Tuesday, October 9, 2012

Marathon Petroleum Corp (NYSE:MPC) to purchase the Texas City Refinery by BP plc (NYSE:BP)

Marathon Petroleum Corp (NYSE:MPC) is a large oil refining company, being rated as the fifth largest in the U.S.A and, with a capacity of 1.2 million barrels per day, according to calendar days. This large turnover of crude-oil also ensures sound financial assets of MPC.  This company works with a six-refinery system and their gasoline is sold in over 18 states, with about 5,000 retail outlets making the oil available.

MPC recently revealed the confirmation of a contract under which they will be buying BP plc (NYSE:BP)’s Texas City Refinery. This refinery gives out about 451,000 barrels of oil per calendar day. As a part of the agreement, comes the four terminals, three intrastate NGL pipelines which start from the refinery itself,  and the allocation of the shipper history for the Colonial Pipeline Company owned by BP. Also, MPC gets the retail marketing contract assignments for about 1,040 Megawatt cogeneration facility, as well as 1,200 branded sites. The total cost of this purchase could come up to $1.2 Billion, which is inclusive of the base price of $589 million, to which, inventories will be added. If all goes according to plan, MPC may also be shelling out $700 million over the course of the next few years. The acquisition will probably be done by 2013, when it will reach a close. The money will be paid from the cash which MPC has at hand.

The magnitude of the BP Texas City refinery is worth all the money which MPC is going to be paying for it. It is one of the largest in the United States, and it is also one of the most complex, with a 15.3 rating in the Nelson complexity index. The refinery is placed in such a way so as to get the maximum amount of benefits with the exports as well as the national supply of oil to places such as the U. Gulf Coast, as well as the Midwest, and the Southeast of the country.

The acquisition will definitely improve the portfolio of MCP, and the location of the Texas City Refinery is also very lucrative for the company.  Gary R. Heminger, who is the President as well as the Chief Executive Officer for MPC is very hopeful of the acquisition.

Shares of MPC were up 5.56% to $57.92 and BP added 0.26% to $42.26.

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