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Section 1: 10-Q (10-Q)

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Table of Contents
                            

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
OR
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)
Securities registered pursuant to Section 12(b) of the Act
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $.01
MPC
New York Stock Exchange
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      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files.) Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer          Accelerated Filer     Non-accelerated Filer      Smaller reporting company
Emerging growth company    

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes     No  
There were 658,319,324 shares of Marathon Petroleum Corporation common stock outstanding as of July 31, 2019.
 


Table of Contents
                            

MARATHON PETROLEUM CORPORATION
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2019
TABLE OF CONTENTS

 
Page
 
 
 
 
 
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.

1


GLOSSARY OF TERMS
Throughout this report, the following company or industry specific terms and abbreviations are used:
ANS
Alaskan North Slope crude oil, an oil index benchmark price
ASC
Accounting Standards Codification
ASU
Accounting Standards Update
barrel
One stock tank barrel, or 42 United States gallons liquid volume, used in reference to crude oil or other liquid hydrocarbons
CARB
California Air Resources Board
CARBOB
California Reformulated Gasoline Blendstock for Oxygenate Blending
CBOB
Conventional Blending for Oxygenate Blending
EBITDA (a non-GAAP financial measure)
Earnings Before Interest, Tax, Depreciation and Amortization
EPA
United States Environmental Protection Agency
FASB
Financial Accounting Standards Board
GAAP
Accounting principles generally accepted in the United States
IDR
Incentive Distribution Right
LCM
Lower of cost or market
LIFO
Last in, first out, an inventory costing method
LLS
Louisiana Light Sweet crude oil, an oil index benchmark price
mbpd
Thousand barrels per day
MMBtu
One million British thermal units, an energy measurement
MMcf/d
One million cubic feet of natural gas per day
NGL
Natural gas liquids, such as ethane, propane, butanes and natural gasoline
NYMEX
New York Mercantile Exchange
OPEC
Organization of Petroleum Exporting Countries
OTC
Over-the-Counter
ppm
Parts per million
RIN
Renewable Identification Number
SEC
United States Securities and Exchange Commission
ULSD
Ultra-low sulfur diesel
USGC
U.S. Gulf Coast
VIE
Variable interest entity
WTI
West Texas Intermediate crude oil, an oil index benchmark price

2



PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

MARATHON PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
 
Three Months Ended 
June 30,
 
Six Months Ended 
June 30,
(Millions, except per share data)
2019
 
2018
 
2019
 
2018
Revenues and other income:
 
 
 
 
 
 
 
Sales and other operating revenues
$
33,547

 
$
22,317

 
$
61,814

 
$
41,183

Income from equity method investments
107

 
80

 
206

 
166

Net gain on disposal of assets
4

 
3

 
218

 
5

Other income
30

 
45

 
65

 
75

Total revenues and other income
33,688

 
22,445

 
62,303

 
41,429

Costs and expenses:
 
 
 
 
 
 
 
Cost of revenues (excludes items below)
29,682

 
19,655

 
55,642

 
37,166

Depreciation and amortization
886

 
533

 
1,805

 
1,061

Selling, general and administrative expenses
904

 
424

 
1,785

 
826

Other taxes
174

 
122

 
360

 
225

Total costs and expenses
31,646

 
20,734

 
59,592

 
39,278

Income from operations
2,042

 
1,711

 
2,711

 
2,151

Net interest and other financial costs
322

 
195

 
628

 
378

Income before income taxes
1,720

 
1,516

 
2,083

 
1,773

Provision for income taxes
353

 
281

 
457

 
303

Net income
1,367

 
1,235

 
1,626

 
1,470

Less net income attributable to:
 
 
 
 
 
 
 
Redeemable noncontrolling interest
21

 
20

 
41

 
36

Noncontrolling interests
240

 
160

 
486

 
342

Net income attributable to MPC
$
1,106

 
$
1,055

 
$
1,099

 
$
1,092

Per Share Data (See Note 7)
 
 
 
 
 
 
 
Basic:
 
 
 
 
 
 
 
Net income attributable to MPC per share
$
1.67

 
$
2.30

 
$
1.65

 
$
2.34

Weighted average shares outstanding
662

 
459

 
667

 
467

Diluted:
 
 
 
 
 
 
 
