Business context and reporting period
MPLX LP’s unaudited Form 10-Q covers the quarter and nine months ended September 30, 2023. The partnership operates Logistics and Storage (L&S) and Gathering and Processing (G&P) businesses, providing midstream infrastructure and fuels distribution services. Marathon Petroleum Corporation (MPC) is its sponsor and a major customer.
Financial and operating performance
Amounts are in millions of dollars except per-unit data, operating ratios, and where otherwise noted.
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Total revenue and other income | $2,912 | $3,401 | $8,315 | $8,951 |
| Net income | $928 | $1,437 | $2,822 | $3,154 |
| Net income attributable to MPLX LP | $918 | $1,428 | $2,794 | $3,128 |
| Common-unit earnings per unit, diluted | $0.89 | $1.36 | $2.70 | $2.97 |
| Adjusted EBITDA attributable to MPLX LP (non-GAAP) | $1,596 | $1,471 | $4,646 | $4,321 |
| DCF attributable to MPLX (non-GAAP) | $1,373 | $1,264 | $3,956 | $3,711 |
Cash flow and investment: Nine-month operating cash flow was $3,908, versus $3,651 a year earlier. Investing cash outflow was $727, including $662 of property and equipment additions. Adjusted free cash flow was $3,171 and adjusted free cash flow after distributions was $752 (both non-GAAP). Cash and cash equivalents were $960 at September 30, up from $238 at year-end 2022.
Debt and liquidity: Total borrowings were $20,707, including $20,417 of long-term debt. Total liquidity was $4.46 billion: $960 million cash and $3.5 billion available under the MPLX and MPC revolving loan facilities. The credit-agreement leverage ratio was 3.4x against a 5.0x covenant limit; MPLX reported compliance with its covenants. Senior unsecured debt ratings were Baa2/BBB/BBB, all with stable outlooks.
Segments: Q3 L&S Segment Adjusted EBITDA was $1,091, up from $969; G&P was $505, compared with $502. For the nine months, L&S was $3,139 versus $2,839 and G&P was $1,507 versus $1,482. L&S benefited from higher pipeline tariffs, throughput, fee escalations, and equity-method investment income. G&P results reflected higher volumes and throughput fees, offset by lower NGL prices.
Material changes versus prior comparable periods
- Reported revenue and net income declined year over year, but comparisons include a $509 million non-cash sales-type lease gain recognized in Q3 2022. Excluding that item in its Adjusted EBITDA reconciliation, Q3 2023 Adjusted EBITDA increased $125 million; nine-month Adjusted EBITDA increased $325 million.
- Lower NGL prices reduced G&P product-related revenue; nine-month product-related revenue fell $634 million. Lower prices also reduced purchased product costs, partially offsetting the revenue impact.
- Operating cash flow increased $257 million for the nine months, while capital spending and investing outflows were higher. Distributions paid to common and preferred unitholders were $2,419 million for the period.
- MPLX issued $1.6 billion of senior notes in February, redeemed $600 million of Series B preferred units, and used remaining proceeds plus cash to redeem $1.0 billion of notes due July 2023. Interest expense rose $46 million for the nine months.
- The quarterly common-unit distribution increased to $0.850 from $0.775 in the prior quarter, a 10% increase. The third-quarter distribution was declared after quarter-end and scheduled for payment November 13, 2023.
Outlook, commentary, risks, and unusual items
- MPLX’s initial 2023 capital plan was $950 million net of reimbursements: $800 million growth capital and $150 million maintenance capital. Management said it expects cash from operations, revolving facilities, and capital-market access to meet funding needs, including distributions and capital requirements.
- Management cited capital discipline, cost control, portfolio optimization, and inflation-related fee adjustments as priorities. It did not provide a specific earnings or cash-flow forecast in the supplied filing text.
- An August 2023 naphtha release and fire at the Garyville Tank Farm destroyed four tanks with combined shell capacity of 894,000 barrels. MPLX incurred $63 million of response costs and is pursuing insurance recovery; the amount, if any, is uncertain.
- MPLX has a 9.19% indirect interest in the Bakken Pipeline system. The Army Corps’ draft environmental review presented several possible outcomes for the Lake Oahe easement, without selecting a preferred option. The pipeline remained operational. MPLX’s maximum potential undiscounted contribution under its contingent equity agreement was approximately $170 million.
- A federal enforcement action concerning alleged Clean Water Act violations related to pipeline releases, including the Edwardsville incident, was disclosed; MPLX said it could not estimate potential penalties and did not expect a material financial impact. Environmental remediation accruals were $23 million.
- Nearly half of revenue and other income came from MPC: 49% in Q3 and 50% for the nine months. MPC held approximately 65% of common units. This concentration and related-party dependence are relevant to assessing commercial and governance risk.
- Other stated risks include commodity prices and volumes, interest rates, project execution, environmental and regulatory requirements, litigation, accidents or shutdowns, and access to financing. Management noted uncertainty about inflation, higher interest rates, and recession effects on demand.
Most important facts for investors to verify
- Whether operating performance and cash generation continue to support the $0.850 quarterly common-unit distribution and the planned capital program.
- The underlying trend in G&P profitability and volumes as NGL prices change, separate from the prior-year $509 million lease gain.
- Garyville incident repair, insurance recovery, and any resulting operational or financial effects.
- The Army Corps’ final Lake Oahe easement decision, related litigation, and potential funding obligations under the Bakken Pipeline agreement.
- Debt refinancing costs, leverage, covenant headroom, and the continued availability of credit facilities and capital markets.
- Exposure to MPC as customer, sponsor, and service provider, including the effect of contract terms and related-party costs.