MPLX LP Reports Fourth-Quarter and Full-Year Financial Results

FINDLAY, Ohio, Jan. 29, 2020 /PRNewswire/ --

• Reported fourth-quarter net loss attributable to MPLX of $581 million and full-year net income attributable to MPLX of $1.0 billion; includes non-cash impairment charges of $1.2 billion in fourth quarter primarily related to goodwill associated with the Andeavor Logistics G&P businesses acquired by MPC as part of its combination with Andeavor in October 2018
• Reported fourth-quarter adjusted EBITDA attributable to MPLX of $1.3 billion and full-year adjusted EBITDA attributable to MPLX of $4.3 billion, or $5.1 billion including results of Andeavor Logistics
• Generated $4.1 billion in net cash provided by operating activities for the full-year 2019, supporting the return of capital of approximately $2.8 billion to unitholders
• Reduced 2020 growth capital spending target to approximately $1.5 billion
• Targeting positive free cash flow, after capital investments and distributions, in 2021

MPLX LP MPLX today reported a fourth-quarter 2019 net loss attributable to MPLX of $581 million compared with net income of $434 million for the fourth quarter of 2018. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) attributable to MPLX was $1.3 billion, compared with $1.2 billion in the fourth quarter of 2018. Fourth-quarter 2019 results include non-cash impairment charges of $1.2 billion, primarily related to goodwill associated with the Andeavor Logistics (ANDX) gathering and processing businesses acquired by Marathon Petroleum Corporation MPC as part of its combination with Andeavor in October 2018.

The Logistics and Storage (L&S) segment reported segment income from operations of $677 million and adjusted EBITDA of $853 million for the quarter, up $40 million and $44 million, respectively, versus the fourth quarter of last year. The Gathering and Processing (G&P) segment reported a segment loss from operations of $1.0 billion and adjusted EBITDA of $466 million for the quarter, down $1.3 billion and up $29 million, respectively, on a year-over-year basis. G&P results include the non-cash impairment charges discussed above.

MPLX today announced an updated 2020 growth capital target of approximately $1.5 billion from the previously announced target of approximately $2.0 billion. Michael J. Hennigan, president and chief executive officer, commented, "We have further streamlined our project portfolio to focus on projects that deliver the highest returns. Our continued efforts to high-grade our capital spending will help accomplish our target of positive free cash flow generation, after capital investments and distributions, in 2021. This inflection is expected to allow both the funding of our distribution and capital program entirely from internally generated cash flow, as well as increase our flexibility to reduce debt or repurchase units."

During the quarter, MPLX generated $1.1 billion in net cash provided by operating activities and $1.0 billion of distributable cash flow, which provided adjusted distribution coverage of 1.42 times. MPLX also announced its 28th consecutive distribution increase, to $0.6875 per common unit, a $0.01 increase over the prior quarter and a 6.2% increase over the prior year's fourth quarter.

Financial Highlights

Segment Results (including predecessor)

Logistics & Storage

L&S segment income from operations and adjusted EBITDA for the fourth quarter of 2019 increased by $40 million and $44 million, respectively, compared to the same period in 2018. The increase was primarily due to the acquisition of ANDX and the performance of the underlying base business.

Total pipeline throughputs were 5.1 million barrels per day in the fourth quarter, relatively flat versus the same quarter of 2018, despite volume impacts related to project work at MPC's Garyville refinery. The average tariff rate was $0.90 per barrel for the quarter. Terminal throughput was 3.3 million barrels per day for the quarter, an increase of 4% versus the same quarter of 2018.

Gathering & Processing

G&P segment income from operations and segment adjusted EBITDA for the fourth quarter of 2019 decreased by $1.3 billion and increased by $29 million, respectively, compared to the same period in 2018. Year-over-year results were impacted by non-cash impairment charges of $1.2 billion, primarily related to goodwill associated with the ANDX G&P businesses acquired by MPC as part of its combination with Andeavor in October 2018. In the fourth quarter of 2019:

• Gathered volumes: 6.2 billion cubic feet per day, a 5% increase versus the fourth quarter of 2018
• Processed volumes: 8.8 billion cubic feet per day, a 7% increase versus the fourth quarter of 2018
• Fractionated volumes: 557 thousand barrels per day, an 11% increase versus the fourth quarter of 2018

In the Marcellus and Utica, the company continued to experience significant year-over-year growth:

