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MPLX LP Delivers Extraordinary Results in 2018

FINDLAY, Ohio, Feb. 7, 2019 /PRNewswire/ -- 

  • Reported record full-year net income of $1.8 billion and adjusted EBITDA of $3.5 billion, an increase of $1.0 billion and $1.5 billion, respectively, compared to 2017
  • $2.8 billion in net cash provided by operating activities supported the return of nearly $2.1 billion to unitholders
  • Maintained capital discipline and improved financial profile by increasing distribution coverage to 1.36x while keeping leverage below 4.0x

MPLX LP (MPLX) today reported fourth quarter 2018 net income attributable to MPLX of $434 million and full-year 2018 net income attributable to MPLX of $1.8 billion, compared with $238 million and $0.8 billion for the fourth quarter and full year 2017, respectively, which was an increase of $1.0 billion on a year-over-year basis. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) was $3.5 billion for the full year, which was nearly $1.5 billion higher than 2017. The increase was driven by dropdowns in the L&S segment and strong base business performance across both segments.

"2018 was a transformational year for MPLX," said Gary R. Heminger, chairman and chief executive officer. "Our team executed on the strategic vision outlined at the beginning of the year by significantly growing the business, enhancing the stability of the cash flow profile, and simplifying our financial structure.

"Looking forward, we continue to focus on increasing our presence throughout the midstream value chain as well as developing assets that generate third-party revenue. We announced a number of compelling new projects, including anticipated investments in multiple long-haul pipelines and export facilities that we expect to deliver long-term attractive returns for our shareholders and position the company for success in 2019 and beyond."

For the year, the company generated $2.8 billion in net cash provided by operating activities and distributable cash flow of $2.8 billion, returning $2.1 billion to unitholders. Consistent with its self-funding strategy, the company did not issue any public equity in 2018 and ended the year with leverage of 3.9x.

Financial Highlights



Three Months Ended
 Dec. 31



Year Ended
 Dec. 31

(In millions, except per unit and ratio data)


2018



2017



2018



2017

Net income attributable to MPLX(a)


$

434




$

238




$

1,818




$

794


Adjusted EBITDA attributable to MPLX(b)


911




569




3,475




2,004


Net cash provided by operating activities


799




569




2,826




1,907


Distributable cash flow ("DCF")(b)


701




445




2,781




1,628


Distribution per common unit(c)


$

0.6475




$

0.6075




$

2.5300




$

2.2975


Distribution coverage ratio(d)


1.32x




1.24x




1.36x




1.28x


Consolidated debt to adjusted EBITDA(e)


3.9x




3.6x




3.9x




3.6x
















(a)

Includes $60 million of debt extinguishment charges.

(b)

Non-GAAP measure calculated before distributions to preferred unitholders. See reconciliation below.

(c)

Distributions declared by the board of directors of MPLX's general partner.

(d)

Non-GAAP measure. See calculation below.

(e)

Calculated using face value total debt and LTM pro forma adjusted EBITDA, which is pro forma for acquisitions. See reconciliation below.

During the quarter, MPLX generated $799 million in net cash provided by operating activities and distributable cash flow of $701 million. Fourth quarter 2018 results were impacted by several items that reduced net income attributable to MPLX by approximately $82 million. Debt extinguishment costs were $60 million, of which nearly $14 million were cash costs, and approximately $22 million of the impact was associated with unplanned downtime at the Houston complex, NGL production curtailments due to the delayed startup of the Mariner East 2 pipeline, and contract related accrual adjustments. Adjusted EBITDA attributable to MPLX was reduced by approximately $22 million for these items.

Segment Results













(In millions)


Three Months Ended
 Dec. 31



Year Ended
 Dec. 31

Segment income from operations (unaudited)


2018



2017



2018



2017

Logistics and Storage

$

449



$

161



$

1,736



$

602


Gathering and Processing


217




174




767




589














Segment adjusted EBITDA attributable to MPLX
LP (unaudited)












Logistics and Storage


547




231




2,057




775


Gathering and Processing

$

364



$

338



$

1,418



$

1,229














Logistics & Storage

L&S segment income from operations and adjusted EBITDA for 2018 increased by $1.1 billion and $1.3 billion, respectively, compared with the prior year. The increase was primarily due to dropdowns of certain refining logistics assets and the fuels distribution service business as well as record crude oil and product pipeline throughputs.

