Marathon Petroleum Subsidiary Merges With MarkWest Energy

Marathon Petroleum Corp. (MPC; Findlay, Ohio) said July 13 that its midstream master limited partnership, MPLX LP, had signed a merger agreement with MarkWest Energy Partners LP (Denver) whereby MarkWest would become a wholly owned subsidiary of MPLX. The merger would be a unit-for-unit transaction, generally expected to be tax-free, plus a one-time cash payment to MarkWest unit holders. The deal is valued at about $20 billion, including assumption of debt of about $4.2 billion.

MarkWest owns and operates midstream service businesses in several liquids-rich natural gas resource plays in the U.S. and is a major processor of natural gas and one of the largest processors and fractionators in the Marcellus and Utica shale regions. “This combination is a significant step in executing MPC’s strategy to grow its higher-valued, stable cash flow midstream business by transforming MPLX into a large-cap, diversified master limited partnership,” said Gary R. Heminger, Marathon president and CEO. “We are very pleased that MPLX and MarkWest will join forces and provide us with opportunities to increase our participation in the U.S. energy infrastructure build-out.” Heminger added that the combination of MarkWest and MPLX eliminates the need for the recently proposed MPLX acquisition of MPC’s marine transportation assets.

Noted was that the complementary aspects of MarkWest’s, MPLX’s, and MPC’s diverse asset base provides significant additional opportunities across multiple segments of the hydrocarbon value chain. The combined entity would further MarkWest’s midstream presence in the Marcellus and Utica shales by allowing it to pursue additional midstream projects. Such large-scale projects would allow producer customers to achieve higher value for their growing production. In addition, the combination provides significant vertical integration opportunities since MPC is a large consumer of natural gas liquids.

Frank Semple, president and CEO of MarkWest, commented, “This powerful combination provides MarkWest with an investment-grade balance sheet and a significant expansion of growth projects driven by MPC’s significant pipeline and refinery operations in the Upper Midwest and the Gulf Coast. Our best-in-class midstream platform will provide the combined company with an extraordinary portfolio of integrated services and long-term growth opportunities.”