• Gathered volumes averaged 3.6 billion cubic feet per day (bcf/d) in the fourth quarter, an 11% increase versus the fourth quarter of 2018. For the full year, gathered volumes increased 18% year-over-year
• Processed volumes averaged 6.1 bcf/d in the fourth quarter, a 7% increase versus the fourth quarter of 2018 driven by the addition of the Sherwood 12 and 13 processing plants, which were placed in service during the quarter. For the full year, processed volumes increased 14% year-over-year
• Fractionated volumes averaged 487 thousand barrels per day in the fourth quarter, a 9% increase versus the fourth quarter of 2018. The increase was primarily driven by higher volumes from expansions at the Hopedale and Sherwood complexes. For the full year, fractionated volumes increased 12% year-over-year

Strategic Update

Today, MPLX announced an updated 2020 growth capital target of approximately $1.5 billion from the previously announced target of approximately $2.0 billion. The company also announced it is targeting positive free cash flow, after capital investments and distributions, in 2021. This inflection is expected to allow both the funding of its distribution and capital program entirely from internally generated cash flow. Removing MPLX's reliance on external funding and shifting to a model focused on generating cash flow beyond the needs of the business is anticipated to enable MPLX to focus its capital allocation toward opportunities like debt reduction or unit repurchases.

In the L&S segment, MPLX continues to advance its strategy of creating integrated crude oil and natural gas logistics systems from the Permian to the U.S. Gulf Coast. The Wink-to-Webster crude oil pipeline, in which MPLX has an equity interest, remains on schedule to be completed in the first half of 2021. The 36-inch diameter pipeline will originate in the Permian Basin and have destination points in the Houston market, including MPC's Galveston Bay refinery.

Also in the Permian, the Whistler Pipeline is being designed to transport approximately 2 bcf/d of natural gas from Waha, Texas, to the Agua Dulce market in south Texas, ultimately reaching MPC's Galveston Bay refinery. MPLX has an equity interest in Whistler, which is expected to be placed in service in the second half of 2021.

MPLX continues to progress its Permian-to-Gulf Coast NGL pipeline, called BANGL, which has a planned capacity of approximately 500 thousand barrels per day. The company expects a final investment decision in the near term.

Reversal of the Capline pipeline continues to progress, with a purge of the mainline completed in the fourth quarter. Once reversed, Capline will be capable of supplying discounted mid-continent and Canadian crude to St. James, Louisiana, which has a direct connection to MPC's Garyville refinery. Capline, which is partially owned by MPC and operated by MPLX, is expected to begin light crude service in mid-2021, with heavy crude service expected in 2022.

To support additional growth in the G&P segment, following the Sherwood 12 and Torñado processing plants that came online in October 2019, MPLX completed the Sherwood 13 processing plant late in the fourth quarter. This added another 200 million cubic feet per day of incremental capacity. The company expects to place in service the Omega 2 processing plant in the STACK shale play in Oklahoma in the first quarter of 2020, the Preakness processing plant in the Permian in the second quarter of 2020, and the Smithburg 1 processing plant in the Marcellus in the third quarter of 2020.

Financial Position and Liquidity

As of Dec. 31, 2019, MPLX had $15 million in cash, $3.5 billion available through its bank revolving credit facility expiring in July 2024 and $0.9 billion available through its intercompany loan agreement with MPC. The company's leverage ratio was 4.1 times at Dec. 31, 2019. MPLX remains committed to maintaining an investment-grade credit profile.

Conference Call

At 11 a.m. ET today, MPLX will hold a conference call and webcast to discuss the reported results and provide an update on operations. Interested parties may listen by visiting MPLX's website at http://www.mplx.com and clicking on the "2019 Fourth-Quarter and Full-Year Financial Results" link in the "Financial Results" section. A replay of the webcast will be available on MPLX's website for two weeks. Financial information, including this earnings release and other investor-related material, will also be available online prior to the conference call and webcast at http://ir.mplx.com.

About MPLX LP

MPLX is a diversified, large-cap master limited partnership that owns and operates midstream energy infrastructure and logistics assets, and provides fuels distribution services. MPLX's assets include a network of crude oil and refined product pipelines; an inland marine business; light-product terminals; storage caverns; refinery tanks, docks, loading racks, and associated piping; and crude and light-product marine terminals. The company also owns crude oil and natural gas gathering systems and pipelines as well as natural gas and NGL processing and fractionation facilities in key U.S. supply basins. More information is available at www.MPLX.com

Investor Relations Contacts: (419) 421-2071
Kristina Kazarian, Vice President, Investor Relations
Jim Mallamaci, Manager, Investor Relations
Evan Barbosa, Manager, Investor Relations

Media Contacts:
Hamish Banks, Vice President, Communications (419) 421-2521
Jamal Kheiry, Manager, Communications (419) 421-3312

