Edgar Filing: Marathon Petroleum Corp

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Smaller reporting company

MPC-2013.9.30-10Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2013



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-35054

Marathon Petroleum Corporation

(Exact name of registrant as specified in its charter)



Delaware		27-1284632
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

539 South Main Street, Findlay, Ohio		45840-3229
(Address of principal executive offices)		(Zip code)

(419) 422-2121

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ¨ No x

There were 301,026,678 shares of Marathon Petroleum Corporation common stock outstanding as of October 31, 2013.

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MARATHON PETROLEUM CORPORATION

Form 10-Q

Quarter Ended September 30, 2013

INDEX



	Page
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Statements of Income (Unaudited)	2
Consolidated Statements of Comprehensive Income (Unaudited)	3
Consolidated Balance Sheets (Unaudited)	4
Consolidated Statements of Cash Flows (Unaudited)	5
Consolidated Statements of Equity (Unaudited)	6
Notes to Consolidated Financial Statements (Unaudited)	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3. Quantitative and Qualitative Disclosures about Market Risk	46
Item 4. Controls and Procedures	47
Supplementary Statistics (Unaudited)	48

PART II – OTHER INFORMATION
Item 1. Legal Proceedings	50
Item 1A. Risk Factors	50
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	51
Item 6. Exhibits	52
Signatures	53

Unless otherwise stated or the context otherwise indicates, all references in this Form 10-Q to “MPC,” “us,” “our,” “we” or “the Company” mean Marathon Petroleum Corporation and its consolidated subsidiaries.

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Part I – Financial Information

Item 1. Financial Statements

Marathon Petroleum Corporation

Consolidated Statements of Income (Unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
(In millions, except per share data)	2013			2012			2013			2012
Revenues and other income:
Sales and other operating revenues (including consumer excise taxes)	$	26,253		$	21,047		$	75,256		$	61,551
Sales to related parties	3			2			7			6
Income from equity method investments	9			7			16			18
Net gain on disposal of assets	1			175			3			178
Other income	8			18			40			28
Total revenues and other income	26,274			21,249			75,322			61,781
Costs and expenses:
Cost of revenues (excludes items below)	23,553			17,202			65,907			51,323
Purchases from related parties	103			84			254			204
Consumer excise taxes	1,631			1,463			4,685			4,271
Depreciation and amortization	299			246			888			712
Selling, general and administrative expenses	305			293			912			909
Other taxes	82			66			259			204
Total costs and expenses	25,973			19,354			72,905			57,623
Income from operations	301			1,895			2,417			4,158
Net interest and other financial income (costs)	(47		)	(25		)	(140		)	(64		)
Income before income taxes	254			1,870			2,277			4,094
Provision for income taxes	81			646			775			1,460
Net income	173			1,224			1,502			2,634
Less net income attributable to noncontrolling interests	5			—			16			—
Net income attributable to MPC	$	168		$	1,224		$	1,486		$	2,634
Per Share Data (See Note 7)
Basic:
Net income attributable to MPC per share	$	0.54		$	3.61		$	4.63		$	7.69
Weighted average shares outstanding	309			338			321			342
Diluted:
Net income attributable to MPC per share	$	0.54		$	3.59		$	4.60		$	7.65
Weighted average shares outstanding	311			340			323			344
Dividends paid	$	0.42		$	0.35		$	1.12		$	0.85

The accompanying notes are an integral part of these consolidated financial statements.

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Marathon Petroleum Corporation

Consolidated Statements of Comprehensive Income (Unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
(In millions)	2013			2012			2013			2012
Net income	$	173		$	1,224		$	1,502		$	2,634
Other comprehensive income (loss):
Defined benefit postretirement and post-employment plans:
Actuarial changes, net of tax of $34, ($5), $169 and $28	57			(9		)	282			46
Prior service costs, net of tax of ($5), $10, ($14) and $207	(8		)	17			(23		)	344
Other comprehensive income	49			8			259			390
Comprehensive income	222			1,232			1,761			3,024
Less comprehensive income attributable to noncontrolling interests	5			—			16			—
Comprehensive income attributable to MPC	$	217		$	1,232		$	1,745		$	3,024

The accompanying notes are an integral part of these consolidated financial statements.

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Marathon Petroleum Corporation

Consolidated Balance Sheets (Unaudited)



(In millions, except per share data)	September 30, 2013			December 31, 2012
Assets
Current assets:
Cash and cash equivalents	$	2,018		$	4,860
Receivables, less allowance for doubtful accounts of $9 and $10	5,593			4,610
Inventories	5,714			3,449
Other current assets	206			110
Total current assets	13,531			13,029
Equity method investments	417			321
Property, plant and equipment, net	13,795			12,643
Goodwill	938			930
Other noncurrent assets	322			300
Total assets	$	29,003		$	27,223
Liabilities
Current liabilities:
Accounts payable	$	8,961		$	6,785
Payroll and benefits payable	341			364
Consumer excise taxes payable	277			325
Accrued taxes	609			598
Long-term debt due within one year	23			19
Other current liabilities	190			112
Total current liabilities	10,401			8,203
Long-term debt	3,380			3,342
Deferred income taxes	2,228			2,050
Defined benefit postretirement plan obligations	895			1,266
Deferred credits and other liabilities	835			257
Total liabilities	17,739			15,118
Commitments and contingencies (see Note 22)
Equity
MPC stockholders’ equity:
Preferred stock, no shares issued and outstanding (par value $0.01 per share, 30 million shares authorized)	—			—
Common stock:
Issued—362 million and 361 million shares (par value $0.01 per share, 1 billion shares authorized)	4			4
Held in treasury, at cost—59 million and 28 million shares	(3,703		)	(1,253		)
Additional paid-in capital	9,748			9,527
Retained earnings	5,007			3,880
Accumulated other comprehensive loss	(205		)	(464		)
Total MPC stockholders’ equity	10,851			11,694
Noncontrolling interests	413			411
Total equity	11,264			12,105
Total liabilities and equity	$	29,003		$	27,223

The accompanying notes are an integral part of these consolidated financial statements.