Total pipeline throughputs were 3.36 million barrels per day in 2018, an increase of 11 percent versus the prior year, primarily due to the expansion of the Ozark and Wood River-to-Patoka pipeline systems. The average tariff rate was $0.66 per barrel for the year. Terminal throughput was 1.48 million barrels per day in 2018, which is consistent with the prior year.

Gathering & Processing

G&P segment income from operations and segment adjusted EBITDA both increased by $0.2 billion for 2018 compared with 2017. The increase was primarily due to record gathered, processed and fractionated volumes and a benefit from higher product margins.

  • Gathered volumes: 4.5 billion cubic feet per day in 2018, a 26 percent annual increase
  • Processed volumes: 7.0 billion cubic feet per day in 2018, a 9 percent annual increase
  • Fractionated volumes: 459 thousand barrels per day in 2018, a 16 percent annual increase

Regionally, the company delivered significant volume growth in the Northeast in 2018. Gathered volumes averaged 3.0 billion cubic feet per day (bcf/d) for the year, a 35 percent increase versus 2017, driven primarily by higher Utica dry-gas and Marcellus wet-gas volumes. Processed volumes averaged 5.3 bcf/d, a 10 percent increase versus the prior year. Fractionated volumes averaged 426,000 barrels per day, an 18 percent increase versus 2017.

MPLX commissioned the Sherwood 10, Sherwood 11, and Harmon Creek plants during the fourth quarter. The company also completed fractionation plants at Sherwood, Harmon Creek, and Hopedale during the quarter. In total, the company commissioned 8 plants in the Northeast in 2018, adding 1.2 bcf/d of processing capacity and 100,000 barrels per day of fractionation capacity for the year.

In the Southwest, gathered volumes averaged 1.6 bcf/d in 2018, an 11 percent increase versus the prior year. Processed volumes averaged 1.4 bcf/d for the year, an 8 percent increase versus 2017. The company added 275 million cubic feet per day of processing capacity in 2018.

Financial Position and Liquidity

As of December 31, 2018, MPLX had $68 million in cash, $2.2 billion available through its bank revolving credit facility expiring in July 2022, and $1 billion available through its credit facility with MPC.

On December 10, 2018, MPLX redeemed all $750 million aggregate principal amount of its 5.5% senior notes due February 15, 2023. These notes were redeemed at 101.833 percent of the principal amount and resulted in a payment of approximately $14 million related to the note premium and the immediate recognition of $46 million of unamortized debt issuance costs.

The company's $3.3 billion of available liquidity, its distribution coverage and its access to the capital markets should provide it with sufficient flexibility to meet its day-to-day operational needs and continue investing in organic growth opportunities. The company's leverage ratio was 3.9 times at December 31, 2018. MPLX remains committed to maintaining an investment-grade credit profile and self-funding strategy for its organic growth capital needs.

2019 and 2020 Financial Outlook

In December 2018, MPLX provided its 2019 and 2020 capital investment plans. This strategic deployment of capital combined with growth in the underlying base business is expected to generate $2.2 billion and $2.5 billion of net income in 2019 and 2020, and $3.9 billion and $4.4 billion of annual adjusted EBITDA, respectively.

Key new project announcements include Permian long-haul crude oil, natural gas and NGL pipelines and export facilities which would enhance the full value chain capture in the L&S segment.  The company also expects to add approximately 800 million cubic feet per day of processing capacity and 100,000 barrels per day of fractionation capacity in 2019 to the G&P segment.

The partnership plans to fund approximately 50% of its organic growth capital plan with cash from operating activities, while maintaining strong coverage and an investment grade credit profile. MPLX does not anticipate the need to issue public equity in 2019 or 2020 to fund its organic growth capital.

Conference Call

At 11 a.m. EST today, MPLX will hold a conference call and webcast to discuss the reported results and provide an update on operations. Interested parties may listen by visiting MPLX's website at http://www.mplx.com and clicking on the "2018 Fourth-Quarter and Full-Year Financial Results" link in the "News & Headlines" section. A replay of the webcast will be available on MPLX's website for two weeks. Financial information, including earnings release and other investor-related material, will also be available online prior to the conference call and webcast at http://ir.mplx.com.

