MPC-ANDV Merger Would Create Premium Midstream Assets


Nov. 20 2020, Updated 5:00 p.m. ET

Midstream segment

Marathon Petroleum (MPC) is set to acquire Andeavor (ANDV) by 2H18, subject to requisite approvals. In this article, we’ll look at how pro forma MPC’s (the merged entity) midstream asset base would evolve.

The merger would create a huge midstream segment with two separate MLPs, namely MPLX LP (MPLX) and Andeavor Logistics (ANDX). Pro forma MPC would own general partner and the majority of limited partner units in both the MLPs.

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Creation of premium midstream segment

Currently, MPLX and ANDX have vast and robust assets. Both the MLPs have recently gone through acquisitions and dropdowns, which have strengthened and expanded them.

MPLX has received asset dropdowns of $1.4 billion of annual EBITDA from MPC, according to the strategic plan unveiled by MPC in January 2017. In comparison, Andeavor Logistics has acquired Western Refining Logistics, enhancing its asset base. Also, Andeavor has dropped down assets consistently to ANDX. Thus, pro forma MPC’s midstream segment would have a huge asset base with more than 15,000 miles of pipeline, ~130 terminals, and more than 10 billion cubic feet per day of natural gas processing capacity.

Also, the midstream segment would have a wider earnings base. MPLX receives the majority of its earnings from terminalling and transportation, wholesale, and gathering and processing. However, ANDX’s major earnings contributors are logistics & storage and gathering & processing. Moreover, pro forma MPC would have well diversified regional assets in the Permian and Bakken regions, the Marcellus and UTICA regions, and SCOOP/STACK regions.

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Peers Valero Energy (VLO) and Phillips 66 (PSX) also have a presence in midstream segments via MLPs Valero Energy Partners (VLP) and Phillips 66 Partners (PSXP). VLO is focusing on expanding its midstream capabilities through acquisitions and partnerships. Also, PSX has a strong emphasis on strengthening its midstream segment.

A vast network of retail stores

Pro forma MPC would have a vast network of around 4,800 company-operated and 7,800 branded locations spread across the US, which would present a substantial opportunity for the entity to further penetrate markets, widen its base, and enhance customer satisfaction. Also, the integration of best practices and economies of scale could lead to huge operational synergies and benefits. Thus, pro forma MPC can take advantage of MPC’s and ANDV’s wide network of retail stores.


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