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Marathon Petroleum Corporation

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Helped by solid operational performance, particularly at its Midstream unit, Marathon Petroleum overcame the challenging market conditions to report surprise Q1 earnings. The downstream operator – boasting of scale advantage, impressive asset quality and extensive midstream/retail network – has handily outperformed the Zacks categorized 'Oil Refining & Marketing' industry over the past 6 months- and 1-year periods. Further, management's positive update on asset dropdowns highlights MPC’s commitment to return more value to shareholders. However, we remain worried by the tepid outlook for refining margins and increase in direct costs associated with the heavy turnaround schedule. As it is, the U.S. refiners are feeling the pinch of higher RFS costs to comply with new cleaner gasoline production rules. These factors form the basis of our cautious stance on MPC.

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