10-QPeriod: Q1 FY2018

MPLX LP Quarterly Report for Q1 Ended Mar 31, 2018

Filed April 30, 2018For Securities:MPLXMPLXP

Summary

MPLX LP reported a significant increase in revenue and net income for the first quarter of 2018 compared to the same period in 2017. This growth was primarily driven by the substantial acquisition of Refining Logistics and Fuels Distribution assets from its sponsor, Marathon Petroleum Corporation (MPC), which closed on February 1, 2018. This acquisition, valued at $8.4 billion, significantly expanded MPLX's Logistics and Storage (L&S) segment. Despite increased interest expenses related to new debt issuances to finance acquisitions, MPLX LP demonstrated strong operational performance across both its L&S and Gathering & Processing (G&P) segments. The company also successfully completed a large debt offering, reinforcing its financial position. Management highlighted increased distributions per unit and a commitment to returning capital to unitholders, supported by robust cash flow generation. The conversion of MPC's incentive distribution rights (IDRs) and economic general partner interest to common units in early 2018 is expected to be accretive to distributable cash flow.

Financial Highlights

36 data points
Beta

Revenue

$1.42B

Net Income

$421.00M

29.6% Net Margin

Total Assets

$21.01B

Cash & Equivalents

$2.00M

Free Cash Flow

-$5.00M

Financial Statements
Beta
Revenue$1.42B
Operating Expenses$863.00M
Operating Income$557.00M
Net Income$421.00M

Key Highlights

  • 1Revenue increased by 60% to $1,420 million, driven by the acquisition of MPC's refining logistics and fuels distribution assets, which contributed $265 million in revenue for the two months of ownership in Q1 2018.
  • 2Net income attributable to MPLX LP surged by 181% to $421 million, or $0.61 per diluted unit, compared to $150 million, or $0.19 per diluted unit, in Q1 2017.
  • 3Operating income from the Logistics & Storage (L&S) segment increased by 172% to $424 million, significantly boosted by the recent acquisition and prior smaller acquisitions.
  • 4Gathering & Processing (G&P) segment operating income grew by 13% to $350 million, driven by volume increases in processing, fractionation, and gathering operations.
  • 5MPLX LP successfully issued $5.5 billion in senior notes in February 2018 to fund acquisitions and refinance debt, enhancing its liquidity and financial flexibility.
  • 6Long-term debt increased substantially from $6,945 million to $11,861 million, primarily due to the new debt issuances to finance the significant acquisition of refining logistics and fuels distribution assets.
  • 7Distributions declared per limited partner common unit increased to $0.6175 for Q1 2018, up from $0.5400 in Q1 2017, reflecting a 14% year-over-year increase and a commitment to returning capital to unitholders.

Frequently Asked Questions

The primary driver was the acquisition of Refining Logistics and Fuels Distribution assets from Marathon Petroleum Corporation (MPC) on February 1, 2018. This acquisition significantly expanded MPLX's Logistics & Storage segment and contributed substantially to both revenue and net income for the period.

MPLX's long-term debt increased significantly due to new debt issuances to finance the large acquisition. While this increases financial leverage, the company also raised substantial capital through a large senior notes offering, which was used to repay shorter-term debt. Management stated they intend to maintain an investment-grade credit profile, and the company was in compliance with its debt covenants as of the reporting date. The increased scale of operations is expected to support this debt load.

In early 2018, MPC exchanged its incentive distribution rights (IDRs) and economic general partner interest for 275 million MPLX common units. This conversion eliminates the requirement for MPLX to make cash distributions on IDRs, which is expected to increase distributable cash flow available to common unitholders and be accretive to earnings per unit.

Both segments showed strong performance. The Logistics & Storage (L&S) segment experienced significant growth, largely due to acquisitions. The Gathering & Processing (G&P) segment also saw solid growth driven by increased volumes in processing, fractionation, and gathering operations. The acquisition of MPC's refining logistics assets heavily boosted the L&S segment's revenue and operating income.