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MPLX LP Reports First-Quarter 2016 Financial Results

(GLOBE NEWSWIRE via COMTEX) -- - Reported first-quarter adjusted EBITDA of $302 million; distributable cash flow of $236 million

- Declared distribution of $0.505 per common unit, a 23 percent increase over first-quarter 2015

- Announced a $1 billion private placement of convertible preferred securities with third-party investors

- Completed acquisition of Marathon Petroleum Corporation's inland marine business, with strong sponsor support for the transaction

- Reaffirmed guidance of 12 to 15 percent distribution growth rate over the prior year; expect double-digit distribution growth rate in 2017

FINDLAY, Ohio, April 28, 2016 - MPLX LP MPLX, -0.83% today reported first-quarter 2016 results, which include the operations of MarkWest Energy Partners, L.P. for the first full quarter following its merger with MPLX. First-quarter 2016 earnings include a non-cash charge of $129 million to impair a small portion of the goodwill recorded in connection with the acquisition of MarkWest.

 Three Months Ended March 31 (In millions, except per unit and ratio data) 2016 2015 Net (loss) income attributable to MPLX(a) $ (60 ) $ 46 Adjusted EBITDA attributable to MPLX(b) 302 64 Distributable cash flow attributable to MPLX(b) 236 57 Distribution per unit 0.505 0.410 Limited partner coverage ratio 1.18x 1.56x Growth capital expenditures(c) 302 32 

(a) The three months ended March 31, 2016, include a pretax $129 million goodwill impairment related to the MarkWest acquisition.

(b) Non-GAAP measure. See reconciliation below. Excludes goodwill impairment charge.

(c) Includes capital expenditures for inland marine business for all periods presented. Excludes non-affiliated joint-venture (JV) members' share of capital expenditures. See reconciliation below.

"We delivered solid financial results in this first full quarter as a combined company," MPLX Chairman and Chief Executive Officer Gary R. Heminger said. "Our growth in distributable cash flow resulted in a strong distribution coverage ratio of 1.18 times. We are on track to achieve a 12 to 15 percent distribution growth rate for 2016, and we expect a double-digit distribution growth rate in 2017. With strategically located assets, a supportive sponsor and strong relationships with our customers, we are well-positioned to continue delivering sustainable returns over the long-term."

On March 31, MPLX completed its acquisition of the inland marine business from its sponsor Marathon Petroleum Corp. MPC, -0.94% The business accounts for approximately 60 percent of MPC's inland water movements and brings with it a fee-for-capacity contract, which is expected to generate approximately $120 million of annual earnings before interest, taxes, depreciation and amortization (EBITDA) for MPLX.

"These high-quality marine assets provide predictable cash flow and further diversify our earnings mix," Heminger said. MPC contributed the assets at a supportive valuation of approximately five times the annual EBITDA of the marine business in exchange for MPLX equity. MPC provided an additional measure of support by waiving first-quarter distributions on the newly issued common units and the associated incentive distribution rights. "This transaction clearly demonstrates MPC's ongoing commitment to the success of the partnership," he said.

Heminger also emphasized the quality of the partnership's gathering and processing assets and the diversified customer base they support, particularly in the prolific Marcellus and Utica shale regions. "We are pleased with MPLX's financial and operational results during the first full quarter of operations following the MarkWest merger," Heminger said. In addition to its strong distributable cash flow generated during the quarter, MPLX commenced operation of one processing plant and one de-ethanizer in the Marcellus Shale in early April. For 2016, MPLX anticipates utilization of its processing facilities in the Marcellus and Utica to average approximately 80 percent as it expects its overall processed gas volumes in the region to increase by approximately 15 percent.

During the quarter, MPLX also facilitated the first delivery of unit trains of propane from its Hopedale, Ohio, fractionation complex, leading the evolution of efficient natural gas liquids marketing from the Marcellus and Utica shales. Over one third of the total U.S. gas rigs in service are in the rich- and dry-gas areas where MPLX operates, and over the last year MarkWest commissioned almost 1.5 billion cubic feet per day of processing capacity to support its customers' growth plans.

"MPLX is managing both capital and expenses across the business in light of the challenging commodity price environment," Heminger said. As previously announced, the partnership reduced its 2016 capital investment plan substantially, from an initial forecast of $1.7 billion, to a range of $800 million to $1.2 billion of growth capital and about $60 million of maintenance capital. "We are committed to pursuing a capital strategy that continually balances investments to match the requirements of our customers with the sustainable growth of the partnership."

