MarkWest-MPLX Merger: Big News for the Midstream Energy Sector

In a press release published on July 13, 2015, MarkWest Energy Partners (MWE) and MPLX LP (MPLX) announced that the two MLPs have agreed to merge. This is one of the biggest merger announcements in the midstream energy sector following the recent slump in energy prices. Including MarkWest Energy’s ~$4.2 billion in outstanding debt, the transaction is valued at ~$20 billion.

In this series, we’ll discuss the transaction terms, MarkWest Energy’s assets, MPLX’s pro forma distribution guidance, and post-merger integration opportunities. We’ll also analyze how investors and analysts reacted to the merger announcement. First, we’ll look at a brief overview of the transaction.

After the merger, MarkWest would become a wholly owned subsidiary of MPLX. The combined entity will become the fourth largest MLP in the US. It will have a total market capitalization of $21 billion. MPLX’s sponsor, Marathon Petroleum (MPC), will control the combined MPLX through a continued 2% general partner interest. Marathon Petroleum will also hold 17% of the limited partner units in the combined MPLX. The remaining 79% will be held by public unitholders.

MarkWest Energy Partners is the second largest processor of natural gas and the fourth largest fractionator of NGLs (natural gas liquids) in the US. Apart from natural processing and NGL fractionation, the partnership is engaged in:

• gathering and transportation of natural gas
• transportation, storage, and marketing of NGL
• gathering and transportation of crude oil

Also, MarkWest Energy is the largest natural gas processor in the Marcellus and Utica shale regions. EQT Midstream (EQM), Crestwood Midstream (CMLP), and Williams Partners (WPZ) are among the midstream MLPs that have significant midstream assets in these regions. Together, MarkWest Energy, EQT Midstream, Crestwood Midstream, and Williams Partners account for ~20.55% of the Alerian MLP ETF (AMLP).

MPLX LP provides crude oil and refined products transportation and storage services in the Midwest and Gulf Coast regions of the US. The partnership was formed by Marathon Petroleum in 2012. According to the company, Marathon Petroleum is currently the “fourth largest transportation fuels refiner” in the US.