Is Marathon Petroleum's (MPC) Heavy Debt Load Justifiable Amid Eroding EBIT Trends?

Marathon Petroleum Corporation (MPC) has long operated with a high-debt strategy, leveraging its balance sheet to fund aggressive growth in refining, midstream, and renewable fuels. As of March 2025, its debt-to-equity ratio stands at 1.96, a level significantly above its 13-year median of 1.05. This raises a critical question for investors: Is this heavy debt load justified in a market where EBITDA trends have shown volatility and, in recent years, erosion?

The Debt-EBITDA Dilemma

Marathon's debt burden must be evaluated against its ability to generate consistent cash flows. Over the past five years, its EBITDA has swung dramatically: from a -$8.8 billion loss in 2020 to a peak of $24.7 billion in 2022, followed by declines to $10.1 billion in 2024. This volatility underscores the cyclical nature of the energy sector and the risks of maintaining high leverage during downturns.

The third quarter of 2025 offers a mixed picture. Marathon reported adjusted EBITDA of $3.2 billion, driven by its Refining & Marketing segment ($1.8 billion) and Midstream operations ($1.7 billion). However, the Renewable Diesel segment dragged down performance with a -$56 million contribution, and corporate expenses totaled $238 million. For the nine months ending September 30, 2025, total adjusted EBITDA was $8.5 billion, slightly below the $9.2 billion recorded in the same period in 2024. This suggests a potential slowdown in growth, even as core segments remain resilient.

Segment Performance and Strategic Priorities

Marathon's capital allocation strategy appears focused on its core strengths. The Midstream segment, for instance, has shown consistent growth, contributing $1.7 billion in Q3 2025-a 5% year-over-year increase. This aligns with the company's 2025 capital outlook of $1.25 billion, emphasizing "value-enhancing" projects. Such investments could bolster long-term cash flow stability, but their success hinges on maintaining refining margins and midstream utilization rates.

The Renewable Diesel segment, however, remains a liability. While the company reported a $28 million profit in this segment during Q4 2024, Q3 2025 results indicate ongoing challenges. This segment's performance is highly sensitive to feedstock costs and regulatory tailwinds, which remain uncertain. If Marathon cannot turn this division into a consistent profit center, its debt burden could become a drag on overall performance.

Risk-Reward Tradeoff in a Volatile Market

The energy sector's inherent volatility complicates Marathon's leverage strategy. While its 2025 debt-to-equity ratio of 1.96 is high, it is not unprecedented for a company with cyclical cash flows. The key question is whether Marathon's EBITDA can sustain its debt obligations during downturns.

Historical data suggests a pattern of recovery after sharp declines. For example, after the 2020 EBITDA collapse, the company rebounded with $24.7 billion in 2022. However, the 2023-2024 decline to $10.1 billion raises concerns about the sustainability of its leverage. If EBITDA trends continue to erode, Marathon's interest coverage ratio could weaken, increasing default risk.

On the other hand, Marathon's Q3 2025 results highlight its ability to adapt. The Refining & Marketing segment's $1.8 billion EBITDA-up from $1.1 billion in Q3 2024-demonstrates operational resilience. This could provide a buffer against debt servicing costs, particularly if refining margins stabilize.

The Path Forward

Marathon's full-year 2025 EBITDA results, to be released on February 4, 2026, will be critical in assessing the company's trajectory. For now, investors must weigh the risks of its high debt against the potential rewards of its strategic investments. The company's focus on midstream growth and refining efficiency could generate stable cash flows, but the Renewable Diesel segment's underperformance remains a wildcard.

In a volatile energy market, Marathon's leverage strategy is a double-edged sword. While it has historically enabled aggressive growth, it also exposes the company to significant downside risk if EBITDA trends fail to recover. Investors should monitor key metrics closely, including refining margins, midstream utilization, and the Renewable Diesel segment's path to profitability.