Geri Ewing - Gary R. Heminger - Chief Executive Officer, President, Director and Member of Executive Committee Timothy T. Griffith - Chief Financial Officer, Senior Vice President and Treasurer C. Michael Palmer - Senior Vice President of Supply, Distribution & Planning Richard D. Bedell - Senior Vice President of Refining Donald C. Templin - Executive Vice President of Supply, Transportation and Marketing Pamela K. M. Beall - Senior Vice President of Corporate Planning, Government & Public Affairs Anthony R. Kenney - President of Speedway LLC

Evan Calio - Morgan Stanley, Research Division Edward Westlake - Crédit Suisse AG, Research Division Neil Mehta - Goldman Sachs Group Inc., Research Division Paul Y. Cheng - Barclays Capital, Research Division Chi Chow - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division Paul B. Sankey - Wolfe Research, LLC Douglas Terreson - Evercore ISI, Research Division Phil M. Gresh - JP Morgan Chase & Co, Research Division Brad Heffern - RBC Capital Markets, LLC, Research Division Douglas George Blyth Leggate - BofA Merrill Lynch, Research Division Roger D. Read - Wells Fargo Securities, LLC, Research Division

Welcome to the Marathon Petroleum First Quarter 2015 Earnings Conference Call. My name is Cynthia, and I will be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Geri Ewing. Ms. Ewing, you may begin.

Thank you, Cynthia. Welcome to Marathon Petroleum Corporation's First Quarter 2015 Earnings Webcast and Conference Call. The synchronized slides that accompany this call can be found on our website at marathonpetroleum.com under the Investor Center tab. On the call today are Gary Heminger, President and CEO; Don Templin, Executive Vice President of Supply, Transportation and Marketing; Tim Griffith, Senior Vice President and Chief Financial Officer; Mike Palmer, Senior Vice President of Supply, Distribution and Planning; Rich Bedell, Senior Vice President of Refining; Pam Beall, Senior Vice President of Corporate Planning, Government and Public Affairs; and Tony Kenney, President of Speedway. We invite you to read the safe harbor statement on Slide 2. It's a reminder that we will be making forward-looking statements during the presentation and during the question-and-answer session. These results may differ materially from what we expect today. Factors that could cause the results to differ are included here as well as in our filings with the SEC. Now we turn the call over to Gary Heminger for opening remarks and highlights.

Thank you, Geri, and good morning to everyone. I appreciate you joining our call. We are pleased to report record first quarter results with $891 million of earnings. The outstanding results demonstrate our ability to take full advantage of favorable market conditions. MPC's extensive logistics and retail networks give us tremendous flexibility in feedstock acquisition, and the ability to optimize refining operations and product distribution throughout our marketing footprint. MPC's integrated refining system made a significant contribution to the quarter's earnings, with Refining & Marketing segment generating $1.3 billion of income during the quarter. Our refineries operated very well, and we were able to capture the strong Gulf Coast and Midwest crack spreads. First quarter results also benefited from lower maintenance activity relative to the first quarter of last year. I am particularly proud of dedicated employees at both our Catlettsburg and Galveston Bay refineries for operating our facilities safely, efficiently and without production impact during the recent work stoppage, which has ended at Catlettsburg but continues at Galveston Bay. We look forward to a successful resolution at our Galveston Bay complex in the near term. Speedway, MPC's retail segment, also performed very well during the quarter. Speedway's earnings, independent of the contribution from newly acquired retail operations, resulted in a record first quarter. Speedway continues to make excellent progress transitioning its new retail locations to the Speedway brand. As of today, we have converted more than 400 stores, including 260 completed, during the first quarter. The comprehensive transition for each store not only includes the changing of signs and canopies, but it's a complete system changeover, which includes the back office, point-of-sale and inventory control systems, as well as integration of the Speedy Rewards Loyalty Program. With the majority of the Florida stores now converted, crews have been focused…

