John Quaid
Thanks, Maryann.
Moving to first-quarter highlights, slide 4 provides a summary of our financial results. This morning we reported a first quarter net loss of $0.24 per share. During the quarter we returned over $1.3 billion to shareholders through dividends and repurchases.
Slide 5 shows the sequential change in adjusted EBITDA from fourth quarter 2024 to first quarter 2025 and the reconciliation between adjusted EBITDA and our net results for the quarter.
Adjusted EBITDA for the quarter was approximately $2 billion lower sequentially by $145 million due to decreased results in our refining and marketing and renewable diesel segments. In addition to effects from the mix of pre-tax earnings between our R&M and midstream businesses, our tax rate was further lowered by discrete tax benefits recognized in the quarter.
Moving to our refining and marketing first quarter segment results on slide 6, our refineries ran at 89% utilization, processing 2.6 million barrels of crude per day. We completed significant planned turnaround activity in the quarter, particularly in our Gulf Coast region where utilization decreased from 97% in the fourth quarter of last year to 82% in the first quarter.
As compared to fourth quarter of last year, the effects of lower Gulf Coast volumes were partially offset by higher margins in the mid-con and the West Coast. R&M segment adjusted EBITDA was $1.91 per barrel for the quarter.
Turning to slide 7, first quarter capture of 104% was driven by solid commercial execution, as well as seasonally strong clean product tailwinds. We leveraged the scale of our fully integrated system across all three regions to capture margin opportunities across our entire value chain, from feedstocks to products.
Slide 8 shows our midstream segment performance for the quarter. Our midstream segment continues to deliver cash flow growth with an 8% year-over-year increase in quarterly segment adjusted EBITDA. And in the first quarter, MPC received $619 million of distributions from MPLX, a 12.5% increase compared to the $550 million received in the first quarter of 2024. MPLX remains a source of durable growth as it progresses its mid-single-digit adjusted EBITDA growth strategy.
Slide 9 shows our renewable diesel segment performance for the quarter in what was a challenging environment. Our renewable diesel facilities ran at 70% utilization, mainly as a result of unplanned downtime at both facilities. As compared to last year's fourth quarter, the segment's largest headwind was changes in regulatory credits, which reduced margins across the industry.
As we look forward based on the late latest guidance, we have already taken actions we expect will allow us to realize incremental 45Z credits starting at the beginning of the second quarter, and we will continue to pursue value for the 45Z credits we were unable to recognize in the first quarter.
That said, we're focused on what we can control, at our Martinez joint venture facility, one of the most competitive renewable diesel operations in the US, we are optimizing the renewable refinery to its nameplate capacity, leveraging flexible logistics and pre-treatment capabilities to enable a diverse slate and margin.
We have addressed the operational items that limited production in the first quarter, and following some planned downtime at our Dickinson refinery in April, both our renewable refineries are positioned to run in the second quarter.
Slide 10 presents the elements of change in our consolidated cash position for the first quarter. Operating cash flow, excluding changes in working capital, was $1 billion for the quarter, driven by the strength and growth of our midstream business. Working capital was a $1.1 billion use of cash for the quarter, primarily driven by inventory builds, mostly in our Gulf Coast region, crude and product inventory builds related to planned turnarounds here in the first and second quarters, as well as product bills related to in-transit export shipments.
In the second quarter, we expect some, but maybe not all of this inventory build will reverse as turnarounds are completed and inventory is drawn to normal operating levels. First-quarter capital expenditures and investments were $795 million and MPLX completed the acquisition of a gathering business from Whiptail Midstream for $237 million.
In the quarter, MPC issued $2 billion in senior notes, and this issuance was intended to replace the $750 million of senior notes that matured in September of last year, as well as refinance the $1.25 billion of senior notes that matured on May 1.
MPLX repaid $500 million of maturing debt in February and also issued $2 billion of senior notes. MPLX used a portion of the proceeds to retire $1.2 billion of senior notes scheduled to mature in June. At the end of the quarter, MPC had approximately $3.8 billion in consolidated cash, including MPC cash of $1.3 billion and MPLX cash of $2.5 billion. We continue to manage our balance sheet to an investment grade credit profile.
We remain comfortable with our minimum target of about $1 billion of cash on the balance sheet being sufficient to run the business, and this is supported by the $2.5 billion and growing annual distribution from MPLX, as well as our undrawn credit facilities of $5 billion positioning us to have ample liquidity to endure market fluctuations.
