Marathon Petroleum Acquires Andeavor

Earlier this year, Oil & Energy reported that Marathon Petroleum Corp. (NYSE:MPC) and Andeavor (NYSE:ANDV) had agreed to an acquisition deal that would create the largest oil refiner in the U.S. (see “Kind of a Big Deal,” Oil & Energy Volume 20, Issue 5, June 2018).

Under the terms of the agreement, all of Andeavor’s outstanding shares were to be acquired by Marathon Petroleum Corp., and Andeavor Chairman and Chief Executive Officer Greg Goff was to join the Marathon board of directors, along with three other members of the Andeavor board. The transaction was expected to close in the second half of 2018. An October 1 announcement made it official. That morning, Marathon Petroleum Corp. released the following statement:

“Marathon Petroleum Corp. has closed the transaction in which it acquired all of the outstanding shares of Andeavor. As of this morning, Andeavor ceased to be publicly traded and its common stock discontinued trading on the New York Stock Exchange.
“‘This transformative transaction is a significant milestone in our company’s more than 130-year history,’ said MPC Chairman and Chief Executive Officer Gary R. Heminger. ‘MPC is now the leading refining, midstream, and marketing company in the U.S., and is well-positioned for long-term growth and shareholder value creation.’

“‘We are excited to begin unlocking the extraordinary potential across our new platform, including approximately $1 billion of tangible annual run-rate synergies we expect within the first three years,’ added Heminger. “We look forward to sharing more details around our plans at our upcoming December Investor Day.’”

In total, Andeavor stockholders received approximately 240 million shares of MPC and about $3.5 billion in cash.

Readers who track the “Oil & Energy Securities Recap” featured on page 46 of each print edition of Oil & Energy will find the acquisition reflected in the most recent issue. While Andeavor (formerly Tesero Petroleum) is no longer included in the recap, Marathon Petroleum Corp. has been added to the ranks.

As a reminder, Marathon Petroleum Corp. is not to be confused with Marathon Oil, which is also listed in the securities recap. Where as Marathon Oil focuses primarily on oil and gas exploration and production, Marathon Petroleum Corp. operates further downstream in refining, marketing and transportation. Marathon Petroleum Corp. was spun off from Marathon Oil in 2011.

A New Merger Mania?

As it turns out, the Marathon-Andeavor deal is not the only change reflected in our November/December securities recap. Readers will also note that Energy Transfer Partners (NYSE:ETP) is now listed simply as Energy Transfer (ET). This follows a merger completed on October 19, by which Energy Transfer Equity L.P. joined with Energy Transfer Partners L.P.

Energy Transfer’s core operations include natural gas midstream, intrastate and interstate transportation and storage assets; crude oil, natural gas liquids (NGL) and refined product transportation and terminalling assets; NGL fractionation; and various acquisition and marketing assets.

Not immediately identifiable in the “Oil & Energy Securities Recap” but perhaps no less relevant to Oil & Energy readers is the news that Valero Energy Corporation (NYSE:VLO) and Valero Energy Partners (NYSE:VLP) also agreed to merge. Under the terms of this agreement, Valero Energy will acquire Valero Energy Partners for $42.25 per unit, making the deal worth approximately $950 million.

Valero Energy Corporation is an international manufacturer and marketer of transportation fuels and other petrochemical products. The corporation founded Valero Energy Partners in 2013 to own, operate, develop and acquire crude oil and refined petroleum products, pipelines, terminals, and other transportation and logistics assets. With three major energy companies all announcing big deals inside of a year’s time, some readers might wonder if a new era of consolidation is upon us. As Captain Paul E. Mawn, USN (Ret.) wrote earlier this year: “At the very end of the 1990s and continuing after the turn of the century, the oil industry went through an intensive period of mergers & acquisitions, which in many cases were driven by upstream considerations but had a significant ripple effect on secondary distribution” (see “Structural Change in Petroleum’s Secondary Distribution,” Oil & Energy Volume 20, Issue 1, January/February 2018).

Oil & Energy will continue to track this trend as it develops in 2019.

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