Credit Suisse Sees 'A Long Road Of Execution' Ahead For MPLX

• MPLX LP MPLX shares have been on a downward trajectory over the last six months, and are down 52 percent since June 22.
• Credit Suisse’s John D. Edwards initiating coverage of the company with a Neutral rating and a price target of $49.
• While MPLX has exposure to the NE and Gulf Coast, the schedule and cost of project execution would have a bearing on valuation, Edwards stated.

MPLX appears poised to leverage its diversified energy portfolio, driven mainly by access to supply/demand opportunities in the Northeast & Gulf Coast, analyst John Edwards said. MPLX is owned by Marathon Petroleum Corporation and has recently acquired Markwest Energy Partners LP MWE.

Edwards stated that the Markwest acquisition adds a significant natural gas gathering and processing presence in the Marcellus and Utica shale plays to MPLX operations.

“MPLX has identified $27-$33Bn of investment opportunities, including $1.6Bn in dropdown EBITDA from MPC ($13-$16B in value), $7.5Bn of MarkWest organic capital, $6-$9Bn in synergistic MPLX and MarkWest capital, and $800mm MPLX organic capital,” the analyst wrote.

MPLX has a robust balance sheet, which supports execution of MarkWest’s growth project backlog of around $7.5Bn. Edwards added, however, that in case the execution of backlog projects take longer or cost more than expected, there would be a delay in the realization of projected cash flows, which would negatively impact valuation.

MarkWest’s significantly larger size and slower standalone growth rate call for more dropdowns long-term to be accretive to MPLX’s EBITDA at the same outlined rate as it had prior to the acquisition, the Credit Suisse report mentioned.

The analyst commented that while MPC’s large and growing MLP-eligible dropdown inventory should be enough to meet the growth objectives, MPLX may require additional sponsor support to maintain growth beyond 2020.