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Marathon Petroleum Corporation

Consolidated Statements of Cash Flows (Unaudited)



	Nine Months Ended September 30,
(In millions)	2013			2012
Increase (decrease) in cash and cash equivalents
Operating activities:
Net income	$	1,502		$	2,634
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	888			712
Pension and other postretirement benefits, net	3			119
Deferred income taxes	22			425
Net gain on disposal of assets	(3		)	(178		)
Equity method investments, net	(4		)	13
Changes in the fair value of derivative instruments	(54		)	8
Changes in:
Current receivables	(974		)	360
Inventories	(1,330		)	(555		)
Current accounts payable and accrued liabilities	2,028			(1,160		)
All other, net	(28		)	71
Net cash provided by operating activities	2,050			2,449
Investing activities:
Additions to property, plant and equipment	(733		)	(966		)
Acquisitions	(1,515		)	(190		)
Disposal of assets	12			52
Investments—acquisition, loans and contributions	(113		)	(26		)
—redemptions and repayments	76			94
All other, net	22			3
Net cash used in investing activities	(2,251		)	(1,033		)
Financing activities:
Long-term debt—repayments	(16		)	(12		)
Debt issuance costs	(2		)	(6		)
Issuance of common stock	37			54
Common stock repurchased	(2,341		)	(850		)
Dividends paid	(358		)	(291		)
Distributions to noncontrolling interests	(15		)	—
Tax settlement with Marathon Oil Corporation	39			—
All other, net	15			(3		)
Net cash used in financing activities	(2,641		)	(1,108		)
Net increase (decrease) in cash and cash equivalents	(2,842		)	308
Cash and cash equivalents at beginning of period	4,860			3,079
Cash and cash equivalents at end of period	$	2,018		$	3,387

The accompanying notes are an integral part of these consolidated financial statements.

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Marathon Petroleum Corporation

Consolidated Statements of Equity (Unaudited)



	MPC Stockholders’ Equity
(In millions)	Common Stock		Treasury Stock			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interests			Total Equity
Balance as of December 31, 2011	$	4	$	—		$	9,482		$	898		$	(879	)	$	—		$	9,505
Net income	—		—			—			2,634			—			—			2,634
Dividends declared	—		—			—			(291		)	—			—			(291		)
Other comprehensive income	—		—			—			—			390			—			390
Shares repurchased	—		(850		)	—			—			—			—			(850		)
Shares issued (returned)—stock based compensation	—		(2		)	55			—			—			—			53
Stock-based compensation	—		—			35			—			—			—			35
Other	—		—			(9		)	—			—			—			(9		)
Balance as of September 30, 2012	$	4	$	(852	)	$	9,563		$	3,241		$	(489	)	$	—		$	11,467
Balance as of December 31, 2012	$	4	$	(1,253	)	$	9,527		$	3,880		$	(464	)	$	411		$	12,105
Net income	—		—			—			1,486			—			16			1,502
Dividends declared	—		—			—			(359		)	—			—			(359		)
Distributions to noncontrolling interests	—		—			—			—			—			(15		)	(15		)
Other comprehensive income	—		—			—			—			259			—			259
Shares repurchased	—		(2,441		)	100			—			—			—			(2,341		)
Shares issued (returned)—stock based compensation	—		(9		)	37			—			—			—			28
Stock-based compensation	—		—			45			—			—			1			46
Tax settlement with Marathon Oil Corporation	—		—			39			—			—			—			39
Balance as of September 30, 2013	$	4	$	(3,703	)	$	9,748		$	5,007		$	(205	)	$	413		$	11,264

(Shares in millions)	Common Stock		Treasury Stock
Balance as of December 31, 2011	357		—
Shares repurchased	—		(20		)
Shares issued—stock-based compensation	2		—
Balance as of September 30, 2012	359		(20		)
Balance as of December 31, 2012	361		(28		)
Shares repurchased	—		(31		)
Shares issued—stock-based compensation	1		—
Balance as of September 30, 2013	362		(59		)

The accompanying notes are an integral part of these consolidated financial statements.

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Notes to Consolidated Financial Statements (Unaudited)

1. Description of the Business and Basis of Presentation

Description of the Business—As used in this report, the terms “MPC,” “we,” “us,” “the Company” or “our” may refer to Marathon Petroleum Corporation, one or more of its consolidated subsidiaries or all of them taken as a whole.

Our business consists of refining and marketing, retail marketing and pipeline transportation operations conducted primarily in the Midwest, Gulf Coast and Southeast regions of the United States, through subsidiaries, including Marathon Petroleum Company LP, Speedway LLC and MPLX LP and its subsidiaries (“MPLX”).

See Note 9 for additional information about our operations.

Basis of Presentation—All significant intercompany transactions and accounts have been eliminated.

These interim consolidated financial statements are unaudited; however, in the opinion of our management, these statements reflect all adjustments necessary for a fair statement of the results for the periods reported. All such adjustments are of a normal, recurring nature unless otherwise disclosed. These interim consolidated financial statements, including the notes, have been prepared in accordance with the rules of the Securities and Exchange Commission applicable to interim period financial statements and do not include all of the information and disclosures required by United States generally accepted accounting principles (“US GAAP”) for complete financial statements.

These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2012. The results of operations for the three and nine months ended September 30, 2013 are not necessarily indicative of the results to be expected for the full year.

In the fourth quarter of 2012, we reclassified certain expenses from selling, general and administrative expenses to cost of revenues, which is consistent with expense classifications for MPLX, MPC’s consolidated subsidiary. Historical periods were also reclassified to conform to the current period presentation. This reclassification resulted in an increase in cost of revenues and a decrease in selling, general and administrative expenses of $12 million and $35 million in the three and nine months ended September 30, 2012, respectively.

2. Accounting Standards

Recently Adopted

In February 2013, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update that requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. If the amount reclassified is required under US GAAP to be reclassified to net income in its entirety in the same reporting period, an entity is required to present, either on the face of the financial statements or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income. For other amounts not required to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional detail about those amounts. The accounting standards update was to be applied prospectively for interim and annual periods beginning with the first quarter of 2013. The adoption of this accounting standards update in the first quarter of 2013 did not have an impact on our consolidated results of operations, financial position or cash flows. The new required disclosures are included in Note 19.