Turning to guidance on slide 11, we provide our second quarter outlook. With major planned turnaround activity behind us, we are ready to run to meet increasing seasonal demand. We're projecting throughput volumes of 2.8 million barrels per day, representing utilization of 94%. Turnaround expense is projected to be approximately $265 million in the second quarter, with activity mainly focused in the mid-con and West Coast regions.
For the full year, turnaround expenses are expected to be similar to last year at around $1.4 billion. Operating costs are projected to be $5.30 per barrel in the in the second quarter. Distribution costs are expected to be approximately $1.5 billion. Corporate costs are expected to be $220 million.
With that, let me pass it back to Maryann.
Maryann Mannen
Thanks, John.
We are unwavering in our commitment to safe and reliable operations, operational excellence, commercial execution, and our cost competitiveness yield sustainable structural benefits and position us to deliver peer leading financial performance in each of the regions in which we operate.
To deliver this, we will optimize our portfolio to deliver our performance now and in the future. We'll leverage our value chain advantages and ensure the competitiveness of our assets while we continue to invest in our people. Our execution of these commitments positions us to deliver the strongest through cycle cash generation.
Durable midstream growth is expected to deliver cash flow uplift and to deliver distribution increase going forward, a differentiator from our peers. Investing capital where we believe there are attractive returns will enhance our competitiveness now and for the future. We are committed to leading in capital allocation and will return excess capital through share repurchases.
MPC is positioned to create exceptional value through peer leading performance, execution of our strategic commitments, and its compelling value proposition.
Let me turn the call back to Kristina.
Kristina Kazarian
Thanks, Maryann. As we open the call for your questions, as a courtesy to all participants, we ask that you limit yourself to one question and we'll follow up. If time permits, we will prompt for additional questions.
Operator, we're ready for questions.
Operator
(Operator Instructions) Neil Mehta, Goldman Sachs.
Neil Mehta
Yeah, good morning, Maryann and team. A lot to talk about here, but maybe we start on what you're seeing real time from a demand perspective as we get into deeper here in the second quarter. Are you seeing any physical evidence of an economic slowdown? And just maybe give some real time color of what you're seeing in your system here?
Maryann Mannen
Yeah, good morning, Neil, and thanks for the question. Look, I think we've seen refined cracks improve. We're about $4 better the second quarter than we were in the first. It's showing the typical seasonal improvement into the second quarter.
You've seen our guidance when we look at overall utilization, 94%, particularly when you look at the Gulf Coast, 96% for us as we get out of our second largest turnaround. And if you will, ready to run in the second quarter, we think we are well positioned to meet this seasonal uptick in demand and certainly when you look at the fundamentals, the inventories that I referred to, the five-year average, et cetera, and certainly, sort of the overall outlook.
But I'm going to ask Rick to give you some specifics as he's looking at our system and demand to address your question.
Rick Hessling
Yeah, Neil, to bolt on to Maryann's comments, so real time, we're very optimistic on what we're seeing within the domestic business. We're seeing steady year-over-year demand for gas, and we're seeing growth in diesel and jet fuel. And then additionally, when we look at our exports, Neil, when you go year on year, quarter on quarter, we're seeing increases in export demand as well. So all the way across our system we are seeing positive signs and aren't really seeing a slowdown whatsoever.
Closer to home to what Maryann mentioned, on the inventories, I want to double tap on that for a moment because those signals are really important to us and a great indication of how the market is setting up as we head into our summer driving season. So as we did a lot of turnaround work in Q1, we are ready to run in Q2, and with the lower street prices year on year, we see this as another strong demand signal that the consumers will have to continue this demand strength that we're seeing.
And lastly, Maryann mentioned the $4 a barrel increase versus Q1. Just a few specifics on that to break down for you by region, in the mid-con, we're seeing a $6 a barrel increase of where we stand today versus the Q1 results. In the Gulf Coast, the $3 a barrel increase and in the West Coast a $5 barrel increase so strength across the system, Neil.
Neil Mehta
Yeah, okay. You see it in the margins for now and so it's definitely notable in some of the hard data here. The follow-up is just on the west coast specifically, we've seen a lot of developments here most notably [Beishia] but how are you guys thinking about the multiyear outlook for the West Coast? How do you position yourself and do you think that the political environment is such that if you go into a period of strong margins, you'll be able to capitalize that?
Maryann Mannen
Yeah, thanks, Neil.
