in our midstream adjusted EBITDA versus the fourth quarter of 2022. Our midstream segment delivered resilient first quarter results. Adjusted EBITDA was 9% higher year-over-year, reflecting business growth. Our midstream business continues to grow and generate strong cash flows. We are advancing our capital plan with projects anchored in the Marcellus, Permian, and Bakken basins. These disciplined investments in high return projects, along with our focus on cost and portfolio optimization, are expected to grow our cash flows. This will allow us to reinvest in the business and return capital to unit holders. This quarter, MPLX distributions contributed $502 million in cash flow to MPC. MPLX remains a source of durable earnings in the MPC portfolio and is a differentiator for us compared to peers without midstream businesses. Slide 10 presents the elements of change in our consolidated cash position for the first quarter. Operating cash flow, excluding changes in working capital, was nearly $4.2 billion in the quarter. Working capital was a $98 million headwind for the quarter, driven primarily by increases in crude and product inventory, offsetting benefits from a decrease in refined product receivables related to lower product sales. Capital expenditures and investments totaling $664 million this quarter. We saw consistent spending and refining in the first quarter as work progressed on the Martinez Renewable Fuel facility conversion and the completion of the Galveston Bay STAR project. MPC returned over $3.5 billion via share repurchases and dividends during the quarter. This represents an 85% payout of the nearly $4.2 billion of operating cash flow, excluding changes in working capital, highlighting our commitment to superior shareholder returns. We now have $9 billion remaining under our current share repurchase authorization, which includes the additional $5 billion approval announced today. At the end of the first quarter, MPC had approximately $11.5 billion in cash and short-term investments. Turning to guidance on slide 11, we provide our second quarter outlook. We expect crude throughput volumes of roughly 2.6 million barrels per day, representing utilization of 91%. Utilization is forecast to be higher than the first quarter levels due to planned turnaround activity having a lower impact on crude units in the second quarter. Planned turnaround expense is projected to be approximately $400 million in the quarter, with activity primarily in the MidCon and West Coast regions. We expect turnaround activity to be front-half weighted in 2023. By the end of the second quarter, we expect to spend roughly $760 million on turnaround in 2023 and anticipate the full year turnaround spend to be comparable to the level of spend in 2022. Operating costs per barrel in the second quarter are expected to be lower at $5.20 as we expect to see benefits from higher throughput and lower energy costs. We look further into 2023, we anticipate our operating cost per barrel would decline and trend towards a more normalized level of $5 per barrel as we complete turnaround and project activity. Distribution costs are expected to be approximately $1.35 billion for the second quarter. Corporate costs are expected to be $175 million, representing the sustained reductions that we have made in this area. To recap, our first quarter results reflect our team's strong operational and commercial execution across the company. Our capital allocation framework remains consistent. We will invest in sustaining our asset base while paying a secure, competitive dividend with the potential for growth. We want to grow the company's earnings, and we will exercise strict capital discipline. Beyond these three priorities, we are committed to returning excess capital through share repurchases to meaningfully lower our share count. With that, let me pass it back to Mike. Thanks, Maryann. In summary, our results reflect the strongest first quarter in the company's history, generating $5.2 billion of adjusted EBITDA. MPLX remains a source of durable earnings in the MPC portfolio, distributing just over $500 million to MPC this quarter. As MPLX grows its free cash flow, we believe it will have capacity to increase capital returns to MPC. This quarter, we invested $664 million. We will invest capital where we believe there are attractive returns. We remain focused on ensuring the competitiveness of our assets as we progress through the energy evolution. Solid execution of our three strategic pillars is foundational. We remain steadfast in our commitment to safely operate our assets, protect the health and safety of our employees, and support the communities in which we operate. We believe the improvements we've made to our cost structure, portfolio, and commercial and operational execution have driven sustainable structural benefits, which will enable us to capture opportunities irrespective of the market environment. We believe MPC is positioned as the refiner investment of choice with the ability to generate the most cash through cycle and delivering superior returns to our shareholders with our steadfast commitment to returning capital. Let me turn the call back to Kristina. Thanks, Mike. As we open the call for your question, as a courtesy to all participants, we ask that you limit yourself to one question and a follow-up. If time permits, we'll re-prompt for additional questions. Sheila, we're ready for them. Thank you. We will now begin the question and answer session. If you have a question, please press star then one on your touch tone phone. If you wish to be removed from the queue, please press star then two. If you are using a speakerphone, you may need to pick up the handset first before pressing