MPC · Read the filing

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

All statements in this section, other than statements of historical fact, are forward-looking statements that are inherently uncertain. See “Disclosures Regarding Forward-Looking Statements” and Item 1A. Risk Factors for a discussion of the factors that could cause actual results to differ materially from those projected in these statements. The following information concerning our business, results of operations and financial condition should also be read in conjunction with the information included under Item 1. Business, Item 1A. Risk Factors, Item 6. Selected Financial Data and Item 8. Financial Statements and Supplementary Data.

EXECUTIVE SUMMARY

Business Update

The outbreak of COVID-19 and its development into a pandemic in March 2020 have resulted in significant economic disruption globally. Actions taken by various governmental authorities, individuals and companies around the world to prevent the spread of COVID-19 through social distancing have restricted travel, many business operations, public gatherings and the overall level of individual movement and in-person interaction across the globe.

This has in turn significantly reduced global economic activity, including a dramatic reduction in airline flights and a decrease in motor vehicle use. As a result, there has been a decline in the demand for the refined petroleum products that we manufacture and sell, which coupled with a decline in the price of crude oil for most of 2020 resulted in a significant decrease in the price and volume of our production and sales of refined petroleum products.

During 2020, there were significant variations in the market prices of products held in our inventories. In each quarter of 2020, these variations required us to record either inventory valuation charges or benefits to reflect the valuation of our inventories at the lower of cost or market.

We have been and continue to actively respond to the impacts that these matters are having on our business. Our response has focused on establishing three strategic short-term priorities:

Strengthen Competitive Position of Assets

We are committed to positioning our assets so that we are a leader in operational, financial, and sustainability performance and are evaluating the strength and fit of assets in our portfolio. Our goal is that each individual asset generates free-cash-flow back to the business and contributes to shareholder returns. With our investments we are focused on high returning projects that we believe will enhance the competitiveness of our portfolio, including our investments in sustainable fuels and technologies that lower our carbon intensity as the global energy mix evolves.

Improve Commercial Performance

We are focused on leveraging advantaged raw material selection, new approaches in the commercial space to be more dynamic amidst changing market conditions, and achieving technology improvements to advance our commercial performance.

Lower Cost Structure

We are committed to achieving operational excellence by reducing costs, improving efficiency, and driving operational improvements. In response to the pandemic, in March of 2020, we committed to immediately reducing our capital spending and operating expenses. We accomplished our goal of significantly reducing our capital spending levels by over $1.4 billion from our initial 2020 plans. We also reduced our 2020 forecasted operating expenses by more than our target of $950 million.

In connection with these three strategic short-term priorities, in the third quarter of 2020 we announced strategic actions to lay a foundation for long-term success, including plans to optimize our assets and structurally lower costs in 2021 and beyond. These actions included indefinitely idling the Gallup refinery, initiating actions to strategically reposition the Martinez refinery to a renewable diesel facility and the approval of an involuntary workforce reduction plan. In connection with these strategic actions, we recorded restructuring expenses of $367 million for the year ended December 31, 2020.

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In addition to these measures to address our operations, throughout the year we took action to address our liquidity as outlined below:

•Share repurchases were temporarily suspended. The timing and amount of future repurchases will depend upon several factors, including market and business conditions.

•On April 27, 2020, we entered into an additional $1.0 billion 364-day revolving credit facility, which expires in 2021, to provide incremental liquidity and financial flexibility during the commodity price and demand downturn. In February 2021, we elected to terminate this credit agreement as we no longer believe the facility is necessary as an additional source for liquidity, and we do not intend to replace it.

•On April 27, 2020, we closed on the issuance of $2.5 billion of senior notes. Proceeds from the senior notes were used to pay down certain amounts outstanding on the five-year revolving credit facility.

•During June 2020, we repaid the remaining amounts outstanding on the five-year revolving credit facility.

•On September 23, 2020, we entered into a 364-day revolving credit agreement, which provides for a $1.0 billion unsecured revolving credit facility that matures in September 2021, and which replaced a similar 364-day revolving credit agreement that expired on September 28, 2020.

•At December 31, 2020, we had $6.73 billion available on our variable credit facilities, net of commercial paper borrowings of $1.02 billion.

Many uncertainties remain with respect to COVID-19, including its resulting economic effects, and we are unable to predict the ultimate economic impacts from COVID-19 and how quickly national economies can recover once the pandemic ultimately subsides. However, the adverse impact of the economic effects on MPC has been and will likely continue to be significant. We believe we have proactively addressed many of the known impacts of COVID-19 to the extent possible and will strive to continue to do so, but there can be no guarantee the measures will be fully effective.

Other Strategic Updates

The Dickinson, North Dakota, renewable fuels facility began ramping operations at the end of 2020 and is on-track to reach full production by the end of the first quarter of 2021. At full capacity, the facility is expected to produce 184 million gallons per year of renewable diesel from corn and soybean oil. MPC intends to sell the renewable diesel into the California market to comply with the California Low Carbon Fuel Standard.

During the fourth quarter of 2020, we also progressed activities associated with the conversion of the Martinez refinery to a renewable diesel facility, including applying for permits, advancing discussions with feedstock suppliers, and beginning detailed engineering activities. As envisioned, the Martinez facility would start producing approximately 260 million gallons per year of renewable diesel by the second half of 2022, with a potential to build to full capacity of approximately 730 million gallons per year by the end of 2023. On February 24, 2021, MPC’s board of directors approved these plans.

On November 2, 2020, MPLX announced the authorization of a unit repurchase program for the repurchase of up to $1 billion of its outstanding common units held by the public. MPLX may utilize various methods to effect the repurchases, which could include open market repurchases, negotiated block transactions, tender offers, accelerated unit repurchases or open market solicitations for units, some of which may be effected through Rule 10b5-1 plans. The timing and amount of repurchases will depend upon several factors, including market and business conditions, and repurchases may be initiated, suspended or discontinued at any time. The repurchase authorization has no expiration date.

During the year ended December 31, 2020, 1,473,843 MPLX common units were repurchased at an average cost per unit of $22.29. Total cash paid for units repurchased during the year was $33 million and $967 million of repurchase authorization remained outstanding on the program as of December 31, 2020.

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Results

Select results for continuing operations for 2020 and 2019 are reflected in the following table.

Income (loss) from continuing operations by segment

Refining & Marketing(a) $ (5,189) $ 2,856

Items not allocated to segments:

Restructuring expense(d) (367) —

Gain on sale of assets 66 —

Transaction-related costs(e) (8) (153)

Equity method investment restructuring gains(c) — 259

Income (loss) from continuing operations (12,247) 4,462

Net interest and other financial costs 1,365 1,229

Income (loss) from continuing operations before income taxes (13,612) 3,233

Provision (benefit) for income taxes on continuing operations (2,430) 784

Income (loss) from continuing operations, net of tax $ (11,182) $ 2,449

(a)Includes LIFO liquidation charge of $561 million for 2020.

(b)Reflects corporate costs of $26 million and $28 million for 2020 and 2019, respectively, that are no longer allocated to Speedway under discontinued operations accounting.

(d)2020 restructuring expense include $195 million for exit costs related to the Martinez and Gallup refineries and $172 million of employee separation costs.

(e)2020 and 2019 include costs incurred in connection with the Midstream strategic review and other related efforts. 2019 includes employee severance, retention and other costs related to the acquisition of Andeavor. Effective October 1, 2019, we discontinued reporting Andeavor transaction-related costs as one year has passed since the acquisition and these costs are immaterial. Costs incurred in connection with the Speedway separation are included in discontinued operations.

Select results for discontinued operations are reflected in the following table.

Income from discontinued operations

Transaction-related costs(b) (114) (7)

Income from discontinued operations 1,587 1,114

Net interest and other financial costs 20 18

Income from discontinued operations before income taxes 1,567 1,096

Provision for income taxes on discontinued operations 362 290

Income from discontinued operations, net of tax $ 1,205 $ 806

(a)As of August 2, 2020, MPC ceased recording depreciation and amortization for Speedway. Asset write-offs and retirement charges, which totaled $7 million for the fourth quarter of 2020, are presented as depreciation and amortization in our financial statements. Speedway depreciation and amortization was $244 million and $413 million for the twelve months ended December 31, 2020 and 2019, respectively.

(b)Costs related to the Speedway separation.

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The following table includes net income (loss) per diluted share data.

Net income (loss) per diluted share 2020 2019

Continuing operations $ (16.99) $ 2.76

Discontinued operations 1.86 1.21

Net income (loss) attributable to MPC $ (15.13) $ 3.97

During 2020, actions taken by various governmental authorities, individuals and companies to prevent the spread of COVID-19 through social distancing restricted travel, many business operations, public gatherings and the overall level of individual movement and in-person interaction in the areas where we operate which impacted demand for our products. Net income attributable to MPC decreased $12.46 billion, or $19.10 per diluted share, in 2020 compared to 2019 primarily due to a loss in our Refining & Marketing segment, goodwill and long-lived asset impairment charges of $8.43 billion and impairments of equity method investments of $1.32 billion during the period primarily driven by the effects of COVID-19 and the decline in commodity prices, and restructuring expenses of $367 million related to the idling of the Martinez and Gallup refineries and costs related to our announced workforce reduction.

The loss from operations in our Refining & Marketing segment is primarily due to decreases in refined product sales volumes, prices and margins during 2020 and includes a charge of $561 million for the twelve months ended December 31, 2020 to reflect a LIFO liquidation for our crude oil and refined product inventories. The costs of inventories in the historical LIFO layers which were liquidated were higher than current costs, which resulted in increased cost of revenues and decreased income from operations. These results were partially offset by increased income from discontinued operations, which relates to Speedway, in 2020 compared to 2019 largely due to higher fuel margins partially offset by lower fuel volumes. In addition, as of August 2, 2020, MPC ceased recording depreciation and amortization for Speedway. See Item 8. Financial Statements and Supplementary Data – Note 5 for additional information on discontinued operations.

Refer to the Results of Operations section for a discussion of financial results by segment for the three years ended December 31, 2020.

MPLX

We received limited partner distributions of $1.79 billion and $1.82 billion from MPLX and Andeavor Logistics LP (“ANDX”) during 2020 and 2019, respectively.

We owned approximately 647 million MPLX common units at December 31, 2020 with a market value of $14.02 billion based on the December 31, 2020 closing unit price of $21.65. On January 28, 2021, MPLX declared a quarterly cash distribution of $0.6875 per common unit, which was paid February 12, 2021. As a result, MPLX made distributions totaling $714 million to its common unitholders. MPC’s portion of this distribution was approximately $445 million.

On July 31, 2020, Western Refining Southwest, Inc. (now known as Western Refining Southwest LLC) (“WRSW”), a wholly owned subsidiary of MPC, entered into a Redemption Agreement (the “Redemption Agreement”) with MPLX, pursuant to which MPLX transferred to WRSW all of the outstanding membership interests in Western Refining Wholesale, LLC, (“WRW”) in exchange for the redemption of MPLX common units held by WRSW. The transaction effected the transfer to MPC of the Western wholesale distribution business that MPLX acquired as a result of its acquisition of ANDX. Beginning in the third quarter of 2020, the results of these operations are presented in MPC’s Refining & Marketing segment.

At the closing, per the terms of Redemption Agreement, MPLX redeemed 18,582,088 MPLX common units held by WRSW. The number of redeemed units was calculated by dividing WRW’s aggregate valuation of $340 million by the simple average of the volume weighted average New York Stock Exchange prices of an MPLX common unit for the ten trading days ending at market close on July 27, 2020. The transaction resulted in a minor decrease in MPC’s ownership interest in MPLX.

See Item 8. Financial Statements and Supplementary Data – Note 6 for additional information on MPLX.

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Liquidity

Our liquidity, excluding MPLX, totaled $7.3 billion at December 31, 2020 consisting of:

(In millions) Total Capacity Outstanding Borrowings AvailableCapacity

Bank revolving credit facility(a) $ 5,000 $ 1 $ 4,999

Trade receivables facility(c) 750 — 750

Commercial paper borrowings(d) — — (1,024)

Cash and cash equivalents(e) 540

Total liquidity $ 7,265

(a)Outstanding borrowings include $1 million in letters of credit outstanding under this facility. Excludes MPLX’s $3.5 billion bank revolving credit facility, which had $175 million borrowings and no of letters of credit outstanding as of December 31, 2020.

