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 .
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," "intend," "may," "objective," "opportunity," "outlook," "plan," "policy," "position," "potential," "predict," "priority," "project," "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") plans and goals, including those
related to greenhouse gas ("GHG") emissions, diversity and inclusion and ESG
reporting;
•future levels of capital, environmental or maintenance expenditures, general and administrative and other expenses;
•the success or timing of completion of ongoing or anticipated capital or maintenance projects;
•business strategies, growth opportunities and expected investments;
•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. Forward-looking and other statements regarding our ESG plans and goals are not an indication that these statements are material to investors or required to be disclosed in our filings with theSEC . In addition, historical, current, and forward-looking ESG-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future. 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: 27 -------------------------------------------------------------------------------- Table of Contents •the continuance or escalation of the military conflict betweenRussia andUkraine , and related sanctions and market disruptions; •general economic, political or regulatory developments, including inflation, interest rates, 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;
•changes in estimates or projections used to assess fair value of intangible assets, goodwill and property and equipment and/or strategic decisions or other developments with respect to our assets that cause impairment charges;
•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 general economic, market, industry or business conditions as a result of the COVID-19 pandemic, other infectious disease outbreaks, natural hazards, extreme weather events, the military conflict betweenRussia andUkraine , other conflicts, inflation, rising interest rates or otherwise;
•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;
•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.
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For additional risk factors affecting our business, see the risk factors
described in our Annual Report on Form 10-K for the year ended December 31,
2021 . We undertake no obligation to update any forward-looking statement except
to the extent required by applicable law.
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 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 endedSeptember 30, 2022 andSeptember 30, 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-20220930_g1.jpg]]
(1) The 2022 amounts include non-cash gain on a lease reclassification of
Other Highlights
•Generated net cash provided by operating activities of$1,039 million , distributable cash flow of$1,264 million , and adjusted free cash flow after distributions of$22 million in the third quarter of 2022. •Announced a third quarter 2022 distribution of$0.7750 per common unit, representing an increase of 10 percent over the prior quarter's distribution, resulting in a distribution coverage ratio of 1.58x for the third quarter. •Returned$180 million and$315 million of cash to unitholders in the three and nine months endedSeptember 30, 2022 , respectively, through the repurchase of common units under our unit repurchase program. We repurchased approximately 6 million and 10 million common units during the three and nine months endedSeptember 30, 2022 , respectively. As ofSeptember 30, 2022 , we had$1,006 million remaining under the unit repurchase authorizations.
Current Economic Environment
Through the first nine months of 2022, our results were favorably impacted by the continuing recovery in the environment in which our business operates. The increase in global demand for refined products and global commodity supply constraints have contributed to improved throughputs and higher natural gas and NGL prices. We are unable to predict the potential effects that resurgences of COVID-19 or the continuance or escalation of the military conflict betweenRussia andUkraine , and related sanctions or market disruptions, may have on our financial position and results. It remains uncertain how long these conditions may last or how severe they may become. 29
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In 2022, data indicates a sharp rise in inflation in theU.S. and globally. Current and future inflationary effects may be driven by, among other things, supply chain disruptions, governmental stimulus or fiscal policies and increasing demand for certain goods and services as recovery from the COVID-19 pandemic continues. We have observed higher costs for labor and materials used in our business. We cannot predict the effect of rising interest rates, the concern of a recession, and higher inflation and fuel prices on demand for our products and services. 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, adjusted free cash flow ("Adjusted FCF") and adjusted 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) gain on sales-type leases; (viii) noncontrolling interests;
and (ix) 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
maintenance capital expenditures paid out; and (vi) other adjustments as deemed
necessary. Segment Adjusted EBITDA represents Adjusted EBITDA attributable to
the reportable segments.
We define Adjusted 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 adjusted free cash flow
after distributions as Adjusted FCF less base distributions to common and
preferred unitholders.
We believe that the presentation of Adjusted EBITDA, DCF, Adjusted FCF and
adjusted 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 Adjusted FCF and adjusted 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 Adjusted FCF and adjusted 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
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,
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. This discussion should be read in conjunction with Item 1.
Financial Statements and is intended to provide investors with a reasonable
basis for assessing our historical operations, but should not serve as the only
criteria for predicting our future performance.