About MPLX LP

MPLX is a diversified, large-cap master limited partnership that owns and operates midstream energy infrastructure and logistics assets, and provides fuels distribution services. MPLX's assets include a network of crude oil and refined product pipelines; an inland marine business; light-product terminals; storage caverns; refinery tanks, docks, loading racks, and associated piping; and crude and light-product marine terminals. The company also owns crude oil and natural gas gathering systems and pipelines as well as natural gas and NGL processing and fractionation facilities in key U.S. supply basins. More information is available at www.MPLX.com

Investor Relations Contacts:
Kristina Kazarian (419) 421-2071

Media Contacts:
Chuck Rice (419) 421-2521

Non-GAAP references
In addition to our financial information presented in accordance with U.S. generally accepted accounting principles (GAAP), management utilizes additional non-GAAP measures to facilitate comparisons of past performance and future periods. This press release and supporting schedules include the non-GAAP measures adjusted EBITDA and consolidated debt to last twelve months pro forma adjusted EBITDA, which we refer to as our leverage ratio, distributable cash flow (DCF) and distribution coverage ratio. The amount of adjusted EBITDA and DCF generated is considered by the board of directors of our general partner in approving the Partnership's cash distribution. Adjusted EBITDA and DCF should not be considered separately from or as a substitute for net income, income from operations, or cash flow as reflected in our financial statements. The GAAP measures most directly comparable to adjusted EBITDA and DCF are net income and net cash provided by operating activities. We define Adjusted EBITDA as net income adjusted for (i) depreciation and amortization; (ii) provision for income taxes; (iii) amortization of deferred financing costs; (iv) non-cash equity-based compensation; (v) net interest and other financial costs; (vi) income from equity method investments; (vii) distributions and adjustments related to equity method investments; (viii) unrealized derivative gains and losses; (ix) acquisition costs; (x) noncontrolling interest and (xi) other adjustments as deemed necessary. In general, we define DCF as adjusted EBITDA adjusted for (i) deferred revenue impacts; (ii) net interest and other financial costs; (iii) maintenance capital expenditures; (iv) equity method investment capital expenditures paid out; and (v) other non-cash items.

The Partnership makes a distinction between realized or unrealized gains and losses on derivatives. During the period when a derivative contract is outstanding, we record changes in the fair value of the derivative as an unrealized gain or loss. When a derivative contract matures or is settled, we reverse the previously recorded unrealized gain or loss and record the realized gain or loss of the contract.

Adjusted EBITDA is a financial performance measure used by management, industry analysts, investors, lenders, and rating agencies to assess the financial performance and operating results of our ongoing business operations. Additionally, we believe adjusted EBITDA provides useful information to investors for trending, analyzing and benchmarking our operating results from period to period as compared to other companies that may have different financing and capital structures.

DCF is a financial performance measure used by management as a key component in the determination of cash distributions paid to unitholders. We believe DCF is an important financial measure for unitholders as an indicator of cash return on investment and to evaluate whether the partnership is generating sufficient cash flow to support quarterly distributions. In addition, DCF is commonly used by the investment community because the market value of publicly traded partnerships is based, in part, on DCF and cash distributions paid to unitholders.

Distribution coverage ratio is a financial performance measure used by management to reflect the relationship between the partnership's financial operating performance and cash distribution capability. We define the distribution coverage ratio as the ratio of DCF attributable to GP and LP unitholders to total GP and LP distributions declared.

Leverage ratio is a liquidity measure used by management, industry analysts, investors, lenders and rating agencies to analyze our ability to incur and service debt and fund capital expenditures.