the numbers. Once again, if you have a question, please press star then one on your touch tone phone. Our first question will come from Neil Mehta with Goldman Sachs. Your line is open. Good morning, team, congrats on a great first quarter. I had a couple questions here. The first is around the West Coast. We're all watching Singapore margins right now, they continue to trade very weak. Just your perspective of do you think, you know, that the weakness in Asia is a reflection of demand? Do you see risk that that product comes to the West Coast, at which point there could be some downward pressure on Pad 5 margins? Hi, Neil. It's Rick. Really, I think the way we look at it is we're looking at it from a global perspective, we'll touch on the West Coast here in a moment. When you think globally, it's a great call-out to put Asia and Singapore in a bucket, I'd also throw Europe into that bucket as well. If we've learned anything over the last couple of years, is trade flows and cracks, the world is more connected than it's ever been. It's a really good call-out in drawing if there is a truly impact to the U.S. refiners. One thing I'd say is, as we look at Asia and Europe specifically, we actually see that as support for U.S. cracks. We see it as bullish for MPC. We're hearing rumors of both regions you mentioned, Singapore and Asia and Europe, of run cuts there, which we see as bullish for us, especially on the West Coast. As you know, the incremental barrel at times comes from Asia, and if it doesn't come to the West Coast, we see that as positive for margins and cracks. Lastly, I'd say our break-even is structurally lower than it's been in the past. As we view Europe as the marginal player in the world, we have a competitive advantage, as you know, on energy costs, feedstock acquisition, complexity of our refineries, our workforce, our reliability. Last, but certainly not least, we have an incredible global export program on products, so we're able to clear our markets quite well. We believe when you add all of those up, Neil, it really gives us quite the competitive advantage, specifically in the West Coast, but I would say in pads two, three, and five, where we operate. With that, I'll ask Brian if he has any specific comments on products in the West Coast to add. Thanks, Rick. Good morning, Neil. Just a couple of quick data points. You know, very good question. We are seeing some fundamental shifts in global trade flows as a result of economic activities and product sanctions, et cetera. Rick did mention that, you know, the marginal barrel coming into the West Coast is traditionally been, for many years, an import coming from the Far East. Just on order of magnitude, we're looking at 250,000 barrels a day to balance the system, predominantly gas and jet fuel. We expect that balance to continue to trend in terms of favoring more imports as we go forward, as more facilities are converted to RD on the West Coast. Other data point I think that's relevant in terms of penetrating the West Coast market from the Far East is also the tanker rates and availability of the foreign fleet. Current rates out of South Korea into the West Coast are about $8 a barrel. That's about 2x of what historically we've seen in the market. And the other two components that make it a little bit tricky to push incremental barrels into the West Coast are, of course, in California to meet the CARB spec, and then just logistics constraints in terms of docks and tankage, which are also being further constrained by some of the RD penetration that we're seeing in the West Coast market. That's great perspective, guys. The follow-up for me is just around return of capital. You guys have done a super job getting the share count down. Is there a consideration here, though, given the degree of economic uncertainty that might be out there about the downside resilience through strengthening the balance sheet, as we've seen in the past? You know, companies have gotten themselves in trouble by buying back stock towards the top of the cycle, and you guys have generally been countercyclical in your buyback approach. Hey, Neil. Thanks for the question. It's Maryann. You know, look, first of all, as you know, we've got a little over eleven and a half billion dollars of cash sitting on the MPC balance sheet. You know, you've heard from the team and Mike this morning, you know, our views on the balance of the year. We do take into consideration each time we make our decisions on what the share repurchase will look like, and we do that quarterly. We look at the macro conditions. We look at our cash positions. Obviously, having a strong balance sheet is foundational for us to be able to execute our capital allocation program as we just shared with you. We do take a look at it quarterly. It is not something that, you know, that we set for a long period of time. We have the ability to evaluate, all of those things as you, just outlined for us. Thank you, guys. Thank you. Our next question will come from Doug Leggate with Bank of America. Your line is open. Good morning, guys. This is actually Kalei on for Doug, so thank you for getting me on. My first question is just on the macro and how you're positioned here for the second quarter. Your peers are seeing really solid demand numbers, and your opening commentary was quite constructive. Yet the throughput guidance put out for the second quarter looks a bit conservative. At a high level, can you share any insights on demand from your own system and maybe elaborate a bit more on your outlook near-term? Good morning. This is Brian. Yeah. Let me weigh in on that. First and foremost is we look across, you know, an outlook for demand. We really look comprehensively at our