UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________
FORM 10-Q
_____________________________________________
(Mark One)____________________________________________
|
| |
x(Mark One) |
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended September 30, 2017
quarterly period ended March 31, 2020
OR
|
| |
¨☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 001-35714
_____________________________________________
MPLX LP
(Exact name of registrant as specified in its charter)
_____________________________________________
|
| | | | | | |
| Delaware | | | 27-0005456 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
|
| | | | | |
| 200 E. Hardin Street, | Findlay, | Ohio | | 45840 | |
| (Address of principal executive offices) | | (Zip code) | |
(419)
(419) 421-2414
(Registrant’s telephone number, including area code)
_____________________________________________
|
| | |
| Securities Registered pursuant to Section 12(b) of the Act |
| Title of each class | Trading symbol(s) | Name of each exchange on which registered |
| Common Units Representing Limited Partnership Interests | MPLX | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesx No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) Yesx No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
| | | |
| Large accelerated filer | x | Accelerated filer | ¨ |
| | | ☐ |
| Non-accelerated filer | ¨ (Do not check if a smaller reporting company)
☐ | Smaller reporting company | ¨ |
| | | ☐ |
| | | Emerging growth company | ¨☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ¨☐ No x
MPLX LP had 407,066,3201,058,603,592 common units and 8,307,473 general partner units outstanding at October 27, 2017.
May 1, 2020.
MPLX LP
Form 10-Q
Quarter Ended September 30, 2017
INDEX
Table of Contents
Unless the context otherwise requires, references in this report to “MPLX LP,” “MPLX,” “the Partnership,” “we,” “our,” “us,” or like terms refer to MPLX LP and its subsidiaries, including MPLX Operations LLC (“MPLX Operations”), MPLX Terminalsubsidiaries. Additionally, throughout this Quarterly Report on Form 10-Q, we have used terms in our discussion of the business and Storage LLC (“MPLX Terminal and Storage”), MarkWest Energy Partners, L.P. (“MarkWest”), MarkWest Hydrocarbon, L.L.C. (“MarkWest Hydrocarbon”), MarkWest Pioneer, L.L.C. (“MarkWest Pioneer”), MPLX Pipe Line Holdings LLC (“Pipe Line Holdings”), Marathon Pipe Line LLC (“MPL”), Ohio River Pipe Line LLC (“ORPL”), Hardin Street Marine LLC (“HSM”), Hardin Street Transportation LLC (“HST”), Woodhaven Cavern LLC (“WHC”) and MPLX Terminals LLC (“MPLXT”). Weoperating results that have partial ownership interestsbeen defined in a numberour Glossary of joint venture legal entities, including MarkWest Utica EMG, L.L.C. (“MarkWest Utica EMG”) and its subsidiary Ohio Gathering Company, L.L.C. (“Ohio Gathering”), Ohio Condensate Company, L.L.C. (“Ohio Condensate”), Wirth Gathering Partnership (“Wirth”), MarkWest EMG Jefferson Dry Gas Gathering Company, L.L.C. (“Jefferson Dry Gas”), Sherwood Midstream LLC (“Sherwood Midstream”), Sherwood Midstream Holdings LLC (“Sherwood Midstream Holdings”), MarEn Bakken Company, LLC (“MarEn Bakken”), Johnston County Terminal, LLC (“Johnston Terminal”), Guilford County Terminal Company, LLC (“Guilford Terminal”), LOOP LLC (“LOOP”), LOCAP LLC (“LOCAP”), Illinois Extension Pipeline Company, L.L.C. (“Illinois Extension”) and Explorer Pipeline Company (“Explorer”). References to “MPC” refer collectively to Marathon Petroleum Corporation and its subsidiaries, other than the Partnership. Unless otherwise specified, references to “Predecessor” refer collectively to HSM’s, HST’s, WHC’s and MPLXT’s related assets, liabilities and results of operations prior to the dates of their respective acquisitions effective January 1, 2014 for HSM, January 1, 2015 for HST and WHC and April 1, 2016 for MPLXT.Terms.
Glossary of Terms
The abbreviations, acronyms and industry technology used in this report are defined as follows. |
| |
| ASC | Accounting Standards Codification |
| ASU | Accounting Standards Update |
| ATM Program | A continuous offering, orAn at-the-market program by whichfor the Partnership may offerissuance of common units in amounts, at prices and on terms to be determined by market conditions and other factors at the time of any offerings |
BblBarrel | BarrelsOne stock tank barrel, or 42 United States gallons of liquid volume, used in reference to crude oil or other liquid hydrocarbons |
| Bcf/d | One billion cubic feet of natural gas per day |
| Btu | One British thermal unit, an energy measurement |
| Condensate | A natural gas liquid with a low vapor pressure mainly composed of propane, butane, pentane and heavier hydrocarbon fractions |
| DCF (a non-GAAP financial measure) | Distributable Cash Flow |
Dth/d | Dekatherms per day |
| EBITDA (a non-GAAP financial measure) | Earnings Before Interest, Taxes, Depreciation and Amortization |
EPA | United States Environmental Protection Agency |
| FASB | Financial Accounting Standards Board |
| GAAP | Accounting principles generally accepted in the United States of America |
Gal | Gallon |
Gal/d | Gallons per day |
IDR | Incentive distribution right |
Initial Offering | Initial public offering on October 31, 2012 |
| LIBOR | London Interbank Offered Rate |
MarkWest Merger | On December 4, 2015, a wholly-owned subsidiary of the Partnership merged with MarkWest Energy Partners, L.P. |
| mbpd | Thousand barrels per day |
| Merger | MPLX acquisition by merger of Andeavor Logistics LP (“ANDX”) on July 30, 2019 |
| MMBtu | One million British thermal units, an energy measurement |
| MMcf/d | One million cubic feet of natural gas per day |
Net operating margin (a non-GAAP financial measure) | Segment revenues, less segment purchased product costs, less realized derivative gains (losses) related to purchased product costs |
| NGL | Natural gas liquids, such as ethane, propane, butanes and natural gasoline |
| NYSE | New York Stock Exchange |
OTC | Over-the-Counter |
Partnership Agreement | Third Amended and Restated Agreement of Limited Partnership of MPLX LP, dated as of October 31, 2016, as amended |
| Predecessor | Collectively:
- HSM’sThe related assets, liabilities and results of operations prior to the date of its acquisition, March 31, 2016, effective January 1, 2015.
- HST’s, WHC’s and MPLXT’s related assets, liabilities and results of operationsAndeavor Logistics LP (“ANDX”) prior to the date of the acquisition, MarchJuly 30, 2019, effective October 1, 2017, effective January 1, 2015 for HST and WHC and April 1, 2016 for MPLXT.
2018 |
| Realized derivative gain/loss | The gain or loss recognized when a derivative matures or is settled |
| SEC | United States Securities and Exchange Commission |
| SMR | Steam methane reformer, operated by a third party and located at the Javelina gas processing and fractionation complex in Corpus Christi, Texas |
| Unrealized derivative gain/loss | The gain or loss recognized on a derivative due to changes in fair value prior to the instrument maturing or settling |
| VIE | Variable interest entity |
WTI | West Texas Intermediate |
Part I—Financial Information
Item 1. Financial Statements
MPLX LP
Consolidated Statements of Income (Unaudited) |
| | | | | | | |
| | Three Months Ended
March 31, |
| (In millions, except per unit data) | 2020 | | 2019(1) |
| Revenues and other income: | | | |
| Service revenue | $ | 612 |
| | $ | 614 |
|
| Service revenue - related parties | 928 |
| | 803 |
|
| Service revenue - product related | 39 |
| | 34 |
|
| Rental income | 96 |
| | 99 |
|
| Rental income - related parties | 234 |
| | 325 |
|
| Product sales | 169 |
| | 216 |
|
| Product sales - related parties | 33 |
| | 41 |
|
Income/(loss) from equity method investments(2) | (1,184 | ) | | 77 |
|
| Other income | 1 |
| | — |
|
| Other income - related parties | 64 |
| | 26 |
|
| Total revenues and other income | 992 |
| | 2,235 |
|
| Costs and expenses: | | | |
| Cost of revenues (excludes items below) | 368 |
| | 339 |
|
| Purchased product costs | 135 |
| | 194 |
|
| Rental cost of sales | 35 |
| | 37 |
|
| Rental cost of sales - related parties | 46 |
| | 43 |
|
| Purchases - related parties | 276 |
| | 278 |
|
| Depreciation and amortization | 325 |
| | 301 |
|
| Impairment expense | 2,165 |
| | — |
|
| General and administrative expenses | 97 |
| | 101 |
|
| Other taxes | 31 |
| | 30 |
|
| Total costs and expenses | 3,478 |
| | 1,323 |
|
| Income/(loss) from operations | (2,486 | ) | | 912 |
|
| Related party interest and other financial costs | 3 |
| | 1 |
|
| Interest expense (net of amounts capitalized of $13 million and $11 million, respectively) | 211 |
| | 214 |
|
| Other financial costs | 16 |
| | 9 |
|
| Income/(loss) before income taxes | (2,716 | ) | | 688 |
|
| (Benefit)/provision for income taxes | — |
| | (1 | ) |
| Net income/(loss) | (2,716 | ) | | 689 |
|
| Less: Net income attributable to noncontrolling interests | 8 |
| | 6 |
|
| Less: Net income attributable to Predecessor | — |
| | 180 |
|
| Net income/(loss) attributable to MPLX LP | (2,724 | ) | | 503 |
|
| Less: Series A preferred unit distributions | 20 |
| | 20 |
|
| Less: Series B preferred unit distributions | 11 |
| | — |
|
| Limited partners’ interest in net income/(loss) attributable to MPLX LP | $ | (2,755 | ) | | $ | 483 |
|
| Per Unit Data (See Note 6) | | | |
| Net income/(loss) attributable to MPLX LP per limited partner unit: | | | |
| Common - basic | $ | (2.60 | ) | | $ | 0.61 |
|
| Common - diluted | $ | (2.60 | ) | | $ | 0.61 |
|
| Weighted average limited partner units outstanding: | | | |
| Common - basic | 1,058 |
| | 794 |
|
| Common - diluted | 1,058 |
| | 795 |
|
|
| | | | | | | | | | | | | | | |
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| (In millions, except per unit data) | 2017 | | 2016(1) | | 2017 | | 2016(1) |
| Revenues and other income: | | | | | | | |
| Service revenue | $ | 299 |
| | $ | 250 |
| | $ | 845 |
| | $ | 712 |
|
| Service revenue - related parties | 276 |
| | 253 |
| | 801 |
| | 676 |
|
| Rental income | 69 |
| | 77 |
| | 208 |
| | 218 |
|
| Rental income - related parties | 70 |
| | 68 |
| | 207 |
| | 172 |
|
| Product sales | 217 |
| | 157 |
| | 611 |
| | 394 |
|
| Product sales - related parties | 2 |
| | 2 |
| | 6 |
| | 8 |
|
| Gain on sale of assets | — |
| | 1 |
| | 1 |
| | 1 |
|
| Income (loss) from equity method investments | 23 |
| | 6 |
| | 29 |
| | (72 | ) |
| Other income | 2 |
| | 2 |
| | 5 |
| | 5 |
|
| Other income - related parties | 22 |
| | 22 |
| | 69 |
| | 67 |
|
| Total revenues and other income | 980 |
| | 838 |
| | 2,782 |
| | 2,181 |
|
| Costs and expenses: | | | | | | | |
| Cost of revenues (excludes items below) | 129 |
| | 122 |
| | 381 |
| | 329 |
|
| Purchased product costs | 170 |
| | 117 |
| | 441 |
| | 310 |
|
| Rental cost of sales | 19 |
| | 13 |
| | 44 |
| | 42 |
|
| Rental cost of sales - related parties | — |
| | — |
| | 1 |
| | 1 |
|
| Purchases - related parties | 114 |
| | 109 |
| | 330 |
| | 286 |
|
| Depreciation and amortization | 164 |
| | 151 |
| | 515 |
| | 438 |
|
| Impairment expense | — |
| | — |
| | — |
| | 130 |
|
| General and administrative expenses | 59 |
| | 56 |
| | 174 |
| | 172 |
|
| Other taxes | 14 |
| | 12 |
| | 40 |
| | 37 |
|
| Total costs and expenses | 669 |
| | 580 |
| | 1,926 |
| | 1,745 |
|
| Income from operations | 311 |
| | 258 |
| | 856 |
| | 436 |
|
| Related party interest and other financial costs | 1 |
| | — |
| | 1 |
| | 1 |
|
| Interest expense (net of amounts capitalized of $6 million, $7 million, $24 million and $21 million, respectively) | 77 |
| | 51 |
| | 217 |
| | 158 |
|
| Other financial costs | 15 |
| | 13 |
| | 40 |
| | 37 |
|
| Income before income taxes | 218 |
| | 194 |
| | 598 |
| | 240 |
|
| Provision (benefit) for income taxes | 1 |
| | — |
| | 3 |
| | (12 | ) |
| Net income | 217 |
| | 194 |
| | 595 |
| | 252 |
|
| Less: Net income attributable to noncontrolling interests | 1 |
| | 2 |
| | 3 |
| | 3 |
|
| Less: Net income attributable to Predecessor | — |
| | 51 |
| | 36 |
| | 149 |
|
| Net income attributable to MPLX LP | 216 |
| | 141 |
| | 556 |
| | 100 |
|
| Less: Preferred unit distributions | 16 |
| | 16 |
| | 49 |
| | 25 |
|
| Less: General partner’s interest in net income attributable to MPLX LP | 86 |
| | 51 |
| | 222 |
| | 136 |
|
| Limited partners’ interest in net income (loss) attributable to MPLX LP | $ | 114 |
| | $ | 74 |
| | $ | 285 |
| | $ | (61 | ) |
| Per Unit Data (See Note 6) | | | | | | | |
| Net income (loss) attributable to MPLX LP per limited partner unit: | | | | | | | |
| Common - basic | $ | 0.29 |
| | $ | 0.22 |
| | $ | 0.75 |
| | $ | (0.19 | ) |
| Common - diluted | 0.29 |
| | 0.21 |
| | 0.75 |
| | (0.19 | ) |
| Weighted average limited partner units outstanding: | | | | | | | |
| Common - basic | 394 |
| | 341 |
| | 378 |
| | 324 |
|
| Common - diluted | 395 |
| | 346 |
| | 381 |
| | 324 |
|
| Cash distributions declared per limited partner common unit | $ | 0.5875 |
| | $ | 0.5150 |
| | $ | 1.6900 |
| | $ | 1.5300 |
|
| |
| (1) | Financial information for the first quarter of 2019 has been retrospectively adjusted for the acquisition of HST, WHC and MPLXT from MPC.ANDX. See Notes 1 and 3. |
| |
| (2) | The 2020 period includes $1,264 million of impairment expense. See Note 4. |
The accompanying notes are an integral part of these consolidated financial statements.
MPLX LP
Consolidated Balance Sheets (Unaudited)
|
| | | | | | | |
| (In millions) | September 30, 2017 | | December 31, 2016 |
| Assets | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | 3 |
| | $ | 234 |
|
| Receivables, net | 320 |
| | 299 |
|
| Receivables - related parties | 152 |
| | 247 |
|
| Inventories | 64 |
| | 55 |
|
| Other current assets | 32 |
| | 33 |
|
| Total current assets | 571 |
| | 868 |
|
| Equity method investments | 3,997 |
| | 2,471 |
|
| Property, plant and equipment, net | 11,922 |
| | 11,408 |
|
| Intangibles, net | 463 |
| | 492 |
|
| Goodwill | 2,245 |
| | 2,245 |
|
| Long-term receivables - related parties | 18 |
| | 11 |
|
| Other noncurrent assets | 22 |
| | 14 |
|
| Total assets | $ | 19,238 |
| | $ | 17,509 |
|
| Liabilities | | | |
| Current liabilities: | | | |
| Accounts payable | $ | 152 |
| | $ | 140 |
|
| Accrued liabilities | 202 |
| | 232 |
|
| Payables - related parties | 317 |
| | 87 |
|
| Deferred revenue | 3 |
| | 2 |
|
| Deferred revenue - related parties | 42 |
| | 38 |
|
| Accrued property, plant and equipment | 183 |
| | 146 |
|
| Accrued taxes | 44 |
| | 38 |
|
| Accrued interest payable | 64 |
| | 53 |
|
| Other current liabilities | 41 |
| | 27 |
|
| Total current liabilities | 1,048 |
| | 763 |
|
| Long-term deferred revenue | 34 |
| | 12 |
|
| Long-term deferred revenue - related parties | 40 |
| | 19 |
|
| Long-term debt | 6,848 |
| | 4,422 |
|
| Deferred income taxes | 7 |
| | 6 |
|
| Deferred credits and other liabilities | 175 |
| | 177 |
|
| Total liabilities | 8,152 |
| | 5,399 |
|
| Commitments and contingencies (see Note 17) |
| |
|
| Redeemable preferred units | 1,000 |
| | 1,000 |
|
| Equity | | | |
| Common unitholders - public (289 million and 271 million units issued and outstanding) | 8,457 |
| | 8,086 |
|
| Class B unitholders (0 million and 4 million units issued and outstanding) | — |
| | 133 |
|
| Common unitholder - MPC (95 million and 86 million units issued and outstanding) | 1,302 |
| | 1,069 |
|
| Common unitholder - GP (23 million and 0 units issued and outstanding) | 822 |
| | — |
|
| General partner - MPC (8 million and 7 million units issued and outstanding) | (626 | ) | | 1,013 |
|
| Equity of Predecessor | — |
| | 791 |
|
| Accumulated other comprehensive loss | (14 | ) | | — |
|
| Total MPLX LP partners’ capital | 9,941 |
| | 11,092 |
|
| Noncontrolling interests | 145 |
| | 18 |
|
| Total equity | 10,086 |
| | 11,110 |
|
| Total liabilities, preferred units and equity | $ | 19,238 |
| | $ | 17,509 |
|
The accompanying notes are an integral part of these consolidated financial statements.
MPLX LP
Consolidated Statements of Cash FlowsComprehensive Income (Unaudited)
|
| | | | | | | |
| | Nine Months Ended
September 30, |
| (In millions) | 2017 | | 2016(1) |
| (Decrease) increase in cash and cash equivalents | | | |
| Operating activities: | | | |
| Net income | $ | 595 |
| | $ | 252 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Amortization of deferred financing costs | 38 |
| | 34 |
|
| Depreciation and amortization | 515 |
| | 438 |
|
| Impairment expense | — |
| | 130 |
|
| Deferred income taxes | 2 |
| | (16 | ) |
| Asset retirement expenditures | (2 | ) | | (4 | ) |
| Gain on disposal of assets | (1 | ) | | (1 | ) |
| (Income) loss from equity method investments | (29 | ) | | 72 |
|
| Distributions from unconsolidated affiliates | 136 |
| | 111 |
|
| Changes in: | | | |
| Current receivables | (20 | ) | | (43 | ) |
| Inventories | (3 | ) | | (4 | ) |
| Fair value of derivatives | (3 | ) | | 28 |
|
| Current accounts payable and accrued liabilities | 6 |
| | 64 |
|
| Receivables from / liabilities to related parties | 61 |
| | (104 | ) |
| All other, net | 43 |
| | 18 |
|
| Net cash provided by operating activities | 1,338 |
| | 975 |
|
| Investing activities: | | | |
| Additions to property, plant and equipment | (1,004 | ) | | (943 | ) |
| Acquisitions, net of cash acquired | (249 | ) | | — |
|
| Disposal of assets | 4 |
| | — |
|
| Investments - net related party loans | 80 |
| | 103 |
|
| Investments in unconsolidated affiliates | (690 | ) | | (56 | ) |
| Distributions from unconsolidated affiliates - return of capital | 24 |
| | — |
|
| All other, net | (2 | ) | | 4 |
|
| Net cash used in investing activities | (1,837 | ) | | (892 | ) |
| Financing activities: | | | |
| Long-term debt - borrowings | 2,661 |
| | 434 |
|
| - repayments | (251 | ) | | (1,312 | ) |
| Related party debt - borrowings | 829 |
| | 2,215 |
|
| - repayments | (627 | ) | | (2,223 | ) |
| Debt issuance costs | (25 | ) | | — |
|
| Net proceeds from equity offerings | 483 |
| | 510 |
|
| Issuance of redeemable preferred units | — |
| | 984 |
|
| Distribution to MPC for acquisition | (1,931 | ) | | — |
|
| Distributions to preferred unitholders | (49 | ) | | (9 | ) |
| Distributions to unitholders and general partner | (800 | ) | | (612 | ) |
| Distributions to noncontrolling interests | (4 | ) | | (3 | ) |
| Contributions from noncontrolling interests | 128 |
| | 4 |
|
| Consideration payment to Class B unitholders | (25 | ) | | (25 | ) |
| All other, net | (8 | ) | | (2 | ) |
| Contribution from MPC | — |
| | 225 |
|
| Distributions to MPC from Predecessor | (113 | ) | | (104 | ) |
| Net cash provided by financing activities | 268 |
| | 82 |
|
| Net (decrease) increase in cash and cash equivalents | (231 | ) | | 165 |
|
| Cash and cash equivalents at beginning of period | 234 |
| | 43 |
|
| Cash and cash equivalents at end of period | $ | 3 |
| | $ | 208 |
|
|
| | | | | | | |
| | Three Months Ended
March 31, |
| (In millions) | 2020 | | 2019(1) |
| Net income/(loss) | $ | (2,716 | ) | | $ | 689 |
|
| Other comprehensive income/(loss), net of tax: | | | |
| Remeasurements of pension and other postretirement benefits related to equity method investments, net of tax | (1 | ) | | 1 |
|
| Comprehensive income/(loss) | (2,717 | ) | | 690 |
|
| Less comprehensive income attributable to: | | | |
| Noncontrolling interests | 8 |
| | 6 |
|
| Income attributable to Predecessor | — |
| | 180 |
|
| Comprehensive income/(loss) attributable to MPLX LP | $ | (2,725 | ) | | $ | 504 |
|
| |
| (1) | Financial information for the first quarter of 2019 has been retrospectively adjusted for the acquisition of HST, WHC and MPLXT from MPC.ANDX. See Notes 1 and 3. |
The accompanying notes are an integral part of these consolidated financial statements.
