MPLX LP Management's Discussion and Analysis of Financial Condition and Results of Operations should also be read in conjunction with the unaudited consolidated financial statements and accompanying footnotes included under Item 1. Financial Statements and in conjunction with our Annual Report on Form 10-K for the year endedDecember 31, 2020 .
Disclosures Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q, particularly Management's Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures about Market Risk, includes forward-looking statements that are subject to risks, contingencies or uncertainties. 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," "will," "would" or other similar expressions that convey the uncertainty of future events or outcomes.
Forward-looking statements include, among other things, statements regarding:
•future financial and operating results;
•the success or timing of completion of ongoing or anticipated capital or
maintenance projects;
•the timing and amount of future distributions or unit repurchases; and
•the anticipated effects of actions of third parties such as competitors,
activist investors, federal, foreign, state or local regulatory authorities, or
plaintiffs in litigation.
Our forward-looking 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. Material differences between actual results
and any future performance suggested in our forward-looking statements could
result from a variety of factors, including the following:
•general economic, political or regulatory developments, including changes in
governmental policies relating to refined petroleum products, crude oil, natural
gas or NGLs, or taxation;
•the magnitude and duration of the COVID-19 pandemic and its restrictions,
including travel restrictions, business and school closures, increased remote
work, stay-at-home orders and other actions taken by individuals, governments
and the private sector to stem the spread of the virus;
•the ability of MPC to achieve its strategic objectives and the effects of those
strategic decisions on us;
•further impairments;
•negative capital market conditions, including an increase of the current yield
on common units;
•the ability to achieve strategic and financial objectives, including 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 the 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;
•volatility in or degradation of market and industry conditions;
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•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 or enforcement actions initiated
thereunder;
•adverse results in litigation;
•the reliability of processing units and other equipment;
•the effect of restructuring or reorganization of business components;
•the potential effects of changes in tariff rates on our business, financial
condition, results of operations and cash flows;
•foreign imports and exports of crude oil, refined products, natural gas and
NGLs;
•changes in producer customers' drilling plans or in volumes of throughput of
crude oil, natural gas, NGLs, refined products or other hydrocarbon-based
products;
•changes in the cost or availability of third-party vessels, pipelines, railcars
and other means of transportation for crude oil, natural gas, NGLs, feedstocks
and refined products;
•the price, availability and acceptance of alternative fuels and
alternative-fuel vehicles and laws mandating such fuels or vehicles;
•actions taken by our competitors, including pricing adjustments and the
expansion and retirement of pipeline capacity, processing, fractionation and
treating facilities in response to market conditions;
•expectations regarding joint venture arrangements and other acquisitions or
divestitures of assets;
•midstream and refining industry overcapacity or under capacity;
•accidents or other unscheduled shutdowns affecting our machinery, pipelines,
processing, fractionation and treating facilities or equipment, or those of our
suppliers or customers;
•acts of war, terrorism or civil unrest that could impair our ability to gather,
process, fractionate or transport crude oil, natural gas, NGLs or refined
products; and
•political pressure and influence of environmental groups upon policies and
decisions related to the production, gathering, refining, processing,
fractionation, transportation and marketing of crude oil or other feedstocks,
refined products, natural gas, NGLs or other hydrocarbon-based products.
For additional risk factors affecting our business, see the risk factors
described in our Annual Report on Form 10-K for the year ended
MPLX OVERVIEW
We are a diversified, large-cap MLP formed by MPC, that owns and operates
midstream energy infrastructure and logistics assets, and provides fuels
distribution services. We are engaged in the transportation, storage and
distribution of crude oil and refined petroleum products; the gathering,
processing and transportation of natural gas; and the gathering, transportation,
fractionation, storage and marketing of NGLs. Our operations are conducted in
our Logistics and Storage and Gathering and Processing segments.
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SIGNIFICANT FINANCIAL AND OTHER HIGHLIGHTS
Significant financial highlights including revenues and other income, income
from operations, net income, adjusted EBITDA attributable to MPLX and DCF
attributable to GP and LP unitholders for the three months ended March 31, 2021
and March 31, 2020 are shown in the chart below. See the Non-GAAP Financial
Information section below for the definitions of Adjusted EBITDA and DCF and the
Results of Operations section for further details regarding changes in these
metrics.
[[Image Removed: mplx-20210331_g1.jpg]]
Other Highlights
•Announced a first quarter 2021 distribution rate of $0.6875 per common unit.
•During the first quarter of 2021, we returned $155 million to unitholders
through the repurchase of 6,272,981 public common units under our unit
repurchase program. As of March 31, 2021 , total repurchases of $188 million have
been made under the unit repurchase program since the program was launched in
the fourth quarter of 2020.
•In line with previously announced efforts around portfolio optimization, the
company closed on the sale of our Javelina plant in Corpus Christi, Texas , on
February 12, 2021 , for $70 million of cash in addition to future consideration
contingent on the performance of the facility.
•On January 15, 2021 we redeemed $750 million outstanding aggregate principal
amount of 5.250 percent senior notes due January 15, 2025 , at 102.625 percent of
the principal amount.
CURRENT ECONOMIC ENVIRONMENT
During the first quarter of 2021, we have seen improvement in the environment in
which our business operates as COVID-19 impacts are beginning to subside. The
increased availability of vaccinations, coupled with an easing of COVID-19
restrictions in certain areas, has been followed by an increase in economic
activity, the opening of many businesses and schools and an increase in
in-person interaction and associated travel.