Forward-looking statements

This press release contains forward-looking statements within the meaning of federal securities laws regarding MPLX LP (MPLX). These forward-looking statements relate to, among other things, expectations, estimates and projections concerning the business and operations, strategy and value creation plans of MPLX. In accordance with "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, these statements are accompanied by cautionary language identifying important factors, though not necessarily all such factors, that could cause future outcomes to differ materially from those set forth in the forward-looking statements. You can identify forward-looking statements by words such as "anticipate," "believe," "could," "design," "estimate," "expect," "forecast," "goal," "guidance," "imply," "intend," "may," "objective," "opportunity," "outlook," "plan," "policy, " "position," "potential," "predict," "priority, " "project," "prospective," "pursue," "seek," "should," "strategy," "target," "would," "will" or other similar expressions that convey the uncertainty of future events or outcomes. Such forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond the company's control and are difficult to predict. Factors that could cause MPLX's actual results to differ materially from those implied in the forward-looking statements include: negative capital market conditions, including an increase of the current yield on common units, adversely affecting MPLX's ability to meet its distribution growth guidance; the ability to achieve strategic and financial objectives, including with respect to proposed projects and transactions; adverse changes in laws including with respect to tax and regulatory matters; the adequacy of MPLX's capital resources and liquidity, including, but not limited to, availability of sufficient cash flow to pay distributions and access to debt on commercially reasonable terms, and the ability to successfully execute its business plans, growth strategy and self-funding model; the timing and extent of changes in commodity prices and demand for crude oil, refined products, feedstocks or other hydrocarbon-based products; continued/further volatility in and/or degradation of market and industry conditions; changes to the expected construction costs and timing of projects and planned investments, and the ability to obtain regulatory and other approvals with respect thereto; completion of midstream infrastructure by competitors; disruptions due to equipment interruption or failure, including electrical shortages and power grid failures; the suspension, reduction or termination of MPC's obligations under MPLX's commercial agreements; modifications to earnings and distribution growth objectives; the ability to manage disruptions in credit markets or changes to credit ratings; compliance with federal and state environmental, economic, health and safety, energy and other policies and regulations and/or enforcement actions initiated thereunder; adverse results in litigation; changes to MPLX's capital budget; other risk factors inherent to MPLX's industry; risks related to MPC as set forth below, including those related to MPC's acquisition of Andeavor or the potential merger, consolidation or combination of MPLX with ANDX; and the factors set forth under the heading "Risk Factors" in MPLX's Annual Report on Form 10-K for the year ended Dec. 31, 2017, and in MPLX's Forms 10-Q, filed with the Securities and Exchange Commission (SEC). Factors that could cause MPC's actual results to differ materially from those implied in the forward-looking statements include: the risk that the cost savings and any other synergies from the Andeavor transaction may not be fully realized or may take longer to realize than expected; disruption from the Andeavor transaction making it more difficult to maintain relationships with customers, employees or suppliers; risks relating to any unforeseen liabilities of Andeavor; the potential merger, consolidation or combination of MPLX with ANDX; future levels of revenues, refining and marketing margins, operating costs, retail gasoline and distillate margins, merchandise margins, income from operations, net income or earnings per share; the regional, national and worldwide availability and pricing of refined products, crude oil, natural gas, NGLs and other feedstocks; consumer demand for refined products; the ability to manage disruptions in credit markets or changes to credit ratings; future levels of capital, environmental or maintenance expenditures, general and administrative and other expenses; the success or timing of completion of ongoing or anticipated capital or maintenance projects; the reliability of processing units and other equipment; business strategies, growth opportunities and expected investment; share repurchase authorizations, including the timing and amounts of any common stock repurchases; the adequacy of capital resources and liquidity, including but not limited to, availability of sufficient cash flow to execute business plans and to effect any share repurchases or dividend increases, including within the expected timeframe; the effect of restructuring or reorganization of business components; the potential effects of judicial or other proceedings on MPC's business, financial condition, results of operations and cash flows; continued or further volatility in and/or degradation of general economic, market, industry or business conditions; compliance with federal and state environmental, economic, health and safety, energy and other policies and regulations, including the cost of compliance with the Renewable Fuel Standard, and/or enforcement actions initiated thereunder; the anticipated effects of actions of third parties such as competitors, activist investors or federal, foreign, state or local regulatory authorities or plaintiffs in litigation; the impact of adverse market conditions or other similar risks to those identified herein affecting MPLX or ANDX; and the factors set forth under the heading "Risk Factors" in MPC's Annual Report on Form 10-K for the year ended Dec. 31, 2017, and in MPC's Forms 10-Q, filed with the SEC. We have based our forward-looking statements on our current expectations, estimates and projections about our industry. We caution that these statements are not guarantees of future performance and you should not rely unduly on them, as they involve risks, uncertainties, and assumptions that we cannot predict. In addition, we have based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. While our management considers these assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. Accordingly, our actual results may differ materially from the future performance that we have expressed or forecast in our forward-looking statements. We undertake no obligation to update any forward-looking statements except to the extent required by applicable law. Copies of MPLX's Form 10-K and Forms 10-Q are available on the SEC website, MPLX's website at http://ir.mplx.com or by contacting MPLX's Investor Relations office. Copies of MPC's Form 10-K and Forms 10-Q are available on the SEC website, MPC's website at http://ir.marathonpetroleum.com or by contacting MPC's Investor Relations office.

