Ambitious Minds - Another Transformation Ahead for MPLX; A New Spotlight Report

Change continues to come fast and furious to midstream MLPs, with no master limited partnership facing a bigger shift than MPLX. MPLX LP, formed in 2012 by Marathon Petroleum Corp. (MPC), is no stranger to transformation. In 2015, MPLX acquired MarkWest Energy Partners for $14.7 billion, a move that in one fell swoop made the merged entity the fourth-largest MLP in the U.S. In October 2016, Marathon announced an aggressive “dropdown” strategy that will provide MPLX with additional assets that will generate about $1.4 billion in annual earnings by the end of 2019. MPLX also has a significant capital investment program that allocates $2.3-$2.8 billion to build out gathering and processing infrastructure and logistics and storage facilities in Appalachia and Texas. Today, we review our latest Spotlight analysis of one of the nation’s largest MLPs.

Spotlight is a joint venture of RBN Energy and East Daley Capital Advisors. With the support of Oil & Gas Financial Analytics, Spotlight provides “deep dives” into the fundamentals that shape the outlook for midstream energy companies. Spotlight should not be viewed as investment advice. Spotlight is included as part of our Drill Down report series, which is available to RBN Backstage Pass members. For more about Spotlight, see the paragraph at the end of this blog.

MPLX LP is a publicly-traded (NYSE: MPLX) master limited partnership (MLP) formed in 2012 by MPC to own, operate, develop, and acquire midstream energy infrastructure assets (See Masters of the Midstream for more on MLPs). As of September 30, 2016, Marathon owned a 2% interest in MPLX through the general partner and a direct 24.9% interest in MPLX. The partnership has a market capitalization of about $11.4 billion and a debt to total capital ratio of 28%. The company is expected to generate $1.57 billion in operating income in 2016.

The company has two business segments:

  • The Gathering & Processing unit accounts for about 70% of MPLX’s operating income. Its major operating regions are the Marcellus Shale and Utica Shale, where it is the largest processor and fractionator; the Northeast region (Kentucky and West Virginia); and the Southwest region (Texas and Oklahoma). The G&P segment, which MPLX acquired in the 2012 merger with MarkWest Energy Partners, has over 7,500 MMcf/d of gas processing capacity with another 800 MMcf/d of planned gas processing capacity additions.

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