Three Months Ended September 30, Nine Months Ended September 30,
(In millions) 2022 2021 Variance 2022 2021 Variance
Revenues and other income:
Total revenues and other income(1)
371 298 73 981 864 117
Purchased product costs 540 421 119 1,670 1,035 635
Rental cost of sales 22 33 (11) 101 97 4
Rental cost of sales - related parties 10 24 (14) 44 86 (42)
Purchases - related parties 364 307 57 1,034 902 132
Depreciation and amortization 302 324 (22) 925 971 (46)
Impairment expense - - - - 42 (42)
General and administrative expenses 88 94 (6) 248 267 (19)
Other taxes 30 27 3 97 93 4
Total costs and expenses 1,727 1,528 199 5,100 4,357 743
Income from operations 1,674 1,031 643 3,851 2,936 915
Related-party interest and other
financial costs - 2 (2) 5 4 1
Interest expense, net of amounts
capitalized 217 197 20 627 590 37
Other financial costs 19 21 (2) 59 67 (8)
Income before income taxes 1,438 811 627 3,160 2,275 885
Provision for income taxes 1 - 1 6 1 5
Net income 1,437 811 626 3,154 2,274 880
Less: Net income attributable to
noncontrolling interests 9 9 - 26 27 (1)
Net income attributable to MPLX LP 1,428 802 626 3,128 2,247 881
Adjusted EBITDA attributable to MPLX
LP(2) 1,471 1,389 82 4,321 4,115 206
DCF attributable to GP and LP
unitholders(2) $ 1,231 $ 1,143 (1) The three and nine months endedSeptember 30, 2022 include a$509 million non-cash gain on a lease reclassification. See Note 14 in the unaudited consolidated financial statements for additional information. (2) Non-GAAP measure. See reconciliation below to the most directly comparable GAAP measures. 31
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Three Months Ended September 30, Nine Months Ended September 30,
(In millions) 2022 2021 Variance 2022 2021 Variance
Reconciliation of Adjusted EBITDA attributable to
MPLX LP and DCF attributable to GP and LP
unitholders from Net income:
Net income $ 1,437 $ 811 $ 626 $ 3,154 $ 2,274 $ 880
Provision for income taxes 1 - 1 6 1 5
Interest and other financial costs 236 220 16 691 661 30
Income from operations 1,674 1,031 643 3,851 2,936 915
Depreciation and amortization 302 324 (22) 925 971 (46)
Impairment expense - - - - 42 (42)
Income from equity method investments (125) (92) (33) (335) (228) (107)
Distributions/adjustments related to equity method investments 166 129 37 450 371 79 Gain on sales-type leases (509) - (509) (509) - (509) Other (27) 6 (33) (32) 52 (84) Adjusted EBITDA 1,481 1,398 83 4,350 4,144 206 Adjusted EBITDA attributable to noncontrolling interests (10) (9) (1) (29) (29)
-
Adjusted EBITDA attributable to MPLX LP 1,471 1,389 82 4,321 4,115 206 Deferred revenue impacts 39 14 25 87 76 11 Sales-type lease payments, net of income 3 14 (11) 13 68
(55)
Net interest and other financial costs(1) (216) (200) (16) (635) (618)
(17)
Maintenance capital expenditures, net of reimbursements (40) (21) (19) (93) (50)
(43)
Equity method investment maintenance capital expenditures paid out (4) (1) (3) (10) (4) (6) Other 11 (4) 15 28 (9) 37 DCF 1,264 1,191 73 3,711 3,578 133 Preferred unit distributions (33) (48) 15 (96) (110)
14
DCF attributable to GP and LP unitholders
147
(1) Excludes gain/ loss on extinguishment of debt and amortization of deferred financing costs.
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Nine Months Ended September 30,
(In millions) 2022 2021 Variance
Reconciliation of Adjusted EBITDA attributable to
$ 3,651 $ 3,671 $ (20) Changes in working capital items 60 (143) 203 All other, net (51) (11) (40) Loss/ (gain) on extinguishment of debt 1 (10) 11 Net interest and other financial costs(1) 635 618 17 Other adjustments to equity method investment distributions 45 10 35 Other 9 9 - Adjusted EBITDA 4,350 4,144 206 Adjusted EBITDA attributable to noncontrolling interests (29) (29) - Adjusted EBITDA attributable to MPLX LP 4,321 4,115 206 Deferred revenue impacts 87 76 11 Sales-type lease payments, net of income(2) 13 68 (55) Net interest and other financial costs(1) (635) (618) (17) Maintenance capital expenditures, net of reimbursements (93) (50) (43) Equity method investment maintenance capital expenditures paid out (10) (4) (6) Other 28 (9) 37 DCF 3,711 3,578 133 Preferred unit distributions (96) (110) 14 DCF attributable to GP and LP unitholders $
3,615
(1) Excludes gain/loss on extinguishment of debt and amortization of deferred financing costs. (2) The nine months endedSeptember 30, 2021 includes one-time impact from Refining Logistics harmonization project of$54 million .
Three months ended
Total revenues and other income increased$842 million in the third quarter of 2022 compared to the same period of 2021. This was primarily driven by a contract modification that resulted in a non-cash gain on sales-type lease of$509 million . Also contributing to the increase were higher volumes and prices in the G&P segment of approximately$221 million . There were also increased revenue from terminal activities, higher pipeline throughput, and fee escalations, as well as higher income from equity method investments. Cost of revenues increased$73 million in the third quarter of 2022 compared to the same period of 2021. This was primarily due to higher expenses related to repairs and maintenance, project spend and energy costs.
