Marathon profit plunges on $1.2 billion pipeline unit writedown

(Reuters) - Marathon Petroleum Corp's MPC.N quarterly profit halved as the U.S. refiner was forced to write down $1.2 billion goodwill in its pipeline and transportation business that has failed to perform since Marathon acquired it two years ago.

The company launched a review of the business in October, after its activist shareholder, Elliott Management, called for the company to be split into three, citing its laggard stock performance.

However, Marathon’s adjusted earnings of $1.56 per share were well-above Wall Street expectations of 86 cents, boosted by better-than-expected refining margins that have set a positive tone for the entire sector.

Refining and marketing margin of $15.55 per barrel in the quarter handily beat estimates from at least 4 brokerages.

“Given the negative sentiment on the space, a beat of this magnitude should be seen as a positive for the entire space,” Credit Suisse analyst Manav Gupta wrote in a note. Marathon’s beat will be followed by strong earnings performance from rivals Valero Energy and Philips 66, Gupta added.

Marathon Petroleum Chairman Gary Heminger expects refining margins to strengthen in the first quarter from seasonal factors in transportation markets and the shipping industry’s continued response to the implementation of new rules.

Since the start of this year, United Nations shipping agency, International Maritime Organization (IMO), has banned ships from using fuels with a sulphur content above 0.5%, compared with 3.5% previously.

Marathon refined 3.1 million barrels per day (bpd) in the fourth quarter, 3% more than energy brokerage Tudor Pickering Holt & Co’s forecast.

Net income attributable to the company fell to $443 million, or 68 cents per share, in the fourth quarter ended Dec. 31, from $951 million, or $1.35 per share, a year earlier.

The refiner also lowered its 2020 capital spending plan to $4.35 billion, from the $6.13 billion it spent in 2019. TPH said the number was way below its expectations of $5.1 billion.

The Findlay, Ohio-based company’s total revenue and other income fell 4% to $31.38 billion.

Marathon shares were up 0.4% at $53.16.

Reporting by Arundhati Sarkar and Shradha Singh in Bengaluru, and Laura Sanicola in New York; Editing by Vinay Dwivedi