In July 2012, the FASB issued an accounting standards update that gives an entity the option to first assess qualitatively whether it is more likely than not that an indefinite-lived intangible asset is impaired. If, through the qualitative assessment, an entity determines that it is more likely than not that the intangible asset is impaired, the quantitative impairment test must then be performed. The accounting standards update was effective for annual and interim impairment tests performed in fiscal years beginning after September 15, 2012. Early adoption was permitted. The adoption of this accounting standards update in the first quarter of 2013 did not have an impact on our consolidated results of operations, financial position or cash flows. We perform the annual intangible asset impairment testing in the fourth quarter.

In December 2011, the FASB issued an accounting standards update which was amended in January 2013 that requires disclosure of additional information related to recognized derivative instruments, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions that are offset or are not offset but are subject to an enforceable netting agreement. The purpose of the requirement is to help users evaluate the effect or potential effect of offsetting and related netting arrangements on an entity’s financial position. The update was to be applied retrospectively and was effective for interim and annual periods beginning with the first quarter of 2013. The adoption of this

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accounting standards update in the first quarter of 2013 did not have an impact on our consolidated results of operations, financial position or cash flows. The new required disclosures are included in Note 15.

3. MPLX LP

MPLX is a publicly traded master limited partnership that was formed by us to own, operate, develop and acquire pipelines and other midstream assets related to the transportation and storage of crude oil, refined products and other hydrocarbon-based products. MPLX’s initial assets consisted of a 51 percent general partner interest in MPLX Pipe Line Holdings LP (“Pipe Line Holdings”), which owns a network of common carrier crude oil and product pipeline systems and associated storage assets in the Midwest and Gulf Coast regions of the United States, and a 100 percent interest in a butane storage cavern in West Virginia. On May 1, 2013, we sold an additional five percent interest in Pipe Line Holdings to MPLX for $100 million. This increased MPLX’s ownership interest in Pipe Line Holdings to 56 percent and reduced our ownership interest to 44 percent.

On October 31, 2012, MPLX completed its initial public offering of 19,895,000 common units. Net proceeds to MPLX from the sale of the units were $407 million. We own a 73.6 percent interest in MPLX, including the two percent general partner interest. We consolidate this entity for financial reporting purposes since we have a controlling financial interest, and we record a noncontrolling interest for the interest owned by the public. The initial public offering represented the sale of a 26.4 percent interest in MPLX.

4. Acquisitions and Investments

Acquisition of Refinery and Related Logistics and Marketing Assets

On February 1, 2013, we paid $1.49 billion to acquire from BP Products North America Inc. and BP Pipelines (North America) Inc. (collectively, “BP”) the 451,000 barrel per calendar day refinery in Texas City, Texas, three intrastate natural gas liquid pipelines originating at the refinery, an allocation of BP’s Colonial Pipeline Company shipper history, four light product terminals, branded-jobber marketing contract assignments for the supply of approximately 1,200 branded sites and a 1,040 megawatt electric cogeneration facility, as well as the inventory associated with these assets. We refer to these assets as the “Galveston Bay Refinery and Related Assets”. Pursuant to the purchase and sale agreement, we may also be required to pay to BP a contingent earnout of up to an additional $700 million over six years, subject to certain conditions as discussed below. These assets complement our current geographic footprint and align with our strategic initiative of growing in existing and contiguous markets to enhance our portfolio. The transaction was funded with cash on hand.

As of the acquisition date, we recorded a contingent liability of $600 million, representing the preliminary fair value of contingent consideration we expect to pay to BP related to the earnout provision. The fair value of the contingent consideration was estimated using an income approach. The amount of cash to be paid under the arrangement is based on both a market-based crack spread and refinery throughput volumes for the months during which the contract applies, as well as established thresholds that cap the annual and total payment. The earnout payment cannot exceed $200 million per year for the first three years of the arrangement or $250 million per year for the last three years of the arrangement, with the total cumulative payment capped at $700 million over the six-year period. Any excess or shortfall from the annual cap for a current year’s earnout calculation will not affect subsequent years’ calculations. We used internal and external forecasts for the crack spread and internal forecasts for refinery throughput volumes and applied an appropriate risk-adjusted discount rate to the range of cash flows indicated by various scenarios to determine the fair value of the arrangement. The fair value of the contingent consideration is reassessed each quarter, with changes in fair value recorded in cost of revenues. The fair value of the contingent consideration was $606 million at September 30, 2013, which includes $108 million classified as current. See Note 15 for additional information.

The transaction provided for a post-closing adjustment for inventory, which was finalized for $9 million during the three months ended September 30, 2013, reducing our total consideration.

The components of the fair value of consideration transferred are as follows:



(In millions)
Cash	$	1,491
Fair value of contingent consideration as of acquisition date	600
Payable to seller	6
Post-closing adjustment	(9		)
Total consideration	$	2,088

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The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date, pending finalization of an independent appraisal and other evaluations. During the second and third quarters of 2013, we made minor updates to the preliminary fair value measurements of assets acquired and liabilities assumed, with the revised balances shown in the table below.



(In millions)
Inventories	$	935
Other current assets	1
Property, plant and equipment, net	1,274
Other noncurrent assets	88
Accounts payable	(12		)
Payroll and benefits payable	(14		)
Long-term debt due within one year^(a)	(2		)
Other current liabilities	(6		)
Long-term debt^(a)	(58		)
Defined benefit postretirement plan obligations	(43		)
Deferred credits and other liabilities	(75		)
Total	$	2,088


^(a)	Represents a capital lease obligation assumed.

Neither goodwill nor a gain from a bargain purchase was recognized in conjunction with the Galveston Bay Refinery and Related Assets acquisition.

Other noncurrent assets consist of a $20 million intangible asset related to customer relationships and a $68 million intangible asset related to prepaid licensed refinery technology agreements. The intangible assets related to customer relationships and prepaid licensed refinery technology agreements are being amortized on a straight-line basis over four and 15 years, respectively. The weighted average life over which these acquired intangibles are being amortized is approximately 13 years.

We recognized $7 million of acquisition-related costs associated with the Galveston Bay Refinery and Related Assets acquisition. These costs were expensed and were included in selling, general and administrative expenses.