In the first quarter of 2020, the outbreak of COVID-19 and its development into
a pandemic resulted in significant economic disruption globally. Actions taken
by various governmental authorities, individuals and companies around the world
to prevent the spread of COVID-19 through social distancing restricted travel,
many business operations, public gatherings and the overall level of individual
movement and in-person interaction across the globe. This significantly reduced
global economic activity and resulted in a decline in the demand for products
for which we provide midstream services. Macroeconomic conditions and global
geopolitical events have also resulted in significant price volatility related
to those aforementioned products.
We took actions to respond to the impacts that these matters have had on our business including:
•Emphasizing strict capital discipline by focusing on investments that deliver
the most attractive returns
•Identifying areas where we can reduce operating expenses across the business
•Evaluating and high-grading our capital portfolio
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Many uncertainties remain with respect to COVID-19 and we are unable to predict
the ultimate economic impacts from COVID-19 and how quickly economies can fully
recover to pre-pandemic levels. We believe we have proactively addressed many of
the known impacts of COVID-19 to the extent possible and will strive to continue
to do so, but there can be no guarantee the measures will be fully effective.
NON-GAAP FINANCIAL INFORMATION
Our management uses a variety of financial and operating metrics to analyze our
performance. These metrics are significant factors in assessing our operating
results and profitability and include the non-GAAP financial measures of
Adjusted EBITDA, DCF, free cash flow ("FCF") and excess/deficit cash flow. The
amount of Adjusted EBITDA and DCF generated is considered by the board of
directors of our general partner in approving MPLX's cash distributions.
We define Adjusted EBITDA as net income adjusted for: (i) depreciation and
amortization; (ii) provision/(benefit) for income taxes; (iii) amortization of
deferred financing costs; (iv) (gain)/loss on extinguishment of debt; (v)
non-cash equity-based compensation; (vi) impairment expense; (vii) net interest
and other financial costs; (viii) income/(loss) from equity method investments;
(ix) distributions and adjustments related to equity method investments; (x)
unrealized derivative gains/(losses); (xi) acquisition costs; (xii)
noncontrolling interest; and (xiii) other adjustments as deemed necessary. We
also use DCF, which we define as Adjusted EBITDA adjusted for: (i) deferred
revenue impacts; (ii) net interest and other financial costs; (iii) net
maintenance capital expenditures; (iv) equity method investment capital
expenditures paid out; and (v) other adjustments as deemed necessary. We make a
distinction between realized and unrealized gains and losses on derivatives.
During the period when a derivative contract is outstanding, changes in the fair
value of the derivative are recorded as an unrealized gain or loss. When a
derivative contract matures or is settled, the previously recorded unrealized
gain or loss is reversed and the realized gain or loss of the contract is
recorded.
We define FCF as net cash provided by operating activities adjusted for (i) net
cash used in investing activities; (ii) contributions from MPC; (iii)
contributions from noncontrolling interests and (iv) distributions to
noncontrolling interests. We define excess/deficit cash flow as FCF adjusted for
distributions to common and preferred unitholders.
We believe that the presentation of Adjusted EBITDA, DCF, FCF and excess/deficit
cash flow provides useful information to investors in assessing our financial
condition and results of operations. The GAAP measures most directly comparable
to Adjusted EBITDA and DCF are net income and net cash provided by operating
activities while the GAAP measure most directly comparable to FCF and
excess/deficit cash flow is net cash provided by operating activities. These
non-GAAP financial measures should not be considered alternatives to GAAP net
income or net cash provided by operating activities as they have important
limitations as analytical tools because they exclude some but not all items that
affect net income and net cash provided by operating activities or any other
measure of financial performance or liquidity presented in accordance with GAAP.
These non-GAAP financial measures should not be considered in isolation or as
substitutes for analysis of our results as reported under GAAP. Additionally,
because non-GAAP financial measures may be defined differently by other
companies in our industry, our definitions may not be comparable to similarly
titled measures of other companies, thereby diminishing their utility. For a
reconciliation of Adjusted EBITDA and DCF to their most directly comparable
measures calculated and presented in accordance with GAAP, see the Results of
Operations section. For a reconciliation of FCF and excess/deficit cash flow to
their most directly comparable measure calculated and presented in accordance
with GAAP, see the Liquidity and Capital resources section.
Management also utilizes Segment Adjusted EBITDA in evaluating the financial performance of our segments. The use of this measure allows investors to understand how management evaluates financial performance to make operating decisions and allocate resources.
COMPARABILITY OF OUR FINANCIAL RESULTS
Our acquisitions and dispositions have impacted comparability of our financial results (see Note 3 of the Notes to Consolidated Financial Statements).
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RESULTS OF OPERATIONS
The following tables and discussion are a summary of our results of operations
for the three months ended March 31, 2021 and 2020, including a reconciliation
of Adjusted EBITDA and DCF from "Net income" and "Net cash provided by operating
activities," to the most directly comparable GAAP financial measures.