MPLX LP
Consolidated Statements of EquityBalance Sheets (Unaudited)
|
| | | | | | | |
| (In millions) | March 31, 2020 | | December 31, 2019 |
| Assets | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | 57 |
| | $ | 15 |
|
| Receivables, net | 522 |
| | 593 |
|
| Current assets - related parties | 600 |
| | 656 |
|
| Inventories | 105 |
| | 110 |
|
| Other current assets | 45 |
| | 110 |
|
| Total current assets | 1,329 |
| | 1,484 |
|
| Equity method investments | 3,992 |
| | 5,275 |
|
| Property, plant and equipment, net | 21,829 |
| | 22,145 |
|
| Intangibles, net | 1,055 |
| | 1,270 |
|
| Goodwill | 7,722 |
| | 9,536 |
|
| Right of use assets, net | 352 |
| | 365 |
|
| Noncurrent assets - related parties | 677 |
| | 303 |
|
| Other noncurrent assets | 50 |
| | 52 |
|
| Total assets | 37,006 |
| | 40,430 |
|
| Liabilities | | | |
| Current liabilities: | | | |
| Accounts payable | 138 |
| | 242 |
|
| Accrued liabilities | 135 |
| | 187 |
|
| Current liabilities - related parties | 297 |
| | 1,008 |
|
| Accrued property, plant and equipment | 234 |
| | 283 |
|
| Accrued interest payable | 214 |
| | 210 |
|
| Operating lease liabilities | 67 |
| | 66 |
|
| Other current liabilities | 129 |
| | 136 |
|
| Total current liabilities | 1,214 |
| | 2,132 |
|
| Long-term deferred revenue | 241 |
| | 217 |
|
| Long-term liabilities - related parties | 290 |
| | 290 |
|
| Long-term debt | 20,467 |
| | 19,704 |
|
| Deferred income taxes | 11 |
| | 12 |
|
| Long-term operating lease liabilities | 284 |
| | 302 |
|
| Deferred credits and other liabilities | 175 |
| | 192 |
|
| Total liabilities | 22,682 |
| | 22,849 |
|
| Commitments and contingencies (see Note 21) |
| |
|
| Series A preferred units | 968 |
| | 968 |
|
| Equity | | | |
| Common unitholders - public (393 million and 392 million units issued and outstanding) | 9,509 |
| | 10,800 |
|
| Common unitholder - MPC (666 million and 666 million units issued and outstanding) | 3,014 |
| | 4,968 |
|
| Series B preferred units (.6 million and .6 million units issued and outstanding) | 601 |
| | 611 |
|
| Accumulated other comprehensive loss | (16 | ) | | (15 | ) |
| Total MPLX LP partners’ capital | 13,108 |
| | 16,364 |
|
| Noncontrolling interests | 248 |
| | 249 |
|
| Total equity | 13,356 |
| | 16,613 |
|
| Total liabilities, preferred units and equity | $ | 37,006 |
| | $ | 40,430 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Partnership | | | | | | |
| (In millions) | Common Unit-holders Public | | Class B Unit-holders Public | | Common Unit-holder MPC | | Common Unit-holder GP | | General Partner MPC | | Accumulated Other Comprehensive Loss | | Non-controlling Interests | | Equity of Predecessor(1) | | Total |
| Balance at December 31, 2015 | $ | 7,691 |
| | $ | 266 |
| | $ | 465 |
| | $ | — |
| | $ | 819 |
| | $ | — |
| | $ | 13 |
| | $ | 692 |
| | $ | 9,946 |
|
| Distributions to MPC from Predecessor | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (104 | ) | | (104 | ) |
| Contribution from MPC | — |
| | — |
| | 84 |
| | — |
| | 141 |
| | — |
| | — |
| | — |
| | 225 |
|
| Contribution of MarkWest Hydrocarbon from MPC | — |
| | — |
| | — |
| | — |
| | (188 | ) | | — |
| | — |
| | — |
| | (188 | ) |
| Distribution of MarkWest Hydrocarbon to MPC | — |
| | — |
| | — |
| | — |
| | 565 |
| | — |
| | — |
| | — |
| | 565 |
|
| Issuance of units under ATM Program | 499 |
| | — |
| | — |
| | — |
| | 11 |
| | — |
| | — |
| | — |
| | 510 |
|
| Net (loss) income | (51 | ) | | — |
| | (10 | ) | | — |
| | 136 |
| | — |
| | 3 |
| | 149 |
| | 227 |
|
| Allocation of MPC's net investment at acquisition | — |
| | — |
| | 669 |
| | — |
| | (337 | ) | | — |
| | — |
| | (332 | ) | | — |
|
| Distributions to unitholders and general partner | (378 | ) | | — |
| | (98 | ) | | — |
| | (136 | ) | | — |
| | — |
| | — |
| | (612 | ) |
| Distributions to noncontrolling interests | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (3 | ) | | — |
| | (3 | ) |
| Contributions from noncontrolling interests | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 4 |
| | — |
| | 4 |
|
| Class B unit conversion | 133 |
| | (133 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Non-cash contribution from MPC | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 334 |
| | 334 |
|
| Equity-based compensation | 6 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 6 |
|
| Deferred income tax impact from changes in equity | (2 | ) | | — |
| | (13 | ) | | — |
| | (2 | ) | | — |
| | — |
| | — |
| | (17 | ) |
| Balance at September 30, 2016 | $ | 7,898 |
| | $ | 133 |
| | $ | 1,097 |
|
| $ | — |
| | $ | 1,009 |
|
| $ | — |
| | $ | 17 |
| | $ | 739 |
| | $ | 10,893 |
|
| | | | | | | | | | | | | | | | | |
|
|
| Balance at December 31, 2016 | $ | 8,086 |
| | $ | 133 |
| | $ | 1,069 |
| | $ | — |
| | $ | 1,013 |
| | $ | — |
| | $ | 18 |
| | $ | 791 |
| | $ | 11,110 |
|
| Distributions to MPC from Predecessor | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (113 | ) | | (113 | ) |
| Distributions of cash received from Joint-Interest Acquisition entities to MPC | — |
| | — |
| | — |
| | — |
| | (13 | ) | | — |
| | — |
| | — |
| | (13 | ) |
| Issuance of units under ATM Program | 473 |
| | — |
| | — |
| | — |
| | 10 |
| | — |
| | — |
| | — |
| | 483 |
|
| Net income | 212 |
| | — |
| | 68 |
| | 5 |
| | 222 |
| | — |
| | 3 |
| | 36 |
| | 546 |
|
| Contribution from MPC | — |
| | — |
| | — |
| | — |
| | — |
| | (14 | ) | | — |
| | 689 |
| | 675 |
|
| Allocation of MPC's net investment at acquisition | — |
| | — |
| | 845 |
| | 824 |
| | (266 | ) | | — |
| | — |
| | (1,403 | ) | | — |
|
| Distribution to MPC for acquisitions | — |
| | — |
| | (537 | ) | | — |
| | (1,394 | ) | | — |
| | — |
| | — |
| | (1,931 | ) |
| Distributions to unitholders and general partner | (452 | ) | | — |
| | (143 | ) | | (7 | ) | | (198 | ) | | — |
| | — |
| | — |
| | (800 | ) |
| Distributions to noncontrolling interests | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (4 | ) | | — |
| | (4 | ) |
| Contributions from noncontrolling interests | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 128 |
| | — |
| | 128 |
|
| Class B unit conversion | 133 |
| | (133 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Equity-based compensation | 5 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 5 |
|
| Balance at September 30, 2017 | $ | 8,457 |
| | $ | — |
| | $ | 1,302 |
|
| $ | 822 |
| | $ | (626 | ) | | $ | (14 | ) | | $ | 145 |
| | $ | — |
| | $ | 10,086 |
|
| |
(1) | Financial information has been retrospectively adjusted for the acquisition of HST, WHC and MPLXT from MPC. See Notes 1 and 3. |
The accompanying notes are an integral part of these consolidated financial statements.
MPLX LP
Consolidated Statements of Cash Flows (Unaudited) |
| | | | | | | |
| | Three Months Ended
March 31, |
| (In millions) | 2020 | | 2019(1) |
| Increase/(decrease) in cash, cash equivalents and restricted cash | | | |
| Operating activities: | | | |
| Net income/(loss) | $ | (2,716 | ) | | $ | 689 |
|
| Adjustments to reconcile net income/(loss) to net cash provided by operating activities: | | | |
| Amortization of deferred financing costs | 14 |
| | 7 |
|
| Depreciation and amortization | 325 |
| | 301 |
|
| Impairment expense | 2,165 |
| | — |
|
| Deferred income taxes | — |
| | (2 | ) |
| (Gain)/loss on disposal of assets | — |
| | 1 |
|
Loss/(income) from equity method investments(2) | 1,184 |
| | (77 | ) |
| Distributions from unconsolidated affiliates | 119 |
| | 115 |
|
| Changes in: | | | |
| Current receivables | 71 |
| | 6 |
|
| Inventories | 3 |
| | 4 |
|
| Fair value of derivatives | (15 | ) | | 7 |
|
| Current accounts payable and accrued liabilities | (142 | ) | | (69 | ) |
| Current assets/current liabilities - related parties | (52 | ) | | (157 | ) |
| Right of use assets/operating lease liabilities | (4 | ) | | — |
|
| Deferred revenue | 27 |
| | 13 |
|
| All other, net | 30 |
| | 15 |
|
| Net cash provided by operating activities | 1,009 |
| | 853 |
|
| Investing activities: | | | |
| Additions to property, plant and equipment | (379 | ) | | (575 | ) |
| Acquisitions, net of cash acquired | — |
| | 1 |
|
| Disposal of assets | 39 |
| | 7 |
|
| Investments in unconsolidated affiliates | (91 | ) | | (135 | ) |
| Distributions from unconsolidated affiliates - return of capital | 69 |
| | 2 |
|
| Net cash used in investing activities | (362 | ) | | (700 | ) |
| Financing activities: | | | |
| Long-term debt - borrowings | 1,325 |
| | 1,404 |
|
| - repayments | (581 | ) | | (821 | ) |
| Related party debt - borrowings | 1,667 |
| | 1,405 |
|
| - repayments | (2,261 | ) | | (1,405 | ) |
| Distributions to noncontrolling interests | (9 | ) | | (6 | ) |
| Distributions to Series A preferred unitholders | (20 | ) | | (20 | ) |
| Distributions to Series B preferred unitholders | (21 | ) | | — |
|
| Distributions to unitholders and general partner | (717 | ) | | (515 | ) |
| Distributions to common and Series B preferred unitholders from Predecessor | — |
| | (259 | ) |
| Contributions from MPC | 14 |
| | 12 |
|
| Contributions from noncontrolling interests | — |
| | 94 |
|
| All other, net | (2 | ) | | (5 | ) |
| Net cash used in financing activities | (605 | ) | | (116 | ) |
| Net (decrease)/increase in cash, cash equivalents and restricted cash | 42 |
| | 37 |
|
| Cash, cash equivalents and restricted cash at beginning of period | 15 |
| | 85 |
|
| Cash, cash equivalents and restricted cash at end of period | $ | 57 |
| | $ | 122 |
|
| |
| (1) | Financial information for the first quarter of 2019 has been retrospectively adjusted for the acquisition of ANDX. See Notes 1 and 3. |
| |
| (2) | The 2020 period includes $1,264 million of impairment expense. See Note 4. |
The accompanying notes are an integral part of these consolidated financial statements.
MPLX LP
Consolidated Statements of Equity (Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Partnership | | | | | | | | |
| (In millions) | Common
Unit-holders
Public | | Common
Unit-holder
MPC | | Series B Preferred Unit-holders | | Accumulated Other Comprehensive Loss | | Non-controlling
Interests | | Equity of Predecessor | | Total(1) |
| Balance at December 31, 2018 | $ | 8,336 |
| | $ | (1,612 | ) | | $ | — |
| | $ | (16 | ) | | $ | 156 |
| | 10,867 |
| | $ | 17,731 |
|
| Net income (excludes amounts attributable to Series A preferred units) | 176 |
| | 307 |
| | — |
| | — |
| | 6 |
| | 180 |
| | 669 |
|
| Distributions to: | | | | | | | | | | | | | |
| Unitholders | (188 | ) | | (327 | ) | | — |
| | — |
| | — |
| | (261 | ) | | (776 | ) |
| Noncontrolling interests | — |
| | — |
| | — |
| | — |
| | (6 | ) | | — |
| | (6 | ) |
| Contributions from: | | | | | | | | | | | | | |
| MPC | — |
| | — |
| | — |
| | — |
| | — |
| | 15 |
| | 15 |
|
| Noncontrolling interests | — |
| | — |
| | — |
| | — |
| | 94 |
| | — |
| | 94 |
|
| Other | 2 |
| | — |
| | — |
| | 1 |
| | — |
| | — |
| | 3 |
|
| Balance at March 31, 2019 | 8,326 |
| | (1,632 | ) | | — |
| | (15 | ) | | 250 |
| | 10,801 |
| | 17,730 |
|
| | | | | | | | | | | | | | |
| Balance at December 31, 2019 | 10,800 |
| | 4,968 |
| | 611 |
| | (15 | ) | | 249 |
| | — |
| | 16,613 |
|
| Net income (excludes amounts attributable to Series A preferred units) | (1,022 | ) | | (1,733 | ) | | 11 |
| | — |
| | 8 |
| | — |
| | (2,736 | ) |
| Distributions to: | | | | | | | | | | | | | |
| Unitholders | (271 | ) | | (446 | ) | | (21 | ) | | — |
| | — |
| | — |
| | (738 | ) |
| Noncontrolling interests | — |
| | — |
| | — |
| | — |
| | (9 | ) | | — |
| | (9 | ) |
| Contributions from: | | | | | | | | | | | | | |
| MPC | — |
| | 225 |
| | — |
| | — |
| | — |
| | — |
| | 225 |
|
| Other | 2 |
| | — |
| | — |
| | (1 | ) | | — |
| | — |
| | 1 |
|
| Balance at March 31, 2020 | $ | 9,509 |
| | $ | 3,014 |
| | $ | 601 |
| | $ | (16 | ) | | $ | 248 |
| | $ | — |
| | $ | 13,356 |
|
| |
| (1) | Financial information for the first quarter of 2019 has been retrospectively adjusted for the acquisition of ANDX. See Notes 1 and 3. |
The accompanying notes are an integral part of these consolidated financial statements.
Notes to Consolidated Financial Statements (Unaudited)
1. Description of the Business and Basis of Presentation
Description of the Business – MPLX LP is a diversified, growth-orientedlarge-cap master limited partnership formed by Marathon Petroleum Corporation.Corporation that owns and operates midstream energy infrastructure and logistics assets, and provides fuels distribution services. References in this report to “MPLX LP,” “MPLX,” “the Partnership,” “we,” “ours,” “us,” or like terms refer to MPLX LP and its subsidiaries (collectively, the “Partnership”) are engaged in the gathering, processing and transportation of natural gas; the gathering, transportation, fractionation, storage and marketing of NGLs; and the transportation, storage and distribution of crude oil and refined petroleum products, principally for our sponsor.subsidiaries. References to “MPC” refer collectively to Marathon Petroleum Corporation as our sponsor and its subsidiaries, other than the Partnership. We are engaged in the transportation, storage and distribution of crude oil, asphalt and refined petroleum products; the gathering, processing and transportation of natural gas; and the gathering, transportation, fractionation, storage and marketing of NGLs. MPLX’s principal executive office is located in Findlay, Ohio.
The Partnership’sMPLX’s business consists of two2 segments based on the nature of services it offers: Logistics and Storage (“L&S”), which is focused onrelates primarily to crude oil, asphalt and refined petroleum productsproducts; and Gathering and Processing (“G&P”), which is focused onrelates primarily to natural gas and NGLs. See Note 9 for additional information regarding operations.
Basis of Presentation – The Partnership’s consolidated financial statements include all majority-ownedthe operations and controlled subsidiaries. For non-wholly-owned consolidated subsidiaries, the interests owned by third parties have been recorded as Noncontrolling interests in the accompanying Consolidated Balance Sheets. Intercompany investments, accounts and transactions have been eliminated. The Partnership’s investments in which the Partnership exercises significant influence but does not control and does not have a controlling financial interest are accounted for using the equity method. The Partnership’s investments in a VIE in which the Partnership exercises significant influence but does not control and is not the primary beneficiary are also accounted for using the equity method.
Effective March 1, 2017, the Partnership acquired pipeline, storage and terminal businesses that are operated through Hardin Street Transportation LLC (“HST”), Woodhaven Cavern LLC (“WHC”) and MPLX Terminals LLC (“MPLXT”) (collectively with Hardin Street Marine LLC (“HSM”), “Predecessor”) from MPC. The acquisition from MPC was considered a transfer between entities under common control. Accordingly, the Partnership recorded the acquisition from MPC on its Consolidated Balance Sheets at MPC’s historical basis instead of fair value. Transfers of businesses between entities under common control require prior periods to be retrospectively adjusted to furnish comparative information since inception of common control. Therefore, the accompanying consolidated financial statements and related notes of MPLX LP have been retrospectively adjusted to include the historical results of the businesses acquired from MPC prior tothese segments.
On July 30, 2019, MPLX completed its acquisition by merger (the “Merger”) of Andeavor Logistics LP (“ANDX”). At the effective datestime of the acquisition.Merger, each common unit held by ANDX’s public unitholders was converted into the right to receive 1.135 MPLX common units. ANDX common units held by certain affiliates of MPC were converted into the right to receive 1.0328 MPLX common units. See Note 3 for additional information regarding the HST, WHCMerger.
Impairments – The recent outbreak of COVID-19 and MPLXT acquisition. its development into a pandemic in March 2020 has resulted in significant economic disruption globally. Actions taken by various governmental authorities, individuals and companies around the world to prevent the spread of COVID-19 through social distancing have restricted travel, many business operations, public gatherings and the overall level of individual movement and in-person interaction across the globe. This has significantly reduced global economic activity and resulted in a decline in the demand for the midstream services we provide. Macroeconomic conditions and global geopolitical events have also resulted in significant price volatility related to those aforementioned products.
The accompanying financial statementsoverall deterioration in the economy and related notes present the combined financial position, results of operations, cash flowsenvironment in which MPLX and equity of Predecessor onour customers operate, as well as a historical basis. The financial statements of Predecessor have been prepared from the separate records maintained by MPC and may not necessarily be indicativesustained decrease in unit price, were considered triggering events resulting in impairments of the conditions orcarrying value of certain assets. During the resultsfirst quarter of operations that would2020 we recognized impairments related to goodwill, certain equity method investments and certain long-lived assets (including intangibles), within our G&P segment. Many of our producer customers have existed if Predecessor had been operated as an unaffiliated entity.
In preparing the Consolidated Statements of Equity, net income attributablecontinued to MPLX LP is allocated to preferred unitholders based on a fixed distribution schedule, as discussedrefine and update production forecasts in Note 8, and subsequently allocatedresponse to the general partnercurrent environment, which has impacted their current and limited partner unitholders. Distributions, although earned, are not accrued until declared. However, when distributionsexpected future demand for our services, including the future utilization of our assets. Additionally, certain of our contracts have commodity price exposure, including NGL prices, which have experienced increased volatility as noted above. The table below provides information related to the IDRs are made, earnings equal toimpairments recognized during the amountfirst quarter of those distributions are first allocated to2020 as well as the general partner before the remaining earnings are allocated to the limited partner unitholders based on their respective ownership percentages. The allocationcorresponding footnote where additional information can be found.
|
| | | | | | |
| (In millions) | | Impairment | | Footnote Reference |
| Goodwill | | $ | 1,814 |
| | 12 |
| Equity method investments | | 1,264 |
| | 4 |
| Intangibles, net | | 177 |
| | 12 |
| Property, plant and equipment, net | | 174 |
| | 11 |
| Total impairments | | $ | 3,429 |
| | |
Basis of net income attributable to MPLX LP for purposes of calculating net income per limited partner unit is described in Note 6.
Presentation – The accompanying interim consolidated financial statements are unaudited; however, in the opinion of the Partnership’sMPLX’s management, these statements reflect all adjustments necessary for a fair statement of the results for the periods reported. All such adjustments are of a normal, recurring nature unless otherwise disclosed. These interim consolidated financial statements, including the notes, have been prepared in accordance with the rules and regulations of the SEC applicable to interim period financial statements and do not include all of the information and disclosures required by GAAP for complete financial statements. Certain amounts in prior years have been reclassified to conform to current year presentation.
These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2016, as updated by our Current Report on Form 8-K filed on May 1, 2017.2019. The results of
operations for the three and nine months ended September 30, 2017March 31, 2020 are not necessarily indicative of the results to be expected for the full year.
In relation to the Merger described above and in Note 3, ANDX’s assets, liabilities and results of operations prior to the Merger are collectively included in what we refer to as the “Predecessor” from October 1, 2018, which was the date that MPC acquired Andeavor. MPLX’s acquisition of ANDX is considered a transfer between entities under common control due to MPC’s relationship with ANDX prior to the Merger. As an entity under common control with MPC, MPLX recorded the assets acquired and liabilities assumed on its consolidated balance sheets at MPC’s historical carrying value. Transfers of businesses between entities under common control require prior periods to be retrospectively adjusted for those dates that the entity was under common control. Accordingly, the accompanying financial statements and related notes of MPLX LP have been retrospectively adjusted to include the historical results of ANDX beginning October 1, 2018.
7
MPLX’s consolidated financial statements include all majority-owned and controlled subsidiaries. For non wholly owned consolidated subsidiaries, the interests owned by third parties have been recorded as “Noncontrolling interests” on the accompanying Consolidated Balance Sheets. Intercompany investments, accounts and transactions have been eliminated. MPLX’s investments in which MPLX exercises significant influence but does not control and does not have a controlling financial interest are accounted for using the equity method. MPLX’s investments in VIEs in which MPLX exercises significant influence but does not control and is not the primary beneficiary are also accounted for using the equity method.
In preparing the Consolidated Statements of Equity, net income attributable to MPLX LP is allocated to Series A and Series B preferred unitholders based on a fixed distribution schedule. Distributions, although earned, are not accrued until declared. The allocation of net income attributable to MPLX LP for purposes of calculating net income per limited partner unit is described in Note 6.
2. Accounting Standards
Recently Adopted
In October 2016,ASU 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments
Effective January 1, 2020, we adopted ASU 2016-13 using the FASB issuedmodified retrospective transition method. This ASU requires entities to consider a broader range of information to estimate expected credit losses, which may result in earlier recognition of losses. The ASU requires the company to utilize an accounting standards update to amend the consolidation guidance issuedexpected loss methodology in February 2015 to require that a decision maker consider, in the determinationplace of the primary beneficiary, its indirect interest in a VIE held by a related party that is under common control on a proportionate basis only. The change was effectiveincurred loss methodology for the financial statements for fiscal years beginning after December 15, 2016,instruments, including trade receivables, and interim periods within those fiscal years. The Partnership was required to applyoff-balance sheet credit exposures. Adoption of the standard retrospectively to January 1, 2016, the date on which the Partnership adopted the consolidation guidance issued in February 2015. The Partnership adopted this accounting standards update in the first quarter of 2017 and it did not have an impact on the consolidated financial statements.
In March 2016, the FASB issued an accounting standards update on the accounting for employee share-based payments. This update requires the recognition of income tax effects of awards through the income statement when awards vest or are settled. It also increases the amount an employer can withhold for tax purposes without triggering liability accounting. Lastly, it allows employers to make a policy election to account for forfeitures as they occur. The changes were effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Under the new guidance, the Partnership will continue estimating forfeiture rates to calculate compensation cost. The Partnership adopted this accounting standards update in the first quarter of 2017 and it did not have a material impact on the consolidatedour financial statements.
Not Yet Adopted
In August 2017,We are exposed to credit losses, primarily as a result of the FASB issued an accounting standards update to amend the hedge accounting rules to simplify the application of hedge accounting guidance and better portray the economic results of risk management activities in the financial statements. The guidance expands themidstream services that we provide. We assess each customer’s ability to hedge nonfinancial and financial risk components, reduces complexity in fair value hedgespay through our credit review process, which considers various factors such as external credit ratings; a review of interest rate risk, eliminates the requirement to separately measure and report hedge ineffectiveness, as well as eases certain hedge effectiveness assessment requirements. The guidance is effective beginning in 2019 with early adoption permitted. The Partnership is in the process of determining the impact of this guidance, including transition elections and required disclosures, on the consolidated financial statements to determine liquidity, leverage, trends and business specific risks; market information; pay history and our business strategy. We monitor our ongoing credit exposure through timely review of customer payment activity. At March 31, 2020, we reported $522 million of accounts receivable, net of allowances of $1 million.
We are also exposed to credit losses from off-balance sheet exposures, such as guarantees of joint venture debt. See Note 21 for more information on these off-balance sheet exposures.
We also adopted the timing of adoption.