(b)In February 2021, we elected to cancel one of the $1.0 B 364-day revolving credit agreements prior to its maturity in April 2021.

(c)Availability under our $750 million trade receivables facility is a function of eligible trade receivables, which will be lower in a sustained lower price environment for refined products.

(d)We do not intend to have outstanding commercial paper borrowings in excess of available capacity under bank revolving credit facilities.

(e)Includes cash and cash equivalents classified as assets held for sale of $140 million (see Item 8. Financial Statements and Supplementary Data – Note 5) and excludes $15 million of MPLX cash and cash equivalents.

On November 15, 2020, all of the $650 million outstanding aggregate principal amount of 3.400% senior notes due December 2020 were redeemed at a price equal to par.

On October 1, 2020, all of the $475 million outstanding aggregate principal amount of 5.375% senior notes due October 2022, including the portion of such notes for which Andeavor was the obligor, were redeemed at a price equal to par.

MPLX’s liquidity totaled $4.84 billion at December 31, 2020. As of December 31, 2020, MPLX had cash and cash equivalents of $15 million, $3.33 billion available under its $3.5 billion revolving credit agreement and $1.5 billion available through its intercompany loan agreement with MPC.

On December 29, 2020, MPLX announced the redemption of all the $750 million outstanding aggregate principal amount of 5.250% senior notes due January 2025. The notes were redeemed on January 15, 2021 at a price equal to 102.625% of the principal amount. These notes are included in long-term debt due within one year in our consolidated balance sheet as of December 31, 2020.

See Item 8. Financial Statements and Supplementary Data – Note 22 for information on our new bank revolving credit facilities.

OVERVIEW OF SEGMENTS

Refining & Marketing

Refining & Marketing segment income from operations depends largely on our Refining & Marketing margin, refining operating costs, refining planned turnarounds, distribution costs, depreciation expenses and refinery throughputs. Our total refining capacity was 2,874 mbpcd, 3,067 mbpcd and 3,021 mbpcd as of December 31, 2020, 2019 and 2018, respectively.

Our Refining & Marketing margin is the difference between the prices of refined products sold and the costs of crude oil and other charge and blendstocks refined, including the costs to transport these inputs to our refineries and the costs of products purchased for resale. The crack spread is a measure of the difference between market prices for refined products and crude oil, commonly used by the industry as a proxy for the refining margin. Crack spreads can fluctuate significantly, particularly when prices of refined products do not move in the same relationship as the cost of crude oil. As a performance benchmark and a comparison

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with other industry participants, we calculate Gulf Coast, Mid-Continent and West Coast crack spreads that we believe most closely track our operations and slate of products. The following will be used for these crack-spread calculations:

•The Gulf Coast crack spread uses three barrels of LLS crude producing two barrels of USGC CBOB gasoline and one barrel of USGC ULSD;

•The Mid-Continent crack spread uses three barrels of WTI crude producing two barrels of Chicago CBOB gasoline and one barrel of Chicago ULSD; and

•The West Coast crack spread uses three barrels of ANS crude producing two barrels of LA CARBOB and one barrel of LA CARB Diesel.

Our refineries process a variety of sweet and sour grades of crude oil, which typically can be purchased at a discount to the crude oils referenced in our Gulf Coast, Mid-Continent and West Coast crack spreads. The amount of these discounts, which we refer to as the sweet differential and the sour differential, can vary significantly, causing our Refining & Marketing margin to differ from blended crack spreads. In general, larger sweet and sour differentials will enhance our Refining & Marketing margin.

Future crude oil differentials will be dependent on a variety of market and economic factors, as well as U.S. energy policy.

The following table provides sensitivities showing an estimated change in annual net income due to potential changes in market conditions.

(In millions, after-tax)

Blended crack spread sensitivity(a) (per $1.00/barrel change) $ 838

Sour differential sensitivity(b) (per $1.00/barrel change) 396

Sweet differential sensitivity(c) (per $1.00/barrel change) 381

Natural gas price sensitivity(d) (per $1.00/MMBtu) 275

(a)Crack spread based on 40 percent LLS, 40 percent WTI and 20 percent ANS with Gulf Coast, Mid-Continent and West Coast product pricing, respectively, and assumes all other differentials and pricing relationships remain unchanged.

(b)Sour crude oil basket consists of the following crudes: ANS, Argus Sour Crude Index, Maya and Western Canadian Select. We expect approximately 51 percent of the crude processed at our refineries in 2021 will be sour crude.

(c)Sweet crude oil basket consists of the following crudes: Bakken, Brent, LLS, WTI-Cushing and WTI-Midland. We expect approximately 49 percent of the crude processed at our refineries in 2021 will be sweet crude.

(d)This is consumption based exposure for our Refining & Marketing segment and does not include the sales exposure for our Midstream segment.

In addition to the market changes indicated by the crack spreads, the sour differential and the sweet differential, our Refining & Marketing margin is impacted by factors such as:

•the selling prices realized for refined products;

•the types of crude oil and other charge and blendstocks processed;

•our refinery yields;

•the cost of products purchased for resale;

•the impact of commodity derivative instruments used to hedge price risk;

•the potential impact of LCM adjustments to inventories in periods of declining prices: and

•the potential impact of LIFO liquidation charges due to draw-downs from historic inventory levels.

Inventories are stated at the lower of cost or market. Costs of crude oil, refinery feedstocks and refined products are stated under the LIFO inventory costing method and aggregated on a consolidated basis for purposes of assessing if the cost basis of these inventories may have to be written down to market values. At December 31, 2020, market values for refined products exceed their cost basis and, therefore, there is no LCM inventory valuation reserve at the end of the year. Based on movements of refined product prices, future inventory valuation adjustments could have a negative effect to earnings. Such losses are subject to reversal in subsequent periods if prices recover.

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Refining & Marketing segment income from operations is also affected by changes in refining operating costs and refining planned turnaround costs in addition to committed distribution costs. Changes in operating costs are primarily driven by the cost of energy used by our refineries, including purchased natural gas, and the level of maintenance costs. Refining planned turnarounds, requiring temporary shutdown of certain refinery operating units, are periodically performed at each refinery. Distribution costs primarily include long-term agreements with MPLX, as discussed below, which are based on committed volumes and will negatively impact income from operations in periods when throughput or sales are lower or refineries are idled.

The following table lists the refineries that had significant planned turnaround and major maintenance activities for each of the last three years and only reflects the activity for the acquired refineries after October 1, 2018.

Year Refinery

2018 Canton, Detroit, Galveston Bay and Martinez

We have various long-term, fee-based commercial agreements with MPLX. Under these agreements, MPLX, which is reported in our Midstream segment, provides transportation, storage, distribution and marketing services to our Refining & Marketing segment. Certain of these agreements include commitments for minimum quarterly throughput and distribution volumes of crude oil and refined products and minimum storage volumes of crude oil, refined products and other products. Certain other agreements include commitments to pay for 100 percent of available capacity for certain marine transportation and refining logistics assets.

Midstream

Our Midstream segment transports, stores, distributes and markets crude oil and refined products, principally for our Refining & Marketing segment. The profitability of our pipeline transportation operations primarily depends on tariff rates and the volumes shipped through the pipelines. The profitability of our marine operations primarily depends on the quantity and availability of our vessels and barges. The profitability of our light product terminal operations primarily depends on the throughput volumes at these terminals. The profitability of our fuels distribution services primarily depends on the sales volumes of certain refined products. The profitability of our refining logistics operations depends on the quantity and availability of our refining logistics assets. A majority of the crude oil and refined product shipments on our pipelines and marine vessels and the refined product throughput at our terminals serve our Refining & Marketing segment and our refining logistics assets and fuels distribution services are used solely by our Refining & Marketing segment.

As discussed above in the Refining & Marketing section, MPLX, which is reported in our Midstream segment, has various long-term, fee-based commercial agreements related to services provided to our Refining & Marketing segment. Under these agreements, MPLX has received various commitments of minimum throughput, storage and distribution volumes as well as commitments to pay for all available capacity of certain assets. The volume of crude oil that we transport is directly affected by the supply of, and refiner demand for, crude oil in the markets served directly by our crude oil pipelines, terminals and marine operations. Key factors in this supply and demand balance are the production levels of crude oil by producers in various regions or fields, the availability and cost of alternative modes of transportation, the volumes of crude oil processed at refineries and refinery and transportation system maintenance levels. The volume of refined products that we transport, store, distribute and market is directly affected by the production levels of, and user demand for, refined products in the markets served by our refined product pipelines and marine operations. In most of our markets, demand for gasoline and distillate peaks during the summer driving season, which extends from May through September of each year, and declines during the fall and winter months. As with crude oil, other transportation alternatives and system maintenance levels influence refined product movements.

Our Midstream segment also gathers and processes natural gas and NGLs. NGL and natural gas prices are volatile and are impacted by changes in fundamental supply and demand, as well as market uncertainty, availability of NGL transportation and fractionation capacity and a variety of additional factors that are beyond our control. Our Midstream segment profitability is affected by prevailing commodity prices primarily as a result of processing or conditioning at our own or third‐party processing plants, purchasing

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and selling or gathering and transporting volumes of natural gas at index‐related prices and the cost of third‐party transportation and fractionation services. To the extent that commodity prices influence the level of natural gas drilling by our producer customers, such prices also affect profitability.

RESULTS OF OPERATIONS

The following discussion includes comments and analysis relating to our results of operations for the years ended December 31, 2020, 2019 and 2018. These amounts include the results of Andeavor from the October 1, 2018 acquisition date forward. This discussion should be read in conjunction with Item 8. Financial Statements and Supplementary Data and is intended to provide investors with a reasonable basis for assessing our historical operations, but should not serve as the only criteria for predicting our future performance.

Consolidated Results of Operations

Revenues and other income:

Costs and expenses:

Restructuring expenses 367 — 367 — —

Less net income (loss) attributable to:

Redeemable noncontrolling interest 81 81 — 75 6

(a)In accordance with discontinued operations accounting, Speedway sales to retail customers and net results are reflected in Income from discontinued operations, net of tax, and Refining & Marketing intercompany sales to Speedway are now presented as third-party sales for all periods presented.

(b)2020 includes $1.32 billion of impairment expense. See Item 8. Financial Statements and Supplementary Data – Note 7 for further information.

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2020 Compared to 2019

Net income (loss) attributable to MPC decreased $12.46 billion in 2020 compared to 2019 primarily due to impairment expenses for goodwill and long-lived assets of $8.43 billion, impairments of equity method investments of $1.32 billion, decreased refined product sales volumes, prices and margin, a charge of $561 million to reflect a LIFO liquidation in our crude oil and refined product inventories and restructuring expenses of $367 million. These changes were partially offset by reduced operating costs and increased income from discontinued operations, which represents Speedway. See Segment Results for additional information.

Total revenues and other income decreased $42.83 billion in 2020 compared to 2019 primarily due to:

•decreased sales and other operating revenues of $41.37 billion primarily due to decreased Refining & Marketing segment refined product sales volumes, which decreased 513 mbpd, or 14 percent, and lower average refined product sales prices, which decreased $0.55 per gallon, or 31 percent, largely due to reduced travel and business operations associated with the COVID-19 pandemic;

•decreased income from equity method investments of $1.25 billion largely due to impairments of equity method investments of $1.32 billion primarily driven by the effects of COVID-19 and the decline in commodity prices; and

•decreased net gain on disposal of assets of $208 million mainly due to the absence of $259 million of non-cash gains related to obtaining equity investments in Capline Pipeline Company LLC (“Capline LLC”) and The Andersons in exchange for contributing assets in 2019. This decrease was offset by net gains on disposal of assets in 2020 largely due to the sale of three asphalt terminals and other Refining & Marketing assets.

