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Independent oil refiner and marketer, Marathon Petroleum Corp. (MPC - Analyst Report) has decided to become the primary shipper of Enbridge Inc’s (ENB - Snapshot Report) Sandpiper pipeline project. The pipeline will transport crude oil from the Bakken field of North Dakota to the refiners of U.S.  

Moreover, Marathon Petroleum has agreed to finance roughly 37.5% of the $2.6 billion Sandpiper project for 27.0% ownership in the North Dakota pipeline System of Enbridge Energy Partners LP (EEP - Analyst Report). Marathon Petroleum also has the option to hike its ownership to 30.0% with further investments in the future.

Sandpiper pipeline will integrate with the North Dakota pipeline, increasing the Bakken crude oil transporting capacity of the latter by 225,000 barrels per day (bpd). The Sandpiper pipeline is expected to start operating by 2016.

Marathon Petroleum revealed that it will be able to transport more crude oil from the Bakken play at a competitive cost, upon completion of the Sandpiper pipeline project.

Findlay, Ohio-based Marathon Petroleum is a leading independent refiner, transporter and marketer of petroleum products. The company, in its current form, came into existence following the 2011 spin-off of Houston, Texas-based Marathon Oil Corp.’s (MRO - Analyst Report) refining/sales business into a separate, independent and publicly traded entity. Marathon Petroleum operates through three segments: Refining and Marketing, Speedway (Retail), and Pipeline Transportation.

Being a buyer of oil, we believe that Marathon Petroleum’s profits improved on a sharp decline in oil price recently.

However, the requirement of conforming to regulations to reformulate fuel and lower emission from refinery operations make the industry a highly regulated one. As a result, Marathon Petroleum is often compelled to divert cash flows to ensure regulatory compliance, which can adversely impact profitability.

Marathon Petroleum currently holds a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.  

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