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, 2022 .
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 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: •general economic, political or regulatory developments, including inflation, interest rates, changes in governmental policies relating to refined petroleum products, crude oil, natural gas, NGLs, renewables, or taxation;
•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, or renewables;
•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;
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•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;
•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, other hydrocarbon-based products, or renewables;
•changes in the cost or availability of third-party vessels, pipelines, railcars and other means of transportation for crude oil, natural gas, NGLs, feedstocks, refined products, or renewables;
•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 undercapacity;
•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, refined products, or renewables;
•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, other hydrocarbon-based products, or renewables; •the imposition of windfall profit taxes or maximum refining margin penalties on companies operating in the energy industry inCalifornia or other jurisdictions; and
•our ability to successfully achieve our ESG goals and targets within the expected timeframe, if at all.
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 master limited partnership formed by MPC in 2012
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 primarily engages in the
gathering, transportation, storage and distribution of crude oil, refined
products, other hydrocarbon-based products, and renewables. 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 as well
as the transportation, fractionation, storage and marketing of NGLs.
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Significant Financial and Other Highlights
Significant financial highlights for the three months ended March 31, 2023 and
March 31, 2022 are shown in the chart below. Refer to the Results of Operations,
the Liquidity and Capital Resources, and Non-GAAP Financial Information sections
for further information.
[[Image Removed: 9341]](1) Non-GAAP measure. See reconciliations that follow for the most directly comparable GAAP measures.
Other Highlights •Generated$1,227 million of net cash provided by operating activities,$1,268 million of distributable cash flow attributable to MPLX, and$1,005 million of adjusted free cash flow in the first quarter of 2023. •Returned$821 million of capital to unitholders in the three months endedMarch 31, 2023 , in the form of distributions. •Announced a first quarter 2023 distribution of$0.7750 per common unit. •Issued$1.6 billion of senior notes and used the proceeds to redeem all of the$0.6 billion outstanding Series B preferred units and$1.0 billion of senior notes dueJuly 2023 . Current Economic Environment In 2023, data indicates a slowed increase in inflation in theU.S. and globally. We cannot predict the effect of rising interest rates, the concern of a recession, and 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, fostering a low-cost culture, and portfolio optimization. To the extent permitted by competition, regulation and our existing agreements, many of which provide for inflation-based adjustments, we have passed along a portion of our increased costs to our customers in the form of higher fees and expect to continue to do so in the future.
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 FCF
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.
We define Adjusted EBITDA as net income adjusted for: (i) provision for income
taxes; (ii) interest and other financial costs; (iii) depreciation and
amortization; (iv) income/(loss) from equity method investments; (v)
distributions and adjustments related to equity method investments; (vi) gain on
sales-type leases; (vii) impairment expense; (viii) noncontrolling interests;
and (ix) other adjustments, as applicable. 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.
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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; and (iii) cash distributions to noncontrolling interests. We define
Adjusted FCF 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 FCF 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 FCF 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 Results of Operations. For a reconciliation of Adjusted FCF and
Adjusted FCF after distributions to their most directly comparable measure
calculated and presented in accordance with GAAP, see Liquidity and Capital
Resources.
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 ASU No. 2016-02, Leases ("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.
