This deal is about leveraging complementary assets
MarkWest Energy Partners (MWE), MPLX (MPLX), and Marathon Petroleum (MPC) have diverse asset bases that provide opportunities across multiple segments of the hydrocarbon value chain. A MarkWest-MPLX merger would bolster MarkWest’s midstream presence in the Marcellus and Utica shales by giving it the financial backing to pursue more midstream projects.
Remember, while MPLX is the named buyer in this deal, it’s actually the vehicle that Marathon Petroleum is using to buy MarkWest. This deal provides Marathon Petroleum with some vertical integration benefits, especially in the natural gas processing business. MarkWest processes 75% of daily gas production in the Marcellus and Utica shale regions.
At the end of the day, this deal helps MarkWest and MPLX grow through Marathon Petroleum’s balance sheet. Gary R. Heminger, chief executive office of MPLX, said, “MPC’s strong balance sheet and liquidity will enable MarkWest to accelerate organic growth in some of the nation’s most economic and prolific liquids-rich natural gas resource plays.” He added, “We expect the combination of these projects and MPC’s MLP-eligible midstream assets to support a strong distribution growth profile over an extended period of time for MPLX.”
On the conference call, management said it intends to use cash flow to fund expansion.
Not about synergies
The MarkW-MPLX merger is about vertical integration and growth, not synergies. Management didn’t discuss synergies much on the conference call.