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Marathon combines midstream units MPLX and Andeavor Logistics

Marathon Petroleum Corp said it would combine its midstream units in a $9 billion deal, but shares fell more than 5 percent following a surprise quarterly loss on lower-than-expected refining margins.

The deal comes months after the U.S. refiner said it had been weighing a possible merger of MPLX and Andeavor Logistics LP, the two master limited partnerships (MLPs) in its midstream segment that transport, store and market crude oil and its refined products.

“This transaction simplifies our MLPs into a single listed entity and creates a leading, large-scale, diversified midstream company anchored by fee-based cash flows,” Chief Executive Officer Gary Heminger said in a statement.

The deal further deepens the refiner’s presence in the Permian basin, the largest oilfield in the United States, building on its $23 billion Andeavor acquisition last year, the company said.

Marathon has been strengthening its midstream operations and retail unit, which includes Speedway gas stations and convenience stores and Andeavor’s retail and direct dealer business, to diversify its revenue streams beyond refining.

“This transaction can likely unlock $2 billion value net to MPC that is being discounted by the market due to the overhang of this combination and concerns around future growth,” Cowen & Co said.

Marathon Petroleum shares have fallen 4 percent so far this year, underperforming a 11 percent rise in the broader S&P 500 Energy Index.

Andeavor Logistics units rose nearly 9 percent to $35.66, while MPLX units fell about 2.5 percent to $30.76.

Source: Reuters

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