MPLX LP
Fitch Ratings has assigned
The Rating Outlook is Stable.
BANGL's rating are based on its strong position in the Permian basin, where the company operates a natural gas liquids (NGL) pipeline. The ratings also reflects BANGL's fixed-fee business model and expected low leverage. The issuer does not take on direct commodity price exposure in its operations; however, volumetric risk exists given in its dedication (i.e. not take-or-pay) contracts.
While no explicit rating linkage exists, Fitch views BANGL's relationship with its owners WhiteWater (NR),
The Stable Outlook reflects expectations for supportive production economics in the
Fitch has reviewed preliminary terms for the proposed term loan; the assigned ratings assume no material variations in the final terms.
Key Rating Drivers
Fixed-Fee, Volume Exposed: BANGL operates under contracts that are entirely fixed-fee in nature. However, given the lack of minimum volume commitments (MVC) within those contracts, the majority of EBITDA generated comes from volume-exposed operations. BANGL has plant dedication contracts where volumes produced on certain dedicated acreage must be processed at certain plants and then sent down the BANGL pipeline. The weighted average remaining life of those contracts is currently 13 years.
A large percentage of the natural gas associated with these dedicated processing plants are tied to an MVC contract on an adjacent gas pipeline (Whistler and the Agua Blanca system, also owned by WhiteWater), creating a structural incentive for these plants to remain highly utilized.
Fitch expects volumes on the BANGL pipeline to rise with newly built nitrogen rejection units (allowing for ethane capture) on processing plants owned by WTG (one of BANGL's owners). Volumes on BANGL are also supported by expectations for a continued robust export market for propane and butane to international markets via the
Limited Size and Scale: BANGL is relatively small in size/scale despite its status as one of the larger NGL pipelines in the Permian basin. Fitch anticipates the company's EBITDA to remain below
The risk is partially mitigated by the Permian basin's position as the premier oil producing region in
Strong Financial Profile: BANGL's leverage is seen just below 5.5x at transaction close and Fitch expects leverage to steadily decline through 2025 to approximately 3.5x. BANGL's anticipated deleveraging is supported by expected volume and EBITDA growth. The company has a long-term target to keep leverage under 4.0x, on the company's calculation. BANGL's sponsors have committed to not taking distributions until the
BANGL maintains adequate liquidity through its currently undrawn
Near-Term Growth Opportunities: BANGL has three near-term, highly visible opportunities to expand its annual EBITDA. In 2024 and 2025, the rates BANGL receives for its transportation services will step up for some customers as initial lower 'teaser rates' expire. Contract rate steps-ups range from 29% to 480% per gallon depending on the producer. Additionally, once the GtoS pipeline project is completed and put into service, BANGL will no longer need to lease capacity on third-party pipelines to access Sweeney, equating to roughly
In 2025, BANGL is expected to benefit from a reduction in
Supportive Ownership: Fitch views BANGL's ownership as supportive of its credit quality, despite a lack of explicit rating linkages. WhiteWater (45% ownership) is a private equity backed firm focusing on the financing and construction of natural gas and NGL pipeline transportation assets. WhiteWater previously, successfully completed pipelines in the area including the Agua Blanca pipeline in 2018 and the Whistler pipeline in 2022. Furthermore, MPLX (25% ownership), WTG (20% ownership), and FANG (10% ownership) are all customers of BANGL. MPLX has dedicated four (plus one partial dedication) of its six processing plants (including one under construction) to BANGL and WTG has dedicated three of its eight processing plants to BANGL. Fitch views the integration of BANGL's assets within its owner's larger value chain as supportive of BANGL's credit profile.
Near-Term Execution Risk: BANGL faces some execution risk related to its two primary near-term growth projects, the GtoS greenfield expansion and the brownfield addition of pumps to expand the BANGL mainline capacity. Fitch considers both projects to be relatively low risk, given the use of existing technology on the brownfield expansion and the fact that the greenfield expansion runs along an existing right-of-way.
However, the successful on-time and on-budget completion of these projects is a major factor supporting Fitch's expectations for deleverage at BANGL. Fitch notes that Whitewater is experienced at building pipelines in
Derivation Summary
BANGL operates a small (less than
Similar to BANGL, M6 derives most of its volumes from fixed-fee, volume exposed contracts; however, M6 generates roughly 20% of its EBITDA under ship-or-pay contracts. M6 has leverage that is expected to decline from 4.5x at present to below 3.5x over the forecast period. With similar leverage expectations and roughly similar business profiles including significant volume exposure, Fitch rates both BANGL and M6 at the same IDR level.
Key Assumptions
Oil and natural gas production consistent with the Fitch Price Deck. No significant ethane rejection over the forecast period;
Export markets for NGLs remain robust and BANGL volumes increase year over year until peak processing capacity is achieved;
Incremental EBITDA growth, beyond volume growth, due to contract rate step-ups and lease expanse fallaway, as organic growth projects come online;
Maintenance capex increases in 2025 due to new assets (
No further meaningful growth projects beyond those currently in process;
BANGL does not pay distributions until the Bennedum to
Interest rates consistent with the Fitch Global Economic Outlook.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
An upgrade is not expected in the near term given BANGL's limited size and scale. However, a positive rating action/upgrade could occur if BANGL's EBITDA were expected to be sustained at or above approximately
A significant increase in the percentage of EBITDA coming from take-or-pay-type contracts.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Actual or forecast EBITDA leverage above 6.0x;
Significantly lower than expected volumes;
A significant increase in capex, targeted towards higher business risk projects.
Best/Worst Case Rating Scenario
International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
Liquidity and Debt Structure
Adequate liquidity: As of
Issuer Profile
Date of Relevant Committee
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg.
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