MPLX LP — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. MPLX operates Logistics and Storage (L&S) and Gathering and Processing (G&P) businesses. Amounts below are in U.S. dollars; financial figures are in millions unless noted.
Financial performance
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue and other income | $2,559 | $2,247 | $7,293 | $5,320 |
| Operating income (loss) | $1,031 | $899 | $2,936 | $(709) |
| Net income (loss) | $811 | $674 | $2,274 | $(1,387) |
| Net income (loss) attributable to MPLX LP | $802 | $665 | $2,247 | $(1,411) |
| Common unit earnings, basic and diluted | $0.74 | $0.61 | $2.07 | $(1.43) |
| Adjusted EBITDA attributable to MPLX LP (non-GAAP) | $1,389 | $1,335 | $4,115 | $3,856 |
| DCF attributable to GP and LP unitholders (non-GAAP) | $1,143 | $1,032 | $3,468 | $3,075 |
Q3 operating margin was approximately 40.3%, compared with 40.0% a year earlier. Q3 revenue growth was largely driven by higher G&P product prices (approximately $300 million); purchased product costs also rose, reflecting higher commodity prices. For the nine-month comparison, 2020 results included $2.165 billion of impairment expense in operating costs and $1.264 billion of equity-method investment impairments. 2021 included $42 million of impairment expense, including $6 million related to an equity-method investment.
Segments and cash flow
- Q3 Segment Adjusted EBITDA: L&S $904 million, up $11 million year over year; G&P $485 million, up $43 million. Nine-month figures were $2.747 billion for L&S and $1.368 billion for G&P.
- Operating cash flow: $1.182 billion in Q3 and $3.671 billion for the first nine months, versus $1.222 billion and $3.336 billion, respectively, in 2020.
- Free cash flow (non-GAAP): $1.055 billion in Q3 and $3.296 billion year to date. Excess cash flow after common and preferred distributions was $310 million and $1.068 billion, respectively.
- Capital spending: Property, plant and equipment additions were $374 million for nine months, versus $982 million in 2020. MPLX revised its 2021 capital investment estimate from approximately $1.0 billion to approximately $650 million.
Balance sheet, debt and distributions
- At September 30, cash was $39 million; total assets were $35.699 billion and total liabilities were $22.023 billion.
- Reported borrowings totaled $18.609 billion, down from $20.536 billion at year-end 2020. MPLX also had $1.370 billion outstanding under the MPC affiliate loan agreement, classified in current related-party liabilities.
- Available liquidity was approximately $3.669 billion, including $3.5 billion available under the revolving credit facility, $130 million available under the MPC loan agreement and $39 million of cash. The company reported a 3.64-to-1 debt-to-Consolidated-EBITDA covenant ratio and compliance with its 5.0-to-1 limit.
- For Q3, MPLX declared a distribution of $1.28 per common unit—$0.705 base and $0.575 special—payable November 19, 2021. Q3 unit repurchases totaled $155 million; nine-month repurchases totaled $465 million, with $497 million remaining under the authorization at quarter-end.
Changes, outlook and risks
- Management said economic activity improved as COVID-19 restrictions eased, while noting that the pandemic’s longer-term effects remain uncertain. MPLX cited capital discipline, cost reduction and portfolio optimization as priorities.
- G&P revenue growth reflected higher product prices; reported throughput was mixed, and the Javelina assets were sold in February 2021. L&S pipeline throughput and terminal throughput increased year over year in Q3.
- The 2021 capital estimate was reduced to approximately $650 million. The filing does not provide specific earnings or distribution guidance; management said available operating cash flow and financing sources were expected to cover funding needs, including distributions and capital requirements.
- A one-time $54 million impact from a Refining Logistics harmonization project was included in nine-month DCF adjustments. MPLX also reported a $104 million liability for an embedded derivative in a keep-whole processing agreement.
- Contingencies: MPLX’s 9.19% indirect interest in the Bakken Pipeline system carries contingent equity contribution exposure of up to approximately $230 million if specified events affect the pipeline’s operations or debt payments. The pipeline remained operational while its easement and environmental review proceedings continued.
- Environmental remediation accruals were $22 million. A separate pipeline trespass matter involving THPP remained under discussion and litigation; an earlier approximately $4 million damages assessment had been paid. Management stated that it could not predict all legal outcomes, but did not expect the proceedings to have a material adverse effect in aggregate.
- Credit ratings were investment grade at quarter-end: Moody’s Baa2 (stable), S&P BBB (negative) and Fitch BBB (stable). COVID-19 impacts, commodity prices, customer volumes, MPC-related arrangements, regulatory and environmental matters, litigation, and access to capital are among the disclosed risks.
Investor verification points
- Review how much of G&P’s revenue and earnings growth reflects commodity pricing versus sustained volume and fee activity.
- Confirm distribution coverage using the company’s non-GAAP DCF and cash-flow reconciliations, including the special distribution and the $54 million harmonization adjustment.
- Monitor total debt, the MPC affiliate loan balance, available liquidity, covenant headroom and investment-grade rating outlooks.
- Track progress and potential cash exposure from the Bakken Pipeline easement proceedings and the THPP trespass matter.
- Assess whether the reduced capital investment plan and portfolio optimization—including planned non-core asset dispositions or closures—affect future volumes, cash generation or impairment risk.