8-KAcquisitions & DispositionsMaterial AgreementsFinancial Events+4

MPLX LP 8-K Report, Material Agreement (Feb 2, 2018)

Filed February 2, 2018For Securities:MPLXMPLXP

Summary

MPLX LP (MPLX) announced the closing of a significant "Dropdown Transaction" on February 1, 2018, acquiring MPLX Refining Logistics LLC and MPLX Fuels Distribution LLC from affiliates of Marathon Petroleum Corporation (MPC). This transaction involved the issuance of approximately $4.1 billion in cash and a substantial equity component, including over 85 million common units to MPC and its affiliates. The acquisition is expected to integrate key refining and fuels distribution assets, enhancing MPLX's logistics and midstream operations. In conjunction with the Dropdown Transaction, MPLX also completed a GP/IDR Restructuring. This involved the cancellation of Incentive Distribution Rights (IDRs) held by the General Partner and the conversion of its economic general partner interest into a non-economic one. In exchange, the General Partner received approximately 275 million common units. This restructuring aims to simplify MPLX's capital structure and align sponsor incentives more closely with limited partner interests.

Key Highlights

  • 1MPLX LP completed the "Dropdown Transaction" to acquire MPLX Refining Logistics LLC and MPLX Fuels Distribution LLC from MPC affiliates for $4.1 billion in cash and MPLX common units.
  • 2The acquisition includes significant refining logistics and fuels distribution assets, integrating them further into MPLX's operations.
  • 3MPLX issued approximately 85.6 million common units and 2.3 million general partner units to MPC and its subsidiaries as part of the Dropdown Transaction consideration.
  • 4MPLX also closed a GP/IDR Restructuring, cancelling Incentive Distribution Rights (IDRs) and converting the General Partner's economic interest to a non-economic one.
  • 5In exchange for the GP/IDR Restructuring, MPLX issued approximately 275 million common units to its General Partner.
  • 6The Dropdown Transaction and GP/IDR Restructuring were financed in part by a $4.1 billion term loan facility.
  • 7New long-term service agreements are in place, including a 10-year Storage Services Agreement for the Galveston Bay refinery and a 10-year Storage Services Agreement for the Garyville refinery, along with a 10-year Fuels Distribution Services Agreement.

Frequently Asked Questions

The Dropdown Transaction refers to MPLX LP's acquisition of all outstanding membership interests in MPLX Refining Logistics LLC and MPLX Fuels Distribution LLC from its general partner and other MPC affiliates. This brought significant refining logistics and fuels distribution assets under MPLX's control.

The transaction was financed through a combination of $4.1 billion in cash and the issuance of MPLX LP common and general partner units to MPC and its subsidiaries. The cash portion was supported by a $4.1 billion term loan.

The GP/IDR Restructuring involved the cancellation of Incentive Distribution Rights (IDRs), which typically entitles the general partner to increasing cash flow at higher distribution levels. It also converted the General Partner's economic general partner interest to a non-economic one. This simplified MPLX's capital structure and aimed to better align the interests of the general partner with those of common unitholders, with the General Partner receiving a significant number of common units in exchange.

MPLX entered into several long-term service agreements: a 10-year Storage Services Agreement with Blanchard Refining Company LLC and MPC LP for facilities at the Galveston Bay refinery, a 10-year Storage Services Agreement with MPC LP for facilities at MPC's Garyville refinery, and a 10-year Fuels Distribution Services Agreement with MPC LP to manage scheduling and marketing of certain petroleum products.