 

 

Condensed Results of Operations (unaudited)














Three Months Ended
 Dec. 31



Year Ended
 Dec. 31

(In millions, except per unit data)


2018



2017



2018



2017

Revenues and other income:












Operating revenue

$

847



$

658



$

3,153



$

2,322


Operating revenue - related parties


778




355




2,926




1,369


Income (loss) from equity method investments


65




49




240




78


Other income


25




23




106




98


Total revenues and other income


1,715




1,085




6,425




3,867


Costs and expenses:












Operating expenses


522




375




1,928




1,241


Operating expenses - related parties


235




126




865




457


Depreciation and amortization


201




168




766




683


General and administrative expenses


74




67




291




241


Other taxes


17




14




72




54


Total costs and expenses


1,049




750




3,922




2,676


Income from operations


666




335




2,503




1,191


Interest and other financial costs


227




96




661




354


Income before income taxes


439




239




1,842




837


(Benefit) provision for income taxes





(2)




8




1


Net income


439




241




1,834




836


Less: Net income (loss) attributable to noncontrolling interests


5




3




16




6


Less: Net income attributable to Predecessor(a)











36


Net income attributable to MPLX LP


434




238




1,818




794


Less: Preferred unit distributions


20




16




75




65


Less: General partner's interest in net income attributable to
MPLX LP





96







318


Limited partners' interest in net income attributable to
MPLX LP

$

414



$

126



$

1,743



$

411














Per Unit Data












Net income attributable to MPLX LP per limited partner unit:












Common - basic

$

0.52



$

0.31



$

2.29



$

1.07


Common - diluted


0.52




0.31




2.29




1.06


Weighted average limited partner units outstanding:












Common units – basic


794




407




761




385


Common units – diluted


794




407




761




388
















(a)

The pipeline, storage and terminals businesses acquired on March 1, 2017 ("Predecessor").

 

 

Select Financial Statistics (unaudited)














Three Months Ended
 Dec. 31



Year Ended
 Dec. 31

(In millions, except ratio data)


2018



2017



2018



2017

Distribution declared












Common units (LP) - public

$

187



$

175



$

732



$

656


Common units - MPC(a)


327




171




1,253




338


GP units - MPC











18


Incentive distribution rights - MPC











211


Total GP and LP distribution declared


514




346




1,985




1,223


Redeemable preferred units(b)


20




16




75




65


Total distribution declared

$

534



$

362



$

2,060



$

1,288














Distribution coverage ratio(c)


1.32x




1.24x




1.36x




1.28x














Cash Flow Data












Net cash flow provided by (used in):












Operating activities

$

799



$

569



$

2,826



$

1,907


Investing activities


(659)




(472)




(2,686)




(2,308)


Financing activities


(103)




(97)




(73)




171














Other Financial Data












Adjusted EBITDA attributable to MPLX LP(d)


911




569




3,475




2,004


DCF attributable to GP and LP unitholders(d)

$

681



$

429



$

2,706



$

1,563
















(a)

MPC agreed to waive $23.7 million in common unit distributions associated with the units received in connection with the Feb. 1 dropdown.

(b)

The preferred units are considered redeemable securities due to the existence of redemption provisions upon a deemed liquidation event which is outside our control. These units rank senior to all common units with respect to distributions and rights upon liquidation and effective May 13, 2018, on an as-converted basis, preferred unit holders receive the greater of $0.528125 per unit or the amount of per unit distributions paid to holders of MPLX LP common units.

