Marathon Petroleum (MPC)

The Capture-Rate Benchmark

A capture rate only means something once you know what it is struck against, and Marathon's 105% is the number most often quoted without that half. Marathon publishes a full-year refining capture percentage where most US refiners leave you to work one out. It is reported R&M margin over Marathon's own R&M Margin Indicator, a blend of the regional benchmarks its Gulf Coast, Mid-Continent and West Coast plants actually sell into. It is not the EIA Gulf Coast 3-2-1.

That distinction is the whole point. Marathon does not print the indicator's level beside the margin, but the arithmetic gives it: $16.87/bbl divided by 1.05 puts its own benchmark near $16/bbl for 2025. Against our planning crack of $25/bbl, the same $16.87 is 67% capture, not 105%. Both figures describe the same year. A refiner that looks to be keeping all of the crack against its house benchmark is keeping two thirds of a national one, which is why our capture-rate guide confines the 85–110% comfort band to own-indicator readings and nowhere else.

So Valero's $12.29/bbl and Marathon's $16.87/bbl can be compared with each other, and both can be divided by one common benchmark. What you cannot do is set a margin in dollars beside a ratio in per cent and call the higher one better.

Business Overview

Marathon runs the largest refining system in the United States, spread across the Gulf Coast, the Mid-Continent and the West Coast, with heavy export exposure on the coasts. But refining is no longer where most of the earnings are. In 2025 the midstream segment made $6,750 million of adjusted EBITDA against $6,138 million from refining and marketing, with renewable diesel losing $110 million and roughly $0.8 billion of unallocated corporate items bringing the consolidated figure to $11,956 million.

The midstream earnings come from MPLX, the gathering, processing and pipeline partnership Marathon controls and owns 63.7% of (647.4 million of 1,015.7 million common units). Marathon consolidates all of MPLX's earnings and all of its debt, but a little over a third of both belongs to outside unitholders. The distribution MPLX pays is cash into Marathon and cash out of MPLX, so the same dollar cannot be counted at both levels.

Consolidated net debt was about $29.6 billion at the end of 2025, being $33,305 million of debt less $3,672 million of cash. Most of that is MPLX's, raised against fee-based pipeline cash flows rather than against the refineries. Ranking Marathon beside a merchant refiner on that headline badly overstates how geared the refining business is.

How the Economics Work

The margin per barrel is a gross figure, and two thirds of it is spent before anything reaches EBITDA. Marathon made $16.87/bbl in 2025, spent $5.59/bbl running the refineries and another $5.67/bbl on distribution, leaving $5.61/bbl. Across 2,989 mb/d, about 1.09 billion barrels in the year, that comes to roughly $6.1 billion, which is the $6,138 million the segment reported. Anyone multiplying $16.87 by throughput and stopping there gets $18 billion and is out by a factor of three.

The cost half of that sum barely moves with the crack. Turnarounds get scheduled, staff get paid and product still has to be trucked whatever gasoline is worth, so almost all of a margin swing lands in earnings. On this system a $1/bbl move in R&M margin is about $1.1 billion of EBITDA a year, roughly a fifth of the refining segment. That is the operating leverage that makes refiners look cheap at the top of a cycle and impossible to value at the bottom.

Compliance is already inside the $16.87. Marathon bought $1.33 billion of RINs in 2025, the credits refiners must surrender under the Renewable Fuel Standard, up from $1.07 billion, and states in its own filing that the expense sits within R&M margin. That is about $1.22/bbl. Deducting it again from the margin, a common mistake and one our RIN costs guide warns about, double-counts it.

Marathon's plants are complex, meaning they carry enough conversion units to run cheap heavy and sour crude rather than only light sweet. That is what lets a system capture above its indicator when heavy-light differentials widen, and it is the mechanism the Nelson Complexity Index guide describes. Complexity is bought with capital, so it shows up as a cost as well as an option.

