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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, 2020
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 650,695,467 shares of Marathon Petroleum Corporation common stock outstanding as of July 30, 2020.
 


Table of Contents
                            

MARATHON PETROLEUM CORPORATION
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2020
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
LCM
Lower of cost or market
LIFO
Last in, first out, an inventory costing method
LIBOR
London Interbank Offered Rate
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
OTC
Over-the-Counter
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,
(In millions, except per share data)
2020
 
2019
 
2020
 
2019
Revenues and other income:
 
 
 
 
 
 
 
Sales and other operating revenues
$
15,024

 
$
33,529

 
$
40,239

 
$
61,782

Income (loss) from equity method investments(a)
105

 
107

 
(1,105
)
 
206

Net gain on disposal of assets
2

 
4

 
6

 
218

Other income
67

 
30

 
138

 
65

Total revenues and other income
15,198

 
33,670

 
39,278

 
62,271

Costs and expenses:
 
 
 
 
 
 
 
Cost of revenues (excludes items below)
13,777

 
29,682

 
36,598

 
55,642

LCM inventory valuation adjustment
(1,480
)
 

 
1,740

 

Impairment expense
25

 

 
7,847

 

Depreciation and amortization
935

 
886

 
1,897

 
1,805

Selling, general and administrative expenses
746

 
886

 
1,567

 
1,753

Other taxes
214

 
174

 
465

 
360

Total costs and expenses
14,217

 
31,628

 
50,114

 
59,560

Income (loss) from operations
981

 
2,042

 
(10,836
)
 
2,711

Net interest and other financial costs
345

 
322

 
683

 
628

Income (loss) before income taxes
636

 
1,720

 
(11,519
)
 
2,083

Provision (benefit) for income taxes
360

 
353

 
(1,577
)
 
457

Net income (loss)
276

 
1,367

 
(9,942
)
 
1,626

Less net income (loss) attributable to:
 
 
 
 
 
 
 
Redeemable noncontrolling interest
21

 
21

 
41

 
41

Noncontrolling interests
246

 
240

 
(758
)
 
486

Net income (loss) attributable to MPC
$
9

 
$
1,106

 
$
(9,225
)
 
$
1,099

Per Share Data (See Note 7)
 
 
 
 
 
 
 
Basic:
 
 
 
 
 
 
 
Net income (loss) attributable to MPC per share
$
0.01

 
$
1.67

 
$
(14.21
)
 
$
1.65

Weighted average shares outstanding
650

 
662

 
649

 
667

Diluted:
 
 
 
 
 
 
 
Net income (loss) attributable to MPC per share
$
0.01

 
$
1.66

 
$
(14.21
)
 
$
1.63

Weighted average shares outstanding
653

 
666

 
649

 
672

(a) 
The six months ended June 30, 2020 includes $1,315 million of impairment expense. See Note 4 for further information.
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)
2020
 
2019
 
2020
 
2019
Net income (loss)
$
276

 
$
1,367

 
$
(9,942
)
 
$
1,626

Other comprehensive income (loss):
 
 
 
 
 
 
 
Defined benefit plans:
 
 
 
 
 
 
 
Actuarial changes, net of tax of $0, $0, $1 and $6, respectively
(1
)
 
(1
)
 
3

 
(4
)
Prior service, net of tax of ($3), ($3), ($6) and ($11), respectively
(8
)
 
(8
)
 
(17
)
 
(11
)
Other, net of tax of ($1), ($1), ($1) and ($1), respectively
(1
)
 
(1
)
 
(2
)
 
(2
)
Other comprehensive loss
(10
)
 
(10
)
 
(16
)
 
(17
)
Comprehensive income (loss)
266

 
1,357

 
(9,958
)
 
1,609

Less comprehensive income (loss) attributable to:
 
 
 
 
 
 
 
Redeemable noncontrolling interest
21

 
21

 
41

 
41

Noncontrolling interests
246

 
240

 
(758
)
 
486

Comprehensive income (loss) attributable to MPC
$
(1
)
 
$
1,096

 
$
(9,241
)
 
$
1,082

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,
2020
 
December 31,
2019
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
1,091

 
$
1,527

Receivables, less allowance for doubtful accounts of $18 and $17, respectively
4,361

