Acquisitions and Investments

3 Months Ended

Mar. 31, 2016

Business Combinations [Abstract]

Acquisitions and Investments

Acquisition and Investments

Merger with MarkWest Energy Partners, L.P.

On December 4, 2015, MPLX completed the MarkWest Merger. The total value of consideration transferred was $8.61 billion, consisting of $7.33 billion in equity and $1.28 billion in cash. At closing, we made a payment of $1.23 billion to MarkWest common unitholders and the remaining $50 million will be paid in equal amounts in July 2016 and July 2017, respectively, in connection with the conversion of the MPLX Class B units to MPLX common units. Our financial results and operating statistics reflect the results of MarkWest from the date of the MarkWest Merger.

The following table summarizes the preliminary purchase price allocation. Subsequent to December 31, 2015, additional analysis was completed and adjustments were made to the preliminary purchase price allocation as noted in the table below. The estimated fair value of assets acquired and liabilities and noncontrolling interests assumed at the acquisition date as of March 31, 2016, are as follows:

(In millions)	As originally reported		Adjustments			As adjusted
Cash and cash equivalents	$	12	$	—		$	12
Receivables	164		—			164
Inventories	33		(1		)	32
Other current assets	44		—			44
Equity method investments	2,457		143			2,600
Property, plant and equipment, net	8,474		43			8,517
Other noncurrent assets(a)	473		65			538
Total assets acquired	11,657		250			11,907
Accounts payable	322		6			328
Payroll and benefits payable	13		—			13
Accrued taxes	21		—			21
Other current liabilities	44		—			44
Long-term debt	4,567		—			4,567
Deferred income taxes	374		3			377
Deferred credit and other liabilities	151		—			151
Noncontrolling interests	13		—			13
Total liabilities and noncontrolling interest assumed	5,505		9			5,514
Net assets acquired excluding goodwill	6,152		241			6,393
Goodwill	2,454		(241		)	2,213
Net assets acquired	$	8,606	$	—		$	8,606

^(a)   The adjustment relates to the intangible asset acquired.

Adjustments to the preliminary purchase price stem mainly from additional information obtained by management in the first quarter about facts and circumstances that existed at the acquisition date including updates to forecasted employee benefit costs and capital expenditures, and completion of certain valuations to determine the underlying fair value of certain acquired assets. The adjustment to intangibles mainly relates to a misstatement in the original preliminary purchase price allocation. The correction of the error resulted in a $68 million reduction to the carrying value of goodwill and an offsetting increase of $64 million in intangibles and $2 million in each of equity method investments and property, plant and equipment. Management concluded that the correction of the error is immaterial to the consolidated financial statements of all periods presented. We are still completing our analysis of the final purchase price allocation.

The increase to fair value of equity method investments, property plant and equipment, and other noncurrent assets noted above would not have resulted in a material effect to depreciation and amortization or income from equity method investments in the Consolidated Statements of Income for the year ended December 31, 2015, had the fair value adjustments been recorded as of December 4, 2015.

The net fair value of the assets acquired and liabilities assumed in connection with the MarkWest Merger was less than the fair value of the total consideration resulting in the recognition of $2.21 billion of goodwill in three reporting units within our Midstream segment, substantially all of which is not deductible for tax purposes. Goodwill represents the complementary aspects of the highly diverse asset base of MarkWest and MPLX that will provide significant additional opportunities across the hydrocarbon value chain.

As further discussed in Note 14, we recorded a goodwill impairment charge based on the implied fair value of goodwill as of the interim impairment analysis date. Therefore, any future adjustments to the purchase price allocation will be offset by adjustments to the impairment expense line item in the Consolidated Statements of Income.

Unaudited Pro Forma Financial Information

The following unaudited pro forma financial information presents consolidated results assuming the MarkWest Merger occurred on January 1, 2014. The unaudited pro forma financial information does not give effect to potential synergies that could result from the transaction and is not necessarily indicative of the results of future operations.

	Three Months Ended   March 31,
(In millions, except per share data)	2015
Sales and other operating revenues (including consumer excise taxes)	$	17,652
Net income attributable to MPC	871
Net income attributable to MPC per share – basic	$	1.60
Net income attributable to MPC per share – diluted	1.59

The unaudited 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, adjustments to amortize the fair value adjustment for the debt assumed by MPLX, adjustments to reflect the change in our limited partner interest in MPLX resulting from the MarkWest Merger, as well as the related income tax effects.

Investment in Ocean Vessel Joint Venture

In September 2015, we acquired a 50 percent ownership interest in a new joint venture with Crowley Maritime Corporation through our investment in Crowley Ocean Partners. The joint venture will operate and charter four new Jones Act product tankers, most of which will be leased to MPC. The new vessels are in various stages of construction with two of them completed and operational prior to the end of the first quarter. Contributions to the joint venture with respect to each vessel will occur at the vessel’s delivery. During 2015, we contributed $72 million in connection with delivery of the first two vessels. The third vessel was delivered April 15, 2016 and the remaining vessel is expected to be delivered by the third quarter of 2016. We account for our ownership interest in Crowley Ocean Partners as an equity method investment. In the first quarter of 2016, we revised our internal reporting of operating results for our investment in Crowley Ocean Partners. These operating results are now reported in our Midstream segment. Previously they were reported as part of our Refining & Marketing segment. Prior periods have been recast to reflect our revised segment presentation. See Note 22 for information on our conditional guarantee of the indebtedness of the joint venture and future contributions to Crowley Ocean Partners.

Investment in Pipeline Company

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. The anticipated in-service date for the pipeline is likely to be delayed from 2017 to early 2019, which is also likely to increase cost estimates for the project. The project schedule and cost estimates remain under review. We made contributions of $5 million to North Dakota Pipeline Company LLC (“North Dakota Pipeline”) during the three months ended March 31, 2016 and have contributed $292 million since project inception. We account for our interest in North Dakota Pipeline as part of our Midstream segment using the equity method of accounting. See Note 22 for information on future contributions to North Dakota Pipeline.