In May 2017, the FASB issued an accounting standards update to provide guidance about when changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. An entity should account for the effects of a modification unless the fair value, vesting conditions and balance sheet classification of the modified award is the same as the original award immediately before the original award is modified. The Partnership will adopt the new standard on a prospective basis beginning on January 1, 2018. The application of this new accounting standard is not expected to have a material impact on the consolidated financial statements.
In February 2017, the FASB issued an accounting standards update addressing the derecognition of nonfinancial assets. The guidance defines in-substance nonfinancial assets, and states that the derecognition of business activities should be evaluated under the consolidation guidance, with limited exceptions related to conveyances of oil and gas mineral rights or contracts with customers. The standard eliminates the previous exclusion for businesses that are in-substance real estate, and eliminates some differences based on whether a transferred set is that of assets or a business and whether the transfer is to a joint venture. The standard must be implemented in conjunction with the implementation of the revenue recognition accounting standards update, which the Partnership will implement January 1, 2018. The Partnership plans to adopt the new standard using the modified retrospective method and does not expect the application of this accounting standards update to have a material impact on the consolidated financial statements.
In January 2017, the FASB issued an accounting standards update which simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Under the new guidance, the recognition of an impairment charge is calculated based on the amount by which the carrying amount exceeds the reporting unit’s fair value, which could be different from the amount calculated under the current method using the implied fair value of the goodwill; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The guidance should be applied on a prospective basis, and is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Partnership is in the process of determining the impact of the accounting standards update on the consolidated financial statements.
In January 2017, the FASB issued an accounting standards update to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of
assets or businesses. The standard is intended to narrow the definition of a business by specifying the minimum inputs and processes and by narrowing the definition of outputs. The change is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The guidance will be applied prospectively and early adoption is permitted for certain transactions. The Partnership is in the process of evaluating this accounting standards update and determining whether it will early adopt.
In November 2016, the FASB issued an accounting standards update requiring that the statement of cash flows explain the changefollowing ASU during the period in the totalfirst three months of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. The change is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. Retrospective application is required. The application of this accounting standards update will2020, which did not have a material impact on the Consolidated Statements of Cash Flows.
In August 2016, the FASB issued an accounting standards update related to the classification of certain cash flows. The accounting standards update provides specific guidance on eight cash flow classification issues, including debt prepaymentour financial statements or debt extinguishment costs and distributions received from equity method investees, to reduce diversity in practice. The change is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. Retrospective application is required. The Partnership does not expect application of this accounting standards update to have a material impact on the Consolidated Statements of Cash Flows.
In June 2016, the FASB issued an accounting standards update related to the accounting for credit losses on certain financial instruments. The guidance requires that for most financial assets, losses are based on an expected loss approach which includes estimates of losses over the life of exposure that considers historical, current and forecasted information. Expanded disclosures related to the methods used to estimate the losses as well as a specific disaggregation of balances for financial assets are also required. The change is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The Partnership does not expect application of this accounting standards update to have a material impact on the consolidated financial statements.
In February 2016, the FASB issued an accounting standards update requiring lessees to record virtually all leases on their balance sheets. The accounting standards update also requires expanded disclosures to help financial statement users better understand the amount, timing and uncertainty of cash flows arising from leases. For lessors, this amended guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. The change will be effective on a modified retrospective basis for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. The Partnership is currently evaluating the impact of this standard on the Partnership’s financial statements and disclosures, internal controls and accounting policies. This evaluation process includes reviewing all forms of leases, performing a completeness assessment over the lease population and analyzing the practical expedients in order to determine the best path to implementation. The Partnership does not plan to early adopt the standard. The Partnership believes the impact will be material on the consolidated financial statements as all operating leases will be recognized as a right of use asset and lease obligation. Based on results of the evaluation process to date, the Partnership also believes the impact on existing processes, controls and information systems may be material.disclosures:
|
| | | |
| ASU | | | Effective Date |
| 2018-13 | Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement | | January 1, 2020 |
| | | |
In January 2016, the FASB issued an accounting standards update requiring unconsolidated equity investments, not accounted for under the equity method, to be measured at fair value with changes in fair value recognized in net income. The update also requires the use of the exit price notion when measuring the fair value of financial instruments for disclosure purposes and the separate presentation of financial assets and liabilities by measurement category and form on the balance sheet and accompanying notes. The update eliminates the requirement to disclose the methods and assumptions used in estimating the fair value of financial instruments measured at amortized cost. Lastly, the accounting standards update requires separate presentation in other comprehensive income of the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when electing to measure the liability at fair value in accordance with the fair value option for financial instruments. The changes are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted only for guidance regarding presentation of the liability’s credit risk. The Partnership does not expect application of this accounting standards update to have a material impact on the consolidated financial statements.
In May 2014, the FASB issued Accounting Standards Update 2014-09 which created Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers” (“ASC 606”). The guidance in ASC 606 states that revenue is recognized when a customer obtains control of a good or service. Recognition of the revenue will involve a multiple step approach including identifying the contract, identifying the separate performance obligations, determining the transaction price, allocating the price to the performance obligations and recognizing the revenue as the obligations are satisfied. Additional disclosures will be required to provide adequate information to understand the nature, amount, timing and uncertainty of reported revenues and revenues expected to be recognized. The change will be effective on a retrospective or modified retrospective basis for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted no earlier than January 1, 2017.
The Partnership will adopt the revenue recognition standard during the first quarter of 2018. The Partnership plans to adopt the new standard using the modified retrospective method, which will result in a cumulative effect adjustment as of the date of adoption. By selecting this adoption method, the Partnership will disclose the amount by which each financial statement line item is affected by the standard in the current reporting period after adoption as compared with the guidance that was in effect before adoption.
The Partnership is currently evaluating the impact of the revenue recognition standard on its consolidated financial statements and disclosures, internal controls and accounting policies. This evaluation process includes a phased approach, the first phase of which includes reviewing a sample of contracts and transaction types across segments. This phase was completed as of September 30, 2017.
Based on the results of the first phase assessment, the Partnership has reached conclusions for all material contract types. Revenue recognition patterns will not change for fee-based or percent-of-proceeds contracts. The Partnership does expect certain amounts to be grossed up in revenue and cost of revenues as a result of implementation, specifically related to third-party reimbursements from customers and commodities received as consideration in service agreements, such as keep-whole arrangements. In the third quarter of 2017, the Partnership finalized a conclusion on the valuation of non-cash consideration received in the form of a commodity product, with the valuation being performed on the date the service performance obligation is completed.
The Partnership is in the process of finalizing the second phase of implementation, which includes the calculation of the impact of the new standard on results and the development of new policies, procedures and disclosures related to the application upon adoption. The Partnership believes third-party reimbursements included in the transaction price would have resulted in a gross up in 2016 and 2017 service revenue and cost of revenues between $300 million and $350 million annually, with no impact to net income. The Partnership will provide a summary of the total ASC 606 impact in the Annual Report on Form 10-K for the year ended December 31, 2017.
3. Acquisitions
Joint-Interest Acquisition of Andeavor Logistics LP
On September 1, 2017,As previously disclosed, on May 7, 2019, ANDX, Tesoro Logistics GP, LLC, then the Partnership entered into a Membership Interests and Shares Contributions Agreement (the “September 2017 Contributions Agreement”general partner of ANDX (“TLGP”) with, MPLX, MPLX GP LLC, the general partner of MPLX (“MPLX GP”), and MPLX Logistics HoldingsMAX LLC, (“MPLX Logistics”), MPLX Holdings Inc. (“MPLX Holdings”) and MPC Investment LLC (“MPC Investment”), each a wholly-ownedwholly owned subsidiary of MPC, wherebyMPLX (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) that provided for, among other things, the Partnership agreed to acquire certain ownership interests in joint venture entities indirectlymerger of Merger Sub with and into ANDX. On July 30, 2019, the Merger was completed, and ANDX survived the Merger as a wholly owned subsidiary of MPLX. At the effective time of the Merger, each common unit held by MPC. PursuantANDX’s public unitholders was converted into the right to the September 2017 Contributions Agreement, MPC Investment agreed to contribute: all of the membership interests of Lincoln Pipeline LLC, which holds a 35 percent interest in Illinois Extension Pipeline Company, L.L.C. (“Illinois Extension”); all of the membership interests of MPL Louisiana Holdings LLC, which holds a 40.7 percent interest in LOOP LLC (“LOOP”); a 58.52 percent interest in LOCAP LLC (“LOCAP”); and a 24.51 percent interest in Explorer Pipeline Company (“Explorer”), through a series of intercompany contributions to the Partnership for an agreed upon purchase price of approximately $420 million in cash and equity consideration valued at approximately $630 million for total consideration of $1.05 billion (collectively, the “Joint-Interest Acquisition”). The number ofreceive 1.135 MPLX common units. ANDX common units representing the equity consideration was then determinedheld by dividing the contribution amount by the simple averagecertain affiliates of the ten day trading volume weighted average NYSE price of a common unit for the ten trading days ending at market close on August 31, 2017. The fair value of the common and general partner units issued was approximately $653 million based on the closing common unit price as of September 1, 2017, as recorded on the Consolidated Statements of Equity, for a total purchase price of $1.07 billion. The equity issued consisted of: (i) 13,719,017 common units to MPLX GP, (ii) 3,350,893 common units to MPLX Logistics and (iii) 1,441,224 common units to MPLX Holdings. The Partnership also issued 377,778 general partner units to MPLX GP in order to maintain its two percent general partner interest (“GP Interest”) in the Partnership.
Illinois Extension operates the 168-mile, 24-inch diameter Southern Access Extension (“SAX”) crude oil pipeline from Flanagan, Illinois to Patoka, Illinois, as well as additional tankage and two pump stations. LOOP owns and operates midstream crude oil infrastructure, including a deep water oil port offshore of Louisiana, pipelines and onshore storage facilities. LOOP also manages the operations of LOCAP, an affiliate pipeline system. LOCAP owns and operates a crude oil pipeline and tank facility in St. James, Louisiana, that distributes oil received from LOOP’s storage facilities and other connecting pipelines to nearby refineries andMPC were converted into the mid-continent region of the United States. Explorer owns and operates an approximate 1,830-mileright to receive 1.0328 MPLX common carrier pipeline that primarily transports gasoline, diesel, diluent and jet fuel from the Gulf Coast refining complex to the Midwest United States. The Partnership accountsunits. See Note 7 for the Joint-Interest Acquisition entities as equity method investments within its L&S segment.
As a transfer between entities under common control, the Partnership recorded the Joint-Interest Acquisitioninformation on its Consolidated Balance Sheets at MPC’s historical basis, which included accumulated other comprehensive loss. The Partnership recognizes an accumulated other comprehensive loss on its Consolidated Balance Sheets relating to pension and other post-retirement benefits provided by the LOOP and Explorer joint-interests to their employees. MPLX LP is not a sponsor of these benefit plans. There were no changes to Accumulated other comprehensive loss during the period September 1, 2017 through September 30, 2017.
Distributions of cash received from the entities and interests acquired in the Joint-Interest Acquisition related to periods prior to the acquisition will be prorated on a daily basis with MPLX LP retaining the portion of distributions beginning on the closing date. All amounts distributed to MPLX LP related to periods before the acquisition will be paid to MPC. Additionally, MPLX LP has agreed to pay MPC for any distributions of cash from LOOP related to the sale of LOOP’s excess crude oil inventory. Because the future distributions or payments cannot be reasonably quantified, a liability was not recorded in connection with the acquisition. MPLX LP subsequently received distributions related to the third quarter 2017 and recorded a liability to MPC and a corresponding decrease to the general partner’s equity for $13 million, as shown on the Consolidated Statements of Equity.
There is no income associated with the Joint-Interest Acquisition included in the Consolidated Statements of Income since the September 1, 2017 acquisition date, as the Partnership accounts for these investments in arrears using the most recently available information. The Partnership’s investment balance at September 30, 2017 related to the acquired interests is approximately $645 million and reported under the caption Equity method investments on the Consolidated Balance Sheets. MPC agreed to waive approximately two-thirds of the third quarter 2017 distributions on the common units issued in connection with the Joint-Interest Acquisition.Merger.
Additionally, as a result of the Merger, each ANDX TexNew Mex Unit issued and outstanding immediately prior to the effective time of the Merger was converted into a right for Western Refining Southwest, Inc. (“Southwest, Inc.”), a wholly owned subsidiary of MPC, as the holder of all such units, to receive a unit representing a substantially equivalent limited partner interest in MPLX (the “MPLX TexNew Mex Units”). By virtue of the conversion, all ANDX TexNew Mex Units were cancelled and ceased to exist as of the effective time of the Merger. The MPLX TexNew Mex Units are a new class of units in MPLX substantially equivalent to the ANDX TexNew Mex Units, including substantially equivalent rights, powers, duties and obligations that the ANDX TexNew Mex Units had immediately prior to the closing of the Merger. As a result of this waiver, MPC did not receive approximately two-thirdsthe Merger, the ANDX Special Limited Partner Interest outstanding immediately prior to the effective time of the distributions or IDRs that would have otherwise accruedMerger was converted into a right for Southwest Inc., as the holder of all such interest, to receive a substantially equivalent special limited partner interest in MPLX (the “MPLX Special Limited Partner Interest”). By virtue of the conversion, the ANDX Special Limited Partner Interest was cancelled and ceased to exist as of the effective time of the Merger. For information on such commonANDX’s preferred units, please see Note 7.
The assets of ANDX consist of a network of owned and operated crude oil, refined product and natural gas pipelines; crude oil and water gathering systems; refining logistics assets; terminals with respect tocrude oil and refined products storage capacity; rail facilities; marine terminals including storage; bulk petroleum distribution facilities; a trucking fleet; and natural gas processing and fractionation systems and complexes. The assets are located in the third quarter 2017 distributions. The valuewestern and inland regions of these waived distributions was $10 million.the United States and complement MPLX’s existing business and assets.
Acquisition of Hardin Street Transportation LLC, Woodhaven Cavern LLC and MPLX Terminals LLC
MPC contributedaccounted for its October 1, 2018 acquisition of Andeavor (including acquiring control of ANDX), using the acquisition method of accounting, which required Andeavor assets and liabilities to be recorded by MPC at the acquisition date fair value. The Merger was closed on July 30, 2019, and the results of HST, WHC and MPLXT to newly created and wholly-owned subsidiaries and enteredANDX have been incorporated into commercial agreements related to services provided by these new entities to MPC on Januarythe results of MPLX as of October 1, 2015 for HST and WHC and April 1, 2016 for MPLXT. Pursuant to a Membership Interests Contributions Agreement entered into on March 1, 2017 by2018, which is the Partnership with MPLX GP, MPLX Logistics, MPLX Holdings and MPC Investment, each a wholly-owned subsidiary of MPC, MPC Investment agreed to contribute the outstanding membership interests in HST, WHC and MPLXT through a series of intercompany contributions to the Partnership for approximately $1.5 billion in cash and equity consideration valued at approximately $504 million (the “Transaction”). The number ofdate that common units representing the equity considerationcontrol was determined by dividing the contribution amount by the simple average of the ten day trailing volume weighted average NYSE price of a common unit for the ten trading days ending at market close on February 28, 2017. The fair value of the common and general partner units issued was approximately $503 million, as recorded on the Consolidated Statements of Equity, and consisted of (i) 9,197,900 common units to MPLX GP, (ii) 2,630,427 common units to MPLX Logistics and (iii) 1,132,049 common units to MPLX Holdings. The Partnership also issued 264,497 general partner units to MPLX GP in order to maintain its two percent GP Interest in the Partnership. MPC agreed to waive two-thirds of the first quarter 2017 distributions on the common units issued in connection with the Transaction.established. As a result of this waiver, MPC did not receive two-thirdsMPC’s relationship with both MPLX and ANDX, the Merger has been treated as a common control transaction, which requires the recasting of MPLX’s historical results and the general partner distributions or IDRs that would have otherwise accrued on such common units with respect torecognition of assets acquired and liabilities assumed using MPC’s historical carrying value. We recognized $1 million in acquisition costs during the first quarter 2017 distributions. The value of these waived distributions was $6 million.
HST owns and operates various private crude oil and refined product pipeline systems and associated storage tanks. As of the acquisition date, these pipeline systems consisted of 174 miles of crude oil pipelines and 430 miles of refined products pipelines. WHC owns and operates nine butane and propane storage caverns located in Michigan with approximately 1.8 million barrels of NGL storage capacity. As of the acquisition date, MPLXT owned and operated 59 terminals for the receipt, storage, blending, additization, handling and redelivery of refined petroleum products. Additionally, MPLXT operated one leased terminal and had partial ownership interest in two terminals. Collectively, these 62 terminals have a combined shell capacity of approximately 23.6 million barrels. The terminal facilities are located primarily in the Midwest, Gulf Coast and Southeast regions of the United States. The Partnership accounts for these businesses within its L&S segment.
The Partnership retrospectively adjusted the historical financial results for all periods to give effect2019 related to the acquisitionMerger, which are reflected in general and administrative expenses. For the three months ended March 31, 2019, we recognized $589 million of HSTrevenues and WHC effective January 1, 2015,other income and the acquisition$180 million of MPLXT effective April 1, 2016, as required for transactions between entities under common control. Priornet income related to these dates, these entities were not considered businesses and, therefore, there are no financial results from which to recast.ANDX.
