MPLX LP — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; comparisons are with Q1 2022. MPLX is a midstream energy partnership with Logistics and Storage (L&S) and Gathering and Processing (G&P) segments. MPC is its sponsor, customer, and majority common-unit holder.
Financial performance and liquidity
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue and other income | $2.713 billion | $2.610 billion |
| Operating income | $1.196 billion | $1.060 billion |
| Net income | $952 million | $833 million |
| Net income attributable to MPLX LP | $943 million | $825 million |
| Limited partners’ net income per common unit, diluted | $0.91 | $0.78 |
| Net cash provided by operating activities | $1.227 billion | $1.125 billion |
| Adjusted free cash flow (non-GAAP) | $1.005 billion | $850 million |
| Adjusted free cash flow after distributions (non-GAAP) | $184 million | $92 million |
Revenue increased 4%; net income rose 14%. Operating margin was approximately 44.1%, compared with 40.6% a year earlier; net margin was approximately 35.1%, versus 31.9%. These are calculated from reported GAAP figures. Adjusted EBITDA attributable to MPLX, a non-GAAP measure, was $1.519 billion, up from $1.393 billion. Distributable cash flow attributable to MPLX was $1.268 billion, compared with $1.210 billion.
Operating cash flow funded $220 million of net investing outflows and $852 million of net financing outflows. Cash and cash equivalents were $393 million at quarter-end, up from $238 million at December 31, 2022. MPLX reported total liquidity of $3.893 billion: $393 million cash and $3.5 billion available under its revolving credit facilities. The current ratio was approximately 1.53.
Balance-sheet long-term debt was $20.393 billion, with $1 million due within one year. The debt note reports $20.707 billion of total borrowings before unamortized issuance costs and discounts. The credit-agreement leverage ratio was 3.52x, below the 5.0x covenant limit.
Material changes versus Q1 2022
- L&S Segment Adjusted EBITDA increased to $1.026 billion from $904 million, supported by higher throughput, tariff escalations, rental and lease revenue, and equity-method investment income. Crude pipeline throughput rose to 3.642 million barrels per day from 3.380 million; total pipeline throughput rose to 5.630 million barrels per day from 5.336 million.
- G&P Segment Adjusted EBITDA was nearly unchanged at $493 million versus $489 million. Lower NGL prices reduced product-related revenue, partly offset by higher volumes, service fees, and equity-method investment income.
- Interest expense, net, increased to $224 million from $198 million, primarily reflecting debt refinancing at higher fixed rates. Purchased product costs fell by $61 million, mainly due to lower commodity prices.
- Cash operating activities increased $102 million. Investing outflows fell $56 million, partly because Q1 2022 included a $60 million contribution to the Bakken Pipeline joint venture. Financing outflows included increased unitholder distributions and the Series B preferred-unit redemption.
Capital, distributions, outlook, and risks
- In February, MPLX issued $1.6 billion of senior notes: $1.1 billion of 5.00% notes due 2033 and $500 million of 5.65% notes due 2053. Proceeds and cash on hand funded redemption of $600 million of Series B preferred units and $1.0 billion of 4.50% notes due July 2023. The refinancing generated a $9 million loss from expensing unamortized debt costs.
- MPLX declared a Q1 common-unit distribution of $0.775 per unit, up from $0.705 a year earlier, payable May 15, 2023. It paid $821 million of distributions during the quarter. The $1 billion unit-repurchase authorization had $846 million remaining; no units were repurchased in Q1.
- The initial 2023 capital investment plan is $950 million net of reimbursements, including $800 million growth capital and $150 million maintenance capital. No specific earnings or cash-flow guidance is provided in the filing. Management expects cash from operations, credit facilities, and capital markets access to meet funding needs, including distributions, but notes that results and cash availability remain subject to risks.
- Management cited inflation, interest rates, recession concerns, and fuel prices as uncertainties, and emphasized capital discipline, cost control, and portfolio optimization. Commodity prices, volumes, project execution, regulation, and MPC’s commercial commitments are among the stated risks. MPC accounted for 50% of revenue and other income and 27% of costs and expenses; it held approximately 65% of outstanding common units.
- MPLX’s 9.19% indirect Bakken Pipeline interest carries a contingent equity contribution commitment. The pipeline remained operational; maximum potential undiscounted payments under the agreement were approximately $170 million. The Army Corps’ draft environmental impact statement was expected in 2023, and further litigation is possible.
- A subsidiary’s dispute with the Bureau of Indian Affairs includes government counterclaims seeking pipeline-profit disgorgement, pipeline removal, and remediation; MPLX stated it intends to defend the claims. Separately, an EPA consent decree entered after quarter-end provides for a $2 million penalty and remedial and emissions-mitigation measures, subject to court approval. Environmental remediation liabilities were $17 million.
Important facts for investors to verify
- Whether throughput, fee escalations, and L&S performance can sustain earnings as commodity prices and G&P product revenues fluctuate.
- Debt costs, refinancing needs, covenant headroom, and the sustainability of distributions relative to distributable cash flow and free cash flow.
- Progress and costs associated with the 2023 capital plan, and any changes to expected growth projects or maintenance spending.
- Developments in the Bakken Pipeline permitting and litigation, the BIA counterclaims, and implementation of the EPA consent decree.
- Continued dependence on MPC-related agreements and transactions, including the effects of any changes to MPC’s volumes or commitments.