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, 2021 . 22
-------------------------------------------------------------------------------- Table of Contents 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;
•environmental, social and governance ("ESG") goals and targets, including those related to greenhouse gas emissions, diversity and inclusion and ESG reporting;
•our plans to achieve our ESG goals and targets and to monitor and report progress thereon;
•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. 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:
•the continuance or escalation of the military conflict between
•general economic, political or regulatory developments, including inflation, changes in governmental policies relating to refined petroleum products, crude oil, natural gas or NGLs, or taxation; •the magnitude, duration and extent of future resurgences 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 our business, financial condition, results of operations and cash flows; •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;
•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 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;
•changes in foreign imports and exports of crude oil, refined products, natural gas and NGLs;
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•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, means of transportation, 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. The business consists of two segments based on the nature
of services it offers: Logistics and Storage ("L&S"), and Gathering and
Processing ("G&P"). The L&S segment is engaged in the gathering, transportation,
storage and distribution of crude oil, refined products and other
hydrocarbon-based products. The L&S segment also includes the operation of our
refining logistics, fuels distribution and inland marine businesses, terminals,
rail facilities and storage caverns. The G&P segment provides gathering,
processing and transportation of natural gas; and the gathering, transportation,
fractionation, storage and marketing of NGLs.
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 endedMarch 31, 2022 andMarch 31, 2021 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-20220331_g1.jpg]] 24
-------------------------------------------------------------------------------- Table of Contents Other Highlights •Generated net cash provided by operating activities of$1,125 million and free cash flow of$850 million in the first quarter of 2022. •Announced a first quarter 2022 distribution of$0.7050 per common unit, resulting in a distribution coverage ratio of 1.65x for the first quarter. •Returned$100 million of cash to unitholders through the repurchase of over 3 million common units under our unit repurchase program. •Issued$1.5 billion aggregate principal amount of 4.950 percent senior notes dueMarch 2052 (the "2052 Senior Notes") in an underwritten public offering. The net proceeds were used to repay amounts outstanding under the MPC Intercompany Loan Agreement and the MPLX Credit Agreement.
Current Economic Environment
Through the first three months of 2022, we continue to see recovery in the environment in which our business operates. We are unable to predict the potential effects that further resurgences of COVID-19 or the continuance or escalation of the military conflict betweenRussia andUkraine may have on our financial position and results. In response to this business environment, MPLX remains focused on executing its strategic priorities of strict capital discipline, embedding a low-cost culture, and portfolio optimization.
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 free cash flow after
distributions. 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. 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.
We define Adjusted EBITDA as net income adjusted for: (i) depreciation and
amortization; (ii) provision/(benefit) for income taxes; (iii) interest and
other financial costs; (iv) impairment expense; (v) income from equity method
investments; (vi) distributions and adjustments related to equity method
investments; (vii) noncontrolling interests; and (viii) other adjustments as
deemed necessary. We also use DCF, which we define as Adjusted EBITDA adjusted
for: (i) deferred revenue impacts; (ii) sales-type lease payments, net of
income; (iii) net interest and other financial costs; (iv) net maintenance
capital expenditures; (v) equity method investment capital expenditures paid
out; and (vi) other adjustments as deemed necessary. Segment Adjusted EBITDA
represents Adjusted EBITDA attributable to the reportable segments.
We define FCF as net cash provided by operating activities adjusted for (i) net
cash used in investing activities; (ii) cash contributions from MPC; (iii) cash
contributions from noncontrolling interests and (iv) cash distributions to
noncontrolling interests. We define free cash flow after distributions as FCF
less base distributions to common and preferred unitholders.
We believe that the presentation of Adjusted EBITDA, DCF, FCF and free cash flow
after distributions 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
free cash flow after distributions 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 free cash flow after
distributions to their most directly comparable measure calculated and presented
in accordance with GAAP, see the Liquidity and Capital resources section.
Comparability of our Financial Results
The Javelina divestiture, which was completed onFebruary 12, 2021 , has impacted comparability of our financial results. Prior to the sale, Javelina was reported within the G&P segment.