Thanks, Gary. Slide 4 provides earnings both on an absolute and per-share basis. As you can see in the green bars in the chart, our financial performance for the first quarter is quite strong. MPC had earnings of $891 million or $3.24 per diluted share during the first quarter of '15 compared to $199 million or $0.67 per diluted share in last year's first quarter. The chart on Slide 5 shows, by segment, the change in earnings from the first quarter of last year. The primary drivers for the change was the $954 million increase in Refining & Marketing and the $110 million increase in Speedway income, partially offset by higher income taxes associated with those higher earnings. Turning to Slide 6. Refining & Marketing segment income from operations was $1.3 billion in the first quarter of 2015 compared to $362 million in the same quarter last year. The increase was primarily due to a higher crack spreads in the U.S. Gulf Coast and Chicago regions as well as lower turnaround and other direct operating costs in the business. The higher blended crack spread had a positive impact on earnings of approximately $449 million. The blended crack spread was almost $2 per barrel higher at $9.69 per barrel in the first quarter compared to $7.85 per barrel in the first quarter of 2014. The $503 million year-over-year benefit in direct operating cost relate primarily to the substantially lower turnaround activity in the first quarter versus the first quarter last year. Turnaround and major maintenance costs decreased to $0.79 per barrel in the first quarter from $3.15 per barrel in the same period in 2014. The lower turnaround activity also benefited throughputs, which were 202,000 barrels per day higher than the same period last year. During the quarter, we recognized a…

Thanks, Tim. [Operator Instructions] With that, we will now open the call to questions.

[Operator Instructions] And our first question comes from Evan Calio from Morgan Stanley.

My first question. Gary, could you elaborate on your opening comments regarding the favorable market conditions that you referenced? And as there's always investor apprehension around early summer margin compression? Do you see any industry elements that reduce margin volatility, and more particularly, MPC's ability to perform better through those periods of seasonal weakness given willingness return to cash to shareholders and generate additional proceeds via drop-downs?

Sure. And Evan, if you -- first of all, on the market conditions. Yes, we had a very strong first quarter. There are turnarounds in the Gulf Coast as well in the Midwest. I think a little bit earlier in the Midwest than we have seen historically helped us. And as we've been able to illustrate, and as we've talked about with investors, we do very well when you have volatility in the marketplace and being able to capture margins because of the logistics systems that we have. However, in this first quarter when you compare against our prior quarters, we didn't have that big other net adjustment that -- I shouldn't say, adjustment but that other revenue gross margin that we have illustrated in the past because it was more of a stable quarter from crude prices and -- but there were some upticks in different wholesale margins. Going forward, though, to your question, as we look here in the second quarter, Mike Palmer can get into this in more detail than I. The -- we continue to have a very robust export market. And I think the export market is going to continue to give, not just Marathon, but the industry, a solid performance going forward because of those export markets. We are being very careful to watch inventories across the regions that we operate to keep an eye on inventories because certainly, refiners want to run full out with the crack spreads that we have seen to date. But I think the ability of us being able to reach the export market and capture the margins both on the crack spread. And the differentials that we're seeing in the marketplace are going to help us. Mike, do you want to add any color to the exports?

Gary, I think you addressed it pretty well. As you said, I think that the export market for us continues to be as good as it has been. We continue to grow volumes, and we don't expect that to change. So I think looking at the second quarter, the product inventories have been pretty well behaved relative to the crude inventories that have grown a lot. So right now, the second quarter looks pretty good.

Great. That's great. The domestic market looks pretty strong as well. Let me -- my second question. Can you give us an update on BP Texas City integration now it's operating? I mean, it appears you're capturing a higher percentage of your benchmark now for several quarters, and I was just wondering if you're seeing upside to your synergy since the acquisition and integration. Any comments there?

Rich, would you handle that, please?

Sure. I mean, we were in the middle of some of the integration projects of tying the 2 plants together. In fact, pipe rack is getting ready to go across between the 2 plants. But we have also been able to capture some synergies on crude and storage and utilizing the gas, oils and the cat crackers. So those items have all come to fruition. I don't know if, Mike -- if you have any other comments about -- shaking his head no. So -- but yes, we've been very pleased with the performance of Galveston Bay.

And the other thing that I would add to that, Evan, is in my comments, I talked about $830 million of CapEx with $650 million of EBITDA. Part of that comes from Galveston Bay. And if you recall, in the first 2 years we operated in Galveston Bay, we really were going in and doing turnarounds, trying to get the plant operationally headed towards our method of operating and some of our operational excellence metrics. So we're just now starting into the process of being able to capture some of these low-hanging fruits that we think have outstanding returns. And that's why I stated $830 million of CapEx was $650 million of EBITDA per year. Part of that is coming from Galveston Bay. And as you can recognize, those are very high returns.