entire book of business from a marketing standpoint. It's including our wholesale class of trade, our direct dealer, our branded jobber, our national accounts. We really think that's more reflective of the market as a whole. Let me give you some color on the quarter. I'll give you some numbers in terms of what Q1 looked like relative to Q1 of 2022. On the gasoline front, our book of business, as just described, was up 4.7%. The EIA call on demand on Q1 was about 1.7%. On the West Coast, despite some historically heavy rainfall and flood events, we were actually flat year-on-year, which bodes for some optimism as we trend into the summer on the West Coast. On the distillate side, we are off about 1.2% in the first quarter. EIA call on demand was down about 7%, but we believe that's heavily weighted with some, you know, sluggish home heat demand due to the warmer weather temperatures this past winter in the Northeast. On the West Coast, often asked in terms of distillate, we were actually up 1.4% year-on-year, again, despite those weather events. On the jet fuel side of the business, we saw a 6% rise in demand on the quarter, which comps to about 5% from the EIA perspective. We expect to see jet to continue to grow on the trend that it's been on really over the last two years to reach pre-pandemic levels late this year into early 2024. A couple other really important data points as we look forward on demand, I think it's important to mention that if we look at gasoline, you know, last year around this time of the year, we were about $4.20 per gallon at retail. We're currently around $3.61, so about 15% below prior year. We believe that bodes favorably. We're seeing that as we look at our April sales as we trend into Q2. We've seen week-on-week growth, so we're seeing that optimism built into the summer driving season. Similarly, on the distillate side, retail is off almost 22% year-on-year. Now, as it relates to, you know, some of the sluggishness in demand in the first quarter on the distillate side of the book, as we look domestically, certainly inflation is creating some degree of drag on demand. We're seeing that really pretty consistently across the U.S. on a nominal basis coming off a pretty high clip over the last year or so. It goes without saying, you know, with the inflationary pressures, you do expect to see some demand curtailments, and we do see that manifesting. It's not something that is a bright red light for us right now. It's something that we're watching closely. As we trend into the ag season here, in the MidCon, we're seeing early signs of, you know, recovery of demand as we go into the second quarter and have optimism as we roll through the balance of the year. The last thing I would say is, you know, as we look forward and we've seen a shift away from a demand perspective favoring diesel to gasoline, we do think that that sets up well for our commercial capabilities as we look to do more inter and intra-regional optimization as we come away from a strong distillate lead over the last year and a half or so to more of a balance between gas and diesel in terms of which one leads the crack. I guess on balance, it sounds quite positive. Thank you. My second question is for Maryann Mannen. The buyback is obviously something that separates you from your peers, and we appreciate the visibility provided by the $5 billion expansion today. I wanna ask about the ordinary dividend. In our view, refining is not contributing to that dividend today, as it's more than covered by the distribution from MPLX. As you close out spending on the STAR project and consider what we think is a reset in the mid-cycle, it looks like the dividend has a lot of capacity to increase here. How are you thinking about that piece of your value proposition? Thanks for the question. You know, as it relates to the dividend, we continue to be committed to the secure, competitive, and as we've said, you know, potentially growing dividend. We've committed to evaluate that dividend at least annually, and we intend to do so on a very similar schedule as we did in 2022. You know, it is part of the capital allocation framework as we've shared, and we will evaluate that, you know, in similar timeframe as we did in 2022. I just wanna add to that. Thanks for noticing that. You know, one of the things that we think is unique in our value proposition is the $2+ billion that we're getting from MPLX. If you listen to the call earlier, MPLX had a very strong quarter. We continue to grow the cash flows at MPLX. You know, we'll have a similar distribution increase discussion later in the year. I think it's pretty important to understand that, you know, $2+ billion coming in, as you mentioned and I mentioned in pre-prepared remarks, covers the dividend and a good portion of the capital. I think it's a pretty important point as to the way we think about all the cash flows within the portfolio. Thanks for pointing that out. It does come into, you know, our thinking as, you know, we advance both dividend and repurchase activity. I appreciate the comments, guys. Thank you. You're welcome. Our next question will come from Manav Gupta with UBS. Your line is open. Hey. I quickly just wanted to focus a little bit on the Galveston Bay STAR project. I think it's not as well understood. If you could help us understand how to model it a little more accurately. I mean, 40,000 barrel, the increase we can model more accurately, but how does the 17,000 barrel resid processing capacity, you know, what are spreads we should watch for that so we can give you full credit for this project? I honestly don't think you're getting too much credit for this project in your numbers. Manav, it's Mike. I'll start, and then I'll