Net income attributable to MPC per share
$
1.66

 
$
2.27

 
$
1.63

 
$
2.31

Weighted average shares outstanding
666

 
464

 
672

 
472

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

3

Table of Contents
                            

MARATHON PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
 
Three Months Ended 
June 30,
 
Six Months Ended 
June 30,
(Millions of dollars)
2019
 
2018
 
2019
 
2018
Net income
$
1,367

 
$
1,235

 
$
1,626

 
$
1,470

Other comprehensive income (loss):
 
 
 
 
 
 
 
Defined benefit plans:
 
 
 
 
 
 
 
Actuarial changes, net of tax of $0, $2, $6 and $5, respectively
(1
)
 
7

 
(4
)
 
14

Prior service costs, net of tax of ($3), ($2), ($11) and ($4), respectively
(8
)
 
(7
)
 
(11
)
 
(14
)
Other, net of tax of ($1), $0, ($1) and ($1), respectively
(1
)
 

 
(2
)
 
(2
)
Other comprehensive income (loss)
(10
)
 

 
(17
)
 
(2
)
Comprehensive income
1,357

 
1,235

 
1,609

 
1,468

Less comprehensive income attributable to:
 
 
 
 
 
 
 
Redeemable noncontrolling interest
21

 
20

 
41

 
36

Noncontrolling interests
240

 
160

 
486

 
342

Comprehensive income attributable to MPC
$
1,096

 
$
1,055

 
$
1,082

 
$
1,090

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

4

Table of Contents
                            

MARATHON PETROLEUM CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)

(Millions of dollars, except share data)
June 30,
2019
 
December 31,
2018
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
1,247

 
$
1,687

Receivables, less allowance for doubtful accounts of $10 and $9, respectively
7,603

 
5,853

Inventories
9,088

 
9,837

Other current assets
458

 
646

Total current assets
18,396

 
18,023

Equity method investments
6,729

 
5,898

Property, plant and equipment, net
45,335

 
45,058

Goodwill
20,277

 
20,184

Right of use assets
2,588

 

Other noncurrent assets
3,571

 
3,777

Total assets
$
96,896

 
$
92,940

Liabilities
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
10,905

 
$
9,366

Payroll and benefits payable
778

 
1,152

Accrued taxes
1,223

 
1,446

Debt due within one year
554

 
544

Operating lease liabilities
615

 

Other current liabilities
815

 
708

Total current liabilities
14,890

 
13,216

Long-term debt
27,853

 
26,980

Deferred income taxes
5,235

 
4,864

Defined benefit postretirement plan obligations
1,610

 
1,509

Long-term operating lease liabilities
2,068

 

Deferred credits and other liabilities
1,174

 
1,318

Total liabilities
52,830

 
47,887

Commitments and contingencies (see Note 23)

 

Redeemable noncontrolling interest
1,005

 
1,004

Equity
 
 
 
MPC stockholders’ equity:
 
 
 
Preferred stock, no shares issued and outstanding (par value $0.01 per share, 30 million shares authorized)

 

Common stock:
 
 
 
Issued – 978 million and 975 million shares (par value $0.01 per share, 2 billion shares authorized)
10

 
10

Held in treasury, at cost – 318 million and 295 million shares
(14,573
)
 
(13,175
)
Additional paid-in capital
33,785

 
33,729

Retained earnings
15,146

 
14,755

Accumulated other comprehensive loss
(161
)
 
(144
)
Total MPC stockholders’ equity
34,207

 
35,175

Noncontrolling interests
8,854

 
8,874

Total equity
43,061

 
44,049

Total liabilities, redeemable noncontrolling interest and equity
$
96,896

 
$
92,940

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

5

Table of Contents
                            

MARATHON PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 
Six Months Ended 
June 30,
(Millions of dollars)
2019
 
2018
Operating activities:
 
 
 
Net income
$
1,626

 
$
1,470

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Amortization of deferred financing costs and debt discount
9

 
35

Depreciation and amortization
1,805

 
1,061

Pension and other postretirement benefits, net
86

 
65

Deferred income taxes
360

 
2

Net gain on disposal of assets
(218
)
 
(5
)
Income from equity method investments
(206
)
 
(166
)
Distributions from equity method investments
310

 
217

Changes in the fair value of derivative instruments
(27
)
 
1

Changes in operating assets and liabilities, net of effects of businesses acquired:
 