Total costs and expenses decreased $26.12 billion in 2020 compared to 2019 primarily due to:

•decreased cost of revenues of $33.50 billion primarily due to reduced travel and business operations associated with the COVID-19 pandemic, partially offset by increased cost of revenues of $561 million to reflect LIFO liquidations for our crude oil and refined product inventories. The costs of inventories in the historical LIFO layers liquidated were higher than current costs, which resulted in the LIFO liquidation charge;

•impairment expense of $8.43 billion recorded in 2020 for goodwill and long-lived assets of $7.39 billion and $1.03 billion, respectively, primarily driven by the effects of COVID-19 and the decline in commodity prices. It also includes impairment of long-lived assets primarily related to the repositioning of the Martinez refinery compared to impairment expense of $1.20 billion recorded in 2019 primarily related to MPLX goodwill associated with the ANDX gathering and processing businesses acquired as part of the Andeavor acquisition;

•decreased selling, general and administrative expenses of $482 million mainly due to decreases in salaries and employee-related expenses, transaction-related expenses, credit card processing fees for brand customers and contract services expenses;

•restructuring expense of $367 million related to the idling of the Martinez and Gallup refineries and costs related to our announced workforce reduction. See See Item 8. Financial Statements and Supplementary Data – Note 4 for additional information; and

•increased other taxes of $107 million primarily due to increased property and environmental taxes of approximately $78 million and $69 million, respectively. Property taxes increased in the current period mainly due to the absence of property tax refunds and tax exemptions received in 2019 and environmental taxes increased largely due to the reinstatement of the Oil Spill Tax in 2020, which was not in effect for all of 2019. These increases were offset by a state tax refund and reduced payroll tax expenses.

Net interest and other financial costs increased $136 million largely due to increased MPC borrowings and foreign currency exchange losses and decreased interest income. We capitalized interest of $129 million in 2020 and $158 million in 2019. See Item 8. Financial Statements and Supplementary Data – Note 22 for further details.

Provision for income taxes decreased $3.21 billion primarily due to decreased income before taxes of $16.85 billion. The effective tax rate of 18 percent in 2020 is lower than the U.S. statutory rate of 21 percent, primarily due to a significant amount of our pre-tax loss consisting of non-tax deductible goodwill impairment charges, partially offset by the tax rate differential resulting from the expected net operating

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loss carryback provided under the Coronavirus Aid, Relief, and Economic Security Act. Additionally, our effective tax rate is generally benefited by our noncontrolling interest in MPLX, but this benefit was lower for the year ended December 31, 2020 due to goodwill and other impairment charges recorded by MPLX. The effective tax rate of 24 percent in 2019 is higher than the U.S. statutory rate of 21 percent, primarily due to permanent tax differences related to goodwill impairment and state and local tax expense, partially offset by permanent tax differences related to net income attributable to noncontrolling interests. See Item 8. Financial Statements and Supplementary Data – Note 15 for further details.

Noncontrolling interests decreased $769 million mainly due to MPLX’s net loss primarily resulting from impairment expense recognized during 2020.

2019 Compared to 2018

Net income attributable to MPC decreased $143 million primarily due to impairment expense of $1.20 billion and an increase in net interest and other financial costs, partially offset by a decrease in net income attributable to noncontrolling interests and increased income from discontinued operations in 2019. See Segment Results for additional information.

Total revenues and other income increased $25.28 billion in 2019 compared to 2018 primarily due to:

•increased sales and other operating revenues of $25.06 billion mainly due to an increase in our Refining & Marketing segment refined product sales volumes, which increased 1,032 mbpd largely due to the Andeavor acquisition on October 1, 2018, partially offset by lower average refined product sales prices, which decreased $0.09 per gallon; and

•increased net gain on disposal of assets of $272 million mainly due to $259 million of non-cash gains related to obtaining equity investments in Capline LLC and The Andersons in exchange for contributing assets in 2019.

Total costs and expenses increased $25.50 billion in 2019 compared to 2018 primarily due to:

•increased cost of revenues of $22.18 billion primarily due to the inclusion of costs related to the Andeavor operations following the acquisition;

•increased impairment expense of $1.20 billion primarily related to MPLX goodwill associated with the ANDX gathering and processing businesses acquired as part of the Andeavor acquisition;

•increased depreciation and amortization of $1.06 billion, primarily due to the depreciation of the fair value of the assets acquired in connection with the Andeavor acquisition;

•increased selling, general and administrative expenses of $916 million mainly due to the inclusion of costs related to Andeavor operations following the acquisition and reflecting MPC’s classification of those costs and expenses; and

•increased other taxes of $155 million primarily due to the inclusion of other taxes related to the acquired Andeavor operations.

Net interest and other financial costs increased $236 million mainly due to debt assumed in the acquisition of Andeavor and increased MPLX borrowings, partially offset by a decrease in pension settlement losses of $44 million. We capitalized interest of $158 million in 2019 and $80 million in 2018. See Item 8. Financial Statements and Supplementary Data – Note 22 for further details.

Provision for income taxes on continuing operations increased $20 million primarily due to non-deductible goodwill impairments partially offset by decreased income from continuing operations $464 million. The effective tax rate of 24 percent in 2019 is higher than the U.S. statutory rate of 21 percent, primarily due to permanent tax differences related to goodwill impairment and state and local tax expense, partially offset by permanent tax differences related to net income attributable to noncontrolling interests. The effective tax rate of 21 percent in 2018 is consistent with the U.S. statutory rate of 21 percent, as permanent benefit differences related to income attributable to noncontrolling interest were offset by state and local tax expense. See Item 8. Financial Statements and Supplementary Data – Note 15 for further details.

Noncontrolling interests decreased $214 million mainly due lower MPLX net income primarily as a result of the $1.2 billion goodwill impairment charge recorded in 2019.

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Results of Discontinued Operations

The results of Speedway are presented as discontinued operations in our consolidated financial statements.

The following includes key financial and operating data for Speedway for the years ended December 31, 2020, 2019 and 2018.

Merchandise margin (in millions)(b)(c) $ 1,846 $ 1,827 $ 1,486

Same store merchandise sales (period over period)(d)(e) (0.2) % 5.4 % 4.2 %

(a)The price paid by consumers less the cost of refined products, excluding transportation, consumer excise taxes and bankcard processing fees (where applicable), divided by gasoline and distillate sales volume.

(b)See “Non-GAAP Measures” section for reconciliation and further information regarding this non-GAAP measure.

(c)The price paid by consumers less the cost of merchandise.

(d)Same store comparison includes only locations owned at least 13 months.

(e)Excludes cigarettes.

2020 Compared to 2019

Income from discontinued operations, net of tax, increased $399 million primarily due to higher fuel margins partially offset by lower fuel volumes. Changes in fuel sales volumes were primarily due to the effects of the COVID-19 pandemic which resulted in restricted travel, social distancing and reduced business operations. In addition, fuel sales volumes decreased as a result of an agreement between Speedway and Pilot Travel Centers (“PTC”), effective October 1, 2019, in which PTC supplies, prices and sells diesel fuel at certain Speedway and PTC locations with both companies sharing in the diesel fuel margins.

Beginning August 2, 2020, in accordance with ASC 360, Property, Plant, and Equipment, we ceased recording depreciation and amortization for Speedway’s property, plant and equipment, finite-lived intangible assets and right of use lease assets. As a result, Speedway depreciation and amortization was $244 million and $413 million for the twelve months ended December 31, 2020 and 2019, respectively.

The Speedway fuel margin increased to 34.52 cents per gallon in 2020 compared with 24.34 cents per gallon in 2019.

2019 Compared to 2018

Income from discontinued operations, net of tax, increased $133 million primarily due to higher fuel and merchandise margins largely related to the addition of the Andeavor retail operations. These increases were partially offset by increases in operating expenses and depreciation primarily related to the locations acquired from Andeavor.

The Speedway fuel margin increased to 24.34 cents per gallon in 2019 compared with 21.22 cents per gallon in 2018.

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Segment Results

Our Refining & Marketing and Midstream segment income (loss) from continuing operations was approximately $(1.48) billion, $6.45 billion and $5.41 billion for the years ended December 31, 2020, 2019 and 2018, respectively.

Refining & Marketing

Beginning with the third quarter of 2020, the direct dealer business is managed as part of the Refining & Marketing segment. The results of the Refining & Marketing segment have been retrospectively adjusted to include the results of the direct dealer business in all periods presented.

The following includes key financial and operating data for 2020, 2019 and 2018. Our results include the results of Andeavor from the October 1, 2018 acquisition date forward.

(a)Includes intersegment sales to Midstream and sales destined for export.

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LIFO liquidation charge (0.59) — —

Refining & Marketing margin per barrel(a)(b)(c) 8.37 14.77 14.50

Less:

Refining operating costs per barrel(d) 5.68 5.66 4.99

Distribution costs per barrel(a) 5.37 4.52 4.24

Refining planned turnaround costs per barrel 0.88 0.65 0.80

Depreciation and amortization per barrel(a) 1.96 1.58 1.45

Plus:

Biodiesel tax credit(e) — 0.08 —

Refining & Marketing segment income (loss) per barrel $ (5.49) $ 2.52 $ 3.20

Fees paid to MPLX included in distribution costs above $ 3.66 $ 2.84 $ 2.74

(a)Includes direct dealer results due to our third quarter change in segment presentation.

(b)Sales revenue less cost of refinery inputs and purchased products, divided by net refinery throughput.

(c)See “Non-GAAP Measures” section for reconciliation and further information regarding this non-GAAP measure.

(d)Includes refining operating and major maintenance costs. Excludes planned turnaround and depreciation and amortization expense.

(e)Reflects a benefit of $93 million in 2019 for the biodiesel tax credit attributable to volumes blended in 2018.

(f)Includes income from equity method investments, net gain on disposal of assets and other income.

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The following table presents certain benchmark prices in our marketing areas and market indicators that we believe are helpful in understanding the results of our Refining & Marketing segment. The results of the Andeavor businesses are only included in our results from October 1, 2018 forward. The benchmark crack spreads below do not reflect the market cost of RINs necessary to meet EPA renewable volume obligations for attributable products under the Renewable Fuel Standard.

Chicago CBOB unleaded regular gasoline $ 1.07 $ 1.67 $ 1.86

Chicago ultra-low sulfur diesel 1.19 1.86 2.07

USGC CBOB unleaded regular gasoline 1.10 1.63 1.83

Market Indicators (dollars per barrel)

Crack Spreads

Crude Oil Differentials

(a)The blended crack spread for the fourth quarter of 2020 is weighted 40 percent of the USGC crack spread, 40 percent of the Mid-Continent crack spread and 20 percent of the West Coast crack spread. The blended crack spreads for the first three quarters of 2020, all of 2019 and the fourth quarter of 2018 are weighted 38 percent of the USGC crack spread, 38 percent of the Mid-Continent crack spread and 24 percent of the West Coast crack spread. The blended crack spread for the first three quarters of 2018 reflects the average weighting of 60 percent of the USGC crack spread and 40 percent of the Mid-Continent crack spread. These blends are based on MPC’s refining capacity by region in each period.

2020 Compared to 2019

Refining & Marketing segment revenues decreased $41.16 billion primarily due to lower refined product sales volumes, which decreased 513 mbpd, and decreased average refined product sales prices of $0.55 per gallon.

Refinery crude oil capacity utilization was 82 percent during 2020 and net refinery throughputs decreased 529 mbpd primarily due to reducing throughputs during the COVID-19 pandemic.

Refining & Marketing segment income from operations decreased $8.05 billion primarily driven by lower blended crack spreads.

Refining & Marketing margin, excluding LIFO liquidation charge, was $8.96 per barrel for 2020 compared to $14.77 per barrel for 2019. Refining & Marketing margin is affected by the market indicators shown earlier, which use spot market values and an estimated mix of crude purchases and product sales. Based on the market indicators and our crude oil throughput, we estimate a net negative impact of $9.75 billion on Refining & Marketing margin, primarily due to lower crack spreads. Our reported Refining & Marketing margin differs from market indicators due to the mix of crudes purchased and their costs, the effects of market structure on our crude oil acquisition prices, RIN prices on the crack spread and other items like refinery yields and other feedstock variances, direct dealer fuel margin, and for 2020, a LIFO liquidation charge of $561 million. For 2019, the Refining & Marketing segment income from operations also reflects a benefit of $93 million for the biodiesel tax credit attributable to volumes blended in 2018. These factors had an estimated net positive impact on Refining & Marketing segment income from operations of

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approximately $800 million, including the LIFO liquidation charge, in 2020 compared to 2019 resulting in a capture rate of 102 percent in 2020 and 96 percent in 2019.