Maybe a few things around the around the west coast and our views sort of longer term. First, as you know, we've been investing, I mentioned it on some of my prepared remarks there. We've been investing in our LA asset. We believe its flexibility, the integrated nature of that asset, its ability to process different types of crudes, et cetera gives us a long-term competitive advantage, in the case of this capital that we're putting to work, gives us efficiency, improves performance, EBITDA while at the same time we are complying with regulatory requirements around NOx emissions.
So overall, we think that's been a good investment. Just when we think about demand in the West Coast, right, 28 million conventional fuel vehicles, as I like to say in the state, a lot of that demand is centered in the Los Angeles region, so speaks well for our asset also. And then you speak about the regulatory environment, we've spent a lot of time -- you can go back really to 2018, 2019, frankly, as we began our assessment of our profitability and the competitive nature of our assets in that region when we made the decision, frankly to close Martinez as a fossil fuel refinery, albeit continued as a renewable diesel.
We're watching the regulatory environment very closely, right? We've got minimum inventory, law went into place in the beginning of the year, but frankly, the rulemaking isn't done. I think right now the state and the officials there are focused on resupply as maintenance and turnaround activity happens to ensure that we can provide, they can provide requirements for consumers there.
There's also been conversation around whether or not the state would own or operate refineries. We certainly don't think that that's plausible, but we'll watch it closely. And last, what I would say is we are spending time with the regulatory agencies through our Washington office, et cetera, to ensure that there is an understanding of sort of the longer-term view and the decisions that they are trying to make there.
So we're comfortable as we sit here today recognizing that a challenging environment. We think we've got one of the most competitive assets in the region and hopefully I've done a reasonably good job of telling you why that's the case.
I'm going to ask Rick, excuse me, to give you a little bit of color on what we're seeing maybe long term with demand there.
Rick Hessling
Yeah, so Neil, we continue to see pretty positive signals also on the west coast, but I want to maybe take a step back and gives some color to our positioning as well to add on to Maryann's comments. So we have the largest refinery in California. It is complex. It is fully integrated, and we will beat the what we call high cost alternative of imports into the region all day long.
With that being said, the closures that we have seen certainly are a tailwind to not only our LAR facility but also to our Pacific Northwest facilities. So if you look, they will also be the beneficiary of product placement, and as you know, the West Coast is structurally short gasoline and jet, so we will be leaning into these markets as others close.
And lastly, I want to leave you with a nugget that not a lot of people talk about. It's on the feedstock side. If these closures happen that have been announced, Neil, we will be the beneficiary as well. We have a large TMX position taking advantage of barrels from Canada, but above and beyond that, we're a big ANS and a big SJV buyer, and we will be the beneficiary of those closures if they happen. That'll put incremental pressure on those differentials, and we have a large appetite for those grades, so I'll leave it there, Neil.
Neil Mehta
Great color. Thanks.
Rick Hessling
Thank you.
Maryann Mannen
Thank you, Neil.
Operator
Doug Leggate, Wolfe Research.
Doug Leggate
Hello, good morning everyone. Thanks for taking my questions. Maryann, I want to come back to a topic that -- I feel like we used to bring it up relatively frequently and then it kind of fell into the background a little bit, and it's the issue of capture rates.
You had one of the heaviest turnaround seasons in, I guess in your history this quarter, but yet your capture rate kind of knocked it out of the park, and I know this is related to the commercial organization that you've built up over the last several years, and I'm just wondering as you get back into normal utilization rates into the -- when you don't have a lot of downtime, should we be thinking that your capture rate has shifted up as a matter of course, or I'm just curious how you would respond to that comment?
Maryann Mannen
Good morning, Doug, and thanks for your question. So as you know, one of the things that we've been really leaning in for some time is our ability to improve our commercial performance. We think it is one of the most important elements when we think about our value proposition and our peer leading performance. And over the last few years, as you said, we've been building what we think are sustainable benefits across the system organization wise, other capabilities we've talked about our London office, our Singapore office, our Houston office, in addition to our Finley office as well.
So some of these capabilities will transcend. We've also said that approaching 100% is clearly an objective of ours, and we think some of the sustainable advantages that we've really put in place are being demonstrated through our financial performance. And as you know, some of these things, regardless of whether it's a high crack environment or a low crack environment may not be in our control, but the ones that are that what we are trying to focus on quarter after quarter.
We think, right, looking at our fully integrated system and trying to leverage those capabilities, you hear us talk about value chain integration, the strategic importance of the relationship between MPC and MPLX. We believe all of these will continue to deliver -- capture rates approaching 100%.