let Tim add some color. As far as modeling, the way to think about the incremental change at the, at the plant now is we'll be able to run 40,000 barrels a day of more heavy crude, you know, with the additional resid. Processing capability. The way to model it is 40,000 times the delta between heavy crude and untreated or unfinished distillate. That's exactly what STAR is doing, and then we can, you know, add in, you know, commercial changes to that, et cetera, et cetera. As far as the modeling, it's that delta for whatever margin you think, you know. Today, I will say right today, that's running about $15 to give you a point in time, multiply it by the 40,000 and wherever you project, you know, margins into the future. Tim can give a little bit more color on where we stand on the, on the project itself. Yeah, Manav, this is Tim. Thanks for the question. I would say that, you have to keep in mind is first off, I think that, we completed this project in phases. Really a good amount of the STAR scope has already been completed and has been put in service previously. It's already earning a return. I think the remaining STAR project is, you know, is really around this resid portion of the RU. That is indeed, you know, finished up during the mechanical completion during the first quarter turnaround, and then we've been in startup during April. That's all looking good from that standpoint. I think the other thing that I would say is that we ended up, you know, expanding the RU, the Resid Hydrocracker instead of the GBR cokers. That's really because of the better conversion and the liquid volume expansion that you get with the addition of the hydrogen. That, that can maybe be explained a little bit. If you, if you look at a comparison between a coker and the RU unit, if you put 100 barrels of liquid into the coker, you get about 80 barrels of liquid out and the rest is coke that's lower valued. If you put that same 100 in the RU unit, you get 107 barrels of liquids out. Obviously that 27 barrels is about 34% increase in liquids which are higher valued. That's why we made that decision. I would also point out that GBR is unique in that it's got the only operating resid hydrocracker unit in the U.S., that's what made that beneficial. We had a pretty capital efficient project there to make the modifications to the RU, as opposed to starting with another greenfield coker. Hopefully that's helpful. No, that is very helpful. My follow-up quickly here is, your first phase of Martinez is already on. Looks like a very smooth smart start compared to some of the other projects which are facing problems. Obviously at some point, pre-treat comes on and then the second phase. If you could just walk us through when everything starts up, and then there is one small request is that when everything starts up, you probably are one of the bigger producers of renewable diesel. At some point, if you could break those earnings out for us, then we can give you more credit for it. Okay. Manav, I'll start with, maybe just giving a update on the schedule. You, you are correct. The Martinez reached the full phase one production of 260 million gallons per year, back in earlier in the first quarter. The facility did ramp up to the design rates, you know, as planned and as scheduled. We're happy to report that the remaining construction activities at Martinez are on schedule. Regarding the pre-treatment unit, that's scheduled to come online in the second half of 2023. And then by the end of the year, we're looking to have the full rate of production of renewable diesel at 730 million gallons per year, by the end of December. Then I'll turn it to Maryann Mannen relative to the second part of your question. Thanks for the question, Manav. Yeah. We'll continue to evaluate the appropriate timing for a renewable segment. You know, as we've shared before, for 2023, we won't have a renewable segment, but we recognize the question, we recognize the importance of our renewables and commitment to, you know, low carbon strategies, and we'll continue to evaluate that and make a proper determination as these projects come full online as to when we'll do that. Thank you so much for your help. Our next question comes from Paul Cheng with Scotiabank. Your line is open. Hey, guys. Good morning. Can I just go back into the Galveston Bay? I mean, you talk about wanting more heavy oil. Does it in any shape or form that change your product grades? What is the OpEx associated with wanting that additional asset or that expanded asset? Yeah, Paul, I think you hit it on the head. It just gives us more ability to run heavy crudes. That's at the front end, and the incremental coming out the back end is distillate. It, you know, the project itself coming out of the Resid Hydrotreater, it's unfinished distillate, that's why I was trying to answer Manav's question on how to model it. The easiest way to think about it is heavy crude to unfinished distillate. That's the crack spread of the incremental change. We should assume that the entire 40,000 because that you have a volumetric expansion, so that your throughput will up, say 43,000 barrel per day. Is it all of them that will be distillate or 70%? No, no, it's the 40, Manav. I'm sorry, Paul. I'm saying just like I answered to Manav is it's 40,000 barrels a day of crude that comes into the plant, heavy crude. What comes out of the plant is untreated distillate. I see. Okay. At the end time will be in treated distillate. How about the OpEx associated with that unit? Is that incremental cost? We haven't given that specific, you know, that particular unit itself specifics. Okay. The second question is quite simple. Maryann in your presentation, you indicate that first quarter result