Results of Operations
The following tables and discussion summarize 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 March 31,
(In millions) 2023 2022 Variance
Revenues and other income:
Total revenues and other income$ 2,713 $ 2,610 $ 103 Costs and expenses: Cost of revenues (excludes items below) 308 287 21 Purchased product costs 406 467 (61) Rental cost of sales 20 37 (17) Rental cost of sales - related parties 7 15 (8) Purchases - related parties 361 319 42 Depreciation and amortization 296 313 (17) General and administrative expenses 89 78 11 Other taxes 30 34 (4) Total costs and expenses 1,517 1,550 (33) Income from operations 1,196 1,060 136 Related-party interest and other financial costs - 4 (4) Interest expense, net of amounts capitalized 224 198 26 Other financial costs 19 20 (1) Income before income taxes 953 838 115 Provision for income taxes 1 5 (4) Net income 952 833 119 Less: Net income attributable to noncontrolling interests 9 8 1 Net income attributable to MPLX LP 943 825 118 Adjusted EBITDA attributable to MPLX LP(1) 1,519 1,393 126 DCF attributable to MPLX(1)$ 1,268 $ 1,210 $ 58
(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) 2023 2022 Variance
Reconciliation of Adjusted EBITDA attributable to
$ 952 $ 833 $ 119 Provision for income taxes 1 5 (4) Interest and other financial costs 243 222 21 Income from operations 1,196 1,060 136 Depreciation and amortization 296 313 (17) Income from equity method investments (134) (99) (35) Distributions/adjustments related to equity method investments 153 132 21 Other(1) 18 (4) 22 Adjusted EBITDA 1,529 1,402 127 Adjusted EBITDA attributable to noncontrolling interests (10) (9) (1) Adjusted EBITDA attributable to MPLX LP 1,519 1,393 126 Deferred revenue impacts 12 24 (12) Sales-type lease payments, net of income 4 5 (1) Net interest and other financial costs(2) (217) (204) (13) Maintenance capital expenditures, net of reimbursements (44) (14) (30)
Equity method investment maintenance capital expenditures paid out
(5) (3) (2)
Other (1) 9 (10)
DCF attributable to MPLX LP 1,268 1,210 58
Preferred unit distributions (28) (32) 4
DCF attributable to GP and LP unitholders
(1) Includes unrealized derivative gain/(loss), non-cash equity-based
compensation and other miscellaneous items.
(2) Excludes gain/loss on extinguishment of debt and amortization of deferred
financing costs.
Three Months Ended March 31,
(In millions) 2023 2022 Variance
Reconciliation of Adjusted EBITDA attributable to
$ 1,227 $ 1,125 $ 102 Changes in working capital items 48 118 (70) All other, net (9) (45) 36 Loss on extinguishment of debt 9 - 9 Net interest and other financial costs(1) 217 204 13 Other adjustments to equity method investment distributions 13 12 1 Other 24 (12) 36 Adjusted EBITDA 1,529 1,402 127 Adjusted EBITDA attributable to noncontrolling interests (10) (9) (1) Adjusted EBITDA attributable to MPLX LP 1,519 1,393 126 Deferred revenue impacts 12 24 (12) Sales-type lease payments, net of income 4 5 (1) Net interest and other financial costs(1) (217) (204) (13) Maintenance capital expenditures, net of reimbursements (44) (14) (30)
Equity method investment maintenance capital expenditures paid out
(5) (3) (2)
Other (1) 9 (10)
DCF attributable to MPLX LP 1,268 1,210 58
Preferred unit distributions (28) (32) 4
DCF attributable to GP and LP unitholders $
1,240
(1) Excludes gain/loss on extinguishment of debt and amortization of deferred financing costs.
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Three months ended
Total revenues and other income increased$103 million in the first quarter of 2023 compared to the same period of 2022. The increase was driven by higher throughput and rate escalations across the business and a$35 million increase in income from equity method investments. The increases were partially offset by a decrease in product sales revenue as a result of lower NGL prices during the first quarter of 2023 as compared to the same period of 2022. Cost of revenues increased$21 million and rental cost of sales (including related party) decreased$25 million in the first quarter of 2023 compared to the same period of 2022. These offsetting variances reflect the modification of a gathering and compression agreement in the third quarter of 2022 ("Third-Party Lease Modification") which resulted in a change in the presentation of expenses from rental cost of sales to cost of revenues. Purchased product costs decreased$61 million in the first quarter of 2023 compared to the same period of 2022. This was primarily due to lower prices of$157 million in the Southwest and Southern Appalachia, partially offset by higher volumes in the Southwest of$82 million and increase of$6 million due to changes in the fair value of our embedded derivative.
