MPLX LP Reports First-Quarter 2020 Financial Results

FINDLAY, Ohio, May 5, 2020 /PRNewswire/ --

• Reported net loss attributable to MPLX of $2.7 billion; includes non-cash impairment charges of $3.4 billion primarily related to goodwill, equity method investments, and long-lived assets
• Reported adjusted EBITDA attributable to MPLX of $1.3 billion
• Generated $1.0 billion in net cash provided by operating activities and reported distribution coverage of 1.44x
• Announced business response to COVID-19 environment, including reductions of over $700 million of capital and approximately $200 million of operating expense
• Maintained quarterly distribution of $0.6875 per common unit

MPLX LP (NYSE: MPLX) today reported a first-quarter 2020 net loss attributable to MPLX of $2.7 billion, compared with net income of $503 million for the first quarter of 2019. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) attributable to MPLX was $1.3 billion, compared with $1.3 billion in the first quarter of 2019. First-quarter 2020 results include non-cash impairment charges of $3.4 billion. These charges include a goodwill impairment associated with Marcellus gathering and processing assets, impairments of equity method investments primarily located in the Utica region, and long-lived asset impairments related to assets located in East Texas.

The Logistics and Storage (L&S) segment reported segment income from operations of $723 million and adjusted EBITDA of $872 million for the quarter, up $36 million and $44 million, respectively, versus the first quarter of last year. The Gathering and Processing (G&P) segment reported a segment loss from operations of $3.2 billion and adjusted EBITDA of $422 million for the quarter, down $3.4 billion and $13 million, respectively, versus the first quarter of last year. G&P results include the non-cash impairment charges discussed above.

During the quarter, MPLX generated $1.0 billion in net cash provided by operating activities and $1.1 billion of distributable cash flow. Distribution coverage was 1.44x for the first quarter of 2020. MPLX also announced a first-quarter 2020 distribution of $0.6875 per common unit, consistent with the prior quarter and a 4.6% increase over the prior year's first quarter.

"COVID-19 has created an extraordinary set of circumstances and challenges across the country, impacting the personal and professional lives of many, as well as the demand for hydrocarbons that we transport through our logistics assets," said Michael J. Hennigan, president and chief executive officer. "In this environment, we are taking proactive steps by reducing planned 2020 capital and operating expenses to offset the impacts from the related demand destruction, as well as potential impacts from the current commodity price environment on our Gathering and Processing business segment."

Spending Reductions for 2020

MPLX 2020 capital spending target reduced by over $700 million to approximately $1.0 billion.

• Growth capital spending target reduced by over $600 million to approximately $900 million. Growth capital spend is primarily related to projects that are already underway, including the Wink-to-Webster crude oil pipeline, the Whistler natural gas pipeline, and the expansion of the Mt. Airy Terminal.
• The original BANGL project scope is no longer being pursued given the current down cycle. Instead, the company is working with others to optimize existing pipeline capacity while continuing to meet producers' needs for flow assurance and future growth. Also, the associated fractionation capacity and export facility have been deferred.
• Net maintenance capital spending target reduced by $100 million to approximately $150 million.

The company also expects to reduce forecasted annual operating expenses by approximately $200 million, primarily through the deferral of certain expense projects.

MPLX is maintaining its goal to achieve positive free cash flow, after capital investments and distributions, in 2021.

Financial Highlights

Segment Results (including predecessor)

Logistics & Storage

L&S segment income from operations and segment adjusted EBITDA for the first quarter of 2020 increased by $36 million and $44 million, respectively, compared to the same period in 2019. The increase was primarily due to increased pipeline volumes as well as growth in the marine business.

Total pipeline throughputs were 5.1 million barrels per day in the first quarter, an increase of 2% versus the same quarter of 2019. The average tariff rate was $0.88 per barrel for the quarter. Terminal throughput was 3 million barrels per day for the quarter, a decrease of 8% versus the same quarter of 2019.