And our next question comes from Ed Westlake with Crédit Suisse. Edward Westlake - Crédit Suisse AG, Research Division: And also good to see the operating cost performance coming through as you run the operations more fully this year. 2 questions. You gave us the Cornerstone update that looks like it's moving ahead. Any updates on Sandpiper-SAX that you could share, and obviously, the proposal to reverse Capline?

Mike, do you want to take Sandpiper-SAX, and I'll handle Capline.

Yes. Okay, Gary, that sounds fine. Yes, Ed. With regard to Sandpiper and SAX, it looks very positive for us. SAX, I think, we've cleared all the permitting hurdles that we've had. Construction is going to begin this summer. We would expect to see SAX operating sometime in the fourth quarter. With regard to Sandpiper, I think as we've talked about, we did have some permitting delays in Minnesota, but in April, the administrative law judge did basically rule in favor of the certificate of need. He made a recommendation to the Minnesota PUC that the project go forward and the certificate of need be granted. So that was very, very positive. And we're waiting on that ruling that will take place within the next couple of months, and then it will go into a routing hearing as well, but things look very positive to-date. Edward Westlake - Crédit Suisse AG, Research Division: Good to hear.

And Ed, on Capline, really no news from when we spoke last. As I've stated before, technically, it's not very complex to reverse a pipeline like this. It just takes time, and you have to have everything in order, so that you can continue to move barrels from the South to the North, if you were to reverse this. But as I've said -- as I've stated before, and I gave a speech at the CERA conference last week, where we had a few questions on this as well. We're still in the throes of discussing with the other owners the interest in doing so, and it's going to continue to take some time, I believe, to get all of the owners on the same page that this appears to be the right thing to do.

And our next question comes from Neil Mehta from Goldman Sachs.

So the first question relates to the retail business. Clearly, the integration is going very well with Speedway. And just, Gary, I want to get your thoughts on potential monetization of those retail assets. And are there ways or other structures in which you can get the full value of those assets that might not be fully reflective of the [indiscernible] right now?

Well, clearly, Neil, there are different structures and avenues that you can take. We have looked at those over time, and they do not make sense to us at this time to consider other types of structures. First and foremost is to get the what we now call Speedway East fully transitioned, converted over into the type of operation that Tony runs, which I'm very pleased with how the progress that they're making, both in getting the stores converted, and secondly, the inside sales results bump that we're starting to see. So those are the key things. And we started an MLP with -- back in 2012, and that has been very fruitful for starting that, and we've talked about the fuels distribution. And in order to be able to do a fuel's distribution piece inside our MLP is we're counting on these volumes to be there. So I would just say that we remain flexible, we have many options that we could play down the road if we wanted to, and we'll just continue to analyze.

All right, Gary. And then second was more of a macro question here. LLS brand has looked tight here. Just from -- you have a unique vantage point on this and potential bottlenecks between Houston and St. James. Curious on your thoughts in terms of the dynamics there and what's needed to get the spread to be [indiscernible]?

Certainly, a very timely question, and let me have Mike address this.

Okay, Neil. Yes, the LLS brand differentials of late have been near parity back and forth. I think currently, we're at about $1 spread with LL under Brent. If you look at the forward market, the forward market suggests that it ought to be in the $3 kind of range, and I think that's plausible. I do think that we still have some logistical constraints moving all of the light sweet down through Houston and of course, into the St. James area. And companies are working on that continually, but there is also, I think, a misconception in the market that we have this large overhang [Audio Gap] somewhere of this light sweet shale crude. And I guess, what I would say to you is, I don't think that's really the case. I think that -- first of all, I think the refiners have been doing a very good job of keeping up with the light sweet production that we've got in this country. We're running more than we've run in the past. We're not saturated within our Gulf Coast plants on the amount of light sweet that we could run. And I also think that the producers have done a better job of clearing the market than maybe, what, many people in the trade press understand. There's a lot of this light sweet crude that is going on foreign flagships to Canada. The number is in excess of 400,000 barrels a day. We've got another 50,000 barrels a day plus that goes on Jones Act vessels into the East Coast. That number fluctuates depending upon what the ARB is. But in addition to that, we've got another roughly 50,000 barrels a day of condensate exports that are occurring under the BIS rulings. So I would argue that the producers have done a pretty good job of clearing that market. I do think that as inventories continue to build mid-continent and more of those barrels maybe go to the South, you should see the differentials widen. And then again, that $3 level makes sense to us.