Our refineries and related assets are operated as an integrated system. As the information is not available by refinery, it is not practicable to disclose the revenues and net income associated with the acquisition that were included in our consolidated statements of income for the three and nine months ended September 30, 2013.

The following unaudited pro forma financial information presents consolidated results assuming the Galveston Bay Refinery and Related Assets acquisition occurred on January 1, 2012. The pro forma financial information does not give effect to potential synergies that could result from the acquisition and is not necessarily indicative of the results of future operations.



	Three Months Ended September 30,		Nine Months Ended September 30,
(In millions, except per share data)	2012		2013		2012
Sales and other operating revenues (including consumer excise taxes)	$	26,888	$	77,224	$	77,714
Net income attributable to MPC	1,530		1,541		2,798
Net income attributable to MPC per share - basic	$	4.53	$	4.80	$	8.18
Net income attributable to MPC per share - diluted	4.50		4.77		8.13

The pro forma information includes adjustments to align accounting policies, an adjustment to depreciation expense to reflect the fair value of property, plant and equipment, increased amortization expense related to identifiable intangible assets and the related income tax effects. The pro forma information for the nine months ended September 30, 2013 and 2012 reflect revisions made during the second and third quarters of 2013 to the estimated fair values of assets acquired and liabilities assumed.

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Acquisitions of Convenience Stores

During the nine months ended September 30, 2013, Speedway LLC acquired nine convenience stores located in Tennessee, western Indiana and western Pennsylvania. In connection with these acquisitions, our Speedway segment recorded $8 million of goodwill, which is deductible for income tax purposes.

In July 2012, Speedway LLC acquired 10 convenience stores located in the northern Kentucky and southwestern Ohio regions from Road Ranger LLC in exchange for cash and a truck stop location in the Chicago metropolitan area. In connection with this acquisition, our Speedway segment recorded $5 million of goodwill, which is deductible for income tax purposes.

In May 2012, Speedway LLC acquired 87 convenience stores situated throughout Indiana and Ohio from GasAmerica Services, Inc., along with the associated inventory, intangible assets and two parcels of undeveloped real estate. In connection with this acquisition, our Speedway segment recorded $83 million of goodwill, which is deductible for income tax purposes.

These acquisitions support our strategic initiative to increase our Speedway segment sales and profitability. The principal factors contributing to a purchase price resulting in goodwill included the acquired stores complementing our existing network in our Midwest market, access to our refined product transportation systems and the potential for higher merchandise sales.

Assuming these transactions had been made at the beginning of any period presented, the consolidated pro forma results would not be materially different from reported results.

Investments in Ethanol Companies

On August 1, 2013, we acquired from Mitsui & Co. (U.S.A.), Inc. its interests in three ethanol companies for $75 million. Under the purchase agreement, we acquired an additional 24 percent interest in The Andersons Clymers Ethanol LLC ("TACE"), bringing our ownership interest to 60 percent; a 34 percent interest in The Andersons Ethanol Investment LLC, which holds a 50 percent ownership in The Andersons Marathon Ethanol LLC ("TAME"), bringing our direct and indirect ownership interest in TAME to 67 percent; and a 40 percent interest in The Andersons Albion Ethanol LLC ("TAAE"), which owns an ethanol production facility in Albion, Michigan. We hold a noncontrolling interest in each of these entities and account for them using the equity method of accounting since the minority owners have substantive participating rights.

On October 1, 2013, our ownership interest in TAAE increased to 43 percent as a result of TAAE redeeming one of the owner's interest.

5. Related Party Transactions

Our related parties include:


•	TAAE, in which we have a 43 percent interest, TACE, in which we have a 60 percent noncontrolling interest and TAME, in which we have a 67 percent direct and indirect noncontrolling interest. These companies each own an ethanol production facility.


•	Centennial Pipeline LLC (“Centennial”), in which we have a 50 percent noncontrolling interest. Centennial owns a refined products pipeline and storage facility.


•	LOOP LLC (“LOOP”), in which we have a 51 percent noncontrolling interest. LOOP owns and operates the only U.S. deepwater oil port.


•	Other equity method investees.

Sales to related parties were as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2013		2012		2013		2012
Centennial	$	—	$	—	$	—	$	1
Other equity method investees	3		2		7		5
Total	$	3	$	2	$	7	$	6

Fees received for operating Centennial’s pipeline, which are included in other income on the consolidated statements of income, were less than $1 million and $1 million for the three and nine months ended September 30, 2013, respectively.

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Purchases from related parties were as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2013		2012		2013		2012
Centennial	$	4	$	—	$	4	$	9
LOOP	11		11		32		32
TAAE	8		—		8		—
TACE	42		35		92		50
TAME	31		29		98		89
Other equity method investees	7		9		20		24
Total	$	103	$	84	$	254	$	204

Related party purchases from Centennial consist primarily of refinery feedstocks and refined product transportation costs. Related party purchases from LOOP and other equity method investees consist primarily of crude oil transportation costs. Related party purchases from TAAE, TACE and TAME consist of ethanol.

Receivables from related parties, which are included in receivables, less allowance for doubtful accounts on the consolidated balance sheets, were as follows:



(In millions)	September 30, 2013		December 31, 2012
Centennial	$	1	$	2
TAME	1		—
Other equity method investees	1		—
Total	$	3	$	2

At September 30, 2013, we also had a $2 million long-term receivable from Centennial, which is included in other noncurrent assets on the consolidated balance sheet.

Payables to related parties, which are included in accounts payable on the consolidated balance sheets, were as follows:



(In millions)	September 30, 2013		December 31, 2012
Centennial	$	7	$	—
LOOP	4		4
TAAE	2		—
TACE	1		2
TAME	5		5
Other equity method investees	2		2
Total	$	21	$	13

We had a throughput and deficiency agreement with Centennial, which expired on March 31, 2012. During the first quarter of 2012, we impaired our $14 million prepaid tariff with Centennial. For additional information on the impairment, see Note 15.