For the year ended December 31, 2020, refining operating costs, excluding depreciation and amortization, were $5.37 billion. This was a decrease of $1.06 billion, and a per barrel increase of $0.02 due to lower refinery throughput, compared to the year ended December 31, 2019 as we took actions to reduce costs in response to the economic effects of COVID-19, including operating at lower throughput at our refineries and idling portions of our refining capacity. Net refinery throughput was 529 mbpd lower in 2020

Distribution costs, excluding depreciation and amortization, were $5.08 billion and $5.13 billion for 2020 and 2019, respectively, and include fees paid to MPLX of $3.46 billion and $3.22 billion for 2020 and 2019, respectively. On a per barrel basis, distribution costs, excluding depreciation and amortization, increased $0.85 primarily due to lower throughput partially offset by a decrease in costs.

Refining planned turnaround costs increased $92 million, or $0.23 per barrel, due to the timing of turnaround activity and a decrease in throughput.

Depreciation and amortization per barrel increased by $0.38, primarily due to a decrease in throughput and increased costs.

We purchase RINs to satisfy a portion of our RFS2 compliance. Our expenses associated with purchased RINs were $606 million in 2020 and $356 million in 2019 and are included in Refining & Marketing margin. The increase in 2020 was primarily due to higher weighted average RIN costs, partially offset by a decrease in our RIN obligations.

2019 Compared to 2018

Refining & Marketing segment revenues increased $24.6 billion in 2019 compared to 2018 primarily due to higher refined product sales volumes, which increased 1,032 mbpd, largely due to the acquisition of Andeavor on October 1, 2018, partially offset by decreased average refined product sales prices of $.09 per gallon.

Refinery crude oil capacity utilization was 96 percent during 2019 and net refinery throughputs increased 838 mbpd primarily due to the refineries acquired from Andeavor.

Refining & Marketing segment income from operations increased $202 million primarily due to a full year of direct dealer sales and an increase in Refining & Marketing margin on a per barrel basis partially offset by higher operating, distribution and depreciation and amortization costs. The increases in costs and expenses were primarily due to increased sales and production volumes following the Andeavor acquisition.

Refining & Marketing margin was $14.77 per barrel for 2019 compared to $14.50 per barrel for 2018. Refining & Marketing margin is affected by the market indicators shown earlier, which use spot market values and an estimated mix of crude purchases and product sales. Based on the market indicators and our crude oil throughput, we estimate a net positive impact of $4.46 billion on Refining & Marketing margin, primarily due to an approximate $5.35 billion benefit from increased throughput volume, mainly attributed to the Andeavor acquisition, partially offset by narrower sour and sweet crude oil differentials. Our reported Refining & Marketing margin differs from market indicators due to the mix of crudes purchased and their costs, the effects of market structure on our crude oil acquisition prices, RIN prices on the crack spread and other items like refinery yields and other feedstock variances and direct dealer fuel margin. For 2019, the Refining & Marketing segment income from operations also reflects a benefit of $93 million for the biodiesel tax credit attributable to volumes blended in 2018. These factors had an estimated net positive impact on Refining & Marketing segment income from operations of approximately $370 million in 2019 compared to 2018 resulting in a capture rate of 96 percent in 2019 compared to 92 percent in 2018.

For the year ended December 31, 2019, refining operating costs, excluding depreciation and amortization, were $6.42 billion. This was an increase of $2.28 billion, and a per barrel increase of $0.67. Distribution costs, excluding depreciation and amortization, were $5.13 billion and $3.52 billion, and include fees paid to MPLX of $3.22 billion and $2.28 billion, for 2019 and 2018, respectively. This was an increase of $1.61 billion, or $0.28 per barrel. Excluding depreciation and amortization, refining operating costs and distribution costs increased primarily due to the inclusion of costs for the refining operations acquired from Andeavor. The per barrel increases, among other items, reflect the addition of Andeavor’s West Coast

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refineries, which generally have higher operating costs than other regions in which we operate due to specific geographical location and regulatory factors.

Refining planned turnaround costs decreased $76 million, or $0.15 per barrel, due to the timing of turnaround activity.

Depreciation and amortization per barrel increased by $0.13, primarily due to the fair value of assets acquired from Andeavor as of October 1, 2018. During 2019, we recorded a $0.01 per barrel adjustment to reduce depreciation and amortization, which reflects the cumulative effects related to a measurement period adjustment arising from the finalization of purchase accounting.

We purchase RINs to satisfy a portion of our RFS2 compliance. Our expenses associated with purchased RINs were $356 million in 2019 and $316 million in 2018. The increase in 2019 was primarily due to an increase in our RIN obligations resulting from the acquisition of Andeavor, partially offset by lower weighted average RIN costs.

Supplemental Refining & Marketing Statistics

Refining & Marketing Operating Statistics

Refined product export sales volumes (mbpd)(a) 340 397 334

Crude oil capacity utilization percent(b) 82 96 96

Refinery throughputs (mbpd):

Sour crude oil throughput percent 49 48 52

Sweet crude oil throughput percent 51 52 48

Refined product yields (mbpd):

(a)Represents fully loaded export cargoes for each time period. These sales volumes are included in the total sales volumes amounts.

(b)Based on calendar-day capacity, which is an annual average that includes down time for planned maintenance and other normal operating activities.

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Midstream

(a)On owned common-carrier pipelines, excluding equity method investments.

(b)Includes amounts related to unconsolidated equity method investments on a 100 percent basis.

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Natural Gas NYMEX HH ($ per MMBtu) $ 2.13 $ 2.53 $ 3.07

C2 + NGL Pricing ($ per gallon)(a) $ 0.43 $ 0.52 $ 0.78

(a)C2 + NGL pricing based on Mont Belvieu prices assuming an NGL barrel of approximately 35 percent ethane, 35 percent propane, six percent Iso-Butane, 12 percent normal butane and 12 percent natural gasoline.

2020 Compared to 2019

Midstream segment revenue decreased $322 million primarily due to decreased demand for the products that we produce and transport due to the current macro-economic conditions in addition to lower natural gas prices.

In 2020, Midstream segment income from operations increased $114 million mainly due stable, fee-based earnings in the current business environment, contributions from organic growth projects and reduced operating expenses.

2019 Compared to 2018

Midstream segment revenue increased $2.10 billion primarily due to the inclusion of ANDX revenues subsequent to the Andeavor acquisition on October 1, 2018. On July 30, 2019, MPLX acquired ANDX. In addition, 2019 reflects twelve months of fees charged for fuels distribution and refining logistics services provided to our Refining & Marketing segment following the February 1, 2018 dropdown to MPLX. MPLX revenues from refining logistics and fuels distribution services provided to MPC were $1.48 billion and $1.36 billion for the years ended December 31, 2019 and 2018, respectively.

In 2019, Midstream segment income from operations increased $842 million largely due to contributions from ANDX in addition to growth across MPLX’s businesses.

Corporate

(a)Corporate and other unallocated items consists primarily of MPC’s corporate administrative expenses and costs related to certain non-operating assets, except for corporate overhead expenses attributable to MPLX, which are included in the Midstream segment. Corporate overhead expenses are not allocated to the Refining & Marketing segment.

2020 Compared to 2019

Corporate expenses decreased $33 million in 2020 compared to 2019 largely due to decreased salaries and contract services expenses, partially offset by increased expenses due to an information systems integration project. 2020 and 2019 corporate expenses include expenses of $26 million and $28 million, respectively, which are no longer allocable to Speedway due to discontinued operations accounting.

2019 Compared to 2018

Corporate expenses increased $305 million in 2019 compared to 2018 largely due to the inclusion of costs and expenses related to Andeavor operations. 2019 and 2018 corporate expenses include expenses of $28 million and $26 million, respectively, which are no longer allocable to Speedway due to discontinued operations accounting.

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Items not Allocated to Segments

Our chief operating decision maker evaluates the performance of our segments using segment income from operations. Items identified in the table below are either believed to be non-recurring in nature or not believed to be allocable, controlled by the segment or are not tied to the operational performance of the segment.

Items not allocated to segments:

Restructuring expense (367) — —

Gain on sale of assets 66 — —

Transaction-related costs(a) (8) (153) (197)

Equity method investment restructuring gains — 259 —

(a)2020 and 2019 includes costs incurred in connection with the Midstream strategic review and other related efforts. Both 2019 and 2018 include employee severance, retention and other costs related to the acquisition of Andeavor. Effective October 1, 2019, we have discontinued reporting Andeavor transaction-related costs as one year has passed since the acquisition and these costs are immaterial. Costs incurred in connection with the Speedway separation are included in discontinued operations.

2020 Compared to 2019

Unallocated items include impairment charges of $9.74 billion which includes $8.43 billion related to goodwill and long-lived assets and $1.32 billion related to equity method investments. See Item 8. Financial Statements and Supplementary Data – Note 7 for additional information.

During 2020, we indefinitely idled our Gallup refinery, initiated actions to strategically reposition our Martinez refinery to a renewable diesel facility and approved an involuntary workforce reduction plan. In connection with these strategic actions, we recorded restructuring expenses of $367 million for the year ended December 31, 2020. See Item 8. Financial Statements and Supplementary Data – Note 4 for additional information.

Other unallocated items in 2020 include a favorable litigation settlement of $84 million and gain on sale of assets of $66 million related to the sale of three asphalt terminals and certain other Refining & Marketing assets.

2019 Compared to 2018

Unallocated items in 2019 include $259 million of non-cash gains related to obtaining equity investments in Capline LLC and The Andersons in exchange for contributing assets. See Item 8. Financial Statements and Supplementary Data – Note 17 for additional information.

In 2019, other unallocated items also include transaction-related costs of $153 million and a litigation reserve adjustment of $22 million. The transaction-related costs recognized during the year include the recognition of an obligation for vacation benefits provided to former Andeavor employees in the first quarter as well as employee retention, severance and other costs and the Midstream strategic review and other related efforts.

Impairment charges of $1.24 billion in 2019 primarily relate to MPLX goodwill associated with the ANDX gathering and processing businesses acquired as part of the Andeavor acquisition. See Item 8. Financial Statements and Supplementary Data – Note 19 for additional information.

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Non-GAAP Financial Measures

Management uses certain financial measures to evaluate our operating performance that are calculated and presented on the basis of methodologies other than in accordance with GAAP. We believe these non-GAAP financial measures are useful to investors and analysts to assess our ongoing financial performance because, when reconciled to their most comparable GAAP financial measures, they provide improved comparability between periods through the exclusion of certain items that we believe are not indicative of our core operating performance and that may obscure our underlying business results and trends. These measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP, and our calculations thereof may not be comparable to similarly titled measures reported by other companies. The non-GAAP financial measures we use are as follows:

Refining & Marketing Margin

Refining margin is defined as sales revenue less the cost of refinery inputs and purchased products and excludes other items reflected in the table below.

Reconciliation of Refining & Marketing income from operations to Refining & Marketing gross margin and Refining & Marketing margin

Refining & Marketing income (loss) from operations $ (5,189) $ 2,856 $ 2,654

Plus (Less):

Selling, general and administrative expenses 2,030 2,211 1,479

Income from equity method investments (2) (11) (15)

Net gain on disposal of assets (1) (8) (4)

Plus (Less):

Operating expenses (excluding depreciation and amortization) 9,694 10,710 7,406

Gross margin excluded from Refining & Marketing margin(a) (365) (621) (506)

Other taxes included in Refining & Marketing margin (79) (11) (61)

Biodiesel tax credit — (93) —

(a)The gross margin, excluding depreciation and amortization, of operations that support Refining & Marketing such as biodiesel and ethanol ventures, power facilities and processing of credit card transactions.

Speedway Fuel Margin

Speedway fuel margin is defined as the price paid by consumers less the cost of refined products, including transportation, consumer excise taxes and bankcard processing fees (where applicable).

Speedway Merchandise Margin

Speedway merchandise margin is defined as the price paid by consumers less the cost of merchandise.

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Reconciliation of Speedway income from discontinued operations to Speedway gross margin and Speedway margin

Income from discontinued operations $ 1,587 $ 1,114 $ 881

Plus (Less):

Operating, selling, general and administrative expenses 2,376 2,371 1,753

Income from equity method investments (93) (82) (74)

Net gain on disposal of assets (1) (29) (17)

Plus (Less):

Speedway margin:

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

Our cash and cash equivalents balance was $415 million at December 31, 2020 compared to $1.39 billion at December 31, 2019, excluding $140 million and $134 million, respectively, of cash and cash equivalents related to the discontinued operations of Speedway which are included in assets held for sale. Net cash provided by (used in) operating activities, investing activities and financing activities for the past three years is presented in the following table.