 
7,479

Inventories
8,086

 
10,243

Other current assets
1,105

 
921

Total current assets
14,643

 
20,170

Equity method investments
5,740

 
6,898

Property, plant and equipment, net
45,025

 
45,615

Goodwill
12,710

 
20,040

Right of use assets
2,454

 
2,459

Other noncurrent assets
4,021

 
3,374

Total assets
$
84,593

 
$
98,556

Liabilities
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
6,110

 
$
11,623

Payroll and benefits payable
815

 
1,126

Accrued taxes
1,272

 
1,186

Debt due within one year
1,715

 
711

Operating lease liabilities
625

 
604

Other current liabilities
967

 
897

Total current liabilities
11,504

 
16,147

Long-term debt
30,451

 
28,127

Deferred income taxes
5,914

 
6,392

Defined benefit postretirement plan obligations
1,772

 
1,643

Long-term operating lease liabilities
1,850

 
1,875

Deferred credits and other liabilities
1,285

 
1,265

Total liabilities
52,776

 
55,449

Commitments and contingencies (see Note 22)

 

Redeemable noncontrolling interest
968

 
968

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

 

Common stock:
 
 
 
Issued – 979 million and 978 million shares (par value $0.01 per share, 2 billion shares authorized)
10

 
10

Held in treasury, at cost – 329 million and 329 million shares
(15,149
)
 
(15,143
)
Additional paid-in capital
33,208

 
33,157

Retained earnings
6,008

 
15,990

Accumulated other comprehensive loss
(336
)
 
(320
)
Total MPC stockholders’ equity
23,741

 
33,694

Noncontrolling interests
7,108

 
8,445

Total equity
30,849

 
42,139

Total liabilities, redeemable noncontrolling interest and equity
$
84,593

 
$
98,556

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)
2020
 
2019
Operating activities:
 
 
 
Net income (loss)
$
(9,942
)
 
$
1,626

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
Amortization of deferred financing costs and debt discount
30

 
9

Impairment expense
7,847

 

Depreciation and amortization
1,897

 
1,805

LCM inventory valuation adjustment
1,740

 

Pension and other postretirement benefits, net
103

 
86

Deferred income taxes
(465
)
 
360

Net gain on disposal of assets
(6
)
 
(218
)
(Income) loss from equity method investments(a)
1,105

 
(206
)
Distributions from equity method investments
330

 
310

Changes in income tax receivable
(1,150
)
 
(106
)
Changes in the fair value of derivative instruments
23

 
(27
)
Changes in operating assets and liabilities, net of effects of businesses acquired:
 
 
 
Current receivables
3,117

 
(1,697
)
Inventories
417

 
740

Current accounts payable and accrued liabilities
(5,220
)
 
1,297

Right of use assets and operating lease liabilities, net
2

 
9

All other, net
(58
)
 
257

Net cash provided by (used in) operating activities
(230
)
 
4,245

Investing activities:
 
 
 
Additions to property, plant and equipment
(1,910
)
 
(2,419
)
Disposal of assets
79

 
33

Investments – acquisitions, loans and contributions
(383
)
 
(595
)
 – redemptions, repayments and return of capital
118

 
58

All other, net
19

 
43

Net cash used in investing activities
(2,077
)
 
(2,880
)
Financing activities:
 
 
 
Long-term debt – borrowings
9,672

 
7,964

                          – repayments
(6,388
)
 
(7,116
)
Debt issuance costs
(24
)
 

Issuance of common stock
6

 
3

Common stock repurchased

 
(1,385
)
Dividends paid
(755
)
 
(706
)
Distributions to noncontrolling interests
(620
)
 
(640
)
Contributions from noncontrolling interests

 
95

All other, net
(20
)
 
(56
)
Net cash provided by (used in) financing activities
1,871

 
(1,841
)
Net change in cash, cash equivalents and restricted cash
(436
)
 
(476
)
Cash, cash equivalents and restricted cash at beginning of period
1,529

 
1,725

Cash, cash equivalents and restricted cash at end of period
$
1,093

 
$
1,249

(a) 
The six months ended June 30, 2020 includes $1,315 million of impairment expense. See Note 4 for further information.