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6. Variable Interest Entity

On December 1, 2010, we completed the sale of most of our Minnesota assets. These assets included the 74,000 barrel per calendar day St. Paul Park refinery and associated terminals, 166 convenience stores primarily branded SuperAmerica^®, along with the SuperMom’s bakery and certain associated trademarks, SuperAmerica Franchising LLC, interests in pipeline assets in Minnesota and associated inventories. We refer to these assets as the “Minnesota Assets.” The terms of the sale included (1) a preferred stock interest in the entity that holds the Minnesota Assets with a stated value of $80 million, (2) a maximum $125 million earnout provision payable to us over eight years, (3) a maximum $60 million of margin support payable to the buyer over two years, up to a maximum of $30 million per year, (4) a receivable from the buyer of $107 million which was fully collected in 2011, and (5) lease guarantees made by us on behalf of and to the buyer related to a limited number of convenience store sites. As a result of this continuing involvement, the related gain on sale of $89 million was initially deferred.

In July 2012, the buyer of our Minnesota Assets successfully completed an initial public offering ("IPO"). The successful completion of this IPO triggered the provisions in our May 4, 2012 settlement agreement with the buyer. Under the settlement agreement, we were released from our obligation to pay margin support and the buyer was released from its obligation to pay us under the earnout provisions contained in the original sales agreement. Also, the buyer redeemed our $80 million preferred equity interest, paid us $12 million for dividends accrued on our preferred equity interest and paid us $40 million of cash, for total cash receipts of $132 million. In addition, the buyer issued to us a second preferred security with a stated valued of $45 million. As a result, we recognized income before income taxes of approximately $183 million during the three months ended September 30, 2012, which included $86 million of the deferred gain that was recorded when the sale transaction was originally closed.

During the three months ended September 30, 2013, the buyer redeemed the second preferred security for $49 million, which included $4 million of accrued distributions.

Certain terms of the transaction and the subsequent settlement agreement with the buyer resulted in the creation of variable interests in a variable interest entity (“VIE”) that owns the Minnesota Assets. We are not the primary beneficiary of this VIE and, therefore, do not consolidate it because we lack the power to control or direct the activities that impact the VIE’s operations and economic performance. At September 30, 2013, our variable interest in this VIE and maximum exposure to loss is limited to convenience store lease guarantees of $5 million. These guarantees do not expose us to residual returns or expected losses that are significant to the VIE.

7. Income per Common Share

We compute basic earnings per share by dividing net income attributable to MPC by the weighted average number of shares of common stock outstanding. Diluted income per share assumes exercise of stock options and stock appreciation rights, provided the effect is not anti-dilutive.

Shares related to stock-based compensation awards excluded from the diluted share calculation as their effect would be anti-dilutive are approximately one million and two million shares for the three months ended September 30, 2013 and 2012 and one million and four million shares for the nine months ended September 30, 2013 and 2012, respectively.

MPC grants certain incentive compensation awards to employees and non-employee directors that are considered to be participating securities. Due to the presence of participating securities, we have calculated our earnings per share using the two-class method.

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	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions, except per share data)	2013		2012		2013		2012
Basic earnings per share:
Allocation of earnings:
Net income attributable to MPC	$	168	$	1,224	$	1,486	$	2,634
Income allocated to participating securities	—		2		2		5
Income available to common stockholders - basic	$	168	$	1,222	$	1,484	$	2,629
Weighted average common shares outstanding	309		338		321		342
Basic earnings per share	$	0.54	$	3.61	$	4.63	$	7.69
Diluted earnings per share:
Allocation of earnings:
Net income attributable to MPC	$	168	$	1,224	$	1,486	$	2,634
Income allocated to participating securities	—		2		2		5
Income available to common stockholders - diluted	$	168	$	1,222	$	1,484	$	2,629
Weighted average common shares outstanding	309		338		321		342
Effect of dilutive securities	2		2		2		2
Weighted average common shares, including dilutive effect	311		340		323		344
Diluted earnings per share	$	0.54	$	3.59	$	4.60	$	7.65

8. Equity

On February 1, 2012, we announced that our board of directors authorized a share repurchase plan, enabling us to purchase up to $2.0 billion of MPC common stock over a two-year period. Through January 30, 2013, we had acquired $1.35 billion of shares under the initial $2.0 billion authorization. On January 30, 2013, we announced that our board of directors extended the duration of the existing $650 million repurchase authorization and approved an additional $2.0 billion share repurchase authorization, both to expire in December 2014. On September 26, 2013, we announced that our board of directors approved an additional $2.0 billion share repurchase authorization through September 2015, resulting in $6.0 billion of total share repurchase authorizations since January 1, 2012. After the effects of the accelerated share repurchase (“ASR”) programs and open market repurchases shown below, $2.31 billion of the amounts authorized by our board of directors remain available for repurchases at September 30, 2013. We may utilize various methods to effect the repurchases, which could include open market repurchases, negotiated block transactions, accelerated share repurchases or open market solicitations for shares, some of which may be effected through Rule 10b5-1 plans. The timing and amount of future repurchases, if any, will depend upon several factors, including market and business conditions, and such repurchases may be discontinued at any time.

In February 2012 and November 2012, we entered into $850 million and $500 million ASR programs, respectively, to repurchase shares of MPC common stock under the approved share repurchase plan authorized by our board of directors. The total number of shares repurchased under these ASR programs was based generally on the volume-weighted average price of our common stock during the repurchase periods. The shares repurchased under the ASR programs were accounted for as treasury stock purchase transactions, reducing the weighted average number of basic and diluted common shares outstanding by the shares repurchased, and as forward contracts indexed to our common stock. The forward contracts were accounted for as equity instruments.

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Total share repurchases transacted through ASR programs and open market transactions were as follows for the three and nine months ended September 30, 2013 and 2012:



	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions, except per share data)	2013		2012		2013		2012
Number of shares repurchased^(a)	14		2		31		20
Cash paid for shares repurchased	$	1,028	$	—	$	2,341	$	850
Effective average cost per delivered share	$	70.73	$	41.75	$	76.01	$	41.75


^(a)	The nine months ended September 30, 2013 includes one million shares received under the November 2012 ASR program, which were paid for in the fourth quarter of 2012. The three months ended September 30, 2012 includes two million shares received under the February 2012 ASR program, which were paid for in the first quarter of 2012.

