MPLX LP — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; unaudited. MPLX operates midstream energy infrastructure and fuels distribution businesses through its Logistics and Storage (L&S) and Gathering and Processing (G&P) segments. MPC owned MPLX’s general partner and approximately 64% of its limited partner interests.
Financial performance
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Total revenue and other income | $2.846 billion | $2.713 billion |
| Income from operations | $1.251 billion | $1.196 billion |
| Net income | $1.015 billion | $952 million |
| Net income attributable to MPLX LP | $1.005 billion | $943 million |
| Common-unit net income per unit, diluted | $0.98 | $0.91 |
| Adjusted EBITDA attributable to MPLX LP (non-GAAP) | $1.635 billion | $1.519 billion |
| DCF attributable to MPLX LP (non-GAAP) | $1.370 billion | $1.268 billion |
| Cash from operating activities | $1.291 billion | $1.227 billion |
| Capital expenditures | $210 million | $191 million |
Operating margin was approximately 44.0% of revenue, versus 44.1% a year earlier; net margin was approximately 35.7%, versus 35.1%. These percentages are calculated from reported figures.
L&S Adjusted EBITDA rose to $1.098 billion from $1.026 billion; G&P Adjusted EBITDA rose to $537 million from $493 million. The filing reports that approximately 49% of total revenue and other income came from MPC in Q1 2024, underscoring significant customer concentration.
Liquidity, debt and capital returns
- Cash was $385 million at March 31, down from $1.048 billion at year-end. Cash flow was $1.291 billion from operations, $(996) million from investing and $(958) million from financing; cash decreased by $663 million.
- Adjusted free cash flow (non-GAAP) was $294 million, compared with $1.005 billion. Adjusted free cash flow after distributions was $(582) million, versus $184 million. The 2024 figures include the Utica acquisition and a $92 million Dakota Access contribution.
- Debt totaled $20.706 billion before unamortized discounts and issuance costs; $1.639 billion was classified as due within one year. The $2 billion revolving credit facility and $1.5 billion MPC loan facility had no borrowings outstanding. Total liquidity, including cash, was $3.885 billion.
- Ratings were Baa2 (Moody’s), BBB (S&P) and BBB (Fitch), all with stable outlooks. MPLX reported compliance with credit agreement covenants.
- MPLX returned $951 million through distributions and unit repurchases during the quarter. It repurchased approximately 1.87 million common units for $75 million, with $771 million remaining under the $1 billion authorization.
- The April 23 distribution declaration was $0.850 per common unit, payable May 13; the rate was 9.7% above the $0.775 comparable rate. Total declared distributions applicable to Q1 earnings were $874 million, including preferred-unit distributions.
Material changes and notable items
- On March 22, MPLX completed the $625 million Utica Midstream Acquisition using cash on hand. It now owns 73% of Ohio Gathering Company (which remains equity-method accounted), 100% of Ohio Condensate Company, and a 100% interest in a dry-gas gathering system. A $20 million gain from remeasuring its existing OCC interest was recorded in other income.
- Revenue increased $133 million. Management cited tariff increases, higher equity-investment throughput income, the Torñado consolidation and $43 million of increased other income, including business-interruption insurance proceeds and an investment-related gain. Lower NGL prices and lower pipeline throughput partly offset the gains.
- Operating costs rose, including higher repairs and maintenance; G&P cost of revenue also reflects Torñado consolidation. Product sales decreased, primarily with lower NGL prices.
- Management reported that the 200 MMcf/d Harmon Creek II processing plant entered service. MPLX also agreed to combine the Whistler and Rio Bravo pipeline projects in a new joint venture; closing was expected in Q2 2024, subject to approvals and other conditions.
- Q1 2024 capital plan: $1.1 billion net of reimbursements, including $950 million growth and $150 million maintenance capital. This outlook excludes the $92 million Dakota Access contribution.
Outlook, risks and contingencies
- The filing provides no specific full-year earnings or cash-flow guidance. Management expects operating cash generation, revolving facilities and capital-market access to fund operating needs, capital spending, obligations and distributions, but results are not assured.
- Key disclosed risks include commodity-price and volume changes, customer and producer activity, interest rates and credit-market access, project costs and approvals, equipment disruptions, regulation, environmental compliance, litigation, and reliance on MPC and its commercial agreements. The filing says risk factors were not materially changed from the 2023 Form 10-K.
- The Army Corps was expected to decide by year-end 2024 on the Lake Oahe easement for the Dakota Access Pipeline. The pipeline remained operational during review. MPLX’s maximum potential undiscounted contribution under its contingent equity agreement was approximately $170 million at March 31; the scheduled April 1 debt payment reduced that exposure.
- A separate dispute concerns a portion of the Tesoro High Plains Pipeline crossing the Fort Berthold Reservation. That portion remains non-operational. MPLX’s subsidiary previously paid approximately $4 million in assessed damages; the government’s counterclaims seeking pipeline-profit disgorgement, removal and remediation were severed and stayed while the company’s challenge proceeds.
- Environmental remediation liabilities were $17 million. Management says it cannot estimate the ultimate cost of all remediation matters; it believes resolution of current environmental matters will not have a material adverse effect, while noting some contingencies could ultimately be material.
- Management disclosed no material changes to contractual obligations outside the ordinary course and no material changes to environmental matters since the 2023 Form 10-K. A natural-gas embedded derivative liability was $69 million, up from $61 million at year-end.
Most important facts for investors to verify
- Whether operating cash flow and DCF continue to cover distributions and planned capital spending after the acquisition-driven negative adjusted free cash flow after distributions.
- Utica acquisition integration, returns, and the effect of the new interests on G&P performance and cash generation.
- Progress, approval conditions and expected completion of the Whistler/Rio Bravo joint venture combination.
- Lake Oahe easement decision, Dakota Access operating status and any resulting change in MPLX’s contingent contribution exposure.
- Exposure to MPC as a major customer and affiliate: approximately 49% of revenue and other income was related to MPC in the quarter.
- Debt maturities, refinancing needs and continued access to liquidity, including the MPC loan facility’s scheduled July 2024 expiry and demand-repayment provision.
- Developments in the Fort Berthold pipeline litigation and environmental remediation obligations.