Gathering & Processing

G&P segment income from operations and segment adjusted EBITDA for the first quarter of 2020 decreased by $3.4 billion and $13 million, respectively, compared to the same period in 2019. Year-over-year results were impacted by non-cash impairment charges primarily related to goodwill, equity method investments, and long-lived assets during the quarter. In the first quarter of 2020:

• Gathered volumes averaged 5.8 billion cubic feet per day, a 3% decrease versus the first quarter of 2019.
• Processed volumes averaged 8.8 billion cubic feet per day, a 3% increase versus the first quarter of 2019.
• Fractionated volumes averaged 553 thousand barrels per day, an 8% increase versus the first quarter of 2019.

In the Marcellus and Utica:

• Gathered volumes averaged 3.2 billion cubic feet per day (bcf/d) in the first quarter, a 5% decrease versus the first quarter of 2019.
• Processed volumes averaged 6.2 bcf/d in the first quarter, a 3% increase versus the first quarter of 2019, driven by volumes ramping at the Sherwood 12 and 13 processing plants, which were placed in service in the fourth quarter of 2019.
• Fractionated volumes averaged 490 thousand barrels per day in the first quarter, a 6% increase versus the first quarter of 2019. The increase was primarily driven by higher volumes from an expansion at the Sherwood complex.

Strategic Update

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, of which 100% of the contractible capacity is committed with minimum volume commitments, will originate in the Permian Basin and have destination points in the Houston market, including Marathon Petroleum Corporation's (NYSE: MPC) 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. Whistler is more than 90% committed with minimum volume commitments.

Financial Position and Liquidity

As of March 31, 2020, MPLX had $57 million in cash, $2.8 billion available through its bank revolving credit facility expiring in July 2024 and $1.5 billion available through its intercompany loan agreement with MPC. The company's leverage ratio was 4.1 times at March 31, 2020. 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 "2020 First-Quarter 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 https://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 Contact: (419) 421-2071
Kristina Kazarian, Vice President, Investor Relations
Evan Barbosa, Manager, Investor Relations
Jim Mallamaci, 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 DCF generated 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: the effects of the recent outbreak of COVID-19 and the adverse impact thereof on our business, financial condition, results of operations and cash flows, including our growth, operating costs, labor availability, logistical capabilities, customer demand for our services and industry demand generally, cash position, taxes, the price of our securities and trading markets with respect thereto, our ability to access capital markets, and the global economy and financial markets generally; the ability to reduce capital and operating expenses; the risk of further impairments; the risk that anticipated opportunities and any other synergies from or anticipated benefits of the Andeavor Logistics LP (ANDX) 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 as a result of the COVID-19 pandemic, other infectious disease outbreaks or otherwise; non-payment or non-performance by our producer and other customers; 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, 2019, and in Forms 10-Q and other filings, 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: the effects of the recent outbreak of COVID-19 and the adverse impact thereof on the business, financial condition, results of operations and cash flows, including, but not limited to, growth, operating costs, labor availability, logistical capabilities, customer demand for products and industry demand generally, margins, inventory value, cash position, taxes, the price of securities and trading markets with respect thereto, the ability to access capital markets, and the global economy and financial markets generally; the effects of the recent outbreak of COVID-19, and the current economic environment generally, on working capital, cash flows and liquidity, which can be significantly affected by decreases in commodity prices; the ability to reduce capital and operating expenses; 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, the ability to satisfy customary conditions, including obtaining regulatory approvals, and the ability to achieve the strategic and other objectives discussed herein; with respect to the Midstream review, the ability to achieve the strategic and other objectives 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 ANDX 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 as a result of the COVID-19 pandemic, other infectious disease outbreaks or otherwise; 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, 2019, and in Forms 10-Q and other filings, 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, Forms 10-Q and other SEC filings are available on the SEC's website, MPLX's website at http://ir.mplx.com or by contacting MPLX's Investor Relations office. Copies of MPC's Form 10-K, Forms 10-Q and other SEC filings are available on the SEC's website, MPC's website at https://www.marathonpetroleum.com/Investors/ or by contacting MPC's Investor Relations office.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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SOURCE MPLX LP