Is MPLX's distribution safe given its coverage and cash flow?

Coverage was 1.6x for both Q4 and full-year 2023, meaning distributable cash flow covered distributions with room to spare. Full-year DCF of $5,340 million exceeded the roughly $3.3 billion distributed to unitholders, and adjusted free cash flow after distributions was $839 million for the year. Coverage still depends on continued volumes and tariffs, and this is a non-GAAP measure, so investors should review the reconciliation in the release.

How much of the Q4 earnings increase was from one-time items?

The $92 million non-cash gain from remeasuring the Permian joint venture stake accounts for much of the rise in net income. Net income attributable to MPLX increased $318 million year over year, so the gain explains a large share of the increase. Adjusted EBITDA, which excludes this gain, rose about $169 million (12%), a better gauge of underlying growth.

How is MPLX funding its growth plans?

MPLX expects 2024 capital spending of $1.1 billion, with about $950 million for growth. It ended 2023 with $1.0 billion in cash, $2.0 billion available on its revolver, and $1.5 billion available from its intercompany loan with Marathon Petroleum. Management also says leverage can rise to around 4.0x if needed, although the current 3.3x leaves room for debt-funded expansion.

What are the main growth projects to watch in 2024 and 2025?

In the Permian, the ADCC pipeline lateral is expected in service in Q3 2024, the Preakness II gas processing plant in early Q2 2024, and the Secretariat plant in H2 2025, bringing Delaware basin processing capacity to 1.4 bcf/d. The BANGL NGL pipeline expansion to 200 thousand bpd is expected by H1 2025, and the Harmon Creek II plant in the Marcellus by end of Q1 2024.

Does MPLX face risks from the Garyville incident or volume declines?

The release shows a $47 million recovery in Q4 related to the Garyville incident, after $16 million of costs for the full year, so the net impact is small. Volumes were mixed: Utica operated throughput fell 8% in Q4, while Marcellus and Rockies volumes rose. Investors should watch producer activity in these basins, since the release lists commodity prices, regulatory changes, and unscheduled shutdowns among its risk factors.

MPLX/MPLXP 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed January 30, 2024. Cited figures are marked; the original filing is the authoritative source.

MPLX LP reported fourth-quarter 2023 net income attributable to MPLX of $1,134 million^a (vs. $816 million a year earlier) and adjusted EBITDA attributable to MPLX of $1,623 million (vs. $1,454 million).

Results were helped by a $92 million^b non-cash gain from acquiring the remaining interest in a Permian basin joint venture, so investors should look at adjusted EBITDA and distributable cash flow (DCF) as the cleaner measures of run-rate performance. For full-year 2023, adjusted EBITDA attributable to MPLX rose about 9% to $6,269 million, DCF rose about 7% to $5,340 million, and net cash from operations was $5,397 million. Distribution coverage held at 1.6x, and the leverage ratio improved to 3.3x from 3.5x.

MPLX returned $3.3 billion^c to unitholders in 2023, including a 10% increase in the quarterly distribution for the second consecutive year, to $0.85 per common unit for the fourth quarter. Operationally, Logistics and Storage (L&S) segment adjusted EBITDA grew on higher pipeline tariff rates (up 9% in the quarter) and throughput, while Gathering and Processing (G&P) benefited from higher processed volumes (up 9%). The partnership also bought a partner's 40% interest in a Permian G&P joint venture for about $270 million, closing in December 2023.

Looking ahead, management guided to 2024 capital spending of $1.1 billion^d, of which about $950 million is growth capital, and expects new Permian and Marcellus processing plants and pipeline expansions to come online through 2025. Liquidity was solid at year-end, with $1.0 billion of cash, $2.0 billion available under the bank revolver, and $1.5 billion available under the intercompany loan with Marathon Petroleum. Management says stable cash flows support leverage in the range of 4.0x, which leaves room for additional growth investment.

02—Key points

Key Highlights

Q4 2023 adjusted EBITDA attributable to MPLX of $1,623 million, up 12% from $1,454 million in Q4 2022; net income of $1,134 million included a $92 million non-cash remeasurement gain
Full-year 2023 adjusted EBITDA of $6,269 million (+9%) and distributable cash flow of $5,340 million (+7%), supporting distribution coverage of 1.6x
Returned $3.3 billion to unitholders in 2023; quarterly distribution raised 10% to $0.85 per common unit, the second consecutive annual 10% increase
Leverage ratio improved to 3.3x from 3.5x a year earlier; management cites cash flow stability supporting leverage up to 4.0x
Acquired the remaining 40% interest in a Permian G&P joint venture for about $270 million, closed December 2023
2024 capital spending outlook of $1.1 billion (about $950 million growth), with Preakness II plant expected online early Q2 2024 and Harmon Creek II at end of Q1 2024
Q4 2023 pipeline tariff rate rose 9% to $0.97 per barrel, and processed gas volumes rose 9% to 9.4 bcf/d, driving segment growth

03—Questions

Frequently Asked Questions

Is MPLX's distribution safe given its coverage and cash flow?
Coverage was 1.6x for both Q4 and full-year 2023, meaning distributable cash flow covered distributions with room to spare. Full-year DCF of $5,340 million exceeded the roughly $3.3 billion distributed to unitholders, and adjusted free cash flow after distributions was $839 million for the year. Coverage still depends on continued volumes and tariffs, and this is a non-GAAP measure, so investors should review the reconciliation in the release.
How much of the Q4 earnings increase was from one-time items?
The $92 million non-cash gain from remeasuring the Permian joint venture stake accounts for much of the rise in net income. Net income attributable to MPLX increased $318 million year over year, so the gain explains a large share of the increase. Adjusted EBITDA, which excludes this gain, rose about $169 million (12%), a better gauge of underlying growth.
How is MPLX funding its growth plans?
MPLX expects 2024 capital spending of $1.1 billion, with about $950 million for growth. It ended 2023 with $1.0 billion in cash, $2.0 billion available on its revolver, and $1.5 billion available from its intercompany loan with Marathon Petroleum. Management also says leverage can rise to around 4.0x if needed, although the current 3.3x leaves room for debt-funded expansion.
What are the main growth projects to watch in 2024 and 2025?
In the Permian, the ADCC pipeline lateral is expected in service in Q3 2024, the Preakness II gas processing plant in early Q2 2024, and the Secretariat plant in H2 2025, bringing Delaware basin processing capacity to 1.4 bcf/d. The BANGL NGL pipeline expansion to 200 thousand bpd is expected by H1 2025, and the Harmon Creek II plant in the Marcellus by end of Q1 2024.
Does MPLX face risks from the Garyville incident or volume declines?
The release shows a $47 million recovery in Q4 related to the Garyville incident, after $16 million of costs for the full year, so the net impact is small. Volumes were mixed: Utica operated throughput fell 8% in Q4, while Marcellus and Rockies volumes rose. Investors should watch producer activity in these basins, since the release lists commodity prices, regulatory changes, and unscheduled shutdowns among its risk factors.

04—Continue

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