Unrest amidst Marathon Petroleum shareholders

Two shareholders in Marathon Petroleum Corporation, a Houston firm are voicing concerns about the company’s financial operations.

Together, Paul Foster and Jeff Stevens of Scottsdale,
Arizona hold nearly 1.7% of the outstanding common stock in the company and released a letter sent to Marathon’s Board of Directors. In it, they complained about the company’s performance and business strategy since its 2018 acquisition of Andeavor. They also call for Gary Heminger to be replaced as the Company’s CEO and Chairman of the Board.

Foster is a co-founder and former chairman of Western Refining and a former member of Andeavor. Stevens is a co-founder and former chief executive of Western Refining and former board member of Andeavor and Andeavor Logistics.

“In our view, Marathon’s record of value destruction since the Andeavor acquisition is staggering on both a standalone basis and relative to peers. Today, we believe Marathon has lost the confidence of its largest stockholders and its credibility with sell-side analysis,” wrote the two investors.

They pointed to two examples of the company’s failure to capitalize off the Andeavor acquisition:

• Marathon has failed to attract and maintain a best-in-class executive team, as evidenced by its decision not to fill its Chief Operating Officer role, and;

• Marathon failed to successfully integrate Andeavor, leading to a critical loss of talent.

The two stated they preferred to have a meaningful private dialogue with Marathon’s leadership about their recommendations, but claimed their “efforts to do so were either dismissed or rebuffed.”

The full text of the letter sent by Mr. Foster and Mr. Stevens to the Board last evening is below.

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September 26, 2019

The Board of Directors
Marathon Petroleum Corp.
539 South Main Street
Findlay, OH 45840
Attn: Chairman Gary R. Heminger

Dear Mr. Heminger and Members of the Board of Directors:

As you know, we represent one of the top ten largest stockholders of Marathon Petroleum Corporation (“Marathon” or the “Company”). In addition to collectively being one of Marathon’s largest stockholders, we also have decades of experience operating as board members, executives and investors across the oil and gas industry. We believe Marathon has the best assets in the industry and, if managed correctly, they should yield the best returns to stockholders. This is why we are particularly disappointed that you have chosen to dismiss and rebuff our repeated attempts to forge a meaningful private dialogue with you and a separate dialogue with the Board of Directors’ (the “Board”) lead independent director. We are investors with a demonstrated track record operating refining, mid-stream and retail businesses on a sizeable scale within this industry. This experience, combined with Marathon’s stagnation and destruction of value, causes us great concern with your decision to ignore our perspectives and insights.

We built Western Refining from a $50 million company in 2000 to a company worth $6.4 billion when it was sold to Andeavor in 2017. As a public company, we embraced accountability to our stockholders and exercised sound corporate governance practices. You do not appear to embrace these same values.

Marathon’s Destruction of Stockholder Value

In our view, Marathon’s record of value destruction since the Andeavor acquisition is staggering on both a standalone basis and relative to peers. Today, we believe Marathon has lost the confidence of its largest stockholders and its credibility with sell-side analysts. We feel the evidence speaks for itself:

• Marathon’s stock continues to trade at a persistent and glaring discount to both a sum-of-the-parts valuation and relative to its peers;

• Leadership has failed to deliver the type of growth and profitability it suggested could be produced by an integrated business model;

• Leadership has failed to capture synergies necessary to justify an integrated business model;

• Marathon has embraced both insular investor relations practices and poor governance, as evidenced by its combined Chairman and Chief Executive Officer role, staggered Board and lack of financial reporting clarity;

• Marathon has failed to attract and maintain a best-in-class executive team, as evidenced by its decision not to fill its Chief Operating Officer role, and;

• Marathon failed to successfully integrate Andeavor, leading to a critical loss of talent.

The Path Forward: Unlocking the Value That Stockholders Deserve Starts at the Top

While we agree with the majority of Elliott Management’s proposals that were made public this week, our view is that Elliott has not gone far enough. Other near-term steps must be taken with respect to management and corporate governance to ensure the best interests of stockholders are pursued. In our opinion, the most important step is replacing you, Mr. Heminger, as Marathon’s Chairman and Chief Executive Officer.

Our recent experience trying to interact with Marathon’s lead independent director and your insistence on being present at any such meeting demonstrates a stunning disregard for sound corporate governance.

Engaging with you in a public manner was not our first choice, but unfortunately our hand was forced by your obstruction and obfuscation. We still welcome the opportunity to meet with and commence a substantive dialogue with your independent Board members.