01—Abstract
Summary
Summary of the 10-K filed February 28, 2018. Cited figures are marked; the original filing is the authoritative source.
MPLX LP's 2017 10-K filing highlights a year of significant growth and strategic development, largely driven by its close relationship with sponsor Marathon Petroleum Corporation (MPC).
The company expanded its midstream infrastructure significantly through "dropdown" acquisitions of MLP-qualifying assets from MPC, projecting an additional $1.4 billiona in annual EBITDA. These acquisitions, coupled with the elimination of incentive distribution rights (IDRs) and the conversion of MPC's general partner interest, are intended to enhance distributable cash flow and provide a clearer path for future growth. The report details MPLX's operational footprint across two main segments: Logistics and Storage (L&S) and Gathering and Processing (G&P).
The L&S segment benefits from assets integrated with MPC's refining operations, supporting approximately 75%b of U.S. crude distillation capacity. The G&P segment, bolstered by the MarkWest merger, positions MPLX as a leading processor and fractionator, particularly in the Marcellus and Utica shale plays. The company emphasizes its focus on fee-based businesses, which constituted 92% of its net operating margin, aiming for stable and predictable cash flows.
02—Key points
Key Highlights
- Significant asset "dropdowns" from MPC projected to add $1.4 billion in annual EBITDA, bolstering MPLX's scale and diversification.
- Elimination of incentive distribution rights (IDRs) and conversion of MPC's general partner interest in exchange for common units, simplifying the structure and improving distributable cash flow per unit.
- Robust operational performance with L&S segment operating income increasing by 73% and G&P segment operating income by 18% year-over-year, driven by acquisitions and organic growth.
- Strategic expansion of gathering and processing capacity, with significant organic growth projects planned for 2018, including new processing and fractionation plants.
- Continued reliance on fee-based contracts, representing approximately 95% of net operating margin, providing stable revenue streams.
- Strong financial flexibility maintained with an investment grade credit profile and ample availability under revolving credit facilities.
- Commitment to increasing distributions to unitholders, with a history of 20 consecutive quarterly increases and guidance for 10% growth in 2018.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 28, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $3.87B$3.03B | +27.7% |
| Operating Expenses | $2.68B$2.35B | +14.1% |
| Operating Income | $1.19B$683.00M | +74.4% |
| Net Income | $794.00M$233.00M | +240.8% |
05—Questions
Frequently Asked Questions
What were the major strategic initiatives completed or planned by MPLX in 2017?
In 2017, MPLX focused on executing its growth strategy through "dropdown" acquisitions of MLP-qualifying midstream assets from its sponsor, MPC, projected to generate $1.4 billion of annual EBITDA. Key strategic moves included the acquisition of joint-interest ownerships in pipelines and storage facilities from MPC, the acquisition of the Ozark crude oil pipeline, and a joint venture with Antero Midstream. Furthermore, the company planned significant organic growth projects for 2018 to expand processing and fractionation capacity.
How does MPLX generate its revenue, and what is its exposure to commodity price volatility?
MPLX generates the substantial majority of its revenue through long-term, fee-based agreements, providing midstream services such as transportation, storage, gathering, and processing. This fee-based model results in minimal direct commodity exposure, with approximately 92% of its net operating margin derived from fee-based contracts in 2017. While some contracts include "percent-of-proceeds" or "keep-whole" arrangements that have some commodity price linkage, the overall strategy aims for stable and predictable cash flows.
What was the significance of the GP IDR Exchange and related transactions with MPC?
The significant transactions with MPC, including the "dropdown" acquisitions of midstream assets and the GP IDR Exchange, were strategically important. The GP IDR Exchange, completed in early 2018, eliminated the incentive distribution rights and converted MPC's economic general partner interest into a non-economic one in exchange for common units. This move is expected to be accretive to distributable cash flow per common unitholder, simplify the capital structure, and provide a clearer path for future distribution growth and financial flexibility.
What is MPLX's financial position and outlook regarding liquidity and capital expenditures?
As of December 31, 2017, MPLX maintained strong liquidity with approximately $1.9 billion available under its credit facilities. The company generated significant net cash from operating activities and planned capital expenditures primarily for growth projects. MPLX's stated intention is to fund its 2018 organic growth needs from internal cash flows and debt, without needing to access public equity markets, while also aiming to maintain an investment grade credit profile.
06—Continue