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In July 13th, the Marathon Oil Company MPLX announced that the full acquisition of, the second largest natural gas treatment provider of United States, MarkWest. By that time, it will further expand the business scale of condensed liquid natural gas.
In the oil and gas industry, the Master Limited Partnerships (MLPs) is taked mainly by some middle enterprise with constant rate of return. To support the expected growth rate of enterprises, the Master Limited Partnerships must continue to increase new assets, such as investing the construction of new pipelines, plant, or mergers and acquisitions, and MPLX apparently chose the latter.
1.Improve the cash distribution rate.
"Financial Times" noted that the acquisition of MPLX MarkWest launched include the debt valued up to 17.4 billion dollars. Initially expected the deal will be completed in the fourth quarter of this year, but still need to be approved by the shareholders of MarkWest and the authorities from relevant regulators.
MPLX shares in New York stock exchange plunged 16 percentage points to per share when the news released.However, MarkWest shares rose 14% to per share and the marathon oil price rose 7.9%.
Gary, chief executive of Marathon Oil, said that the acquisition is an important step to help MPLX expand the assets of the middle stream, improve earnings, stabilize cash flow. The company is moving forward to a large diversified Master Limited Partnerships.
Frank Semple, the MarkWest CEO, also said that "we are based on the business point of view of the merger, intended to explore more opportunities for development and maximize synergies, then achieve the vision of common business."
It is reported that the acquisition of MarkWest will improve the allocation of investors' cash targets. This year it will increase by 29% and the next two years it will be increased by 25%. By the MarkWest earlier plan, in the next 5 years, an annual investment of 1.5 billion dollars will be expended. In view of this, the MPLX commitment that they will provide a clear path to cash flow growth for the capital spending plan.
In fact, although the tax-free gold medal, but the Master Limited Partnerships partnership enterprise has not been popular "". Last August, Kim Morgan, the United States Large-scale Pipeline Operator, announced that integrated of 3 ordinary partnership and abandoned the structure of Master Limited Partnerships. They intended to become an independent, single integrated energy company.
In the Marathon Oil Company's opinion, new company will continue structure after the merger of MPLX and MarkWest. The merger can further reduce the corporation's tax bills. This is also the reason that the United States energy Property Investment Companies ETE initiate comprehensive acquisition to the United States gas pipeline company Williams at the end of June.
2.The By-product of Gas have Enjoyed Brick Sales
There is one thing that have to be mentioned, the American energy companies have seen the cost advantage of natural gas by-product. They are looking for a market for these products and exports have become a big choice. "The New York times" noted that some European petrochemical manufacturers have planed to build the infrastructure and to receive and store the ethane, propane and other fuels from United States.
Pickering Holt Tudor, a United States energy investment company, indicated in a report that propane, ethane and other natural gas by-products are becoming increasingly attractive. The general manager of the company said: "low oil prices, slow crude oil production growth or stagnant estimates bring great pressure to those company focus on crude oil. These companies are trying to move closer to the diversified natural gas field".
Reuters noted that the main reason that MPLX launched a acquisition to MarkWest is aimed at the export of condensed natural gas". After the completion of the acquisition, Marathon Oil's midstream business will be more stable, especially natural gas processing business gathered in the northeast of in America.
The Wall Street Journal noted that executives of Marathon Oil and markwest said that after the merger,they will explore the possibility of joint developing project in the northeastern region of the United States of America. The condensed natural gas in that area is almost all producted from Marcellus and Utica's shale areas.
Gary indicated that after the merger, the company will further integrate the capacity of natural gas processing along the Gulf of Mexico. Marathon Oil in the region runs the third and fifth largest steel-making factory in US which located in Louisiana and Texas. In addition, the company also has a lot of refining infrastructure in the midwest.
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