Purchased product costs increased
Rental cost of sales and rental cost of sales - related parties decreased$25 million in the third quarter of 2022 compared to the same period of 2021. This was primarily due modifications to lease contracts which resulted in a greater portion of costs being recorded to purchases - related parties, as noted below. Purchases - related parties increased$57 million in the third quarter of 2022 compared to the same period of 2021. This was primarily due to modifications to lease contracts which resulted in a greater portion of costs now being recorded to purchases - related parties as opposed to rental cost of sales - related parties costs, as noted above, as well as to increased transportation, and project expenses. Depreciation and amortization decreased$22 million in the third quarter of 2022 compared to the same period of 2021. This was primarily due to accelerated depreciation on idled assets recorded in the third quarter of 2021, and lower depreciation as a result of the derecognition of fixed assets resulting from the modification of certain lease contracts resulting in sales-type lease accounting treatment in the third quarter of 2022. 33 -------------------------------------------------------------------------------- Table of Contents Nine months endedSeptember 30, 2022 compared to nine months endedSeptember 30, 2021 Total revenues and other income increased$1,658 million in the first nine months of 2022 compared to the same period of 2021. This was primarily due to higher prices of$576 million and product volumes of$342 million within the G&P segment. The increase also includes a non-cash gain on sales-type lease of$509 million as a result of a contract modification in the third quarter of 2022, as well as a$107 million increase in income from equity method investments in the 2022 period. Higher service revenue within our L&S segment of$103 million , driven primarily by higher pipeline throughput and terminal activities, also contributed to the increase in the 2022 period.
Cost of revenues increased
Purchased product costs increased$635 million in the first nine months of 2022 compared to the same period of 2021. This was primarily due to higher prices of$483 million and higher volumes of$252 million , primarily in the Southwest, partially offset by a decrease of$103 million due to changes in the fair value of our embedded derivative. Rental cost of sales and rental cost of sales - related parties decreased$38 million in the first nine months 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. The decreases were partially offset by higher operating costs and repairs and maintenance costs. Purchases - related parties increased$132 million in the first nine months 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. There were also increased transportation costs. Depreciation and amortization decreased$46 million in the first nine months of 2022 compared to the same period of 2021. This was primarily due to accelerated depreciation on idled assets recorded in the 2021 period, and lower depreciation as a result of the derecognition of fixed assets resulting from the modification of certain lease contracts resulting in sales-type lease accounting treatment. 34
-------------------------------------------------------------------------------- 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) gain on sales-type leases; (vii) noncontrolling interests; and (viii) 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 and nine months ended
L&S Segment
Third Quarter L&S Segment Financial Highlights (in millions)
[[Image Removed: mplx-20220930_g2.jpg]][[Image Removed: mplx-20220930_g3.jpg]]
[[Image Removed: mplx-20220930_g4.jpg]]
Three Months Ended September 30, Nine Months Ended September 30,
(In millions) 2022 2021 Variance 2022 2021 Variance
Service revenue $ 1,038 $ 983 $ 55 $ 3,031 $ 2,928 $ 103
Rental income 210 172 38 593 597 (4)
Product related revenue 4 3 1 15 11 4
Sales-type lease revenue 118 132 (14) 343 305 38
Income from equity method investments 72 41 31 183 112 71
Other income 8 15 (7) 42 46 (4)
Total segment revenues and other income 1,450 1,346 104 4,207 3,999 208
Cost of revenues 160 164 (4) 460 451 9
Purchases - related parties 265 232 33 762 675 87
Depreciation and amortization 128 131 (3) 387 414 (27)
General and administrative expenses 48 48 - 134 140 (6)
Other taxes 19 19 - 60 57 3
Segment income from operations 830 752 78 2,404 2,262 142
Depreciation and amortization 128 131 (3) 387 414 (27)
Income from equity method investments (72) (41) (31) (183) (112) (71)
Distributions/adjustments related to equity
method investments 75 58 17 212 174 38
Other 8 4 4 19 9 10
Segment Adjusted EBITDA(1) 969 904 65 2,839 2,747 92
Capital expenditures 80 85 (5) 238 220 18
Investments in unconsolidated affiliates(2)
(1) See the Reconciliation of Adjusted EBITDA attributable to
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(2) The nine months ended September 30, 2022 includes a contribution of $60
million to our Bakken Pipeline joint venture to fund our share of a debt
repayment by the joint venture.
Three months ended
Service revenue increased$55 million in the third quarter of 2022 compared to the same period of 2021. This was primarily driven by increased revenue from terminal activities, increased pipeline fees due to increased throughput outweighing lower average tariff rates, and annual fee escalations. There was also an increase of$9 million from changes in the presentation of revenue between service revenue, rental income and sales-type lease revenue driven by modifications to agreements with MPC. Rental income increased$38 million in the third quarter of 2022 compared to the same period of 2021. This was primarily due annual fee escalations. There was also a net increase of$3 million from changes in the presentation of revenue between service revenue, rental income and sales-type lease revenue driven by modifications to agreements with MPC. Sales-type lease revenue - related parties decreased$14 million in the third quarter of 2022 compared to the same period of 2021. This was primarily due to a decrease of$12 million from changes in the presentation of revenue between service revenue, rental income and sales-type lease revenue as a result of modifications to agreements with MPC. Income from equity methods investments increased$31 million in the third 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$4 million and Purchases - related parties increased$33 million in the third quarter of 2022 compared to the same period of 2021. Modifications to lease contracts resulted in a greater portion of costs being recorded to purchases - related parties as opposed to rental cost of sales - related parties, which is included in cost of revenues, causing a$7 million increase and offsetting decreases to cost of revenues. The overall net increase in the accounts was due to higher energy costs and project expense in the third quarter of 2022.
