CLOSINGS: View Closings

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 3:16 AM
Updated: May 1, 2018 3:16 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.

Terre Haute
Clear
69° wxIcon
Hi: 85° Lo: 66°
Feels Like: 69°
Robinson
Scattered Clouds
69° wxIcon
Hi: 84° Lo: 66°
Feels Like: 69°
Indianapolis
Broken Clouds
69° wxIcon
Hi: 84° Lo: 65°
Feels Like: 69°
Rockville
Clear
61° wxIcon
Hi: 84° Lo: 64°
Feels Like: 61°
Casey
Clear
67° wxIcon
Hi: 84° Lo: 66°
Feels Like: 67°
Brazil
Clear
69° wxIcon
Hi: 85° Lo: 66°
Feels Like: 69°
Marshall
Clear
69° wxIcon
Hi: 84° Lo: 65°
Feels Like: 69°
Partly cloudy and calm
WTHI Planner
WTHI Temps
WTHI Radar

WTHI Events

 

Illinois Coronavirus Cases

(Widget updates once daily at 7 p.m. CT)

Confirmed Cases: 198248

Reported Deaths: 7866
CountyConfirmedDeaths
Cook1124844933
Lake12852447
DuPage12427522
Kane9878305
Will9413346
St. Clair4107161
Winnebago3797131
McHenry3250114
Madison270276
Kankakee180269
Rock Island176436
Champaign169319
Peoria166736
Kendall139823
Unassigned1347209
Sangamon129733
DeKalb94730
LaSalle80124
Boone76923
Jackson73120
McLean67015
Macon65023
Tazewell6108
Adams5576
Coles49221
Randolph4747
Williamson4346
Ogle4165
Clinton41517
Whiteside36617
Grundy3345
Stephenson3346
Union32723
Monroe32313
Knox3131
Jefferson29219
Morgan2696
Iroquois26711
Henry2531
Vermilion2342
Cass23311
Bureau2313
Franklin1941
Warren1910
Perry1842
Macoupin1823
Lee1781
Montgomery1717
Marion1650
Effingham1631
Woodford1583
Logan1571
McDonough14515
Christian1434
Saline1342
Jo Daviess1301
Livingston1223
Douglas1222
Jersey1172
Pulaski941
Clark872
Shelby861
Mercer764
Moultrie750
White710
Johnson710
Fayette693
Washington670
Wayne662
Piatt630
Hancock631
Bond623
Carroll614
Jasper607
Greene590
Cumberland573
Menard570
Mason560
Lawrence510
Gallatin512
Ford502
Massac410
Wabash400
Alexander370
Fulton350
De Witt340
Crawford300
Edgar290
Hamilton290
Marshall280
Clay260
Pike240
Scott210
Edwards200
Richland200
Hardin180
Schuyler180
Brown150
Putnam140
Henderson130
Pope110
Calhoun90
Stark70
Out of IL10

Indiana Coronavirus Cases

(Widget updates once daily at 8 p.m. ET)

Confirmed Cases: 75862

Reported Deaths: 3069
CountyConfirmedDeaths
Marion16088730
Lake7688278
Elkhart492685
Allen4002163
St. Joseph357883
Hamilton2829104
Vanderburgh202213
Hendricks1927108
Cass18029
Johnson1789119
Porter135539
Clark128749
Tippecanoe123811
Madison100665
LaPorte93130
Howard91365
Kosciusko86812
Bartholomew81747
Floyd80948
Marshall79323
Monroe76631
Delaware74552
Dubois70812
Vigo69911
Noble68829
Boone68746
Hancock68339
Jackson5965
Warrick58830
Shelby56527
LaGrange56310
Grant52930
Dearborn51228
Morgan49334
Clinton4444
Henry40620
Wayne38510
White37611
Montgomery35921
Lawrence35227
Harrison34823
Decatur34132
Putnam3128
Daviess27720
Miami2772
Scott27210
Jasper2552
Greene25434
Franklin24615
DeKalb2384
Gibson2314
Jennings22712
Steuben2133
Ripley2138
Carroll1962
Fayette1947
Perry18713
Posey1790
Starke1787
Wells1742
Orange17424
Fulton1722
Wabash1703
Jefferson1672
Knox1610
Whitley1556
Tipton14312
Washington1421
Sullivan1381
Spencer1373
Clay1245
Huntington1243
Randolph1244
Newton12010
Adams1092
Owen991
Jay920
Rush854
Pulaski811
Fountain742
Brown741
Blackford652
Ohio656
Benton640
Pike590
Vermillion580
Switzerland530
Parke511
Martin480
Crawford450
Union410
Warren241
Unassigned0206