Three Months Ended March 31,
(In millions) 2021 2020 Variance
Total revenues and other income(1) $ 2,339 $ 992 $ 1,347
Costs and expenses:
Cost of revenues (excludes items below) 273 368 (95)
Purchased product costs 276 135 141
Rental cost of sales 32 35 (3)
Rental cost of sales - related parties 39 46 (7)
Purchases - related parties 298 276 22
Depreciation and amortization 329 325 4
Impairment expense - 2,165 (2,165)
General and administrative expenses 86 97 (11)
Other taxes 32 31 1
Total costs and expenses 1,365 3,478 (2,113)
Income/(loss) from operations 974 (2,486) 3,460
Related party interest and other financial costs - 3 (3)
Interest expense, net of amounts capitalized 198 211 (13)
Other financial costs 27 16 11
Income/(loss) before income taxes 749 (2,716) 3,465
Provision for income taxes 1 - 1
Net income/(loss) 748 (2,716) 3,464
Less: Net income attributable to noncontrolling
interests 9 8 1
Net income/(loss) attributable to MPLX LP 739 (2,724) 3,463
Adjusted EBITDA attributable to MPLX LP(2) 1,352 1,294 58
DCF attributable to GP and LP unitholders(2) $ 1,106
(1) The three months ended
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Three Months Ended March 31,
(In millions) 2021 2020 Variance
Reconciliation of Adjusted EBITDA attributable to
$ 748 $ (2,716) $ 3,464 Provision for income taxes 1 - 1 Amortization of deferred financing costs 17 14 3 Gain on extinguishment of debt (12) - (12) Net interest and other financial costs 220 216 4 Income/(loss) from operations 974 (2,486) 3,460 Depreciation and amortization 329 325 4 Non-cash equity-based compensation 3 5 (2) Impairment expense - 2,165 (2,165) (Income)/loss from equity method investments (70) 1,184 (1,254) Distributions/adjustments related to equity method investments 121 124 (3) Unrealized derivative losses/(gains)(1) 3 (15) 18 Other 2 1 1 Adjusted EBITDA 1,362 1,303 59 Adjusted EBITDA attributable to noncontrolling interests (10) (9) (1) Adjusted EBITDA attributable to MPLX LP(2) 1,352 1,294 58 Deferred revenue impacts 22 23 (1) Net interest and other financial costs (220) (216) (4) Maintenance capital expenditures (18) (34) 16 Maintenance capital expenditures reimbursements 7 14 (7) Equity method investment capital expenditures paid out (1) (7) 6 Other (5) 4 (9) DCF 1,137 1,078 59 Preferred unit distributions (31) (31) - DCF attributable to GP and LP unitholders$ 1,106 $ 1,047 $ 59 (1) MPLX makes a distinction between realized and unrealized gains and losses on derivatives. During the period when a derivative contract is outstanding, changes in the fair value of the derivative are recorded as an unrealized gain or loss. When a derivative contract matures or is settled, the previously recorded unrealized gain or loss is reversed and the realized gain or loss of the contract is recorded. (2) For the three months ended March 31, 2021, the L&S and G&P segments made up$896 million and$456 million of Adjusted EBITDA attributable toMPLX LP , respectively. For the three months endedMarch 31, 2020 , the L&S and G&P segments made up$872 million and$422 million of Adjusted EBITDA attributable toMPLX LP , respectively. 37
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Three Months Ended March 31,
(In millions) 2021 2020 Variance
Reconciliation of Adjusted EBITDA attributable to
$ 1,124 $ 1,009 $ 115 Changes in working capital items 34 112 (78) All other, net (15) (30) 15 Non-cash equity-based compensation 3 5 (2) Gain on extinguishment of debt (12) - (12) Net interest and other financial costs 220 216 4 Current income taxes 1 - 1 Unrealized derivative losses/(gains)(1) 3 (15) 18 Other adjustments to equity method investment distributions 2 5 (3) Other 2 1 1 Adjusted EBITDA 1,362 1,303 59 Adjusted EBITDA attributable to noncontrolling interests (10) (9) (1) Adjusted EBITDA attributable to MPLX LP(2) 1,352 1,294 58 Deferred revenue impacts 22 23 (1) Net interest and other financial costs (220) (216) (4) Maintenance capital expenditures (18) (34) 16 Maintenance capital expenditures reimbursements 7 14 (7) Equity method investment capital expenditures paid out (1) (7) 6 Other (5) 4 (9) DCF 1,137 1,078 59 Preferred unit distributions (31) (31) - DCF attributable to GP and LP unitholders$ 1,106
(1) MPLX makes a distinction between realized and unrealized gains and losses on derivatives. During the period when a derivative contract is outstanding, changes in the fair value of the derivative are recorded as an unrealized gain or loss. When a derivative contract matures or is settled, the previously recorded unrealized gain or loss is reversed and the realized gain or loss of the contract is recorded. (2) For the three months endedMarch 31, 2021 , the L&S and G&P segments made up$896 million and$456 million of Adjusted EBITDA attributable toMPLX LP , respectively. For the three months endedMarch 31, 2020 , the L&S and G&P segments made up$872 million and$422 million of Adjusted EBITDA attributable toMPLX LP , respectively.