During the normal course of business, we amend or modify our contractual agreements with customers. These amendments or modifications require the agreements to be reassessed under ASC 842, which can impact the classification of revenues or costs associated with the agreement. These reassessments may impact the comparability of our financial results.
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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, 2022 and 2021, 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) 2022 2021 Variance
Revenues and other income:
Total revenues and other income$ 2,610 $ 2,339 $ 271 Costs and expenses: Cost of revenues (excludes items below) 287 273 14 Purchased product costs 467 276 191 Rental cost of sales 37 32 5 Rental cost of sales - related parties 15 39 (24) Purchases - related parties 319 298 21 Depreciation and amortization 313 329 (16) General and administrative expenses 78 86 (8) Other taxes 34 32 2 Total costs and expenses 1,550 1,365 185 Income from operations 1,060 974 86 Related party interest and other financial costs 4 - 4 Interest expense, net of amounts capitalized 198 198 - Other financial costs 20 27 (7) Income before income taxes 838 749 89 Provision for income taxes 5 1 4 Net income 833 748 85 Less: Net income attributable to noncontrolling interests 8 9 (1) Net income attributable to MPLX LP 825 739 86 Adjusted EBITDA attributable to MPLX LP(1) 1,393 1,352 41
DCF attributable to GP and LP unitholders(1)
(1) Non-GAAP measure. See reconciliation below to the most directly comparable GAAP measures.
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Three Months Ended March 31,
(In millions) 2022 2021 Variance
Reconciliation of Adjusted EBITDA attributable to
$ 833 $ 748 $ 85
Provision for income taxes 5 1 4
Interest and other financial costs 222 225 (3)
Income from operations 1,060 974 86
Depreciation and amortization 313 329 (16)
Income from equity method investments (99) (70) (29)
Distributions/adjustments related to equity method investments 132 121 11
Other (4) 8 (12)
Adjusted EBITDA 1,402 1,362 40
Adjusted EBITDA attributable to noncontrolling interests (9) (10) 1
Adjusted EBITDA attributable to MPLX LP 1,393 1,352 41
Deferred revenue impacts 24 22 2
Sales-type lease payments, net of income 5 - 5
Net interest and other financial costs(1) (204) (220) 16
Maintenance capital expenditures, net of reimbursements (14) (11) (3)
Equity method investment capital expenditures paid out (3) (1) (2)
Other 9 (5) 14
DCF 1,210 1,137 73
Preferred unit distributions (32) (31) (1)
DCF attributable to GP and LP unitholders $
1,178
(1) Excludes gain/ loss on extinguishment of debt and amortization of deferred financing costs.
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Three Months Ended March 31,
(In millions) 2022 2021 Variance
Reconciliation of Adjusted EBITDA attributable to
MPLX LP and DCF attributable to GP and LP
unitholders from Net cash provided by operating
activities:
Net cash provided by operating activities $ 1,125 $ 1,124 $ 1
Changes in working capital items 118 37 81
All other, net (45) (15) (30)
Gain on extinguishment of debt - (12) 12
Net interest and other financial costs(1) 204 220 (16)
Other adjustments to equity method investment
distributions 12 2 10
Other (12) 6 (18)
Adjusted EBITDA 1,402 1,362 40
Adjusted EBITDA attributable to noncontrolling
interests (9) (10) 1
Adjusted EBITDA attributable to MPLX LP 1,393 1,352 41
Deferred revenue impacts 24 22 2
Sales-type lease payments, net of income 5 - 5
Net interest and other financial costs(1) (204) (220) 16
Maintenance capital expenditures, net of
reimbursements (14) (11) (3)
Equity method investment capital expenditures paid
out (3) (1) (2)
Other 9 (5) 14
DCF 1,210 1,137 73
Preferred unit distributions (32) (31) (1)
DCF attributable to GP and LP unitholders $ 1,178 (1) Excludes gain/ loss on extinguishment of debt and amortization of deferred financing costs.