Nine months ended
Service revenue increased$103 million in the first nine months of 2022 compared to the same period of 2021. This was primarily due to increased revenue from terminal activities and annual fee escalations. Additionally, there was a net increase in pipeline fees due to increased throughput outweighing lower average tariff rates. There was also an increase of$9 million from changes in the presentation of revenue between service revenue, rental income and sales-type lease revenue driven by modifications to agreements with MPC. Rental income decreased$4 million in the first nine months of 2022 compared to the same period of 2021. This was due to a net decrease of$49 million from changes in the presentation of lease income between service revenue, rental income and sales-type lease revenue as a result of modifications to lease contracts. The decrease was partially offset by increased storage fees and fee escalations. Sales-type lease revenue - related parties increased$38 million in the first nine months of 2022 compared to the same period of 2021. This was primarily due to an increase of$40 million from changes in the presentation of lease income between service revenue, rental income and sales-type lease revenue driven by modifications of lease contracts. Income from equity methods investments increased$71 million in the first nine months 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 increased$9 million and Purchases - related parties increased$87 million in the first nine months of 2022 compared to the same period of 2021. Modifications to lease contracts resulted in a greater portion of costs being recorded to purchases - related parties as opposed to rental cost of sales - related parties, which is included in cost of revenues, causing a$47 million increase and offsetting decreases to cost of revenues. The overall increase in the accounts was driven by higher project expense and higher environmental response and remediation costs compared to the first nine months of 2021, partially offset by decreased employee-related costs from MPC. Depreciation and amortization decreased$27 million in the first nine months of 2022 compared to the same period of 2021. This was primarily due to the derecognition of fixed assets due to the modification of certain lease contracts and accelerated depreciation on refining logistics assets at MPC's idledGallup refinery . 36
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L&S Operating Data
[[Image Removed: mplx-20220930_g5.jpg]]
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
L&S
Pipeline throughput (mbpd)
Crude oil pipelines 3,596 3,440 3,551 3,399
Product pipelines 2,169 2,061 2,125 2,008
Total pipelines 5,765 5,501 5,676 5,407
Average tariff rates ($ per barrel)(1)
Crude oil pipelines $ 0.93 $ 0.97 $ 0.91 $ 0.96
Product pipelines 0.80 0.79 0.80 0.78
Total pipelines $ 0.88 $ 0.90 $ 0.86 $ 0.89
Terminal throughput (mbpd) 3,026 3,046 3,023 2,884
Marine Assets (number in operation)(2)
Barges 296 299 296 299
Towboats 23 23 23 23
(1) Average tariff rates calculated using pipeline transportation revenues
divided by pipeline throughput barrels.
(2) Represents total at end of period.
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G&P Segment
Third Quarter G&P Segment Financial Highlights (in millions)
[[Image Removed: mplx-20220930_g6.jpg]][[Image Removed: mplx-20220930_g7.jpg]]
[[Image Removed: mplx-20220930_g8.jpg]]
(1) The 2022 amounts include non-cash gain on a lease reclassification of $509
million . See Note 14 in the unaudited consolidated financial statements for
additional information.
Three Months Ended September 30, Nine Months Ended September 30,
(In millions) 2022 2021 Variance 2022 2021 Variance
Service revenue $ 537 $ 519 $ 18 $ 1,528 $ 1,520 $ 8
Rental income 66 80 (14) 239 263 (24)
Product related revenue 742 553 189 2,263 1,357 906
Sales-type lease revenue 28 - 28 28 - 28
Income from equity method investments 53 51 2 152 116 36
Other income(1) 525 10 515 534 38 496
Total segment revenues and other income 1,951 1,213 738 4,744 3,294 1,450
Cost of revenues 243 191 52 666 596 70
Purchased product costs 540 421 119 1,670 1,035 635
Purchases - related parties 99 75 24 272 227 45
Depreciation and amortization 174 193 (19) 538 557 (19)
Impairment expense - - - - 42 (42)
General and administrative expenses 40 46 (6) 114 127 (13)
Other taxes 11 8 3 37 36 1
Segment income from operations 844 279 565 1,447 674 773
Depreciation and amortization 174 193 (19) 538 557 (19)
Gain on sales-type leases (509) - (509) (509) - (509)
Impairment expense - - - - 42 (42)
Income from equity method investments (53) (51) (2) (152) (116) (36)
Distributions/adjustments related to
equity method investments 91 71 20 238 197 41
Other (35) 2 (37) (51) 43 (94)
Adjusted EBITDA attributable to
noncontrolling interests (10) (9) (1) (29) (29) -
Segment Adjusted EBITDA(2) 502 485 17 1,482 1,368 114
Capital expenditures 146 69 77 336 135 201
Investments in unconsolidated affiliates $ 30
(1) The three and nine months endedSeptember 30, 2022 include a$509 million non-cash gain on a lease reclassification. See Note 14 in the unaudited consolidated financial statements for additional information. (2) See the Reconciliation of Adjusted EBITDA attributable toMPLX LP and DCF attributable to GP and LP unitholders from Net income table for the reconciliation to the most directly comparable GAAP measure. 38
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Table of Contents
Three months ended