And our next question comes from Paul Cheng with Barclays.

Gary, one of your competitors, when they pre-announce a negative earnings for the first quarter, one of the reasons cited is that, given the strike, that the one of their recently bought facility. In this case, that will be Carson because they didn't have enough people in the headquarter that have worked in that facility. And so as a result even though they've been able to run it, that there's a huge degradation or efficiency loss. Wondering that, in your case, that in Galveston Bay, did you experienced any of those kind of yield degradations or efficiency loss? In other words, that when the strike is over, should we assume we could have another improvement in the operating performance?

Yes, Paul. First of all, I again want to recognize our team, both in Catlettsburg and Galveston Bay, but you're specifically asking about Galveston Bay here. And a gentleman who I went down to the plant, Rich and I went together, went down and visited the plant just a few weeks ago. And I was really impressed by of our management and the ship foremen and the superintendents who were running the facility. This is something that we train. We train diligently to be prepared. And from day 1 of taking over this refinery, this was our plan to make sure we always had a trained workforce, no matter what the event that could come in and help out. So I would say, and I will let Rich talk about it in more detail, but we have set new records on a number of process units, and we have been able to get a backlog of maintenance completed and doing it all in a very, very safe manner. And Rich, do you want to go into some of the details?

Yes, well, I think we run both Catlettsburg and Galveston Bay, basically, ran them full out through all this time period. We have a lot of people in the refining organization within the company. We've got waiting lists of people to go in if need be. So we're well-equipped to staff Galveston Bay for as long as it takes. And like Gary said, we've run -- we set production rates. We've lowered our -- I mean, our costs are down, our rates are up. So it's been doing a great job by the people at Galveston Bay and Catlettsburg.

My second question. Gary, do you have any insight in terms of the U.S. economy when you're looking -- even though today, you no longer do as much of the diesel sales, but when you're looking at your retail network, any insight you can provide, and also whether you would be able to give us what is the RIN cost to you in the first quarter?

Okay. I'll let Don or Mike handle the RIN cost. As far as the U.S. economy, we're continuing to see strong diesel demand across all the pads, kind of 1.3% to 1.5% increase in distillate demand, which I think is really a precursor to how the economy continues to move. And these are -- I think these are good increases based on last year's substantial increase as well. So the thing that is a bit of, I wouldn't say concerning. But as we tried to reconcile the numbers that come out from a number of the government agencies and other groups who put out numbers, I think the gasoline demand, I don't believe, and it's just not Marathon's numbers -- look at what other competitors are saying in their earnings calls and talking to a number of our jobbers as well. The numbers are coming out from the EIA, on gasoline demand did not quite sync with what we really believe the gasoline demand is looking like. I think they are a bit overstated. But when I look back then at Tony's merchandise sales and customers in the store, we certainly are capturing increases in merchandise sales across his entire chain, which tells us that the customers are there. And I think especially here in the first quarter, we had so many areas that were hampered by very challenging storms, both Midwest, Northeast. And then in the Southeast mid-first quarter, we had a number of stores that were closed because of weather. So I think as we get out into the second quarter, we're going to have a much better barometer on how gasoline demand is going herein. Starting off in April's business, we're up a little bit on gasoline demand so far in the month. So I'll turn it over then to Don to talk about the RINs.

Sure. RIN expense for the first quarter was $41 million, Paul.

And our next question comes from Chi Chow with Tudor, Pickering, Holt. Chi Chow - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: Got a couple of quick questions on the marine business. Can you give us any sort of annual EBITDA estimates for those assets? Do you -- is the business all MPC-related? Or do you have third-party business flowing through those assets? And any comments on the tax basis on the assets?

Okay, Don?

Sure, Chi. The EBITDA, annual EBITDA, is about $115 million, and that is all related to MPC activities. So essentially, we also charter out, but those assets -- those specific assets would be dedicated entirely to moving MPC volumes. So that's kind of the EBITDA perspective. What was the last question, I'm sorry, Chi? Chi Chow - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: The tax basis.

