Marathon can increase light crude processing

Marathon Petroleum Corp can run up to 75 percent light-sweet crude oil across its six refineries if the price is right, executives told analysts on Tuesday.

"We constantly get questions about how much sweet crude we can run at a refinery or in our system. The answer is we can run a lot of light sweet crude," Mike Palmer, senior vice president of supply, distribution and planning, said during the company's second-quarter earnings conference call.

A "rough ballpark" figure would be 75 percent of the company's crude slate could be light sweet, he said.

Light sweet crude production is ramping up in the United States thanks to increased shale oil output, giving refineries a cheap alternative to more expensive global crudes.

Palmer said Marathon, with four refineries in the Midwest and two on the Gulf Coast -- including its 490,000 barrels-per-day Garyville, Louisiana plant -- could make adjustments to increase how much light sweet they process.

"At Garyville, we're running a lot more light sweet crude than we forecast in the past," he said.

The Garyville refinery underwent a $3.9 billion expansion that was finished in 2010.

Gary Peiffer, executive vice president of corporate planning and investor and government relations, told Reuters in an interview on Tuesday that Marathon's current crude slate is a 50/50 mixture of sweet and sour crudes.

He said U.S. West Texas Intermediate-priced sweet crude would have to hit a "fairly steep discount" to London's Brent to prompt Marathon to shift that slate to 75/25 percent -- steeper than the current $15 a barrel, down from a record $28.

That discount has been a profit boon for Midwest refineries that can capitalize on cut-price largely landlocked crude as U.S. shale and light sweet crude oil output have ramped up, as they spend less for crude than peers in other regions.

But upping Marathon's sweet crude slate requires a wider discount than what has been seen because the company would have to back out production of other products, such as asphalt, to make room for it, Peiffer said

Peiffer also said that Marathon increased its diesel and gasoline exports to 110,000 bpd during the second quarter, up from about 85,000 bpd in the previous quarter. But that's about as high as the company can go at this point, he said.

"All the stars aligned correctly for us," he said. "We think that is probably our reasonable maximum until our engineers make technological improvements."

The company on Tuesday reported higher second-quarter earnings, beating Wall Street forecasts, as profit margins climbed at its refineries near Chicago and on the Gulf Coast.

Marathon Petroleum, which was spun off from Marathon Oil Corp a year ago, posted a profit of $814 million, or $2.38 per share, compared with $802 million or $2.24 per share in the same period a year earlier.

Excluding one-time items, earnings per share were $2.53, slightly above the $2.51 per share that analysts had on average forecast, according to Thomson Reuters I/B/E/S.

Revenues fell to $20.3 billion from $20.8 billion a year before.

Marathon's refining and marketing gross margin rose to $11.13 per barrel in the second quarter from $10.78 in the second quarter of 2011.

Marathon Petroleum's shares have rallied nearly 43 percent so far this year through Monday's close and were up 1.4 percent in late Tuesday morning trading to $48.15 a share.