Service revenue increased$18 million in the third quarter of 2022 compared to the same period of 2021. This was primarily due to higher fees from higher volumes in the Southwest and Marcellus, an increase in revenue from cost reimbursements, partially offset by a decrease in revenue due to a contract modification resulting in a change in the presentation of the related income from service revenue to rental income. Rental income decreased$14 million in the third quarter of 2022 compared to the same period of 2021. This was primarily due to changes in the presentation of revenue between rental income and sales-type lease revenue as a result of modifications to an agreement with a third party in the third quarter of 2022, partially offset by a contract modification resulting in a change in the presentation of the related income from service revenue to rental income. Product related revenue increased$189 million in the third quarter of 2022 compared to the same period of 2021. This was primarily due to higher volumes in the Southwest and Rockies of$132 million , and higher prices in the Southwest of approximately$57 million . Sales-type lease revenue increased$28 million in the third quarter of 2022 compared to the same period of 2021. This was due to the modification of a gathering and compression agreement in the third quarter of 2022 that resulted in a change in the presentation of revenue between rental income and sales-type lease revenue. Other income increased$515 million in the third quarter of 2022 compared to the same period of 2021 and includes a gain on sales-type lease of$509 million as a result of a contract modification in the third quarter of 2022. Cost of revenues increased$52 million in the third quarter of 2022 compared to the same period of 2021. This increase is attributable to higher operating costs and repairs and maintenance costs in the Marcellus, Rockies, Southwest, and Southern Appalachia. Purchased product costs increased$119 million in the third quarter of 2022 compared to the same period of 2021. This was primarily due to higher volumes in the Southwest and Rockies of$113 million , and higher prices of$53 million in the Southwest, partially offset by a decrease of$48 million due to changes in the fair value of our embedded derivative. Purchases - related parties increased$24 million in the third quarter of 2022 compared to the same period of 2021. This was primarily due to an increase in transportation costs. Depreciation and amortization decreased$19 million in the third quarter of 2022 compared to the same period of 2021. This was primarily due to accelerated depreciation on idled assets recorded in the third quarter of 2021, and lower depreciation as a result of the derecognition of fixed assets as a result of a lease reclassification in the third quarter of 2022. This decrease was partially offset by depreciation on new assets placed in service after the third quarter of 2021.
Nine months ended
Service revenue increased$8 million in the first nine months of 2022 compared to the same period of 2021. This was primarily due to higher fees from higher volumes in the Southwest of$22 million , an increase of revenue from cost reimbursements in the Marcellus, an increase 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, partially offset by decreases in revenue related to cost reimbursements and lower volumes in the Rockies. Rental income decreased$24 million in the first nine months of 2022 compared to the same period of 2021. This was primarily due to changes in the presentation of revenue between rental income, sales-type lease revenue and service revenue as a result of modifications to agreements with third parties, partially offset by an increase in cost reimbursement revenue in the Marcellus and Southern Appalachia. Product related revenue increased$906 million in the first nine months of 2022 compared to the same period of 2021. This was primarily due to higher prices in the Southwest, Marcellus, Southern Appalachia and Bakken of approximately$576 million and higher fees from higher volumes in the Southwest, Rockies, Bakken and Marcellus of$330 million . Sales-type lease revenue increased$28 million in the first nine months of 2022 compared to the same period of 2021. This was due to the modification of a gathering and compression agreement in the third quarter of 2022 that resulted in a change in the presentation of revenue between rental income and sales-type lease revenue. Income from equity method investments increased$36 million in the first nine months 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 and an impairment recorded in the second quarter of 2021, partially offset by increased facility expenses from a joint venture in the Southwest. 39 -------------------------------------------------------------------------------- Table of Contents Other income increased$496 million in the first nine months of 2022 compared to the same period of 2021 primarily due to a non-cash gain on lease reclassification of$509 million as a result of a contract modification in the third quarter of 2022. The gain was partially offset by a$23 million loss on disposal of assets during the 2022 period. Cost of revenues increased$70 million in the first nine months of 2022 compared to the same period of 2021. This increase is attributable to higher operating costs and repairs and maintenance costs in the Marcellus, Rockies, and Southern Appalachia. Purchased product costs increased$635 million in the first nine months of 2022 compared to the same period of 2021. This was primarily due to higher prices of$483 million in the Southwest and Southern Appalachia, higher volumes in the Southwest and Rockies, partially offset by a decrease of$103 million due to changes in the fair value of our embedded derivative.