was being hurt by unfavorable inventory impact. Can you quantify, Or also that say where that unfavorable inventory impact that is showing up? I suppose that you're showing up in the crack, but what region? Also that, whether those will get reversed in the second quarter? Sure, Paul. You know, in the quarter, as I was trying to share, you know, capture in the quarter was 98%. There were a couple of key factors that actually impacted our performance. One of those, as I mentioned, was planned turnarounds. Obviously, that impacted throughput, Galveston Bay. As you know, we took Galveston Bay, we took that opportunity to complete STAR as well. There was also turnaround in the MidCon as well. The second driver was inventory impacts. You may remember from the fourth quarter, we actually had a tailwind. We built some inventory in the quarter. We wouldn't expect necessarily that inventory to impact the second quarter as well, but, you know, those things are volatile. One of the key benefits in the quarter was actually light product margins. In the second quarter, you know, we gave guidance, remember, you know, we are very much front half weighted from a turnaround perspective. Actually, our guidance for Q2, at roughly $400 million is above the first quarter actual turnaround expense. This will be for us four quarters of heavy turnaround, somewhat unprecedented. You know, we made what we think were some good decisions in early 2022 to delay turnaround to be sure that we did not have lost opportunity with respect to, you know, the heavy driving season and the increased demand. Similarly, when we think about the second quarter, we would expect that the months of May and June would see benefit as we look at the turnaround expense there. I'll pause there and see if maybe, Rick and or Brian want to add any incremental color with respect to the performance in the quarter. Maryann I just want to clarify that. The first quarter, the statement saying that is a negative inventory, unfavorable inventory impact, that is the absence of the fourth quarter benefit, or that is actually is a negative inventory impact in the first quarter? No, Paul, sorry about that. It is actually a negative impact in the first quarter. We actually built inventory in the quarter. Could you quantify how big is that? You know, Paul, we normally don't give that level of detail. It was not, however, Of those three elements, it was not the single largest driver. Okay. Can you tell us which region that the majority of that inventory build happened, or it's just across all regions? Yeah, we had inventory builds across all regions, Paul. Okay. Good. Good. Thank you. You're welcome. Our next question will come from Sam Margolin with Wolfe Research. Your line is open. Hi. Good morning, everybody. Thanks for taking the question. This one's on diesel. It, it connects to some of your comments earlier about the heating impact and, you know, maybe some timing-related factors in the market. You know, there was an expectation that as jet fuel recovered, that it would benefit the diesel market because there was some over-blending of jet components into diesel. You know, we ran into sort of tough demand comps around both price and weather. You know, maybe that benefit didn't necessarily filter through. I was wondering if since you're so, you know, you guys are pretty indexed heavily to the jet market, you probably see things that other operators don't. If you think that that benefit is maybe coming just a little bit on a lag, particularly given, you know, some of your comments around demand on jet side, which seem to be, you know, performing as expected. Thanks. Sam, this is Brian. Very, very good question. Very on point. You know, I think the question here and the paradox is demand looks fairly decent as you look across the distillate barrel, but we've seen this sell-off here over the last several weeks. There, therein lies the question. You know, our view is it's a little bit overdone. I think the read-through is not on the macro fundamentals of supply and demand. The one element that we think overreached into the distillate market and the outlook was the Russian sanctions. We've all been anticipating the sanctions that went into place earlier this year, and the associated impacts were uncertain. As you know, the market doesn't process uncertainty very well. I think the market had a more bearish view, if you will, of those sanctions and the implications in terms of slowing flows into the global market. What we've seen is those flows have continued, albeit at a pretty significant discount. They have continued. I, you know, I think the overreach or the overarching sentiment around distillate and valuation is not on supply and demand, but with a little bit more clarity around the impact or lack of impact, if you will, on the Russian sanctions on global distillate flows. Okay. Yeah, that makes sense. We saw the same thing in crude, I guess. Oh, sorry. Go ahead. No, I was just gonna add, Sam, we still are constructive on jet recovery as well, to your point. You know, it's been slowly, you know, moving in the right direction. We think that's gonna continue to advance throughout. If gasoline is as strong as we think it's gonna be, I mean, inventories are still pretty low gasoline compared to last year, compared to the five-year average, however you wanna look at it. It's a constructive gasoline market. It's a recovering jet market. In our view, that bodes well for distillate. Okay. Thanks. Just follow up, this is sort of a redo on Neil's question about the balance sheet structure and capital allocation, but I'll put it a different way. You know, I think a lot of people are aware now that the MPLX distribution more than covers