Three months ended
Total revenues and other income increased$1,347 million in the first quarter of 2021 compared to the same period of 2020. This increase was primarily due to impairments recorded in the first quarter of 2020 of$1,264 million . Impairments were recognized related to our ownership inMarkWest Utica EMG , our indirect ownership inOhio Gathering Company, L.L.C. through our investment inMarkWest Utica EMG and our ownership inUintah Basin Field Services, L.L.C. The remaining$83 million increase is primarily due to higher product related revenue due to higher prices in all G&P regions of approximately$192 million as well as from increased pipeline tariff rates and increased revenue from terminal storage. These increases were partially offset by lower fees from lower volumes in the Southwest and Bakken of$46 million , which includes impacts related to severe weather in the Southwest. There were also decreases due to the Wholesale Exchange, lower marine transportation fees, decreased volume deficiency payments and lower L&S terminal and pipeline volumes, including decreased throughputs on certain of our equity method investments. Cost of Revenues decreased$95 million in the first quarter of 2021 compared to the same period of 2020. This was primarily due to lower repairs, maintenance and operating costs and lower project-related spend, both as a result of cost reduction initiatives. The Wholesale Exchange as well as other miscellaneous expenses also contributed to the decrease. Purchased product costs increased$141 million in the first quarter of 2021 compared to the same period of 2020. This was primarily due to an increase of$18 million related to unrealized derivative gains in the prior year compared to unrealized 38 -------------------------------------------------------------------------------- Table of Contents derivative losses in the current year and higher prices of$136 million in the Southwest and Southern Appalachia, partially offset by lower volumes of$14 million in the Southwest. Rental cost of sales - related parties decreased$7 million in the first quarter of 2021 compared to the same period of 2020. This was primarily due to lower operating costs as well as decreased project spend from overall cost reduction initiatives. Purchases - related parties increased$22 million in the first quarter of 2021 compared to the same period of 2020. This was primarily due to higher prices in the Rockies and higher employee related costs. Impairment expense decreased$2,165 million in the first quarter of 2021 compared to the same period of 2020. During the first quarter of 2020 we recorded impairment expense for goodwill, intangible assets and property, plant and equipment of$1,814 million ,$177 million and$174 million , respectively. The impairment of goodwill related to our Eastern G&P reporting unit while the intangible asset and property, plant and equipment impairments relate to certain assets in our Southwest region. The impairments were primarily driven by the slowing of drilling activity, which reduced production growth forecasts from our producer customers. General and administrative expenses decreased$11 million in the first quarter of 2021 compared to the same period of 2020. This was primarily due to decreased employee costs from MPC as a result of cost reduction initiatives as well as decreased other miscellaneous expenses.
SEGMENT RESULTS
We classify our business in the following reportable segments: L&S and G&P. Segment Adjusted EBITDA represents Adjusted EBITDA attributable to the reportable segments. Amounts included in net income and excluded from Segment Adjusted EBITDA include: (i) depreciation and amortization; (ii) provision/(benefit) for income taxes; (iii) amortization of deferred financing costs; (iv) (gain)/loss on extinguishment of debt; (v) non-cash equity-based compensation; (vi) impairment expense; (vii) net interest and other financial costs; (viii) income/(loss) from equity method investments; (ix) distributions and adjustments related to equity method investments; (x) unrealized derivative gains/(losses); (xi) acquisition costs; (xii) noncontrolling interests; and (xiii) other adjustments as deemed necessary. These items are either: (i) believed to be non-recurring in nature; (ii) not believed to be allocable or controlled by the segment; or (iii) not tied to the operational performance of the segment.
The tables below present information about Segment Adjusted EBITDA for the
reported segments for the three months ended
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L&S Segment
First Quarter L&S Segment Financial Highlights (in millions)
[[Image Removed: mplx-20210331_g2.jpg]][[Image Removed: mplx-20210331_g3.jpg]]
[[Image Removed: mplx-20210331_g4.jpg]]
Three Months Ended March 31,
(In millions) 2021 2020 Variance
Service revenue $ 953 $ 1,004 $ (51)
Rental income 249 242 7
Product related revenue 4 19 (15)
Income from equity method investments 36 50 (14)
Other income 52 51 1
Total segment revenues and other income 1,294 1,366 (72)
Cost of revenues 144 238 (94)
Purchases - related parties 215 199 16
Depreciation and amortization 147 138 9
General and administrative expenses 46 52 (6)
Other taxes 19 16 3
Segment income from operations 723 723 -
Depreciation and amortization 147 138 9
Income from equity method investments (36) (50) 14
Distributions/adjustments related to equity method investments
58 57 1
Non-cash equity-based compensation 2 3 (1)
Other 2 1 1
Segment adjusted EBITDA(1) 896 872 24
Capital expenditures 59 184 (125)
Investments in unconsolidated affiliates $ 9
(1) See the Reconciliation of Adjusted EBITDA attributable to
Three months ended
Service revenue decreased$51 million in the first quarter of 2021 compared to the same period of 2020. This was primarily due to a$26 million decrease in marine transportation fees, an$11 million decrease in volume deficiency payments, a$25 million decrease due to the Wholesale Exchange as well as other immaterial decreases associated with terminal and pipeline volumes. These decreases were partially offset by increased pipeline tariff rates and increased fees associated with Mt. Airy. Rental income increased$7 million in the first quarter of 2021 compared to the same period of 2020. This was primarily due to increased terminal storage fees as well as additional refining logistics fees associated with increased storage capacity and annual fee escalations. 40 -------------------------------------------------------------------------------- Table of Contents Product related revenue decreased$15 million in the first quarter of 2021 compared to the same period of 2020. This was primarily due to the Wholesale Exchange. Income from equity method investments decreased$14 million in the first quarter of 2021 compared to the same period of 2020. This was primarily due to decreased throughput volumes onMarEn Bakken Company LLC ,Explorer Pipeline Company ,Illinois Extension Pipeline Company L.L.C. andLOCAP LLC . Cost of revenues decreased$94 million in the first quarter of 2021 compared to the same period of 2020. This was primarily due to the Wholesale Exchange as well as lower project-related spend as a result of cost reduction initiatives. Purchases - related parties increased$16 million in the first quarter of 2021 compared to the same period of 2020. This was primarily due to higher employee related costs. Depreciation and amortization increased$9 million in the first quarter of 2021 compared to the same period of 2020. This was primarily due to accelerated depreciation related to assets at an indefinitely idledMPC refinery , as well as property, plant and equipment placed in service in the last nine months of 2020 and the first three months of 2021. General and administrative expenses decreased$6 million in the first quarter of 2021 compared to the same period of 2020. This was primarily due to decreased employee costs from MPC as a result of cost reduction initiatives. 41 -------------------------------------------------------------------------------- Table of Contents G&P Segment
First Quarter G&P Segment Financial Highlights (in millions)
[[Image Removed: mplx-20210331_g5.jpg]][[Image Removed: mplx-20210331_g6.jpg]]
[[Image Removed: mplx-20210331_g7.jpg]]
(1) Includes impairment of equity method investments of $1,264 million for
2020.