The partnership announced yesterday its binding agreement for a $1 billion private placement of convertible preferred securities with third-party investors. "We elected to take advantage of very strong investor interest in convertible preferred securities to privately place $1 billion with a select group of investors," Heminger said. "Originally contemplated as a transaction with MPC, we were pleased to reach an agreement on a transaction with third-party investors with attractive terms for the partnership. The combination of some opportunistic At-The-Market issuances in the first quarter and this private placement provides for the partnership's anticipated funding needs for the remainder of 2016 and into 2017, enabling the partnership to continue its execution of attractive organic growth projects that will contribute to distributable cash flow and long-term value for our unitholders."

The partnership continues to identify opportunities to leverage the geographic and commercial synergies between MPC assets and the MPLX logistics and storage network, and its gathering and processing infrastructure. Such potential projects include transportation and logistics solutions that could further support NGL and light-product distribution to regional and international end users. "We remain optimistic about our strategic projects and the long-term value they can create for our producer customers and unitholders," Heminger concluded.

Operational Highlights

- Commenced operation of one processing plant and one de-ethanizer in the Marcellus Shale in early April, increasing the partnership's total processing capacity by 200 million cubic feet per day and ethane capacity by 10,000 barrels per day.

- Facilitated the first delivery of unit trains of propane from the Hopedale, Ohio, fractionation complex.

- Anticipate a May startup of the 200 million cubic foot per day Hidalgo processing plant, the partnership's first facility in the highly prospective Delaware Basin in West Texas.

- Completed expansion of the Patoka-to-Robinson, Illinois, pipeline, adding 20,000 barrels per day of crude oil supply capacity to MPC's refinery in Robinson.

- Began construction of the Cornerstone Pipeline to transport liquids production from the Utica Shale region of eastern Ohio to MPC's refinery in Canton, Ohio; the pipeline is scheduled for completion in the fourth quarter.

Financial Position and Liquidity

Net of the $764 million of borrowings outstanding at March 31, MPLX had $1.67 billion of remaining capacity under its $2 billion bank revolving credit facility, as well as $62 million available under the facility with MPC. During the first quarter of 2016, MPLX issued 12 million new units through its At-The-Market program and received net proceeds of approximately $315 million. MPLX remains committed to maintaining an investment grade credit profile and is targeting a leverage ratio of approximately 4.0 times. Pro forma for acquisitions, the partnership's debt-to-adjusted EBITDA ratio was 4.3 times at March 31.

2016 Forecast

MPLX's 2016 financial forecast is consistent with the forecast previously provided. Based on current estimates for operational volumes, commodity prices, and derivative instruments currently outstanding, and excluding the $129 million first-quarter non-cash goodwill impairment charge, our 2016 forecast is:

- Adjusted Net income: $325 million to $485 million

- Adjusted EBITDA: $1.25 billion to $1.40 billion

- Distributable cash flow (DCF): $970 million to $1.10 billion

MPLX reaffirms an expected 12 to 15 percent year-over-year distribution growth rate for 2016 and a double-digit distribution growth rate in 2017.

MPLX forecasted growth capital expenditures for 2016 remain in a range of $800 million to $1.2 billion with maintenance capital of approximately $60 million.

Segment Results

 Three Months Ended March 31 (In millions) 2016 2015 Logistics and Storage $ 88 $ 82 Gathering and Processing 257 - Segment operating income attributable to MPLX LP(a) $ 345 $ 82 

(a) See reconciliation below for details.

Logistics and Storage segment operating income increased for the first quarter of 2016 compared with the same period in 2015. The increase was primarily due to higher average tariffs and an increase in volumes of crude oil and products shipped, partially offset by increased expenses provided under the omnibus and employee services agreements with MPC.

Gathering and Processing (G&P) segment operating income increased for the first quarter of 2016 compared with the same period in 2015. This increase is due to the acquisition of MarkWest. Further discussion is included in the G&P pro forma financial information below.

Corporate general and administrative expenses, unrealized derivative gains/losses, depreciation, amortization and goodwill impairment charges are not allocated to the reportable segments. MPLX management does not consider these items allocable to or controllable by any individual segment, and therefore, excludes these items when evaluating segment performance. As noted above...