And I'll look at Rick and see if there was anything else that Rick wanted to add, particularly as we think about what happened in the quarter.
Rick Hessling
Yeah, thank you, Maryann. Doug, I have to chuckle for a moment. I'm guessing Maryann thinks I paid you to ask that question because we are quite proud of our results. Not only has it been this quarter, but I think you've seen it the last several quarters, and I do want to reiterate that it is structurally sustainable. We believe we built the system and have the value chain to continue to garner more value than our competition.
In three areas of particularly strong performance that I want to highlight in our specific teams: specialty products, asphalt, and product margins. And sometimes we mention product margins and they're specific to a region. This past quarter, I would tell you it's all three regions. It's Gulf Coast, Midcon, and West Coast. So very proud of the team's performance and wringing value out of the entire value chain, as Maryann referenced.
Doug Leggate
Okay, well, I was thinking the 100% might now be a little conservative, but we'll see where we go.
Rick Hessling
Please don't do that to me, but we're confident in our ability to outperform in this area, Doug.
Doug Leggate
Good stuff, thanks for the answer. Maryann, a completely unrelated question, again, it's something that's come up periodically. You've talked about -- you want to hold $1 billion of cash on the balance sheet, but you did admittedly have some working capital moves and you lend into the balance sheet this quarter, it seems for share buybacks.
What is the net debt level at the MPC level -- try that again, the net debt MPC level that you're comfortable with, as opposed to the cash level at the MPC level?
Maryann Mannen
Yeah, thanks for the question, Doug. Maybe just a couple of other comments as well before I get to your specific answer. But one of the things that we think is important as we try to lean in with respect to our capital allocation priorities, and they haven't changed. You talk about the $1 billion, as you know, from quarter to quarter, some of those things just depending on commodity prices, et cetera, that'll ebb and flow, but the billion dollars continues to be something that we have stress tested and remain comfortable in part because we had a real life situation many years ago called COVID that helped us understand that.
The second part of that, and I think you've been asking me this question for a couple of quarters now, right, if not longer than that, the distribution that MPC receives from MPLX at $2.5 billion today covers the MPC dividend to its shareholders as well as the 2025 capital plan that MPC has announced. And hopefully, you can see that we are supporting that mid-single-digit growth in MPLX and the distribution increase of 12.5%, which means the cash coming back to MPC should continue to increase as that growth in MPLX happens.
These are all factors that give us confidence when we talk about $1 billion on the balance sheet that that continues to be, if you will, a durable basis. I'm going to pass it to John, and he can talk a bit about the debt to specifically answer that question, Doug.
John Quaid
Yeah, hey, morning, Doug. Thanks for the question. So maybe again to take it back, as you know, we'd like to kind of think about the two balance sheets a little bit separately. So if I think about MPC standalone, I'll come back to MPLX in the midstream business. Look, we've said absolute gross debt. We're comfortable in and around plus or minus $7 billion, right? So $7 billion absolute debt, the billion dollar of minimum cash target. Again, I commented and Maryann did why we continue to be really comfortable with that and comfortable with our investment grade profile.
MPX is a little interesting, right? There, debt has stayed relatively flat, but we've really grown the EBIDTA, four-year CAGRs of 7%. So leverage has really come down and there, we look at kind of a gross debt to EBITDA and we're sitting the end of this quarter at about 3.3 times and we've said, look, given that business, the durability and stable cash flows it generates, we're comfortable up to 4, so we see a lot of capacity there as MPLX looks at its growth opportunities to leverage that balance sheet.
Again on the MPC side, absolute debt about $7 billion, as I think you know there, we talk again about a gross debt to cap ratio, and I think we've got some of that in our materials as well. What you would typically see more with an investment grade approach. It's a little bit interesting there because if we did something like we did this quarter where we're leaning into buybacks and maybe a lower profitability market, you're going to impact that ratio, but over time, we're really comfortable with that $7 billion. So hopefully that helps, Doug.
Doug Leggate
It does. Thanks very much indeed, guys.
Maryann Mannen
You're welcome, Doug. Thank you.
Operator
Manav Gupta, UBS.
Manav Gupta
Congrats on a strong quarter. I wanted to ask you about the crude quality discounts. Looks like OPEC would be raising volumes faster than most of us expected. So help us understand your near to medium term outlook for crude quality discounts and how MPC can benefit from it?