(2) Includes impairment of goodwill of $1,814 million , long-lived assets
including intangibles of $351 million and equity method investments of $1,264
million for 2020.
Three Months Ended March 31,
(In millions) 2021 2020 Variance
Service revenue $ 508 $ 536 $ (28)
Rental income 92 88 4
Product related revenue 397 222 175
Income/(loss) from equity method investments(1) 34 (1,234) 1,268
Other income 14 14 -
Total segment revenues and other income/(loss) 1,045 (374) 1,419
Cost of revenues 200 211 (11)
Purchased product costs 276 135 141
Purchases - related parties 83 77 6
Depreciation and amortization 182 187 (5)
Impairment expense - 2,165 (2,165)
General and administrative expenses 40 45 (5)
Other taxes 13 15 (2)
Segment income/(loss) from operations 251 (3,209) 3,460
Depreciation and amortization 182 187 (5)
Impairment expense - 2,165 (2,165)
(Income)/loss from equity method investments (34) 1,234 (1,268)
Distributions/adjustments related to equity method investments
63 67 (4)
Unrealized derivative losses/(gains)(2) 3 (15) 18
Non-cash equity-based compensation 1 2 (1)
Adjusted EBITDA attributable to noncontrolling interests (10) (9) (1)
Segment Adjusted EBITDA(3) 456 422 34
Capital expenditures 30 134 (104)
Investments in unconsolidated affiliates $ 26 $ 37 $ (11)
(1) Includes impairment of equity method investments of $1,264 million for
2020.
(2) MPLX makes a distinction between realized and unrealized gains and losses
on derivatives. During the period when a derivative contract is outstanding,
changes in the fair value of the derivative are recorded as an unrealized gain
or loss. When a derivative contract matures or is settled, the previously
recorded unrealized gain or loss is reversed and the realized gain or loss of
the contract is recorded.
(3) See the Reconciliation of Adjusted EBITDA attributable to MPLX LP and DCF
attributable to GP and LP unitholders from Net income table for the
reconciliation to the most directly comparable GAAP measure.
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Three months ended
Service revenue decreased$28 million in the first quarter of 2021 compared to the same period of 2020. This was primarily due to lower fees from lower volumes in the Southwest and Bakken, which includes impacts related to severe weather in the Southwest. Product related revenue increased$175 million in the first quarter of 2021 compared to the same period of 2020. This was primarily due to higher prices in all of the regions of approximately$192 million and a slight increase in volume in the Rockies, partially offset by lower volumes in the Southwest of$18 million , which includes impacts related to severe weather in the Southwest. Income from equity method investments increased$1,268 million in the first quarter of 2021 compared to the same period of 2020. This increase was driven by impairments recorded in the first quarter of 2020 of$1,264 million . Impairments were recognized related to our ownership inMarkWest Utica EMG , our indirect ownership inOhio Gathering Company, L.L.C. through our investment inMarkWest Utica EMG and our ownership inUintah Basin Field Services, L.L.C. Also contributing to the increase was higher volumes associated with ourSherwood Midstream LLC andOhio Condensate Company joint ventures. Cost of revenues decreased$11 million in the first quarter of 2021 compared to the same period of 2020. This decrease is attributable to lower repairs, maintenance and operating costs in the Marcellus and Southwest as a result of cost reduction initiatives, partially offset by higher prices in the Rockies. Purchased product costs increased$141 million in the first quarter of 2021 compared to the same period of 2020. This was primarily due to an increase of$18 million related to unrealized derivative gains in the prior year compared to unrealized derivative losses in the current year and higher prices of$136 million in the Southwest and Southern Appalachia, partially offset by lower volumes of$14 million in the Southwest. Purchases - related parties increased$6 million in the first quarter of 2021 compared to the same period of 2020. This was primarily due to higher prices in the Rockies partially offset by lower employee related costs. Impairment expense decreased$2,165 million in the first quarter of 2021 compared to the same period of 2020. During the first quarter of 2020 we recorded impairment expense for goodwill, intangible assets and property, plant and equipment of$1,814 million ,$177 million and$174 million , respectively. The impairment of goodwill related to our Eastern G&P reporting unit while the intangible asset and property, plant and equipment impairments relate to certain assets in our Southwest region. The impairments were primarily driven by the slowing of drilling activity, which reduced production growth forecasts from our producer customers. SEASONALITY The volume of crude oil and refined products transported and stored utilizing our assets is directly affected by the level of supply and demand for crude oil and refined products in the markets served directly or indirectly by our assets. Any effects of seasonality on the L&S segment's revenues will be mitigated through the use of our fee-based transportation and storage services agreements with MPC that include minimum volume commitments. In our G&P segment, we experience minimal impacts from seasonal fluctuations which impact the demand for natural gas and NGLs and the related commodity prices caused by various factors including variations in weather patterns from year to year. We are able to manage the seasonality impacts through the execution of our marketing strategy and via our storage capabilities. Overall, our exposure to seasonality fluctuations is declining due to growth in our fee-based business. 43 -------------------------------------------------------------------------------- Table of Contents OPERATING DATA [[Image Removed: mplx-20210331_g8.jpg]] Three Months Ended March 31, 2021 2020 L&S Pipeline throughput (mbpd) Crude oil pipelines 3,282 3,210 Product pipelines 1,858 1,905 Total pipelines 5,140 5,115 Average tariff rates ($ per barrel)(1) Crude oil pipelines$ 0.96 $ 0.93 Product pipelines 0.79 0.79 Total pipelines$ 0.90 $ 0.88 Terminal throughput (mbpd) 2,613 2,966 Marine Assets (number in operation)(2) Barges 297 305 Towboats 23 23 44