Three months ended
Total revenues and other income increased$271 million in the first quarter of 2022 compared to the same period of 2021. This was primarily due to higher prices and volumes in most regions in the G&P segment of approximately$274 million . There were also increased pipeline fees in the L&S segment due to higher pipeline throughput outweighing decreased average tariff rates, as well as increased equity method income across both segments. These increases were partially offset by a loss on disposal of assets. Cost of revenues increased$14 million in the first quarter of 2022 compared to the same period of 2021. This was primarily due to higher environmental response and remediation costs. Purchased product costs increased$191 million in the first quarter of 2022 compared to the same period of 2021 This was primarily due to higher prices of$143 million in the Southwest and Southern Appalachia and higher volumes in the Southwest. Rental cost of sales and rental cost of sales - related parties decreased$19 million in the first quarter of 2022 compared to the same period of 2021. This was primarily due to modifications to lease contracts which resulted in costs now being recorded to purchases - related parties, as noted below, as opposed to rental cost of sales - related parties. Purchases - related parties increased$21 million in the first quarter of 2022 compared to the same period of 2021. This was primarily due to modifications to lease contracts which resulted in costs now being recorded to purchases - related parties as opposed to rental cost of sales - related parties, as noted above. Depreciation and amortization decreased$16 million in the first quarter of 2022 compared to the same period of 2021. This was primarily due to the prior year derecognition of assets reclassified as sales-type leases due to contract modifications. 28
-------------------------------------------------------------------------------- Table of Contents 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) interest and other financial costs; (iii) impairment expense; (iv) income/(loss) from equity method investments; (v) distributions and adjustments related to equity method investments; (vi) noncontrolling interests; and (vii) 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) are 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
L&S Segment
First Quarter L&S Segment Financial Highlights (in millions)
[[Image Removed: mplx-20220331_g2.jpg]][[Image Removed: mplx-20220331_g3.jpg]]
[[Image Removed: mplx-20220331_g4.jpg]]
Three Months Ended March 31,
(In millions) 2022 2021 Variance
Service revenue $ 983 $ 953 $ 30
Rental income 175 249 (74)
Product related revenue 4 4 -
Sales-type lease revenue 111 37 74
Income from equity method investments 52 36 16
Other income 12 15 (3)
Total segment revenues and other income 1,337 1,294 43
Cost of revenues 141 144 (3)
Purchases - related parties 239 215 24
Depreciation and amortization 130 147 (17)
General and administrative expenses 43 46 (3)
Other taxes 21 19 2
Segment income from operations 763 723 40
Depreciation and amortization 130 147 (17)
Income from equity method investments (52) (36) (16)
Distributions/adjustments related to equity method
investments 58 58 -
Other 5 4 1
Segment adjusted EBITDA(1) 904 896 8
Capital expenditures 77 59 18
Investments in unconsolidated affiliates(2) $ 68 $ 9 $ 59
(1) See the Reconciliation of Adjusted EBITDA attributable to
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Three months ended
Service revenue increased$30 million in the first quarter of 2022 compared to the same period of 2021. This was primarily due to a net increase in pipeline fees due to increased throughput outweighing lower average tariff rates, as well as to an increase of$15 million from changes in the presentation of lease income between service revenue, rental income and sales-type lease revenue due to modifications to lease contracts. Fee escalations also contributed to the increase. Rental income decreased$74 million in the first quarter of 2022 compared to the same period of 2021. This was primarily due to a net decrease of$88 million from changes in the presentation of lease income between service revenue, rental income and sales-type lease revenue due to modifications to lease contracts. The decrease was partially offset by fee escalations. Sales-type lease revenue - related parties increased$74 million in the first quarter of 2022 compared to the same period of 2021. This was primarily due to an increase of$73 million from changes in the presentation of lease income between service revenue, rental income and sales-type lease revenue due to modifications to lease contracts. Income from equity methods investments increased$16 million in the first quarter of 2022 compared to the same period of 2021. This was primarily due to