Purchases - related parties increased
Depreciation and amortization decreased$17 million in the first quarter of 2023 compared to the same period of 2022. This was primarily due to lower depreciation as a result of the derecognition of fixed assets in connection with the Third-Party Lease Modification in the third quarter of 2022. This decrease was partially offset by depreciation on new assets placed in service after the first quarter of 2022. Interest expense, net of amounts capitalized increased$26 million in the first quarter of 2023 compared to the same period of 2022. This was primarily due to refinancing debt with fixed rate debt at higher interest rates in 2022 and 2023. These increases were partially offset by lower variable rate interest in 2023. Refer to the Liquidity and Capital Resources section for further information. 27 -------------------------------------------------------------------------------- Table of Contents Segment Results We classify our business in the following reportable segments: L&S and G&P. We evaluate the performance of our segments using Segment Adjusted EBITDA. 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) income/(loss) from equity method investments; (iv) distributions and adjustments related to equity method investments; (v) gain on sales-type leases; (vi) impairment expense; (vii) noncontrolling interests; and (viii) other adjustments, as applicable. 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: 77]][[Image Removed: 80]]
Three Months Ended March 31,
(In millions) 2023 2022 Variance
Service revenue $ 1,033 $ 983 $ 50
Rental income 212 175 37
Product related revenue 5 4 1
Sales-type lease revenue 125 111 14
Income from equity method investments 71 52 19
Other income 14 12 2
Total segment revenues and other income 1,460 1,337 123
Cost of revenues 135 141 (6)
Purchases - related parties 244 239 5
Depreciation and amortization 129 130 (1)
General and administrative expenses 49 43 6
Other taxes 19 21 (2)
Total costs and expenses 576 574 2
Segment Adjusted EBITDA 1,026 904 122
Capital expenditures 68 77 (9)
Investments in unconsolidated affiliates(1) $ 15
(1) The three months ended
Three months ended
Service revenue increased$50 million in the first quarter of 2023 compared to the same period of 2022. This was primarily driven by increased pipeline and terminal throughput, higher pipeline tariff rates and$5 million from refining logistics fee escalations. These increases were partially offset by a decrease of$31 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$37 million in the first quarter of 2023 compared to the same period of 2022. This was primarily due to an increase of$20 million from changes in the presentation of revenue between service revenue, rental income and sales-type 28 -------------------------------------------------------------------------------- Table of Contents lease revenue driven by modifications to agreements with MPC after the first quarter of 2022. There was also increased revenue of$9 million from refining logistics primarily due to fee escalations. Sales-type lease revenue - related parties increased$14 million in the first quarter of 2023 compared to the same period of 2022. This was primarily due to an increase of$11 million from changes in the presentation of revenue between service revenue, rental income and sales-type lease revenue as a result of modifications to agreements with MPC, as well as from fee escalations.
Income from equity methods investments increased
Cost of revenues decreased
L&S Operating Data
[[Image Removed: 24]]
Three Months Ended
March 31,
2023 2022
L&S
Pipeline throughput (mbpd)
Crude oil pipelines 3,642 3,380
Product pipelines 1,988 1,956
Total pipelines 5,630 5,336
Average tariff rates ($ per barrel)(1)
Crude oil pipelines $ 0.93 $ 0.93
Product pipelines 0.85 0.82
Total pipelines $ 0.90 $ 0.89
Terminal throughput (mbpd) 3,091 2,941
Marine Assets (number in operation)(2)
Barges 298 296
Towboats 23 23
(1) Average tariff rates calculated using pipeline transportation revenues
divided by pipeline throughput barrels. Transportation revenues include tariff
and other fees, which may vary by region and nature of services provided.
(2) Represents total at end of period.
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G&P Segment
First Quarter G&P Segment Financial Highlights (in millions)
[[Image Removed: 77]] [[Image Removed: 80]]
Three Months Ended March 31,
(In millions) 2023 2022 Variance
Service revenue $ 525 $ 486 $ 39
Rental income 51 81 (30)
Product related revenue 564 661 (97)
Sales-type lease revenue 34 - 34
Income from equity method investments 63 47 16
Other income/(loss) 16 (2) 18
Total segment revenues and other income 1,253 1,273 (20)
Cost of revenues 200 198 2
Purchased product costs 406 467 (61)
Purchases - related parties 117 80 37
Depreciation and amortization 167 183 (16)
General and administrative expenses 40 35 5
Other taxes 11 13 (2)
Total costs and expenses 941 976 (35)
Segment Adjusted EBITDA 493 489 4
Capital expenditures 123 95 28
Investments in unconsolidated affiliates $ 36 $
42
Three months ended
Service revenue increased$39 million in the first quarter of 2023 compared to the same period of 2022. This was primarily due to higher throughput fee rates in the Marcellus and Rockies, increased revenue from minimum volume commitments, and higher volumes. Rental income decreased$30 million and sales-type lease revenue increased$34 million in the first quarter of 2023 compared to the same period of 2022. This was primarily due to changes in the presentation of revenue between rental income and sales-type lease revenue as a result of the Third-Party Lease Modification in the third quarter of 2022.