4. Investments and Noncontrolling Interests
The following tables presenttable presents MPLX’s equity method investments at the Partnership’s previously reported unaudited Consolidated Statements of Income for the three and nine months ended September 30, 2016, retrospectively adjusted for the acquisition of HST, WHC and MPLXT:dates indicated:
|
| | | | | | | | | |
| | Ownership as of | | Carrying value at |
| | March 31, | | March 31, | | December 31, |
| (In millions, except ownership percentages) | 2020 | | 2020 | | 2019 |
| L&S | | | | | |
| MarEn Bakken Company LLC | 25% | | $ | 479 |
| | $ | 481 |
|
| Illinois Extension Pipeline Company, L.L.C. | 35% | | 271 |
| | 265 |
|
| LOOP LLC | 41% | | 239 |
| | 238 |
|
Andeavor Logistics Rio Pipeline LLC(1) | 67% | | 200 |
| | 202 |
|
| Minnesota Pipe Line Company, LLC | 17% | | 190 |
| | 190 |
|
Whistler Pipeline LLC(1) | 38% | | 163 |
| | 134 |
|
W2W Holdings LLC(1)(2) | 50% | | 76 |
| | — |
|
Wink to Webster Pipeline LLC(1)(2) | 15% | | — |
| | 126 |
|
| Explorer Pipeline Company | 25% | | 81 |
| | 83 |
|
Other(1) | | | 55 |
| | 55 |
|
| Total L&S | | | 1,754 |
| | 1,774 |
|
| G&P | | | | | |
MarkWest Utica EMG, L.L.C.(1) | 57% | | 712 |
| | 1,984 |
|
Sherwood Midstream LLC(1) | 50% | | 546 |
| | 537 |
|
MarkWest EMG Jefferson Dry Gas Gathering Company, L.L.C.(1) | 67% | | 302 |
| | 302 |
|
Rendezvous Gas Services, L.L.C.(1) | 78% | | 167 |
| | 170 |
|
Sherwood Midstream Holdings LLC(1) | 52% | | 155 |
| | 157 |
|
| Centrahoma Processing LLC | 40% | | 150 |
| | 153 |
|
Other(1) | | | 206 |
| | 198 |
|
| Total G&P | | | 2,238 |
| | 3,501 |
|
| Total | | | $ | 3,992 |
| | $ | 5,275 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2016 |
| (In millions, except per unit data) | MPLX LP (Previously Reported) | | HST/WHC | | MPLXT | | Eliminations(1) | | MPLX LP (Currently Reported) |
| Revenues and other income: | | | | | | | | | |
| Service revenue | $ | 250 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 250 |
|
| Service revenue - related parties | 153 |
| | 28 |
| | 72 |
| | — |
| | 253 |
|
| Rental income | 77 |
| | — |
| | — |
| | — |
| | 77 |
|
| Rental income - related parties | 29 |
| | 13 |
| | 26 |
| | — |
| | 68 |
|
| Product sales | 157 |
| | — |
| | — |
| | — |
| | 157 |
|
| Product sales - related parties | 2 |
| | — |
| | — |
| | — |
| | 2 |
|
| Income from equity method investments | 6 |
| | — |
| | — |
| | — |
| | 6 |
|
| Gain on sale of assets | 1 |
| | — |
| | — |
| | — |
| | 1 |
|
| Other income | 2 |
| | — |
| | — |
| | — |
| | 2 |
|
| Other income - related parties | 26 |
| | — |
| | — |
| | (4 | ) | | 22 |
|
| Total revenues and other income | 703 |
| | 41 |
| | 98 |
| | (4 | ) | | 838 |
|
| Costs and expenses: | | | | | | | | | |
| Cost of revenues (excludes items below) | 90 |
| | 10 |
| | 22 |
| | — |
| | 122 |
|
| Purchased product costs | 117 |
| | — |
| | — |
| | — |
| | 117 |
|
| Rental cost of sales | 11 |
| | 2 |
| | — |
| | — |
| | 13 |
|
| Rental cost of sales - related parties | — |
| | 1 |
| | — |
| | (1 | ) | | — |
|
| Purchases - related parties | 84 |
| | 4 |
| | 24 |
| | (3 | ) | | 109 |
|
| Depreciation and amortization | 138 |
| | 4 |
| | 9 |
| | — |
| | 151 |
|
| General and administrative expenses | 46 |
| | 2 |
| | 8 |
| | — |
| | 56 |
|
| Other taxes | 10 |
| | — |
| | 2 |
| | — |
| | 12 |
|
| Total costs and expenses | 496 |
| | 23 |
| | 65 |
| | (4 | ) | | 580 |
|
| Income from operations | 207 |
| | 18 |
| | 33 |
| | — |
| | 258 |
|
| Interest expense (net of amounts capitalized) | 51 |
| | — |
| | — |
| | — |
| | 51 |
|
| Other financial costs | 13 |
| | — |
| | — |
| | — |
| | 13 |
|
| Income before income taxes | 143 |
| | 18 |
| | 33 |
| | — |
| | 194 |
|
| Net income | 143 |
| | 18 |
| | 33 |
| | — |
| | 194 |
|
| Less: Net income attributable to noncontrolling interests | 2 |
| | — |
| | — |
| | — |
| | 2 |
|
| Less: Net income attributable to Predecessor | — |
| | 18 |
| | 33 |
| | — |
| | 51 |
|
| Net income attributable to MPLX LP | 141 |
| | — |
| | — |
| | — |
| | 141 |
|
| Less: Preferred unit distributions | 16 |
| | — |
| | — |
| | — |
| | 16 |
|
| Less: General partner’s interest in net income attributable to MPLX LP | 51 |
| | — |
| | — |
| | — |
| | 51 |
|
| Limited partners’ interest in net income attributable to MPLX LP | $ | 74 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 74 |
|
| |
| (1) | Represents intercompany transactions eliminated during the consolidation process, in accordance with GAAP. |
|
| | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2016 |
| (In millions, except per unit data) | MPLX LP (Previously Reported) | | HST/WHC | | MPLXT | | Eliminations(1) | | MPLX LP (Currently Reported) |
| Revenues and other income: | | | | | | | | | |
| Service revenue | $ | 712 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 712 |
|
| Service revenue - related parties | 448 |
| | 82 |
| | 146 |
| | — |
| | 676 |
|
| Rental income | 218 |
| | — |
| | — |
| | — |
| | 218 |
|
| Rental income - related parties | 84 |
| | 36 |
| | 52 |
| | — |
| | 172 |
|
| Product sales | 394 |
| | — |
| | — |
| | — |
| | 394 |
|
| Product sales - related parties | 8 |
| | — |
| | — |
| | — |
| | 8 |
|
| Loss from equity method investments | (72 | ) | | — |
| | — |
| | — |
| | (72 | ) |
| Gain on sale of assets | 1 |
| | — |
| | — |
| | — |
| | 1 |
|
| Other income | 5 |
| | — |
| | — |
| | — |
| | 5 |
|
| Other income - related parties | 78 |
| | — |
| | — |
| | (11 | ) | | 67 |
|
| Total revenues and other income | 1,876 |
| | 118 |
| | 198 |
| | (11 | ) | | 2,181 |
|
| Costs and expenses: | | | | | | | | | |
| Cost of revenues (excludes items below) | 263 |
| | 24 |
| | 42 |
| | — |
| | 329 |
|
| Purchased product costs | 310 |
| | — |
| | — |
| | — |
| | 310 |
|
| Rental cost of sales | 39 |
| | 3 |
| | — |
| | — |
| | 42 |
|
| Rental cost of sales - related parties | — |
| | 2 |
| | — |
| | (1 | ) | | 1 |
|
| Purchases - related parties | 238 |
| | 13 |
| | 45 |
| | (10 | ) | | 286 |
|
| Depreciation and amortization | 407 |
| | 12 |
| | 19 |
| | — |
| | 438 |
|
| Impairment expense | 130 |
| | — |
| | — |
| | — |
| | 130 |
|
| General and administrative expenses | 147 |
| | 5 |
| | 20 |
| | — |
| | 172 |
|
| Other taxes | 32 |
| | 2 |
| | 3 |
| | — |
| | 37 |
|
| Total costs and expenses | 1,566 |
| | 61 |
| | 129 |
| | (11 | ) | | 1,745 |
|
| Income from operations | 310 |
| | 57 |
| | 69 |
| | — |
| | 436 |
|
| Related party interest and other financial income | 1 |
| | — |
| | — |
| | — |
| | 1 |
|
| Interest expense (net of amounts capitalized) | 158 |
| | — |
| | — |
| | — |
| | 158 |
|
| Other financial costs | 37 |
| | — |
| | — |
| | — |
| | 37 |
|
| Income before income taxes | 114 |
| | 57 |
| | 69 |
| | — |
| | 240 |
|
| Benefit for income taxes | (12 | ) | | — |
| | — |
| | — |
| | (12 | ) |
| Net income | 126 |
| | 57 |
| | 69 |
| | — |
| | 252 |
|
| Less: Net income attributable to noncontrolling interests | 3 |
| | — |
| | — |
| | — |
| | 3 |
|
| Less: Net income attributable to Predecessor | 23 |
| | 57 |
| | 69 |
| | — |
| | 149 |
|
| Net income attributable to MPLX LP | 100 |
| | — |
| | — |
| | — |
| | 100 |
|
| Less: Preferred unit distributions | 25 |
| | — |
| | — |
| | — |
| | 25 |
|
| Less: General partner’s interest in net income attributable to MPLX LP | 136 |
| | — |
| | — |
| | — |
| | 136 |
|
| Limited partners’ interest in net loss attributable to MPLX LP | $ | (61 | ) |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | (61 | ) |
| |
(1) | Represents intercompany transactions eliminated during the consolidation process, in accordance with GAAP. |
The following table presents the Partnership’s previously reported unaudited Consolidated Statements of Cash Flows, retrospectively adjusted for the acquisition of HST, WHC and MPLXT: |
| | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2016 |
| (In millions) | MPLX LP (Previously Reported) | | HST/WHC | | MPLXT | | MPLX LP (Currently Reported) |
| Increase (decrease) in cash and cash equivalents | | | | | | | |
| Operating activities: | | | | | | | |
| Net income | $ | 126 |
| | $ | 57 |
| | $ | 69 |
| | $ | 252 |
|
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | | | | |
| | |
| Amortization of deferred financing costs | 34 |
| | — |
| | — |
| | 34 |
|
| Depreciation and amortization | 407 |
| | 12 |
| | 19 |
| | 438 |
|
| Impairment expense | 130 |
| | — |
| | — |
| | 130 |
|
| Deferred income taxes | (16 | ) | | — |
| | — |
| | (16 | ) |
| Asset retirement expenditures | (3 | ) | | (1 | ) | | — |
| | (4 | ) |
| Gain on disposal of assets | (1 | ) | | — |
| | — |
| | (1 | ) |
| Loss from equity method investments | 72 |
| | — |
| | — |
| | 72 |
|
| Distributions from unconsolidated affiliates | 111 |
| | — |
| | — |
| | 111 |
|
| Changes in: | | | | | | | |
| Current receivables | (44 | ) | | 1 |
| | — |
| | (43 | ) |
| Inventories | (4 | ) | | — |
| | — |
| | (4 | ) |
| Fair value of derivatives | 28 |
| | — |
| | — |
| | 28 |
|
| Current accounts payable and accrued liabilities | 59 |
| | (1 | ) | | 6 |
| | 64 |
|
| Receivables from / liabilities to related parties | 15 |
| | 3 |
| | (122 | ) | | (104 | ) |
| All other, net | 18 |
| | 2 |
| | (2 | ) | | 18 |
|
| Net cash provided by (used in) operating activities | 932 |
| | 73 |
| | (30 | ) | | 975 |
|
| Investing activities: | | | | | | | |
| Additions to property, plant and equipment | (874 | ) | | (36 | ) | | (33 | ) | | (943 | ) |
| Investments - net related party loans | 77 |
| | (37 | ) | | 63 |
| | 103 |
|
| Investments in unconsolidated affiliates | (56 | ) | | — |
| | — |
| | (56 | ) |
| All other, net | 4 |
| | — |
| | — |
| | 4 |
|
| Net cash (used in) provided by investing activities | (849 | ) | | (73 | ) | | 30 |
| | (892 | ) |
| Financing activities: | | | | | | | |
| Long-term debt - borrowings | 434 |
| | — |
| | — |
| | 434 |
|
| - repayments | (1,312 | ) | | — |
| | — |
| | (1,312 | ) |
| Related party debt - borrowings | 2,215 |
| | — |
| | — |
| | 2,215 |
|
| - repayments | (2,223 | ) | | — |
| | — |
| | (2,223 | ) |
| Net proceeds from equity offerings | 510 |
| | — |
| | — |
| | 510 |
|
| Issuance of redeemable preferred units | 984 |
| | — |
| | — |
| | 984 |
|
| Distributions to preferred unitholders | (9 | ) | | — |
| | — |
| | (9 | ) |
| Distributions to unitholders and general partner | (612 | ) | | — |
| | — |
| | (612 | ) |
| Distributions to noncontrolling interests | (3 | ) | | — |
| | — |
| | (3 | ) |
| Contributions from noncontrolling interests | 4 |
| | — |
| | — |
| | 4 |
|
| Consideration payment to Class B unitholders | (25 | ) | | — |
| | — |
| | (25 | ) |
| All other, net | (2 | ) | | — |
| | — |
| | (2 | ) |
| Contribution from MPC | 225 |
| | — |
| | — |
| | 225 |
|
| Distributions to MPC from Predecessor | (104 | ) | | — |
| | — |
| | (104 | ) |
| Net cash provided by financing activities | 82 |
| | — |
| | — |
| | 82 |
|
| Net increase in cash and cash equivalents | 165 |
| | — |
| | — |
| | 165 |
|
| Cash and cash equivalents at beginning of period | 43 |
| | — |
| | — |
| | 43 |
|
| Cash and cash equivalents at end of period | $ | 208 |
| | $ | — |
| | $ | — |
| | $ | 208 |
|
Acquisition of Ozark Pipeline
On March 1, 2017, the Partnership acquired the Ozark pipeline from Enbridge Pipelines (Ozark) LLC for approximately $219 million, including purchase price adjustments made in the second quarter of 2017. Based on the final fair value estimates of assets acquired and liabilities assumed at the acquisition date, the purchase price was primarily allocated to property, plant and equipment. The Ozark pipeline is a 433-mile, 22-inch crude oil pipeline originating in Cushing, Oklahoma, and terminating in Wood River, Illinois, capable of transporting approximately 230 mbpd. The Partnership accounts for the Ozark pipeline within its L&S segment.
The amounts of revenue and income from operations associated with the acquisition included in the Consolidated Statements of Income, since the March 1, 2017 acquisition date, are as follows: |
| | | | | | | |
| (In millions) | Three Months Ended September 30, 2017 | | Seven Months Ended September 30, 2017 |
| Revenues and other income | $ | 19 |
| | $ | 45 |
|
| Income from operations | 6 |
| | 17 |
|
Assuming the acquisition of the Ozark pipeline had occurred on January 1, 2016, the consolidated pro forma results would not have been materially different from reported results.
MarEn Bakken
On February 15, 2017, the Partnership closed on a joint venture, MarEn Bakken Company, LLC (“MarEn Bakken”), with Enbridge Energy Partners L.P. in which MPLX LP acquired a partial, indirect interest in the Dakota Access Pipeline and Energy Transfer Crude Oil Company Pipeline projects, collectively referred to as the Bakken Pipeline system, from Energy Transfer Partners, L.P. and Sunoco Logistics Partners, L.P. The Partnership contributed $500 million of the $2.0 billion purchase price paid by MarEn Bakken to acquire a 36.75 percent indirect interest in the Bakken Pipeline system. The Partnership holds, through a subsidiary, a 25 percent interest in MarEn Bakken, which equates to a 9.1875 percent indirect interest in the Bakken Pipeline system.
The Partnership accounts for its investment in MarEn Bakken as an equity method investment and bases the equity method accounting for this joint venture in arrears using the most recently available information. The Partnership’s investment balance at September 30, 2017 is approximately $520 million and reported under the caption Equity method investments on the Consolidated Balance Sheets. In connection with the Partnership’s acquisition of a partial, indirect equity interest in the Bakken Pipeline system, MPC agreed to waive its right to receive incentive distributions of $1.6 million per quarter for twelve consecutive quarters, beginning with distributions declared in the first quarter of 2017 and paid to MPC in the second quarter of 2017, which was prorated to $0.8 million from the acquisition date.
Acquisition of Hardin Street Marine LLC
On March 14, 2016, the Partnership entered into a Membership Interests Contribution Agreement (the “Contribution Agreement”) with MPLX GP, MPLX Logistics and MPC Investment, each a wholly-owned subsidiary of MPC, related to the acquisition of HSM, MPC’s inland marine business, from MPC. Pursuant to the Contribution Agreement, the transaction was valued at $600 million consisting of a fixed number of common units and general partner units of 22,534,002 and 459,878, respectively. The general partner units maintain MPC’s two percent GP Interest in the Partnership. The acquisition closed on March 31, 2016 and the fair value of the common units and general partner units issued was $669 million and $14 million, respectively, as recorded on the Consolidated Statements of Equity. MPC agreed to waive distributions in the first quarter of 2016 on common units issued in connection with this transaction. As a result of this waiver, MPC did not receive general partner distributions or IDRs that would have otherwise accrued on such common units with respect to the first quarter 2016 distributions. The value of these waived distributions was $15 million.
The inland marine business, comprised of 18 tow boats and 219 owned and leased barges as of the acquisition date, which transport light products, heavy oils, crude oil, renewable fuels, chemicals and feedstocks in the Midwest and Gulf Coast regions of the United States, accounted for nearly 60 percent of the total volumes MPC shipped by inland marine vessels as of March 31, 2016. The Partnership accounts for HSM within its L&S segment.
4. Investments and Noncontrolling Interests
Summarized financial information for the Partnership’s equity method investments for the nine months ended September 30, 2017 and 2016 is as follows:
|
| | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2017 |
| (In millions) | MarkWest Utica EMG | | Other VIEs | | Non-VIEs | | Total |
| Revenues and other income | $ | 137 |
| | $ | 49 |
| | $ | 178 |
| | $ | 364 |
|
| Costs and expenses | 72 |
| | 29 |
| | 115 |
| | 216 |
|
| Income from operations | 65 |
| | 20 |
| | 63 |
| | 148 |
|
| Net income | 65 |
| | 19 |
| | 28 |
| | 112 |
|
Income from equity method investments(1) | 6 |
| | 7 |
| | 16 |
| | 29 |
|
|
| | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2016 |
| (In millions) | MarkWest Utica EMG | | Other VIEs(2) | | Non-VIEs | | Total |
| Revenues and other income | $ | 165 |
| | $ | 13 |
| | $ | 108 |
| | $ | 286 |
|
| Costs and expenses | 70 |
| | 107 |
| | 80 |
| | 257 |
|
| Income (loss) from operations | 95 |
| | (94 | ) | | 28 |
| | 29 |
|
| Net income (loss) | 94 |
| | (94 | ) | | 28 |
| | 28 |
|
Income (loss) from equity method investments(1) | 10 |
| | (88 | ) | | 6 |
| | (72 | ) |
| |
(1) | Income (loss) from equity methodInvestments deemed to be VIE’s. Some investments includes the impact of any basis differential amortization or accretion.
included within “Other” have also been deemed to be VIE’s. |
| |
| (2) | Includes an impairment charge of $89 million forDuring the ninethree months ended September 30, 2016 relatedMarch 31, 2020, we contributed our ownership in Wink to the Partnership’s investment in Ohio Condensate Company, L.L.C., which does not appear separately in this table.Webster Pipeline LLC to W2W Holdings LLC. |
Summarized balance sheet information for the Partnership’s equity method investments as of September 30, 2017 and December 31, 2016 is as follows:
|
| | | | | | | | | | | | | | | |
| | September 30, 2017 |
| (In millions) | MarkWest Utica EMG(1) | | Other VIEs | | Non-VIEs | | Total |
| Current assets | $ | 72 |
| | $ | 47 |
| | $ | 379 |
| | $ | 498 |
|
| Noncurrent assets | 2,092 |
| | 878 |
| | 4,614 |
| | 7,584 |
|
| Current liabilities | 37 |
| | 55 |
| | 492 |
| | 584 |
|
| Noncurrent liabilities | 2 |
| | 12 |
| | 562 |
| | 576 |
|
|
| | | | | | | | | | | | | | | |
| | December 31, 2016 |
| (In millions) | MarkWest Utica EMG(1) | | Other VIEs | | Non-VIEs | | Total |
| Current assets | $ | 45 |
| | $ | 2 |
| | $ | 40 |
| | $ | 87 |
|
| Noncurrent assets | 2,173 |
| | 132 |
| | 390 |
| | 2,695 |
|
| Current liabilities | 30 |
| | 4 |
| | 26 |
| | 60 |
|
| Noncurrent liabilities | 2 |
| | 13 |
| | — |
| | 15 |
|
| |
(1) | MarkWest Utica EMG, L.L.C.’s (“MarkWest Utica EMG”) noncurrent assets include its investment in its subsidiary Ohio Gathering Company, L.L.C. (“Ohio Gathering”), which does not appear elsewhere in this table. The investment was $794 million as of September 30, 2017 and December 31, 2016. |
As of September 30, 2017 and December 31, 2016, the carrying value of the Partnership’s equity method investments exceeded the underlying net assets of its investees by $1.1 billion. This basis difference is being amortized or accreted into net income over the remaining estimated useful lives of the underlying net assets, except for $459 million of excess related to goodwill.
MarkWest Utica EMG
Effective January 1, 2012, MarkWest Utica Operating Company, LLC (“Utica Operating”), a wholly-owned and consolidated subsidiary of MarkWest Energy Partners, L.P. (“MarkWest”), and EMG Utica, LLC (“EMG Utica” and together with Utica Operating, the “Members”) executed agreements to form a joint venture, MarkWest Utica EMG, to develop significant natural gas gathering, processing and NGL fractionation, transportation and marketing infrastructure in eastern Ohio. The related limited liability company agreement hasFor those entities that have been amended from time to time (the limited liability company agreement currently in effect is referred to as the “Amended LLC Agreement”). The aggregate funding commitment of EMG Utica was $950 million. Thereafter, Utica Operating was required to fund, as needed, 100 percent of future capital for MarkWest Utica EMG until the aggregate capital that had been contributed by the Members reached $2.0 billion, which occurred prior to the MarkWest Merger. Until such time as the investment balances of Utica Operating and EMG Utica are in the ratio of 70 percent and 30 percent, respectively (such time being referred to as the “Second Equalization Date”), EMG Utica will have the right, but not the obligation, to fund up to 10 percent of each capital call for MarkWest Utica EMG, and Utica Operating will be required to fund all remaining capital not elected to be funded by EMG Utica. After the Second Equalization Date, Utica Operating and EMG Utica will have the right, but not the obligation, to fund their pro rata portion (based on their respective investment balances) of any additional required capital and may also fund additional capital that the other party elects not to fund. As of September 30, 2017, EMG Utica has contributed approximately $1.2 billion and Utica Operating has contributed approximately $1.5 billion to MarkWest Utica EMG.
Under the Amended LLC Agreement, prior to December 31, 2016, EMG Utica’s investment balance was increased by a quarterly special non-cash allocation of income (“Preference Amount”), calculated based upon the amount of capital contributed by EMG Utica in excess of $500 million. After December 31, 2016, no Preference Amount will accrue to EMG Utica’s investment balance. EMG Utica received a Preference Amount totaling approximately $4 million and $12 million for the three and nine months ended September 30, 2016, respectively.
Under the Amended LLC Agreement, after December 31, 2016, cash generated by MarkWest Utica EMG that is available for distribution will be allocated to the Members in proportion to their respective investment balances. As of September 30, 2017, Utica Operating’s investment balance in MarkWest Utica EMG was approximately 56 percent.
MarkWest Utica EMG is deemed to be a VIE. Utica Operating is notVIE’s, neither MPLX nor any of its subsidiaries have been deemed to be the primary beneficiary due to EMG Utica’s voting rights on significant matters. The Partnership’s investmentWhile we have the ability to exercise influence through participation in MarkWest Utica EMG’s,the management committees which was $2.2 billion at September 30, 2017 and December 31, 2016, is reported under the caption Equity method investments on the Consolidated Balance Sheets. The Partnership’s maximum exposure to lossmake all significant decisions, since we have equal influence over each committee as a result of its involvement with MarkWest Utica EMG includes its equity investment, any additional capital contribution commitmentsjoint interest partner and any operating expenses incurred byall significant decisions require the subsidiary operator in excess of its compensation received for the performanceconsent of the operating services. The Partnership didother investors without regard to economic interest, we have determined that these entities should not provide any financial support to MarkWest Utica EMG that it was not contractually obligated to provide duringbe consolidated and apply the three and nine months ended September 30, 2017 and 2016, respectively. The Partnership receives management fee revenue for engineering and construction and administrative services for operating MarkWest Utica EMG, and is also reimbursed for personnel services (“Operational Service revenue”). Operational Service revenue is reported as Other income-related parties in the Consolidated Statements of Income. The amount of Operational Service revenue related to MarkWest Utica EMG for the three and nine months ended September 30, 2017, totaled $5 million and $13 million, respectively. The amount of Operational Service revenue related to MarkWest Utica EMG for the three and nine months ended September 30, 2016, totaled approximately $5 million and $12 million, respectively.
Ohio Gathering
Ohio Gathering is a subsidiary of MarkWest Utica EMG and is engaged in providing natural gas gathering services in the Utica Shale in eastern Ohio. Ohio Gathering is a joint venture between MarkWest Utica EMG and Summit Midstream Partners, LLC. As of September 30, 2017, the Partnership has an approximate 34 percent indirect ownership interest in Ohio Gathering. As Ohio Gathering is a subsidiary of MarkWest Utica EMG, which is accounted for as an equity method investment, the Partnership reports its portion of Ohio Gathering’s net assets as a component of its investmentaccounting with respect to our investments in MarkWest Utica EMG. The Partnership receives Operational Service revenue for operating Ohio Gathering which is reported as Other income-related parties in the Consolidated Statements of Income. The amount of Operational Service revenue related to Ohio Gathering for the three and nine months ended September 30, 2017, totaled $4 million and $12 million, respectively. The amount of Operational Service revenue related to Ohio Gathering for the three and nine months ended September 30, 2016, totaled approximately $5 million and $12 million, respectively.each entity.
Sherwood Midstream
Effective January 1, 2017, MarkWest Liberty Midstream & Resources, L.L.C. (“MarkWest Liberty Midstream”), a wholly-owned and consolidated subsidiary of MarkWest, and Antero Midstream Partners, LP (“Antero Midstream”) formed a joint venture, Sherwood Midstream LLC (“Sherwood Midstream”), to support Antero Resources Corporation’s development in the Marcellus Shale. MarkWest Liberty Midstream has a 50 percent ownership interest in Sherwood Midstream. Pursuant to the terms of the related limited liability company agreement (the “LLC Agreement”), MarkWest Liberty Midstream contributed assets then under construction with a fair value of approximately $134 million and cash of approximately $20 million. Antero Midstream made an initial capital contribution of approximately $154 million.
Also effective January 1, 2017, MarkWest Liberty Midstream converted all of its ownership interests in MarkWest Ohio Fractionation Company, L.L.C. (“Ohio Fractionation”), a previously wholly-owned subsidiary, to Class A Interests and amended its LLC Agreement to create Class B-3 Interests, which were sold to Sherwood Midstream for $126 million in cash. The Class B-3 Interests provide Sherwood Midstream with the right to fractionation revenue and the obligation to pay expenses related to 20 mbpd of capacity in the Hopedale 3 fractionator. Sherwood Midstream accounts for its investment in Ohio Fractionation, which is a VIE, as an equity method investment as Sherwood Midstream does not control Ohio Fractionation. MarkWest Liberty Midstream has been deemed to be the primary beneficiary of Ohio Fractionation because it has control over the decisions that could significantly impact its financial performance, and as a result, consolidates Ohio Fractionation. The carrying amounts of assets and liabilities included in the Partnership’s Consolidated Balance Sheets pertaining to Ohio Fractionation at September 30, 2017, were current assets of $51 million, non-current assets of $406 million and current liabilities of $26 million. The creditors of Ohio Fractionation do not have recourse to MPLX LP’s general credit through guarantees or other financial arrangements. The assets of Ohio Fractionation are the property of Ohio Fractionation and cannot be used to satisfy the obligations of MPLX LP. Sherwood Midstream’s interests are reflected in Net income attributable to noncontrolling interests in the Consolidated Statements of Income and Noncontrolling interests in the Consolidated Balance Sheets.
Under the LLC Agreement, cash generated by Sherwood Midstream that is available for distribution will be allocated to the members in proportion to their respective investment balances.
Sherwood Midstream is deemed to be a VIE. MarkWest Liberty Midstream is not deemed to be the primary beneficiary, due to Antero Midstream’s voting rights on significant matters. The Partnership’s investment in Sherwood Midstream, which was approximately $220 million at September 30, 2017, is reported under the caption Equity method investments on the Consolidated Balance Sheets. The Partnership’s maximum exposure to loss as a result of its involvement with Sherwood Midstream includes its equity investment, any additional capital contribution commitments and any operating expenses incurred by the subsidiary operator in excess of its compensation received for the performance of the operating services. The Partnership did not provide any financial support to Sherwood Midstream that it was not contractually obligated to provide during the nine months ended September 30, 2017. The Partnership receives Operational Service revenue for operating Sherwood Midstream. The amount of Operational Service revenue related to Sherwood Midstream for the three and nine months ended September 30, 2017, totaled approximately $2 million and $6 million, respectively, and is reported as Other income-related parties in the Consolidated Statements of Income.
