Acquisitions and Investments

Acquisition of Hess' Retail Operations and Related Assets

On September 30, 2014, we acquired from Hess Corporation ("Hess") all of Hess' retail locations, transport operations and shipper history on various pipelines, including approximately 40,000 barrels per day on Colonial Pipeline for $2.82 billion. We refer to these assets as “Hess' Retail Operations and Related Assets.” The transaction was funded with a combination of debt and available cash.

The transaction provides for an adjustment for working capital, which has not been finalized with Hess. If a change is made for working capital, the fair value of the assets acquired will be revised.

The estimated fair values of assets acquired and liabilities assumed at the acquisition date, pending the completion of an independent appraisal and other evaluations, are as follows:



(In millions)
Cash and cash equivalents	$	39
Receivables	132
Inventories	178
Other current assets	5
Property, plant and equipment, net	2,062
Other noncurrent assets	103
Total assets acquired	2,519
Accounts payable	77
Payroll and benefits payable	4
Consumer excise taxes payable	80
Other current liabilities	10
Defined benefit postretirement plan obligations	2
Deferred credits and other liabilities	122
Total liabilities assumed	295
Net assets acquired excluding goodwill	2,224
Goodwill	600
Net assets acquired	$	2,824

The purchase price allocation resulted in the recognition of $600 million in goodwill by our Speedway segment, which is deductible for tax purposes. Goodwill recognized for the acquisition primarily relates to the expected benefits of a significantly expanded retail platform that should enable growth in new markets, as well as the potential for higher merchandise sales. We also expect strategic benefits from the financial and operational scale we expect to realize across our entire retail network. This acquisition significantly expands our Speedway presence from nine to 22 states throughout the East Coast and Southeast and is aligned with our strategy to grow higher-valued, stable cash flow businesses. This acquisition also enables us to further leverage our integrated refining and transportation operations, providing an outlet for an incremental 200,000 barrels per day of assured sales from our refining system.

Other noncurrent assets includes a $22 million intangible asset related to a trade name and $60 million related to favorable lease contract terms. Deferred credits and other liabilities includes $80 million related to unfavorable lease contract terms. The trade name is being amortized over its estimated useful life of two years based on the utilization of the assets. The favorable and unfavorable lease contract amounts are being amortized over the terms of the leases.

We recognized $12 million of acquisition-related costs associated with Hess' Retail Operations and Related Assets acquisition. These costs were expensed and were included in selling, general and administrative expenses.

Acquisition of Refinery and Related Logistics and Marketing Assets

On February 1, 2013, we acquired from BP Products North America Inc. and BP Pipelines (North America) Inc. (collectively, “BP”) the 451,000 barrel per calendar day refinery in Texas City, Texas, three intrastate natural gas liquid pipelines originating at the refinery, four light product terminals, branded-jobber marketing contract assignments for the supply of approximately 1,200 branded sites, a 1,040 megawatt electric cogeneration facility and a 50,000 barrel per day allocation of space on Colonial Pipeline. We refer to these assets as the “Galveston Bay Refinery and Related Assets.” We paid $1.49 billion for these assets, which included $935 million for inventory. The transaction was funded with cash on hand. Pursuant to the purchase and sale agreement, we may also be required to pay BP a contingent earnout of up to an additional $700 million over six years, subject to certain conditions. In July 2014, we paid BP $180 million for the first period's contingent earnout. On the consolidated statements of cash flows, $172 million of the contingent earnout payment is included as a financing activity with the remainder included as an operating activity. See Note 15 for additional information on the contingent consideration.

The following unaudited pro forma financial information presents consolidated results assuming the Galveston Bay Refinery and Related Assets acquisition occurred on January 1, 2012 and Hess' Retail Operations and Related Assets acquisition occurred on January 1, 2013. The pro forma financial information does not give effect to potential synergies that could result from the acquisitions and is not necessarily indicative of the results of future operations.



