Marathon Petroleum Corp. is purchasing MarkWest Energy Partners LP for $15.6 billion, through its pipeline unit MPLX LP, allowing it to expand into natural gas processing, according to a report by Reuters.
The cash-and-stock deal will create the fourth-largest master limited partnership, valued at $21 billion. The deal will also help Marathon Petroleum add condensate storage and stabilization plants at a time when companies are betting on the export of processed condensate, or super-light crude, following a relaxation of the U.S. crude export ban, Reuters noted.
MarkWest, the second-largest U.S. natural gas processor, has plants across the country, as well as more than 4,000 miles of pipelines, mostly natural gas and natural gas liquids, and one crude oil pipeline. MarkWest will operate as a unit of MPLX after the deal closes, expected in the fourth quarter.
MPLX, which operates a network of crude oil and refined product pipelines in the U.S. Midwest and Gulf Coast regions, is building a condensate pipeline in Ohio to move output from the Utica shale field.
Marathon Petroleum, which set up MPLX in 2012, will contribute $675 million to fund the cash component of the deal.
MPLX will also assume $4.2 billion in MarkWest’s debt, implying an enterprise value of $20 billion for MarkWest.
“Strategically, this brings MPC/MPLX a major Northeast natural gas gathering and processing footprint, which complements MPC’s nearby refining footprint …,” Reuters quoted Raymond James analyst Cory Garcia as saying in reference to Marathon’s refineries in Kentucky, Michigan and Ohio.