MPLX LP — 2022 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2022. This is an annual report, not a standalone fourth-quarter filing. Amounts are in U.S. dollars; financial figures are generally in millions unless stated otherwise.
Business context
MPLX is a master limited partnership sponsored by Marathon Petroleum Corporation (MPC). It operates U.S. midstream infrastructure through Logistics and Storage (L&S) and Gathering and Processing (G&P). MPC owned approximately 65% of MPLX’s common units and accounted for 47% of 2022 revenue and other income, excluding the disclosed non-cash lease gain. L&S was particularly concentrated, with about 88% of segment revenue and other income generated from MPC.
Financial and operating performance
| Metric | 2022 | 2021 |
|---|---|---|
| Revenue and other income | $11,613 | $10,027 |
| Income from operations | $4,911 | $3,992 |
| Net income | $3,978 | $3,112 |
| Net income attributable to MPLX LP | $3,944 | $3,077 |
| Net income per common unit, basic and diluted | $3.75 | $2.86 |
| Adjusted EBITDA attributable to MPLX LP (non-GAAP) | $5,775 | $5,560 |
| Distributable cash flow attributable to MPLX LP (non-GAAP) | $4,981 | $4,785 |
| Net cash provided by operating activities | $5,019 | $4,911 |
| Adjusted free cash flow (non-GAAP) | $4,069 | $4,399 |
| Adjusted free cash flow after base distributions (non-GAAP) | $1,022 | $1,429 |
Revenue rose about 16%, net income about 28%, and Adjusted EBITDA about 4% year over year. The filing reports a $509 million non-cash gain from a lease reclassification in 2022; this materially boosted reported earnings and revenue, but is excluded from Adjusted EBITDA under MPLX’s reconciliation. Income from operations was approximately 42% of revenue, versus 40% in 2021.
L&S Adjusted EBITDA increased to $3,818 from $3,681; G&P Adjusted EBITDA increased to $1,957 from $1,879. G&P revenue growth reflected higher NGL prices and volumes, while L&S benefited from increased pipeline throughput, terminal blending and equity-method investment income. Operating cash flow increased 2%. Adjusted free cash flow fell from 2021, which included a different investing-cash-flow profile; MPLX attributed 2022’s higher investing outlay primarily to G&P spending and producer demand.
Debt, liquidity and capital returns
- Year-end debt was approximately $20.1 billion; the reported leverage ratio was 3.5x. Interest expense, net of capitalized amounts, increased to $843 from $785, partly due to refinancing at higher fixed rates.
- Year-end cash was $238, and reported total liquidity was $3.738 billion, including $2.0 billion available under the revolving credit facility and $1.5 billion under the MPC loan facility. No borrowings were outstanding on either facility at year-end.
- MPLX paid more than $3.0 billion in distributions during 2022 and repurchased about 15 million public common units for $491. The annual declared common-unit distribution was $2.96, compared with $3.36 in 2021, which included a $0.575 supplemental distribution. The quarterly rate increased 10% to $0.775 beginning in the third quarter of 2022.
- 2022 capital expenditures were $855, including growth capital and maintenance capital, as presented in the filing. MPLX’s 2023 capital outlook was $950 net of reimbursements: $800 growth and $150 maintenance.
Outlook, risks and unusual items
- Management said 2022 results benefited from recovering refined-product demand, higher throughputs, and higher natural gas and NGL prices. It emphasized capital discipline, cost control and portfolio optimization. The filing does not provide numerical earnings guidance.
- Management reported higher labor and materials costs and said it expects to pass some cost increases to customers where contracts, competition and regulation permit. It cautioned that inflation, higher interest rates and recession concerns could affect demand and costs.
- Key business risks include reliance on MPC and producer customers, changing throughput and commodity conditions, substantial debt, interest-rate exposure, operating disruptions, cybersecurity, environmental and climate regulation, and the ability to obtain permits and property rights.
- Notable contingencies include the Dakota Access Pipeline permit litigation; MPLX’s maximum potential undiscounted contribution under the related contingent equity agreement was approximately $170 million at year-end. A federal counterclaim concerning the Tesoro High Plains Pipeline seeks disgorgement of profits, pipeline removal and remediation; the potential amount is not clearly quantified in the filing. Following a March 2022 crude-oil release near Edwardsville, Illinois, MPLX was negotiating with the state over alleged violations and penalties; the amount was not estimable. MPLX expected to finalize an EPA settlement concerning compressor stations and a gas plant in 2023, including an expected $2 million penalty and remedial measures.
- Subsequent to year-end, MPLX issued $1.6 billion of senior notes in February 2023, used $600 million of proceeds to redeem all Series B preferred units, and gave notice to redeem $1.0 billion of 4.50% notes due July 2023. The board declared a $0.775 distribution per common unit, paid in February 2023.
Important facts for investors to verify
- Separate recurring operating performance from the $509 million non-cash lease-reclassification gain; review the lease accounting and its cash-flow implications.
- Assess distribution sustainability using operating cash flow, maintenance capital needs, debt service and the company’s non-GAAP DCF and adjusted free-cash-flow reconciliations.
- Monitor leverage, refinancing costs and the terms and availability of the revolving and MPC credit facilities.
- Evaluate customer concentration and the renewal, minimum-volume and termination provisions of MPC agreements; MPC represented 47% of revenue and other income.
- Track resolution and potential costs of the Dakota Access, Tesoro High Plains, Edwardsville and EPA matters, including any changes to estimated liabilities or operating restrictions.
- Review the $950 million 2023 capital outlook and progress on planned Marcellus, Permian and Bakken projects.
The independent auditor gave an unqualified opinion on the financial statements and concluded internal control over financial reporting was effective as of December 31, 2022. The auditor identified the Crude Gathering reporting unit goodwill impairment test, particularly the forecast of future volumes, as a critical audit matter; no goodwill impairment was recorded in 2022.