	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions, except per share data)	2014		2013		2014		2013
Sales and other operating revenues (including consumer excise taxes)	$	28,284	$	29,317	$	84,232	$	86,386
Net income attributable to MPC	698		170		1,748		1,516
Net income attributable to MPC per share - basic	$	2.48	$	0.55	$	6.07	$	4.72
Net income attributable to MPC per share - diluted	2.46		0.55		6.03		4.69

The pro forma information includes adjustments to align accounting policies, an adjustment to depreciation expense to reflect the fair value of property, plant and equipment, increased amortization expense related to identifiable intangible assets, additional interest expense related to financing the acquisition of Hess' Retail Operations and Related Assets, as well as the related income tax effects.

Acquisitions of Convenience Stores

During 2013, Speedway acquired nine convenience stores located in Tennessee, western Indiana and western Pennsylvania. In connection with these acquisitions, our Speedway segment recorded $8 million of goodwill, which is deductible for income tax purposes.

The principal factors contributing to a purchase price resulting in goodwill included the acquired stores complementing our existing network in our Midwest market, access to our refined product transportation systems and the potential for higher merchandise sales.

Acquisition of Biodiesel Facility

On April 1, 2014, we purchased a facility in Cincinnati, Ohio from Felda Iffco Sdn Bhd, Malaysia for $40 million. The plant currently produces biodiesel, glycerin and other by-products. The capacity of the plant is approximately 60 million gallons per year.

Neither goodwill nor a gain from a bargain purchase was recognized in conjunction with the biodiesel facility acquisition.

Assuming the acquisitions of the convenience stores in 2013 and the biodiesel facility in 2014 had been made at the beginning of any period presented, the consolidated pro forma results would not be materially different from reported results.

Investments in Ethanol Companies

On August 1, 2013, we acquired from Mitsui & Co. (U.S.A.), Inc. its interests in three ethanol companies for $75 million. Under the purchase agreement, we acquired an additional 24 percent interest in The Andersons Clymers Ethanol LLC ("TACE"), bringing our ownership interest to 60 percent; a 34 percent interest in The Andersons Ethanol Investment LLC ("TAEI"), which holds a 50 percent ownership in The Andersons Marathon Ethanol LLC ("TAME"), bringing our direct and indirect ownership interest in TAME to 67 percent; and a 40 percent interest in The Andersons Albion Ethanol LLC ("TAAE"), which owns an ethanol production facility in Albion, Michigan. On October 1, 2013, our ownership interest in TAAE increased to 43 percent as a result of TAAE acquiring one of the owner's interest. We hold a noncontrolling interest in each of these entities and account for them using the equity method of accounting since the minority owners have substantive participating rights.

Investments in Pipeline Companies

In July 2014, we exercised our option to acquire a 35 percent ownership interest in Enbridge Inc.'s Southern Access Extension pipeline ("SAX") through our investment in Illinois Extension Pipeline Company, LLC ("Illinois Extension Pipeline"). During the nine months ended September 30, 2014, we made contributions of $97 million to Illinois Extension Pipeline to fund our portion of the construction costs incurred-to-date on the SAX project. We account for our ownership interest in Illinois Extension Pipeline as an equity method investment. See Note 22 for information on future contributions to Illinois Extension Pipeline.

In March 2014, we acquired from Chevron Raven Ridge Pipe Line Company an additional seven percent interest in Explorer Pipeline Company ("Explorer") for $77 million, bringing our ownership interest to 25 percent. As a result of this increase in our ownership, we now account for our investment in Explorer using the equity method of accounting rather than the cost method. The cumulative impact of the change was applied as an adjustment to 2014 retained earnings.

In November 2013, we agreed to serve as an anchor shipper for the Sandpiper pipeline project and fund 37.5 percent of the construction costs of the project, which will become part of Enbridge Energy Partners L.P.'s ("Enbridge Energy Partners") North Dakota System. In exchange for these commitments, we will earn an approximate 27 percent equity interest in Enbridge Energy Partners' North Dakota System when the Sandpiper pipeline is placed into service. We also have the option to increase our ownership interest to approximately 30 percent through additional investments in future system improvements. We made contributions of $149 million to North Dakota Pipeline Company LLC ("North Dakota Pipeline") during the nine months ended September 30, 2014. We have contributed $173 million since project inception. We account for our interest in North Dakota Pipeline using the equity method of accounting. See Note 22 for information on future contributions to North Dakota Pipeline.