Marathon Petroleum poised to become Ohio's largest company

Findlay-based oil company could unseat Dublin-based Cardinal Health as state’s largest company in terms of revenue.
TNS Regional News
Jul 14, 2014

 

Marathon Petroleum Corp. is poised to become Ohio’s largest company, with the help of its Southwest Ohio-based subsidiary, Speedway.

As early as 2015, the Findlay-based oil company could unseat Dublin-based Cardinal Health as the state’s largest company in terms of revenue, ending the pharmaceutical and medical supply company’s decade-long run atop the rankings.

Marathon Petroleum, the fourth-largest oil refiner in the United States and owner of pipeline capacity in more than 20 states, posted $100.2 billion in sales last year, ranking behind only Cardinal Health who pulled in $101.1 billion during its fiscal year. Cincinnati-based Kroger ranked third with $98.4 billion in sales in 2013.

Prior to last year, Cardinal Health had a $25 billion sales edge over Marathon. That gap closed significantly in 2013, with Marathon’s sales jumping about $18 billion and Cardinal Health falling nearly $7 billion.

Marathon’s sales spike was largely due to the $2.4 billion acquisition of the Galveston Bay refinery in February 2013. The refinery produces more than 475,000 barrels per day, which brought the company’s total daily barrel product to 1.7 million.

Cardinal Health’s sales will fall further in 2014 after losing a $22 billion-a-year contract with Walgreen Co. Meanwhile, Kroger’s sales should be boosted from its $2.5 billion Harris Teeter acquisition.

“We expect continued growth in U.S. oil production and growth from Marathon Petroleum,” said Jeff Dietert, an analyst who covers Marathon at Simmons & Company International.

Dietert added that higher fuel prices would also boost the company’s sales.

So where does Enon-based Speedway fit into the picture?

The convenience store chain will nearly double its size in the next few years as a result of the $2.8 billion deal announced in May to acquire Hess Retail Holdings — a gas station chain along the East Coast.

Speedway currently has 1,478 stores, but once the deal is completed later this year it will have around 2,700 stores.

The deal will give Speedway a presence in states ranging from New Hampshire to Florida.

Patrick DeHann, an analyst for GasBuddy.com, said that Speedway uses aggressive pricing strategies, causing volatile gas prices in areas of the Midwest, including the Cincinnati and Dayton regions.

DeHaan said its unknown if Speedway will take those pricing tactics to the East Coast.

“Speedway is expanding its footprint, it already has a big footprint in the Midwest and now

will be a major player on the East Coast,” Dietert said.

He said Marathon will have the ability to transport more gas from its Texas refineries to the East Coast as a result of the Hess deal, which includes capacity in the Colonial Pipeline.

Angelia Graves, Marathon spokesperson, says that following the acquisition, Speedway will have $27.6 billion in annual revenue. That estimated revenue is a large jump for Speedway, which reported $14.5 billion in sales last year.

Marathon did not provide a 2014 revenue forecast for its overall operations.

Dietert is projecting that Marathon’s earnings per share will jump from $6.67 last year to $8 in 2014 and to $10 per share in 2015. His firm does not project revenue.

Marathon’s rise to the top of Ohio’s company sales ranks has been quick, considering it became an independent company just two years ago.

In 2011 Marathon Petroleum was spun off from is parent company, Houston-based Marathon Oil.

Marathon Oil kept the upstream business, including exploration and oil production, while Marathon Petroleum took the downstream business, including refining, pipeline transportation and Marathon and Speedway stores.

Marathon is also a big employer in the state, with more than 10,000 employees, including 800 at Speedway’s headquarters in Enon.

Despite the possibility of becoming Ohio’s largest company in terms of revenue, Marathon’s profit of $2.1 billion last year was significantly below that of the state’s most profitable company: Procter and Gamble.

The Cincinnati-based consumer product titan’s $11.3 billion profit was more than Cardinal Health, Kroger and Marathon’s earnings combined.

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By Lance Lambert - Journal-News, Hamilton, Ohio (MCT)

©2014 the Journal-News (Hamilton, Ohio)

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