Saturday, May 2, 2015

Marathon to sell its marine unit

It's taken me several years to not refer to Marathon Petroleum towboats as "Ashland Oil" boats, and now that I've gotten adjusted to the Marathon name, I'll have to learn another one.

This week, Marathon Petroleum said it will sell its marine assets -- towboats, barges, etc. -- to MPLX LP, a company formed when Marathon Petroleum spun off its pipeline operations. "LP" stands for "limited partnership," and Gary Heminger is CEO of both companies.

In Marathon Petroleum's conference call with investment analysts on Thursday, Heminger announced that Marathon's board had approved the sale, which should close in the next several months. Here is how he announced it:

"I am pleased to announce that MPC's board has authorized the sale of its marine logistics business to MPLX, which we expect to close in the next several months. MPC's marine transportation business is a fully integrated waterborne transportation service provider, consisting of 18 towboats, 203 tank barges and related assets supporting movement of light products, heavy oils, crude oil, renewable fuels, chemicals and feedstocks throughout the Midwest and Gulf Coast regions of the U.S. The addition of the marine business to MPLX, along with its very stable earnings and cash flow, would support our plans to accelerate the growth of partnership and provides increased asset diversity as the MPLX continues to grow rapidly. "

In response to a question from one analyst, Donald C. Templin, executive vice president of supply, transportation and marketing for MPC, said the marine transportation segment had EBITDA (earnings before interest, taxes, depreciation and amortization) of about $115 million last year. Templin also said the marine assets have a relatively low tax basis, "which would be dropped into MPLX."

Later, Pam Beall, president of MPLX, described the transaction during that company's conference call. She said Marathon's marine business consists primarily of three groups of assets. First is the company's floating assets -- the boats and barges. Then there is the marine repair facility at Catlettsburg. And then you have fleeting properties that are located at strategic points along the Ohio River.

"The marine business to be acquired represents about 60 percent of the volume of MPC’s inland marine movement. In addition to providing transportation services with acquired assets, MPLX would provide additional marine logistics services, including managing the 40 percent of the volumes MPC’s inland marine movements provided by third-party and Jones Act blue-water movement that are provided 100 percent today by third-parties," she said.

MPC’s marine requirements have increased significantly in the past several years with its acquisition of Galveston Bay refinery and the Hess retail business along the Atlantic Coast, Beall said.

MPLX could eventually acquire part or all of the 40 percent of product movements that Marathon now contracts out to third parties, Beall said. There are also opportunities to capture some of the blue-water movements, she said.

Beall would not provide specific estimates of when the transaction would close.

Now, here is how MPLX's website describes the company:

MPLX is a fee-based, growth-oriented master limited partnership formed in 2012 by Marathon Petroleum Corporation to own, operate, develop and acquire pipelines and other midstream assets related to the transportation and storage of crude oil, refined products and other hydrocarbon-based products. Headquartered in Findlay, Ohio, MPLX's assets consist of a 99.5 percent equity interest in a network of common carrier crude oil and products pipeline assets located in the Midwest and Gulf Coast regions of the United States and a 100 percent interest in a butane storage cavern located in W.Va. with approximately 1 million barrels of natural gas liquids storage capacity.

That's what I know now. If I learn more, I'll let you know.

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