The tax basis, yes. They have a relatively low tax basis, and that's not inconsistent with some of the other assets that we have, that would ultimately be dropped into MPLX. But yes, relatively low tax basis. Chi Chow - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: But obviously, still tax efficient on the MPC level. Okay. So another question on MPLX, and I don't know if I'm doing my math right here. But I believe your guidance on EBITDA run rate coming at the tail end of '15 is $450 million. Is that correct on annualized run rate?

That's correct. Chi Chow - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: And so you also have a 29% distribution growth target at least for this year. It seems like there's a mismatch on my numbers, and it suggests that you may end up with a coverage ratio that's well above industry averages. Am I doing the math right there? And is that the intention?

Yes. Chi, this is Tim. I don't think your math is flawed. Ultimately, the -- our interest was to grow the partnership pretty substantially so that it had a base of earnings and the size and scale that would allow to pursue projects on its own. So it is possible that in the first couple of years, the coverage will run a little higher than our 1.1 target over that time period. Chi Chow - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: And is there some thoughts on the pace of bringing that coverage ratio down to really drive the -- what I'm looking at on the MPC side is the GP distributions, the IDRs?

Well, there will be a natural migration back to about 1.1 over the course of the next several years. But again, over these first couple, you could well see a coverage ratio that's well above. So for how we have dropped assets thus far and our anticipated growth for MPLX, we'll see an earnings growth that probably will outpace the distribution growth early on and then those will sort of converge over time. Chi Chow - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: Okay. Okay, great. And maybe just one final question. Any update on the Garyville hydrocracker decision?

We still would -- we pretty much have finished all the front-end engineering, and we won't look at this again until the fourth quarter. We are working on the budgets for next year and the years following. And Chi, as you can recognize it, it's all -- is going to be revolve around where we see the overall commodity price going over the next number of years.

And our next question comes from Paul Sankey with Wolfe Research.

Could we just go back to your direct operating cost for a little bit more analysis, if that's okay? On Slide 6, you show that year-over-year, it's about half of the uplift that you got from refining earnings. I just was wondering, can you break out a little bit how much of that was just the volume increase that we saw in that period and whether or not you can quantify some of the other issues? And I'm thinking, I guess, of fuel cost as helping against any other impacts there may have been.

Tim, you want to handle that?

Sure. Paul, the -- I think the biggest piece of that $503 million that we show in direct operating costs were just, frankly, the absence of a lot of the turnaround costs that were recorded in the first quarter of last year on the year-over-year walk. The volume impact on that, we'll have to come back to you on specifically, but that -- by far, the biggest driver there was just the absence of turnaround activity relative to first quarter last year.

Yes, I get that. And so obviously, there's a double cost that you were running less with the additional cost, and that would be the vast majority of the uplift. I was wondering, is there anything to add on? I guess, particularly, your sensitivity to natural gas prices, which I guess didn't change a whole lot, but also where the lower oil prices also would boost your -- or rather reduce your operating expenses?

Paul, the operating energy costs were down in Q5 -- or Q1 '15 about $80 million.

Okay. And then just totally separately the buyback, I guess, it's our forecast and it's our miss, but it was behind what we were thinking. Could you just talk a bit about how you're looking at the attractiveness of buying in more stock, the pace at which you're doing that and whether or not it's a competition against, for example, higher CapEx?

Sure, Paul. I think our primary drivers around how we're viewing that is, again, how we're situated on a core liquidity perspective as sort of our first prime mover. Core liquidity, in the environment of lower prices, that actually declines to some extent, but again, we'll continue to manage the cash position of the corporation in accordance with the needs. The slightly slower pace in first quarter is not reflective of any change in approach or belief that the shares were appropriately valued. Or otherwise, we still think the shares are substantially undervalued. And again, we'll continue to assess our capital and cash situation as we go and make adjustments. Share repurchase certainly affords us the best lever to make those adjustments, and we'll continue to use it as such.

I think your debt came down a bit in the quarter, but I assume that you're not -- you're very much in the range of where you want the debt ratios?

Yes. I mean, the debt was, at a static level, unchanged, but with the role of LTM EBITDA, we actually had more earnings. So the debt-to-EBITDA decline really as a result of earnings growth as opposed to debt reduction. But yes, Paul, we're very much in the comfort zone with regard to where we think we need to be on maintaining an investment-grade profile, and we'll continue to manage it that way.

