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Actionable news in MPLX: MPLX LP,

- Mplx Lp (Nyse: Mplx) Today Reported

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The following excerpt is from the company's SEC filing.


-quarter and full-year

financial results. Effective Dec. 4, 2015, MPLX and MarkWest Energy Partners (MarkWest) completed the previously announced merger by which MarkWest became a wholly-owned subsidiary of MPLX and together formed one of the largest master limited partnerships (MLPs) in the U.S. The financial and operational results of MarkWest are included in MPLX’s results from the date of the merger, unless otherwise noted.

Three Months Ended

Year Ended

(In millions, except per unit)

Net income attributable to MPLX

Adjusted EBIT DA attributable to MPLX

Distributable cash flow attributable to MPLX

Distribution per unit





Growth capital expenditures


(a) Reflects the results of MarkWest from the date of the merger, Dec. 4, 2015.

(b) Non-GAAP measure including MarkWest from Oct. 1, 2015. See reconciliation below.

(c) Excludes non-affiliated joint-venture (JV) members' share of capital expenditures.

(d) See reconciliation below.

"MPLX’s successful combination with MarkWest creates a diversified, large-cap MLP with compelling long-term growth opportunities," said Gary R. Heminger, MPLX chairman and chief executive officer. "The combination expands our asset base and positions us to continue supporting natural gas liquids development in North America, which provides significant future earnings potential. Our commitment to a strong balance sheet, fee-based cash flows, and supportive sponsor position us for sustainable growth."

Heminger noted that, in addition to this substantial diversification, MarkWest also adds scale to the partnership. "MarkWest has long-term relationships with many producers who operate in the most economic shale plays in the country. The MarkWest leadership team has a demonstrated record of successfully executing midstream organic capital programs to meet producers' needs," Heminger said. "Together with MPLX's existing crude oil and refined products logistics and storage network, we have the ability to pursue projects along the entire hydrocarbon value chain. These opportunities, combined with prospective drop-downs from our sponsor Marathon Petroleum Corporation [NYSE: MPC], are expected to contribute to the partnership's long-term growth profile."

Heminger highlighted the partnership’s strategic advantages in its newly-acquired, full-service midstream assets, saying, "MarkWest has the right assets in the right locations. Even in the current market conditions, we continue to see increased volumes in the Marcellus and Utica shales. We believe the partnership is well-positioned to execute its future growth strategy."

During the fourth quarter of 2015, Heminger indicated that in light of the higher MLP yield environment, drop-down transactions could be expected as early as 2016. Consistent with this guidance, MPC recently offered to contribute its inland marine business to MPLX, with funding anticipated to consist entirely of MPLX equity issued to MPC. The transaction is expected to close in the second quarter, pending requisite approvals. Heminger noted that an all-unit transaction and a supportive valuation demonstrate MPC’s support and provide MPLX a more attractive alternative than accessing the public capital markets. He stressed that MPLX remains committed to maintaining an investment-grade credit profile, which is supported by the anticipated issuance of equity to MPC. MPLX is targeting a leverage ratio of approximately 4.0 times by the end of the year.

"The inland marine business has high-quality assets and is strategically located in key markets. Essentially all of its operations support the movement of crude oil and refined products for MPC," said Heminger. "The cash flows generated from the marine business will further diversify the partnership's earnings stream." Heminger emphasized the fee-for-capacity arrangement associated with these assets and the highly predictable earnings they are expected to generate for the partnership.

As announced on Jan. 25, the board of directors of MPLX’s general partner declared a distribution of $0.50 per common unit, resulting in a 1.20 times distribution coverage ratio for the fourth quarter. Since the partnership’s initial public offering in October 2012, the MPLX board has authorized distribution increases for

consecutive quarters, representing a compound annual growth rate of

24 percent

over its minimum quarterly distribution. The partnership achieved its forecasted increase to distributions of 29 percent in 2015.

"The continued decline in commodity prices, and the market's increasing belief that these conditions will persist for some period of time, has resulted in a challenging valuation and a higher yield environment within the MLP space," said Heminger, also noting that many MLPs have taken steps to address the deteriorating market conditions with significant reductions to either distributions or distribution growth rates. "Given current market conditions, more modest growth in volumes of natural gas and natural gas liquids, the increase in our yield and the impacts to our valuation, we are now forecasting distribution growth of 12 to 15 percent for 2016, which is among the highest for large-cap, diversified MLPs." He said this guidance considers the continuing supportive measures expected from MPC, which include those in connection with the anticipated marine transaction, the expected placement of additional equity with MPC, incubating projects for future acquisition by MPLX, and the ability to borrow from MPC via an inter-company loan agreement. As MPC continues to evaluate the support options available, it is expected to consider the capital allocation needs of both companies.

"We will assess the distribution growth rate for 2017 later this year and provide guidance around the partnership’s growth expectations at that time," Heminger said. "We are continuing to build our financial strength and preserve capital to achieve sustainable long-term growth." He reiterated that continuing support anticipated from its sponsor and maintaining an investment-grade credit profile should allow the partnership to manage the near-term challenges and provide long-term growth. "As we continue to optimize our growth capital investments to support our producer customers and diversify our asset base through acquisitions and drop-downs from our

sponsor, we look forward to increasing our steady earnings streams and capitalizing on the opportunities available to us."

Operational Highlights

Commenced operation of one processing plant and two fractionation facilities in the Marcellus shale, increasing the partnership’s total processing capacity by 200 million cubic feet per day and fractionation capacity by 73,000 barrels per day

Completed 1.24 million barrel expansion at the Patoka tank farm to support the startup of the Southern Access Extension pipeline, which commenced operations in December 2015

10 major processing and fractionation projects currently under construction on a just-in-time basis; five expected to be completed in 2016 to meet forecasted growth in producer volumes

Segment Results

MPLX has two reportable segments:

Logistics and Storage

Gathering and Processing

. Each of these segments is organized and managed based upon the nature of the products and services it offers. Segment results represent income from operations attributable to the reportable segments, including partially-owned entities operated by the partnership that are accounted for as equity method investments. Segment results are also adjusted to exclude the portion of income from operations attributable to the noncontrolling interests related to partially-owned entities that are either consolidated or recorded based upon the equity method investment

- transports and stores crude oil, refined products and other hydrocarbon-based products. This segment generally corresponds to the MPLX business prior to the MarkWest acquisition.

- gathers, processes and transports natural gas; gathers, transports, fractionates, stores and markets natural gas liquids (NGLs). This segment generally corresponds to the MarkWest business, which was acquired on Dec. 4, 2015.

(In millions)

Segment operating income attributable to MPLX LP

See reconciliation below for details.

segment operating income for the fourth quarter of 2015 was

$71 million

, compared with

$57 million

over the same period in

. For the full-year 2015,

segment operating income was

$322 million

$213 million

for the full-year 2014. The increase in the fourth quarter and full year was primarily due to the acquisition of the remaining interest in MPLX Pipe Line Holdings LP and higher average tariff rates. The fourth quarter increase was partially offset by a reduction in transported volumes and the full year increase was partially offset by a reduction in the amount of deferred revenue recognized from volume deficiency credits.

segment operating income increased for the three and twelve months ended Dec. 31...