Net cash provided by (used in):

Net cash provided by operating activities decreased $7.02 billion in 2020 compared to 2019, primarily due to a decrease in operating results and an unfavorable change in working capital of $43 million. Net cash provided by operating activities increased $3.28 billion in 2019 compared to 2018, primarily due to an increase in operating results, excluding impairment expenses, and a favorable change in working capital of $978 million. The above changes in working capital exclude changes in short-term debt.

For 2020, changes in working capital were a net $314 million source of cash, primarily due to the effect of decreases in energy commodity prices and inventory and refined product volumes on working capital. Accounts payable decreased primarily due to lower crude payable prices. Current receivables decreased primarily due to lower crude and refined product receivable prices and refined product volumes. Inventories decreased mainly due to decreases in refined product, crude and materials & supplies inventories.

For 2019, changes in working capital were a net $357 million source of cash, primarily due to the effect of increases in energy commodity prices and volumes on working capital. Accounts payable increased primarily due to higher crude oil payable price and volumes. Current receivables increased primarily due to

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increases in crude and refined product receivable volumes and prices. Inventories increased primarily due to increases in refined product and materials & supplies inventories partially offset by a decrease in crude inventory.

For 2018, changes in working capital were a net $621 million use of cash, primarily due to the effect of decreases in energy commodity prices on working capital. Accounts payable decreased primarily due to lower crude oil payable prices. Inventories decreased primarily due to a decrease in crude and refined product inventories. Current receivables decreased primarily due to lower crude oil receivable prices. All of these effects exclude the working capital acquired in connection with the acquisition of Andeavor.

Cash flows used in investing activities decreased $3.00 billion in 2020 compared to 2019 and decreased $1.41 billion in 2019 compared to 2018.

•Cash used for additions to property, plant and equipment was primarily due to spending in our Midstream and Refining & Marketing segments in 2020. See discussion of capital expenditures and investments under the “Capital Spending” section.

•Cash used for acquisitions of $3.82 billion in 2018 primarily includes cash paid to Andeavor stockholders of $3.5 billion in connection with the acquisition of Andeavor on October 1, 2018.

•Net investments were a use of cash of $348 million in 2020 compared to $966 million in 2019 and $393 million in 2018. Investments in 2020 are largely due to investments in the South Texas Gateway Terminal, the Gray Oak Pipeline and the Whistler Pipeline. Investments in 2019 are largely due to investments in connection with the Gray Oak Pipeline, which began initial start-up in the fourth quarter, the Wink to Webster Pipeline, the Whistler Pipeline and other Midstream projects.

•Cash provided by disposal of assets totaled $150 million, $47 million and $22 million in 2020, 2019 and 2018, respectively. The increase in 2020 is mainly due to the sale of three asphalt terminals and other Refining & Marketing assets. The increase in 2019 is primarily due to proceeds from the sale of assets in our Retail segment.

The consolidated statements of cash flows exclude changes to the consolidated balance sheets that did not affect cash. A reconciliation of additions to property, plant and equipment to total capital expenditures and investments follows for each of the last three years.

Asset retirement expenditures — 1 8

Increase (decrease) in capital accruals (518) (303) 268

Investments in equity method investees 485 1,064 409

Total capital expenditures and investments $ 2,754 $ 5,572 $ 3,864

Financing activities were a use of cash of $135 million in 2020, a use of cash of $3.38 billion in 2019 and a source of cash of $222 million in 2018.

•Long-term debt borrowings and repayments, including debt issuance costs, were a net $1.65 billion source of cash in 2020 compared to a $1.18 billion source of cash in 2019 and a $5.36 billion source of cash in 2018. During 2020, MPC issued $2.5 billion of senior notes, redeemed $1.13 billion of senior notes, borrowed and repaid $4.23 billion under its revolving credit facility, borrowed and repaid $3.55 billion under its trade receivables facility and had net borrowings of $1.02 billion under its commercial paper program. MPLX issued $3.0 billion of senior notes, which were used to repay $1.0 billion of outstanding borrowings under its term loan, $1.0 billion of floating rate senior notes and to redeem $750 million of fixed rate senior notes, and had net borrowings of $175 million under its revolving credit facility. During 2019, MPLX issued $2 billion of floating rate notes, the proceeds of which were used to repay various outstanding MPLX borrowings and for general business purposes, and had net borrowings of $1 billion under its term loan agreement. In addition, MPLX repaid $500 million of senior notes. During 2018, MPLX issued $7.75 billion of senior notes, redeemed $750 million of senior notes, borrowed and repaid $4.1 billion under a term loan agreement, and borrowed and repaid $1.41 billion and $1.92 billion,

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respectively, under the MPLX Credit Agreement. In addition, MPC redeemed $600 million of senior notes. See Item 8. Financial Statements and Supplementary Data – Note 22 for additional information on our long-term debt.

•Cash used in common stock repurchases totaled $1.95 billion in 2019 and $3.29 billion in 2018. See the “Capital Requirements” section for further discussion of our stock repurchases.

•Cash used in dividend payments totaled $1.51 billion in 2020, $1.40 billion in 2019 and $954 million in 2018. The increase in 2020 is primarily due to an increase in our base dividend, partially offset by a reduction of shares resulting from share repurchases in 2019. The increase in 2019 was primarily due a net increase in the number of shares outstanding due to the approximate 239.8 million shares issued in connection with the Andeavor acquisition and a $0.28 per share increase in our base dividend, partially offset by a reduction of shares resulting from share repurchases. Dividends per share were $2.32 in 2020, $2.12 in 2019 and $1.84 in 2018.

•Distributions to noncontrolling interests increased $342 million in 2019 compared to 2018, primarily due to increases in MPLX units outstanding and MPLX’s distribution per common unit. Distributions to noncontrolling interests included ANDX’s distribution per common unit paid in the first and second quarter of 2019, prior to the merger of ANDX and MPLX, and the fourth quarter of 2018 subsequent to the acquisition of Andeavor on October 1, 2018.

Derivative Instruments

See Item 7A. Quantitative and Qualitative Disclosures about Market Risk for a discussion of derivative instruments and associated market risk.

Capital Resources

MPC, Excluding MPLX

We control MPLX through our ownership of the general partner, however, the creditors of MPLX do not have recourse to MPC’s general credit through guarantees or other financial arrangements. The assets of MPLX can only be used to settle its own obligations and its creditors have no recourse to our assets. Therefore, in the following table, we present the liquidity of MPC, excluding MPLX. MPLX liquidity is discussed in the following section.

Our liquidity, excluding MPLX, totaled $7.3 billion at December 31, 2020 consisting of:

(In millions) Total Capacity Outstanding Borrowings AvailableCapacity

Bank revolving credit facility(a) $ 5,000 $ 1 $ 4,999

Trade receivables facility(c) 750 — 750

Commercial paper borrowings(d) — — (1,024)

Cash and cash equivalents(e) 540

Total liquidity $ 7,265

(b)In February 2021, we elected to cancel one of the $1.0 B 364-day revolving credit agreements prior to its maturity in April 2021.

(c)Availability under our $750 million trade receivables facility is a function of eligible trade receivables, which will be lower in a sustained lower price environment for refined products.

(d)We do not intend to have outstanding commercial paper borrowings in excess of available capacity under bank revolving credit facilities.

Because of the alternatives available to us, including internally generated cash flow and access to capital markets, including a commercial paper program, we believe that our short-term and long-term liquidity is adequate to fund not only our current operations, but also our near-term and long-term funding requirements, including capital spending programs, dividend payments, defined benefit plan contributions,

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repayment of debt maturities and other amounts that may ultimately be paid in connection with contingencies. During the year ended December 31, 2020, share repurchases were temporarily suspended, which has helped preserve our liquidity during the COVID-19 pandemic. The timing and amount of future repurchases will depend upon several factors, including market and business conditions, and such repurchases may be initiated, suspended or discontinued at any time.

On August 2, 2020, we entered into a definitive agreement to sell Speedway, our company-owned and operated retail transportation fuel and convenience store business, to 7-Eleven for $21 billion in cash, subject to certain adjustments based on the levels of cash, debt and working capital at closing and certain other items. The taxable transaction is targeted to close in the first quarter of 2021, subject to customary closing conditions and the receipt of regulatory approvals. This transaction is expected to result in after-tax cash proceeds of approximately $16.5 billion. The company expects to use the proceeds from the sale to strengthen the balance sheet and return capital to shareholders.

Additionally, we have recorded an income tax receivable within other current assets in our balance sheet of approximately $2.1 billion which is expected to be received during the second half of 2021.

We established a commercial paper program that allows us to have a maximum of $2 billion in commercial paper outstanding, with maturities up to 397 days from the date of issuance. We do not intend to have outstanding commercial paper borrowings in excess of available capacity under our bank revolving credit facilities. At December 31, 2020, we had $1.02 billion outstanding under the commercial paper program, which matures on various dates in the first quarter of 2021.

On September 23, 2020, MPC entered into a 364-day credit agreement with a syndicate of lenders. This revolving credit agreement provides for a $1.0 billion unsecured revolving credit facility that matures in September 2021, and replaces a similar 364-day revolving credit agreement that expired on September 28, 2020.

On April 27, 2020, MPC entered into a 364-day revolving credit agreement that provided for a $1.0 billion unsecured revolving credit facility that was scheduled to mature in April 2021. In February 2021, we elected to terminate this credit agreement. This facility provided MPC additional liquidity and financial flexibility during the then ongoing commodity price and demand downturn. We no longer believe the facility is necessary as an additional source for liquidity, and we do not intend to replace it. No early termination fees were incurred by MPC in connection with the termination of this credit agreement.

On April 27, 2020, we closed on the issuance of $2.5 billion in aggregate principal amount of senior notes in a public offering, consisting of $1.25 billion aggregate principal amount of 4.500% unsecured senior notes due May 2023 and $1.25 billion aggregate principal amount of 4.700% unsecured senior notes due May 2025. MPC used the net proceeds from this offering to repay amounts outstanding under its five-year revolving credit facility.

The MPC credit agreements and our trade receivables facility contain representations and warranties, affirmative and negative covenants and events of default that we consider usual and customary for agreements of these types. The financial covenant requires us to maintain, as of the last day of each fiscal quarter, a ratio of Consolidated Net Debt to Total Capitalization (as defined in the MPC credit agreements) of no greater than 0.65 to 1.00. Other covenants restrict us and/or certain of our subsidiaries from incurring debt, creating liens on assets and entering into transactions with affiliates. As of December 31, 2020, we were in compliance with the covenants contained in the MPC credit agreements and our trade receivables facility, including the financial covenant with a ratio of Consolidated Net Debt to Total Capitalization of 0.37 to 1.00.

Our intention is to maintain an investment-grade credit profile. As of February 1, 2021, the credit ratings on our senior unsecured debt are as follows.

Company Rating Agency Rating

MPC Moody’s Baa2 (negative outlook)

Standard & Poor’s BBB (negative outlook)

Fitch BBB (negative outlook)

The ratings reflect the respective views of the rating agencies. Although it is our intention to maintain a credit profile that supports an investment-grade rating, there is no assurance that these ratings will continue

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for any given period of time. The ratings may be revised or withdrawn entirely by the rating agencies if, in their respective judgments, circumstances so warrant.

None of the MPC credit agreements or our trade receivables facility or senior notes contains credit rating triggers that would result in the acceleration of interest, principal or other payments in the event that our credit ratings are downgraded. However, any downgrades of our senior unsecured debt could increase the applicable interest rates, yields and other fees payable under such agreements and may limit our flexibility to obtain financing in the future, including to refinance existing indebtedness. In addition, a downgrade of our senior unsecured debt rating to below investment-grade levels could, under certain circumstances, decrease the amount of trade receivables that are eligible to be sold under our trade receivables facility, impact our ability to purchase crude oil on an unsecured basis and could result in us having to post letters of credit under existing transportation services or other agreements.

See Item 8. Financial Statements and Supplementary Data – Note 22 for further discussion of our debt.