Product related revenue decreased
Income from equity methods investments increased$16 million in the first quarter of 2023 compared to the same period of 2022. This was primarily due to higher volumes associated with several of our joint ventures in the Utica. Additionally, new capacity came online in the Southwest region in the fourth quarter of 2022 driving higher volumes over the prior period. Other income increased$18 million in the first quarter of 2023 compared to the same period of 2022 due to a loss on disposal of assets recognized in the first quarter of 2022. Purchased product costs decreased$61 million in the first quarter of 2023 compared to the same period of 2022. This was primarily due to lower prices of$157 million in the Southwest and Southern Appalachia, partially offset by higher volumes in the Southwest of$82 million , an increase of$6 million due to changes in the fair value of our embedded derivative. 30 -------------------------------------------------------------------------------- Table of Contents Purchases - related parties increased$37 million in the first quarter of 2023 compared to the same period of 2022. The increase is attributable to higher volumes and associated related-party purchased product costs in the Rockies and higher transportation costs from increased throughput in the Southwest. Depreciation and amortization decreased$16 million in the first quarter of 2023 compared to the same period of 2022. This was primarily due to lower depreciation as a result of the derecognition of fixed assets in connection with the Third-Party Lease Modification in the third quarter of 2022. This decrease was partially offset by depreciation on new assets placed in service after the first quarter of 2022.
G&P Operating Data
[[Image Removed: 23]] [[Image Removed: 24]](1) Other includes Southern Appalachia, Bakken and Rockies Operations.
MPLX LP(1) MPLX LP Operated(2)
Three Months Ended Three Months Ended
March 31, March 31,
2023 2022 2023 2022
G&P
Gathering Throughput (MMcf/d)
Marcellus Operations 1,363 1,314 1,363 1,314
Utica Operations - - 2,460 1,813
Southwest Operations 1,381 1,307 1,816 1,476
Bakken Operations 156 147 156 147
Rockies Operations 442 394 564 526
Total gathering throughput 3,342 3,162 6,359 5,276
Natural Gas Processed (MMcf/d)
Marcellus Operations 4,045 4,015 5,553 5,529
Utica Operations - - 494 423
Southwest Operations 1,401 1,384 1,720 1,541
Southern Appalachian Operations 230 224 230 224
Bakken Operations 154 143 154 143
Rockies Operations 454 407 454 407
Total natural gas processed 6,284 6,173 8,605 8,267
C2 + NGLs Fractionated (mbpd)
Marcellus Operations(3) 533 468 533 468
Utica Operations(3) - - 28 23
Southern Appalachian Operations 10 10 10 10
Bakken Operations 19 21 19 21
Rockies Operations 3 4 3 4
Total C2 + NGLs fractionated(4) 565 503 593 526
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Three Months Ended
March 31,
2023 2022
Pricing Information
Natural Gas NYMEX HH ($ per MMBtu) $ 2.77 $ 4.57
C2 + NGL Pricing ($ per gallon)(5) $ 0.77 $ 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) 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 246 mbpd and 184 mbpd of MPLX LP
consolidated total fractionated products for the three months ended March 31,
2023 and March 31, 2022 , respectively. Purity ethane makes up approximately 253
mbpd and 188 mbpd of MPLX Operated total fractionated products for the three
months ended March 31, 2023 and March 31, 2022 , respectively.
(5) 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. Overall, our exposure to the seasonality fluctuations is limited due to the nature of our fee-based business.
Liquidity and Capital Resources
Cash Flows
Our cash and cash equivalents were
Three Months Ended
March 31,
(In millions) 2023 2022
Net cash provided by (used in):
Operating activities $ 1,227 $ 1,125
Investing activities (220) (276)
Financing activities (852) (820)
Total $ 155 $ 29
Net cash provided by operating activities increased $102 million in the first
quarter of 2023 compared to the first quarter of 2022, primarily due to improved
results from operations and decreased working capital requirements in the first
quarter of 2023 compared to the first quarter of 2022.