 
 
Current receivables
(1,750
)
 
(225
)
Inventories
740

 
66

Current accounts payable and accrued liabilities
1,297

 
(231
)
Right of use assets and operating lease liabilities, net
9

 

All other, net
204

 
(41
)
Net cash provided by operating activities
4,245

 
2,249

Investing activities:
 
 
 
Additions to property, plant and equipment
(2,419
)
 
(1,466
)
Acquisitions, net of cash acquired
6

 

Disposal of assets
33

 
14

Investments – acquisitions, loans and contributions
(595
)
 
(118
)
 – redemptions, repayments and return of capital
58

 
15

All other, net
37

 
37

Net cash used in investing activities
(2,880
)
 
(1,518
)
Financing activities:
 
 
 
Long-term debt – borrowings
7,964

 
9,610

                          – repayments
(7,116
)
 
(5,270
)
Debt issuance costs

 
(53
)
Issuance of common stock
3

 
21

Common stock repurchased
(1,385
)
 
(2,212
)
Dividends paid
(706
)
 
(430
)
Distributions to noncontrolling interests
(640
)
 
(394
)
Contributions from noncontrolling interests
95

 
5

All other, net
(56
)
 
(19
)
Net cash provided by (used in) financing activities
(1,841
)
 
1,258

Net increase (decrease) in cash, cash equivalents and restricted cash
(476
)
 
1,989

Cash, cash equivalents and restricted cash at beginning of period
1,725

 
3,015

Cash, cash equivalents and restricted cash at end of period
$
1,249

 
$
5,004

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

6

Table of Contents
                            

MARATHON PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMBALE NONCONTROLLING INTEREST
(Unaudited)

 
MPC Stockholders’ Equity
 
 
 
 
 
 
 
Common Stock
 
Treasury Stock
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Non-controlling Interests
 
Total Equity
 
Redeemable Non-controlling Interest
(In millions)
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
 
Balance as of December 31, 2018
975

 
$
10

 
(295
)
 
$
(13,175
)
 
$
33,729

 
$
14,755

 
$
(144
)
 
$
8,874

 
$
44,049

 
$
1,004

Net income (loss)

 

 

 

 

 
(7
)
 

 
246

 
239

 
20

Dividends declared on common stock ($0.53 per share)

 

 

 

 

 
(357
)
 

 

 
(357
)
 

Distributions to noncontrolling interests

 

 

 

 

 

 

 
(305
)
 
(305
)
 
(20
)
Contributions from noncontrolling interests

 

 

 

 

 

 

 
95

 
95

 

Other comprehensive loss

 

 

 

 

 

 
(7
)
 

 
(7
)
 

Shares repurchased

 

 
(14
)
 
(885
)
 

 

 

 

 
(885
)
 

Stock based compensation
1

 

 

 
(3
)
 
32

 

 

 
(1
)
 
28

 

Impact from equity transactions of MPLX & ANDX

 

 

 

 
3

 

 

 
(1
)
 
2

 

Other

 

 

 

 

 

 

 
(1
)
 
(1
)
 

Balance as of March 31, 2019
976

 
$
10

 
(309
)
 
$
(14,063
)
 
$
33,764

 
$
14,391

 
$
(151
)
 
$
8,907

 
$
42,858

 
$
1,004

Net income

 

 

 

 

 
1,106

 

 
240

 
1,346

 
21

Dividends declared on common stock ($0.53 per share)

 

 

 

 

 
(351
)
 

 

 
(351
)
 

Distributions to noncontrolling interests

 

 

 

 

 

 

 
(295
)
 
(295
)
 
(20
)
Other comprehensive loss

 

 

 

 

 

 
(10
)
 

 
(10
)
 

Shares repurchased

 

 
(9
)
 
(500
)
 

 

 

 

 
(500
)
 

Stock based compensation
2

 

 

 
(10
)
 
19

 

 

 
2

 
11

 

Impact from equity transactions of MPLX & ANDX

 

 

 

 
2

 

 

 
(1
)
 
1

 

Other

 

 

 

 

 

 

 
1

 
1

 

Balance as of June 30, 2019
978

 
$
10

 
(318
)
 
$
(14,573
)
 
$
33,785

 
$
15,146

 
$
(161
)
 