increased throughput on equity method investment pipeline systems, including the Whistler pipeline which was placed into service in the third quarter of 2021. Cost of revenues decreased$3 million in the first quarter of 2022 compared to the same period of 2021. This was primarily due to modifications to lease contracts which resulted in costs being recorded to purchases - related parties, as noted below, as opposed to rental cost of sales - related parties, which is included in the decrease being explained here. The decrease was partially offset by higher environmental response and remediation costs compared to the first quarter of 2021. Purchases - related parties increased$24 million in the first quarter of 2022 compared to the same period of 2021. This was primarily due to modifications to lease contracts which resulted in costs now being recorded to purchases - related parties as opposed to rental cost of sales - related parties, which is included in cost of revenues as noted above. This increase, and other miscellaneous increases, were partially offset by decreased employee-related costs from MPC. Depreciation and amortization decreased$17 million in the first quarter of 2022 compared to the same period of 2021. This was primarily due to the derecognition of fixed assets due to the modification of certain lease contracts and accelerated depreciation on refining logistics assets at MPC's idledGallup refinery . 30 -------------------------------------------------------------------------------- Table of Contents L&S Operating Data [[Image Removed: mplx-20220331_g5.jpg]] Three Months Ended March 31, 2022 2021 L&S Pipeline throughput (mbpd) Crude oil pipelines 3,380 3,282 Product pipelines 1,956 1,858 Total pipelines 5,336 5,140 Average tariff rates ($ per barrel)(1) Crude oil pipelines $ 0.93$ 0.96 Product pipelines 0.82 0.79 Total pipelines $ 0.89$ 0.90 Terminal throughput (mbpd) 2,941 2,613 Marine Assets (number in operation)(2) Barges 296 297 Towboats 23 23 (1) Average tariff rates calculated using pipeline transportation revenues divided by pipeline throughput barrels. (2) Represents total at end of period. 31 -------------------------------------------------------------------------------- Table of Contents G&P Segment
First Quarter G&P Segment Financial Highlights (in millions)
[[Image Removed: mplx-20220331_g6.jpg]][[Image Removed: mplx-20220331_g7.jpg]]
[[Image Removed: mplx-20220331_g8.jpg]]
Three Months Ended March 31,
(In millions) 2022 2021 Variance
Service revenue $ 486 $ 508 $ (22)
Rental income 81 92 (11)
Product related revenue 661 397 264
Income from equity method investments 47 34 13
Other income/(loss) (2) 14 (16)
Total segment revenues and other income 1,273 1,045 228
Cost of revenues 198 200 (2)
Purchased product costs 467 276 191
Purchases - related parties 80 83 (3)
Depreciation and amortization 183 182 1
General and administrative expenses 35 40 (5)
Other taxes 13 13 -
Segment income from operations 297 251 46
Depreciation and amortization 183 182 1
Income from equity method investments (47) (34) (13)
Distributions/adjustments related to equity method
investments 74 63 11
Other (9) 4 (13)
Adjusted EBITDA attributable to noncontrolling
interests (9) (10) 1
Segment Adjusted EBITDA(1) 489 456 33
Capital expenditures 95 30 65
Investments in unconsolidated affiliates $ 42 $ 26 $ 16
(1) See the Reconciliation of Adjusted EBITDA attributable to
Three months ended
Service revenue decreased$22 million in the first quarter of 2022 compared to the same period of 2021. This was primarily due to lower fees from lower volumes in the Rockies and Marcellus as well as a decrease in volumes due to the Javelina divestiture in the Southwest of$34 million , partially offset by an increase in fees due to a 2021 contract modification in the Marcellus resulting in a change in the presentation of the related income from rental income to service revenue. Rental income decreased$11 million in the first quarter of 2022 compared to the same period of 2021. This was primarily due to a 2021 contract modification in the Marcellus resulting in a change in the presentation of the related income from rental income to service revenue. 32
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Product related revenue increased$264 million in the first quarter of 2022 compared to the same period of 2021. This was primarily due to higher prices across all regions of approximately$187 million and higher processed volumes in the Southwest of$87 million . This was partially offset by a decrease in volumes primarily due to the Javelina divestiture in the Southwest. Income from equity method investments increased$13 million in the first quarter of 2022 compared to the same period of 2021, primarily due to higher volumes and rates associated with joint ventures in the Utica, Marcellus and Southwest regions.
