Marathon Petroleum Corp. (NYSE: MPC) has agreed to dropdown $8.1 billion of assets to its midstream partnership MPLX.
The assets include refining logistic and fuels distribution services.
The transaction is expected to close on Feb. 1, 2018.
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% 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 chief executive 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 said it 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 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.”
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