Net cash used in investing activities decreased $56 million in the first quarter
of 2023 compared to the first quarter of 2022, due to lower contributions to
equity method investments. Contributions to equity method investments for the
2022 quarter included a $60 million contribution to our Bakken Pipeline joint
venture to fund our share of a scheduled debt repayment by the joint venture.
Net cash used in financing activities increased $32 million in the first quarter
of 2023 compared to the first quarter of 2022. The increase in the use of cash
was due to $63 million of higher distributions paid to unitholders during the
first quarter of 2023 as compared to the same period of 2022, as a result of the
10 percent increase in our base distribution effective for the third quarter of
2022. Net repayments, including the redemption of the Series B preferred units,
in the first quarter of 2023 as compared to net borrowings in the first quarter
of 2022 resulted in an increased use of cash of $68 million . These increases
were offset by decreased spending on the unit repurchase program of $100 million
in the first quarter of 2023 compared to the first quarter of 2022.
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Adjusted Free Cash Flow
The following table provides a reconciliation of Adjusted FCF and Adjusted FCF
after distributions from net cash provided by operating activities for the three
months ended March 31, 2023 and March 31, 2022 .
Three Months Ended
March 31,
(In millions) 2023 2022
Net cash provided by operating activities(1) $ 1,227 $ 1,125 Adjustments to reconcile net cash provided by operating activities to adjusted free cash flow Net cash used in investing activities
(220) (276)
Contributions from MPC 8 10
Distributions to noncontrolling interests (10) (9)
Adjusted free cash flow 1,005 850
Distributions paid to common and preferred unitholders (821) (758)
Adjusted free cash flow after distributions $ 184 $ 92 (1) The three months ended
Debt and Liquidity Overview
OnFebruary 9, 2023 , MPLX issued$1.6 billion aggregate principal amount of notes, consisting of$1.1 billion principal amount of 5.00 percent senior notes due 2033 (the "2033 Senior Notes") and$500 million principal amount of 5.65 percent senior notes due 2053 (the "2053 Senior Notes"). The 2033 Senior Notes were offered at a price to the public of 99.170 percent of par with interest payable semi-annually in arrears, commencing onSeptember 1, 2023 . The 2053 Senior Notes were offered at a price to the public of 99.536 percent of par with interest payable semi-annually in arrears, commencing onSeptember 1, 2023 . OnFebruary 15, 2023 , MPLX used$600 million of the net proceeds to redeem all of the outstanding Series B preferred units. OnMarch 13, 2023 , MPLX used the remaining proceeds from the issuance of the 2033 Senior Notes and 2053 Senior Notes discussed above, and cash on hand, to redeem all of MPLX's and MarkWest's$1.0 billion aggregate principal amount of 4.50 percent senior notes dueJuly 2023 , at par, plus accrued and unpaid interest. The redemption resulted in a loss of$9 million due to the immediate expense recognition of unamortized debt discount and issuance costs for the three months endedMarch 31, 2023 , which is included on the Consolidated Statements of Income as Other financial costs.
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 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.
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Our liquidity totaled $3.9 billion at March 31, 2023 consisting of:
March 31, 2023
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 393
Total liquidity $ 3,893 (1) Outstanding borrowings include less than
We expect our ongoing sources of liquidity to include cash generated from operations and borrowings under our revolving credit facilities 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. Our material future obligations include interest on debt, payments of debt principal, purchase obligations including contracts to acquire plant, property and equipment, and our operating leases and service agreements. 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. 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, 2023 , we were in compliance with this financial covenant with a ratio of Consolidated Total Debt to Consolidated EBITDA of 3.52 to 1.0, as well as all other covenants contained in the MPLX Credit Agreement.
Equity and Preferred Units Overview
Unit Repurchase Program
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 authorization has no expiration date. 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.