$
8,854

 
$
43,061

 
$
1,005


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























7

Table of Contents
                            

MARATHON PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMBALE NONCONTROLLING INTEREST
(Unaudited)
 
MPC Stockholders’ Equity
 
 
 
 
 
 
 
Common Stock
 
Treasury Stock
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Non-controlling Interests
 
Total Equity
 
Redeemable Non-controlling Interest
(Shares in millions;
amounts in millions of dollars)
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
 
Balance as of December 31, 2017
734

 
$
7

 
(248
)
 
$
(9,869
)
 
$
11,262

 
$
12,864

 
$
(231
)
 
$
6,795

 
$
20,828

 
$
1,000

Cumulative effect of adopting new accounting standards

 

 

 

 

 
63

 

 
1

 
64

 

Net income

 

 

 

 

 
37

 

 
182

 
219

 
16

Dividends declared on common stock ($0.46 per share)

 

 

 

 

 
(219
)
 

 

 
(219
)
 

Distributions to noncontrolling interests

 

 

 

 

 

 

 
(179
)
 
(179
)
 
(16
)
Contributions from noncontrolling interests

 

 

 

 

 

 

 
1

 
1

 

Other comprehensive loss

 

 

 

 

 

 
(2
)
 

 
(2
)
 

Shares repurchased

 

 
(19
)
 
(1,327
)
 

 

 

 

 
(1,327
)
 

Stock based compensation

 

 

 
(4
)
 
27

 

 

 
1

 
24

 

Impact from equity transactions of MPLX & ANDX

 

 

 

 
2,380

 

 

 
(2,926
)
 
(546
)
 

Balance as of March 31, 2018
734

 
$
7

 
(267
)
 
$
(11,200
)
 
$
13,669

 
$
12,745

 
$
(233
)
 
$
3,875

 
$
18,863

 
$
1,000

Net income

 

 

 

 

 
1,055

 

 
160

 
1,215

 
20

Dividends declared on common stock ($0.46 per share)

 

 

 

 

 
(211
)
 

 

 
(211
)
 

Distributions to noncontrolling interests

 

 

 

 

 

 

 
(182
)
 
(182
)
 
(17
)
Contributions from noncontrolling interests

 

 

 

 

 

 

 
4

 
4

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

Shares repurchased

 

 
(12
)
 
(885
)
 

 

 

 

 
(885
)
 

Stock based compensation
1

 

 

 
(8
)
 
18

 

 

 
4

 
14

 

Impact from equity transactions of MPLX & ANDX

 

 

 

 
1

 

 

 
(1
)
 

 

Balance as of June 30, 2018
735

 
$
7

 
(279
)
 
$
(12,093
)
 
$
13,688

 
$
13,589

 
$
(233
)
 
$
3,860

 
$
18,818

 
$
1,003


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
We are a leading, integrated, downstream energy company headquartered in Findlay, Ohio. We operate the nation's largest refining system with more than 3 million barrels per day of crude oil capacity across 16 refineries. We sell refined products to wholesale marketing customers domestically and internationally, to buyers on the spot market, to consumers through our Retail business segment and to independent entrepreneurs who operate approximately 7,000 branded outlets. Our retail operations own and operate approximately 3,910 retail transportation fuel and convenience stores across the United States and also sell transportation fuel to consumers through approximately 1,060 direct dealer locations under long-term supply contracts. MPC’s midstream operations are primarily conducted through MPLX LP (“MPLX”) and Andeavor Logistics LP (“ANDX”), which own and operate crude oil and light product transportation and logistics infrastructure as well as gathering, processing, and fractionation assets. We own the general partner and majority limited partner interests in these two midstream companies.
Refer to Note 4 for further information on the Andeavor acquisition, which closed on October 1, 2018, and to Notes 3 and 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 SEC applicable to interim period financial statements and do not include all of the information and disclosures required by 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, 2018. The results of operations for the three and six months ended June 30, 2019 are not necessarily indicative of the results to be expected for the full year.
2. ACCOUNTING STANDARDS
Recently Adopted
ASU 2016-02, Leases
We adopted ASU No. 2016-02, Leases (“ASC 842”), as of January 1, 2019, electing the transition method which permits entities to adopt the provisions of the standard using the modified retrospective approach without adjusting comparative periods. We also elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed us to grandfather the historical accounting conclusions until a reassessment event is present. We have also elected the practical expedient to not recognize short-term leases on the balance sheet, the practical expedient related to right of way permits and land easements which allows us to carry forward our accounting treatment for those existing agreements, and the practical expedient to combine lease and non-lease components for the majority of our underlying classes of assets except for our third-party contractor service and equipment agreements and boat and barge equipment agreements in which we are the lessee. We did not elect the practical expedient to combine lease and non-lease components for arrangements in which we are the lessor. In instances where the practical expedient was not elected, lease and non-lease consideration is allocated based on relative standalone selling price.
Right of use (“ROU”) assets represent our right to use an underlying asset in which we obtain substantially all of the economic benefits and the right to direct the use of the asset during the lease term. Lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. We recognize ROU assets and lease liabilities on the balance sheet for leases with a lease term of greater than one year. Payments that are not fixed at the commencement of the lease are considered variable and are excluded from the ROU asset and lease liability calculations. In the measurement of our ROU assets and lease liabilities, the fixed lease payments in the agreement are discounted using a secured incremental borrowing rate for a term similar to the duration of the lease, as our leases do not provide implicit rates. Operating lease expense is recognized on a straight-line basis over the lease term.