Other income/(loss) decreased
Purchased product costs increased$191 million in the first quarter of 2022 compared to the same period of 2021. This was primarily due to higher prices of$143 million in the Southwest and Southern Appalachia and higher volumes in the Southwest. 33
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G&P Operating Data
[[Image Removed: mplx-20220331_g9.jpg]][[Image Removed: mplx-20220331_g10.jpg]][[Image Removed: mplx-20220331_g11.jpg]]
Three Months Ended Three Months Ended
March 31, 2022 March 31, 2021
MPLX LP(1) MPLX LP Operated(2) MPLX LP(1) MPLX LP Operated(2)
G&P
Gathering Throughput (MMcf/d)
Marcellus Operations 1,314 1,314 1,298 1,298
Utica Operations - 1,813 - 1,566
Southwest Operations 1,307 1,476 1,373 1,448
Bakken Operations 147 147 146 146
Rockies Operations 394 526 470 627
Total gathering throughput 3,162 5,276 3,287 5,085
Natural Gas Processed (MMcf/d)
Marcellus Operations 4,015 5,529 4,249 5,677
Utica Operations - 423 - 513
Southwest Operations(3) 1,384 1,541 1,295 1,367
Southern Appalachian Operations 224 224 227 227
Bakken Operations 143 143 145 145
Rockies Operations 407 407 441 441
Total natural gas processed 6,173 8,267 6,357 8,370
C2 + NGLs Fractionated (mbpd)
Marcellus Operations(4) 468 468 489 489
Utica Operations(4) - 23 - 28
Southwest Operations(3) - - 8 8
Southern Appalachian Operations 10 10 11 11
Bakken Operations 21 21 19 19
Rockies Operations 4 4 4 4
Total C2 + NGLs fractionated(5) 503 526 531 559
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Three Months Ended March 31,
2022 2021
Pricing Information
Natural Gas NYMEX HH ($ per MMBtu) $ 4.57 $ 2.72
C2 + NGL Pricing ($ per gallon)(6) $ 1.15 (1) This column represents operating data for entities that have been consolidated into the MPLX financial statements. (2) 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. (3) The Southwest Operations for the three months endedMarch 31, 2021 include the Javelina complex, which was sold onFebruary 12, 2021 . The processing and fractionated volumes calculated for the number of days MPLX owned these assets during 2021 were 96 MMcf/d and 17 mbpd, respectively. (4) Entities within the Marcellus and Utica Operations jointly own the Hopedale fractionation complex. Hopedale throughput is included in the Marcellus and Utica Operations and represent each region's utilization of the complex. (5) Purity ethane makes up approximately 188 mbpd and 199 mbpd of total MPLX Operated, fractionated products for the three months endedMarch 31, 2022 and 2021, respectively. Purity ethane makes up approximately 184 mbpd and 194 mbpd of totalMPLX LP consolidated, fractionated products for the three months endedMarch 31, 2022 and 2021, respectively. (6) 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.
Seasonality
The volume of crude oil and refined products transported and stored utilizing our assets is affected by the level of supply and demand for crude oil and refined products in the markets served directly or indirectly by our assets. The majority of 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 the seasonality fluctuations is declining due to our growth in fee-based business.
