MPLX LP Reports Third-Quarter 2020 Financial Results

FINDLAY, Ohio, Nov. 2, 2020 /PRNewswire/ --

• Reported net income attributable to MPLX of $665 million, including a charge of $36 million, and adjusted EBITDA attributable to MPLX of $1.3 billion
• Generated $1.2 billion in net cash provided by operating activities and reported distribution coverage of 1.44x
• Maintained quarterly distribution of $0.6875 per common unit
• On-track to achieve forecasted 2020 reductions in capital spending of over $700 million and operating expense of approximately $200 million
• Reiterate expectation of achieving positive free cash flow, after capital investments and distributions, for 2021
• Announces Board authorization of a unit repurchase program for up to $1 billion of common units held by the public

MPLX LP (NYSE: MPLX) today reported third-quarter 2020 net income attributable to MPLX of $665 million, compared with $629 million for the third quarter of 2019. Third-quarter 2020 results include a charge of $36 million related to a reimbursement of expenses associated with Marathon Petroleum Corporation's (NYSE: MPC) involuntary workforce reduction plan. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) attributable to MPLX was $1.3 billion, compared with $1.3 billion in the third quarter of 2019.

The Logistics and Storage (L&S) segment reported segment income from operations of $677 million and adjusted EBITDA of $893 million for the quarter, down $36 million and up $44 million, respectively, versus the third quarter of last year. The Gathering and Processing (G&P) segment reported segment income from operations of $222 million and adjusted EBITDA of $442 million for the quarter, up $9 million and $18 million, respectively, versus the third quarter of last year.

During the quarter, MPLX generated $1.2 billion in net cash provided by operating activities and $1.1 billion of distributable cash flow. Distribution coverage was 1.44x for the third quarter of 2020. MPLX also announced a third-quarter 2020 distribution of $0.6875 per common unit, consistent with the prior quarter.

"Our performance during the third quarter highlights the resiliency and stability of our underlying businesses," said Michael J. Hennigan, chairman, president, and chief executive officer. "In addition to the proactive steps we took earlier this year to reduce capital spending and operating expenses, we took additional necessary steps to reduce our cost structure. The difficult decision to reduce our workforce was not made lightly, and we are committed to treating employees with integrity and respect.

"We continue to believe that we can generate stable EBITDA to support our goal of achieving positive free cash flow, after capital investments and distributions, for 2021, allowing us the financial flexibility to repurchase units or reduce debt. With this in mind, we have obtained board authorization to repurchase up to $1 billion of units."

Logistics & Storage

L&S segment income from operations for the third quarter of 2020 decreased by $36 million and includes a charge of $27 million related to a reimbursement of expenses associated with MPC's involuntary workforce reduction plan. Segment adjusted EBITDA for the third quarter of 2020 increased by $44 million. Both results are compared to the same period in 2019. Results for the quarter benefited from lower operating expenses, minimum volume commitments, and the completion of the Mt. Airy terminal and Utica butane expansion projects, and were partially offset by lower demand due to the COVID-19 pandemic.

Total pipeline throughputs were 4.7 million barrels per day in the third quarter, a decrease of 10% versus the same quarter of 2019. The average tariff rate was $0.93 per barrel for the quarter, an increase of 3% versus the same quarter of 2019. Terminal throughput was 2.7 million barrels per day for the quarter, a decrease of 18% versus the same quarter of 2019.

Gathering & Processing

G&P segment income from operations for the third quarter of 2020 increased by $9 million and includes a charge of $9 million related to a reimbursement of expenses associated with MPC's involuntary workforce reduction plan. Segment adjusted EBITDA for the third quarter of 2020 increased by $18 million. Both results are compared to the same period in 2019. Results for the quarter were primarily driven by higher volumes due to additional plants coming online, partially offset by production curtailments and shut-ins. In the third quarter of 2020:

• Gathered volumes averaged 5.4 billion cubic feet per day (bcf/d), a 14% decrease versus the third quarter of 2019.
• Processed volumes averaged 8.5 bcf/d, a 3% decrease versus the third quarter of 2019.
• Fractionated volumes averaged 567 thousand barrels per day, a 4% increase versus the third quarter of 2019.

In the Marcellus and Utica:

• Gathered volumes in Marcellus averaged 1.3 bcf/d in the third quarter, a 3% increase versus the third quarter of 2019, while gathered volumes in Utica averaged 1.8 bcf/d in the third quarter, a 24% decrease versus the third quarter of 2019.
• Processed volumes in Marcellus averaged 5.7 bcf/d in the third quarter, an 8% increase versus the third quarter of 2019, while processed volumes in Utica averaged 0.5 bcf/d in the third quarter, a 39% decrease versus the third quarter of 2019.
• Fractionated volumes in Marcellus averaged 477 thousand barrels per day in the third quarter, a 10% increase versus the third quarter of 2019, while fractionated volumes in Utica averaged 30 thousand barrels per day in the third quarter, a 39% decrease versus the third quarter of 2019.

