Marathon Petroleum Corp. said March 18 it will retain its midstream unit and tapped the business’ head as its new CEO, concluding a strategic review driven by shareholder demands for its separation.

Michael J. Hennigan, the head of MPLX LP, was appointed by Marathon to serve as its next president and CEO, replacing Gary R. Heminger, who will retire in April after a 45 year-long career at the company.

Heminger’s departure had been announced last October as part of the launch of a restructuring by Marathon Petroleum, the largest independent refiner in the U.S. The restructuring included a strategic review of midstream business unit MPLX and followed demands made by shareholder Elliott Management for Marathon to split its business into three separate companies.

According to Elliott, the move would boost shareholder value of Marathon Petroleum by as much as $40 billion. The hedge fund, later joined by other shareholders, also demanded the removal of Heminger, Reuters reported in September 2019.

In a March 18 company release, Marathon Petroleum said a separation of its midstream unit would be cash-flow negative and require between about $11 billion and $15 billion that would otherwise go toward shareholder returns.

Marathon retaining the MLP structure remains the most tax-advantaged way to own midstream assets, according to Stacey Morris, director of research at Alerian.

“In midstream, there has been an ongoing, broad debate surrounding structure questions and whether MLPs should convert to corporations. In general, midstream MLPs have not outright converted to a C-corp structure,” Morris said in a statement. “Rather, the surviving entity of merger transactions has in some cases been a C-corp.” 

Morris also added that Marathon Petroleum’s newly named CEO, Hennigan, has significant midstream experience, in addition to refining experience, which she said will likely be welcomed by MPLX investors.

Hennigan brings 38 years of energy industry experience in the refining and midstream space, including nearly three years with MPLX. Prior to joining MPLX in 2017, he was president of crude, NGL and refined products of the general partner of Energy Transfer Partners LP and also has served as president and CEO of Sunoco Logistics Partners LP.

In addition to his new role as CEO of Marathon Petroleum, Hennigan will continue to serve as president and CEO of MPLX GP LLC, the general partner of MPLX, according to the company release.

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