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
(Shares in millions;
amounts in millions of dollars)
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
 
Balance as of December 31, 2019
978

 
$
10

 
(329
)
 
$
(15,143
)
 
$
33,157

 
$
15,990

 
$
(320
)
 
$
8,445

 
$
42,139

 
$
968

Net income (loss)

 

 

 

 

 
(9,234
)
 

 
(1,004
)
 
(10,238
)
 
20

Dividends declared on common stock ($0.58 per share)

 

 

 

 

 
(377
)
 

 

 
(377
)
 

Distributions to noncontrolling interests

 

 

 

 

 

 

 
(300
)
 
(300
)
 
(20
)
Other comprehensive loss

 

 

 

 

 

 
(6
)
 

 
(6
)
 

Stock based compensation
1

 

 

 
(2
)
 
17

 

 

 
1

 
16

 

Equity transactions of MPLX

 

 

 

 
(5
)
 

 

 
(2
)
 
(7
)
 

Other

 

 

 

 

 
1

 

 

 
1

 

Balance as of March 31, 2020
979

 
$
10

 
(329
)
 
$
(15,145
)
 
$
33,169

 
$
6,380

 
$
(326
)
 
$
7,140

 
$
31,228

 
$
968

Net income

 

 

 

 

 
9

 

 
246

 
255

 
21

Dividends declared on common stock ($0.58 per share)

 

 

 

 

 
(380
)
 

 

 
(380
)
 

Distributions to noncontrolling interests

 

 

 

 

 

 

 
(279
)
 
(279
)
 
(21
)
Other comprehensive loss

 

 

 

 

 

 
(10
)
 

 
(10
)
 

Stock based compensation

 

 

 
(4
)
 
31

 

 

 
3

 
30

 

Equity transactions of MPLX

 

 

 

 
8

 

 

 
(2
)
 
6

 

Other

 

 

 

 

 
(1
)
 

 

 
(1
)
 

Balance as of June 30, 2020
979

 
$
10

 
(329
)
 
$
(15,149
)
 
$
33,208

 
$
6,008

 
$
(336
)
 
$
7,108

 
$
30,849

 
$
968


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




























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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, 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

 

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

 

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.

8

Table of Contents
                            

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. 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 3,870 retail transportation fuel and convenience stores across the United States and also sell transportation fuel to consumers through approximately 1,070 direct dealer locations under long-term supply contracts. MPC’s midstream operations are primarily conducted through MPLX LP (“MPLX”), which owns and operates crude oil and light product transportation and logistics infrastructure as well as gathering, processing, and fractionation assets. We own the general partner and a majority limited partner interest in MPLX.
See Note 23 Subsequent Events for information regarding the announced agreement to sell our Speedway business.
Basis of Presentation
All significant intercompany transactions and accounts have been eliminated.
Certain prior period financial statement amounts have been reclassified to conform to current period presentation.
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, 2019. The results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of the results to be expected for the full year.
2. ACCOUNTING STANDARDS
Recently Adopted
Effective January 1, 2020, we adopted ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” using the modified retrospective transition method. The amendment requires entities to consider a broader range of information to estimate expected credit losses, which may result in earlier recognition of losses. The ASU requires the company to utilize an expected loss methodology in place of the incurred loss methodology for financial instruments, including trade receivables, and off-balance sheet credit exposures. Adoption of the standard did not have a material impact on our financial statements.
We are exposed to credit losses primarily through our sales of refined petroleum products, crude oil and midstream services. We assess each customer’s ability to pay through our credit review process. The credit review process considers various factors such as external credit ratings, a review of financial statements to determine liquidity, leverage, trends and business specific risks, market information, pay history and our business strategy. Customers that do not qualify for payment terms are required to prepay or provide a letter of credit. We monitor our ongoing credit exposure through timely review of customer payment activity. At June 30, 2020, we reported $4,361 million of accounts and notes receivable, net of allowances of $18 million.
We are also exposed to credit losses from off-balance sheet exposures, such as guarantees of joint venture debt. See Note 22 for more information on these off-balance sheet exposures.
We also adopted the following ASUs during the first six months of 2020, which also did not have a material impact to our financial statements or financial statement disclosures:
ASU
 
 
Effective Date
2018-13
Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement
 
January 1, 2020
2020-04
Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting
 