Purchases - related parties increased
Depreciation and amortization decreased$19 million in the third quarter of 2022 compared to the same period of 2021. This was primarily due to accelerated depreciation on idled assets recorded in the third quarter of 2021, and lower depreciation as a result of the derecognition of fixed assets as a result of a lease reclassification in the third quarter of 2022. This decrease was partially offset by depreciation on new assets placed in service after the third quarter of 2021. Impairment expense decreased$42 million in the first nine months of 2022 compared to the same period of 2021 due to impairments recorded in the second quarter of 2021 related to our continued emphasis on portfolio optimization with the closure of certain non-core assets. 40 -------------------------------------------------------------------------------- Table of Contents G&P Operating Data [[Image Removed: mplx-20220930_g9.jpg]][[Image Removed: mplx-20220930_g10.jpg]][[Image Removed: mplx-20220930_g11.jpg]] Three Months Ended Three Months Ended September 30, 2022 September 30, 2021 MPLX LP MPLX LP(1) Operated(2) MPLX LP(1) MPLX LP Operated(2) G&P Gathering Throughput (MMcf/d) Marcellus Operations 1,325 1,325 1,373 1,373 Utica Operations - 2,381 - 1,798 Southwest Operations 1,362 1,642 1,339 1,516 Bakken Operations 147 147 147 147 Rockies Operations 452 588 439 585 Total gathering throughput 3,286 6,083 3,298 5,419 Natural Gas Processed (MMcf/d) Marcellus Operations 4,060 5,535 4,099 5,638 Utica Operations - 518 - 464 Southwest Operations 1,502 1,666 1,312 1,480 Southern Appalachian Operations 205 205 236 236 Bakken Operations 130 130 146 146 Rockies Operations 462 462 419 419 Total natural gas processed 6,359 8,516 6,212 8,383 C2 + NGLs Fractionated (mbpd) Marcellus Operations(3) 496 496 487 487 Utica Operations(3) - 30 - 25 Southwest Operations - - - - Southern Appalachian Operations 12 12 12 12 Bakken Operations 21 21 25 25 Rockies Operations 3 3 4 4 Total C2 + NGLs fractionated(4) 532 562 528 553 41
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Table of Contents
Nine Months Ended Nine Months Ended
September 30, 2022 September 30, 2021
MPLX LP(1) MPLX LP Operated(2) MPLX LP(1) MPLX LP Operated(2)
G&P
Gathering Throughput (MMcf/d)
Marcellus Operations 1,308 1,308 1,324 1,324
Utica Operations - 2,048 - 1,633
Southwest Operations 1,367 1,605 1,356 1,487
Bakken Operations 147 147 149 149
Rockies Operations 424 556 450 602
Total gathering throughput 3,246 5,664 3,279 5,195
Natural Gas Processed (MMcf/d)
Marcellus Operations 4,021 5,503 4,167 5,640
Utica Operations - 488 - 492
Southwest Operations(5) 1,446 1,616 1,311 1,436
Southern Appalachian Operations 220 220 229 229
Bakken Operations 138 138 148 148
Rockies Operations 436 436 430 430
Total natural gas processed 6,261 8,401 6,285 8,375
C2 + NGLs Fractionated (mbpd)
Marcellus Operations(3) 478 478 484 484
Utica Operations(3) - 28 - 26
Southwest Operations(5) - - 3 3
Southern Appalachian Operations 11 11 12 12
Bakken Operations 21 21 23 23
Rockies Operations 3 3 4 4
Total C2 + NGLs fractionated(4) 513 541 526 552
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Pricing Information
Natural Gas NYMEX HH ($ per MMBtu) $ 7.91 $ 4.31 $ 6.67 $ 3.34 C2 + NGL Pricing ($ per gallon)(6)
$ 1.11 $ 0.81 (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) 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. (4) Purity ethane makes up approximately 217 mbpd and 199 mbpd of total MPLX Operated, fractionated products for the three months endedSeptember 30, 2022 and 2021, respectively, and approximately 200 mbpd and 196 mbpd of total fractionated products for the nine months endedSeptember 30, 2022 and 2021, respectively. Purity ethane makes up approximately 210 mbpd and 194 mbpd of totalMPLX LP consolidated, fractionated products for the three months endedSeptember 30, 2022 and 2021, respectively, and approximately 195 mbpd and 191 mbpd of total fractionated products for the nine months endedSeptember 30, 2022 and 2021, respectively. (5) The Southwest Operations for the nine months endedSeptember 30, 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. (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. 42 -------------------------------------------------------------------------------- Table of Contents 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 by 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$121 million atSeptember 30, 2022 and$13 million atDecember 31, 2021 . The change in cash, cash equivalents and restricted cash was due to the factors discussed below. Net cash provided by (used in) operating activities, investing activities and financing activities were as follows: Nine Months Ended September 30, (In millions) 2022 2021 Net cash provided by (used in): Operating activities$ 3,651 $ 3,671 Investing activities (676) (377) Financing activities (2,867) (3,270) Total$ 108 $ 24 Net cash provided by operating activities decreased$20 million in the first nine months of 2022 compared to the first nine months of 2021, primarily due to an increase in working capital requirements offset by improved results from operations in the first nine months of 2022 compared to the first nine months of 2021. Net cash used in investing activities increased$299 million in the first nine months of 2022 compared to the first nine months of 2021, primarily due to higher 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. Cash used in investing activities also included$28 million for the acquisition of assets during the nine months endedSeptember 30, 2022 . Financing activities were an$2,867 million use of cash in the first nine months of 2022 compared to a$3,270 million use of cash in the first nine months of 2021. The decrease in the use of cash was due to lower net debt repayments of$273 million in the first nine months of 2022 compared to net debt repayments of$576 million in the same period of 2021 as well as$150 million in lower unit repurchases in the first nine months of 2022 compared to the first nine months of 2021. The decreases in the first nine months of 2022 were partially offset with an increase in distributions on common units and debt issuance costs incurred during the period. 