[Editor's note: This story was updated from a previous version posted on 11:00 a.m. CST April 30.]

Wall Street seemed impressed April 30 with the merger announcement by Marathon Petroleum Corp. (NYSE: MPC) and Andeavor Corp. (NYSE: ANDV).

Tudor, Pickering & Holt (TPH) summed up its opinion in a single word: “Wow!”

The investment and merchant banking firm noted the agreement is the sector’s “biggest deal since Holly and Frontier combined to form Holly Frontier Corp. in 2011, and it will create the largest refiner in the U.S.” on the downstream half of the energy chain.

Put together, the new Marathon-Andeavor will operate “16 refineries with just over 3 million barrels per day (MMbbl/d) of capacity (16% of U.S. total).” Their two midstream MLPs, MPLX and Andeavor Logistics, alone equal $22 billion in market value.

Altogether, pro forma market cap for the combined companies will equal $58 billion “before upside synergies,” TPH added. “We estimate refining, midstream, and retail would make up 47%, 28%, and 25% [respectively] of the total,” it reported.

The analysis pointed out the deal creates something of a dominant Big 3 of refining-marketing-midstream firms in the U.S., with Marathon-Andeavor standing alongside Valero Corp. (NYSE: VLO) and Phillips 66 Co. (NYSE: PSX). The merger will “create a stark difference between these three leading companies and the rest of the group,” TPH projected.

In U.S. refining, the combined Marathon/Andeavor will jump ahead of San Antonio-based Valero Corp., now the largest, and Houston-based Phillips 66. Valero also owns refineries in Canada and the U.K. and Phillips has plants in the U.K. and Germany.

Both Andeavor and Marathon have targeted Mexico for new midstream and marketing business, although neither have major operations there at this time.

The two firms announced their deal before the opening bell April 30. They said they believe the deal will be immediately accretive to both earnings and cash flow.

As big midstream players, their MLPs have significant assets in the sector. Marathon’s MPLX LP ranks No. 8 on Hart Energy’s Midstream 50, based on 2017 EBITDA, while Andeavor Logistics lists at No. 16. The combined firms, pro forma, would be larger than Plains All American Pipeline LP (NYSE: PAA) and nearly match The Williams Cos. on the Midstream 50.

Fitch affirmed its BBB rating of Marathon’s debt following the announcement. Fitch also placed Andeavor, rated BBB-, on its credit watch with positive implications.

Andeavor, then known as Tesoro Petroleum Corp., sold off its upstream assets in the late 1990s while Marathon divided into the upstream Marathon Oil Corp. and midstream-downstream Marathon Petroleum in 2011.

TPH wasn’t the only financial analyst firm to express awe.

“And just like that, Andevoured by Marathon,” Jefferies headlined its deal review, noting the merger comes “less than a year after closing the [Andeavor] merger with Western Refining”—but this time Andeavor was the target. That apparently created some doubt by Jefferies.

“While ANDV was already a show-me story in the sense that the company was in the throes of integrating Western Refining, now the future of the company will hinge on further execution efforts, primarily in retail and Permian logistics optimization,” it said.

“In connection with the transaction announcement, management noted a plan to maintain MPLX and Andeavor Logistics as two separate outstanding MLPs, while also noting it will evaluate long-term structure at the appropriate time following the closing of the MPC/ANDV transaction,” it said. “With significant support expected to come from ANDV over the coming years in the form of distribution waivers, drop-downs, projects delivered at cost, and keep-whole arrangements, we note the introduction of ambiguity into Andeavor Logistics’ future likely does not bode well for equity performance.

“As we have seen in several historical transactions where parent sponsors are acquired leaving a residual ‘orphaned’ MLP, the trading performance generally speaks to an ex-growth scenario given enhanced competition for assets from intra-family MLPs… We do not expect ANDV to execute on dropdowns and asset transfers in 2018, which should result in an EBITDA reduction by up to ~$80 million this year.

That “ambiguity” showed conflicting trading patterns in the first hours following the announcement.

Andeavor shares climbed rapidly as the stock market opened, up nearly 16% to $142 per share before settling under $140 in the afternoon. Andeavor Logistics, however, was down more than 10%, trading under $42 per unit in the afternoon. Marathon shares were down more than 6% while its MPLX midstream partnership climbed more than 3%, trading above $35.50 per unit as the closing bell neared.

Marathon announced its first-quarter results the same day, reporting revenues of $18.98 billion, up 15.8% for the year-earlier period. But that number missed analysts’ consensus by just over $1 billion. Earnings were 8 cents per share, 7 cents below consensus. Andeavor will report first-quarter earnings May 7.

Credit Suisse pointed out in its report, “Big Gets Bigger,” that the combined Marathon-Andeavor will be a formidable midstream player with operations in some of the nation’s biggest shale plays.