Non-GAAP references

In addition to our financial information presented in accordance with U.S. generally accepted accounting principles (GAAP), management utilizes additional non-GAAP measures to facilitate comparisons of past performance and future periods. This press release and supporting schedules include the non-GAAP measures adjusted EBITDA and consolidated debt to last twelve months pro forma adjusted EBITDA, which we refer to as our leverage ratio, distributable cash flow (DCF) and distribution coverage ratio. The amount of adjusted EBITDA and DCFgenerated is considered by the board of directors of our general partner in approving the Partnership's cash distribution. Adjusted EBITDA and DCF should not be considered separately from or as a substitute for net income, income from operations, or cash flow as reflected in our financial statements. The GAAP measures most directly comparable to adjusted EBITDA and DCF are net income and net cash provided by operating activities. We define Adjusted EBITDA as net income adjusted for (i) depreciation and amortization; (ii) provision for income taxes; (iii) amortization of deferred financing costs; (iv) non-cash equity-based compensation; (v) net interest and other financial costs; (vi) income from equity method investments; (vii) distributions and adjustments related to equity method investments; (viii) unrealized derivative gains and losses; (ix) acquisition costs; (x) noncontrolling interest and (xi) other adjustments as deemed necessary. In general, we define DCF as adjusted EBITDA adjusted for (i) deferred revenue impacts; (ii) net interest and other financial costs; (iii) maintenance capital expenditures; (iv) equity method investment capital expenditures paid out; and (v) other non-cash items.

The Partnership makes a distinction between realized or unrealized gains and losses on derivatives. During the period when a derivative contract is outstanding, we record changes in the fair value of the derivative as an unrealized gain or loss. When a derivative contract matures or is settled, we reverse the previously recorded unrealized gain or loss and record the realized gain or loss of the contract.

Adjusted EBITDA is a financial performance measure used by management, industry analysts, investors, lenders, and rating agencies to assess the financial performance and operating results of our ongoing business operations. Additionally, we believe adjusted EBITDA provides useful information to investors for trending, analyzing and benchmarking our operating results from period to period as compared to other companies that may have different financing and capital structures.

DCF is a financial performance measure used by management as a key component in the determination of cash distributions paid to unitholders. We believe DCF is an important financial measure for unitholders as an indicator of cash return on investment and to evaluate whether the partnership is generating sufficient cash flow to support quarterly distributions. In addition, DCF is commonly used by the investment community because the market value of publicly traded partnerships is based, in part, on DCF and cash distributions paid to unitholders.

Distribution coverage ratio is a financial performance measure used by management to reflect the relationship between the partnership's financial operating performance and cash distribution capability. We define the distribution coverage ratio as the ratio of DCF attributable to GP and LP unitholders to total GP and LP distributions declared.

Leverage ratio is a liquidity measure used by management, industry analysts, investors, lenders and rating agencies to analyze our ability to incur and service debt and fund capital expenditures.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of federal securities laws regarding MPLX LP (MPLX). These forward-looking statements relate to, among other things, MPLX's expectations, estimates and projections concerning the business and operations, financial priorities and strategic plans of MPLX. These statements are accompanied by cautionary language identifying important factors, though not necessarily all such factors, that could cause future outcomes to differ materially from those set forth in the forward-looking statements. You can identify forward-looking statements by words such as "anticipate," "believe," "commitment," "could," "design," "estimate," "expect," "forecast," "goal," "guidance," "imply," "intend," "may," "objective," "opportunity," "outlook," "plan," "policy," "position," "potential," "predict," "priority," "project," "proposition," "prospective," "pursue," "seek," "should," "strategy," "target," "would," "will" or other similar expressions that convey the uncertainty of future events or outcomes. Such forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond the company's control and are difficult to predict. Factors that could cause MPLX's actual results to differ materially from those implied in the forward-looking statements include but are not limited to: Marathon Petroleum Corporation's (MPC) ability to achieve the strategic and other objectives related to the strategic initiatives and review; the risk of further impairments; the risk that anticipated opportunities and any other synergies from or anticipated benefits of the Andeavor Logistics acquisition may not be fully realized or may take longer to realize than expected, including whether the transaction will be accretive within the expected timeframe or at all; disruption from the transaction making it more difficult to maintain relationships with customers, employees or suppliers; risks relating to any unforeseen liabilities of ANDX; the amount and timing of future distributions; negative capital market conditions, including an increase of the current yield on common units; the ability to achieve strategic and financial objectives, including positive free cash flow in 2021, and with respect to distribution coverage, future distribution levels, proposed projects and completed transactions; the success of MPC's portfolio optimization, including the ability to complete any divestitures on commercially reasonable terms and/or within the expected timeframe, and the effects of any such divestitures on the business, financial condition, results of operations and cash flows; adverse changes in laws including with respect to tax and regulatory matters; the adequacy of capital resources and liquidity, including, but not limited to, availability of sufficient cash flow to pay distributions and access to debt on commercially reasonable terms, and the ability to successfully execute business plans, growth strategies and self-funding models; the timing and extent of changes in commodity prices and demand for crude oil, refined products, feedstocks or other hydrocarbon-based products; continued/further volatility in and/or degradation of market and industry conditions; changes to the expected construction costs and timing of projects and planned investments, and the ability to obtain regulatory and other approvals with respect thereto; completion of midstream infrastructure by competitors; disruptions due to equipment interruption or failure, including electrical shortages and power grid failures; the suspension, reduction or termination of MPC's obligations under MPLX's commercial agreements; modifications to financial policies, capital budgets, and earnings and distributions; the ability to manage disruptions in credit markets or changes to credit ratings; compliance with federal and state environmental, economic, health and safety, energy and other policies and regulations and/or enforcement actions initiated thereunder; adverse results in litigation; other risk factors inherent to MPLX's industry; risks related to MPC; and the factors set forth under the heading "Risk Factors" in MPLX's Annual Report on Form 10-K for the year ended Dec. 31, 2018, and in Forms 10-Q, filed with Securities and Exchange Commission (SEC).

