In energy: when prices move, things happen. After months of nothing, the recent, sudden rise in crude prices had made a mega-merger happen. On 30 April Marathon Petroleum agreed to acquire US independent Andeavor to create the largest US refiner by capacity and one of the top five globally. The deal has two critical points. First, combining Andeavor’s plays in the Permian and Bakken basins with its solid footprint in Marcellus Shale will make it a direct winner in shale growth. Second, its significant refining capabilities around the Gulf of Mexico give it direct access to Mexico’s newly liberalized gasoline and diesel markets.
The refining sector is reborn. Lower oil prices forced US operators, once considered capital traps, to maximize efficiency. Now the business is most profitable. Energy in 2017 was one of the poorest performing global sectors, yet 2018 is seeing price hikes. Crude oil is close to undersupplied, as inventory dropped and demand increased. Improved supply/demand equilibrium converts to higher profits.
Marathon will acquire all of Andeavor’s shares, valued at US$23.3 billion. Andeavor’s shareholders can choose stock or cash. This deal has built a leading national, integrated energy company that will operate 16 US refineries from Gulf to the Midwest.
The refining sector is reborn. Lower oil prices forced US operators, once considered capital traps, to maximize efficiency. Now the business is most profitable. Energy in 2017 was one of the poorest performing global sectors, yet 2018 is seeing price hikes. Crude oil is close to undersupplied, as inventory dropped and demand increased. Improved supply/demand equilibrium converts to higher profits.
Marathon will acquire all of Andeavor’s shares, valued at US$23.3 billion. Andeavor’s shareholders can choose stock or cash. This deal has built a leading national, integrated energy company that will operate 16 US refineries from Gulf to the Midwest.
By Peter Rosenstreich
