Marathon to Reverse Pipeline - Analyst Blog

Independent oil refiner and marketer Marathon Petroleum Corporation (MPC) is planning to reverse the Capline pipeline to transport oil from the Midwest to the Gulf Coast refining belt. The reversal will help in draining the excess crude oil from increased drilling in the Midcontinent.

The 1.2 million barrel-a-day Capline pipeline is currently operated by Shell Pipeline, a subsidiary of Royal Dutch Shell plc (RDS.A). Marathon owns 32.6% of the same and at present, the pipeline delivers crude oil from Louisiana to Illinois.

Marathon is expected to start operating the 630-mile pipeline from Sep 2013. Other details of the deal are yet to be disclosed by the company.

This will be the second key pipeline reversal following the Seaway pipeline. Enbridge Inc. (ENB) and Enterprise Products Partners (EPD) have plans to convert the Seaway pipeline in a month and increase its capacity to 400,000 barrels a day by 2013.

Findlay, Ohio-based Marathon Petroleum Corporation is a leading independent refiner, transporter and marketer of petroleum products. Marathon operates in three segments: Refining and Marketing, Speedway (Retail), and Pipeline Transportation.

Marathon is the fifth largest domestic refiner with a combined crude oil processing capacity of approximately 1,193,000 barrels per day through its portfolio of six refineries.

The stock retains a Zacks Rank #2 (Buy). The company’s financial flexibility and strong balance sheet are real assets in this highly uncertain economy. 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.

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