As of September 30, 2013, the total number of shares we have repurchased cumulatively through the ASR programs and open market repurchases since February 2012 was 59 million shares at an average cost per share of $62.29. The cash paid for shares repurchased was $3.69 billion. In addition, at September 30, 2013, we had agreements to acquire additional common shares for $42 million, which were settled in early October 2013.

9. Segment Information

We have three reportable segments: Refining & Marketing; Speedway; and Pipeline Transportation. Each of these segments is organized and managed based upon the nature of the products and services they offer.

•

Refining & Marketing – refines crude oil and other feedstocks at our refineries in the Gulf Coast and Midwest regions of the United States, purchases ethanol and refined products for resale and distributes refined products through various means, including barges, terminals and trucks that we own or operate. We sell refined products to wholesale marketing customers domestically and internationally, to buyers on the spot market, to our Speedway segment and to dealers and jobbers who operate Marathon^® retail outlets;


•	Speedway – sells transportation fuels and convenience products in retail markets in the Midwest, primarily through Speedway^® convenience stores; and


•	Pipeline Transportation – transports crude oil and other feedstocks to our refineries and other locations, delivers refined products to wholesale and retail market areas and includes the aggregated operations of MPLX and MPC’s retained pipeline assets and investments.

On February 1, 2013, we acquired the Galveston Bay Refinery and Related Assets, which are part of the Refining & Marketing and Pipeline Transportation segments. Segment information for periods prior to the acquisition does not include amounts for these operations. See Note 4.

Segment income represents income from operations attributable to the reportable segments. Corporate administrative expenses and costs related to certain non-operating assets are not allocated to the reportable segments. In addition, certain items that affect comparability (as determined by the chief operating decision maker) are not allocated to the reportable segments.

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(In millions)	Refining & Marketing			Speedway			Pipeline Transportation			Total
Three Months Ended September 30, 2013
Revenues:
Customer	$	22,478		$	3,755		$	20		$	26,253
Intersegment^(a)	2,439			1			117			2,557
Related parties	3			—			—			3
Segment revenues	24,920			3,756			137			28,813
Elimination of intersegment revenues	(2,439		)	(1		)	(117		)	(2,557		)
Total revenues	$	22,481		$	3,755		$	20		$	26,256
Segment income from operations^(b)	$	227		$	102		$	54		$	383
Income from equity method investments	8			—			1			9
Depreciation and amortization^(c)	246			29			19			294
Capital expenditures and investments^(d)	243			65			42			350
(In millions)	Refining & Marketing			Speedway			Pipeline Transportation			Total
Three Months Ended September 30, 2012
Revenues:
Customer	$	17,242		$	3,787		$	19		$	21,048
Intersegment^(a)	2,387			1			97			2,485
Related parties	2			—			—			2
Segment revenues	19,631			3,788			116			23,535
Elimination of intersegment revenues	(2,387		)	(1		)	(97		)	(2,485		)
Total revenues	$	17,244		$	3,787		$	19		$	21,050
Segment income from operations	$	1,691		$	76		$	52		$	1,819
Income (loss) from equity method investments	(1		)	—			8			7
Depreciation and amortization^(c)	198			29			13			240
Capital expenditures and investments^(d)(e)	182			59			71			312



(In millions)	Refining & Marketing			Speedway			Pipeline Transportation			Total
Nine Months Ended September 30, 2013
Revenues:
Customer	$	64,238		$	10,964		$	60		$	75,262
Intersegment^(a)	7,072			3			340			7,415
Related parties	7			—			—			7
Segment revenues	71,317			10,967			400			82,684
Elimination of intersegment revenues	(7,072		)	(3		)	(340		)	(7,415		)
Total revenues	$	64,245		$	10,964		$	60		$	75,269
Segment income from operations^(b)	$	2,235		$	292		$	163		$	2,690
Income from equity method investments	7			—			9			16
Depreciation and amortization^(c)	734			83			55			872
Capital expenditures and investments^(d)(e)(f)	1,797			177			173			2,147

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(In millions)	Refining & Marketing			Speedway			Pipeline Transportation			Total
Nine Months Ended September 30, 2012
Revenues:
Customer	$	50,794		$	10,703		$	57		$	61,554
Intersegment^(a)	6,560			3			266			6,829
Related parties	5			—			1			6
Segment revenues	57,359			10,706			324			68,389
Elimination of intersegment revenues	(6,560		)	(3		)	(266		)	(6,829		)
Total revenues	$	50,799		$	10,703		$	58		$	61,560
Segment income from operations	$	3,959		$	233		$	144		$	4,336
Income (loss) from equity method investments	(2		)	—			20			18
Depreciation and amortization^(c)	574			84			37			695
Capital expenditures and investments^(d)(e)	513			257			169			939


^(a)	Management believes intersegment transactions were conducted under terms comparable to those with unaffiliated parties.


^(b)	Included in the Pipeline Transportation segment for the three and nine months ended September 30, 2013 are $5 million and $15 million of corporate overhead costs attributable to MPLX, which were included in items not allocated to segments prior to MPLX’s October 31, 2012 initial public offering. These expenses are not currently allocated to other segments.


^(c)	Differences between segment totals and MPC totals represent amounts related to unallocated items and are included in “Items not allocated to segments” in the reconciliation below.


^(d)	Capital expenditures include changes in capital accruals.


^(e)	Includes Speedway’s acquisitions of convenience stores. See Note 4.


^(f)	The Refining & Marketing and Pipeline Transportation segments include $1.29 billion and $70 million, respectively, for the acquisition of the Galveston Bay Refinery and Related Assets. See Note 4.

The following reconciles segment income from operations to income before income taxes as reported in the consolidated statements of income:



	Three Months Ended September 30,						Nine Months Ended September 30,
(In millions)	2013			2012			2013			2012
Segment income from operations	$	383		$	1,819		$	2,690		$	4,336
Items not allocated to segments:
Corporate and other unallocated items^(a)(b)	(59		)	(74		)	(190		)	(245		)
Minnesota Assets sale settlement gain^(c)	—			183			—			183
Pension settlement expenses^(d)	(23		)	(33		)	(83		)	(116		)
Net interest and other financial income (costs)	(47		)	(25		)	(140		)	(64		)
Income before income taxes	$	254		$	1,870		$	2,277		$	4,094


^(a)	Corporate and other unallocated items consists primarily of MPC’s corporate administrative expenses and costs related to certain non-operating assets.