Rick Hessling
Yeah, hi, Manav, this is Rick. Good to hear from you. I will say this is very positive for us given the amount of heavy crude we run in all three regions West Coast, Gulf Coast, and Midcon, so we are arguably the largest heavy refiner in the country, and so we will benefit significantly. And as we see the acceleration of OPEC's volume and with their recent announcement this weekend, certainly as a tailwind for the light heavy spreads.
Additionally though, I'd like to give you some color on Canadian because Canadian has recently been depressed, but we see upside there, Manav, as well when you look at not only the OPEC announcement of accelerating their barrels into the market, but as you look forward on their forward curve, and I don't even think the OPEC piece has baked in yet. In the fourth quarter, Manav, we're seeing $3 to $4 a barrel of discounts greater than what we see today. So certainly, that's a benefit to us as we run a lot of heavy Canadian, as you know. I hope that helps, Manav.
Manav Gupta
No, perfect. I actually also wanted to follow up a little bit on the midstream side, 7% year-on-year growth on the MPLX side. But when you look at year to date, almost $1 billion of acquisitions, some of which have not even closed, right? And so if you think about it, how should we look at the distributions from MPLX growing over a period of time given you already had an attractive lineup of project growth at [track 1 fact 2], and now you're adding $1 billion of additional assets, so can we think about that 12%, 12.5% growth for distribution could be sustainable for the next like three to four years?
And then you're already covering your CapEx and dividends through that distribution so that buybacks can also be supported to that distribution if you could talk about that? Thank you.
Maryann Mannen
Manav, thank you and good morning. I appreciate your question. So first of all, when you look at the MPLX, the midstream business, we talk about a compound annual growth rate both on EBITDA and DCF in and about 7% for 4 years. We think, as you have heard us talk about as well, that we have projects and opportunities to be able to continue that mid-single-digit growth, albeit say, it might not be perfectly linear as we as we move out.
The point of that 12.5% distribution increase last year was to say when you look at the growth opportunities, when you look at these mid-teen returns projects using that strict capital discipline lens, we felt very good about suggesting that that 12.5% was clearly doable for the next few years, to your point, because of the durability of those earnings and the opportunities that we see.
This quarter we put about a billion dollars to work. You are absolutely correct. Some of that has not closed yet. BANGL gives us, will give us 100% ownership, very critical when we think about the ability to support our producer customers. Important to the integration of our well head to water strategy.
Second, we talked about whiptail. It's a gathering, it's natural gas, crude oil, and water gathering system. We talk a lot about the value chain importance and the strategic relationship between MPC and MPLX. It's in the four corners, critically important on the opportunity for our El Paso refinery.
So two examples, as you say, plus. As we talked about $1.7 billion of capital in MPLX that is growth oriented, of which 85% was natural gas and NGL-focused, Secretariat, sorry, 7th processing plant. In the Permian bringing our processing capability when it comes online at the end of the year to about 1.4 BCF, so really making the connections and the integrated value chains.
So we believe that 12.5% is durable for multi-years as we bring it back to MPC. To your point, we are already covering the NPC dividend, and as we are continuing to lean in delivering right, excess cash via buyback on the NPC side, and then we are still covering the cost, or excuse me, the capital cost with that distribution. So certainly as it grows it will continue to give us even greater flexibility on the NPC side of the house. I hope that addressed your question, Manav.
Manav Gupta
Thank you so much.
Maryann Mannen
You are welcome.
Operator
Paul Cheng, Scotiabank.
Paul Cheng
Very good. Good morning. Maryann, just want to ask that -- seems like you and a lot of your peers, everyone is looking at the NGO value chain and have a lot of opportunity.
And so that seems a very consensus view and everyone is pursuing a -- -we had to water strategy. So can you try to help us understand that how your strategy may be different than your peers? And there's also in the commodity business, there's always some fear. If everyone is pursuing the same strategy and everyone see that is such a great thing, it turned out that the result may not be as good as everyone hope. So maybe that you can help us that to. Better say understand that what is the risk in terms of everyone is doing this.
Maryann Mannen
Certainly, Paul, thanks for the question. So we think and we've talked about our well head to water strategy, our completion two fracs and the export terminal 2028 and 2029. We are very confident in our ability to fill these two fracs. As I mentioned just earlier, we've got the 7th processing plant in the Permian that's going to be complete. That'll give us 1.4, and frankly, our current customer commitments really support this project.