the MPC dividend. What's interesting now is that your interest income on your cash balance covers like half of the MPC dividend or almost. You know, it's there's a matter of uncertainty in the economic environment, but then there's also sort of what's going on with rates and the, and the optimal capital structure around that. I'm just wondering if, you know, maybe there's a change to kind of the mid-cycle cash balance that I think was $1.5 billion that you were targeting. Thanks. Yeah. I'm gonna start and turn it over to Maryann. You know, thanks for pointing that out as well, Sam. You know, one of the things I know all the analysts wanna hear, what are we gonna do, you know, over the next, you know, 12 months or so. What we've been trying to say is it's much more of a dynamic discussion. obviously, having north of $11 billion on the balance sheet is an important part of what we're doing. At the end of the day, you said it very well, you know, we're generating a decent amount of earnings off of that compared to where we were, you know, just a short time ago. Overall, I think the message that everybody should take away is, you know, we're not projecting out 12 months as to what we're gonna do there because, you know, we think it's a real-time discussion. We are committed, as everybody has seen our DNA, we're committed to returning capital. At the same time, you know, we look at all the parameters that come into play there. You know, the MPLX distribution, the interest that we're getting on that, et cetera, et cetera. I think you pointed out a couple things that are important in our discussion, and I know it frustrates people that we won't say what we're gonna do for the next 12 or 18 months. I think you've seen us, you know, get additional authorization from the board, so we're committed to returning capital. I think you've seen us be very strict in our discipline on investing capital. We'll continue to do that. you know, our thought is, you know, over the long term, that gives us the ability to increase value for shareholders. I think Mike's covered it well. You know, we talked about, you know, ultimately carrying $1 billion. We've had some, you know, real life during COVID, you know, stress testing of that. You know, we remain committed to our $1 billion. You know, your comment around interest, I think is a real fair one. When you look at the our total interest in other financial costs, you can see over the last several quarters, the impact of the benefit of interest income on those cash balances as well, Sam. Hope we've covered your question well. Yes. Thank you so much. Have a great day. You're welcome. Our next question will come from Jason Gabelman with TD Cowen. Your line is open. Morning. Thanks for taking my questions. I wanted to first ask on the light heavy spreads. They've come in quite a bit. Looks like Brent-Maya is now below $12. Can you just talk about what you're seeing in the market, why that tightening is occurring, and if we're resetting back to maybe something that's a more typical light heavy spread versus where we've been, you know, the past six months or so? Hi, Jason. It's Rick. Actually we believe the market's been overdone, which is often the case in markets. You know, when you look at Q4, one could say it was overdone to the positive for us. Right now, we're looking and saying it's overdone to the negative. A lot of things are yet to play out. What I mean by that is when you look at the OPEC+ announced cuts, what will they really cut? History says they announce something and then often do less. We'll watch that play out throughout, you know, throughout the global flows. In addition to that, I think a dynamic that we've seen change and we actually view as a positive for us in some instances, is barrels are staying closer to home. What do I mean by that? When you look at Gulf of Mexico production, you look at BP's Mad Dog 2, look at Shell's Vito platforms that just came online, that's incremental production right in our backyard in the Gulf Coast. We have a really close pulse on Canadian production, and we're seeing upticks in Canadian production, and that's positive for us throughout our entire system. You have the Venezuelan barrels that have been in the news lately, the Chevron-Venezuela barrels that, we and others have taken advantage of. I think this is yet to fully play out, Jason. I don't think it's as bad as it is today. Where it will go, that's a tough call. We just don't feel it is as depressed of an environment from a sweet sour spread as what you're seeing today. Lastly, I'll state, you know, we were a big buyer of SPR barrels. Those barrels will just be coming into our system. That data is public. When you add up all of the pluses and minuses, we actually feel a little more optimistic today going forward than pessimistic. Great. Thanks. I appreciate that outlook. My second question, I wanted to follow up on the prepared marks you made, around the low carbon business, and it seems like you may have aspirations to grow this business well beyond the Martinez renewable diesel plant. You know, you talked about partnerships with a few counterparties, you purchased or you bought into the small RNG business. Then I guess the other thing is you have exposure to natural gas, sourcing via MPLX. I was just hoping you could discuss maybe, broadly how you see this business evolving, over the next few years, how big it could get, what the areas of growth you're focused on, particularly in light of the Inflation Reduction Act? Thanks. Yeah. I'll start. We're very enthusiastic that there could be some opportunities, albeit we think it's gonna take, you know, a considerable amount of time for those to develop. You know, we guided at the last