FINDLAY, Ohio, Nov. 13, 2017 -
Marathon Petroleum Corp. (NYSE: MPC) and MPLX LP (NYSE: MPLX) today
announced an agreement for the dropdown of refining logistics
assets and fuels distribution services to MPLX for total
consideration of approximately $8.1 billion. The transaction is
expected to close on Feb. 1, 2018, and be immediately accretive to
MPLX's distributable cash flow per unit.
These assets and services are projected to
generate annual earnings before interest, taxes, depreciation and
amortization (EBITDA) of $1 billion. MPC is contributing these
assets and services in exchange for $4.1 billion in cash and MPLX
equity valued at approximately $4 billion. The equity to be issued
will consist of 111.6 million MPLX common (LP) units and 2.3
million general partner (GP) units to maintain MPC's 2 percent GP
interest in MPLX.
"We are very pleased to have reached agreement on
the terms for the remaining dropdown to MPLX outlined in our
strategic actions," said Gary R. Heminger, chairman and CEO of both
MPC and MPLX. "The addition of these high-quality, fee-based
revenue streams to MPLX further diversifies the partnership's
earnings and contributes substantially to the distributable cash
flow base of the partnership."
Year-to-date through October, MPC has returned
$2.75 billion to its shareholders and plans further return of
capital with the after-tax cash proceeds of this dropdown once the
transaction closes, in a manner consistent with managing its
current investment grade credit profile.
The dropdown agreement was approved by the MPLX
board of directors following the approval of the terms of the
transaction by its independent conflicts committee. The conflicts
committee was advised by Jefferies LLC as to financial matters and
Andrews Kurth Kenyon LLP as to legal matters. MPC was advised by
Tudor, Pickering, Holt & Co. as to financial matters. The
closing of the dropdown transaction is subject to customary
conditions, including tax and regulatory review.
Michael J. Hennigan, president of MPLX, added, "We
are very enthusiastic about this drop and the substantial benefits
it provides to the partnership. The ability to add these stable
earnings streams, particularly the fuels distribution services,
which require no maintenance capital, is a unique opportunity to
supplement the financial strength of the partnership. It also
supports our focus on growing distribution coverage while building
a sustainable and attractive growth path for LP distributions well
into the future."
Today, MPC also offered to the MPLX board an exchange of its GP
economic interests in MPLX, which include incentive distribution
rights (IDRs), for newly issued MPLX common units. This transaction
is expected to provide a clear valuation for MPC's GP interests in
MPLX, and reduce MPLX's cost of capital to support the sustainable
long-term growth of the partnership. MPC will continue to own the
non-economic general partner interest in MPLX. This transaction is
now under review by the conflicts committee of the MPLX board of
directors. Subject to approval of the MPLX board, the exchange is
expected to close on Feb. 1, 2018, in conjunction with the closing
of the dropdown.
In connection with entering into the dropdown
agreement, MPLX entered into a commitment letter with Mizuho Bank,
Ltd.; Bank of America Merrill Lynch; The Bank of Tokyo-Mitsubishi
UFJ, Ltd.; Barclays Bank PLC; JPMorgan Chase Bank, N.A.; and Wells
Fargo Bank, N.A. for a $4.1 billion 364-day term-loan facility to
be funded upon the closing of the dropdown transaction expected on
Feb. 1, 2018. The proceeds from the term-loan facility will be used
to fund the cash portion of the dropdown consideration. These
commitments are subject to customary conditions, including the
closing of the dropdown transaction.
###
About Marathon Petroleum
Corporation
MPC is the nation's third-largest refiner, with a
crude oil refining capacity of approximately 1.8 million barrels
per calendar day in its seven-refinery system. Marathon brand
gasoline is sold through approximately 5,600 independently owned
retail outlets across 20 states and the District of Columbia. In
addition, Speedway LLC, an MPC subsidiary, owns and operates the
nation's second-largest convenience store chain, with approximately
2,730 convenience stores in 21 states. MPC owns, leases or has
ownership interests in approximately 10,800 miles of crude oil and
light product pipelines. Through subsidiaries, MPC owns the general
partner of MPLX LP, a midstream master limited partnership. Through
MPLX, MPC has ownership interests in gathering and processing
facilities with approximately 5.9 billion cubic feet per day of
gathering capacity, 8 billion cubic feet per day of natural gas
processing capacity and 570,000 barrels per day of fractionation
capacity. MPC's fully integrated system provides operational
flexibility to move crude oil, NGLs, feedstocks and
petroleum-related products efficiently through the company's
distribution network and midstream service businesses in the
Midwest, Northeast, East Coast, Southeast and Gulf Coast
regions.
About MPLX LP
MPLX is a diversified, growth-oriented master
limited partnership formed in 2012 by Marathon Petroleum
Corporation to own, operate, develop and acquire midstream energy
infrastructure assets. We are engaged in the gathering, processing
and transportation of natural gas; the gathering, transportation,
fractionation, storage and marketing of NGLs; and the
transportation, storage and distribution of crude oil and refined
petroleum products. Headquartered in Findlay, Ohio, MPLX's assets
consist of a network of crude oil and products pipeline assets
located in the Midwest and Gulf Coast regions of the United States;
62 light-product terminals with approximately 24 million barrels of
storage capacity; an inland marine business; storage caverns with
approximately 2.8 million barrels of storage capacity; crude oil
and product storage facilities (tank farms) with approximately 5
million barrels of available storage capacity; a barge dock
facility with approximately 78,000 barrels per day of crude oil and
product throughput capacity; and gathering and processing assets
that include approximately 5.9 billion cubic feet per day of
gathering capacity, 8 billion cubic feet per day of natural gas
processing capacity and 570,000 barrels per day of fractionation
capacity.