Liquidity and Capital Resources
Cash Flows
Our cash and cash equivalents were$42 million atMarch 31, 2022 and$13 million atDecember 31, 2021 . The change in cash, cash equivalents and restricted cash was due to the factors discussed below. Net cash provided by (used in) operating activities, investing activities and financing activities were as follows: Three Months Ended March 31, (In millions) 2022 2021 Net cash provided by (used in): Operating activities$ 1,125 $ 1,124 Investing activities (276) (90) Financing activities (820) (1,025) Total $ 29$ 9
Net cash provided by operating activities increased
Net cash used in investing activities increased$186 million in the first three months of 2022 compared to the first three months of 2021, primarily due to an increase in capital spending and an increase in contributions to equity method investments, which included the$60 million contribution to our Bakken Pipeline joint venture to fund our share of a debt repayment by the joint venture. The first quarter of 2021 also included proceeds from the sale of our Javelina plant, which further reduced the use of cash in that period. Financing activities were an$820 million use of cash in the first three months of 2022 compared to a$1,025 million use of cash in the first three months of 2021. The primary reason for the decrease in the use of cash was due to net debt borrowings of$57 million in the first quarter of 2022 compared to net debt repayments of$110 million in the first quarter of 2021, as well as decreased spending on the unit repurchase program of$55 million in the first quarter of 2022 compared to the first quarter of 2021. 35 -------------------------------------------------------------------------------- Table of Contents Free Cash Flow
The following table provides a reconciliation of FCF and free cash flow after
distributions from net cash provided by operating activities for the three
months ended
Three Months Ended March
31,
(In millions) 2022 2021
Net cash provided by operating activities $ 1,125 $ 1,124 Adjustments to reconcile net cash provided by operating activities to free cash flow Net cash used in investing activities
(276) (90)
Contributions from MPC 10 7
Distributions to noncontrolling interests (9) (10)
Free cash flow 850 1,031
Distributions paid to common and preferred unitholders (758) (754)
Free cash flow after distributions $ 92 $ 277 Debt and Liquidity Overview
OnMarch 14, 2022 , MPLX issued$1.5 billion aggregate principal amount of 4.950 percent senior notes dueMarch 2052 (the "2052 Senior Notes") in an underwritten public offering. The 2052 Senior Notes were offered at a price to the public of 98.982 percent with interest payable semi-annually in arrears, commencing onSeptember 14, 2022 . The net proceeds were used to repay amounts outstanding under the MPC Intercompany Loan Agreement and the MPLX Credit Agreement.
As of
Our intention is to maintain an investment-grade credit profile. As of
Rating Agency Rating Moody's Baa2 (stable outlook) Standard & Poor's BBB (stable 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, 2022 , we were in compliance with the covenants, including the financial covenant with a ratio of Consolidated Total Debt to Consolidated EBITDA of 3.64 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. 36 -------------------------------------------------------------------------------- Table of Contents Our liquidity totaled$4.7 billion atMarch 31, 2022 consisting of: March 31, 2022 Available (In millions) Total Capacity Outstanding Borrowings Capacity MPLX Credit Agreement(1)$ 3,500 $ -$ 3,500 MPC Loan Agreement 1,500 (323) 1,177 Total liquidity$ 5,000 $ (323) 4,677 Cash and cash equivalents 42 Total liquidity$ 4,719
(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. We may also, from time to time, repurchase our senior notes or preferred units in the open market, in tender offers, in privately negotiated transactions or otherwise in such volumes, at market prices and upon such other terms as we deem appropriate and execute unit repurchases under our unit repurchase program. 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
through
(In units) Common Balance atDecember 31, 2021 1,016,178,378 Unit-based compensation awards 148,951 Units redeemed in unit repurchase program (3,119,522) Balance atMarch 31, 2022 1,013,207,807 Unit Repurchase Program During the three months endedMarch 31, 2022 , we repurchased approximately 3 million common units at an average cost per unit of$32.06 per unit and paid$100 million of cash. As ofMarch 31, 2022 , we had repurchased a total of approximately 28 million units at an average cost per unit of$27.76 per unit for a total of$763 million under the unit repurchase program. We have$237 million remaining under our repurchase authorization.