^(b)	Corporate overhead costs attributable to MPLX were included in the Pipeline Transportation segment subsequent to MPLX’s October 31, 2012 initial public offering.


^(c)	See Note 6.


^(d)	See Note 20.

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The following reconciles segment capital expenditures and investments to total capital expenditures:



	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2013		2012		2013		2012
Segment capital expenditures and investments	$	350	$	312	$	2,147	$	939
Less: Investments in equity method investees	75		5		86		12
Plus: Items not allocated to segments:
Capital expenditures not allocated to segments	54		19		106		47
Capitalized interest	7		29		15		95
Total capital expenditures^(a)(b)	$	336	$	355	$	2,182	$	1,069


^(a)	Capital expenditures include changes in capital accruals.


^(b)	See Note 18 for a reconciliation of total capital expenditures to additions to property, plant and equipment as reported in the consolidated statements of cash flows.

The following reconciles total revenues to sales and other operating revenues (including consumer excise taxes) as reported in the consolidated statements of income:



	Three Months Ended September 30,					Nine Months Ended September 30,
(In millions)	2013		2012			2013			2012
Total revenues (as reported above)	$	26,256	$	21,050		$	75,269		$	61,560
Plus: Corporate and other unallocated items	—		(1		)	(6		)	(3		)
Less: Sales to related parties	3		2			7			6
Sales and other operating revenues (including consumer excise taxes)	$	26,253	$	21,047		$	75,256		$	61,551

Total assets by reportable segment were:



(In millions)	September 30, 2013		December 31, 2012
Refining & Marketing	$	20,379	$	17,052
Speedway	2,036		1,947
Pipeline Transportation	1,943		1,950
Corporate and Other	4,645		6,274
Total consolidated assets	$	29,003	$	27,223

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10. Other Items

Net interest and other financial income (costs) was:



	Three Months Ended September 30,						Nine Months Ended September 30,
(In millions)	2013			2012			2013			2012
Interest:
Net interest expense	$	(48	)	$	(47	)	$	(140	)	$	(138	)
Interest capitalized	7			29			15			95
Total net interest	(41		)	(18		)	(125		)	(43		)
Other:
Net foreign currency losses	(1		)	(1		)	—			(1		)
Bank service and other fees	(5		)	(6		)	(15		)	(20		)
Total other	(6		)	(7		)	(15		)	(21		)
Net interest and other financial income (costs)	$	(47	)	$	(25	)	$	(140	)	$	(64	)

11. Income Taxes

The combined federal, state and foreign income tax rate was 32 percent and 35 percent for the three months ended September 30, 2013 and 2012, respectively, and 34 percent and 36 percent for the nine months ended September 30, 2013 and 2012, respectively. The effective tax rate for the three and nine months ended September 30, 2013 is less than the U.S. statutory rate of 35 percent primarily due to certain permanent benefit differences, including the domestic manufacturing deduction, partially offset by state and local tax expense. The effective tax rate for the three and nine months ended September 30, 2012 exceeded the U.S. statutory rate of 35 percent due to state and local tax expense, partially offset by permanent benefit differences, including the domestic manufacturing deduction.

Prior to the June 30, 2011 spinoff transaction from Marathon Oil Corporation (“Marathon Oil”), we were included in Marathon Oil’s income tax returns for all applicable years. During 2011, we anticipated a future settlement between Marathon Oil and us upon the filing of Marathon Oil’s consolidated U.S. federal and state income tax returns for the period prior to June 30, 2011. During the second quarter of 2013, we settled with Marathon Oil for the 2011 period based on filed tax returns, resulting in a $39 million increase to additional paid-in capital.

We are continuously undergoing examination of our income tax returns, which have been completed for our U.S. federal and state income tax returns through the 2009 and 2003 tax years, respectively. We had $25 million of unrecognized tax benefits as of September 30, 2013. Pursuant to our tax sharing agreement with Marathon Oil, the unrecognized tax benefits related to pre-spinoff operations for which Marathon Oil was the taxpayer remain the responsibility of Marathon Oil and we have indemnified Marathon Oil accordingly. See Note 22 for indemnification information. During the second quarter of 2013, we settled with Marathon Oil our U.S. federal and related state return liabilities for the 2008-2009 tax years, resulting in a reduction in unrecognized tax benefits of $21 million.

12. Inventories



(In millions)	September 30, 2013		December 31, 2012
Crude oil and refinery feedstocks	$	2,615	$	1,383
Refined products	2,651		1,761
Merchandise	83		74
Materials and supplies	365		231
Total (at cost)	$	5,714	$	3,449

Inventories are carried at the lower of cost or market value. The cost of inventories of crude oil and refinery feedstocks, refined products and merchandise is determined primarily under the last-in, first-out (“LIFO”) method. There were no liquidations of LIFO inventories for the nine months ended September 30, 2013 and 2012.

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13. Property, Plant and Equipment



(In millions)	September 30, 2013		December 31, 2012
Refining & Marketing	$	16,712	$	15,089
Speedway	2,236		2,100
Pipeline Transportation	1,901		1,747
Corporate and Other	526		473
Total	21,375		19,409
Less accumulated depreciation	7,580		6,766
Net property, plant and equipment	$	13,795	$	12,643

14. Goodwill

The changes in the carrying amount of goodwill for the nine months ended September 30, 2013 were as follows:



(In millions)	Refining & Marketing		Speedway		Pipeline Transportation		Total
Balance at December 31, 2012	$	551	$	217	$	162	$	930
Acquisitions^(a)	—		8		—		8
Balance at September 30, 2013	$	551	$	225	$	162	$	938


^(a)	See Note 4 for information on acquisitions.

15. Fair Value Measurements

Fair Values—Recurring

The following tables present assets and liabilities accounted for at fair value on a recurring basis as of September 30, 2013 and December 31, 2012 by fair value hierarchy level. We have elected to offset the fair value amounts recognized for multiple derivative contracts executed with the same counterparty, including any related cash collateral as shown below; however, fair value amounts by hierarchy level are presented on a gross basis in the following tables.