Investor Relations
Contacts:
Lisa Wilson (419) 421-2071
Denice Myers (419) 421-2965
Doug Wendt (419) 421-2423
Media Contacts:
Chuck Rice (419) 421-2521
Katie Merx (419) 672-5159
Forward-looking
Statements
This press release contains forward-looking
statements within the meaning of federal securities laws regarding
Marathon Petroleum Corporation ("MPC") and MPLX LP ("MPLX"). These
forward-looking statements relate to, among other things,
expectations, estimates and projections concerning the business and
operations of MPC and MPLX, including proposed strategic
initiatives and our value creation plans. You can identify
forward-looking statements by words such as "anticipate,"
"believe," "design," "estimate," "expect," "forecast," "goal,"
"guidance," "imply," "intend," "objective," "opportunity,"
"outlook," "plan," "position," "pursue," "prospective," "predict,"
"project," "potential," "seek," "strategy," "target," "could,"
"may," "should," "would," "will" or other similar expressions that
convey the uncertainty of future events or outcomes. Such
forward-looking statements are not guarantees of future performance
and are subject to risks, uncertainties and other factors, some of
which are beyond the companies' control and are difficult to
predict. Factors that could cause MPC's actual results to differ
materially from those implied in the forward-looking statements
include: the time, costs and ability to obtain regulatory or other
approvals and consents and otherwise consummate the strategic
initiatives discussed herein; the satisfaction or waiver of
conditions in the agreements governing the strategic initiatives
discussed herein; our ability to achieve the strategic and other
objectives related to the strategic initiatives discussed herein;
our ability to generate sufficient income and cash flow to effect
the intended share repurchases, including within the expected
timeframe; our ability to manage disruptions in credit markets or
changes to our credit rating; the potential impact on our share
price if we are unable to effect the intended share repurchases;
adverse changes in laws including with respect to tax and
regulatory matters; inability to agree with the MPLX conflicts
committee with respect to the timing of and value attributed to
assets identified for dropdown and/or the general partner economic
interests; continued/further volatility in and/or degradation of
market and industry conditions; the impact of adverse market
conditions affecting MPC's and MPLX's midstream businesses;
modifications to MPLX earnings and distribution growth objectives,
and other risks described below with respect to MPLX; changes to
MPC's capital budget; other risk factors inherent to MPC's
industry; and the factors set forth under the heading "Risk
Factors" in MPC's Annual Report on Form 10-K for the year ended
Dec. 31, 2016, filed with Securities and Exchange Commission (SEC).
Factors that could cause MPLX's actual results to differ materially
from those implied in the forward-looking statements include:
negative capital market conditions, including an increase of the
current yield on common units, adversely affecting MPLX's ability
to meet its distribution growth guidance; the time, costs and
ability to obtain regulatory or other approvals and consents and
otherwise consummate the strategic initiatives discussed herein;
the satisfaction or waiver of conditions in the agreements
governing the strategic initiatives discussed herein; our ability
to achieve the strategic and other objectives related to the
strategic initiatives discussed herein; adverse changes in laws
including with respect to tax and regulatory matters; inability to
agree with respect to the timing of and value attributed to assets
identified for dropdown and/or the general partner economic
interests; the adequacy of MPLX's capital resources and liquidity,
including, but not limited to, availability of sufficient cash flow
to pay distributions and access to debt to fund anticipated
dropdowns on commercially reasonable terms, and the ability to
successfully execute its business plans and growth strategy; the
timing and extent of changes in commodity prices and demand for
crude oil, refined products, feedstocks or other hydrocarbon-based
products; continued/further volatility in and/or degradation of
market and industry conditions; changes to the expected
construction costs and timing of projects; completion of midstream
infrastructure by competitors; the suspension, reduction or
termination of MPC's obligations under MPLX's commercial
agreements; modifications to earnings and distribution growth
objectives; the level of support from MPC, including dropdowns,
alternative financing arrangements, taking equity units, and other
methods of sponsor support, as a result of the capital allocation
needs of the enterprise as a whole and its ability to provide
support on commercially reasonable terms; changes to MPLX's capital
budget; other risk factors inherent to MPLX's industry; and the
factors set forth under the heading "Risk Factors" in MPLX's Annual
Report on Form 10-K for the year ended Dec. 31, 2016, filed with
the SEC. In addition, the forward-looking statements included
herein could be affected by general domestic and international
economic and political conditions. Unpredictable or unknown factors
not discussed here, in MPC's Form 10-K or in MPLX's Form 10-K could
also have material adverse effects on forward-looking statements.
Copies of MPC's Form 10-K are available on the SEC website, MPC's
website at http://ir.marathonpetroleum.com or by contacting MPC's
Investor Relations office. Copies of MPLX's Form 10-K are available
on the SEC website, MPLX's website at http://ir.mplx.com or by
contacting MPLX's Investor Relations office.
Non-GAAP Financial
Measures
The EBITDA forecasts were determined on an
EBITDA-only basis. Accordingly, information related to the elements
of net income, including tax and interest, are not available and,
therefore, reconciliations of these non-GAAP financial measures to
the nearest GAAP financial measures have not been
provided.
dropdown draft 111317
This
announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Marathon Petroleum Corporation via
Globenewswire
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