Morningstar

Marathon Reverses Course, Embraces Activist's Proposals

Our narrow moat rating is unchanged as the firm embraces actions proposed by Elliot Management.

Securities In This Article
Marathon Petroleum Corp
(MPC)

Providing an update on its strategic actions to enhance shareholder value, best idea

Management plans to provide an update on the review of the Speedway segment by mid-2017 with a tax-free spin-off the most likely outcome. Elliot Management previously argued ownership of Speedway was not adequately reflected in Marathon's share price and that operational benefits of integration were not material enough to justify a combined structure.

While our model reflects management’s prior plan to drop assets over the course of three years, we already incorporated a higher distribution growth rate for MPLX in our last update. We also previously accounted for the value of the GP interest. As a result, neither announcement impacts our fair value estimate. We currently consider Speedway as a consolidated entity, but valuing it separately may result in a modest increase to our fair value estimate. Our narrow moat rating is unchanged.

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About the Author

Allen Good, CFA

Director
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Allen Good, CFA, is a director, Europe, for Morningstar*. Based in Amsterdam, he covers the oil and gas industries as well as manages a team of multi-industry analysts. He is also chair of the Morningstar Research Services Economic Moat Committee, a group of senior members of the equity research team responsible for reviewing all Economic Moat ratings issued by Morningstar. In this role, he is responsible for ensuring consistent application of Morningstar’s Economic Moat methodology across sectors and regions as well as updating and revising the methodology. His specialty is global integrated oils such as Exxon, Chevron and Shell and US independent refiners such as Valero and Marathon Petroleum. He also contributes to developing hydrocarbon price and petroleum product margin forecasts used in valuation models.

Before joining Morningstar in 2008, He performed merger and acquisition advisory work for a middle-market investment bank. Before that, he spent several years at Black & Decker in various operational roles, primarily focused on manufacturing and distribution.

Good holds a bachelor’s degree in business from the University of Tennessee and a master’s degree in business administration from Kenan-Flagler Business School at the University of North Carolina. He also holds the Chartered Financial Analyst® designation.

* Morningstar Holland BV (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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