Big Oil deal creates largest American refinery

A new powerhouse has been born in the oil industry just as prices spring back to life.Marathon Petroleum reach...

Posted: May 1, 2018 2:16 AM
Updated: May 1, 2018 2:16 AM

A new powerhouse has been born in the oil industry just as prices spring back to life.

Marathon Petroleum reached a $23 billion deal on Monday to scoop up rival Andeavor, creating the largest oil refinery in the United States.

The combined company will be able to process more than 3 million barrels of crude per day, representing 16% of the nation's total capacity. Marathon also owns the Speedway, the No. 2 gasoline and convenience store chain in the United States.

The energy deal underscores the health of the refining business thanks to soaring appetite for gasoline that has kept their facilities humming.

"For this industry, the wind is behind our backs," Andeavor CEO Greg Goff told analysts during a conference call.

Global oil demand grew during the first three months of 2018 by the most in nearly eight years, according to Goldman Sachs.

"The state of refining in the United States is very healthy," said Matt Smith, director of commodity research at ClipperData.

Marathon agreed to pay $30.4 billion for Andeavor, including debt. That would make it the biggest global oil and gas deal since General Electric's $32 billion takeover of Baker Hughes in October 2016, according to research firm Dealogic.

Soaring oil prices -- crude has climbed above $68 a barrel for the first time in nearly four years -- has accelerated US shale oil production, giving refiners access to more supply.

Related: Why Exxon isn't enjoying America's big oil party

The Andeavor acquisition not only shows confidence in the oil price rally, but represents a bet on the US shale oil boom. Andeavor owns two refining plants located near the Permian Basin, the shale hotbed in West Texas and New Mexico that is pumping more and more oil.

One of the other catalysts for the deal: a 2020 rule change that will prevent ships from burning dirty fuel oil. The switch should boost demand for cleaner fuels that US refiners are able to produce.

"US refiners are the most sophisticated in the world so they will be well-positioned for the shift in demand," said ClipperData's Smith.

If approved by regulators and shareholders, the deal will allow Marathon to expand its refining footprint, which is focused in the Gulf Coast and the Midwest. Andeavor, by contrast, owns multiple refineries in California and the Pacific Northwest.

"Despite the size... we do not foresee any regulatory problems given the disparate geographical markets of each company," Matthew Blair, an analyst at energy investment bank Tudor, Pickering, Holt & Co., wrote to clients.

Marathon and Andeavor said the transaction is expected to close by the end of the year.

The sale marks a huge win for Goff, a former ConocoPhillips exec who took over as Andeavor's CEO in May 2010 when the stock fetched less than $14. Now, Marathon has agreed to purchase the company for $152.27 a share, a 24% premium to Friday's closing price.

The deal "closes out an epic run for Goff" and represents an "unqualified success for management," Blair wrote.

Mississippi Coronavirus Cases

Data is updated nightly.

Cases: 512632

Reported Deaths: 10262
CountyCasesDeaths
Harrison34853555
DeSoto33162432
Hinds32556641
Jackson24830389
Rankin22442402
Lee16238242
Madison14874283
Jones14086247
Forrest13741259
Lauderdale12249324
Lowndes11286193
Lamar10644140
Pearl River9707244
Lafayette8827143
Hancock7835132
Washington7550169
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Monroe6989179
Pontotoc6970109
Warren6849178
Panola6746134
Neshoba6726210
Marshall6653141
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Union633897
Pike5924156
Alcorn5862107
Lincoln5525136
George510180
Prentiss500884
Tippah490282
Itawamba4829107
Scott477499
Adams4766125
Tate4748116
Leflore4723144
Copiah455895
Yazoo455591
Simpson4543117
Wayne442772
Covington432895
Sunflower4299106
Marion4265112
Coahoma4227109
Leake413790
Newton395581
Tishomingo381793
Grenada3775109
Stone365666
Jasper340166
Attala337790
Winston317792
Chickasaw313367
Clay311878
Clarke301195
Calhoun284449
Holmes271289
Smith268952
Yalobusha243747
Tallahatchie231453
Greene224749
Walthall221366
Lawrence217840
Perry213356
Amite209557
Webster205148
Noxubee188642
Montgomery181557
Carroll174441
Jefferson Davis173643
Tunica163239
Benton152639
Kemper144941
Choctaw136527
Claiborne134238
Humphreys131139
Franklin124929
Quitman107528
Wilkinson105939
Jefferson96834
Sharkey65121
Issaquena1957
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Alabama Coronavirus Cases

Cases: 844951

Reported Deaths: 16115
CountyCasesDeaths
Jefferson1161002006
Mobile741871379
Madison53279732
Shelby38325368
Baldwin38068589
Tuscaloosa36009641
Montgomery34482781
Lee25550263
Calhoun22585518
Morgan22451406
Etowah20013517
Marshall18777316
Houston17727425
St. Clair16875358
Limestone16135218
Cullman16044303
Elmore15904294
Lauderdale14968306
Talladega14189299
DeKalb12967269
Walker12020380
Blount10714192
Autauga10517157
Jackson10157194
Coffee9414192
Colbert9334208
Dale9018191
Tallapoosa7254201
Russell707765
Chilton7018170
Escambia6955143
Covington6932195
Franklin6340108
Chambers5783142
Marion5401130
Dallas5285209
Pike5118109
Clarke484986
Lawrence4826129
Winston4780110
Geneva4642136
Bibb434094
Barbour369480
Butler3434100
Marengo342393
Monroe337066
Randolph334367
Pickens333188
Fayette330085
Henry320666
Hale318189
Cherokee317563
Crenshaw260477
Washington256952
Cleburne254460
Lamar251253
Clay250869
Macon244764
Conecuh192762
Coosa184947
Lowndes178168
Wilcox177438
Bullock152645
Perry141840
Sumter139241
Greene130245
Choctaw93228
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