(c)

DCF attributable to GP and LP unitholders divided by total GP and LP distribution declared.

(d)

Non-GAAP measure. See reconciliation below.

 

 

Select Balance Sheet Data (unaudited)






(In millions, except ratio data)


Dec. 31, 2018



Dec. 31, 2017

Cash and cash equivalents

$

68



$

5


Total assets


22,779




19,500


Total debt(a)


13,393




7,332


Redeemable preferred units


1,004




1,000


Total equity

$

6,864



$

9,973


Consolidated total debt to adjusted EBITDA(b)


3.9x




3.6x








Partnership units outstanding:






GP units





8


MPC-held common units


505




118


Public common units


289




289










(a)

Total debt includes $0 million and $386 million of outstanding intercompany borrowings classified in current liabilities as of December 31, 2018 and 2017, respectively.

(b)

Calculated using face value total debt and LTM pro forma adjusted EBITDA, which is pro forma for acquisitions. Face value total debt includes approximately $463 million and $416 million of unamortized discount and debt issuance costs as of December 31, 2018, and 2017, respectively.

 

 

Operating Statistics (unaudited)


















Three Months Ended
 Dec. 31



Year Ended
 Dec. 31



2018



2017


%
Change



2018



2017


%
Change

Logistics and Storage
















Pipeline throughput (mbpd)
















Crude oil pipelines


2,273




2,041



11

%



2,180




1,936



13

%

Product pipelines


1,295




1,186



9

%



1,175




1,085



8

%

Total pipelines


3,568




3,227



11

%



3,355




3,021



11

%

Average tariff rates ($ per barrel)
















Crude oil pipelines

$

0.60



$

0.55



9

%


$

0.59



$

0.56



5

%

Product pipelines


0.78




0.73



7

%



0.79




0.74



7

%

Total pipelines


0.66




0.62



6

%



0.66




0.63



5

%

















Terminal throughput (mbpd)


1,521




1,497



2

%



1,481




1,477



%

















Barges at period-end


256




232



10

%



256




232



10

%

Towboats at period-end


23




18



28

%



23




18



28

%

 

 

Gathering and Processing Operating
Statistics (unaudited) - Consolidated
(a)


Three Months Ended
 Dec. 31



Year Ended
 Dec. 31



2018



2017


%
Change



2018



2017


%
Change

Gathering throughput (mmcf/d)
















Marcellus Operations


1,148




1,121



2

%



1,155




1,004



15

%

Utica Operations







%








%

Southwest Operations


1,694




1,487



14

%



1,566




1,410



11

%

Total gathering throughput


2,842




2,608



9

%



2,721




2,414



13

%

















Natural gas processed (mmcf/d)
















Marcellus Operations


3,977




3,778



5

%



3,826




3,619



6

%

Utica Operations







%








%

Southwest Operations


1,542




1,373



12

%



1,438




1,326



8

%

Southern Appalachian Operations


255




261



(2)

%



247




265



(7)

%

Total natural gas processed


5,774




5,412



7

%



5,511




5,210



6

%

















C2 + NGLs fractionated (mbpd)
















Marcellus Operations


398




350



14

%



379




320



18

%

Utica Operations







%








%

Southwest Operations


17




21



(19)

%



18




20



(10)

%

Southern Appalachian Operations


18




13



38

%



15




14



7

%

Total C2 + NGLs fractionated


433




384



13

%



412




354



16

%



















(a)

Includes operating data for entities that have been consolidated into the MPLX financial statements.

 

 

null

Gathering and Processing Operating
Statistics (unaudited) - Operated
(a)


Three Months Ended
 Dec. 31



Year Ended
 Dec. 31



2018



2017


%
Change



2018



2017


%
Change

Gathering throughput (mmcf/d)
















Marcellus Operations


1,148




1,121



2

%



1,155




1,004



15

%

Utica Operations


2,067




1,571



32

%



1,809




1,192



52

%

Southwest Operations


1,694




1,489



14

%



1,567




1,412



11

%

Total gathering throughput


4,909




4,181



17

%



4,531




3,608



26

%

















Natural gas processed (mmcf/d)
















Marcellus Operations


4,773




4,203



14

%



4,448




3,885



14

%

Utica Operations


877




991



(12)

%



886