MPLX

MPLX’s liquidity totaled $4.84 billion at December 31, 2020 consisting of:

(In millions) Total Capacity Outstanding Borrowings AvailableCapacity

MPLX bank revolving credit facility $ 3,500 $ 175 $ 3,325

MPC intercompany loan agreement 1,500 — 1,500

Cash and cash equivalents 15

Total liquidity $ 4,840

On August 18, 2020, MPLX issued $3.0 billion aggregate principal amount of senior notes in a public offering, consisting of $1.5 billion aggregate principal amount of 1.750% senior notes due March 2026 and $1.5 billion aggregate principal amount of 2.650% senior notes due August 2030. The net proceeds were used to repay $1.0 billion of outstanding borrowings under the MPLX term loan agreement, to repay the $1.0 billion floating rate senior notes due September 2021, to redeem all of the $300 million aggregate principal amount of MPLX’s 6.250% senior notes due October 2022 and to redeem the $450 million aggregate principal amount of 6.375% senior notes due May 2024, including the portion of such notes issued by ANDX. The remaining proceeds were used for general business purposes.

The MPLX credit agreement contains certain representations and warranties, affirmative and restrictive covenants and events of default that we consider to be usual and customary for an agreement of this type. The financial covenant requires MPLX to maintain a ratio of Consolidated Total Debt as of the end of each fiscal quarter to Consolidated EBITDA (both as defined in the MPLX credit agreement) for the prior four fiscal quarters of no greater than 5.0 to 1.0 (or 5.5 to 1.0 for up to two fiscal quarters following certain acquisitions). Consolidated EBITDA is subject to adjustments for certain acquisitions completed and capital projects undertaken during the relevant period. Other covenants restrict MPLX and/or certain of its subsidiaries from incurring debt, creating liens on assets and entering into transactions with affiliates. As of December 31, 2020, MPLX was in compliance with the covenants, including the financial covenant with a ratio of Consolidated Total Debt to Consolidated EBITDA of 3.8 to 1.0.

Our intention is to maintain an investment-grade credit profile for MPLX. As of February 1, 2021, the credit ratings on MPLX’s senior unsecured debt are as follows.

Company Rating Agency Rating

MPLX Moody’s Baa2 (negative outlook)

Standard & Poor’s BBB (negative outlook)

Fitch BBB (negative outlook)

The ratings reflect the respective views of the rating agencies. Although it is our intention to maintain a credit profile that supports an investment-grade rating for MPLX, there is no assurance that these ratings

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will continue for any given period of time. The ratings may be revised or withdrawn entirely by the rating agencies if, in their respective judgments, circumstances so warrant.

Neither the MPLX credit agreement or term loan agreement contains credit rating triggers that would result in the acceleration of interest, principal or other payments in the event that MPLX credit ratings are downgraded. However, any downgrades of MPLX senior unsecured debt could increase the applicable interest rates, yields and other fees payable under such agreements. In addition, a downgrade of MPLX senior unsecured debt ratings to below investment-grade levels may limit MPLX’s ability to obtain future financing, including to refinance existing indebtedness.

See Item 8. Financial Statements and Supplementary Data – Note 22 for further discussion of MPLX’s debt.

Capital Requirements

Capital Spending

MPC’s capital investment plan for 2021 totals approximately $1.4 billion for capital projects and investments, excluding capitalized interest, potential acquisitions and MPLX’s capital investment plan. MPC’s 2021 capital investment plan includes all of the planned capital spending for Refining & Marketing, and Corporate as well as a portion of the planned capital investments in Midstream and Speedway’s capital spending for the first quarter which is now reported separately as discontinued operations. The remainder of the planned capital spending for Midstream reflects the capital investment plan for MPLX. We continuously evaluate our capital plan and make changes as conditions warrant. The 2021 capital investment plan for MPC and MPLX and capital expenditures and investments for each of the last three years are summarized by segment below.

Capital expenditures and investments:(a)

MPC, excluding MPLX

MPC discontinued operations - Speedway $ 150 $ 277 $ 561 $ 440

(a)Capital expenditures exclude changes in capital accruals.

(b)Excludes capitalized interest of $106 million, $137 million and $80 million for 2020, 2019 and 2018, respectively. The 2021 capital investment plan excludes capitalized interest.

(c)The MPLX capital investment plan excludes project reimbursements paid by MPC to MPLX and return of capital from MPLX’s joint venture partners.

Refining & Marketing

The Refining & Marketing segment’s forecasted 2021 capital spending and investments is approximately $1.05 billion. This amount includes approximately $800 million of growth capital focused on on-going projects, such as the first phase of the Martinez facility conversion, the STAR project, and projects that we expect will help us reduce future operating costs. Maintenance capital is expected to be $250 million.

Major capital projects completed over the last three years have prepared us to increase our diesel production, process light crude oil, increase our export capabilities and meet the transportation fuel regulatory mandate (Tier 3 fuel standards). In addition, the STAR investment project at our Galveston Bay refinery is progressing according to plan and is scheduled to complete in 2022.

Midstream

MPLX’s capital investment plan includes $800 million of organic growth capital and approximately $200 million of maintenance capital. This growth plan is focused on investments in projects that deliver the highest returns as we continue to optimize our assets. These investments are focused on crude oil and natural gas logistics systems to transport products from the Permian to the U.S. Gulf Coast and increase our

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export capabilities. This provides for additional flexibility and competitive advantages in how we operate our assets as these projects further enhance our full value chain capture. Other investments include the addition of approximately 400 MMcf/d of processing capacity at two gas processing plants, one in the Marcellus region which is expected to be completed in 2021, and one in the Southwest region, which is expected to be completed in 2022.

Major capital projects over the last three years included investments for the development of natural gas and natural gas liquids infrastructure to support MPLX’s producer customers, primarily in the Marcellus, Utica and Permian regions and development of various crude oil and refined petroleum products infrastructure projects.

The remaining Midstreamsegment’s forecasted 2021 capital spend, excluding MPLX, is approximately $50 million which primarily relates to investments in equity affiliates.

Corporate and Other

The 2021 capital forecast includes approximately $150 million to support corporate activities. Major projects over the last three years included upgrades to information technology systems.

Speedway

Speedway’s 2021 capital forecast for the first quarter of approximately $150 million is focused on new store growth in existing and new markets, commercial fueling/diesel expansion, food service through store remodels and equipment replacement/store maintenance.

Major capital projects over the last three years included converting recently acquired locations to the Speedway brand and systems, building new store locations, remodeling and rebuilding existing locations in core markets and building out our network of commercial fueling lane locations to capitalize on diesel demand growth.

Dividends

On January 29, 2021, we announced our board of directors approved a $0.58 per share dividend, payable March 10, 2021 to shareholders of record at the close of business on February 17, 2021.

Share Repurchases

During the year ended December 31, 2020, share repurchases were temporarily suspended, which has helped preserve our liquidity during the COVID-19 pandemic. The timing and amount of future repurchases will depend upon several factors, including market and business conditions, and such repurchases may be initiated, suspended or discontinued at any time. Since January 1, 2012, our board of directors has approved $18.0 billion in total share repurchase authorizations and we have repurchased a total of $15.0 billion of our common stock, leaving approximately $3.0 billion available for repurchases as of December 31, 2020. Under these authorizations, we have acquired 327 million shares at an average cost per share of $46.05. The table below summarizes our total share repurchases. See Item 8. Financial Statements and Supplementary Data – Note 12 for further discussion of the share repurchase plans.

Number of shares repurchased — 34 47

Cash paid for shares repurchased $ — $ 1,950 $ 3,287

Average cost per share $ — $ 58.87 $ 69.46

We may utilize various methods to effect the repurchases, which could include open market repurchases, negotiated block transactions, tender offers, accelerated share repurchases or open market solicitations for shares, some of which may be effected through Rule 10b5-1 plans.

MPLX Unit Repurchases

On November 2, 2020, MPLX announced the board authorization of a unit repurchase program for the repurchase of up to $1 billion of MPLX’s outstanding common units held by the public. MPLX may utilize various methods to effect the repurchases, which could include open market repurchases, negotiated block transactions, tender offers, accelerated unit repurchases or open market solicitations for units, some of which may be effected through Rule 10b5-1 plans. The timing and amount of repurchases will depend upon

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several factors, including market and business conditions, and repurchases may be initiated, suspended or discontinued at any time. The repurchase authorization has no expiration date.

During the year ended December 31, 2020, 1,473,843 MPLX common units had been repurchased at an average cost per unit of $22.29. Total cash paid for units repurchased during the year was $33 million and $967 million remained outstanding on the program for future repurchases as of December 31, 2020. As of December 31, 2020, MPLX had agreements to acquire 99,406 additional common units for $2 million, which settled in early January 2021.

Other Capital Requirements

In 2020, we made contributions totaling $3 million to our funded pension plans. For 2021, we have $65 million of required funding and we may make voluntary contributions to our funded pension plans at our discretion.

We have $1.0 billion of 5.125 percent senior notes due in March 2021 that will be paid utilizing existing resources.

As of December 31, 2020, $141 million of restructuring expenses were accrued as restructuring reserves in our consolidated balance sheet and we expect cash payments for the majority of these reserves to occur within the next nine months.

We may, from time to time, repurchase notes in the open market, in tender offers, in privately-negotiated transactions or otherwise in such volumes, at such prices and upon such other terms as we deem appropriate.

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Contractual Cash Obligations

The table below provides aggregated information on our consolidated obligations to make future payments under existing contracts as of December 31, 2020. The contractual obligations detailed below do not include our contractual obligations to MPLX under various fee-based commercial agreements as these transactions are eliminated in the consolidated financial statements.

Purchase obligations:(c)

Contracts to acquire property, plant and equipment 1,682 1,580 100 2 —

(a)Includes interest payments of $16.59 billion for our senior notes and the MPLX senior notes, commitment and administrative fees for our credit agreements, the MPLX credit agreement and term loan agreement and our trade receivables facility.

(b)Finance lease obligations represent future minimum payments.

(c)Includes both short- and long-term purchases obligations.

(d)These contracts include variable price arrangements. For purposes of this disclosure we have estimated prices to be paid primarily based on futures curves for the commodities to the extent available.

(e)Primarily includes contracts to purchase services such as utilities, supplies and various other maintenance and operating services.

(f)Primarily includes obligations for pension and other postretirement benefits including medical and life insurance, which we have estimated through 2030. See Item 8. Financial Statements and Supplementary Data – Note 26.

Off-Balance Sheet Arrangements

Off-balance sheet arrangements comprise those arrangements that may potentially impact our liquidity, capital resources and results of operations, even though such arrangements are not recorded as liabilities under accounting principles generally accepted in the United States. Our off-balance sheet arrangements are limited to indemnities and guarantees that are described below. Although these arrangements serve a variety of our business purposes, we are not dependent on them to maintain our liquidity and capital resources, and we are not aware of any circumstances that are reasonably likely to cause the off-balance sheet arrangements to have a material adverse effect on liquidity and capital resources.

We have provided various guarantees related to equity method investees. In conjunction with our spinoff from Marathon Oil, we entered into various indemnities and guarantees to Marathon Oil. These arrangements are described in Item 8. Financial Statements and Supplementary Data – Note 29.

TRANSACTIONS WITH RELATED PARTIES

We believe that transactions with related parties were conducted on terms comparable to those with unaffiliated parties. See Item 8. Financial Statements and Supplementary Data – Note 10 for discussion of activity with related parties.

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ENVIRONMENTAL MATTERS AND COMPLIANCE COSTS

We have incurred and may continue to incur substantial capital, operating and maintenance, and remediation expenditures as a result of environmental laws and regulations. If these expenditures, as with all costs, are not ultimately reflected in the prices of our products and services, our operating results will be adversely affected. We believe that substantially all of our competitors must comply with similar environmental laws and regulations. However, the specific impact on each competitor may vary depending on a number of factors, including the age and location of its operating facilities, marketing areas, production processes and whether it is also engaged in the petrochemical business or the marine transportation of crude oil and refined products.

Legislation and regulations pertaining to fuel specifications, climate change and greenhouse gas emissions have the potential to materially adversely impact our business, financial condition, results of operations and cash flows, including costs of compliance and permitting delays. The extent and magnitude of these adverse impacts cannot be reliably or accurately estimated at this time because specific regulatory and legislative requirements have not been finalized and uncertainty exists with respect to the measures being considered, the costs and the time frames for compliance, and our ability to pass compliance costs on to our customers.