Also keep in mind today we, meaning, as we're thinking about this this fractionation, we are using third-party fracs which we will not need to use in the future. We think it has a very solid cost position as we shared with you, the total cost of the project. We think when we look at both C3 and ethane will be a domestic sale, but we know the strength of C3 when we look at its requirements in, Asia, Japan, et cetera.
So we think that export market will be there, and we think we're very good at executing projects and certainly our commercial prowess will give us the ability to market that in the future. They would be a few of the things, Paul, that I would tell you. We'll differentiate this project from our peers, as I mentioned, we're not looking, we're not done. We are really trying to adapt as these markets are changing and completing these value chains, particularly when we're looking at that well head to water strategy. I hope that addresses your question, Paul.
Paul Cheng
Okay, great. The second question is on the renewable diesel business. Yeah, I mean that it does look like that the wind price is going higher and hopefully the LCFS price will get the amendment will go through and then we will see them higher later this year or next year. But in addition to the market condition, I mean, what else are you doing internally trying to improve the profitability of that business?
I was a little bit surprised that we have, say, the 10 downtimes in the first quarter after all I mean that we have the fire and subsequently that you guys have rebuild the unit or that repair the unit. So can you help us understand that? What is the root cause of the outages in the first quarter and more importantly, what are the initiatives that you are doing to help to improve the operation and reliability of that business?
John Quaid
Hey, morning, Paul. It's John. I'll start here and if we have any other questions, I'll look to some of my peers as well. So I, and some of this I tried to have in our prepared remarks as well, as you noted, there's a portion of this business that's supported by regulations, whether it's RINs, LCF, et cetera. But we're really focused on the things that that we can control.
And as I mentioned in my remarks, we did have some opportunities here in the first quarter. To address utilization, I will tell you again, we're taking a turnaround, doing some work at Dickinson. It's ready to run and quarter to date Martinez is running as we expect it to be. So without getting into the details of what those things are, I think it's maybe more important to tell you the plan is running as we expect, and that's then what we're focused on.
If we take our Martinez position and really looking with our partner to optimize the feedstocking of the facility, really leverage that pre-treat, which is a competitive advantage for the for the facility and obviously where it's located in California, the key market. So those are the things we're really focused on, as you note, as now we get to kind of hit the ground running and really run that plant and see what we can do. So you know those are the big things that we can control. Again, we'll continue to work with government affairs, etc. For the respective agencies to understand the impact of their decisions.
And I guess I wanted to maybe add too, Paul, you didn't ask it, but you might, obviously there's a lot of change in the industry going from the lenders' tax credit to the production tax credit. We, like others, were reacting to guidance that came out during the quarter. As I mentioned, we had very limited recognition in the first quarter, but we've already taken action that's going to drive that.
And let me be clear too, we're also going to continue to push on the regulations, et cetera. To get back the value we weren't able to recognize in Q1 as well. So that's another action we're taking. So hopefully that gives you a little bit of the play of the land.
Paul Cheng
Can you tell us that what is the average duration before you have to change your catalyst and Main?
John Quaid
Yeah, that might be a detailed question, Paul, that we'll work with the team with you offline.
Paul Cheng
Okay, will do. Thank you.
Maryann Mannen
Thank you.
Operator
Theresa Chen, Barclays.
Theresa Chen
Morning, thank you for taking my questions. I'd like to double click on the West Coast outlook one more time. Just on the profitability and the idea that the supply of California spec products coming from Asia by means of a regular way production of [carbob] in Asia versus opportunistic and the regularity of and cadence of imports on an ongoing basis, even if in-state facilities can produce cheaper, do you think the regularity of imports will cap benchmark cracks over time?
Rick Hessling
Hi, Theresa, this is Rick. So generally I would say, we're tracking imports as everyone else is very closely. What imports are doing is creating a lot of volatility, and what I mean by that is when imports come in, they do have an impact on the marketplace, but when that inventory is run through, we then see a spike within the marketplace.
So it's somewhat of a feast or famine because to bring imports in is challenging because you have a 40-plus day transit time. So it's a big bet on where the market will be by the time they get into the West Coast system. So we continue to see imports just wreaking a lot of havoc and volatility within the industry and continue to see our advantage really over overplaying any imports that would be sustainable because we don't believe they're going to be consistently sustainable long-term month in, month out, and that's what you've seen here as of recent.
Theresa Chen
Understood. And on the midstream side, with what seems to be an increasingly visible, near to medium term slowdown in associated gas growth from liquids places and a relatively unchanged long-term natural gas demand outlook, what is your view on pursuing infrastructure growth opportunities in dry gas production areas and further diversify the growth opportunities set within your footprint?