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Three Months Ended Three Months Ended
March 31, 2021 March 31, 2020
MPLX LP(3) MPLX LP Operated(4) MPLX LP(3) MPLX LP Operated(4)
G&P
Gathering Throughput (MMcf/d)
Marcellus Operations 1,298 1,298 1,420 1,420
Utica Operations - 1,566 - 1,800
Southwest Operations 1,373 1,448 1,557 1,601
Bakken Operations 146 146 156 156
Rockies Operations 470 627 592 775
Total gathering throughput 3,287 5,085 3,725 5,752
Natural Gas Processed (MMcf/d)
Marcellus Operations 4,249 5,677 4,198 5,522
Utica Operations - 513 - 648
Southwest Operations 1,295 1,367 1,648 1,679
Southern Appalachian Operations 227 227 243 243
Bakken Operations 145 145 156 156
Rockies Operations 441 441 539 539
Total natural gas processed 6,357 8,370 6,784 8,787
C2 + NGLs Fractionated (mbpd)
Marcellus Operations(5) 489 489 456 456
Utica Operations(5) - 28 - 34
Southwest Operations 8 8 15 15
Southern Appalachian Operations(6) 11 11 12 12
Bakken Operations 19 19 31 31
Rockies Operations 4 4 5 5
Total C2 + NGLs fractionated(7) 531 559 519 553
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Three Months Ended
March 31,
2021 2020
Pricing Information
Natural Gas NYMEX HH ($ per MMBtu) $ 2.72 $ 1.87
C2 + NGL Pricing ($ per gallon)(8) $ 0.73 $ 0.40
(1) Average tariff rates calculated using pipeline transportation revenues
divided by pipeline throughput barrels.
(2) Represents total at end of period.
(3) This column represents operating data for entities that have been
consolidated into the MPLX financial statements.
(4) This column represents operating data for entities that have been
consolidated into the MPLX financial statements as well as operating data for
MPLX-operated equity method investments.
(5) Hopedale is jointly owned by Ohio Fractionation and MarkWest Utica EMG.
Ohio Fractionation is a subsidiary of MarkWest Liberty Midstream. MarkWest
Liberty Midstream and MarkWest Utica EMG are entities that operate in the
Marcellus and Utica regions, respectively. Marcellus Operations includes Ohio
Fractionation's portion utilized of the jointly owned Hopedale Fractionation
Complex . Utica Operations includes MarkWest Utica EMG's portion utilized of the
jointly owned Hopedale Fractionation Complex . Additionally, Sherwood Midstream
has the right to fractionation revenue and the obligation to pay expenses
related to 40 mbpd of capacity in the Hopedale 3 and Hopedale 4 fractionators.
(6) Includes NGLs fractionated for the Marcellus Operations and Utica
Operations.
(7) Purity ethane makes up approximately 199 mbpd and 190 mbpd of total MPLX
Operated, fractionated products for the three months ended March 31, 2021 and
2020, respectively. Purity ethane makes up approximately 194 mbpd and 183 mbpd
of total MPLX LP consolidated, fractionated products for the three months ended
March 31, 2021 and 2020, respectively.
(8) C2 + NGL pricing based on Mont Belvieu prices assuming an NGL barrel of
approximately 35 percent ethane, 35 percent propane, six percent Iso-Butane, 12
percent normal butane and 12 percent natural gasoline.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Our cash and cash equivalents were$24 million atMarch 31, 2021 and$15 million atDecember 31, 2020 . The change in cash, cash equivalents and restricted cash was due to the factors discussed below. Net cash provided by (used in) operating activities, investing activities and financing activities were as follows: Three Months Ended March 31, (In millions) 2021 2020 Net cash provided by (used in): Operating activities$ 1,124 $ 1,009 Investing activities (90) (362) Financing activities (1,025) (605) Total $ 9$ 42 Net cash provided by operating activities increased$115 million in the first three months of 2021 compared to the first three months of 2020, primarily due net income adjusted for non-cash items. Net cash used in investing activities decreased$272 million in the first three months of 2021 compared to the first three months of 2020, primarily due to decreased spending related to the capital budget and decreased contributions to equity method investments. Financing activities were a$1,025 million use of cash in the first three months of 2021 compared to a$605 million use of cash in the first three months of 2020. The primary reason for the increase in the use of cash was due to the return of capital to unitholders through the unit repurchase program as well as net repayments on long-term debt in the current year compared to net borrowing on long-term debt in the prior year.
Free Cash Flow
The following table provides a reconciliation of FCF and excess/deficit cash flow from net cash provided by operating activities for the three months endedMarch 31, 2021 andMarch 31, 2020 . 46
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Three Months Ended March 31,
(In millions) 2021 2020
Net cash provided by operating activities $ 1,124 $ 1,009 Adjustments to reconcile net cash provided by operating activities to free cash flow Net cash used in investing activities
(90) (362)
Contributions from MPC 7 14
Distributions to noncontrolling interests (10) (9)
Free cash flow 1,031 652
Distributions to common and preferred unitholders (754) (758)
Excess (deficit) cash flow $ 277 $ (106)
Debt and Liquidity Overview
On January 15, 2021 , MPLX redeemed $750 million outstanding aggregate principal
amount of 5.250 percent senior notes due January 15, 2025 , at 102.625 percent of
the principal amount.