Our environmental expenditures, including non-regulatory expenditures, for each of the last three years were:

Compliance:(a)

(a)Based on the American Petroleum Institute’s definition of environmental expenditures.

(b)These amounts include spending charged against remediation reserves, where permissible, but exclude non-cash provisions recorded for environmental remediation.

We accrue for environmental remediation activities when the responsibility to remediate is probable and the amount of associated costs can be reasonably estimated. As environmental remediation matters proceed toward ultimate resolution or as additional remediation obligations arise, charges in excess of those previously accrued may be required.

New or expanded environmental requirements, which could increase our environmental costs, may arise in the future. It is not possible to predict all of the ultimate costs of compliance, including remediation costs that may be incurred and penalties that may be imposed.

Our environmental capital expenditures accounted for 6 percent, 12 percent and 11 percent of capital expenditures, for 2020, 2019 and 2018, respectively, excluding acquisitions. Our environmental capital expenditures are expected to approximate $39 million, or 2 percent, of total planned capital expenditures in 2021. Actual expenditures may vary as the number and scope of environmental projects are revised as a result of improved technology or changes in regulatory requirements and could increase if additional projects are identified or additional requirements are imposed.

For more information on environmental regulations that impact us, or could impact us, see Item 1. Business – Regulatory Matters and Item 1A. Risk Factors.

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CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the respective reporting periods. Accounting estimates are considered to be critical if (1) the nature of the estimates and assumptions is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change; and (2) the impact of the estimates and assumptions on financial condition or operating performance is material. Actual results could differ from the estimates and assumptions used.

Fair Value Estimates

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. There are three approaches for measuring the fair value of assets and liabilities: the market approach, the income approach and the cost approach, each of which includes multiple valuation techniques. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to measure fair value by converting future amounts, such as cash flows or earnings, into a single present value amount using current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace the service capacity of an asset. This is often referred to as current replacement cost. The cost approach assumes that the fair value would not exceed what it would cost a market participant to acquire or construct a substitute asset of comparable utility, adjusted for obsolescence.

The fair value accounting standards do not prescribe which valuation technique should be used when measuring fair value and does not prioritize among the techniques. These standards establish a fair value hierarchy that prioritizes the inputs used in applying the various valuation techniques. Inputs broadly refer to the assumptions that market participants use to make pricing decisions, including assumptions about risk. Level 1 inputs are given the highest priority in the fair value hierarchy while Level 3 inputs are given the lowest priority. The three levels of the fair value hierarchy are as follows:

•Level 1 – Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities in active markets as of the measurement date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

•Level 2 – Observable market-based inputs or unobservable inputs that are corroborated by market data. These are inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the measurement date.

•Level 3 – Unobservable inputs that are not corroborated by market data and may be used with internally developed methodologies that result in management’s best estimate of fair value.

Valuation techniques that maximize the use of observable inputs are favored. Assets and liabilities are classified in their entirety based on the lowest priority level of input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the placement of assets and liabilities within the levels of the fair value hierarchy. We use an income or market approach for recurring fair value measurements and endeavor to use the best information available. See Item 8. Financial Statements and Supplementary Data – Note 20 for disclosures regarding our fair value measurements.

Significant uses of fair value measurements include:

•assessment of impairment of long-lived assets;

•assessment of impairment of intangible assets:

•assessment of impairment of goodwill;

•assessment of impairment of equity method investments;

•recorded values for assets acquired and liabilities assumed in connection with acquisitions; and

•recorded values of derivative instruments.

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Impairment Assessments of Long-Lived Assets, Intangible Assets, Goodwill and Equity Method Investments

Fair value calculated for the purpose of testing our long-lived assets, intangible assets, goodwill and equity method investments for impairment is estimated using the expected present value of future cash flows method and comparative market prices when appropriate. Significant judgment is involved in performing these fair value estimates since the results are based on forecasted financial information prepared using significant assumptions including:

•Future operating performance. Our estimates of future operating performance are based on our analysis of various supply and demand factors, which include, among other things, industry-wide capacity, our planned utilization rate, end-user demand, capital expenditures and economic conditions. Such estimates are consistent with those used in our planning and capital investment reviews.

•Future volumes. Our estimates of future refinery, pipeline throughput and natural gas and natural gas liquid processing volumes are based on internal forecasts prepared by our Refining & Marketing and Midstream segments operations personnel. Assumptions about the effects of COVID-19 on our future volumes are inherently subjective and contingent upon the duration of the pandemic, which is difficult to forecast.

•Discount rate commensurate with the risks involved. We apply a discount rate to our cash flows based on a variety of factors, including market and economic conditions, operational risk, regulatory risk and political risk. This discount rate is also compared to recent observable market transactions, if possible. A higher discount rate decreases the net present value of cash flows.

•Future capital requirements. These are based on authorized spending and internal forecasts.

Assumptions about the effects of COVID-19 and the macroeconomic environment are inherently subjective and contingent upon the duration of the pandemic and its impact on the macroeconomic environment, which is difficult to forecast. We base our fair value estimates on projected financial information which we believe to be reasonable. However, actual results may differ from these projections.

The need to test for impairment can be based on several indicators, including a significant reduction in prices of or demand for products produced, a weakened outlook for profitability, a significant reduction in pipeline throughput volumes, a significant reduction in natural gas or natural gas liquids processed, a significant reduction in refining margins, other changes to contracts or changes in the regulatory environment. The following sections detail our critical accounting estimates related to impairment assessments for long-lived assets, goodwill and equity method investments.

Long-lived Asset Impairment Assessments

Long-lived assets used in operations are assessed for impairment whenever changes in facts and circumstances indicate that the carrying value of the assets may not be recoverable based on the expected undiscounted future cash flow of an asset group. For purposes of impairment evaluation, long-lived assets must be grouped at the lowest level for which independent cash flows can be identified, which generally is the refinery and associated distribution system level for Refining & Marketing segment assets, and the plant level or pipeline system level for Midstream segment assets. If the sum of the undiscounted estimated pretax cash flows is less than the carrying value of an asset group, fair value is calculated, and the carrying value is written down to the calculated fair value. The Company’s consolidated long-lived asset balance was $43 billion as of December 31, 2020.

During the first quarter of 2020, we identified long-lived asset impairment triggers relating to all of our refinery asset groups within the Refining & Marketing segment as a result of decreases to the Refining & Marketing segment expected future cash flows. The cash flows associated with these assets were significantly impacted by the effects of COVID-19 and commodity price declines. We assessed each refinery asset group for impairment by comparing the undiscounted estimated pretax cash flows to the carrying value of each asset group. Of the 16 refinery asset groups, only the Gallup refinery’s carrying value exceeded its undiscounted estimated pretax cash flows. It was determined that the fair value of the Gallup refinery’s property, plant and equipment was less than the carrying value. As a result, we recorded a charge of $142 million in the first quarter of 2020 to impairment expense on the consolidated statements of income. The fair value measurements for the Gallup refinery assets represent Level 3 measurements.

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During the second quarter of 2020, we identified long-lived asset impairment triggers relating to all of our refinery asset groups within the Refining & Marketing segment, except the Gallup refinery which had been impaired in the first quarter, as a result of continued macroeconomic developments impacting the Refining & Marketing segment expected future cash flows. All of these refinery asset groups undiscounted estimated pretax cash flows exceeded the carrying value by at least 17 percent.

On August 3, 2020, we announced our plans to evaluate possibilities to strategically reposition our Martinez refinery, including the potential conversion of the refinery into a renewable diesel facility. Subsequent to August 3, 2020, we progressed activities associated with the conversion of the Martinez refinery to a renewable diesel facility, including applying for permits, advancing discussions with feedstock suppliers, and beginning detailed engineering activities. As envisioned, the Martinez facility would start producing approximately 260 million gallons per year of renewable diesel by the second half of 2022, with a potential to build to full capacity of approximately 730 million gallons per year by the end of 2023. As a result of the progression of these activities, we identified assets that would be repurposed and utilized in a renewable diesel facility configuration and assets that would be abandoned since they had no function in a renewable diesel facility configuration. This change in our intended use for the Martinez refinery is a long-lived asset impairment trigger for the assets that would be repurposed and remain as part of the Martinez asset group. We assessed the asset group for impairment by comparing the undiscounted estimated pretax cash flows to the carrying value of the asset group and the undiscounted estimated pretax cash flows exceeded the Martinez asset group carrying value. We recorded impairment expense of $342 million for the abandoned assets as we are no longer using these assets and have no expectation to use these assets in the future. Additionally, as a result of our efforts to progress the conversion of Martinez refinery into a renewable diesel facility, MPLX cancelled in-process capital projects related to its Martinez refinery logistics operations resulting in impairments of $27 million in the third quarter.

In the fourth quarter of 2020, we concluded the evaluation of our intended use of MPLX terminal assets near the Gallup refinery and determined that the assets were abandoned, resulting in an impairment charge of $67 million. Following this conclusion, we revised the estimate of the salvage value for the Gallup refinery asset group resulting in an additional $44 million impairment charge. These charges are included in impairment expense on our consolidated statements of income.

The determination of undiscounted estimated pretax cash flows for our long-lived asset impairment tests utilized significant assumptions including management’s best estimates of the expected future cash flows, allocation of certain Refining & Marketing segment cash flows to the individual refineries, the estimated useful lives of the asset groups, and the salvage values of the refineries. The determinations of expected future cash flows and the salvage values of refineries require considerable judgment and are sensitive to changes in underlying assumptions and factors. As a result, there can be no assurance that the estimates and assumptions made for purposes of our impairment analysis will prove to be an accurate prediction of the future. Should our assumptions significantly change in future periods, it is possible we may determine the carrying values of additional refinery asset groups exceed the undiscounted estimated pretax cash flows of their refinery asset groups, which would result in future impairment charges.

During the first quarter of 2020, MPLX identified an impairment trigger relating to asset groups within its Western Gathering & Processing (“G&P”) reporting unit as a result of significant changes to expected future cash flows for these asset groups resulting from the effects of COVID-19. The cash flows associated with these assets were significantly impacted by volume declines reflecting decreased forecasted producer customer production as a result of lower commodity prices. MPLX assessed each asset group within the Western G&P reporting unit for impairment. It was determined that the fair value of the East Texas G&P asset group’s underlying assets was less than the carrying value. As a result, MPLX recorded impairment charges totaling $350 million related to its property, plant and equipment and intangibles, which are included in impairment expense on our consolidated statements of income. Fair value of MPLX’s PP&E was determined using a combination of an income and cost approach. The income approach utilized significant assumptions including management’s best estimates of the expected future cash flows and the estimated useful life of the asset group. The cost approach utilized assumptions for the current replacement costs of similar assets adjusted for estimated depreciation and deterioration of the existing equipment. The fair value of the intangibles was determined based on applying the multi-period excess earnings method, which is an income approach. Key assumptions included management’s best estimates of the expected future cash flows from existing customers, customer attrition rates and the discount rate. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. As a result, there can be no assurance that the estimates and assumptions made for purposes of the

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impairment analysis will prove to be an accurate prediction of the future. The fair value measurements for the asset group fair values represent Level 3 measurements.

Goodwill Impairment Assessments

Unlike long-lived assets, goodwill is subject to annual, or more frequent if necessary, impairment testing at the reporting unit level. A goodwill impairment loss is measured as the amount by which a reporting unit's carrying value exceeds its fair value, without exceeding the recorded amount of goodwill. As of December 31, 2020, we had a total of $8.26 billion of goodwill recorded on our consolidated balance sheet, which was associated with four of our eight reporting units. An additional reporting unit, Speedway, has goodwill of $4.4 billion and is reported within assets held for sale on our consolidated balance sheets.

The outbreak of COVID-19, its development into a pandemic and the decline in commodity prices during the first quarter of 2020 had significant effects on our business. See “Business Update” in Item 1. Business above. Due to these developments, we performed impairment assessments during the first quarter of 2020 as discussed further below.

