Ohio-based independent oil refiner and marketer, Marathon Petroleum Corp. (MPC) has signed an agreement with a syndicate of lenders. Per the deal, Marathon Petroleum is expected to take senior unsecured term loan of worth $700 million. The duration of the term loan will be five years.
Marathon Petroleum revealed that the proceeds from the loan will likely be utilized for financing its affiliate, Speedway LLC’s purchase of retail and transport operations of integrated energy firm Hess Corporation (HES). (Read: Marathon Petroleum to Boost Retail with Hess Biz).
Marathon Petroleum is the fourth largest domestic refiner, transporter and marketer of petroleum products. The company, in its current form, came into existence following the 2011 spinoff of Houston, TX-based Marathon Oil Corporation’s (MRO) refining/sales business into a separate, independent and publicly traded entity. Marathon Petroleum operates in three segments: Refining and Marketing, Speedway (Retail) and Pipeline Transportation.
A major advantage for the company is its proprietary access to pipelines, which inhibits lower-cost competitors from supplying to Marathon Petroleum's key markets.
However, the requirement of policies to reformulate fuel and lower emission from refinery operations make the industry a highly regulated one. As a result, Marathon Petroleum is often forced to divert cash flows to ensure regulatory compliance, which can adversely impact profitability.
As a result, Marathon Petroleum currently has a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, one can look at a better-ranked player in the energy sector like Sanchez Energy Corporation (SN). The stock sports a Zacks Rank #1 (Strong Buy).
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