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Adoption of the new standard resulted in the recording of ROU assets and lease liabilities of approximately $2.81 billion and $2.90 billion, respectively, as of January 1, 2019. The standard did not materially impact our consolidated statements of income, cash flows or equity as a result of adoption.
As a lessor under ASC 842, MPLX may be required to re-classify existing operating leases to sales-type leases upon modification and related reassessment of the leases. If such a modification were to occur, it may result in the de-recognition of existing assets, recognition of a receivable in the amount of the present value of fixed payments expected to be received by MPLX under the lease, and recognition of a corresponding gain or loss in the period of change. MPLX will evaluate the impact of a lease reassessment as modifications occur.
We also adopted the following ASUs during the first six months of 2019, none of which had a material impact to our financial statements or financial statement disclosures:
ASU
 
 
Effective Date
2018-02
Reporting Comprehensive Income - Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
 
January 1, 2019
2017-12
Derivatives and Hedging - Targeted Improvements to Accounting for Hedging Activities
 
January 1, 2019

Not Yet Adopted
ASU 2017-04, Intangibles - Goodwill and Other - Simplifying the Test for Goodwill Impairment
In January 2017, the FASB issued an ASU which simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Under the new guidance, the recognition of an impairment charge is calculated based on the amount by which the carrying amount exceeds the reporting unit’s fair value, which could be different from the amount calculated under the current method using the implied fair value of the goodwill; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The guidance should be applied on a prospective basis and is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019.
ASU 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments
In June 2016, the FASB issued an ASU related to the accounting for credit losses on certain financial instruments. The guidance requires that for most financial assets, losses be based on an expected loss approach which includes estimates of losses over the life of exposure that considers historical, current and forecasted information. Expanded disclosures related to the methods used to estimate the losses as well as a specific disaggregation of balances for financial assets are also required. The change is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. We do not expect application of this ASU to have a material impact on our consolidated financial statements.
3. MASTER LIMITED PARTNERSHIPS
We own the general partner and majority limited partner interests in two midstream companies, MPLX and ANDX, which own and operate gathering, processing, and fractionation assets, as well as crude oil and light product transportation and logistics infrastructure. As of June 30, 2019, we owned 64 percent of the outstanding common units of both MPLX and ANDX. We control both MPLX and ANDX through our ownership of the general partner interest.
As described in Notes 4 and 5, we have consolidated ANDX since October 1, 2018 in accordance with ASC 810 and previously recorded ANDX’s assets and liabilities to our balance sheet at preliminary fair values as of the Andeavor acquisition date of October 1, 2018.
On July 30, 2019, MPLX completed its acquisition of ANDX. At the effective time of the ANDX acquisition, each common unit held by ANDX’s public unitholders was converted into the right to receive 1.135 MPLX common units. ANDX common units held by MPC were converted into the right to receive 1.0328 MPLX common units. ANDX common unitholders will not receive any future distributions from ANDX, but instead will receive a second quarter 2019 distribution as and when declared by the Board of Directors of MPLX with respect to the MPLX common units issued in connection with the acquisition. Additionally, the ANDX Series A Preferred unitholders will not receive any future distributions from ANDX, but instead will receive the semi-annual distributions payable August 15, 2019 on MPLX Series B Preferred units issued in connection with the acquisition. As of July 30, 2019, MPC will account for this transaction as a common control transaction, as defined by ASC 805, which will result in adjustments to our noncontrolling interest and additional paid-in capital balances.