Maryann Mannen
Yeah, Theresa, it's Maryann. I appreciate the question. If you go back and you look at the things that we have been focused on last year, we did the Utica transaction summit. We think that made sense for a lot of reasons and continues to, one of the opportunities that we were looking for was increasing utilization, frankly, we put a lot of capital to work in the Utica a few years ago.
And as we watch that dried liquids move change, so we'll continue to evaluate that, but as you've seen from the things that we are looking at right now, you see where the majority of our priorities are focused, but again we'll look for those through our lens of how do we deliver a mid-single-digit growth consistently ensure that we got mid-teens returns through that that support the, 12.5%b distribution. So we'll continue to evaluate.
Theresa Chen
Thank you.
Maryann Mannen
You're welcome.
Operator
John Royall, JPMorgan.
John Royall
Hi, good morning, thanks for taking my question. So my first question is to follow up on the LA refinery project. I know you had it as a year end startup and it sounded like from Maryann's comments in the opener that that project is getting maybe close to completion. So any more granular target on the startup timing would be helpful.
And then it seems like the project is more geared towards reliability and cost as well as compliance. So should we think of the 20% IRR target as not being highly exposed to the commodity and margin environment? Therefore, maybe somewhat lower risk than your other two big projects?
Maryann Mannen
Yeah, thanks for the question, John. Yeah, we're looking at -- you're right, we remain committed to that project and expect it to be complete. I'd say closer to the end of the third, early fourth quarter. The 20% return is not subject to commodity price.
One of the things that we tried to do with this project, you may remember a while ago there was a NOx reduction emission requirement. I think it's Rule 1109, to be specific, which no longer allowed paper credits. It had to be absolute. So given what we believe to be one of the most competitive assets in the region, we said we would work to ensure that we had compliance. Then once we made that decision, we looked at how else we could optimize. So there were other changes that add efficiency and reduce overall cost. That's what's driving the 20%, certainly not commodity price driven.
John Royall
Great, thank you. And then we're at the end of the call, so maybe I can sneak in a little bit more of a housekeeping question and happy to take it offline if it's too detailed but we noticed a big step-up in interest expense in 1Q and obviously, there was some net issuance of debt at both the parent and the MPLX level. Is there anything one time in that line this quarter or should we think about that as kind of a similar level going forward?
John Quaid
Yeah, probably similar. Hey, morning John, it's John Quaid. Sorry, I jumped right in. Probably the biggest thing if you're looking at that over time would be as our cash balance has moved lower, you're seeing a little bit less of an offset from an interest income standpoint. You can see those details when we file our 10 later today. But outside of that, no one kind items here in the quarter.
Maryann Mannen
Thank you.
Operator
Matthew Blair, TPH.
Matthew Blair
Thank you and good morning. I have two questions on the RD side. One, are you still finding it economic to run vegetable oil based feeds or or have you shifted entirely to low CI feeds? And then two, do you think that your RD segment is on track for an even a positive quarter?
And two, as you were some of the challenges from Q1, it sounded like, the feed stocks weren't quite optimized and you didn't capture all the 45Z. So putting that behind you is already on track to EBITDA positive in Q2?
John Quaid
Yeah, hey morning, Matt. It's John. Let me try and take that maybe at a higher level, as I said, we're focused on the things we can control. What gets interesting with the feedstocks again, a lot of effects from 45Z, kind of saying that imported Uuode doesn't qualify, so that's affected some of the domestic feedstocks, and we've got teams that, as you would expect, are every day optimizing the best feedstocks we can push through that facility in Martinez and leverage its pre-treatment unit.
Look, it's a regulatory supported business, so I'm not going to go out on a limb and talk about profitability for Q2. We're going to focus on the things we can control, and that's going to be driving the operational performance of the unit, getting the right slate through the pre-treat and through the facility and meeting the demands of our of our customers.
Maryann, I don't know if you want to.
Maryann Mannen
Yeah, Matt, thanks, and I think John's done a nice job of giving you some color there. A few things that I would also comment on, remember that our decision to have a JV with Neste gives us a level of competitiveness we think now that the PTU unit is up and running as of the end of 2024.
Remember, the requirements with Neste was their ability to bring advantage feedstock. We certainly have that advantage as well. So different sources optimizing now around the PTU unit, and as you've heard us say, we continue to believe we are the most competitive relative right, notwithstanding what the regulatory environment is going to do, and we'll ensure that we have cost efficiency in that asset.