And our next question comes from Doug Terreson with Evercore ISI.

Gary, just to clarify your comments on Galveston Bay, it sounds like not only has the work stoppage not led to a reduction in output, but that production and efficiency have been pretty resilient and may have increased during the work stoppage. Is that the correct way to think about that situation?

Yes, it is, Doug.

Okay. And then also, global oil demand growth has been surprisingly strong this year, and you made some comments a few minutes ago about export markets. And I just wanted to see if we can get some more color on the regional demand trends that the company is seeing and whether or not there is any highlights or drivers in the improvement that we're seeing that you may -- that you think may be at work outside of the United States.

Yes. In fact, if you look at some of the announcements yesterday about how Saudi Aramco is going to really increase their supply efforts, and I think try to increase the market share into the Asian market, namely China. There are big questions about the Yanbu refinery coming up in Jubail soon to be operating, if that's going to affect the U.S. market. I was over there just a few weeks ago, and it's clear to me that the output from those refineries is going to head east. They have the best economics because they have the best transportation costs to go east with that product, and I think that's directionally where it is expected to go. And even though China has global markets, when you look at the global markets and specifically at China, that demand within their economy has fallen a bit. It's still up year-on-year, and I would -- we would love to have those types of increases here in the U.S. of continued to -- how they are achieving growth in their markets. So if you go back to the crude side though, and I've said this on the call we had for the fourth quarter and in several energy conferences, you still need and I think, investors need to look at where the crude is moving in the world. We're continuing to see very strong markets for imports of crude into the U.S. You're seeing more of the medium sours coming in. And those who have the equipment to be able to run medium sour, you look at our numbers for this quarter, we ran about 56% medium sour. That's up from where we've been. And the reason being, it's every day we're buying the best barrel in the marketplace, and medium sours certainly have…

And our next question comes from Phil Gresh with JPMorgan. Phil M. Gresh - JP Morgan Chase & Co, Research Division: First question is just on the midstream side. Given your desire to be a diversified MLP in the long term, how do you think about the opportunity for M&A at this stage? And if we think about the potential for slowing crude oil production growth, could that accelerate the M&A in this space or just -- how are you thinking about this over the next couple of years?

All right. Pam, you want to take that?

Sure, happy to do that. Well, I guess, first, I would say, when we saw the crude prices fall, we thought that, that could potentially put more midstream assets on the market that may be captive to some producers. We saw -- we've seen a little bit of that, but not a lot. And I think what we have seen is despite the fact that crude commodity prices have been volatile and crude prices have declined, there's a lot of capital out there to help support producers and help support midstream companies that may be more exposed to commodity prices. So I would -- probably a few exceptions, I wouldn't say that we are seeing any distressed selling in the marketplace today from that standpoint, but we continue to evaluate opportunities, M&A, acquisitions, opportunities, in addition to the drop-downs from MPC. We're looking across the spectrum, as I've said before. Those opportunities that would benefit both MPC and MPLX will always rise to the top of our interest list, but there certainly are a lot of different avenues that we could pursue to grow MPLX through acquisition, and we've got a team of people that are very actively evaluating a lot of opportunities. Phil M. Gresh - JP Morgan Chase & Co, Research Division: And as you evaluate the M&A opportunities, would you likely use MPC as a source of funding? Or do you feel like a MPLX is large enough at this point to do sizable M&A as you think about the tradeoff between drops and M&A?

Well, I think each opportunity really will be fact and circumstance-based. It's hard to make that general comment. Of course, one of the reasons we are committed to accelerating the growth of MPLX is to position it so that it could take on larger opportunities directly.

That's what's good, Phil, is that we have the optionalities and the flexibility to go either way. We aren't beholden to -- like some who are not -- maybe do not have the balance sheet to be able to do certain acquisitions. We have that flexibility. If you go back to the color I just answered on Doug's question, if there is -- if we look at wider spreads going forward into the second quarter, there could be pressure as we go out into the second, third quarter. We'll see where our crude prices go, but there could be some further pressure that may open up the M&A activity a little more.

