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Monday, January 14, 2019

The Marathon Oil and Andeavor merger

Source: NRC Realty & Capital Advisors, LLC

A $23 billion merger between Marathon Oil and Andeavor Oil has created the nation's largest refining company, with Marathon acquiring the latter's assets. Closing in October 2018, the transaction added 10 refineries and over 1,000 convenience store businesses to Marathon (ticker: MPC).

Marathon had previously been a leading American downstream energy company and convenience store owner, headquartered in Finlay, Ohio. Andeavor was San Antonio-based, with refining and retail operations focus in the western U.S.

Post-merger, Marathon will retain its headquarters in Finlay, but will also continue to maintain an office in San Antonio. Keeping abreast of industry changes can be helpful when evaluating gas stations for sale or when the question of selling my gas station business is being considered.

Economies of scale

The merger of the refinery giants positions the new entity to take advantage of economies relating to access to cheap oil and oil transport in the Gulf Coast and throughout Mexico. Also, the merger has created one of the largest convenience store groups in the United States.

Before the merger, Marathon was one of the largest suppliers of fuel for the east coast of Mexico, with major refineries located in Galveston, Texas and Garyville, Louisiana. After its merger with Andeavor, Marathon will now have access to the latter companies drilling resources in the Permian Basin in western Texas and New Mexico.

Andeavor's pre-existing 25 percent stake in Gray Oak, a new pipeline venture, gives the merged entity a powerful combination of refining capacity and adjacent access to inexpensive oil in the region. Another major advantage that Andeavor has brought to the merger is that it was the only company approved to use pipelines and storage facility controlled by the Mexican state oil company Pemex.

Shift to low sulfur fuel

The new Marathon is also purported to be aggressively pursuing the means to produce clean-burning, low-sulfur fuel to comply with new emissions standards established by the International Maritime Organization for 2020.

To comply, ships will need to either install scrubbers or use low-sulfur fuel. Many analysts believe that Marathon now has the lead in terms of production potential for low-sulfur fuel, and that its strategy will pay off even more if the price of low-sulfur fuel rises over time.

Rebranding

The rebranding of Andeavor's Giant brand to Speedway convenience store businesses will provide additional marketing clout for the chain's Speedway Rewards loyalty program that allows customers to accumulate rewards points for fuel and merchandise.

A major aspect of differentiation for Speedway is its new focus on female customers that incorporates prepared meals and fresh food service items into its rewards program.

Broad geographic range

Post-merger, Marathon will have a throughput capacity of approximately 3 million barrels per day, which places it in the top five global refiners. Marathon has also achieved a wider geographic scope with the acquisitions of Andeavor's western U.S.-focused portfolio.


With additional transportation infrastructure and access to product in the Permian Basin, Marathon can catalyze production and distribution in the most targeted drilling region in the nation.

Marathon now has an overall footprint comprised of approximately 4,000 company-owned stores and about 7,800 branded locations. Questions like "selling my gas station" and "selling my convenience store" may be small relative to giant industry mergers, but the effects can trickle down to individual assets.

To see a list of convenience stores and gas stations for sale, click here.