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Marathon Petroleum, Andeavor Join Forces In Mega Refinery Deal

Canton Refinery

Marathon Petroleum merges with Andeavor

Marathon Petroleum Corp (MPC.N) agreed to buy rival Andeavor (ANDV.N) for more than $23 billion in the largest-ever tie-up between U.S. refiners, giving the combined company a nationwide presence and increased access to growing export markets.

The merger was announced before the opening bell today and creates a new U.S. energy monster with significant midstream, refining and marketing assets, stretching across the US.

“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 leapfrog Valero Energy Corp (VLO.N) to become the largest U.S. refiner, with the capacity to process 3.1 million bpd of crude oil into gasoline, diesel and other fuels.

Reuters is reporting that 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. U.S. fuel exports to Mexico had risen to 1.4 million bpd as of January, up more than 85 percent from two years ago.

Including Andeavor’s debt, Marathon is paying $35.6 billion to hold 66 percent of a combined company worth some $58 billion at Friday’s close.

Andeavor operates 10 refineries in the United States, largely in the western part of the country. It has a pipeline, trucking and terminal operations in the Permian, along with North Dakota’s Bakken region, the second-most prolific state for oil production in the country after Texas.

Marathon’s six refineries are largely in the Midwest, with one locale in Texas City, Texas. Analysts at Tudor Pickering Holt said they expected the location of the two companies’ operations to allow them to avoid antitrust hurdles.

“Despite the size of Marathon-Andeavor, we do not foresee any regulatory problems,” they wrote in a note.

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