Analysis: US midstream deals take center stage

OREANDA-NEWS. July 14, 2015. Marathon Petroleum-backed MPLX's \\$15.8bn purchase of MarkWest Energy Partners has put midstream asset deals back in the spotlight.

MarkWest Energy Partners is the largest NGL midstream company in the Marcellus and Utica shales. Marathon's acquisition gives it access to MarkWest NGLs and condensate, and a pipeline footprint with access to the East coast, including the LPG export terminal in Marcus Hook, Pennsylvania.

Many observers expected low crude prices to trigger a wave of energy industry M&A activity, but many producers have been able to tap equity and debt markets to raise cash, or sell off midstream assets.

While oil had recovered nearly 40pc from the near six-year lows touched earlier this year, a recent pullback, of about 16pc, again raises the possibility of more midstream deals, as seen by the MPLX/MarkWest agreement.

The MPLX deal may also indicate that the US refining industry, riding high with solid income in recent quarters because input costs fell, have the means to make large acquisitions.

Marathon's purchase eclipses recent midstream mergers in size. In November Enterprise Products Partners acquired Oiltanking Partners in a \\$4.6bn deal combining two major operators of crude storage and pipelines on the Gulf coast. Kinder Morgan continued the merger trend when it bought Bakken pipeline company Hiland Partners from founder and Continental Resources chief executive Harold Hamm for \\$3bn.

Other recent deals include Hess' sale last month of a 50pc stake in its Bakken midstream assets to Global Infrastructure Partners for \\$2.675bn. Pioneer and India's Reliance Industries sold their Eagle Ford shale condensate and natural gas gathering joint venture for \\$2.15bn, while Ferrellgas said it would buy midstream company Bridger Logistics for \\$837mn.

All those deals will be dwarfed, however, if Energy Transfer Equity (ETE) is successful in its bid to takeover fellow midstream infrastructure operator Williams. ETE said last week it was willing to resort to a hostile takeover if Williams continued to reject its unsolicited \\$53bn bid. Williams says the offer significantly undervalues the company and would not deliver the same value as other growth initiatives.