Sherwood Midstream Holdings
Effective January 1, 2017, MarkWest Liberty Midstream and Sherwood Midstream formed a joint venture, Sherwood Midstream Holdings LLC (“Sherwood Midstream Holdings”), for the purpose of owning, operating and maintaining all of the shared assets that support the operations of the gas plants and other assets owned by Sherwood Midstream and the gas plants and deethanization facilities owned by MarkWest Liberty Midstream. MarkWest Liberty Midstream initially contributed certain real property, equipment and facilities with a fair value of approximately $209 million to Sherwood Midstream Holdings in exchange for a 79 percent initial ownership interest. Sherwood Midstream contributed cash of approximately $44 million to Sherwood Midstream Holdings in exchange for a 21 percent ownership interest. During the second quarter ended June 30, 2017, true-ups to the initial contributions were finalized. MarkWest Liberty Midstream contributed certain additional real property, equipment and facilities with a fair value of approximately $10 million to Sherwood Midstream Holdings and Sherwood Midstream contributed cash of approximately $4 million to Sherwood Midstream Holdings. Collectively, the real property, equipment, facilities and cash initially contributed, or that may be subsequently constructed by or contributed, to Sherwood Midstream Holdings are referred to as the “Shared Assets.” The net book value of the contributed assets was approximately $203 million. The contribution was determined to be an in-substance sale of real estate. As such, the Partnership only recognized a gain for the portion attributable to Antero Midstream’s indirect interest of approximately $2 million, included in Gain on sale of assets in the Consolidated Statements of Income. MarkWest Liberty Midstream’s portion of the gain attributable to its direct and indirect interests of approximately $14 million is included in its investment in Sherwood
Midstream Holdings and is reported under the caption Equity method investments on the Consolidated Balance Sheets. In connection with the initial contributions, MarkWest Liberty Midstream received a special distribution of approximately $45 million.
MarkWest Liberty Midstream’s and Sherwood Midstream’s ownership interests in Sherwood Midstream Holdings will fluctuate over time. As new Shared Assets are constructed, the members will make additional capital contributions to Sherwood Midstream Holdings. The amount that each member must contribute will be based on the expected utilization of the Shared Assets, as defined in the LLC Agreement. Pursuant to the terms of the LLC Agreement, MarkWest Liberty Midstream will serve as the operator for Sherwood Midstream Holdings.
The Partnership accounts for Sherwood Midstream Holdings, which is a VIE, as an equity method investment as Sherwood Midstream is considered to be the general partner and controls all decisions. The Partnership’s investment in Sherwood Midstream Holdings, which was approximately $163 million at September 30, 2017, is reported under the caption Equity method investments on the Consolidated Balance Sheets. The Partnership’s maximum exposure to loss as a result of its involvement with Sherwood Midstream Holdings includes its equity investment, any additional capital contribution commitments and any operating expenses incurred by the subsidiary operator in excess of its compensation received for the performance of the operating services. The Partnership did not provide any financial support to Sherwood Midstream Holdings that it was not contractually obligated to provide during the nine months ended September 30, 2017.
Sherwood Midstream has been deemed the primary beneficiary of Sherwood Midstream Holdings due to its controlling financial interest through its authority to manage the joint venture. As a result, Sherwood Midstream consolidates Sherwood Midstream Holdings. Therefore, the PartnershipMPLX also reports its portion of Sherwood Midstream Holdings’ net assets as a component of its investment in Sherwood Midstream. As of September 30, 2017, the PartnershipMarch 31, 2020, MPLX has a 14.724.1 percent indirect ownership interest in Sherwood Midstream Holdings through Sherwood Midstream.
MPLX’s maximum exposure to loss as a result of its involvement with equity method investments includes its equity investment, any additional capital contribution commitments and any operating expenses incurred by the subsidiary operator in excess of its compensation received for the performance of the operating services. MPLX did not provide any financial support to equity method investments that it was not contractually obligated to provide during the three months ended March 31, 2020.
During the first quarter of 2020, we assessed certain of our equity method investments for impairment as a result of a number of first quarter events and circumstances as discussed in Note 1. During the first quarter of 2020, we recorded an other than temporary impairment for three joint ventures in which we have an interest. Impairment of these investments was $1,264 million, of which $1,251 million was related to MarkWest Utica EMG, L.L.C. and its investment in Ohio Gathering Company, L.L.C. The fair value of the investments was determined based upon applying the discounted cash flow method, which is an income approach. The discounted cash flow fair value estimate is based on known or knowable information at the interim measurement date. The significant assumptions that were used to develop the estimate of the fair value under the discounted cash flow method include management’s best estimates of the expected future cash flows, including prices and volumes, the weighted average cost of capital and the long-term growth rate. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. As such, the fair value of these equity method investments represents a Level 3 measurement. As a result, there can be no assurance that the estimates and assumptions made for purposes of the impairment test will prove to be an accurate prediction of the future. The impairment was recorded through “Income from equity method investments.” The impairments were largely due to a reduction in forecasted volumes gathered and processed by the systems operated by the joint ventures.
Summarized financial information for MPLX’s equity method investments for the three months ended March 31, 2020 and 2019 is as follows:
|
| | | | | | | | | | | |
| | Three Months Ended March 31, 2020 |
| (In millions) | VIEs | | Non-VIEs | | Total |
| Revenues and other income | $ | (217 | ) | | $ | 337 |
| | $ | 120 |
|
| Costs and expenses | 104 |
| | 132 |
| | 236 |
|
| Income from operations | (321 | ) | | 205 |
| | (116 | ) |
| Net income | (337 | ) | | 186 |
| | (151 | ) |
(Loss)/income from equity method investments(1) | $ | (1,222 | ) | | $ | 38 |
| | $ | (1,184 | ) |
| |
| (1) | Includes the impact of any basis differential amortization or accretion in addition to the impairment of $1,264 million. |
|
| | | | | | | | | | | |
| | Three Months Ended March 31, 2019(1) |
| (In millions) | VIEs | | Non-VIEs | | Total |
| Revenues and other income | $ | 155 |
| | $ | 391 |
| | $ | 546 |
|
| Costs and expenses | 77 |
| | 198 |
| | 275 |
|
| Income from operations | 78 |
| | 193 |
| | 271 |
|
| Net income | 71 |
| | 181 |
| | 252 |
|
| Income from equity method investments | $ | 27 |
| | $ | 50 |
| | $ | 77 |
|
| |
| (1) | Financial information for the first quarter of 2019 has been retrospectively adjusted for the acquisition of ANDX. See Notes 1 and 3. |
Summarized balance sheet information for MPLX’s equity method investments as of March 31, 2020 and December 31, 2019 is as follows:
|
| | | | | | | | | | | |
| | March 31, 2020 |
| (In millions) | VIEs | | Non-VIEs | | Total |
| Current assets | $ | 320 |
| | $ | 325 |
| | $ | 645 |
|
| Noncurrent assets | 5,384 |
| | 5,115 |
| | 10,499 |
|
| Current liabilities | 153 |
| | 195 |
| | 348 |
|
| Noncurrent liabilities | $ | 544 |
| | $ | 859 |
| | $ | 1,403 |
|
|
| | | | | | | | | | | |
| | December 31, 2019 |
| (In millions) | VIEs | | Non-VIEs | | Total |
| Current assets | $ | 534 |
| | $ | 330 |
| | $ | 864 |
|
| Noncurrent assets | 5,862 |
| | 5,134 |
| | 10,996 |
|
| Current liabilities | 192 |
| | 245 |
| | 437 |
|
| Noncurrent liabilities | $ | 305 |
| | $ | 822 |
| | $ | 1,127 |
|
As of March 31, 2020, the underlying net assets of MPLX’s investees in the G&P segment exceeded the carrying value of its equity method investments by approximately $60 million, after the impairment charges recognized during the quarter. At December 31, 2019, the carrying value of MPLX’s equity method investments in the G&P segment exceeded the underlying net assets of its investees by approximately $1.0 billion. As of March 31, 2020 and December 31, 2019, the carrying value of MPLX’s equity method investments in the L&S segment exceeded the underlying net assets of its investees by $330 million and $329 million, respectively. At March 31, 2020 and December 31, 2019, the G&P basis difference was being amortized into net income over the remaining estimated useful lives of the underlying assets, except for $31 million and $498 million of excess related to goodwill, respectively. At March 31, 2020 and December 31, 2019, the L&S basis difference was being amortized into net income over the remaining estimated useful lives of the underlying assets, except for $167 million of excess related to goodwill, respectively.
5. Related Party Agreements and Transactions
The Partnership’s materialMPLX engages in transactions with both MPC and certain of its equity method investments as part of its normal business; however, transactions with MPC make up the majority of MPLX’s related party transactions. Transactions with related parties include:are further described below.
MPC, which refines, markets and transports crude oil and petroleum products, primarily in the Midwest, Gulf Coast, East Coast and Southeast regions of the United States.
Centennial Pipeline LLC (“Centennial”), in which MPC has a 50 percent interest as of September 30, 2017. Centennial owns a products pipeline and storage facility.
Muskegon Pipeline LLC (“Muskegon”), in which MPC has a 60 percent interest as of September 30, 2017. Muskegon owns a common carrier products pipeline.
MarkWest Utica EMG, in which MPLX LP has a 56 percent interest as of September 30, 2017. MarkWest Utica EMG is engaged in natural gas processing and NGL fractionation, transportation and marketing in Ohio.
Ohio Gathering, in which MPLX LP has a 34 percent indirect interest as of September 30, 2017. Ohio Gathering is a subsidiary of MarkWest Utica EMG providing natural gas gathering service in the Utica Shale region of eastern Ohio.
Sherwood Midstream, in which MPLX LP has a 50 percent interest as of September 30, 2017. Sherwood Midstream supports the development of Antero Resources Corporation’s Marcellus Shale acreage in the rich-gas corridor of West Virginia.
Sherwood Midstream Holdings, in which MPLX LP has an 86 percent total direct and indirect interest as of September 30, 2017. Sherwood Midstream Holdings owns certain infrastructure at the Sherwood Complex that is shared by and supports the operation of both the Sherwood Midstream and MarkWest gas processing plants and deethanization facilities.
Illinois Extension, in which MPLX LP has a 35 percent interest as of September 30, 2017. Illinois Extension operates the SAX crude oil pipeline from Flanagan, Illinois to Patoka, Illinois, as well as additional tankage and two pump stations.
LOOP, in which MPLX LP has a 40.7 percent interest as of September 30, 2017. LOOP owns and operates midstream crude oil infrastructure, including a deep water oil port offshore of Louisiana, pipelines, and onshore storage facilities, and manages operations of LOCAP, an affiliate pipeline system.
LOCAP, in which MPLX LP has a 58.52 percent interest as of September 30, 2017. LOCAP owns and operates a crude oil pipeline and tank facility in St. James, Louisiana, that distributes oil received from LOOP’s storage facilities and other connecting pipelines to nearby refineries and into the midcontinent region of the United States.
Explorer, in which MPLX LP has a 24.51 percent interest as of September 30, 2017. Explorer owns and operates a common carrier pipeline that primarily transports gasoline, diesel, diluent and jet fuel from the Gulf Coast refining complex to the Midwestern United States.
Related Party Agreements
The Partnership has various long-term, fee-based commercial agreements with MPC. Under these agreements, the PartnershipMPLX provides transportation, terminal, fuels distribution, marketing, storage, management, operational and storageother services to MPC, andMPC. MPC has committed to provide the PartnershipMPLX with minimum quarterly throughput volumes on crude oil and refined products systems and minimumother fees for storage volumescapacity; operating and management fees; as well as reimbursements for certain direct and indirect costs. MPC has also committed to provide a fixed fee for 100 percent of crude oil, refined productsavailable capacity for boats, barges and butane.third-party chartered equipment under the marine transportation service agreement. MPLX also has a keep-whole commodity agreement with MPC under which MPC pays us a processing fee for NGLs related to keep-whole agreements and delivers shrink gas to the producers on our behalf. We pay MPC a marketing fee in exchange for assuming the commodity risk. Additionally, MPLX has obligations to MPC for services provided to MPLX by MPC under omnibus and employee services type agreements as well as other various agreements.
In addition, the PartnershipRelated Party Loan
MPLX is party to a loan agreement with MPC Investment a wholly-owned subsidiary of MPC.LLC (“MPC Investment”) (the “MPC Loan Agreement”). Under the terms of the agreement, MPC Investment will makemakes a loan or loans to the PartnershipMPLX on a revolving basis as requested by the PartnershipMPLX and as agreed to by MPC Investment. In connection with the Merger, on July 31, 2019, MPLX and MPC Investment amended and restated the MPC Loan Agreement to increase the borrowing capacity under the MPC Loan Agreement to $1.5 billion in an amount or amounts that do not result in the aggregate principal amount of all loans outstanding exceeding $500 million at any one time. The entire unpaid principal amount of the loan, together with all accrued and unpaid interest and other amounts (if any), shall become due and payable on December 4, 2020.July 31, 2024, provided that MPC Investment may demand payment of all or any portion of the outstanding principal amount of the loan, together with all accrued and unpaid interest and other amounts (if any), at any time prior to December 4, 2020.July 31, 2024. Borrowings under the loan willMPC Loan Agreement prior to July 31, 2019 bore interest at LIBOR plus 1.50 percent while borrowings as of and after July 31, 2019 bear interest at LIBOR plus 1.50 percent. During1.25 percent or such lower rate as would be applicable to such loans under the nine months ended September 30, 2017, the Partnership borrowed $829 million and repaid $627 million, resulting in $202 million outstanding balance at September 30, 2017, which is included in Payables-related partiesMPLX Credit Agreement. Activity on the Consolidated Balance Sheets. Borrowings were at an average interest rate of 2.721 percent, per annum, forMPC Loan Agreement was as follows:
|
| | | | | | | |
| (In millions) | Three Months Ended March 31, 2020 | | Year Ended December 31, 2019 |
| Borrowings | $ | 1,667 |
| | $ | 8,540 |
|
| Average interest rate of borrowings | 2.833 | % | | 3.441 | % |
| Repayments | $ | 2,261 |
| | $ | 7,946 |
|
Outstanding balance at end of period(1) | $ | — |
| | $ | 594 |
|
| |
| (1) | Included in “Current liabilities - related parties” on the Consolidated Balance Sheets. |
Prior to the nine months ended September 30, 2017. During the year ended December 31, 2016, the Partnership borrowed $2.5 billion and repaid $2.5 billion, resulting in no outstanding balance at December 31, 2016. Borrowings were at an average interest rate of 1.939 percent, per annum, for the year ended December 31, 2016. For additional information regarding the Partnership’s commercial and other agreements with MPC, see Item 1. Business in the Annual Report on Form 10-K for the year ended December 31, 2016.
The Partnership believes the terms and conditions under its agreements with MPC are generally comparable to those with unrelated parties.
HST, WHC and MPLXT Agreements
As discussed in Note 3, the Partnership acquired HST, WHC and MPLXT on March 1, 2017. HST, WHC and MPLXT have various operating, transportation services, terminal services, storage services and employee services agreements with MPC, which were assumed by the Partnership with the closing of the Transaction.
HST is aMerger, ANDX was also party to a transportation servicesloan agreement with MPC dated January 1, 2015. Under this agreement, HST provides pipeline transportation(“ANDX-MPC Loan Agreement”). This facility was entered into on December 21, 2018, with a borrowing capacity of $500 million. In connection with the Merger, on July 31, 2019, MPLX repaid the entire outstanding balance and terminated the ANDX-MPC Loan Agreement. Activity on the ANDX-MPC Loan Agreement prior to the Merger was as follows:
|
| | | |
| (In millions) | Year Ended December 31, 2019 |
| Borrowings | $ | 773 |
|
| Average interest rate of borrowings | 4.249 | % |
| Repayments | $ | 773 |
|
| Outstanding balance at end of period | $ | — |
|
Related Party Revenue
Related party sales to MPC consist of crude oil and refined products as well as related services, for MPC. MPC pays HST for suchpipeline and trucking transportation services based on contractual rates related to MPC crude oiltariff/contracted rates; storage, terminal and refined product deliveries as well as any viscosity surcharges, loading, handling, transfers or other related charges. This agreement is set to expire on December 31, 2026 and automatically renews for two additional renewal terms of four years each unless terminated by either party.
On January 1, 2015, HST entered into various three-year term storage services agreements with MPC. Under the storage services agreements, HST receives a monthly fee from MPC based on a contractual rate per barrel multiplied by the total commitment volume respective to each storage tank. The contractual rate per barrel is subject to an annual review and adjustment for inflation. HST is not obligated to measure volume gains and losses per the terms of these agreements.
On January 1, 2015, WHC entered into a long-term, fee-based storage and services agreement with MPC related to storage at its butane and propane caverns with an initial term of 10 years. Under this storage and services agreement, WHC receives a monthly fee from MPC based on a contractual rate per barrel multiplied by the total commitment volume respective to each storage cavern. The contractual rate per barrel includes utilization of the caverns and related services. The agreement is subject to an annual review and adjustment for inflation.
Under the storage services agreements with both HST and WHC, the Partnership is obligated to make available to MPC, on a firm basis, the available storage capacity at the tank farms and butane and propane caverns and MPC pays the Partnership a per-barrel fee for such storage capacity regardless of whether MPC fully utilizes the available capacity.
MPLXT is a party to a terminal services agreement with MPC, dated March 1, 2017. Under this agreement, MPLXT provides terminal storage for refined petroleum products, as well as related services, for MPC. MPC pays MPLXT monthly for suchfuels distribution services based on contractual fees relatingcontracted rates; and marine transportation services. Related party sales to MPC product deliveries as well as any viscosity surcharges, loading, handling, transfers or otheralso consist of revenue related charges. This agreement is set to expire on March 31, 2026 and automatically renews for two additional renewal terms of five years each unless terminated by either party.volume deficiency credits.
The Partnership is party to various employee servicesMPLX also has operating agreements with MPC under which the Partnership reimburses MPCit receives a fee for employee benefit expenses, along with the provision of operationaloperating MPC’s retained pipeline assets and a fixed annual fee for providing oversight and management services including those in supportrequired to run the marine business. MPLX also receives management fee revenue for engineering, construction and administrative services for operating certain of HST, WHC and MPLXT.its equity method investments.
Related Party Transactions
Sales toRevenue received from related parties wereincluded on the Consolidated Statements of Income was as follows:
| | | | Three Months Ended September 30, | | Nine Months Ended September 30, | Three Months Ended March 31, |
| (In millions) | 2017 | | 2016 | | 2017 | | 2016 | 2020 | | 2019 |
| Service revenues | | | | | | | | |
| Service revenues - related parties | | | | |
| MPC | $ | 276 |
| | $ | 253 |
| | $ | 801 |
| | $ | 676 |
| $ | 927 |
| | $ | 803 |
|
| Rental income | | | | | | | | |
| Other | | 1 |
| | — |
|
| Total Service revenue - related parties | | 928 |
| | 803 |
|
| Rental income - related parties | | | | |
| MPC | $ | 70 |
| | $ | 68 |
| | $ | 207 |
| | $ | 172 |
| 234 |
| | 325 |
|
Product sales(1) | | | | | | | | |
Product sales - related parties(1) | | | | |
| MPC | $ | 2 |
| | $ | 2 |
| | $ | 6 |
| | $ | 8 |
| 33 |
| | 41 |
|
| Other income - related parties | | | | |
| MPC | | 48 |
| | 10 |
|
| Other | | 16 |
| | 16 |
|
| Total Other income - related parties | | $ | 64 |
| | $ | 26 |
|
| |
| (1) | There were additional product sales to MPC that net to zero within the consolidated financial statements as the transactions are recorded net due to the terms of the agreements under which such product was sold. For the three and nine months ended September 30, 2017,March 31, 2020, these sales totaled $63 million and $173 million, respectively.million. For the three and nine months ended September 30, 2016,March 31, 2019, these sales totaled $13 million and $25 million, respectively.$223 million. |
Related partyParty Expenses
MPC provides executive management services and certain general and administrative services to MPLX under the terms of our omnibus agreements (“Omnibus charges”). Omnibus charges included in “Rental cost of sales - related parties” primarily relate to services that support MPLX’s rental operations and maintenance of assets available for rent. Omnibus charges included in “Purchases - related parties” primarily relate to services that support MPLX’s operations and maintenance activities, as well as compensation expenses. Omnibus charges included in “General and administrative expenses” primarily relate to services that support MPLX’s executive management, accounting and human resources activities. MPLX also obtains employee services from MPC under employee services agreements (“ESA charges”). ESA charges for personnel directly involved in or supporting operations and maintenance activities related to rental services are classified as “Rental cost of sales - related parties.” ESA charges for personnel directly involved in or supporting operations and maintenance activities related to other services are classified as “Purchases - related parties.” ESA charges for personnel involved in executive management, accounting and human resources activities are classified as “General and administrative expenses.” In addition to these agreements, MPLX purchases products from MPC, makes payments to MPC consistin its capacity as general contractor to MPLX, and has certain rent and lease agreements with MPC.
Expenses incurred from MPC under the omnibus and refined products pipeline transportation services based on regulated tariff rates, storage services based on contracted rates and transportation services provided by HSM. Under the Partnership’s pipeline transportationemployee services agreements ifas well as other purchases from MPC included on the Consolidated Statements of Income are as follows:
|
| | | | | | | |
| | Three Months Ended March 31, |
| (In millions) | 2020 | | 2019 |
| Rental cost of sales - related parties | | | |
| MPC | $ | 46 |
| | $ | 43 |
|
| Purchases - related parties | | | |
| MPC | 271 |
| | 273 |
|
| Other | 5 |
| | 5 |
|
| Total Purchase - related parties | 276 |
| | 278 |
|
| General and administrative expenses | | | |
| MPC | $ | 64 |
| | $ | 62 |
|
Some charges incurred under the omnibus and ESA agreements are related to engineering services and are associated with assets under construction. These charges are added to “Property, plant and equipment, net” on the Consolidated Balance Sheets. For the three months ended March 31, 2020 and 2019, these charges totaled $36 million and $41 million, respectively.
Related Party Assets and Liabilities
Assets and liabilities with related parties appearing on the Consolidated Balance Sheets are detailed in the table below. This table identifies the various components of related party assets and liabilities, including those associated with leases (see Note 20 for additional information) and deferred revenue on minimum volume commitments. If MPC fails to transportmeet its minimum throughputcommitted volumes, during any quarter, then MPC will pay the PartnershipMPLX a deficiency payment equal tobased on the volumeterms of the deficiency multiplied by the tariff rate then in effect.agreement. The deficiency amounts are recorded as Deferred revenue-related parties.“Current liabilities - related parties.” In many cases, MPC may then apply the amount of any such deficiency payments as a credit for volumes transported on the applicable pipeline system in excess of its minimum volume commitment during the following four or eight quartersin future periods under the terms of the applicable transportation services agreement. The Partnershipagreements. MPLX recognizes related party revenues for the deficiency payments when credits are used for volumes transported in excess of minimum quarterly volume commitments, whenwhere it becomes impossible to physically transport volumes necessary to utilizeis probable the creditscustomer will not use the credit in future periods or upon the expiration of the credits. The use or expiration of the credits is a decrease in Deferred revenue-related parties.