As we do in all of our assets, it is certainly one of our core principles when we think about operational performance and commercial excellence there. We'll continue to optimize, as John said, but it is something that we think is an opportunity for us now that the PTU is operating.
Matthew Blair
Sounds good, thanks for your comments and I guess speaking of the regulatory picture, do you have any views on the upcoming RVO? It sounds like there might be a good chance that the D4 category gets moved up quite a bit. Would you expect D6s to decouple from D4s? And then finally, regarding the new California LCFS targets, do you think they'll be implemented in 2025, or are we looking more like a 2026 startup date for that?
Thank you.
Maryann Mannen
Hey, Matt, thank you. Thanks for your question. I'm going to ask Jim to provide as much color as we possibly can to many of your questions, as the regulatory environment ebbing and flowing there and some of those things we just don't have control over. We can certainly give you our views, but let me pass it to Jim and he'll provide some of the color that he can on the where the specifics are.
James Wilkins
Matt, still a lot of uncertainties on the LCFS timeline, but we anticipate CARB will issue that revised package to the Office of Administrative Law by the end of May. That will allow the Office of Administrator Law to make their final decision by the end of June, so there'll be a lot more clarity by the end of June. CARB's been pretty quiet in the public regarding the effective date if the administrative law approves the package.
It could be anywhere from the beginning of the second quarter or push all the way into 2026, as you suggest. They just have not been open about that.
Maryann Mannen
Hope that's somewhat helpful and responsive there, Matt.
Matthew Blair
Great, thank you.
Maryann Mannen
You're welcome.
Operator
Jason Gabelman, TD Cowen.
Jason Gabelman
I wanted to go back to the $7 billion debt target that you mentioned, and I guess it's kind of two parts, given decline in prices, I think you could see another working capital happen in the quarter. I know you suggested some of the one key working capital will unwind. But given that and potential for some volatility in the stock, given the macro environment, how willing are you, if at all, to go above the $7 billion debt target either to absorb working capital volatility and or support buybacks if the stock gets further dislocated?
John Quaid
Hey, Jason, it's John. Thanks for the question. I'll start and see if there's some other comments as well. I said, let me take the tail end of that, and I think I'll circle back to some of Maryann's comments. We're focused on driving our performance and driving our cash flow and having that then drive our capital return, right? So we're in a nice position with midstream business, MPLX growing that business, that cash flow covering our capital, covering our dividend up at the MPC side.
So if we're performing, we're running our assets safely and reliably, we're getting all the value and then some that the market's providing. That's the cash we're going to look to use to return capital and do repurchases, not really, looking to increase debt to do repurchases. That's not on my radar right now. Again, we'll manage the business with our revolvers, et cetera, as working capital moves. That's what those are for, but really comfortable with that $7 billion of debt long term.
Jason Gabelman
Great, thanks for that. My follow-up is just on midstream growth again. I know we've touched it quite a bit on the call, but I'm wondering if you could characterize the appetite to do, larger deals as the market weakens here you seem pretty bullish on the midstream growth outlook you've done. Small deals that are enhancing the earnings growth of that business so do you feel like it's more favorable to continue to do those smaller deals or would you be open to a larger deal if the right one came across? Thanks.
Maryann Mannen
Yeah, thanks, Jason, and appreciate your comments on midstream growth. I would say as we continue to look at those opportunities we're going to do it through the lens of strict capital discipline. We want to ensure that they have the ability to deliver mid-teens returns, that they are supportive of our mid-single-digit growth objective.
And we certainly have the ability to execute. We hopefully have demonstrated to you over the last, several quarters our ability to lean in both organically and inorganically to drive the well head to water strategy. I mentioned earlier, the strength.
The Utica and what we tried to do there, we just announced a smaller one gathering crude oil, water, and that gas. So hopefully we've demonstrated to you the opportunities that we see and the ability to support it, but they will be through that strict capital discipline lens regardless of their size, Jason.
Jason Gabelman
Okay, great. Thanks for the answers.
Maryann Mannen
You're welcome, thank you.
Kristina Kazarian
All right, if there are no further questions, thank you for your interest in Marathon. Should you have additional questions or want clarifications on topics discussed this morning, please contact us and our team will be available to help with your calls.
Thank you for joining us today.
Operator
Thank you, that concludes today's conference. Thank you for participating. You may disconnect at this time.