43 -------------------------------------------------------------------------------- Table of Contents Adjusted Free Cash Flow The following table provides a reconciliation of Adjusted FCF and adjusted free cash flow after distributions from net cash provided by operating activities for the three and nine months endedSeptember 30, 2022 andSeptember 30, 2021 . Three Months Ended Nine Months Ended September 30, September 30, (In millions) 2022 2021 2022 2021 Net cash provided by operating activities$ 1,039 $ 1,182 $ 3,651 $ 3,671 Adjustments to reconcile net cash provided by operating activities to adjusted free cash flow Net cash used in investing activities (265) (132) (676) (377) Contributions from MPC 13 14 30 31 Distributions to noncontrolling interests (10) (9) (29) (29) Adjusted free cash flow 777 1,055 2,976 3,296 Distributions paid to common and preferred unitholders (755) (745) (2,248) (2,228) Adjusted free cash flow after distributions$ 22 $ 310 $ 728 $ 1,068 Debt and Liquidity Overview MPLX Credit Agreement OnJuly 7, 2022 , MPLX entered into a new five-year credit agreement (the "MPLX Credit Agreement") to replace the previous$3.5 billion credit facility that was scheduled to expireJuly 2024 . The new MPLX Credit Agreement matures inJuly 2027 and, among other things, provides for a$2.0 billion unsecured revolving credit facility and letter of credit issuing capacity of up to$150 million . Letter of credit issuing capacity is included in, not in addition to, the$2.0 billion borrowing capacity. The financial covenants of the new MPLX Credit Agreement are substantially the same as those contained in the previous credit agreement. Borrowings under the MPLX Credit Agreement bear interest, at MPLX's election, at either the Adjusted Term SOFR or the Alternate Base Rate, both as defined in the MPLX Credit Agreement, plus an applicable margin.
Fixed Rate Senior Notes
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 intercompany loan agreement with MPC and under the previous credit agreement. OnAugust 11, 2022 , MPLX issued$1.0 billion aggregate principal amount of 4.950 percent senior notes dueSeptember 2032 (the "2032 Senior Notes") in an underwritten public offering. The 2032 Senior Notes were offered at a price to the public of 99.433 percent with interest payable semi-annually in arrears, commencing onMarch 1, 2023 . The net proceeds were used to redeem all of the 3.500 percent senior notes dueDecember 2022 and all of the 3.375 percent senior notes dueMarch 2023 , as discussed below. OnAugust 25, 2022 , MPLX redeemed all of the$500 million 3.500 percent senior notes dueDecember 2022 ,$14 million of which was issued byAndeavor Logistics LP , at 100.1010 percent of the aggregate principal amount, plus accrued and unpaid interest to, but not including the redemption date. OnSeptember 15, 2022 , MPLX redeemed all of the$500 million 3.375 percent senior notes dueMarch 2023 at 100 percent of the aggregate principal amount. The impact of these debt extinguishments was not material to the Consolidated Statements of Income. Our intention is to maintain an investment-grade credit profile. As ofSeptember 30, 2022 , the credit ratings on our senior unsecured debt were as follows: Rating Agency Rating Moody's Baa2 (stable outlook)Standard & Poor's BBB (stable outlook) Fitch BBB (stable outlook) 44
-------------------------------------------------------------------------------- Table of Contents 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 ofSeptember 30, 2022 , we were in compliance with the covenants, including the financial covenant with a ratio of Consolidated Total Debt to Consolidated EBITDA of 3.50 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
September 30, 2022
Available
(In millions) Total Capacity Outstanding Borrowings Capacity
MPLX Credit Agreement(1) $ 2,000 $ - $ 2,000
MPC Loan Agreement 1,500 - 1,500
Total $ 3,500 $ - 3,500
Cash and cash equivalents 121
Total liquidity $ 3,621 (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 changes in the number of common units during the nine months ended
(In units) Common Units Balance atDecember 31, 2021 1,016,178,378 Unit-based compensation awards 190,529 Units redeemed in unit repurchase program (10,353,035) Balance atSeptember 30, 2022 1,006,015,872 Unit Repurchase Program OnNovember 2, 2020 , we announced the board authorization of a unit repurchase program for the repurchase of up to$1 billion of MPLX's common units held by the public. OnAugust 2, 2022 we announced the board authorization for the repurchase of up to an additional$1.0 billion of MPLX common units held by the public. The authorizations have no expiration date. During the nine months endedSeptember 30, 2022 , we repurchased approximately 10 million common units at an average cost per unit of$31.98 and paid$315 million of cash. As ofSeptember 30, 2022 , we had repurchased a total of approximately 35 million units at an average cost per unit of$28.63 for a total of$994 million under the initial unit repurchase program, which reflects the 45 -------------------------------------------------------------------------------- Table of Contents repurchase of 532,326 common units for$16 million that were transacted in the third quarter of 2022 and settled in the fourth quarter of 2022. As ofSeptember 30, 2022 , we had$1,006 million remaining under the repurchase authorizations. We may utilize various methods to effect the repurchases, which could include open market repurchases, negotiated block transactions, accelerated unit repurchases, tender offers or open market solicitations for units, some of which may be effected through Rule 10b5-1 plans. The timing and amount of future repurchases, if any, will depend upon several factors, including market and business conditions, and such repurchases may be discontinued at any time.
