Marathon Petroleum Corp (MPC) stock intrinsic value fair value estimate & owner earnings analysis

Marathon Petroleum is a refiner and midstream operator. Its Refining & Marketing segment runs refineries in the Gulf Coast, Mid-Continent and West Coast regions of the United States with 2,986 thousand barrels per calendar day of crude capacity, and sells refined products wholesale (including exports, spot, branded and retail distribution). Its Midstream segment is MPLX, a publicly held partnership that Marathon consolidates. Marathon acquired Andeavor in 2018 and sold its Speedway retail business on May 14, 2021. How we measure earnings. We start from operating cash flow, remove the swing from working capital, subtract stock compensation as a real cost, and subtract the capital spending needed to keep the business running. The split between maintenance and growth spending uses a formula tied to revenue changes. For a refiner, revenue moves mainly with oil prices, so the formula treated nearly all 2021 capital spending and most of 2022 as growth spending. That flatters those two years, so we did not rely on them to set the earnings level. Depreciation and amortization ($3.25 billion in 2025) is already added back in operating cash flow. We checked 2025 by rebuilding cash flow from net income ($5.88 billion), depreciation and other non-cash items, and it reconciled. One adjustment matters a great deal. Consolidated cash flow includes all of MPLX, but outside MPLX unitholders own part of it. Marathon paid $1.51 billion to noncontrolling interests in 2025 ($1.38 billion in 2024, $1.28 billion in 2023). We deduct those payments, because that cash does not belong to Marathon shareholders. On that basis, owner earnings attributable to Marathon shareholders were about $3.56 billion in 2025 (consolidated $5.08 billion less $1.51 billion), versus about $4.22 billion in 2024. That is a decline of roughly 15 percent, or about 6 percent per share because buybacks cut the diluted share count from 341 million to 306 million. We do not credit the benefit of future buybacks. The earnings level. Refining earnings swing widely. Attributable owner earnings by year, in billions, were roughly: 2019 $3.3, 2020 negative $1.9 (Marathon reported a net loss of $9.8 billion attributable to the company that year), 2021 $2.0 (flattered by the formula issue above), 2022 $15.4 (also flattered), 2023 $10.4, 2024 $4.2 and 2025 $3.6. We used 2019 through 2025 as one full cycle and took the median, which is the 2025 figure of about $3.56 billion, or $11.64 per share on 306 million diluted shares. The 2022 and 2023 peak years do not set the level. No adjustment was made for the 2025 acquisitions described below, because their contribution is not separable in the filings and only about four months (Northwind) or six months (BANGL) of it fall in 2025. Base case, about $128 per share. Owner earnings stay at about $3.56 billion a year for 10 years, then decline in a straight line to zero over the following 20 years. We credit no growth. The 2025 level is the anchor itself, so year one starts at the 2025 level rather than assuming a rebound from the 15 percent decline. The evidence that earnings persist is structural: the refineries and pipelines exist, and the cost of keeping them running is already deducted. We fade rather than extend indefinitely because we can name no evidence that today's refining earnings continue beyond a few decades. Value is measured on cash flow to shareholders at a flat 6 percent discount rate. We do not subtract debt or add cash, because the cash flow is already after interest; where debt hurts, it is charged in the bear case. Bear case, about $61 per share. Owner earnings fall to about $2.0 billion a year, well below the 2024 and 2025 levels but above the 2019 to 2021 average of roughly $1.1 billion. This is a case in which weak refining conditions like those of 2020 and 2021 return in part. It holds for 10 years and then declines to zero over the following 10 years. The case is also exposed to debt: Marathon borrowed $11.2 billion of long-term debt in 2025, and MPLX used note proceeds to fund the Northwind acquisition and expansion projects. Bull case, about $198 per share. Owner earnings hold at about $5.5 billion a year for 10 years and then decline to zero over the following 20 years. This sits between the 2024 attributable level of $4.2 billion and the 2022 to 2024 median of $10.4 billion. The named lever is MPLX's 2025 purchases of Northwind Midstream ($2.4 billion in cash, closed August 29, 2025, a sour gas gathering and treating business in Lea County, New Mexico) and the remaining 55 percent of BANGL ($703 million, July 1, 2025), which were paid for but contributed only part of 2025. Growth beyond these purchases is left out, as it would rely on new projects or higher margins. What we tested. We challenged the anchor with the deduction for MPLX's outside owners. Without it, the median of the unadjusted per-share series would be about $16.41, roughly 40 percent higher, so the deduction is the single largest judgement in this analysis. We used the distributions actually paid as the measure of outside owners' share. What would make this wrong. Sustained refining margins above the 2024 to 2025 level would make even the bull case too low; a return to 2020 conditions would make the bear case too high. Earnings from the 2025 acquisitions, and any change in how much of MPLX's cash goes to outside owners, are not fully reflected. Margin-of-safety price. The margin-of-safety price is about $75 per share. That is a discount of about 41 percent to our base value, reflecting the sharp swings in refining earnings, and about 20 percent above the bear case.