Factors that could cause MPC's actual results to differ materially from those implied in the forward-looking statements include: with respect to the planned Speedway separation, the ability to successfully complete the separation within the expected timeframe or at all, based on numerous factors including the macroeconomic environment, credit markets and equity markets, and the ability to satisfy customary conditions, including obtaining regulatory approvals, and achieve the strategic and other objectives related thereto; with respect to the Midstream review, the ability to achieve the strategic and other objectives related to the strategic review related thereto; the risk that the cost savings and any other synergies from the Andeavor transaction may not be fully realized or may take longer to realize than expected; disruption from the Andeavor transaction making it more difficult to maintain relationships with customers, employees or suppliers; risks relating to any unforeseen liabilities of Andeavor; risks related to the acquisition of Andeavor Logistics LP by MPLX, including the risk that anticipated opportunities and any other synergies from or anticipated benefits of the transaction may not be fully realized or may take longer to realize than expected, including whether the transaction will be accretive within the expected timeframe or at all, or disruption from the transaction making it more difficult to maintain relationships with customers, employees or suppliers; the risk of further impairments; the ability to complete any divestitures on commercially reasonable terms and/or within the expected timeframe, and the effects of any such divestitures on the business, financial condition, results of operations and cash flows; future levels of revenues, refining and marketing margins, operating costs, retail gasoline and distillate margins, merchandise margins, income from operations, net income and earnings per share; the regional, national and worldwide availability and pricing of refined products, crude oil, natural gas, NGLs and other feedstocks; consumer demand for refined products; the ability to manage disruptions in credit markets or changes to credit ratings; future levels of capital, environmental and maintenance expenditures; general and administrative and other expenses; the success or timing of completion of ongoing or anticipated capital or maintenance projects; the reliability of processing units and other equipment; business strategies, growth opportunities and expected investment; share repurchase authorizations, including the timing and amounts of such repurchases; the adequacy of capital resources and liquidity, including availability, timing and amounts of free cash flow necessary to execute business plans and to effect any share repurchases or to maintain or increase the dividend; the effect of restructuring or reorganization of business components; the potential effects of judicial or other proceedings on the business, financial condition, results of operations and cash flows; continued or further volatility in and/or degradation of general economic, market, industry or business conditions; compliance with federal and state environmental, economic, health and safety, energy and other policies and regulations, including the cost of compliance with the Renewable Fuel Standard, and/or enforcement actions initiated thereunder; the anticipated effects of actions of third parties such as competitors, activist investors or federal, foreign, state or local regulatory authorities or plaintiffs in litigation; the impact of adverse market conditions or other similar risks to those identified herein affecting MPLX; and the factors set forth under the heading "Risk Factors" in MPC's Annual Report on Form 10-K for the year ended Dec. 31, 2018, and in Forms 10-Q, filed with the SEC.

We have based our forward-looking statements on our current expectations, estimates and projections about our business and industry. We caution that these statements are not guarantees of future performance and you should not rely unduly on them, as they involve risks, uncertainties, and assumptions that we cannot predict. In addition, we have based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. While our management considers these assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. Accordingly, our actual results may differ materially from the future performance that we have expressed or forecast in our forward-looking statements. We undertake no obligation to update any forward-looking statements except to the extent required by applicable law. Copies of MPLX's Form 10-K and Forms 10-Q are available on the SEC website, MPLX's website at http://ir.mplx.com or by contacting MPLX's Investor Relations office. Copies of MPC's Form 10-K and Forms 10-Q are available on the SEC website, MPC's website at https://www.marathonpetroleum.com/Investors/ or by contacting MPC's Investor Relations office.