“MPLX and Andeavor Logistics will coexist for some time,” Credit Suisse said. “The combined company will have increased crude sourcing ability from Bakken and Permian and best-in-class gathering and processing assets [in the] Marcellus/Utica and Scoop/Stack.”

Under the agreement, approved by both boards, Marathon will acquire all of Andeavor’s outstanding shares, representing a total equity value of $23.3 billion. Total enterprise value would be $35.6 billion, based on Marathon’s April 27 closing price of $81.43. Andeavor shareholders will have the option to choose 1.87 shares of MPC for each share of Andeavor, or $152.27 in cash, subject to a proration mechanism that will result in 15% of Andeavor’s fully diluted shares receiving cash consideration.

“This represents a premium of 24.4% to ANDV’s closing price on April 27,” Marathon said. “MPC and ANDV shareholders will own approximately 66% and 34% of the combined company, respectively.”

Jefferies put its pencil to the figure the size of the deal and estimated results going forward.

“Based on Friday’s [April 27] closing price, we estimate ANDV was acquired for ~9.3x 2019 stand-alone EBITDA, including parent-level only debt. Including 2019 company projected synergies of ~$480-$710 million, it would reduce the 2019 acquisition multiple to ~7.7x,” Jefferies added. “Pro-forma for the deal, based on our 2019 combined MPC/ANDV estimates, including only hold-co debt and excluding unowned cash flows at the respective Partnerships, we estimate the combined entity is trading at ~9.7x 2019 EBITDA; including the mid-point of $480-$710 million of year one and two synergies, it would reduce the multiple to ~8.9x. We believe this compares favorably to Phillips 66, which we see trading at ~10.2x 2019 EBITDA and representing the best comp to pro-forma MPC.

In addition to their midstream operations, the two companies have assets that stretch from the Atlantic to Alaska. Antitrust questions may not be an issue as the two have little geographic or marketing overlap, analysts noted. Marathon’s operations are predominantly in the Midwest and Southeast while Andeavor’s focus is the upper Midwest, west of the Rockies and Alaska.

The merger “combines two strong, complementary companies,” Gary R. Heminger, Marathon’s chairman and CEO, said in his firm’s merger announcement. “Each of our operating segments are strengthened through this transaction, as it geographically diversifies our refining portfolio into attractive markets, increases access to advantaged feedstocks, enhances our midstream footprint in the Permian Basin, and creates a nationwide retail and marketing portfolio that will substantially improve efficiencies and enhance our ability to serve customers.

“Importantly, we expect this transaction will be meaningfully accretive for shareholders, generating approximately $1 billion of tangible annual run-rate synergies within the first three years and significantly enhancing our long-term cash flow generation profile,” Heminger added.

The CEO noted that predicted strong cash flow from combining the firms will allow Marathon to repurchase $5 billion of MPC shares.

Closing is expected during the second half, subject to customary regulatory conditions and stockholder approval. Headquarters will be at Marathon’s Findlay, Ohio, office, although Marathon added that it expects to maintain some operations at Andeavor’s San Antonio headquarters.

Heminger will head the combined company. Greg Goff, Andeavor chairman and CEO, will join Marathon as executive vice chairman. Goff and three other Andeavor directors will join the Marathon board of directors.

Marathon’s MPLX has more than 8,000 miles of crude oil and product pipelines in 17 states with related terminals, rail, truck and marine operations. It holds an interest in the Louisiana Offshore Oil Port LP, the only U.S. dock that can routinely handle Very Large Crude Carrier (VLCC) tankers. It has a total of 56 MMbbl in storage capacity.

The Andeavor Logistics MLP has major gathering, terminal and pipeline operations in the Permian Basin, the Williston Basin, the intermountain West and on the Pacific Coast. Formerly known as Tesoro Corp., Andeavor changed its name in 2017.

In marketing, Marathon supports more than 5,000 retail outlets, predominantly in the Midwest, and markets under the Marathon and Speedway trademarks. Andeavor has more than 3,000 stations and is a major player in the big California market under the Tesoro, Exxon, Mobil and ARCO brands.

Both companies have had active expansion and acquisition programs in recent years. April 24, Buckeye Partners LP announced the formation of a joint venture with Andeavor and Phillips 66 Partners LP (NYSE: PSXP) to develop a new deep-water, open access marine terminal at Ingleside, Texas, on Corpus Christi Bay. To be known as the South Texas Gateway Terminal, it will serve as the primary outlet for crude oil and condensate volumes delivered off of the planned Gray Oak Pipeline connecting Permian Basin producers to the Gulf Coast. The terminal will 3.4 MMbbl of crude storage capacity, connectivity to Gray Oak and two deep-water docks capable of berthing VLCC tankers.

Paul Hart can be reached at pdhart@hartenergy.com.

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