	September 30, 2013
	Fair Value Hierarchy
(In millions)	Level 1		Level 2		Level 3		Netting and Collateral^(a)			Net Carrying Value on Balance Sheet^(b)		Collateral Pledged Not Offset
Commodity derivative instruments, assets	$	88	$	—	$	—	$	(62	)	$	26	$	69
Other assets	2		—		—		N/A			2		—
Total assets at fair value	$	90	$	—	$	—	$	(62	)	$	28	$	69

Commodity derivative instruments, liabilities	$	62	$	—	$	—	$	(62	)	$	—	$	—
Contingent consideration, liability^(c)	—		—		606		N/A			606		—
Total liabilities at fair value	$	62	$	—	$	606	$	(62	)	$	606	$	—

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	December 31, 2012
	Fair Value Hierarchy
(In millions)	Level 1		Level 2		Level 3		Netting and Collateral^(a)			Net Carrying Value on Balance Sheet^(b)		Collateral Pledged Not Offset
Commodity derivative instruments, assets	$	49	$	—	$	—	$	(49	)	$	—	$	45
Other assets	2		—		—		N/A			2		—
Total assets at fair value	$	51	$	—	$	—	$	(49	)	$	2	$	45

Commodity derivative instruments, liabilities	$	88	$	—	$	—	$	(88	)	$	—	$	—


^(a)	Represents the impact of netting assets, liabilities and cash collateral when a legal right of offset exists. As of December 31, 2012, cash collateral of $39 million was netted with mark-to-market derivative liabilities.


^(b)	We have no derivative contracts that are subject to master netting arrangements that are reflected gross on the balance sheet.


^(c)	Includes $108 million classified as current.

Commodity derivatives in Level 1 are exchange-traded contracts for crude oil and refined products measured at fair value with a market approach using the close-of-day settlement prices for the market. Commodity derivatives are covered under master netting agreements with an unconditional right to offset. Collateral deposits in futures commission merchant accounts covered by master netting agreements related to Level 1 commodity derivatives are classified as Level 1 in the fair value hierarchy.

The contingent consideration represents the fair value as of September 30, 2013 of the amount we expect to pay to BP related to the earnout provision for the Galveston Bay Refinery and Related Assets acquisition. See Note 4. The fair value of the contingent consideration was estimated using an income approach and is therefore a Level 3 liability. The amount of cash to be paid under the arrangement is based on both a market-based crack spread and refinery throughput volumes for the months during which the contract applies, as well as established thresholds that cap the annual and total payment. The earnout payment cannot exceed $200 million per year for the first three years of the arrangement or $250 million per year for the last three years of the arrangement, with the total cumulative payment capped at $700 million over the six-year period. Any excess or shortfall from the annual cap for a current year’s earnout calculation will not affect subsequent years’ calculations. The fair value calculation used significant unobservable inputs, including (1) an estimate of refinery throughput volumes; (2) a range of internal and external crack spread forecasts from $12 to $18 per barrel; and (3) a range of risk-adjusted discount rates from 5 percent to 10 percent. An increase or decrease in crack spread forecasts or refinery throughput volume expectations will result in a corresponding increase or decrease in the fair value. Increases to the fair value as a result of increasing forecasts for both of these unobservable inputs, however, are limited as the earnout payment is subject to annual thresholds. An increase or decrease in the discount rate will result in a decrease or increase to the fair value, respectively. The fair value of the contingent consideration is reassessed each quarter, with changes in fair value recorded in cost of revenues.

The following is a reconciliation of the beginning and ending balances recorded for liabilities classified as Level 3 in the fair value hierarchy.



	Three Months Ended September 30,					Nine Months Ended September 30,
(In millions)	2013			2012		2013		2012
Beginning balance	$	611		$	—	$	—	$	—
Contingent consideration agreement	—			—		600		—
Total realized and unrealized (gains) losses included in net income	(5		)	—		6		2
Settlements of derivative instruments	—			—		—		(2		)
Ending balance	$	606		$	—	$	606	$	—

There were no unrealized gains or losses recorded in net income for the three and nine months ended September 30, 2013 and 2012 related to Level 3 derivative instruments held at September 30, 2013 and 2012, respectively. See Note 16 for the income statement impacts of our derivative instruments. There was an unrealized gain of $5 million and an unrealized loss of $6 million related to the contingent consideration agreement for the three and nine months ended September 30, 2013, respectively.

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Fair Values – Nonrecurring

The following table shows the values of assets, by major category, measured at fair value on a nonrecurring basis in periods subsequent to their initial recognition.



	Nine Months Ended September 30,
	2013				2012
(In millions)	Fair Value		Impairment		Fair Value		Impairment
Property, plant and equipment, net	$	1	$	8	$	—	$	—
Other noncurrent assets	—		—		—		14

Due to changing market conditions, we assessed one of our light products terminals for impairment. The terminal is operated by our Refining & Marketing segment. During the second quarter of 2013, we recorded an impairment charge of $8 million for this terminal. The impairment is included in depreciation and amortization on the consolidated statements of income. The fair value of the terminal was measured using a market approach based on comparable area property values which are Level 3 inputs.

As a result of changing market conditions and declining throughput volumes, we impaired our Refining & Marketing segment’s prepaid tariff with Centennial by $14 million during the first quarter of 2012. The fair value measurement of the prepaid tariff was based on the income approach utilizing the probability of shipping sufficient volumes on Centennial’s pipeline over the remaining life of the throughput and deficiency credits, which expire March 31, 2014 if not utilized. This measurement is classified as Level 3.

Fair Values – Reported

The following table summarizes financial instruments on the basis of their nature, characteristics and risk at September 30, 2013 and December 31, 2012, excluding the derivative financial instruments and contingent consideration reported above.



	September 30, 2013				December 31, 2012
(In millions)	Fair Value		Carrying Value		Fair Value		Carrying Value
Financial assets:
Investments	$	203	$	14	$	263	$	59
Other	30		29		33		31
Total financial assets	$	233	$	43	$	296	$	90
Financial liabilities:
Long-term debt^(a)	$	3,270	$	3,002	$	3,559	$	3,006
Deferred credits and other liabilities	24		24		23		23
Total financial liabilities	$	3,294	$</