The revenue received from“Current liabilities - related parties, included in Other income-related parties on the Consolidated Statements of Income, was as follows:
|
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (In millions) | 2017 | | 2016 | | 2017 | | 2016 |
| MPC | $ | 9 |
| | $ | 10 |
| | $ | 30 |
| | $ | 36 |
|
| MarkWest Utica EMG | 5 |
| | 5 |
| | 13 |
| | 12 |
|
| Ohio Gathering | 4 |
| | 5 |
| | 12 |
| | 12 |
|
| Other | 4 |
| | 2 |
| | 14 |
| | 7 |
|
| Total | $ | 22 |
| | $ | 22 |
| | $ | 69 |
| | $ | 67 |
|
MPC provides executive management services and certain general and administrative services to the Partnership under the terms of an omnibus agreement. Expenses incurred under this agreement are shown in the table below by the income statement line where they were recorded. Charges for services included in Purchases-related parties primarily relate to services that support the Partnership’s operations and maintenance activities, as well as compensation expenses. Charges for services included in General and administrative expenses primarily relate to services that support the Partnership’s executive management, accounting and human resources activities. These charges were as follows:
|
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (In millions) | 2017 | | 2016 | | 2017 | | 2016 |
| Purchases - related parties | $ | 17 |
| | $ | 11 |
| | $ | 50 |
| | $ | 29 |
|
| General and administrative expenses | 9 |
| | 11 |
| | 28 |
| | 33 |
|
| Total | $ | 26 |
| | $ | 22 |
| | $ | 78 |
| | $ | 62 |
|
Also under terms of the omnibus agreement, some service costs related to engineering services are associated with assets under construction. These costs added to Property, plant and equipment were as follows:
|
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (In millions) | 2017 | | 2016 | | 2017 | | 2016 |
| MPC | $ | 11 |
| | $ | 14 |
| | $ | 33 |
| | $ | 36 |
|
MPLX LP obtains employee services from MPC under employee services agreements. Expenses incurred under these agreements are shown in the table below by the income statement line where they were recorded. The costs of personnel directly involved in or supporting operations and maintenance activities are classified as Purchases-related parties. The costs of personnel involved in executive management, accounting and human resources activities are classified as General and administrative expenses in the Consolidated Statements of Income.
Employee services expenses from related parties were as follows: |
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (In millions) | 2017 | | 2016 | | 2017 | | 2016 |
| Purchases - related parties | $ | 97 |
| | $ | 98 |
| | $ | 280 |
| | $ | 257 |
|
| General and administrative expenses | 25 |
| | 27 |
| | 74 |
| | 75 |
|
| Total | $ | 122 |
| | $ | 125 |
| | $ | 354 |
| | $ | 332 |
|
Receivables from related parties, which for December 31, 2016 included reimbursements from the MarkWest Merger to be provided by MPC for the conversion of Class B units, were as follows:
|
| | | | | | | |
| (In millions) | September 30, 2017 | | December 31, 2016 |
| MPC | $ | 144 |
| | $ | 242 |
|
| MarkWest Utica EMG | 2 |
| | 2 |
|
| Ohio Gathering | 2 |
| | 2 |
|
| Other | 4 |
| | 1 |
|
| Total | $ | 152 |
| | $ | 247 |
|
Long-term receivables with related parties, which includes straight-line rental income, were as follows:
|
| | | | | | | |
| (In millions) | September 30, 2017 | | December 31, 2016 |
| MPC | $ | 18 |
| | $ | 11 |
|
Payables to related parties were as follows:
|
| | | | | | | |
| (In millions) | September 30, 2017 | | December 31, 2016 |
MPC(1) | $ | 277 |
| | $ | 63 |
|
| MarkWest Utica EMG | 30 |
| | 24 |
|
| Other | 10 |
| | — |
|
| Total | $ | 317 |
| | $ | 87 |
|
| |
(1) | Balance includes approximately $202 million related to the loan with MPC Investment as discussed above. |
During the nine months ended September 30, 2017 and the year ended December 31, 2016, MPC did not ship its minimum committed volumes on certain pipeline systems.parties.” In addition, capital projects the PartnershipMPLX is undertaking at the request of MPC are reimbursed in cash and recognized in income over the remaining term of the applicable agreements. The Deferred revenue-related parties balance associated with the minimum volume deficiencies and project reimbursements wereagreements or in some cases as follows:an equity contribution from its sponsor.
|
| | | | | | | |
| (In millions) | September 30, 2017 | | December 31, 2016 |
| Minimum volume deficiencies - MPC | $ | 55 |
| | $ | 48 |
|
| Project reimbursements - MPC | 27 |
| | 9 |
|
| Total | $ | 82 |
| | $ | 57 |
|
|
| | | | | | | |
| (In millions) | March 31, 2020 | | December 31, 2019 |
| Current assets - related parties | | | |
| Receivables - MPC | $ | 538 |
| | $ | 621 |
|
| Receivables - Other | 21 |
| | 22 |
|
| Prepaid - MPC | 15 |
| | 9 |
|
| Lease Receivables - MPC | 26 |
| | 4 |
|
| Total | 600 |
| | 656 |
|
| Noncurrent assets - related parties | | | |
| Long-term receivables - MPC | 28 |
| | 21 |
|
| Right of use assets - MPC | 231 |
| | 232 |
|
| Long-term lease receivables - MPC | 399 |
| | 43 |
|
| Unguaranteed residual asset - MPC | 19 |
| | 7 |
|
| Total | 677 |
| | 303 |
|
| Current liabilities - related parties | | | |
| Payables - MPC | 227 |
| | 911 |
|
| Payables - Other | 16 |
| | 37 |
|
| Operating lease liabilities - MPC | 1 |
| | 1 |
|
| Deferred revenue - Minimum volume deficiencies - MPC | 38 |
| | 42 |
|
| Deferred revenue - Project reimbursements - MPC | 14 |
| | 16 |
|
| Deferred revenue - Project reimbursements - Other | 1 |
| | 1 |
|
| Total | 297 |
| | 1,008 |
|
| Long-term liabilities - related parties | | | |
| Long-term operating lease liabilities - MPC | 230 |
| | 230 |
|
| Long-term deferred revenue - Project reimbursements - MPC | 54 |
| | 53 |
|
| Long-term deferred revenue - Project reimbursements - Other | 6 |
| | 7 |
|
| Total | $ | 290 |
| | $ | 290 |
|
Other Related Party Transactions
From time to time, MPLX may also sell to or purchase from related parties, assets and inventory at the lesser of average unit cost or net realizable value. Sales to and purchases from related parties were not material for the three months ended March 31, 2020 and 2019.
6. Net Income Income/(Loss) Per Limited Partner Unit
Net income income/(loss) per unit applicable to common limited partner units is computed by dividing the respective limited partners’ interest in net income income/(loss) attributable to MPLX LP less income/(loss) allocated to participating securities by the weighted average number of common units outstanding. BecauseAdditional MPLX common units, MPLX Series B preferred units, and TexNew Mex units were issued on July 30, 2019 as a result of the Partnership has more than one classmerger with ANDX as discussed in Note 3. Distributions declared on these newly issued common and Series B preferred units are a reduction to income available to MPLX common unit holders due to their participation in distributions of income.
Classes of participating securities it uses the two-class method when calculating the net income (loss) per unit applicable to limited partners. The classes of participating securities include common units, general partner units, Preferred units, certain equity-based compensation awards and IDRs.
As discussed in Note 1, the HST, WHC and MPLXT acquisition was a transfer between entities under common control. As entities under common control with MPC, prior periods were retrospectively adjusted to furnish comparative information. Accordingly, the prior period earnings have been allocated to the general partner and do not affect the net income (loss) per unit calculation. The earnings for the entities acquired under common control will be included in the net income (loss) per unit calculation prospectively as described above.three months ended March 31, 2020 and 2019 include:
|
| | | |
| | Three Months Ended March 31, |
| | 2020 | | 2019 |
| Common Units | ü
| | ü
|
| Equity-based compensation awards | ü | | ü |
| Series A preferred units | ü
| | ü
|
| Series B preferred units | ü | | |
| TexNew Mex units | ü
| | |
For the three months ended September 30, 2017, the PartnershipMarch 31, 2020 and 2019, MPLX had dilutive potential common units consisting of certain equity-based compensation awards. For the three months ended September 30, 2016 and the nine months ended September 30, 2017 and 2016, the Partnership had dilutive potential common units consisting of certain equity-based compensation awards and Class B units. Potential common units omitted from the diluted earnings per unit calculation for the three and nine months ended September 30, 2017March 31, 2020 and 2019 were 1 million and less than one million and for the three and nine months ended September 30, 2016 were less than one million and approximately eight1 million, respectively.
|
| | | | | | | |
| | Three Months Ended March 31, |
| (In millions) | 2020 | | 2019 |
| Net income attributable to MPLX LP | $ | (2,724 | ) | | $ | 503 |
|
Less: Distributions declared on Series A preferred units(1) | 20 |
| | 20 |
|
Distributions declared on Series B preferred units(1) | 11 |
| | — |
|
Limited partners’ distributions declared on MPLX common units (including common units of general partner)(1) | 728 |
| | 523 |
|
| Undistributed net loss attributable to MPLX LP | $ | (3,483 | ) |
| $ | (40 | ) |
|
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (In millions) | 2017 | | 2016 | | 2017 | | 2016 |
| Net income attributable to MPLX LP | $ | 216 |
| | $ | 141 |
| | $ | 556 |
| | $ | 100 |
|
Less: Limited partners’ distributions declared on Preferred units(1) | 16 |
| | 16 |
| | 49 |
| | 25 |
|
General partner’s distributions declared (including IDRs)(1) | 88 |
| | 54 |
| | 229 |
| | 148 |
|
Limited partners’ distributions declared on common units(1) | 232 |
| | 179 |
| | 648 |
| | 507 |
|
| Undistributed net loss attributable to MPLX LP | $ | (120 | ) |
| $ | (108 | ) | | $ | (370 | ) | | $ | (580 | ) |
| |
| (1) | See Note 7 for distribution information. |
|
| | | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2020 |
| (In millions, except per unit data) | Limited Partners’ Common Units | | Series A Preferred Units | | Series B Preferred Units | | Total |
| Basic and diluted net income attributable to MPLX LP per unit | | | | | | | |
| Net income attributable to MPLX LP: | | | | | | | |
| Distributions declared | $ | 728 |
| | $ | 20 |
| | $ | 11 |
| | $ | 759 |
|
| Undistributed net loss attributable to MPLX LP | (3,483 | ) | | — |
| | — |
| | (3,483 | ) |
Net income attributable to MPLX LP(1) | $ | (2,755 | ) | | $ | 20 |
| | $ | 11 |
| | $ | (2,724 | ) |
| Weighted average units outstanding: | | | | | | | |
| Basic | 1,058 |
| | | | | |
|
| Diluted | 1,058 |
| | | | | |
|
| Net income attributable to MPLX LP per limited partner unit: | | | | | | | |
| Basic | $ | (2.60 | ) | | | | | | |
| Diluted | $ | (2.60 | ) | | | | | | |
|
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2017 |
| (In millions, except per unit data) | General Partner | | Limited Partners’ Common Units | | Redeemable Preferred Units | | Total |
| Basic and diluted net income attributable to MPLX LP per unit: | | | | | | | |
| Net income attributable to MPLX LP: | | | | | | | |
| Distributions declared (including IDRs) | $ | 88 |
| | $ | 232 |
| | $ | 16 |
| | $ | 336 |
|
| Undistributed net loss attributable to MPLX LP | (2 | ) | | (118 | ) | | — |
| | (120 | ) |
Net income attributable to MPLX LP(1) | $ | 86 |
| | $ | 114 |
| | $ | 16 |
| | $ | 216 |
|
| Weighted average units outstanding: | | | | | | | |
| Basic | 8 |
| | 394 |
| | 31 |
| | 433 |
|
| Diluted | 8 |
| | 395 |
| | 31 |
| | 434 |
|
| Net income attributable to MPLX LP per limited partner unit: | | | | | | | |
| Basic | | | $ | 0.29 |
| | | | |
| Diluted | | | $ | 0.29 |
| | | | |
|
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2016 |
| (In millions, except per unit data) | General Partner | | Limited Partners’ Common Units | | Redeemable Preferred Units | | Total |
| Basic and diluted net income attributable to MPLX LP per unit: | | | | | | | |
| Net income attributable to MPLX LP: | | | | | | | |
| Distributions declared (including IDRs) | $ | 54 |
| | $ | 179 |
| | $ | 16 |
| | $ | 249 |
|
| Undistributed net loss attributable to MPLX LP | (3 | ) | | (105 | ) | | — |
| | (108 | ) |
Net income attributable to MPLX LP(1) | $ | 51 |
| | $ | 74 |
| | $ | 16 |
| | $ | 141 |
|
| Weighted average units outstanding: | | | | | | | |
| Basic | 7 |
| | 341 |
| | 31 |
| | 379 |
|
| Diluted | 7 |
| | 346 |
| | 31 |
| | 384 |
|
| Net income attributable to MPLX LP per limited partner unit: | | | | | | | |
| Basic | | | $ | 0.22 |
| |
|
| | |
| Diluted | | | $ | 0.21 |
| |
|
| | |
|
| | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2017 |
| (In millions, except per unit data) | General Partner | | Limited Partners’ Common Units | | Redeemable Preferred Units | | Total |
| Basic and diluted net income attributable to MPLX LP per unit: | | | | | | | |
| Net income attributable to MPLX LP: | | | | | | | |
| Distributions declared (including IDRs) | $ | 229 |
| | $ | 648 |
| | $ | 49 |
| | $ | 926 |
|
| Undistributed net loss attributable to MPLX LP | (7 | ) | | (363 | ) | | — |
| | (370 | ) |
Net income attributable to MPLX LP(1) | $ | 222 |
| | $ | 285 |
| | $ | 49 |
| | $ | 556 |
|
| Weighted average units outstanding: | | | | | | | |
| Basic | 8 |
| | 378 |
| | 31 |
| | 417 |
|
| Diluted | 8 |
| | 381 |
| | 31 |
| | 420 |
|
| Net income attributable to MPLX LP per limited partner unit: | | | | | | | |
| Basic | | | $ | 0.75 |
| | | | |
| Diluted | | | $ | 0.75 |
| | | | |
|
| | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2016 |
| (In millions, except per unit data) | General Partner | | Limited Partners’ Common Units | | Redeemable Preferred Units | | Total |
| Basic and diluted net loss attributable to MPLX LP per unit: | | | | | | | |
| Net income (loss) attributable to MPLX LP: | | | | | | | |
| Distributions declared (including IDRs) | $ | 148 |
| | $ | 507 |
| | $ | 25 |
| | $ | 680 |
|
| Undistributed net loss attributable to MPLX LP | (12 | ) | | (568 | ) | | — |
| | (580 | ) |
Net income (loss) attributable to MPLX LP(1) | $ | 136 |
| | $ | (61 | ) | | $ | 25 |
| | $ | 100 |
|
| Weighted average units outstanding: | | | | | | | |
| Basic | 7 |
| | 324 |
| | 16 |
| | 347 |
|
| Diluted | 7 |
| | 324 |
| | 16 |
| | 347 |
|
| Net loss attributable to MPLX LP per limited partner unit: | | | | | | | |
| Basic | | | $ | (0.19 | ) | |
|
| | |
| Diluted | | | $ | (0.19 | ) | |
|
| | |
| |
| (1) | Allocation of net income (loss) attributable to MPLX LP assumes all earnings for the period had been distributed based on the current period distribution priorities.priorities applicable to the period. |
|
| | | | | | | | | | | |
| | Three Months Ended March 31, 2019 |
| (In millions, except per unit data) | Limited Partners’ Common Units | | Series A Preferred Units | | Total |
| Basic and diluted net income attributable to MPLX LP per unit | | | | | |
| Net income attributable to MPLX LP: | | | | | |
| Distributions declared | $ | 523 |
| | $ | 20 |
| | $ | 543 |
|
| Undistributed net loss attributable to MPLX LP | (40 | ) | | — |
| | (40 | ) |
Net income attributable to MPLX LP(1) | $ | 483 |
| | $ | 20 |
| | $ | 503 |
|
| Weighted average units outstanding: | | | | | |
| Basic | 794 |
| | | |
|
| Diluted | 795 |
| | | |
|
| Net income attributable to MPLX LP per limited partner unit: | | | | | |
| Basic | $ | 0.61 |
| |
|
| | |
| Diluted | $ | 0.61 |
| |
|
| | |
| |
| (1) | Allocation of net income attributable to MPLX LP assumes all earnings for the period had been distributed based on the distribution priorities applicable to the period. |
7. Equity
The changes in the number of common units outstanding during the ninethree months ended SeptemberMarch 31, 2020 are summarized below:
|
| | |
| (In units) | Common |
| Balance at December 31, 2019 | 1,058,355,471 |
|
| Unit-based compensation awards | 151,878 |
|
| Balance at March 31, 2020 | 1,058,507,349 |
|
Merger
In connection with the Merger and as discussed in Note 3, each common unit held by ANDX’s public unitholders was converted into the right to receive 1.135 MPLX common units while ANDX common units held by certain affiliates of MPC were converted into the right to receive 1.0328 MPLX common units. This resulted in the issuance of MPLX common units of approximately 102 million units to public unitholders and approximately 161 million units to MPC on July 30, 20172019.
Series B Preferred Units
Prior to the Merger, ANDX had outstanding 600,000 units of 6.875 percent Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units representing limited partner interests of ANDX at a price to the public of $1,000 per unit. Upon completion of the Merger, the ANDX preferred units converted to preferred units of MPLX representing substantially equivalent limited partnership interests in MPLX (the “Series B preferred units”). The Series B preferred units are pari passu with the Series A preferred units with respect to distribution rights and rights upon liquidation. Distributions on the Series B preferred units are 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 including February 15, 2023. After February 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.
The changes in the Series B preferred unit balance from December 31, 2019 through March 31, 2020 are summarized below. Series B preferred units are included in the Consolidated Balance Sheets and Consolidated Statements of Equity within “Equity of Predecessor” for the period prior to the Merger and within “Series B preferred units” for the period following the Merger.
|
| | | |
| (In millions) | Series B Preferred Units |
| Balance at December 31, 2019 | $ | 611 |
|
| Net income allocated | 11 |
|
| Distributions received by Series B preferred unitholders | (21 | ) |
| Balance at March 31, 2020 | $ | 601 |
|
TexNew Mex Units - Prior to the Merger, MPC held 80,000 Andeavor Logistics TexNew Mex units, representing all outstanding units. At the time of the Merger, each Andeavor Logistics TexNew Mex unit was automatically converted into TexNew Mex units of MPLX with substantially the same rights and obligations as the Andeavor Logistics TexNew Mex units. The TexNew Mex units represent the right to receive quarterly distribution payments in an amount calculated using the distributable cash flow generated by a particular portion of the TexNew Mex pipeline system, in excess of a base amount and adjusted for previously agreed upon stipulations and contingencies. In 2019, distributions of less than $1 million were earned by the TexNew Mex units, which were declared in January of 2020 and paid in February 2020. NaN distributions were earned by the TexNew Mex units in the first quarter of 2020.
Cash distributions–In accordance with the MPLX partnership agreement, on April 28, 2020, MPLX declared a quarterly cash distribution for the first quarter of 2020, totaling $728 million, or $0.6875 per common unit. This rate will also be received by Series A preferred unitholders. These distributions will be paid on May 15, 2020 to common unitholders of record on May 8, 2020. Series B preferred unitholders are entitled to receive a fixed distribution of $68.75 per unit, per annum, payable semi-annually in arrears on February 15 and August 15, or the first business day thereafter, up to and including February 15, 2023. After February 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. MPLX made a cash distribution to holders of the Series B preferred unitholders in February 2020 for approximately $21 million.
Quarterly distributions for the first quarter of 2020 and 2019 are summarized below:
|
| | | | | | | | | | | |
| (In units) | Common | | Class B | | General Partner | | Total |
| Balance at December 31, 2016 | 357,193,288 |
| | 3,990,878 |
| | 7,371,105 |
| | 368,555,271 |
|
Unit-based compensation awards(1) | 183,509 |
| | — |
| | 3,745 |
| | 187,254 |
|
Issuance of units under the ATM Program(2) | 13,846,998 |
| | — |
| | 282,591 |
| | 14,129,589 |
|
Contribution of HST/WHC/MPLXT(3) | 12,960,376 |
| | — |
| | 264,497 |
| | 13,224,873 |
|
Contribution of the Joint-Interest Acquisition(3) | 18,511,134 |
| | — |
| | 377,778 |
| | 18,888,912 |
|
Class B conversion(4) | 4,350,057 |
| | (3,990,878 | ) | | 7,330 |
| | 366,509 |
|
| Balance at September 30, 2017 | 407,045,362 |
|
| — |
|
| 8,307,046 |
|
| 415,352,408 |
|
|
| | | | | | | |
| (Per common unit) | 2020 | | 2019 |
| March 31, | $ | 0.6875 |
| | $ | 0.6575 |
|
| |
(1) | As a result of the unit-based compensation awards issued during the period, MPLX GP contributed less than $1 million in exchange for 3,745 general partner units to maintain its two percent GP Interest. |
| |
(2) | As a result of common units issued under the ATM Program during the period, MPLX GP contributed $10 million in exchange for 282,591 general partner units to maintain its two percent GP Interest. |
| |
(3) | See Note 3 for information regarding this acquisition. |
| |
(4) | On July 1, 2017, 3,990,878 Class B units converted to 4,350,057 common units and were eligible to receive the second quarter 2017 distribution. As a result of the Class B conversion, MPLX GP contributed less than $1 million in exchange for 7,330 general partner units to maintain its two percent GP Interest. |
Reorganization Transactions – On September 1, 2016, the Partnership and various affiliates initiated a series of reorganization transactions in order to simplify the Partnership’s ownership structure and its financial and tax reporting requirements. In connection with these transactions, the issued and outstanding MPLX LP Class A units, all of which were held by MarkWest Hydrocarbon, were either distributed to or purchased by MPC in exchange for $84 million in cash, 21,401,137 MPLX LP common units and 436,758 MPLX LP general partner units. Following these initial transactions, all of the MPLX LP Class A units were exchanged on a one-for-one basis for newly issued common units representing limited partner interests in MPLX LP. MPC also contributed $141 million to facilitate the repayment of intercompany debt between MarkWest Hydrocarbon and MarkWest. As a result of these transactions, the MPLX LP Class A units were eliminated, are no longer outstanding and no longer participate in distributions of cash from the Partnership. Cash that is derived from or attributable to MarkWest Hydrocarbon’s operations is now treated in the same manner as cash derived from or attributable to other operations of the Partnership and its subsidiaries.
Net Income Allocation–In preparing the Consolidated Statements of Equity, net income (loss) attributable to MPLX LP is allocated to Preferred unitholders based on a fixed distribution schedule, as discussed in Note 8, and subsequently allocated to the general partner and limited partner unitholders. However, when distributions related to the IDRs are made, earnings equal to the amount of those distributions are first allocated to the general partner before the remaining earnings are allocated to the unitholders, based on their respective ownership percentages. The following table presents the allocation of the general partner’s GP Interest in net income attributable to MPLX LP:
|
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (In millions) | 2017 | | 2016 | | 2017 | | 2016 |
| Net income attributable to MPLX LP | $ | 216 |
| | $ | 141 |
| | $ | 556 |
| | $ | 100 |
|
| Less: Preferred unit distributions | 16 |
| | 16 |
| | 49 |
| | 25 |
|
| General partner's IDRs and other | 83 |
| | 49 |
| | 216 |
| | 137 |
|
| Net income (loss) attributable to MPLX LP available to general and limited partners | $ | 117 |
| | $ | 76 |
| | $ | 291 |
| | $ | (62 | ) |
| | | | | | | | |
| General partner's two percent GP Interest in net income (loss) attributable to MPLX LP | $ | 3 |
| | $ | 2 |
| | $ | 6 |
| | $ | (1 | ) |
| General partner's IDRs and other | 83 |
| | 49 |
| | 216 |
| | 137 |
|
| General partner's GP Interest in net income attributable to MPLX LP | $ | 86 |
| | $ | 51 |
| | $ | 222 |
| | $ | 136 |
|
Cash distributions–The Partnership Agreement sets forth the calculation to be used to determine the amount and priority of cash distributions that the common unitholders, Preferred unitholders and general partner will receive. In accordance with the Partnership Agreement, on October 25, 2017, the Partnership declared a quarterly cash distribution, based on the results of the third quarter of 2017, totaling $320 million, or $0.5875 per common unit. These distributions will be paid on November 14, 2017 to common unitholders of record on November 6, 2017.