Strategic Update

MPLX remains on-track to achieve forecasted 2020 reductions to capital spending by over $700 million and annual operating expenses by approximately $200 million. Incremental to these reductions, MPC implemented a workforce reduction plan to reduce cost structure across the combined enterprise.

The board of directors of MPLX's general partner has authorized a unit repurchase program for the repurchase of up to $1 billion of the outstanding publicly traded common units. MPLX may utilize various methods to effect the repurchases, which could include open market repurchases, negotiated block transactions, tender offers, accelerated unit repurchases, or open market solicitations for units, some of which may be effected through Rule 10b5-1 plans. The timing and amount of repurchases, if any, will depend upon several factors, including market and business conditions, and repurchases may be initiated, suspended or discontinued at any time. The repurchase authorization has no expiration date.

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, with segments and assets expected to come on line throughout 2021. The main segment of the pipeline system started transporting Permian crude oil and condensate from Midland, Texas, to Houston in October. 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 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. Whistler is more than 90% committed with minimum volume commitments.

In August, MPLX, WhiteWater Midstream, and West Texas Gas, Inc. (WTG) announced the formation of a joint venture (JV) to provide natural gas liquids takeaway capacity from MPLX and WTG gas processing plants to Sweeny, Texas. The JV utilizes existing infrastructure with limited new construction and is a capital-efficient solution to support producer customers.

Financial Position and Liquidity

As of Sept. 30, 2020, MPLX had $28 million in cash, $3.4 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 4.0x at Sept. 30, 2020.

During the quarter, MPLX issued $3.0 billion aggregate principal amount of unsecured senior notes in an underwritten public offering consisting of $1.5 billion aggregate principal amount of 1.750% senior notes due 2026 and $1.5 billion aggregate principal amount of 2.650% senior notes due in 2030.

During the third quarter, MPLX used a portion of the net proceeds from this offering to repay or redeem the $1.0 billion term loan borrowing maturing in 2021, the $1.0 billion aggregate principal amount of its floating rate senior notes due 2021, and the $450 million aggregate principal amount of its 6.375% senior notes due 2024. MPLX also used a portion of the net proceeds to redeem all of the $300 million aggregate principal amount of its 6.250% senior notes due 2022, in October 2020. The remainder of the proceeds from the notes offering have or will be used for general partnership purposes.

MPLX remains committed to maintaining an investment-grade credit profile.

Conference Call

At 11 a.m. EST 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 www.mplx.com. 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 www.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
Taryn Erie, Manager, Investor Relations

Media Contact: (419) 421-3312
Jamal Kheiry, Manager, Communications

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, including any related government policies and actions, and the adverse impact thereof on our business, financial condition, results of operations and cash flows, including, but not limited to, 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 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 Marathon Petroleum Corporation's (MPC) 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 and to effect any common unit repurchases; 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 (including any related government policies and actions), other infectious disease outbreaks, natural hazards, extreme weather events 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 but are not limited to: the effects of the recent outbreak of COVID-19, including any related government policies and actions, 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 proposed sale of Speedway, the ability to successfully complete the sale within the expected timeframe, on the expected terms, or at all, based on numerous factors, including the failure to satisfy any of the conditions to the consummation of the proposed transaction (including obtaining certain governmental or regulatory approvals on the proposed terms and schedule), the occurrence of any event, change or other circumstance that could give rise to the termination of the proposed transaction; MPC's ability to utilize the proceeds as anticipated; the risk that the dissynergy costs, costs of restructuring transactions and other costs incurred in connection with the proposed transaction will exceed our estimates; and our ability to capture value and realize the other expected benefits from the associated ongoing supply relationship following consummation of the proposed sale; the risk that the cost savings and any other synergies from MPC's acquisition of Andeavor and the ANDX acquisition may not be fully realized or may take longer to realize than expected, including whether the ANDX transaction will be accretive within the expected timeframe or at all; disruption from the Andeavor or ANDX transactions making it more difficult to maintain relationships with customers, employees or suppliers; risks relating to any unforeseen liabilities of Andeavor or ANDX, respectively; 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, 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, including the potential conversion of MPC's Martinez Refinery to a renewable diesel facility; the receipt of relevant third party and/or regulatory approvals; the reliability of processing units and other equipment; the successful realization of 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, complete announced capital projects and to effect any share repurchases or to maintain or increase the dividend; the effect of restructuring or reorganization of business components, including those undertaken in connection with the Speedway sale and workforce reduction; the potential effects of judicial or other proceedings, including remedial actions involving removal and reclamation obligations under environmental regulations, 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 (including any related government policies and actions), other infectious disease outbreaks, natural hazards, extreme weather events or otherwise; general economic, political or regulatory developments, including changes in governmental policies relating to refined petroleum products, crude oil, natural gas or NGLs, regulation or taxation and other economic and political developments (including those caused by public health issues and outbreaks); non-payment or non-performance by producer and other customers; compliance with federal and state environmental, economic, health and safety, energy and other policies, permitting and regulations, including the cost of compliance with the Renewable Fuel Standard, and/or enforcement actions initiated thereunder; the 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. Any forward-looking statements speak only as of the date of the applicable communication and 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.

SOURCE MPLX LP