Prior to performing our goodwill impairment assessment as of March 31, 2020, we had goodwill totaling approximately $20 billion associated with eight of our 10 reporting units. As part of this assessment, we recorded goodwill impairment of $7.33 billion in the first quarter of 2020 related to our Refining & Marketing and MPLX’s Eastern Gathering & Processing reporting units. The Refining & Marketing and Eastern Gathering & Processing reporting units recorded goodwill impairment charges of $5.52 billion and $1.81 billion, respectively, which fully impaired both reporting units’ historical goodwill balances. These goodwill impairment expenses are primarily driven by the effects of COVID-19, the decline in commodity prices and the slowing of drilling activity which has reduced production growth forecasts from MPLX’s producer customers. For the remaining six reporting units with goodwill, we determined that no significant adjustments to the carrying value of goodwill were necessary. The impairment assessment performed as of March 31, 2020 resulted in the fair value of the reporting units exceeding their carrying value by percentages ranging from approximately 8.5 percent to 270.0 percent. MPLX’s Crude Gathering reporting unit had goodwill totaling $1.1 billion at March 31, 2020 and MPLX’s fair value estimate for this reporting unit exceeded the reporting unit carrying value by 8.5 percent. The operations that make up this reporting unit were acquired by MPLX when it acquired ANDX. We accounted for the October 1, 2018 acquisition of Andeavor (through which we acquired control of ANDX), using the acquisition method of accounting, which required Andeavor assets and liabilities to be recorded at the acquisition date fair value. As such, given the short amount of time from when fair value was established to the date of the impairment test, the amount by which the fair value exceeded the carrying value within this reporting unit is not unexpected. An increase of one percentage point to the discount rate used to estimate the fair value of this reporting unit would not have resulted in goodwill impairment as of March 31, 2020. No other reporting units had fair values exceeding carrying values of less than 20 percent.

Prior to performing our annual impairment assessment as of November 30, 2020, MPC had goodwill totaling approximately $8.26 billion associated with four reporting units. Additionally, a fifth reporting unit, Speedway, is reported in assets held for sale in our consolidated balance sheets and has $4.4 billion of goodwill. Management performed a qualitative assessment for three reporting units as we determined it was more likely than not that the fair values of the reporting units exceeded the carrying values. A quantitative assessment was last performed on these reporting units either on November 30, 2019 or March 31, 2020 and these reporting units’ fair values exceeded carrying values by a range of approximately 90 percent to 270 percent. A quantitative assessment was performed for the remaining two reporting units which resulted in the fair value of the reporting units exceeding their carrying value by percentages ranging from approximately 9 percent to 42 percent. The reporting unit whose fair value exceeded its carrying amount by 9 percent, our Crude Gathering Reporting unit, had goodwill totaling $1.1 billion at December 31, 2020. The excess fair value over carrying value for this reporting unit is consistent with prior assessments. An increase of one percentage point to the discount rate used to estimate the fair value of this reporting unit would not have resulted in goodwill impairment as of November 30, 2020.

Significant assumptions used to estimate the reporting units’ fair value included estimates of future cash flows and market information for comparable assets. If estimates for future cash flows, which are impacted by future margins on products produced or sold, future volumes, and capital requirements, were to decline, the overall reporting units’ fair values would decrease, resulting in potential goodwill impairment charges. Fair value determinations require considerable judgment and are sensitive to changes in underlying

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assumptions and factors. As a result, there can be no assurance that the estimates and assumptions made for purposes of the impairment tests will prove to be an accurate prediction of the future.

Equity Method Investment Impairment Assessment

Equity method investments are assessed for impairment whenever factors indicate an other than temporary loss in value. Factors providing evidence of such a loss include the fair value of an investment that is less than its carrying value, absence of an ability to recover the carrying value or the investee’s inability to generate income sufficient to justify our carrying value. During the first quarter of 2020, we recorded $1.32 billion of equity method investment impairment charges to income from equity method investments in the consolidated statements of income. The impairment charges primarily related to MPLX recording an other than temporary impairment totaling $1.26 billion, of which $1.25 billion related to MarkWest Utica EMG, L.L.C and its investment in Ohio Gathering Company, L.L.C. The fair value of the investments was determined based upon applying the discounted cash flow method, which is an income approach. The discounted cash flow fair value estimate is based on known or knowable information at the interim measurement date. The significant assumptions that were used to develop the estimate of the fair value under the discounted cash flow method include management’s best estimates of the expected future cash flows, including prices and volumes, the weighted average cost of capital and the long-term growth rate. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. As such, the fair value of these equity method investments represents a Level 3 measurement. As a result, there can be no assurance that the estimates and assumptions made for purposes of the impairment test will prove to be an accurate prediction of the future. The impairment was recorded through “Income from equity method investments.” The impairments were largely due to a reduction in forecasted volumes gathered and processed by the systems operated by the joint ventures. At December 31, 2020, we had $5.42 billion of investments in equity method investments recorded on our consolidated balance sheet.

An estimate of the sensitivity to net income resulting from impairment calculations is not practicable, given the numerous assumptions (e.g., pricing, volumes and discount rates) that can materially affect our estimates. That is, unfavorable adjustments to some of the above listed assumptions may be offset by favorable adjustments in other assumptions.

See Item 8. Financial Statements and Supplementary Data – Note 17 for additional information on our equity method investments. See Item 8. Financial Statements and Supplementary Data – Note 19 for additional information on our goodwill and intangibles, including a table summarizing our recorded goodwill by segment.

Acquisitions

In accounting for business combinations, acquired assets, assumed liabilities and contingent consideration are recorded based on estimated fair values as of the date of acquisition. The excess or shortfall of the purchase price when compared to the fair value of the net tangible and identifiable intangible assets acquired, if any, is recorded as goodwill or a bargain purchase gain, respectively. A significant amount of judgment is involved in estimating the individual fair values of property, plant and equipment, intangible assets, contingent consideration and other assets and liabilities. We use all available information to make these fair value determinations and, for certain acquisitions, engage third-party consultants for valuation assistance.

The fair value of assets and liabilities, including contingent consideration, as of the acquisition date are often estimated using a combination of approaches, including the income approach, which requires us to project future cash flows and apply an appropriate discount rate; the cost approach, which requires estimates of replacement costs and depreciation and obsolescence estimates; and the market approach which uses market data and adjusts for entity-specific differences. The estimates used in determining fair values are based on assumptions believed to be reasonable but which are inherently uncertain. Accordingly, actual results may differ materially from the projected results used to determine fair value.

See Item 8. Financial Statements and Supplementary Data – Note 8 for additional information on our acquisitions. See Item 8. Financial Statements and Supplementary Data – Note 20 for additional information on fair value measurements.

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Derivatives

We record all derivative instruments at fair value. Substantially all of our commodity derivatives are cleared through exchanges which provide active trading information for identical derivatives and do not require any assumptions in arriving at fair value. Fair value estimation for all our derivative instruments is discussed in Item 8. Financial Statements and Supplementary Data – Note 20. Additional information about derivatives and their valuation may be found in Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

Variable Interest Entities

We evaluate all legal entities in which we hold an ownership or other pecuniary interest to determine if the entity is a VIE. Our interests in a VIE are referred to as variable interests. Variable interests can be contractual, ownership or other pecuniary interests in an entity that change with changes in the fair value of the VIE’s assets. When we conclude that we hold an interest in a VIE we must determine if we are the entity’s primary beneficiary. A primary beneficiary is deemed to have a controlling financial interest in a VIE. This controlling financial interest is evidenced by both (a) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses that could potentially be significant to the VIE or the right to receive benefits that could potentially be significant to the VIE. We consolidate any VIE when we determine that we are the primary beneficiary. We must disclose the nature of any interests in a VIE that is not consolidated.

Significant judgment is exercised in determining that a legal entity is a VIE and in evaluating our interest in a VIE. We use primarily a qualitative analysis to determine if an entity is a VIE. We evaluate the entity’s need for continuing financial support; the equity holder’s lack of a controlling financial interest; and/or if an equity holder’s voting interests are disproportionate to its obligation to absorb expected losses or receive residual returns. We evaluate our interests in a VIE to determine whether we are the primary beneficiary. We use a primarily qualitative analysis to determine if we are deemed to have a controlling financial interest in the VIE, either on a standalone basis or as part of a related party group. We continually monitor our interests in legal entities for changes in the design or activities of an entity and changes in our interests, including our status as the primary beneficiary to determine if the changes require us to revise our previous conclusions.

Changes in the design or nature of the activities of a VIE, or our involvement with a VIE, may require us to reconsider our conclusions on the entity’s status as a VIE and/or our status as the primary beneficiary. Such reconsideration requires significant judgment and understanding of the organization. This could result in the deconsolidation or consolidation of the affected subsidiary, which would have a significant impact on our financial statements.

Variable Interest Entities are discussed in Item 8. Financial Statements and Supplementary Data – Note 9.

Pension and Other Postretirement Benefit Obligations

Accounting for pension and other postretirement benefit obligations involves numerous assumptions, the most significant of which relate to the following:

•the discount rate for measuring the present value of future plan obligations;

•the expected long-term return on plan assets;

•the rate of future increases in compensation levels;

•health care cost projections; and

•the mortality table used in determining future plan obligations.

We utilize the work of third-party actuaries to assist in the measurement of these obligations. We have selected different discount rates for each of our pension plans and retiree health and welfare based on the projected benefit payment patterns of each individual plan. The selected rates are compared to various similar bond indices for reasonableness. In determining the assumed discount rates, we use our third-party actuaries’ discount rate models. These models calculate an equivalent single discount rate for the projected benefit plan cash flows using yield curves derived from Aa or higher corporate bond yields. The yield curves represent a series of annualized individual spot discount rates from 0.5 to 99 years. The bonds used have an average rating of Aa or higher by a recognized rating agency and generally only non-callable bonds are included. Outlier bonds that have a yield to maturity that deviate significantly from the average yield within each maturity grouping are not included. Each issue is required to have at least $250 million par value outstanding.

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Of the assumptions used to measure the year-end obligations and estimated annual net periodic benefit cost, the discount rate has the most significant effect on the periodic benefit cost reported for the plans. Decreasing the discount rates of 2.55 percent for our pension plans and 2.60 percent for our other postretirement benefit plans by 0.25 percent would increase pension obligations and other postretirement benefit plan obligations by $110 million and $42 million, respectively, and would increase defined benefit pension expense and other postretirement benefit plan expense by $15 million and $3 million, respectively.

The long-term asset rate of return assumption considers the asset mix of the plans (currently targeted at approximately 50 percent equity securities and 50 percent fixed income securities for the primary funded pension plan), past performance and other factors. Certain components of the asset mix are modeled with various assumptions regarding inflation and returns. In addition, our long-term asset rate of return assumption is compared to those of other companies and to historical returns for reasonableness. We used the 6.00 percent long-term rate of return to determine our 2020 defined benefit pension expense. After evaluating activity in the capital markets, along with the current and projected plan investments, we decreased the asset rate of return for our primary plan to 5.75 percent effective for 2021. Decreasing the 5.75 percent asset rate of return assumption by 0.25 percentage points would increase our defined benefit pension expense by $5 million.

Compensation change assumptions are based on historical experience, anticipated future management actions and demographics of the benefit plans.

Health care cost trend assumptions are developed based on historical cost data, the near-term outlook and an assessment of likely long-term trends.

We utilized the 2020 mortality tables from the U.S. Society of Actuaries.

Item 8. Financial Statements and Supplementary Data – Note 26 includes detailed information about the assumptions used to calculate the components of our annual defined benefit pension and other postretirement plan expense, as well as the obligations and accumulated other comprehensive loss reported on the year-end balance sheets.

ACCOUNTING STANDARDS NOT YET ADOPTED

As discussed in Item 8. Financial Statements and Supplementary Data – Note 3 to our audited consolidated financial statements, certain new financial accounting pronouncements will be effective for our financial statements in the future.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

General

We are exposed to market risks related to the volatility of crude oil and refined product prices. We employ various strategies, including the use of commodity derivative instruments, to hedge the risks related to these price fluctuations. We are also exposed to market risks related to changes in interest rates and foreign currency exchange rates. As of December 31, 2020, we did not have any financial derivative instruments to hedge the risks related to interest rate fluctuations; however, we have used them in the past, and we continually monitor the market and our exposure and may enter into these agreements again in the future. We are at risk for changes in fair value of all of our derivative instruments; however, such risk should be mitigated by price or rate changes related to the underlying commodity or financial transaction.

MPC US Equity

MPC · 10-K · period ended 2020-12-31

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

MPC US Equity☆

MPC · 10-K · period ended 2020-12-31

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

MPC US Equity