The allocation of total quarterly cash distributions to general, limited and Preferredpreferred unitholders is as follows for the three and nine months ended September 30, 2017March 31, 2020 and 2016. The Partnership’s2019. 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 September 30, | | Nine Months Ended September 30, |
| (In millions) | 2017 | | 2016 | | 2017 | | 2016 |
| General partner's distributions: | | | | | | | |
| General partner's distributions on general partner units | $ | 7 |
| | $ | 5 |
| | $ | 18 |
| | $ | 13 |
|
| General partner's distributions on IDRs | 81 |
| | 49 |
| | 211 |
| | 135 |
|
| Total distribution on general partner units and IDRs | $ | 88 |
| | $ | 54 |
| | $ | 229 |
| | $ | 148 |
|
| Common and preferred unit distributions: | | | | | | | |
| Common unitholders, includes common units of general partner | $ | 232 |
| | $ | 179 |
| | $ | 648 |
| | $ | 507 |
|
| Preferred unit distributions | 16 |
| | 16 |
| | 49 |
| | 25 |
|
| Total cash distributions declared | $ | 336 |
| | $ | 249 |
| | $ | 926 |
| | $ | 680 |
|
|
| | | | | | | |
| | Three Months Ended March 31, |
| (In millions) | 2020 | | 2019(1) |
| Common and preferred unit distributions: | | | |
| Common unitholders, includes common units of general partner | $ | 728 |
| | $ | 523 |
|
| Series A preferred unit distributions | 20 |
| | 20 |
|
| Series B preferred unit distributions | 11 |
| | — |
|
| Total cash distributions declared | $ | 759 |
| | $ | 543 |
|
| |
| (1) | The distribution on common units for the three months ended March 31, 2019 does not include the impact of the issuance of units in connection with the merger. |
8. RedeemableSeries A Preferred Units
Private Placement of Preferred Units –On May 13, 2016, MPLX LP completed the private placement ofissued approximately 30.8 million 6.5 percent Series A Convertible Preferredpreferred units (the "Preferred units") for a cash purchase price of $32.50 per unit. The aggregate net proceeds of approximately $984 million from the sale of the Preferred units were used for capital expenditures, repayment of debt and general partnership purposes.
The PreferredSeries A preferred units rank senior to all common units and pari passu with all Series B preferred units with respect to distributions and rights upon liquidation. The holders of the PreferredSeries A preferred units are entitled to receive, cumulativewhen and if declared by the board, a quarterly distributionsdistribution equal to $0.528125 per unit. Following the second anniversary of the issuance of the Preferred units, the holders of the Preferred units will receive as a distribution the greater of $0.528125 per unit or the amount of distributions they would have received on an as converted basis. On April 28, 2020, MPLX declared a quarterly cash distribution of $0.6875 per common unit distributions paid to holdersfor the first quarter of MPLX LP2020. Holders of the Series A preferred units will receive the common units.unit rate in lieu of the lower $0.528125 base amount.
The changes in the redeemable preferred balance from December 31, 2016 through September 30, 2017 are summarized below:
|
| | | |
| (In millions) | Redeemable Preferred Units |
| Balance at December 31, 2016 | $ | 1,000 |
|
| Net income | 49 |
|
| Distributions received by Preferred unitholders | (49 | ) |
| Balance at September 30, 2017 | $ | 1,000 |
|
The holders may convert their PreferredSeries A preferred units into common units at any time, after the third anniversary of the issuance date or prior to liquidation, dissolution or winding up of the Partnership, in full or in part, subject to minimum conversion amounts and conditions. After the fourth anniversary of the issuance date, the PartnershipMPLX may convert the PreferredSeries A preferred units into common units at any time, in whole or in part, subject to certain minimum conversion amounts and conditions, if the closing price of MPLX LP common units is greater than $48.75 for the 20 day20-day trading period immediately preceding the conversion notice date. The conversion rate for the PreferredSeries A preferred units shall be the quotient of (a) the sum of (i) $32.50, plus (ii) any unpaid cash distributions on the applicable Preferredpreferred unit, divided by (b) $32.50.$32.50, subject to adjustment for unit distributions, unit splits and similar transactions. The holders of the PreferredSeries A preferred units are entitled to vote on an as-converted basis with the common unitholders and will have certain other class voting rights with respect to any amendment to the Partnership AgreementMPLX partnership agreement that would adversely affect any rights, preferences or privileges of the Preferredpreferred units. In addition, upon certain events involving a change of control, the holders of Preferredpreferred units may elect, among other potential elections, to convert their PreferredSeries A preferred units to common units at the then-changethen change of control conversion rate.
Approximately 29.6 million Series A preferred units remaining outstanding as of March 31, 2020. The changes in the redeemable preferred balance from December 31, 2019 through March 31, 2020 are summarized below:
28 |
| | | |
| (In millions) | Redeemable Series A Preferred Units |
| Balance at December 31, 2019 | $ | 968 |
|
| Net income allocated | 20 |
|
| Distributions received by Series A preferred unitholders | (20 | ) |
| Balance at March 31, 2020 | $ | 968 |
|
The PreferredSeries A preferred units are considered redeemable securities under GAAP due to the existence of redemption provisions upon a deemed liquidation event which is outside the Partnership’sMPLX’s control. Therefore, they are presented as temporary equity in the mezzanine section of the Consolidated Balance Sheets. The PreferredSeries A preferred units have been recorded at their issuance date fair value, net of issuance costs. Income allocations increase the carrying value and declared distributions decreaseddecrease the carrying value of the PreferredSeries A preferred units. As the PreferredSeries A preferred units are not currently redeemable and not probable of becoming redeemable, adjustment to the initial carrying amount is not necessary and would only be required if it becomes probable that the PreferredSeries A preferred units would become redeemable.
9. Segment Information
The Partnership’sMPLX’s chief operating decision maker is the chief executive officer (“CEO”) of its general partner. The CEO reviews the Partnership’sMPLX’s discrete financial information, makes operating decisions, assesses financial performance and allocates resources on a type of service basis. The PartnershipMPLX has two2 reportable segments: L&S and G&P. Each of these segments areis organized and managed based upon the nature of the products and services it offers.
L&S – transports, stores, distributes and distributesmarkets crude oil, andasphalt, refined petroleum products. Segment information for prior periodsproducts and water. Also includes retrospective adjustments in connection with the acquisition of HST, WHCan inland marine business, terminals, rail facilities, storage caverns and MPLXT. Segment information is not included for periods prior to the Joint-Interest Acquisition and the Ozark pipeline acquisition. See Note 3 for more detail of these acquisitions.refining logistics.
G&P – gathers, processes and transports natural gas; and gathers, transports, fractionates, stores and markets NGLs.
The Partnership has investmentsOur CEO evaluates the performance of our segments using Segment Adjusted EBITDA. Amounts included in entities that are accountednet income and excluded from Segment Adjusted EBITDA include: (i) depreciation and amortization; (ii) provision/(benefit) for using theincome taxes; (iii) amortization of deferred financing costs; (iv) extinguishment of debt; (v) non-cash equity-based compensation; (vi) impairment expense; (vii) net interest and other financial costs; (viii) income/(loss) from equity method of accounting (see Note 4). However, the CEO views the Partnership-operatedinvestments; (ix) distributions and adjustments related to equity method investments’ financial informationinvestments; (x) unrealized derivative gains/(losses); (xi) acquisition costs; (xii) noncontrolling interest; and (xiii) other adjustments as if those investments were consolidated.
Segment operating income represents income from operations attributabledeemed 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 reportable segments. Corporate general and administrative expenses, unrealized derivative gains (losses), goodwill impairment, certain management fees and depreciation and amortization are not allocated to the reportable segments. Management does not consider these items allocable to or controllable by any individual segment and, therefore, excludes these items when evaluating segment performance. Segment results are also adjusted to exclude the portion of income from operations attributable to the noncontrolling interests related to partially-owned entities that are either consolidated or accounted for as equity method investments. Segment operating income attributable to MPLX LP excludes the operating income related to Predecessorsoperational performance of the HSM, HST, WHC and MPLXT businesses prior to the dates they were acquired by MPLX LP.segment.
The tables below present information about
revenues and other income,
from operations and capital expenditures
and investments in unconsolidated affiliates as well as total assets for
the reportedour reportable segments:
|
| | | | | | | | | | | |
| | Three Months Ended September 30, 2017 |
| (In millions) | L&S | | G&P | | Total |
| Revenues and other income: | | | | | |
| Segment revenues | $ | 378 |
| | $ | 669 |
| | $ | 1,047 |
|
| Segment other income | 11 |
| | 1 |
| | 12 |
|
| Total segment revenues and other income | 389 |
| | 670 |
| | 1,059 |
|
| Costs and expenses: | | | | | |
| Segment cost of revenues | 176 |
| | 276 |
| | 452 |
|
| Segment operating income before portion attributable to noncontrolling interests and Predecessor | 213 |
| | 394 |
| | 607 |
|
| Segment portion attributable to noncontrolling interests and Predecessor | — |
| | 45 |
| | 45 |
|
| Segment operating income attributable to MPLX LP | $ | 213 |
| | $ | 349 |
| | $ | 562 |
|
29 |
| | | | | | | |
| | Three Months Ended March 31, |
| (In millions) | 2020 | | 2019(1) |
| L&S | | | |
| Service revenue | $ | 1,004 |
| | $ | 889 |
|
| Rental income | 242 |
| | 335 |
|
| Product related revenue | 19 |
| | 15 |
|
| Income from equity method investments | 50 |
| | 45 |
|
| Other income | 51 |
| | 12 |
|
Total segment revenues and other income(2) | 1,366 |
| | 1,296 |
|
Segment Adjusted EBITDA(3) | 872 |
| | 559 |
|
| Capital expenditures | 184 |
| | 198 |
|
| Investments in unconsolidated affiliates | 54 |
| | 7 |
|
| G&P | | | |
| Service revenue | 536 |
| | 528 |
|
| Rental income | 88 |
| | 89 |
|
| Product related revenue | 222 |
| | 276 |
|
| (Loss)/income from equity method investments | (1,234 | ) | | 32 |
|
| Other income | 14 |
| | 14 |
|
Total segment revenues and other (loss)/income(2) | (374 | ) | | 939 |
|
Segment Adjusted EBITDA(3) | 422 |
| | 371 |
|
| Capital expenditures | 134 |
| | 306 |
|
| Investments in unconsolidated affiliates | $ | 37 |
| | $ | 128 |
|
|
| | | | | | | | | | | |
| | Three Months Ended September 30, 2016 |
| (In millions) | L&S | | G&P | | Total |
| Revenues and other income: | | | | | |
| Segment revenues | $ | 339 |
| | $ | 567 |
| | $ | 906 |
|
| Segment other income | 12 |
| | 1 |
| | 13 |
|
| Total segment revenues and other income | 351 |
| | 568 |
| | 919 |
|
| Costs and expenses: | | | | | |
| Segment cost of revenues | 153 |
| | 239 |
| | 392 |
|
| Segment operating income before portion attributable to noncontrolling interests and Predecessor | 198 |
| | 329 |
| | 527 |
|
| Segment portion attributable to noncontrolling interests and Predecessor | 74 |
| | 36 |
| | 110 |
|
| Segment operating income attributable to MPLX LP | $ | 124 |
| | $ | 293 |
| | $ | 417 |
|
|
| | | | | | | | | | | |
| | Nine Months Ended September 30, 2017 |
| (In millions) | L&S | | G&P | | Total |
| Revenues and other income: | | | | | |
| Segment revenues | $ | 1,095 |
| | $ | 1,869 |
| | $ | 2,964 |
|
| Segment other income | 35 |
| | 2 |
| | 37 |
|
| Total segment revenues and other income | 1,130 |
| | 1,871 |
| | 3,001 |
|
| Costs and expenses: | | | | |
|
| Segment cost of revenues | 500 |
| | 781 |
| | 1,281 |
|
| Segment operating income before portion attributable to noncontrolling interests and Predecessor | 630 |
| | 1,090 |
| | 1,720 |
|
| Segment portion attributable to noncontrolling interests and Predecessor | 53 |
| | 119 |
| | 172 |
|
| Segment operating income attributable to MPLX LP | $ | 577 |
| | $ | 971 |
| | $ | 1,548 |
|
|
| | | | | | | | | | | |
| | Nine Months Ended September 30, 2016 |
| (In millions) | L&S | | G&P | | Total |
| Revenues and other income: | | | | | |
| Segment revenues | $ | 901 |
| | $ | 1,595 |
| | $ | 2,496 |
|
| Segment other income | 42 |
| | 1 |
| | 43 |
|
| Total segment revenues and other income | 943 |
| | 1,596 |
| | 2,539 |
|
| Costs and expenses: | | | | |
|
| Segment cost of revenues | 392 |
| | 662 |
| | 1,054 |
|
| Segment operating income before portion attributable to noncontrolling interests and Predecessor | 551 |
| | 934 |
| | 1,485 |
|
| Segment portion attributable to noncontrolling interests and Predecessor | 216 |
| | 113 |
| | 329 |
|
| Segment operating income attributable to MPLX LP | $ | 335 |
| | $ | 821 |
| | $ | 1,156 |
|
|
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (In millions) | 2017 | | 2016 | | 2017 | | 2016 |
| Reconciliation to Income from operations: | | | | | | | |
| L&S segment operating income attributable to MPLX LP | $ | 213 |
| | $ | 124 |
| | $ | 577 |
| | $ | 335 |
|
| G&P segment operating income attributable to MPLX LP | 349 |
| | 293 |
| | 971 |
| | 821 |
|
| Segment operating income attributable to MPLX LP | 562 |
| | 417 |
| | 1,548 |
| | 1,156 |
|
| Segment portion attributable to unconsolidated affiliates | (47 | ) | | (41 | ) | | (125 | ) | | (130 | ) |
| Segment portion attributable to Predecessor | — |
| | 74 |
| | 53 |
| | 216 |
|
| Income (loss) from equity method investments | 23 |
| | 6 |
| | 29 |
| | (72 | ) |
| Other income - related parties | 13 |
| | 11 |
| | 38 |
| | 29 |
|
Unrealized derivative (losses) gains(1) | (17 | ) | | (2 | ) | | 2 |
| | (23 | ) |
| Depreciation and amortization | (164 | ) | | (151 | ) | | (515 | ) | | (438 | ) |
| Impairment expense | — |
| | — |
| | — |
| | (130 | ) |
| General and administrative expenses | (59 | ) | | (56 | ) | | (174 | ) | | (172 | ) |
| Income from operations | $ | 311 |
| | $ | 258 |
| | $ | 856 |
| | $ | 436 |
|
|
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (In millions) | 2017 | | 2016 | | 2017 | | 2016 |
| Reconciliation to Total revenues and other income: | | | | | | | |
| Total segment revenues and other income | $ | 1,059 |
| | $ | 919 |
| | $ | 3,001 |
| | $ | 2,539 |
|
| Revenue adjustment from unconsolidated affiliates | (107 | ) | | (100 | ) | | (287 | ) | | (303 | ) |
| Income (loss) from equity method investments | 23 |
| | 6 |
| | 29 |
| | (72 | ) |
| Other income - related parties | 13 |
| | 11 |
| | 38 |
| | 29 |
|
Unrealized derivative (losses) gains related to product sales(1) | (8 | ) | | 2 |
| | 1 |
| | (12 | ) |
| Total revenues and other income | $ | 980 |
| | $ | 838 |
| | $ | 2,782 |
| | $ | 2,181 |
|
| |
| (1) | The PartnershipFinancial information for the first quarter of 2019 has been retrospectively adjusted for the acquisition of ANDX. See Notes 1 and 3. |
| |
| (2) | Within the total segment revenues and other income amounts presented above, third party revenues for the L&S segment were $158 million and $153 million for the three months ended March 31, 2020 and 2019, respectively. Third party losses for the G&P segment were $425 million for the three months ended March 31, 2020 and third party revenues were $887 million for the three months ended March 31, 2019. |
| |
| (3) | See below for the reconciliation from Segment Adjusted EBITDA to net income. |
|
| | | | | | | |
| (In millions) | March 31, 2020 | | December 31, 2019 |
| Segment assets | | | |
| Cash and cash equivalents | $ | 57 |
| | $ | 15 |
|
| L&S | 20,891 |
| | 20,810 |
|
| G&P | 16,058 |
| | 19,605 |
|
| Total assets | $ | 37,006 |
| | $ | 40,430 |
|
The table below provides a reconciliation between net (loss)/income and Segment Adjusted EBITDA.
|
| | | | | | | |
| | Three Months Ended March 31, |
| (In millions) | 2020 | | 2019(1) |
| Reconciliation to Net (loss)/income: | | | |
| L&S Segment Adjusted EBITDA | $ | 872 |
| | $ | 559 |
|
| G&P Segment Adjusted EBITDA | 422 |
| | 371 |
|
| Total reportable segments | 1,294 |
| | 930 |
|
Depreciation and amortization(2) | (325 | ) | | (301 | ) |
| Benefit for income taxes | — |
| | 1 |
|
| Amortization of deferred financing costs | (14 | ) | | (7 | ) |
| Non-cash equity-based compensation | (5 | ) | | (7 | ) |
| Impairment expense | (2,165 | ) | | — |
|
| Net interest and other financial costs | (216 | ) | | (217 | ) |
| (Loss)/income from equity method investments | (1,184 | ) | | 77 |
|
| Distributions/adjustments related to equity method investments | (124 | ) | | (122 | ) |
Unrealized derivative gains/(losses)(3) | 15 |
| | (4 | ) |
| Acquisition costs | — |
| | (1 | ) |
| Other | (1 | ) | | — |
|
| Adjusted EBITDA attributable to noncontrolling interests | 9 |
| | 7 |
|
Adjusted EBITDA attributable to Predecessor(4) | — |
| | 333 |
|
| Net (loss)/income | $ | (2,716 | ) | | $ | 689 |
|
| |
| (1) | Financial information for the first quarter of 2019 has been retrospectively adjusted for the acquisition of ANDX. See Notes 1 and 3. |
| |
| (2) | Depreciation and amortization attributable to L&S was $138 million and $126 million for the three months ended March 31, 2020 and 2019, respectively. Depreciation and amortization attributable to G&P was $187 million and $175 million for the three months ended March 31, 2020 and 2019, respectively. |
| |
| (3) | MPLX makes a distinction between realized orand unrealized gains and losses on derivatives. During the period when a derivative contract is outstanding, changes in the fair value of the derivative are recorded as an unrealized gain or loss. When a derivative contract matures or is settled, the previously recorded unrealized gain or loss is reversed and the realized gain or loss of the contract is recorded. |
| |
| (4) | The adjusted EBITDA adjustments related to Predecessor are excluded from adjusted EBITDA attributable to MPLX LP prior to the Merger. |
|
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (In millions) | 2017 | | 2016 | | 2017 | | 2016 |
| Reconciliation to Net income attributable to noncontrolling interests and Predecessor: | | | | | | | |
| Segment portion attributable to noncontrolling interests and Predecessor | $ | 45 |
| | $ | 110 |
| | $ | 172 |
| | $ | 329 |
|
| Portion of noncontrolling interests and Predecessor related to items below segment income from operations | (21 | ) | | (39 | ) | | (84 | ) | | (157 | ) |
| Portion of operating income attributable to noncontrolling interests of unconsolidated affiliates | (23 | ) | | (18 | ) | | (49 | ) | | (20 | ) |
| Net income attributable to noncontrolling interests and Predecessor | $ | 1 |
| | $ | 53 |
| | $ | 39 |
| | $ | 152 |
|
The following table reconciles segment capital expenditures to total capital expenditures:
|
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (In millions) | 2017 | | 2016 | | 2017 | | 2016 |
| L&S segment capital expenditures | $ | 120 |
| | $ | 188 |
| | $ | 353 |
| | $ | 369 |
|
| G&P segment capital expenditures | 333 |
| | 183 |
| | 957 |
| | 668 |
|
| Total segment capital expenditures | 453 |
| | 371 |
| | 1,310 |
| | 1,037 |
|
| Less: Capital expenditures for Partnership-operated, non-wholly-owned subsidiaries in G&P segment | 101 |
| | 34 |
| | 306 |
| | 94 |
|
| Total capital expenditures | $ | 352 |
| | $ | 337 |
| | $ | 1,004 |
| | $ | 943 |
|
Total assets by reportable segment were:
|
| | | | | | | |
| (In millions) | September 30, 2017 | | December 31, 2016 |
| Cash and cash equivalents | $ | 3 |
| | $ | 234 |
|
| L&S | 4,520 |
| | 2,978 |
|
| G&P | 14,715 |
| | 14,297 |
|
| Total assets | $ | 19,238 |
| | $ | 17,509 |
|
10. Inventories
Inventories consist of the following:
|
| | | | | | | |
| (In millions) | March 31, 2020 | | December 31, 2019 |
| NGLs | $ | 1 |
| | $ | 5 |
|
| Line fill | 6 |
| | 10 |
|
| Spare parts, materials and supplies | 98 |
| | 95 |
|
| Total inventories | $ | 105 |
| | $ | 110 |
|
|
| | | | | | | |
| (In millions) | September 30, 2017 | | December 31, 2016 |
| NGLs | $ | 3 |
| | $ | 2 |
|
| Line fill | 9 |
| | 9 |
|
| Spare parts, materials and supplies | 52 |
| | 44 |
|
| Total inventories | $ | 64 |
| | $ | 55 |
|
11. Property, Plant and Equipment
Property, plant and equipment with associated accumulated depreciation is shown below:
|
| | | | | | | |
| (In millions) | September 30, 2017 | | December 31, 2016 |
| Natural gas gathering and NGL transportation pipelines and facilities | $ | 5,101 |
| | $ | 4,748 |
|
Processing, fractionation and storage facilities(1) | 3,753 |
| | 3,547 |
|
| Pipelines and related assets | 2,181 |
| | 1,799 |
|
| Barges and towing vessels | 484 |
| | 479 |
|
Terminals and related assets(1) | 794 |
| | 759 |
|
| Land, building, office equipment and other | 755 |
| | 757 |
|
| Construction-in-progress | 986 |
| | 1,013 |
|
| Total | 14,054 |
| | 13,102 |
|
| Less accumulated depreciation | 2,132 |
| | 1,694 |
|
| Property, plant and equipment, net | $ | 11,922 |
| | $ | 11,408 |
|
|
| | | | | | | | | |
| (In millions) | Estimated Useful Lives | | March 31, 2020 | | December 31, 2019 |
| L&S | | | | | |
| Pipelines | 2-51 years | | $ | 5,637 |
| | $ | 5,572 |
|
| Refining Logistics | 13-40 years | | 2,308 |
| | 2,870 |
|
| Terminals | 2-40 years | | 1,176 |
| | 1,109 |
|
| Marine | 15-20 years | | 960 |
| | 906 |
|
| Land, building and other | 1-61 years | | 1,827 |
| | 1,817 |
|
| Construction-in progress | | | 618 |
| | 660 |
|
| Total L&S property, plant and equipment | | | 12,526 |
| | 12,934 |
|
| G&P | | | | | |
| Gathering and transportation | 5-40 years | | 7,349 |
| | 7,159 |
|
| Processing and fractionation | 15-40 years | | 5,605 |
| | 5,545 |
|
| Land, building and other | 3-40 years | | 491 |
| | 484 |
|
| Construction-in-progress | | | 616 |
| | 745 |
|
| Total G&P property, plant and equipment | | | 14,061 |
| | 13,933 |
|
| Total property, plant and equipment | | | 26,587 |
| | 26,867 |
|
Less accumulated depreciation(1) | | | 4,758 |
| | 4,722 |
|
| Property, plant and equipment, net | | | $ | 21,829 |
| | $ | 22,145 |
|
| |
| (1) | Certain prior period amounts have been updated to conform to current period presentation.The March 31, 2020 balance includes property, plant and equipment impairment charges recorded during the first quarter of 2020 as discussed below. |
Long-lived assets used in operations are assessed for impairment whenever changes in facts and circumstances indicate that the carrying value of the assets may not be recoverable based on the expected undiscounted future cash flow of an asset group. For purposes of impairment evaluation, long-lived assets must be grouped at the lowest level for which independent cash flows can be identified, which is at least at the segment level and in some cases for similar assets in the same geographic region where cash flows can be separately identified. If the sum of the undiscounted cash flows is less than the carrying value of an asset group, fair value is calculated, and the carrying value is written down if greater than the calculated fair value.
