Marathon Petroleum Makes Big Midstream Move

FINDLAY, Ohio — Marathon Petroleum Corp. sister company MPLX LP will purchase MarkWest Energy Partners LP, creating the fourth-largest master limited partnership (MLP).

Under the terms of the agreement, which was unanimously approved by the boards of directors of both companies, Denver-based MarkWest will become a wholly owned subsidiary of MPLX in a unit-for-unit transaction, plus a one-time cash payment to MarkWest unitholders. Specifically, MarkWest common unitholders will receive 1.09 MPLX common units, as well as a payment of $3.37 per MarkWest common unit, for a total consideration of $78.64 per MarkWest unit as of July 10’s closing price.

Speedway LLC parent Marathon Petroleum will contribute $675 million of cash to MPLX to fund the one-time cash payment. The total enterprise value of the transaction is approximately $20 billion, including the assumption of $4.2 billion in debt.

“Our strategic combination with MarkWest would result in a large-cap, diversified MLP with an exceptional growth profile,” said MPLX Chairman and CEO Gary R. Heminger. “This transaction creates a tremendous platform for the combined partnership to continue to grow distributable cash flow and creates significant long-term value for the unitholders.”

As CSNews Online previously reported, Findlay-based Marathon Petroleum first announced plans to spin off its MPLX midstream division in 2012. The MLP owns, operates, develops and acquires crude oil, refined products and other hydrocarbon-based product pipelines and other assets.

MarkWest Energy, founded in 2002, is engaged in the gathering, processing and transportation of natural gas, the gathering and transportation of crude oil, and more.

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