Early on in the second quarter, Andeavor (NYSE:ANDV) and Marathon Petroleum (NYSE:MPC) announced they would be joining forces in a $23 billion deal that will make the combined entity the largest independent oil refiner in North America. Even though the deal hasn't actually closed, Andeavor's second-quarter earnings and recent management moves point to a company that is just waiting to sign off on the official statement. 

Let's take a look at Andeavor's second-quarter results, why management's statements suggest it's just a matter of time before the deal is done, and whether it's worth buying the stock today. 

Oil refinery at night.

Image source: Getty Images.

By the numbers

Metric Q2 2018 Q1 2018 Q2 2017
Revenue $12.5 billion $10.3 billion $7.85 billion
Operating income $847 million $370 million $218 million
Net income $515 million $172 million $40 million
Diluted EPS $3.41 $1.12 $0.31

Data source: Andeavor earnings release. EPS = earnings per share.

Like all of Andeavor's peers this past quarter, the company reported a big uptick in earnings driven largely by an incredibly strong performance from its refining segment. Logistical and transportation infrastructure constraints are creating several price discrepancies for various crude oils, which Andeavor and others have been able to exploit.

Chart showing Andeavor operating earnings by segment for Q2 2017, Q1 2018, and Q2 2018. Shows substantial gain for refining

Data source: Andeavor earnings release. Chart by author.

Also, as part of the earnings announcement, management announced that it would be completing a drop-down transaction with its subsidiary partnership Andeavor Logistics Partners (NYSE:ANDX) worth $1.55 billion. This decision to shift a significant portion of assets to its subsidiary all at once is similar to the moves Marathon made with its own subsidiary after activist investors pushed Marathon to do so. One has to imagine that these moves were made in preparation for the Andeavor-Marathon merger, which is set to close on Oct. 1. 

What management had to say

In Andeavor's press release statement, CEO Greg Goff highlighted some of management's actions during in the quarter and gave an update on the acquisition process with Marathon:

Our Logistics business reported its best quarter ever, and we had very strong operational performance and continue to deliver on our synergy commitment related to the Western Refining acquisition. We also continue to make excellent progress growing in Mexico with the announcement of our new terminal project in Northwest Mexico and winning two additional Pemex Logística open season capacity awards in new regions. These achievements further strengthen our growth capabilities in Mexico and extend our West Coast and Southwest integrated value chains.

Today, we also announced the completion of a $1.6 billion drop down, with Andeavor receiving $1.25 billion in Andeavor Logistics' common equity units and $300 million in cash. As a result, our ownership in Andeavor Logistics has increased from 59% to 64%. Importantly, our strategic combination with MPC is expected to close on October 1, 2018, subject to approval of shareholders and customary closing conditions. We are making excellent progress on integration and synergy planning and are very excited about the long-term shareholder value this transaction is expected to create.

ANDV Chart

ANDV data by YCharts.

Buy now or wait until the merger?

I think it is safe to say that this will be the last quarterly earnings report from Andeavor as an independent company. Ever since the merger with Marathon was announced, the two stocks have traded pretty much in lockstep and there haven't been any rumors about regulatory issues that could put the deal on hold. While these aren't absolute guarantees that the merger will go through, the wind appears to be blowing in the right direction.

One challenge for investors today is deciding whether to buy the stock today or to wait until the two entities have combined. While the two companies operate in the same industry, there is always the chance that the integration won't go swimmingly and management won't be able to achieve the cost synergies laid out as part of the acquisition announcement. Personally, I'm of the opinion that it will be best to wait to see what this company looks like post-merger before making a decision. Besides, refining margins don't normally stay this high for long. If we were to see refining margins contract, it could make earnings decline significantly -- and lead to a stock price slide, too.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.