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$264 million per quarter, or$1,056 million per year, based on the number of common units outstanding atSeptember 30, 2022 . OnNovember 1, 2022 , MPLX declared a cash distribution for the third quarter of 2022, totaling$777 million , or$0.7750 per common unit. This distribution will be paid onNovember 22, 2022 to common unitholders of record onNovember 15, 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, cash distribution payments of$21 million were paid to Series B unitholders onFebruary 15, 2022 andAugust 15, 2022 . MPLX has the right to redeem some or all of the Series B preferred units, at any time, on or afterFebruary 15, 2023 at a redemption price of$1,000 per unit plus any accumulated and unpaid distributions up to the redemption date. The allocation of total cash distributions is as follows for the three and nine months endedSeptember 30, 2022 and 2021. MPLX's distributions are declared subsequent to quarter end; therefore, the following table represents total cash distributions applicable to the period in which the distributions were earned. Three Months Ended Nine Months Ended September 30, September 30, (In millions, except per unit data) 2022 2021 2022 2021 Distribution declared: Limited partner units - public(1)$ 275 $ 476 $ 789 $ 998 Limited partner units - MPC(1) 502 829 1,415 1,719Total LP distribution declared 777 1,305 2,204 2,717 Series A preferred units(1) 23 38 65 79 Series B preferred units 10 10 31 31 Total distribution declared 810 1,353 2,300 2,827 Quarterly cash distributions declared per limited partner common unit$ 0.7750 $ 1.2800
(1) The three and nine months ended
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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 an unconsolidated affiliate 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 nine
months ended September 30, 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 and long-haul pipeline investments in
the Permian and Bakken basins. Spending for the period 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.
Our capital expenditures are shown in the table below:
Nine Months Ended
September 30,
(In millions) 2022 2021
Capital expenditures:
Growth capital expenditures $ 451 $ 274
Growth capital reimbursements(1) (70) (22)
Investments in unconsolidated affiliates 198 116 Return of capital (11) (36) Capitalized interest (6) (11) Total growth capital expenditures(2) 562
321
Maintenance capital expenditures 123
81
Maintenance capital reimbursements (30)
(31)
Capitalized interest (1)
(1)
Total maintenance capital expenditures 92
49
Total growth and maintenance capital expenditures 654
370
Investments in unconsolidated affiliates(3) (198)
(116)
Return of capital(3) 11
36
Growth and maintenance capital reimbursements(1)(4) 100
53
(Increase)/ decrease in capital accruals (39)
19
Capitalized interest 7
12
Additions to property, plant and equipment(3)$ 535
(1) Growth capital reimbursements include reimbursements from customers and our Sponsor. Prior periods have been updated to reflect these reimbursements to conform to the current period presentation. (2) Total growth capital expenditures exclude$28 million of acquisitions for the nine months endedSeptember 30, 2022 . (3) Investments in unconsolidated affiliates, return of capital, acquisitions, and additions to property, plant and equipment are shown as separate lines within investing activities in the Consolidated Statements of Cash Flows. (4) Growth capital reimbursements are included in changes in deferred revenue within the operating activities section of the Consolidated Statements of Cash Flows. Maintenance capital reimbursements are included in the Contributions from MPC line within financing activities section of the Consolidated Statements of Cash Flows. 47
-------------------------------------------------------------------------------- Table of Contents Contractual Cash Obligations As ofSeptember 30, 2022 , our contractual cash obligations included debt, finance and operating lease obligations, purchase obligations for services and to acquire property, plant and equipment, and other liabilities. During the nine months endedSeptember 30, 2022 , our debt obligations decreased by$250 million , primarily due to the repayment of amounts outstanding on the previous credit agreement, the MPC Loan Agreement, and the redemption of senior notes. These items were funded with proceeds from the issuance of senior notes, discussed above. 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 guarantees that are described in Note 15 of the unaudited consolidated financial statements and indemnities as disclosed in our Annual Report on Form 10-K for the year endedDecember 31, 2021 . 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, 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.
The below table shows the percentage of Total revenues and other income as well as Total costs and expenses with MPC:
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Total revenues and other income(1) 46 % 48 % 46 % 51 %
Total costs and expenses(2) 24 % 26 % 24 % 27 %
(1) 2022 periods exclude gain on sales-type leases. (2) 2021 periods exclude losses for impairment.
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, 2021 and Note 4 to the unaudited 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 previously disclosed in our Annual Report on Form 10-K for the year endedDecember 31, 2021 , actual expenditures may vary as the number and scope of environmental projects are revised as a result of improved technology or changes in regulatory requirements. During the nine months endedSeptember 30, 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 significant changes to our environmental matters and compliance costs during the nine months endedSeptember 30, 2022 .
Critical Accounting Estimates
As ofSeptember 30, 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 . 48
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Accounting Standards Not Yet Adopted
We have not identified any recent accounting pronouncements that are expected to have a material impact on our financial condition, results of operations or cash flows upon adoption. Accounting standards are discussed in Note 2 of the unaudited consolidated financial statements.
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