Our outstanding borrowings at March 31, 2021 and December 31, 2020 consist of
the following:
(In millions) March 31, 2021 December 31, 2020
MPLX LP:
Bank revolving credit facility $ 835 $ 175
Floating rate senior notes 1,000 1,000
Fixed rate senior notes 18,532 19,240
Consolidated subsidiaries:
MarkWest 23 23
ANDX 45 87
Financing lease obligations 10 11
Total 20,445 20,536
Unamortized debt issuance costs (112) (116)
Unamortized discount/premium (279) (281)
Amounts due within one year (2) (764)
Total long-term debt due after one year
Our intention is to maintain an investment grade credit profile. As ofApril 20, 2021 , the credit ratings on our senior unsecured debt were at or above investment grade level as follows: Rating Agency Rating Moody's Baa2 (negative outlook)Standard & Poor's BBB (negative outlook) Fitch BBB (stable outlook) The ratings reflect the respective views of the rating agencies. Although it is our intention to maintain a credit profile that supports an investment grade rating, there is no assurance that these ratings will continue for any given period of time. The ratings may be revised or withdrawn entirely by the rating agencies if, in their respective judgments, circumstances so warrant. The MPLX Credit Agreement contains certain representations and warranties, affirmative and restrictive covenants and events of default that we consider to be usual and customary for an agreement of this type. The financial covenant requires MPLX to maintain a ratio of Consolidated Total Debt as of the end of each fiscal quarter to Consolidated EBITDA (both as defined in the MPLX Credit Agreement) for the prior four fiscal quarters of no greater than 5.0 to 1.0 (or 5.5 to 1.0 during the six-month period following certain acquisitions). Consolidated EBITDA is subject to adjustments for certain acquisitions completed and capital projects undertaken during the relevant period. Other covenants restrict us and/or certain of our subsidiaries from incurring debt, creating liens on assets and entering into transactions with affiliates. As ofMarch 31, 2021 , we were in 47 -------------------------------------------------------------------------------- Table of Contents compliance with the covenants, including the financial covenant with a ratio of Consolidated Total Debt to Consolidated EBITDA of 3.8 to 1.0. The agreements governing our debt obligations do not contain credit rating triggers that would result in the acceleration of interest, principal or other payments solely in the event that our credit ratings are downgraded. However, any downgrades in the credit ratings of our senior unsecured debt ratings to below investment grade ratings could, among other things, increase the applicable interest rates and other fees payable under the MPLX Credit Agreement and may limit our ability to obtain future financing, including refinancing existing indebtedness.
Our liquidity totaled
March 31, 2021
Outstanding Available
(In millions) Total Capacity Borrowings Capacity
Bank revolving credit facility due 2024(1)
(835) $ 2,665
MPC Loan Agreement 1,500 - 1,500
Total liquidity $ 5,000 $ (835) 4,165
Cash and cash equivalents 24
Total liquidity $ 4,189 (1) Outstanding borrowings include less than
We expect our ongoing sources of liquidity to include cash generated from operations and borrowings under the MPC Loan Agreement, the MPLX Credit Agreement and access to capital markets. We believe that cash generated from these sources will be sufficient to meet our short-term and long-term funding requirements, including working capital requirements, capital expenditure requirements, contractual obligations, and quarterly cash distributions. MPC manages our cash and cash equivalents on our behalf directly with third-party institutions as part of the treasury services that it provides to us under our omnibus agreement. From time to time, we may also consider utilizing other sources of liquidity, including the formation of joint ventures or sales of non-strategic assets.
Equity and Preferred Units Overview
Common units
The table below summarizes the changes in the number of units outstanding throughMarch 31, 2021 : (In units) Balance at December 31, 2020 1,038,777,978 Unit-based compensation awards 143,247 Units redeemed in Unit Repurchase Program (6,272,981) Balance at March 31, 2021 1,032,648,244 Distributions We intend to pay a minimum quarterly distribution to the holders of our common units of$0.2625 per unit, or$1.05 per unit on an annualized basis, to the extent we have sufficient cash from our operations after the establishment of cash reserves and the payment of costs and expenses, including reimbursements of expenses to our general partner. The amount of distributions paid under our policy and the decision to make any distributions is determined by our general partner, taking into consideration the terms of our partnership agreement. Such minimum distribution would equate to$271 million per quarter, or$1,084 million per year, based on the number of common units outstanding atMarch 31, 2021 . OnApril 27, 2021 , we announced the board of directors of our general partner had declared a distribution of$0.6875 per unit that will be paid onMay 14, 2021 to unitholders of record onMay 7, 2021 . This is consistent with the prior quarter distribution. This rate will also be received by Series A preferred unitholders. Although our partnership agreement requires that we distribute all of our available cash each quarter, we do not otherwise have a legal obligation to distribute any particular amount per common unit. Series B preferred unitholders are entitled to receive a fixed distribution of$68.75 per unit, per annum, payable semi-annually in arrears onFebruary 15 andAugust 15 , or the first business day thereafter, up to and includingFebruary 15, 2023 . AfterFebruary 15, 2023 , the holders of Series B preferred units are entitled to receive cumulative, quarterly distributions payable in 48 -------------------------------------------------------------------------------- Table of Contents arrears on the 15th day of February, May, August and November of each year, or the first business day thereafter, based on a floating annual rate equal to the three-month LIBOR plus 4.652 percent, in each case assuming a distribution is declared by the Board of Directors. Accordingly, a cash distribution payment totaling$21 million was paid to Series B unitholders onFebruary 16, 2021 . The allocation of total quarterly cash distributions is as follows for the three months endedMarch 31, 2021 and 2020. MPLX's distributions are declared subsequent to quarter end; therefore, the following table represents total cash distributions applicable to the period in which the distributions were earned. Three Months Ended March 31, (In millions, except per unit data) 2021 2020 Distribution declared: Limited partner units - public $ 262$ 270 Limited partner units - MPC 445 458Total LP distribution declared 707 728 Series A preferred units 20 20 Series B preferred units 11 11 Total distribution declared 738 759
Cash distributions declared per limited partner common unit
Capital Expenditures
Our operations are capital intensive, requiring investments to expand, upgrade,
enhance or maintain existing operations and to meet environmental and
operational regulations. Our capital requirements consist of maintenance capital
expenditures and growth capital expenditures. Examples of maintenance capital
expenditures are those made to replace partially or fully depreciated assets, to
maintain the existing operating capacity of our assets and to extend their
useful lives, or other capital expenditures that are incurred in maintaining
existing system volumes and related cash flows. In contrast, growth capital
expenditures are those incurred for capital improvements that we expect will
increase our operating capacity to increase volumes gathered, processed,
transported or fractionated, decrease operating expenses within our facilities
or increase operating income over the long term. Examples of growth capital
expenditures include the acquisition of equipment or the construction costs
associated with new well connections, and the development of additional
pipeline, processing or storage capacity. In general, growth capital includes
costs that are expected to generate additional or new cash flow for MPLX.