quarter that we would spend about $350 million roughly in our low carbon portfolio. As you heard in our prepared remarks, we have some things going on in a couple different areas. I think at the end of the day, that's why I keep using the word evolution rather than transition. It's going to evolve over a long period of time. It's gonna be something that we think will be additive to our base business, but it'll take a while for it to be meaningfully, you know, different than, you know, the strong refining and natural gas footprint that we have. We're trying to be attentive to it. I mean, we understand how the pendulum's gonna move in that direction. You know, we think the pace will be slower than other people think in general, but at the same time, we do think there's some opportunities for us. You know, as we mentioned, you know, we've made a small investment in renewable natural gas, which if that continues to be what we think it could be, we'll continue to, you know, put capital to work there. We went in at an early entry point. We thought that was important for us, and then we'll see if we can grow out that business as just one example. We're attentive to it. You know, Dave's team, you know, has a lot of resource looking for opportunities for us. As we see them, we'll continue to update you. Got it. Thanks. Sheila, I think we're ready for the next question. Thank you. Our next question comes from Roger Read with Wells Fargo. Your line is open. Yeah, thanks. Good morning. I'd like to come back to commentary on the gasoline markets, just kind of maybe dig in a little deeper where you see, you know, the bigger issues, be it gasoline supply itself, whether it's components. Then as we think, you know, across the five pads, you know, the stress is not evenly distributed, right? I mean, pad three doesn't look all that bad on its own, but pads one, two, and five all show kind of different issues. Between the regional things you're looking at, you know, the underlying demand trends and then anywhere else there's a, you know, octane components or something else, you know, can you walk us through where you, where you think the biggest challenges will be for supply? Yeah, Roger, good morning. This is Brian. I'll give you a little bit more color on kind of our views. I think you're fairly rooted in it, based on your questions. You know, the way I look at the markets, they're fairly well balanced and in check. If you look at the ARB, the only really interesting ARB right now is the New York Harbor market, as you indicated, on gasoline, both whether it's the Midwest or out of the Gulf Coast. New York Harbor has seen, you know, quite a bit of strength in the quarter, primarily attributed to really low inventory levels. As mentioned earlier, on the distillate side of the book, that was more of a drag. It was more of a net positive on the gasoline side of the business in the New York Harbor, Northeast markets. There was some turnaround work as well in the pad that dragged things down a little bit in the first quarter. Of course, some of the labor strikes over in Europe caused a little bit of havoc in the New York Harbor and the markets and the balances. One of the, you know, kind of related read-throughs, if you will, on the interplay between Europe and the New York Harbor, I think is relevant. As we've looked through the transition over the last couple years, New York Harbor has been long time positioned as really the recipient of the push barrels, gasoline barrels coming out of Europe. As refining balances have changed, a little bit more of a change in terms of consumer preference in Europe towards gasoline and away from distillate, on the back end of Dieselgate and some of the outfall of that several years ago in Europe, have now created more of a pull environment into the New York Harbor. That dynamic has changed and progressed over the last year. Yes, you're right to say that is one of the more interesting markets in the U.S., and I'm confident that the market will work to close that gap, more active in that market. We continue to see opportunity to push further into that market. Beyond that, octane, just for a moment, we had a huge blowout last summer in octane, almost $5 a barrel. We had a really strong start in the first quarter on octane values, but we do see that plateauing. More NAPs are coming into the stream for blending and gasoline. Actually, as we switch, you know, from a diesel optimization throughout the system to more of a gasoline focus, that'll help the balances. Even some of the favorability of the light crudes in the Gulf Coast have a better yield on the gasoline/octane side of the book. You know, the forward view on octane is still favorable, but we don't see quite the environment that we enjoyed last year as we progress through the summer months. Roger, it's Mike. Brian gave a lot of specifics. I'll just give you my simplistic view is, you know, gasoline inventories, like you said, are spread around in the different regions, but they're still 10 million barrels below last year, 17 million barrels below the five-year average. You know, the demand numbers are strong relative to last year if you look over a longer period of time. At least in our view, we think it's a very constructive time for gasoline as at this time of year, as we're heading into, which is more of the higher demand time, you know, as we head into the summer. We're, we're more constructive I'll say, than maybe some people out there. As I mentioned earlier, you know, I know there's some concern around distillate, but, you know, we think jet's gonna continue to recover as well. For the first time in whatever it is, 18 months, gasoline is now over distillate. That's a change in the environment