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$266 million per quarter, or$1,064 million per year, based on the number of common units outstanding atMarch 31, 2022 . OnApril 26, 2022 , MPLX declared a cash distribution for the first quarter of 2022, totaling$713 million , or$0.7050 per common unit. This distribution will be paid onMay 13, 2022 to common unitholders of record onMay 6, 2022 . 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. This rate will also be received by Series A preferred unitholders. 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 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 15, 2022 . 37
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MPLX has the right to redeem some or all of the Series B preferred units, at any
time, on or after
The allocation of total cash distributions is as follows for the three months endedMarch 31, 2022 and 2021. 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) 2022 2021 Distribution declared: Limited partner units - public $ 257$ 262 Limited partner units - MPC 456 445Total LP distribution declared 713 707 Series A preferred units 21 20 Series B preferred units 11 11 Total distribution declared 745 738 Quarterly cash distributions declared per limited partner common unit$ 0.7050 $ 0.6875 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 acquisitions or capital improvements that we expect will increase our operating capacity for 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 costs to develop or acquire additional pipeline, terminal, processing or storage capacity. In general, growth capital includes costs that are expected to generate additional or new cash flow for MPLX. MPLX's initial capital investment plan for 2022 totaled$900 million which includes growth capital of$700 million , maintenance capital of$140 million and a$60 million investment in unconsolidated affiliates for the repayment of our 9.19 percent indirect share of the Bakken Pipeline joint venture's debt due in 2022. Growth capital expenditures and investments in affiliates during the three months endedMarch 31, 2022 were primarily for gas gathering, processing and de-ethanization projects in our Bakken, Marcellus, and Southwest basins and the expansion of our crude gathering systems in the Permian and Bakken basins. Spending for the quarter also included the$60 million contribution to our Bakken Pipeline joint venture to fund our share of a debt repayment by the joint venture. We continuously evaluate our capital plan and make changes as conditions warrant. 38 -------------------------------------------------------------------------------- Table of Contents Our capital expenditures are shown in the table below: Three Months Ended March 31, (In millions) 2022 2021 Capital expenditures: Growth capital expenditures $
148 $ 71
Investments in unconsolidated affiliates 110 35 Capitalized interest (2) (5) Total growth capital expenditures 256 101 Maintenance capital expenditures 24 18 Maintenance capital reimbursements (10) (7) Total maintenance capital expenditures 14 11 Total growth and maintenance capital expenditures 270 112 Investments in unconsolidated affiliates(1) (110) (35) Growth and maintenance capital reimbursements(2) 10 7 Decrease in capital accruals (3) 37 Capitalized interest 2 5 Additions to property, plant and equipment, net(1) $
169
(1) Investments in unconsolidated affiliates 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, 2022 , our contractual cash obligations included third-party and related party 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, 2022 , our third-party long-term debt obligations increased by$1.2 billion , primarily due to the issuance of the$1.5 billion aggregate principal amount of 4.950 percent 2052 Senior Notes, discussed above. A portion of the issuance was used to repay amounts outstanding on the MPLX Credit Agreement. There were no other material changes to our contractual obligations outside the ordinary course of business sinceDecember 31, 2021 .
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 14. 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
We provide MPC with crude oil and product pipeline and trucking transportation
services based on regulated tariff/contracted rates, as well as storage,
terminal, fuels distribution, and inland marine transportation services based on
contracted rates. We also have agreements with MPC under which we receive fees
for operating MPC's retained pipeline assets, providing management services for
the marine business, and operating certain of MPC's equity method investments.
MPC provides us with certain services related to information technology,
engineering, legal, accounting, treasury, human resources and other
administrative services under employee services and omnibus services agreements.
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The below table shows the percentage of "Total revenues and other income" as
well as "Total costs and expenses" with MPC:
Three Months Ended March 31,
2022 2021
Total revenues and other income 48 % 51 %
Total costs and expenses 24 % 29 %
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 ended
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. During the three months endedMarch 31, 2022 , environmental remediation costs increased due to a release of crude oil on our pipeline nearEdwardsville, Illinois in March of 2022. There have been no additional changes to our environmental matters and compliance costs since our Annual Report on Form 10-K for the year endedDecember 31, 2021 .
Critical Accounting Estimates
As ofMarch 31, 2022 , there have been no significant changes to our critical accounting estimates since our Annual Report on Form 10-K for the year endedDecember 31, 2021 .
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 the Consolidated Financial Statements.
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