No units were repurchased during the three months ended
Redemption of the Series B Preferred Units
OnFebruary 15, 2023 , MPLX exercised its right to redeem all 600,000 outstanding units of 6.875 percent Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (the "Series B preferred units"). MPLX paid unitholders the Series B preferred unit redemption price of$1,000 per unit. See Note 5 to the unaudited consolidated financial statements for more information. Distributions on the Series B preferred units were payable semi-annually in arrears on the 15th day, or the first business day thereafter, of February and August of each year up to and includingFebruary 15, 2023 . In accordance with these terms, MPLX made a final cash distribution of$21 million to Series B preferred unitholders onFebruary 15, 2023 , in conjunction with the redemption.
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 34 -------------------------------------------------------------------------------- Table of Contents 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$263 million per quarter, or$1,051 million per year, based on the number of common units outstanding atMarch 31, 2023 . OnApril 25, 2023 , MPLX declared a cash distribution for the first quarter of 2023, totaling$776 million , or$0.775 per common unit. This distribution will be paid onMay 15, 2023 to common unitholders of record onMay 5, 2023 . Although our partnership agreement requires that we distribute all of our available cash each quarter, we do not otherwise have a legal obligation to distribute any particular amount per common unit. This rate will also be received by Series A preferred unitholders. The allocation of total cash distributions is as follows for the three months endedMarch 31, 2023 andMarch 31, 2022 . MPLX's distributions are declared subsequent to quarter end; therefore, the following table represents total cash distributions applicable to the period in which the distributions were earned. Three Months Ended March 31, (In millions, except per unit data) 2023 2022 Distribution declared: Limited partner units - public$ 274 $ 257 Limited partner units - MPC 502 456Total LP distribution declared 776 713 Series A preferred units 23 21 Series B preferred units 5 11 Total distribution declared$ 804 $ 745 Quarterly cash distributions declared per limited partner common unit$ 0.775 $ 0.705 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 growth capital expenditures and maintenance capital expenditures. 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. In contrast, 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. MPLX's initial capital investment plan for 2023 is$950 million , net of reimbursements, which includes growth capital of$800 million and maintenance capital of$150 million . Growth capital expenditures and investments in affiliates during the three months endedMarch 31, 2023 were primarily for gas processing plants and gathering projects in the Marcellus and Permian basins. We continuously evaluate our capital plan and make changes as conditions warrant. 35 -------------------------------------------------------------------------------- Table of Contents Our capital expenditures are shown in the table below: Three Months Ended March 31, (In millions) 2023 2022 Capital expenditures: Growth capital expenditures$ 139 $ 148 Growth capital reimbursements(1) (33)
(11)
Investments in unconsolidated affiliates 51
110
Capitalized interest (3)
(2)
Total growth capital expenditures 154
245
Maintenance capital expenditures 52
24
Maintenance capital reimbursements (8)
(10)
Total maintenance capital expenditures 44
14
Total growth and maintenance capital expenditures 198
259
Investments in unconsolidated affiliates(2) (51)
(110)
Growth and maintenance capital reimbursements(3) 41
21
Increase in capital accruals (22)
(3)
Capitalized interest 3
2
Additions to property, plant and equipment(2)$ 169
(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) Investments in unconsolidated affiliates and additions to property, plant and equipment are shown as separate lines within investing activities in the Consolidated Statements of Cash Flows. (3) Growth capital reimbursements are included in changes in deferred revenue within operating activities in the Consolidated Statements of Cash Flows. 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, 2023 , 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 three months endedMarch 31, 2023 , our debt obligations increased by$600 million due to the issuance of Senior Notes and use of proceeds described above in Liquidity and Capital Resources-Debt and Liquidity Overview. There were no other material changes to our contractual obligations outside the ordinary course of business sinceDecember 31, 2022 .
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 under GAAP. Our off-balance sheet arrangements are limited to guarantees that are described in Note 14 of the unaudited consolidated financial statements and indemnities as disclosed in our Annual Report on Form 10-K for the year endedDecember 31, 2022 . 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.
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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,
2023 2022
Total revenues and other income 50 % 48 %
Total costs and expenses 27 % 24 %
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
December 31, 2022 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, 2022 , 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. There have been no significant changes to our environmental matters and compliance costs during the three months endedMarch 31, 2023 .
Critical Accounting Estimates
As ofMarch 31, 2023 , there have been no significant changes to our critical accounting estimates since our Annual Report on Form 10-K for the year endedDecember 31, 2022 .
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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