Marathon to become top US refiner with $23 bln Andeavor buy

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Marathon Petroleum Corp agreed to buy rival Andeavor for more than 23 billion US dollars in a deal creating one of the largest global refiners that will benefit from access to booming US shale fields and growing US fuel export markets.

The United States has become the world’s top fuel exporter, shipping more than three million barrels per day (bpd) of gasoline and diesel. Refiners have capitalized on booming output from shale fields in Texas and North Dakota and are building out export terminals and processing facilities.

Buying Andeavor gives Marathon more exposure to the booming US shale oil sector, thanks to Andeavor’s logistics and terminal operations in Texas and North Dakota shale regions. Rising output from the Permian Basin, the largest oilfield in the United States, has driven the nation’s crude production to an all-time record above 10.5 million bpd.

“The combination of the two companies allows us to go after and find ways to create a bigger presence in the Permian,” said Marathon Chief Executive Gary Heminger, who will lead the combined companies.

The company would be able to process 3.1 million bpd of crude oil into gasoline, diesel and other fuels. Its capacity would be the sixth largest globally, behind China’s Sinopec, Exxon Mobil Corp, PetroChina, Royal Dutch Shell and Aramco, according to consultancy IHSMarkit.

US motorists consume more fuel than any other country in the world and overall demand nationwide hit a record 9.3 million bpd in 2017.

Operations that have capacity to refine light crude produced in shale fields such as Andeavor will be better positioned to take advantage of the production boom. Both North Dakota’s Bakken and Texas shale regions primarily produce light, sweet crude oil.

The deal also gives Marathon a line into fast-growing Mexican fuel markets. Andeavor is expanding its network of filling stations in the country. Mexico’s dilapidated refineries cannot meet the growing population’s demand for gasoline and other products.

US fuel exports to Mexico rose to 1.4 million bpd as of January, up more than 85 percent from two years ago.

The deal values Andeavor, formerly known as Tesoro, at about 152 US dollars per share, or about 24 percent more than Friday’s closing price of 122.38 US dollars.

“We view this as pretty full value for Andeavor,” Scotia Howard Weil analysts said in a note. “Not many saw this one coming.”

Source(s): Reuters