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Our capital expenditures are shown in the table below:
Three Months Ended March 31,
(In millions) 2021 2020
Capital expenditures:
Growth capital expenditures $ 71 $ 284
Growth capital reimbursements - -
Investments in unconsolidated affiliates 35 91
Return of capital - (69)
Capitalized interest (5) (13)
Total growth capital expenditures 101 293
Maintenance capital expenditures 18 34
Maintenance capital reimbursements (7) (14)
Total maintenance capital expenditures 11 20
Total growth and maintenance capital expenditures 112 313
Investments in unconsolidated affiliates(1) (35) (91)
Return of capital(1) - 69
Growth and maintenance capital reimbursements(2) 7 14
Decrease in capital accruals 37 61
Capitalized interest 5 13
Additions to property, plant and equipment, net(1) $
126
(1) Investments in unconsolidated affiliates, return of capital and additions to property, plant and equipment, net are shown as separate lines within investing activities in the Consolidated Statements of Cash Flows. (2) Growth and maintenance capital reimbursements are included in the Contributions from MPC line within financing activities in the Consolidated Statements of Cash Flows.
Contractual Cash Obligations
As ofMarch 31, 2021 , our contractual cash obligations included long-term debt, finance and operating lease obligations, purchase obligations for services and to acquire property, plant and equipment, and other liabilities. During the three months endedMarch 31, 2021 , our third-party long-term debt obligations decreased by$90 million , primarily due to the redemption of$750 million outstanding aggregate principal amount of 5.250 percent senior notes dueJanuary 15, 2025 discussed above, partially offset by increased borrowings on the MPLX Credit Agreement. There were no other material changes to our contractual obligations outside the ordinary course of business sinceDecember 31, 2020 .
Off-Balance Sheet Arrangements
Off-balance sheet arrangements comprise those arrangements that may potentially impact our liquidity, capital resources and results of operations, even though such arrangements are not recorded as liabilities underU.S. GAAP. Our off-balance sheet arrangements are limited to indemnities and guarantees that are described in Note 21. Although these arrangements serve a variety of our business purposes, we are not dependent on them to maintain our liquidity and capital resources, and we are not aware of any circumstances that are reasonably likely to cause the off-balance sheet arrangements to have a material adverse effect on our liquidity and capital resources.
TRANSACTIONS WITH RELATED PARTIES
At
Excluding revenues attributable to volumes shipped by MPC under joint tariffs
with third parties that are treated as third-party revenues for accounting
purposes and excluding losses for impairment of equity method investments, MPC
accounted for 51 percent and 55 percent of our total revenues and other income
for the first quarter of 2021 and 2020, respectively. We provide crude oil and
product pipeline transportation services based on regulated tariff rates and
storage services and inland marine transportation based on contracted rates.
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Of our total costs and expenses, excluding impairment expense, MPC accounted for 29 percent and 29 percent for the first quarter of 2021 and 2020, respectively. MPC performed certain services for us related to information technology, engineering, legal, accounting, treasury, human resources and other administrative services. For further discussion of agreements and activity with MPC and related parties see Item 1. Business in our Annual Report on Form 10-K for the year endedDecember 31, 2020 and Note 5 of the Notes to Consolidated Financial Statements in this report.
ENVIRONMENTAL MATTERS AND COMPLIANCE COSTS
We have incurred and may continue to incur substantial capital, operating and maintenance, and remediation expenditures as a result of environmental laws and regulations. If these expenditures, as with all costs, are not ultimately reflected in the prices of our products and services, our operating results will be adversely affected. We believe that substantially all of our competitors must comply with similar environmental laws and regulations. However, the specific impact on each competitor may vary depending on a number of factors, including, but not limited to, the age and location of its operating facilities.
As of
CRITICAL ACCOUNTING ESTIMATES
As ofMarch 31, 2021 , there have been no significant changes to our critical accounting estimates since our Annual Report on Form 10-K for the year endedDecember 31, 2020 .
ACCOUNTING STANDARDS NOT YET ADOPTED
While new financial accounting pronouncements will be effective for our financial statements in the future, there are no standards that have not yet been adopted that are expected to have a material impact on our financial statements. Accounting standards are discussed in Note 2 of the Notes to Consolidated Financial Statements.
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