MPLX LP — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; compared with Q1 2021. MPLX is a midstream energy partnership with Logistics and Storage (L&S) and Gathering and Processing (G&P) segments. MPC owned approximately 64% of common units and is a major customer and service provider.
Financial and operating performance
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Revenue and other income | $2.610 billion | $2.339 billion | +$271 million |
| Income from operations | $1.060 billion | $974 million | +$86 million |
| Net income | $833 million | $748 million | +$85 million |
| Net income attributable to MPLX LP | $825 million | $739 million | +$86 million |
| Common-unit net income per unit, diluted | $0.78 | $0.68 | +$0.10 |
| Adjusted EBITDA attributable to MPLX LP | $1.393 billion | $1.352 billion | +$41 million |
| DCF attributable to GP and LP unitholders | $1.178 billion | $1.106 billion | +$72 million |
Revenue growth primarily reflected higher G&P prices and volumes, increased L&S pipeline throughput, and higher equity-method income. Purchased product costs rose $191 million, mainly due to higher commodity prices and Southwest volumes. Segment Adjusted EBITDA was $904 million for L&S (up $8 million) and $489 million for G&P (up $33 million). G&P product-related revenue increased $264 million, while service revenue fell $22 million.
Operating cash flow was $1.125 billion, essentially unchanged from $1.124 billion. Investing cash use was $276 million, versus $90 million, reflecting higher capital spending and affiliate contributions, including $60 million for the Bakken Pipeline joint venture. Financing cash use was $820 million. Free cash flow, a non-GAAP measure, was $850 million versus $1.031 billion; free cash flow after distributions was $92 million versus $277 million.
Cash and cash equivalents were $42 million at quarter-end. Total liquidity was $4.719 billion, comprising $3.5 billion available under the revolver, $1.177 billion available under the MPC loan agreement, and $42 million cash. Outstanding senior-note principal was approximately $20.1 billion. MPLX had no revolver borrowings, was in compliance with its debt covenants, and reported a debt-to-Consolidated-EBITDA ratio of 3.64x against a 5.0x limit. Its senior debt ratings were investment grade with stable outlooks.
Material changes and capital returns
- On March 14, MPLX issued $1.5 billion of 4.950% senior notes due 2052; proceeds repaid amounts under the MPC intercompany loan and credit agreement.
- Quarterly common-unit distribution was $0.7050, up from $0.6875 a year earlier. The Q1 distribution coverage ratio was 1.65x. The distribution was declared after quarter-end and scheduled for payment May 13, 2022.
- MPLX repurchased 3.1 million common units for $100 million at an average $32.06 per unit; $237 million remained under its authorization.
- The initial 2022 capital investment plan was $900 million: $700 million growth capital, $140 million maintenance capital, and $60 million for the Bakken Pipeline joint venture debt repayment.
- Comparability reflects the February 2021 Javelina divestiture and lease-contract modifications that changed revenue and cost classifications.
Outlook, risks and contingencies
The filing provides no specific full-year earnings or revenue guidance. Management said it saw continued recovery in its operating environment and emphasized capital discipline, cost control, and portfolio optimization. MPLX said operating cash flow, credit facilities, and capital-market access were expected to fund operations, capital needs, contractual obligations, and distributions. Management may adjust the capital plan as conditions warrant.
- Management cited uncertainty from COVID-19 and the Russia-Ukraine conflict, as well as inflation, commodity-price and demand changes, capital-market conditions, regulatory developments, and project execution risks.
- Environmental remediation accruals were $42 million, up from $23 million at year-end. Costs increased following a March crude-oil release near Edwardsville, Illinois. Illinois brought an action seeking an injunction and civil penalties; MPLX said it was negotiating a settlement and could not estimate resolution timing.
- The Dakota Access Pipeline remains operational, but its Lake Oahe easement was vacated and an environmental impact statement was expected in the second half of 2022. MPLX’s maximum potential undiscounted contribution under a contingent equity agreement was approximately $170 million.
- In a separate pipeline matter on the Fort Berthold Reservation, federal parties asserted counterclaims seeking disgorgement of profits, pipeline removal, and remediation. MPLX said it would defend the claims and was pursuing settlement discussions.
- Other lawsuits and environmental matters are pending; management said their ultimate outcomes cannot be predicted. The filing notes that some unrecorded contingencies cannot currently be reasonably estimated.
- MPC-related transactions represented 48% of total revenue and other income and 24% of total costs and expenses in Q1 2022. The MPC revolving loan agreement allows MPC Investment to demand repayment before its stated 2024 maturity.
- MPLX reported no open commodity or interest-rate hedges at quarter-end apart from an embedded derivative liability valued at $99 million.
Key facts for investors to verify
- Whether higher G&P commodity prices and volumes persist, and how product-cost movements affect segment cash generation.
- Progress and final cost or penalties from the Edwardsville release and the Fort Berthold pipeline dispute.
- The Dakota Access environmental review, permit status, and potential funding obligations.
- Execution of the $900 million 2022 capital plan, including expected growth spending and affiliate commitments.
- Distribution sustainability, coverage, and remaining unit-repurchase authorization in light of free cash flow after distributions.
- Debt refinancing and liquidity access, including the MPC loan’s demand feature and the 2052 notes’ fixed 4.950% coupon.