A lot of private equity out there chasing opportunities. Phil M. Gresh - JP Morgan Chase & Co, Research Division: Understood. On the retail side, with respect to the synergy capture it has, Gary, maybe, you could just talk a little bit about where you stand today and what you think the biggest incremental source of upside could be as you look ahead with where you're at in the process?

Sure, Phil. And we have Tony on the line who's operating these stores every day. And so let me have Tony handle that.

Thanks, Gary. As commented earlier, we're very pleased with the progress we're making on the conversions to the Speedway brand. And along with that includes the implementation of our merchandise programs inside the stores, which is a real source of synergies down the road. To date in 2015, we feel very good on the progress that we're making. We're going through the best practices of both companies that we committed to. And that is in and of itself is a good source of the synergies that we're experiencing, primarily, right now on the expense side of the business. So as we continue to go forward, we're going to start to realize some marketing efficiencies as well. So on a full year basis, in 2015, we're right on plan with where we expect to be on the synergy capture in 2015.

And our next question comes from Brad Heffern with RBC Capital Markets.

Sort of staying right there, I was wondering if you could give an update for the Hess stores that have been converted. Has there been any noticeable loss of customers? Or going the other way, have you been able to pull in more customers from other areas in Florida?

Yes, I'll take that. The benefit that we have with the conversion is our loyalty program. So -- and these are the markets, Florida, in particular, as we move into the Northeast. It really not had a strong presence on a retail loyalty program. So what we're getting is a lot of good interest in customers signing up for our loyalty program, which is probably the best benchmark we have right now in terms of how we're attracting new customers. There's a lot of dynamics in play. Retail price, as the gasoline prices come down, I think that's driving traffic as well. So we're very careful on how we're analyzing that, and we've only got a little over -- we did the deal, it's 7 months old, and the conversions in Florida are probably 3 to 5 months old. So we have limited data at this point, but we're getting some very, very good feedback from our customers in terms of the loyalty and the offers that we have once we convert to the Speedway brand.

Okay, great. And then thinking about SAX, I was wondering if you could go through maybe the ways in which SAX is going to change the crude sourcing in the Midwest, or is it really more providing optionality?

Mike?

Yes, Gary. Yes, Brad, it's going to have a significant impact for us. As you know, that pipeline runs from Enbridge's system in South Chicago down to Putoco, which is our hub. And today, if you look at our flexibility of bringing in either the Bakken crude or other Canadian crude, we pretty much limited that out with the logistical capability that we have today. And SAX, even before Sandpiper is completed, is going to give us that flexibility to increase the amount of crude that comes in from both of those sources. So it's a big deal for us. It's going to help the bottom line, certainly.

And our next question comes from Doug Leggate, Bank of America Merrill Lynch.

Gary, I don't know if I picked up on this earlier, but back to Paul Sankey's question on gas sensitivity. I was looking back at the operating cost question. I was looking back at the presentations from the last year and the Q1 delta last year was a negative 605 versus the prior first quarter 2013, and of course, gas was very strong last year. And this year, you had, obviously, had a big operating cost benefit of over $500 million. So I don't know if I picked it up wrong, but can you just walk through again what your gas sensitivity is, because obviously if gas prices remain low, those cost benefits are, probably, going to be quite sticky, I'm guessing?

Okay. Let me turn this over to Don or Rich. I don't have any of those numbers with me here.

Sure, Doug. Our gas sensitivity -- so $1 change in the natural gas prices is around $140 million after-tax on an annual basis. And with respect to the first quarter of '15 versus the first quarter of '14, there was about an $80 million benefit in the other manufacturing cost line related to the lower energy costs.

Okay. I guess I don't want to labor -- maybe I can take it offline, but what I'm really kind of looking at is the full-year cost hit last year, looked year-over-year was about $913 million according to the presentation. So I'm trying to understand what caused the cost uplift last year because it's an absolute number, not a unit number obviously, and what's reversed to come back out in the first quarter is what I'm trying to understand, see how sustainable it is.

I mean, which -- I'm sorry, which quarter are you comparing...

For the first quarter year-over-year, you had a little over $500 million of benefit in the presentation. But the full year, last year, the direct operating cost negative impact was $913 million, most of which was in the first quarter, which is when gas prices were $5. So I'm trying to understand what the moving parts are. Like I say maybe I need to take it off-line, but what reversed out that gave you $913 million negative last year that gave you a $500 million positive in the first quarter, I guess, is where I'm getting at. I don't know if that's complicating the question too much.

