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Marathon Petroleum to Swap GP Stake & IDRs With MPLX Units

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Marathon Petroleum Corporation MPC entered into an agreement to exchange its general partner (GP) economic interests and incentive distribution rights (IDR) in its midstream subsidiary MPLX LP MPLX. The Oil refining and marketing giant will exchange its GP economic interests and IDRs for 275 million newly issued MPLX common units, valued at about $10.1 billion. Upon the closure of the transaction — expected on Feb 1, 2018 — Marathon Petroleum will own about 64% of the outstanding MPLX common units.

The transaction will help simplifying the corporate structure and poise MPLX with an attractive cost of capital. The transaction is expected to be accretive to the distribution cash flow (DCF) attributable to common unitholders. The elimination of IDRs will free up enough cash flows which wont get distributed to the general partner, thereby giving the limited partners more exposure to future growth.  

Upon the closure of this transaction, Marathon Petroleum will also complete its $8.1-billion dropdown deal with MPLX on the same day. The cash and equity dropdown deal is expected to boost the financials, dividend growth and share repurchase programs of Marathon Corporation. It will also add immediate accretion to MPLX’s cash flow, supporting the partnership’s overall growth.

Headquartered in Findlay, Marathon Petroleum is a leading independent refiner, transporter and marketer of petroleum products. Shares of Marathon Petroleum have gained 31% year to date, significantly outperforming the industry’s growth of 15%. The company currently carries a Zacks Rank #3 (Hold).



A few better-ranked players in the same industry are Delek US Holdings, Inc. DK and HollyFrontier Corporation (HFC - Free Report) . Both companies sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Delek Holdings is expected to deliver year-over-year growth of 110 % and 47.2% in its earnings and revenues, respectively in 2018.

Holly Frontier delivered an average positive earnings surprise of 8.04% in the trailing four quarters.

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