going into this summer that wasn't there last summer. We still think it's a very constructive environment for us, and we'll see how it plays out. Thank you. Our next question will come from John Royall with JP Morgan. Your line is open. Hi. Good morning. Thanks for taking my question. just had a follow-up on capture rates. just any thoughts on the moving pieces directionally in 2Q from the 98% in 1Q? It's another heavy maintenance quarter, but you have the non-recurrence presumably of inventory impact. should we center around maybe the 100% level as a starting point, maybe a little lower due to maintenance or any other moving pieces we should think about? John, thanks for the question. It's Maryann. I'll give you a few high-level comments and then I'm gonna pass to Brian and Rick to give you a little more detail on the quarter. You're right. Actually, as we talked about, turnaround is, you know, slightly higher in the second quarter, but we will be touching less of the crude units, just as an example. You know, while there is some planned maintenance, you know, the impact of that should be less in the second quarter. Commercial performance, as you know, has been something that we have targeted for the last 18 months. We believe a lot of the work that we have done is sustainable, and it certainly is a continued focus of the team as we head into the balance of the year. I'm gonna pass it to Rick and Brian and let them give you a little more color on their expectations for Q2. Hey, John, it's Rick. I'll just double-click on really the last item Maryanne touched on. You know, I can't emphasize enough, under Mike's leadership, we've unpacked and changed everything we do commercially from A to Z, from feedstocks through finished products. There isn't anything that hasn't been looked at under the covers and redesigned where it needs to be redesigned. As we look forward, a lot of people say, "Are you done?" Brian and I would say, "We'll never be done." Mike would tell us that on a daily basis, rightfully so. With that being said, we do expect to continue to get incremental value by region going forward in every region we operate in. We're continuing on this journey, and it's a journey that won't end, and it's quite the change for us corporately as we improve collaboratively from refining all the way through commercial. If you can't tell, we're quite excited about it, and without giving too much detail, we would encourage you to stay tuned and continue to look at our results. Our boss tells us let our results speak for themselves, and that's the mantra we live by and feel good about in this metric as you've seen over the last year or so. John, this is Brian. Just to maybe wrap it up, I think Maryann and Rick covered it quite well. I see it very simply on the journey that we've been on and where we're at. you know, really working hard to leverage our scale, our unrivaled business insights in the industry. moving further down the value chain for enhanced margin capture is also another important attribute that we have momentum behind, whether it's our export program and delivered cargoes or our branded business. All the things that we're doing or we've done historically, we're just doing better today and with more focus and rigor down the value chain. The last thing I would say on is really mindset, and, Rick hit on this, is really two things, continuous improvement, we are never done, and relentless innovation. You know, always trying to reimagine how to run the business, how to do things differently. I'll put an explanation point. We've been pretty opaque around specifics, but, you know, keep watching the results. Rick and I are proud of the work that the team's done, and we've got more to get. Thank you. We do have time for just one more question. Our last question will come from Teresa Chen with Barclays. Your line is open. Hi, there. Thank you for squeezing me in. Just really quickly, Brian, on your demand commentary, clearly you've categorically beaten all the industry data in the first quarter. As we are a month and change into the second quarter, I am curious to hear a little bit more on the diesel side. So you're seeing some early indications of incremental demand from an ag perspective. What about trucking, just because we've seen some of the easing in the Tenish data? Yeah, Teresa. Sure. On the distillate side, yeah, we do see ag picking up. Of course, that's a year-on-year comp, so it's hard to get a complete read. We expect it to be a strong season. We do see, again, as I mentioned earlier, some softness on the transportation side of the business, largely driven through consumption and the curtailment of consumption. Whether it be activity at the ports, over the road, fairly consistently with our big customers, we've heard that theme. The positive standout, though, I would mention, is in the mining business. We do have a pretty big exposure on the mining side of the industry, and we do see, you know, robust activity on the mining side of our business throughout really all regions. It's really that consumer consumption component that we're watching very closely. As we transition here seasonally, I think it's early, as I stated earlier, to call favorably or unfavorably which direction things are gonna break, but it is something that we're keeping a close eye on. All right. With that, thank you so much everyone for joining our call today. If you have additional questions or would like clarifications on topics discussed this morning, please feel free to reach out to any members of the investor relations team, and we're here to help today. Have a great day. Thank you. That does conclude today's conference. Thank you for participating. You may disconnect at this time.