10-QPeriod: Q3 FY2016

MPLX LP Quarterly Report for Q3 Ended Sep 30, 2016

Filed October 31, 2016For Securities:MPLXMPLXP

Summary

MPLX LP's third quarter 2016 results demonstrate significant growth driven by the integration of MarkWest, acquired in late 2015, and the acquisition of Hardin Street Marine (HSM) in early 2016. Revenues and income from operations saw substantial increases compared to the prior year, primarily due to the expanded asset base and operational synergies from these transactions. The company successfully managed its liquidity, utilizing proceeds from its ATM program and preferred unit issuance to fund operations and debt repayment, while maintaining its credit ratings. Despite strong operational performance, the company recorded a significant goodwill impairment charge in the first quarter related to the MarkWest acquisition, reflecting challenging commodity price trends and increased cost of capital. Management remains focused on integrating its expanded operations, managing costs, and continuing its growth strategy through strategic dropdowns from MPC, while also navigating potential environmental and legal contingencies.

Financial Highlights

35 data points
Beta

Revenue

$838.00M

Net Income

$141.00M

16.8% Net Margin

Total Assets

$16.41B

Cash & Equivalents

$208.00M

Free Cash Flow

-$32.00M

Financial Statements
Beta
Revenue$838.00M
Operating Expenses$580.00M
Operating Income$258.00M
Net Income$141.00M

Key Highlights

  • 1Total revenues and other income significantly increased by $489 million (228%) to $703 million for the three months ended September 30, 2016, compared to $214 million in the prior year period, largely due to the MarkWest merger and HSM acquisition.
  • 2Income from operations rose by $139 million to $207 million for the three months ended September 30, 2016, compared to $68 million in the prior year period, reflecting improved performance across both Logistics and Storage (L&S) and Gathering and Processing (G&P) segments.
  • 3The company issued approximately $984 million in preferred units in May 2016 and raised approximately $499 million through its ATM Program during the first nine months of 2016, enhancing liquidity for capital expenditures and debt repayment.
  • 4MPLX LP recorded a goodwill impairment charge of $130 million in the first nine months of 2016, primarily related to the MarkWest acquisition, driven by commodity price deterioration and increased cost of capital.
  • 5Long-term debt decreased by approximately $825 million to $4,411 million at September 30, 2016, from $5,255 million at December 31, 2015, primarily due to repayment of the bank revolving credit facility.
  • 6The company declared a quarterly cash distribution of $0.5150 per unit for the third quarter of 2016, an increase from the prior year, reflecting confidence in operational performance and cash flow generation.
  • 7MPC accounted for a significant portion of MPLX's revenues (28% in Q3 2016) and costs (23% in Q3 2016), highlighting the ongoing related-party relationship and its impact on the business.

Frequently Asked Questions

The substantial increase in revenues and income from operations was primarily driven by the integration of the MarkWest Energy Partners merger completed in December 2015 and the acquisition of Hardin Street Marine (HSM) in March 2016. These transactions significantly expanded MPLX's asset base and operational capabilities, leading to higher throughput volumes and increased service revenues across both its Logistics and Storage (L&S) and Gathering and Processing (G&P) segments.

The MarkWest acquisition has significantly expanded MPLX's G&P segment, contributing substantially to revenue and income growth. However, it also led to a goodwill impairment charge of $130 million in the first nine months of 2016 due to challenging commodity price environments and an increased cost of capital. While this is a non-cash charge, it reflects valuation adjustments and market conditions. The company's overall financial health remains supported by strong operational performance, strategic financing activities, and a reduced debt load.

MPLX has strengthened its liquidity through the issuance of approximately $984 million in preferred units and by raising approximately $499 million in net proceeds from its ATM Program during the first nine months of 2016. These funds, along with cash generated from operations, have been used to finance capital expenditures and reduce debt. Long-term debt decreased significantly due to the repayment of its bank revolving credit facility, and the company maintained compliance with its debt covenants and investment-grade credit ratings from major agencies.

Marathon Petroleum Corporation (MPC) is a key related party, accounting for a substantial portion of MPLX's revenues and costs. MPLX provides pipeline transportation, storage, and marine transportation services to MPC under various agreements. These transactions are critical to MPLX's operations, providing a consistent revenue stream. The company states that these transactions are conducted under terms comparable to those with unrelated parties, but investors should monitor the terms and volume of these related-party dealings as they represent a significant portion of MPLX's business.