April 1, 2020


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Not Yet Adopted
ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes
In December 2019, the FASB issued new guidance to simplify the accounting for income taxes. Amendments include removal of certain exceptions to the general principles of ASC 740 and simplification in several other areas such as accounting for a franchise tax or similar tax that is partially based on income. The change is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted in any interim or annual period, with any adjustments reflected as of the beginning of the fiscal year of adoption. We do not expect the application of this ASU to have a material impact on our consolidated financial statements.
3. MASTER LIMITED PARTNERSHIP
We own the general partner and a majority limited partner interest in MPLX, which owns and operates crude oil and light product transportation and logistics infrastructure as well as gathering, processing, and fractionation assets. We control MPLX through our ownership of the general partner interest and as of June 30, 2020 we owned approximately 63 percent of the outstanding MPLX common units.
MPLX’s Acquisition of ANDX
On July 30, 2019, MPLX completed its acquisition of Andeavor Logistics LP (“ANDX”), and ANDX survived as a wholly owned subsidiary of MPLX. 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. Additionally, as a result of MPLX’s acquisition of ANDX, 600,000 ANDX preferred units were converted into 600,000 preferred units of MPLX (“Series B preferred units”). Series B preferred unitholders are entitled to receive, when and if declared by the board, a fixed distribution of $68.75 per unit, per annum, payable semi-annually in arrears on February 15 and August 15, or the first business day thereafter, up to and including February 15, 2023. After February 15, 2023, the holders of Series B preferred units are entitled to receive cumulative, quarterly distributions payable in arrears on the 15th day of February, May, August and November of each year, or the first business day thereafter, based on a floating annual rate equal to the three month LIBOR plus 4.652 percent.
MPC accounted for this transaction as a common control transaction, as defined by ASC 805, which resulted in an increase to noncontrolling interest and a decrease to additional paid-in capital of approximately $55 million, net of tax. During the third quarter of 2019, we pushed down to MPLX the portion of the goodwill attributable to ANDX as of October 1, 2018, the date of our acquisition of Andeavor. Due to this push down of goodwill, we also recorded an incremental $642 million deferred tax liability associated with the portion of the non-deductible goodwill attributable to the noncontrolling interest in MPLX with an offsetting reduction of our additional paid-in capital balance. We have consolidated ANDX since we acquired Andeavor on October 1, 2018 in accordance with ASC 810.
Agreements
We have various long-term, fee-based commercial agreements with MPLX. Under these agreements, MPLX provides 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 that establish fees for operational and management services provided between us and MPLX and for executive management services and certain general and administrative services provided by us to MPLX. 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)
2020
 
2019
Increase due to the issuance of MPLX & ANDX common units
$
4

 
$
7

Tax impact
(1
)
 
(2
)
Increase in MPC's additional paid-in capital, net of tax
$
3

 
$
5



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4. IMPAIRMENTS
The outbreak of COVID-19 and its development into a pandemic in March 2020 have resulted in significant economic disruption globally. Actions taken by various governmental authorities, individuals and companies around the world to prevent the spread of COVID-19 through social distancing have restricted travel, many business operations, public gatherings and the overall level of individual movement and in-person interaction across the globe. This has in turn significantly reduced global economic activity and resulted in a decrease in motor vehicle use at a time when seasonal driving patterns typically result in an increase of consumer demand for gasoline and a dramatic reduction in airline flights. These macroeconomic conditions and certain global geopolitical events in the first quarter of 2020 contributed to a significant decline in crude oil prices as well as an increase in crude oil price volatility. The decrease in demand for refined petroleum products coupled with the decline in the price of crude oil has resulted in a significant decrease in the price and volume of the refined petroleum products we produce and sell as compared to the three and six months ended June 30, 2019.
During the first quarter of 2020, the overall deterioration in the economy and the environment in which we operate, the related changes to our expected future cash flows, as well as a sustained decrease in share price were considered triggering events requiring various impairment assessments of the carrying values of our assets, which resulted in the impairment charges discussed below.
The table below provides information related to the impairments recognized during the three and six months ended June 30, 2020 and the location of these impairments within the consolidated statements of income.
 
 
Three Months Ended 
June 30,
 
Six Months Ended 
June 30,
(In millions)
Income Statement Line
2020
 
2020
Goodwill
Impairment expense
$

 
$
7,330

Equity method investments
Income (loss) from equity method investments

 
1,315

Long-lived assets
Impairment expense(a)
25

 
517

Total impairments
 
$
25

 
$
9,162


(a) 
Impairment expense in the three months ended June 30, 2020 is related to a Midstream terminal asset with remaining net book value of $10 million.
Goodwill
During the first quarter of 2020, we recorded an impairment of goodwill of $7.33 billion. See the table below for detail by segment. The goodwill impairment within the Refining & Marketing segment was primarily driven by the effects of COVID-19 and the decline in commodity prices. The impairment within the Midstream segment was primarily driven by additional information related to the slowing of drilling activity, which has reduced production growth forecasts from MPLX’s producer customers.
The fair value of the reporting units for the goodwill impairment analysis was determined based on applying both a discounted cash flow or income approach as well as a market approach. The discounted cash flow fair value estimate is based on known or knowable information at the measurement date. The significant assumptions that were used to develop the estimates of the fair values under the discounted cash flow method included management’s best estimates of the expected future results and discount rates, which range from