Marathon's oil pipeline MPLX LP agreed to acquire MarkWest Energy Partners in a partnership that will result in the largest gas processor and fractionator of rich natural gas in the Marcellus and Utica shales. The US midstream has experienced a series of consolidations nationwide (See this issue, p. 6).
MarkWest will become a subsidiary of MPLX. Marathon created MPLX in 2012 to own and operate pipelines and midstream assets. Marathon Petroleum, based in Findlay, Ohio, owns refineries.
Tudor, Pickering Holt & Co. analysts said the MPLX-MarkWest transaction "creates a diversified MLP."
Terms called for MarkWest unitholders to receive 1.09 shares of MPLX LP and $3.37 in cash for each unit held, for a total consideration of $78.64/unit.
Gary R. Heminger, Marathon's chief executive, said Marathon will contribute $675 million to finance the cash payment to MarkWest.
"This combination creates a unique new competitor in the midstream sector," Heminger said. MPLX and MarkWest have worked together for over a year on a number of projects, he said. The resulting combination will bring "substantial scale" to the Northeast shales, Heminger said.
MarkWest built a "premier" master limited partnerships, said Heminger, who noted that the combination of MarkWest and MPLX eliminates the need for the recently proposed MPLX acquisition of MPC's marine transportation assets in 2015. That deal was indefinitely deferred.
The MarkWest executive team will become executive officers of MPLX in roles similar to their current responsibilities at MarkWest, reporting to Heminger, and will remain in Denver, where MPLX is committed to maintaining a presence.
MarkWest Chief Executive Officer Frank Semple will become executive vice-chairman of MPLX. In addition, two existing directors of MarkWest, including Semple, will be appointed to the board of directors of the general partner of MPLX, and Semple will be appointed to the MPC board.