The big piece of it last year, I think, was all the heavy turnaround activity that we had, Doug. So we can walk through individual components, but last year, you will recall, we had very, very heavy turnaround activity, which was a detriment to that quarter. And this quarter really is the absence of all of that turnaround activity.

And Doug, it's both cost and volume this quarter.

Right. You do not put through the maintenance, through CapEx, is that right? You expense it?

That's correct. Maintenance goes through expense, not CapEx.

Okay. So that probably explains the bulk of it. Okay, that's really helpful. My follow-up, Gary, is really more of a micro question. Again, it's -- we're looking at you guys saying you can raise your utilization by 6% or so, and obviously, the industry as a whole has been running pretty hard. But we're starting off with very, very high gasoline inventories, I guess, for the U.S. And what I'm kind of thinking, well, I guess, I'm somewhat concerned about is when we looked at what happened at the end of last year, gasoline margins sunk on very, very high gasoline production. So I'm just kind of curious, how do you see the macro playing out? Obviously, your market is a big beneficiary of imports from other regions. So given those robust gasoline inventories, what's your prognosis on how you see things playing out this -- in this higher utilization environment?

Well, as I stated, I think it was on the first question. Something that we're watching very carefully. The inventories and the product exports still within the industry are much more skewed to distillate then to gasoline. However, gasoline is picking up namely to Latin America countries. And we see that, that is going to continue. But you're right, and that's why, when I stated earlier, also, to keep an eye on the EIA numbers that come out and what demand appears to be. We're not seeing, and I still think it comes down to being able to reconcile all the exports back to -- within the government numbers within their model. So it -- you make a good point, something that we manage and we watch every day, is to watch how the inventories continue to move. The key is going to be clearing out all the bad weather we had in the first quarter, and hopefully, getting down to a clean second quarter, where we really can measure what the gasoline demand is across the U.S. And once I have those optics, obviously, I'm going to be able to answer your question better, but we're watching inventories very, very carefully. But also, I'm seeing very significant growth in the export market.

And your next question comes from Roger Read with Wells Forgo.

I guess, I'd like to follow up a little bit on the light sweet crude. Obviously, you discussed a lot of the pipeline issues and sort of the storage issues. Previously, I think you mentioned as much as 65% of the volumes that you have at hand, could be light sweet crude. Can you let us know what we need to see? Is it the wider differential? Is it more pipeline access in order to get to those volumes?

Mike?

Yes, Roger. I think, what we need to see is we need to see differentials, say, versus medium sour that are more compelling than what they've been. When we're constantly in the market, it is every day trying to optimize our crude slates, and we do that on a day-to-day basis with domestic barrels. So we have this option to buy light sweet crude. We have this option to buy medium sour crude, for example, at Garyville. And so we're constantly looking at the differentials to see which makes a higher margin. And honestly, between the light sweet crude that so many think has this huge overhang in the market. And therefore, you think it would be priced so that it was compelling to bring in, that's just simply not the case. We go back and forth between buying the medium sours versus the light sweet. So at some point, if the production rises enough and the producers don't clear it to another market, then we would see numbers that would allow us to run higher volumes of light sweet.

Okay. But doesn't that, by itself, sort of create the pressure for the export call? In other words, I get that you don't want to run the crude unless it's economically profitable, but if you have a differential at $7 or even, say, $10, that puts more pressure kind of within the system to call for the export volumes. So do you think it's a number closer to, as you mentioned, with LLS, $3? Or is it something that we need to see in a $5 to $7 range in order to clear the market if we have more crude on the market from the lower 48 producers?

Well, I think what we tend to look at, again, is the differential of LLS versus our other alternatives. So of late, I think, again, when I talk about the competition with the medium sours, I mean, we've been seeing a differential between LLS and Mars, it's been in the $3 range, $3 to $4. So again, if that differential came into something less, then we would run more -- we would try and run more light sweet at those more economic numbers. But that's primarily what we look at.

Cynthia, with that, we'll close the question-and-answer. I want to thank everyone for joining us today, and thank you for your interest in Marathon Petroleum Corporation. Should you have additional questions or, like, clarification on the topics we have discussed this morning, Teresa Homan and I will be available to take your calls.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.