Valuation Framework

One multiple on $11,956 million values two different businesses as though they were one, and the midstream half is the larger. A sum-of-parts is not optional here. Put the refining and marketing EBITDA on a refining multiple, our illustrative 5–7× band applied to a mid-cycle figure rather than a filed one, and the midstream EBITDA on the higher multiple fee-based pipeline cash flows command. Then take out what Marathon does not own: 36.3% of MPLX's common units are held by other investors, and the earnings attached to them never reach a Marathon shareholder.

Mid-cycle means rebuilding the margin rather than trailing it. Our planning deck holds the Gulf Coast 3-2-1 crack at $25/bbl and a refiner keeps roughly half of a national crack, though Marathon's line is struck on refining and marketing together and so runs higher than a merchant refiner's on the same barrels. Hold the $11.26/bbl of operating and distribution cost, which is where the leverage lives, and run the system at something nearer the 92% US average than 2025's 94%.

The debt goes with the segment that raised it. Netting all $29.6 billion against refining EBITDA alone gives a leverage ratio that means nothing; nor can it be ignored, since it is a real claim ahead of the equity. Value each half against its own debt, or accept that the consolidated ratio is a blend and not comparable with Valero's ~$6.0 billion against a pure refining base.

What to Watch in the Financials

Capture rate, with its benchmark attached. 105% for 2025 is a strong result against Marathon's own indicator. A reading under 85% points to turnaround drag, a crude slate that does not suit the market, or product timing. Never carry the percentage across to a national crack.

The cost lines, not just the margin. Refining operating cost per barrel and distribution cost per barrel are published each quarter. They are the half of the bridge management controls, and a drift upward in a good crack year is easy to miss.

Throughput and utilisation. 2,989 mb/d at 94% is a hard-run year. A trailing figure in the high 80s usually means turnarounds have clustered or a unit is down, and margin barrels are being lost rather than demand.

The MPLX relationship. Marathon sets tariffs on volumes it ships through a partnership it controls, so related-party terms in MPLX's filings decide how the profit splits between the two sets of holders. MPLX growth capex is the other watch item: it is spent at the partnership and reduces what flows up.

Which entity is deleveraging. Consolidated net debt can sit still through a refining recovery if MPLX is borrowing to build at the same time. Read the two debt stacks separately.

Peer Context

Valero ran almost exactly the same volume in 2025, 2,988 mb/d against 2,989, and reported $12.29/bbl. Some of that $4.58 gap is a different measure rather than a better refinery, because Marathon's line covers refining and marketing together while Valero's is refining alone. Valero publishes no capture percentage, so the two cannot be ranked on that. Phillips 66 reported $10.88/bbl, and like Marathon it earns more outside refining than in it, with $2,338 million of refining segment EBITDA against $3,773 million from midstream. PBF Energy earned $7.72/bbl on 832.9 mb/d, $8.77/bbl before special items, which is what the bottom of the ladder looks like on a smaller system with a far thinner earnings base.

Key Risks

The capture rate reverts, and so does the crack under it. 105% embeds a year in which the crude slate and product timing went Marathon's way. Assume something closer to 100% of its own indicator for valuation work, and remember the indicator itself is cyclical, so a normalisation has to move both.

Compliance cost that moves on its own schedule. RIN prices are set by EPA rulemaking rather than by barrels, so the $1.33 billion bill can rise in a year when cracks do nothing. Marathon generates some of the credits it surrenders through blending and its Martinez renewables joint venture, which is why the cost is smaller per barrel than a merchant refiner's, not why it is safe. The exemptions EPA grants small refineries cut both ways: Marathon was granted one covering half the obligation at a single refinery, and the exemption credits it booked in 2025 came to $57 million, under 1% of refining EBITDA, while proposals to reallocate exempted volumes would bill large obligated parties like it.

Turnarounds arrive in waves. A system this size cannot spread outages evenly, so a year with several Gulf Coast turnarounds compresses capture even when the crack is wide. That is a timing effect, not a deterioration, and it is worth checking the schedule before reading a weak quarter as a trend.

Two businesses, one share price. The midstream half is regulated, contracted and slow-moving; the refining half is none of those things. Investors buying Marathon for refining leverage own something diluted by MPLX, and investors buying it for midstream yield own it through a parent whose earnings swing with the crack.