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Dropdowns to MPLX and GP/IDR Exchange
On February 1, 2018, we contributed refining logistics assets and fuels distribution services to MPLX in exchange for $4.1 billion in cash and approximately 112 million common units and 2 million general partner units from MPLX. MPLX financed the cash portion of the transaction with its $4.1 billion 364-day term loan facility, which was entered into on January 2, 2018. We agreed to waive approximately one-third of the first quarter 2018 distributions on the common units issued in connection with this transaction. The contributions of these assets were accounted for as transactions between entities under common control and we did not record a gain or loss.
Immediately following the February 1, 2018 dropdown to MPLX, our IDRs were cancelled and our economic general partner interest was converted into a non-economic general partner interest, all in exchange for 275 million newly issued MPLX common units (“GP/IDR Exchange”). As a result of this transaction, the general partner units and IDRs were eliminated, are no longer outstanding and no longer participate in distributions of cash from MPLX.
Agreements
We have various long-term, fee-based commercial agreements with MPLX and ANDX. Under these agreements, MPLX and ANDX provide transportation, storage, distribution and marketing services to us. With certain exceptions, these agreements generally contain minimum volume commitments. These transactions are eliminated in consolidation but are reflected as intersegment transactions between our Refining & Marketing and Midstream segments. We also have agreements with MPLX and ANDX that establish fees for operational and management services provided between us and MPLX and ANDX and for executive management services and certain general and administrative services provided by us to MPLX and ANDX. These transactions are eliminated in consolidation but are reflected as intersegment transactions between our Corporate and Midstream segments.
Noncontrolling Interest
As a result of equity transactions of MPLX and ANDX, we are required to adjust non-controlling interest and additional paid-in capital. Changes in MPC’s additional paid-in capital resulting from changes in its ownership interests in MPLX and ANDX were as follows:
 
Six Months Ended 
June 30,
(In millions)
2019
 
2018
Increase due to the issuance of MPLX common units and general partner units to MPC
$

 
$
1,114

Increase due to GP/IDR Exchange

 
1,808

Increase due to the issuance of MPLX & ANDX common units
7

 
5

Increase in MPC's additional paid-in capital
7

 
2,927

Tax impact
(2
)
 
(546
)
Increase in MPC's additional paid-in capital, net of tax
$
5

 
$
2,381


4. ACQUISITIONS
Acquisition of Andeavor
On October 1, 2018, we acquired Andeavor. The total value of consideration transferred was $23.46 billion, consisting of $19.97 billion in equity and $3.49 billion in cash. The cash portion of the purchase price was funded using cash on hand. Our financial results reflect the results of Andeavor from the date of the acquisition.
We accounted for the Andeavor acquisition using the acquisition method of accounting, which requires Andeavor assets and liabilities to be recorded to our balance sheet at fair value as of the acquisition date. We will complete a final determination of the fair value of certain assets and liabilities within the one year measurement period from the date of the acquisition as required by ASC 805. Due to the level of effort required to develop fair value measurements, the valuation studies necessary to determine the fair value of assets acquired and liabilities assumed are preliminary, including the underlying cash flows used to determine the fair value of identified intangible assets and economic obsolescence adjustments to property, plant and equipment. The size and the breadth of the Andeavor acquisition necessitates the use of the one year measurement period to fully analyze all the factors used in establishing the asset and liability fair values as of the acquisition date, including, but not limited to, property, plant and equipment, intangible assets, real property, leases, environmental and asset retirement obligations and the related tax impacts of any changes made. Any potential adjustments made could be material in relation to the preliminary values.

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During the six months ended June 30, 2019, we recorded adjustments to the preliminary fair value estimates of assets acquired and liabilities assumed as of the acquisition date as noted in the table below.
(In millions)
As originally reported
 
Adjustments
 
As adjusted
Cash and cash equivalents
$
382

 
$

 
$
382

Receivables
2,744

 
(2
)
 
2,742

Inventories
5,204

 
(9
)
 
5,195