32
During the first quarter of 2020, we identified an impairment trigger relating to asset groups within our Western G&P reporting unit as a result of significant impacts to forecasted cash flows for these asset groups resulting from the first quarter events and circumstances as discussed in Note 1. The cash flows associated with these assets were significantly impacted by volume declines reflecting decreased forecasted producer customer production as a result of lower commodity prices. After assessing each asset group within the Western G&P reporting unit for impairment, only the East Texas G&P asset group resulted in the fair value of the underlying assets being less than the carrying value. As a result, an impairment of $174 million was recorded to Impairment expense on the Consolidated Statements of Income. Fair value of the assets was determined using a combination of an income and cost approach. The income approach utilized significant assumptions including management’s best estimates of the expected future cash flows, the estimated useful life of the asset group and discount rate. The cost approach utilized assumptions for the current replacement costs of similar assets adjusted for estimated depreciation and deterioration of the existing equipment and economic obsolescence. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. As a result, there can be no assurance that the estimates and assumptions made for purposes of our impairment analysis will prove to be an accurate prediction of the future. The fair value measurements for the asset group fair values represent Level 3 measurements.
12. Goodwill and Intangibles
Goodwill
MPLX annually evaluates goodwill for impairment as of November 30, as well as whenever events or changes in circumstances indicate it is more likely than not that the fair value of a reporting unit with goodwill is less than its carrying amount.
During the first quarter of 2020, we determined that an interim impairment analysis of the goodwill recorded was necessary based on consideration of a number of first quarter events and circumstances as discussed in Note 1. Our producer customers in our Eastern G&P region reduced production forecasts and drilling activity in response to the global economic downturn. Additionally, a decline in NGL prices impacted our future revenue forecast. After performing our evaluations related to the interim impairment of goodwill during the first quarter of 2020, we recorded an impairment of $1,814 million within the Eastern G&P reporting unit, which was recorded to Impairment expense on the Consolidated Statements of Income. The impairment was primarily driven by additional guidance related to the slowing of drilling activity, which has reduced production growth forecasts from our producer customers. This resulted in goodwill totaling approximately $7.7 billion as of March 31, 2020 within 4 reporting units. The fair value of the remaining reporting units with goodwill were in excess of their carrying value by percentages ranging from 8.5 percent to 270.0 percent. The reporting unit whose fair value exceeded its carrying amount by 8.5 percent, our Crude Gathering reporting unit, had goodwill totaling $1.1 billion at March 31, 2020. The operations which make up this reporting unit were acquired through the merger with ANDX. MPC accounted for its October 1, 2018 acquisition of Andeavor (including acquiring control of ANDX), using the acquisition method of accounting, which required Andeavor assets and liabilities to be recorded by MPC at the acquisition date fair value. The Merger was closed on July 30, 2019 and has been treated as a common control transaction, which required the recognition of assets acquired and liabilities assumed using MPC’s historical carrying value. As such, given the short amount of time from when fair value was established to the date of the impairment test, the amount by which the fair value exceeded the carrying value within this reporting unit is not unexpected.
Our reporting units are one level below our operating segments and are determined based on the way in which segment management operates and reviews each operating segment. The fair value of our 6 reporting units was determined based on applying both a discounted cash flow or income approach as well as a market approach. The discounted cash flow fair value estimate is based on known or knowable information at the measurement date. The significant assumptions that were used to develop the estimates of the fair values under the discounted cash flow method included management’s best estimates of the expected future results and discount rate, which ranged from 9.5 percent to 11.5 percent. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. As a result, there can be no assurance that the estimates and assumptions made for purposes of the interim goodwill impairment test will prove to be an accurate prediction of the future. The fair value measurements for the individual reporting units represent Level 3 measurements.
After performing our evaluations related to the impairment of goodwill during the fiscal year ending December 31, 2019, we recorded an impairment of $1,197 million within the Western G&P reporting unit. The remainder of the reporting units’ fair values were in excess of their carrying values. The impairment was primarily driven by updated guidance related to the slowing of drilling activity, which has reduced production growth forecasts from our producer customers. This resulted in goodwill totaling approximately $9.5 billion as of December 31, 2019, with all but 1 of our 6 reporting units having goodwill.
The changes in carrying amount of goodwill were as follows:
|
| | | | | | | | | | | |
| (In millions) | L&S | | G&P | | Total |
| Gross goodwill as of December 31, 2018 | $ | 7,234 |
| | $ | 2,912 |
| | $ | 10,146 |
|
| Accumulated impairment losses | — |
| | (130 | ) | | (130 | ) |
| Balance as of December 31, 2018 | 7,234 |
| | 2,782 |
| | 10,016 |
|
| Impairment losses | — |
| | (1,197 | ) | | (1,197 | ) |
| Acquisitions | 488 |
| | 229 |
| | 717 |
|
| Balance as of December 31, 2019 | 7,722 |
| | 1,814 |
| | 9,536 |
|
| Impairment losses | — |
| | (1,814 | ) | | (1,814 | ) |
| Balance as of March 31, 2020 | 7,722 |
| | — |
| | 7,722 |
|
| | | | | | |
| Gross goodwill as of March 31, 2020 | 7,722 |
| | 3,141 |
| | 10,863 |
|
| Accumulated impairment losses | — |
| | (3,141 | ) | | (3,141 | ) |
| Balance as of March 31, 2020 | $ | 7,722 |
| | $ | — |
| | $ | 7,722 |
|
Intangible Assets
During the first quarter of 2020, we also determined that an impairment analysis of intangibles within our Western G&P reporting unit was necessary. See Note 11 for additional information regarding our assessment around the Western G&P reporting unit, and more specifically our East Texas G&P asset group. The fair value of the intangibles in our East Texas G&P asset group were determined based on applying the multi-period excess earnings method, which is an income approach. Key assumptions included management’s best estimates of the expected future cash flows from existing customers, customer attrition rates and the discount rate. After performing our evaluations related to the impairment of intangible assets associated with our East Texas G&P asset group during the first quarter of 2020, we recorded an impairment of $177 million to Impairment expense on the Consolidated Statements of Income related to our customer relationships.
MPLX’s remaining intangible assets are comprised of customer contracts and relationships. Gross intangible assets with accumulated amortization as of March 31, 2020 and December 31, 2019 is shown below:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | March 31, 2020 | | December 31, 2019 |
| (In millions) | | Useful Life | | Gross | | Accumulated Amortization(1)(2) | | Net | | Gross | | Accumulated Amortization | | Net |
| L&S | | 6 - 8 years | | $ | 283 |
| | $ | (54 | ) | | $ | 229 |
| | $ | 283 |
| | $ | (45 | ) | | $ | 238 |
|
| G&P | | 6 - 25 years | | 1,288 |
| | (462 | ) | | 826 |
| | 1,288 |
| | (256 | ) | | 1,032 |
|
| | | | | $ | 1,571 |
| | $ | (516 | ) | | $ | 1,055 |
| | $ | 1,571 |
| | $ | (301 | ) | | $ | 1,270 |
|
| |
| (1) | Amortization expense attributable to the G&P and L&S segments for the three months ended March 31, 2020 was $29 million and $9 million, respectively. |
| |
| (2) | Impairment charge of $177 million is included within the G&P accumulated amortization. |
12.Estimated future amortization expense related to the intangible assets at March 31, 2020 is as follows:
|
| | | | |
| (In millions) | | |
| 2020 | | $ | 96 |
|
| 2021 | | 128 |
|
| 2022 | | 128 |
|
| 2023 | | 128 |
|
| 2024 | | 124 |
|
| Thereafter | | 451 |
|
| Total | | $ | 1,055 |
|
13. Fair Value Measurements
Fair Values – Recurring
Fair value measurements and disclosures relate primarily to the Partnership’sMPLX’s derivative positions as discussed in Note 13. Money market funds, which are included in Cash and cash equivalents on14. The following table presents the Consolidated Balance Sheets, are measuredfinancial instruments carried at fair value on a recurring basis as of March 31, 2020 and are included in Level 1 measurements ofDecember 31, 2019 by fair value hierarchy level. MPLX has elected to offset the valuation hierarchy. Level 2 instruments include crude oil and natural gas swap contracts. fair value amounts recognized for multiple derivative contracts executed with the same counterparty.
|
| | | | | | | | | | | | | | | |
| | March 31, 2020 | | December 31, 2019 |
| (In millions) | Assets | | Liabilities | | Assets | | Liabilities |
| Significant unobservable inputs (Level 3) | | | | | | | |
| Embedded derivatives in commodity contracts | $ | — |
| | $ | (45 | ) | | $ | — |
| | $ | (60 | ) |
| Total carrying value on Consolidated Balance Sheets | $ | — |
| | $ | (45 | ) | | $ | — |
| | $ | (60 | ) |
Level 3 instruments include all NGL transactions and embedded derivatives in commodity contracts. The following table presents the financial instruments carried atembedded derivative liability relates to a natural gas purchase commitment embedded in a keep-whole processing agreement. The fair value classified by the valuation hierarchy:
|
| | | | | | | | | | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| (In millions) | Assets | | Liabilities | | Assets | | Liabilities |
| Significant other observable inputs (Level 2) | | | | | | | |
| Commodity contracts | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Significant unobservable inputs (Level 3) | | | | | | | |
| Commodity contracts | — |
| | (5 | ) | | — |
| | (6 | ) |
| Embedded derivatives in commodity contracts | — |
| | (52 | ) | | — |
| | (54 | ) |
| Total carrying value in Consolidated Balance Sheets | $ | — |
| | $ | (57 | ) | | $ | — |
| | $ | (60 | ) |
The following table provides additional information about thecalculation for these Level 3 instruments used significant unobservable inputs used inincluding: (1) NGL prices interpolated and extrapolated due to inactive markets ranging from $0.26 to $0.68 per gallon with a weighted average of $0.39 per gallon per the valuation of Level 3 instruments as of September 30, 2017. The market approach is used for valuation of all instruments.
|
| | | | | | | | |
Level 3 Instrument | | Balance Sheet Classification | | Unobservable Inputs | | Value Range | | Time Period |
Commodity contracts | | Liabilities | | Forward ethane prices (per Gal)(1)
| | $0.27 - $0.28 | | Oct. 17 - Dec. 17 |
| | | | Forward propane prices (per Gal)(1)
| | $0.68 - $0.91 | | Oct. 17 - Dec. 18 |
| | | | Forward isobutane prices (per Gal)(1)
| | $0.82 - $1.06 | | Oct. 17 - Dec. 18 |
| | | | Forward normal butane prices (per Gal)(1)
| | $0.76 - $1.03 | | Oct. 17 - Dec. 18 |
| | | | Forward natural gasoline prices (per Gal)(1)
| | $1.18 - $1.22 | | Oct. 17 - Dec. 18 |
| | | | | | | | |
Embedded derivatives in commodity contracts | | Assets | | ERCOT Pricing (per MegaWatt Hour) | | $24.19 - $26.05 | | Oct. 17 - Dec. 17 |
| | Liabilities | | Forward propane prices (per Gal)(1)
| | $0.61 - $0.91 | | Oct. 17 - Dec. 22 |
| | | | Forward isobutane prices (per Gal)(1)
| | $0.75 - $1.06 | | Oct. 17 - Dec. 22 |
| | | | Forward normal butane prices (per Gal)(1)
| | $0.69 - $1.03 | | Oct. 17 - Dec. 22 |
| | | | Forward natural gasoline prices (per Gal)(1)
| | $1.15 - $1.22 | | Oct. 17 - Dec. 22 |
| | | | Forward natural gas prices (per MMBtu)(2)
| | $2.30 - $3.11 | | Oct. 17 - Dec. 22 |
| | | | Probability of renewal(3)
| | 50.0% | | |
| | | | Probability of renewal for second 5-yr term(3)
| | 75.0% | | |
| |
(1) | NGL prices used in the valuations decrease over time. |
| |
(2) | Natural gas prices used in the valuations decrease over time. |
| |
(3) | The producer counterparty to the embedded derivative has the option to renew the gas purchase agreement and the related keep-whole processing agreement for two successive five-year terms after 2022. The embedded gas purchase agreement cannot be renewed without the renewal of the related keep-whole processing agreement. Due to the significant number of years until the renewal options are exercisable and the high level of uncertainty regarding the counterparty’s future |
business strategy,current term of the future commodity price environment,embedded derivative and (2) the future competitive environment for midstream services in the Southern Appalachian region, management determined that a 50 percent probability of renewal of 95 percent for the first five-year term and 7583.5 percent for the second five-year term are appropriate assumptions. Included in this assumption is a further extension of management’s estimates of future frac spreads through 2032.
Fair Value Sensitivity Related to Unobservable Inputs
Commodity contracts (assetsthe gas purchase commitment and liabilities) – For the Partnership’s commodity contracts, increases in forward NGL prices result in a decreaserelated keep-whole processing agreement. Increases or decreases in the fair value of the derivative assets and an increase in the fair value of the derivative liabilities. The forward prices for the individual NGL products generally increase or decrease in a positive correlation with one another.
Embedded derivatives in commodity contracts – The Partnership has two embedded derivatives in commodity contracts, as follows:
A single embedded derivative liability comprised of both the purchase of natural gas at prices impacted by the frac spread and the probability of contract renewal (the “Natural Gas Embedded Derivative”), as discussed further in Note 13. Increases (decreases) in the fracfractionation spread result in an increase (decrease)or decrease in the fair value of the embedded derivative liability.liability, respectively. An increase in the probability of renewal would result in an increase in the fair value of the related embedded derivative liability.
An embedded derivative related to utilities costs discussed further in Note 13. Increases in the forward Electric Reliability Council of Texas (“ERCOT”) prices result in a decrease in the fair value of Beyond the embedded derivative liability.
Level 3 Valuation Process
The Partnership’s Risk Management Department (the “Risk Department”) is responsible for the valuation of the Partnership’s commodity derivative contracts and embedded derivatives indiscussed above, we had no outstanding commodity contracts except for the Natural Gas Embedded Derivative. The Risk Department reports to the Chief Financial Officer and is responsible for the oversightas of the Partnership’s commodity risk management program. The members of the Risk Department have the requisite experience, knowledge and day-to-day involvement in the energy commodity markets to ensure appropriate valuations and understand the changes in the valuations from period to period. The valuations of the Level 3 commodity derivative contracts are performed by a third-party pricing service and are reviewed and validated on a quarterly basis by the Risk Department by comparing the pricing and option volatilities to actual market data and/March 31, 2020 or data provided by at least one other independent third-party pricing service.December 31, 2019.
Management is responsible for the valuation of the Natural Gas Embedded Derivative discussed in Note 13. Included in the valuation of the Natural Gas Embedded Derivative are assumptions about the forward price curves for NGLs and natural gas for periods in which price curves are not available from third-party pricing services due to insufficient market data. The Risk Department must develop forward price curves for NGLs and natural gas through the initial contract term (October 2017 through December 2022) for management’s use in determining the fair value of the Natural Gas Embedded Derivative. In developing the pricing curves for these periods, the Risk Department maximizes its use of the latest known market data and trends as well as its understanding of the historical relationships between forward NGL and natural gas prices and the forward market data that is available for the required period, such as crude oil pricing and natural gas pricing from other markets. However, there is very limited actual market data available to validate the Risk Department’s estimated price curves. Management also assesses the probability of the producer customer’s renewal of the contracts, which includes consideration of:
The estimated favorability of the contracts to the producer customer as compared to other options that would be available to them at the time and in the relative geographic area of their producing assets;
Extrapolated pricing curves, using a weighted average probability method that is based on historical frac spreads, which impact the calculation of favorability; and
The producer customer’s potential business strategy decision points that may exist at the time the counterparty would elect whether to renew the contracts.
Changes in Level 3 Fair Value Measurements
The tables below includefollowing table is a rollforwardreconciliation of the balance sheet amountsnet beginning and ending balances recorded for the three and nine months ended September 30, 2017 and 2016, respectively (including the change in fair value), fornet assets and liabilities classified by the Partnership withinas Level 3 ofin the valuationfair value hierarchy.
|
| | | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2020 | | Three Months Ended March 31, 2019 |
| (In millions) | Commodity Derivative Contracts (net) | | Embedded Derivatives in Commodity Contracts (net) | | Commodity Derivative Contracts (net) | | Embedded Derivatives in Commodity Contracts (net) |
| Fair value at beginning of period | $ | — |
| | $ | (60 | ) | | $ | — |
| | $ | (61 | ) |
Total gains/(losses) (realized and unrealized) included in earnings(1) | — |
| | 14 |
| | — |
| | (6 | ) |
| Settlements | — |
| | 1 |
| | — |
| | 2 |
|
| Fair value at end of period | — |
| | (45 | ) | | — |
| | (65 | ) |
| The amount of total gains/(losses) for the period included in earnings attributable to the change in unrealized gains/(losses) relating to liabilities still held at end of period | $ | — |
| | $ | 13 |
| | $ | — |
| | $ | (5 | ) |
|
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2017 | | Nine Months Ended September 30, 2017 |
| (In millions) | Commodity Derivative Contracts (net) | | Embedded Derivatives in Commodity Contracts (net) | | Commodity Derivative Contracts (net) | | Embedded Derivatives in Commodity Contracts (net) |
| Fair value at beginning of period | $ | 2 |
| | $ | (43 | ) | | $ | (6 | ) | | $ | (54 | ) |
Total losses (realized and unrealized) included in earnings(1) | (10 | ) | | (12 | ) | | (3 | ) | | (4 | ) |
| Settlements | 3 |
| | 3 |
| | 4 |
| | 6 |
|
| Fair value at end of period | $ | (5 | ) | | $ | (52 | ) | | $ | (5 | ) | | $ | (52 | ) |
| The amount of total losses for the period included in earnings attributable to the change in unrealized losses relating to liabilities still held at end of period | $ | (7 | ) | | $ | (10 | ) | | $ | (4 | ) | | $ | (4 | ) |
|
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2016 | | Nine Months Ended September 30, 2016 |
| (In millions) | Commodity Derivative Contracts (net) | | Embedded Derivatives in Commodity Contracts (net) | | Commodity Derivative Contracts (net) | | Embedded Derivatives in Commodity Contracts (net) |
| Fair value at beginning of period | $ | (4 | ) | | $ | (40 | ) | | $ | 7 |
| | $ | (32 | ) |
Total gains (losses) (realized and unrealized) included in earnings(1) | 2 |
| | (6 | ) | | (5 | ) | | (17 | ) |
| Settlements | (1 | ) | | 2 |
| | (6 | ) | | 5 |
|
Netting adjustment(2) | — |
| | — |
| | 1 |
| | — |
|
| Fair value at end of period | $ | (3 | ) | | $ | (44 | ) | | $ | (3 | ) | | $ | (44 | ) |
| The amount of total losses for the period included in earnings attributable to the change in unrealized losses relating to liabilities still held at end of period | $ | — |
| | $ | (4 | ) | | $ | (4 | ) | | $ | (15 | ) |
| |
| (1) | Gains and losses on Commodity Derivative Contractscommodity derivative contracts classified as Level 3 are recorded in Product sales in“Product sales”on the accompanying Consolidated Statements of Income. Gains and losses on Embedded Derivativesderivatives embedded in Commodity Contractscommodity contracts are recorded in Purchased“Purchased product costscosts” and Cost“Cost of revenues.revenues” on the Consolidated Statements of Income. |
| |
(2) | Certain derivative positions are subject to master netting agreements; therefore, the Partnership has elected to offset derivative assets and liabilities where legally permissible. The Partnership may hold positions with certain counterparties, which for GAAP purposes are classified within different levels of the fair value hierarchy and may be legally permissible to offset. This adjustment represents the total impact of offsetting Level 2 positions with Level 3 positions as of September 30, 2016. |
Fair Values – Reported
The Partnership’sMPLX’s primary financial instruments are cash and cash equivalents, receivables, receivables from related parties, lease receivables from related parties, accounts payable, payables to related parties and long-term debt. The Partnership’sMPLX’s fair value assessment incorporates a variety of considerations, including (1) the short-term duration of the instruments, (2) MPC’s investment-grade credit rating and (3) the historical incurrence of and expected future insignificance of bad debt expense, which includes an evaluation of counterparty credit risk. The PartnershipMPLX believes the carrying values of its current assets and liabilities approximate fair value. The recorded value of the amounts outstanding under the bank revolving credit facility, if any, approximates fair value due to the variable interest rate that approximates current market rates. Derivative instruments are recorded at fair value, based on available market information (see Note 13)14).
The fair value of the Partnership’sMPLX’s long-term debt is estimated based on recent market non-binding indicative quotes. The fair value of the SMR liability is estimated using a discounted cash flow approach based on the contractual cash flows and the Partnership’sMPLX’s unsecured borrowing rate. The long-term debt and SMR liability fair values are considered Level 3 measurements. The following table summarizes the fair value and carrying value of the long-term debt, excluding capitalfinance leases, and SMR liability:
|
| | | | | | | | | | | | | | | |
| | March 31, 2020 | | December 31, 2019 |
| (In millions) | Fair Value | | Carrying Value | | Fair Value | | Carrying Value |
| Long-term debt | $ | 18,352 |
| | $ | 20,560 |
| | $ | 21,054 |
| | $ | 19,800 |
|
| SMR liability | $ | 77 |
| | $ | 79 |
| | $ | 90 |
| | $ | 80 |
|
|
| | | | | | | | | | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| (In millions) | Fair Value | | Carrying Value | | Fair Value | | Carrying Value |
| Long-term debt | $ | 7,619 |
| | $ | 6,869 |
| | $ | 4,953 |
| | $ | 4,422 |
|
| SMR liability | 106 |
| | 92 |
| | 108 |
| | 96 |
|
14. Derivative Financial Instruments
Commodity Derivatives
NGL and natural gas prices are volatile and are impacted by changes in fundamental supply and demand, as well as market uncertainty, availability of NGL transportation and fractionation capacity and a variety of additional factors that are beyond the Partnership’s control. A portion of the Partnership’s profitability is directly affected by prevailing commodity prices primarily as a result of processing or conditioning at its own or third-party processing plants, purchasing and selling or gathering and transporting volumes of natural gas at index-related prices and the cost of third-party transportation and fractionation services. To the extent that commodity prices influence the level of natural gas drilling by the Partnership’s producer customers, such prices also affect profitability. To protect itself financially against adverse price movements and to maintain more stable and predictable cash flows so that the Partnership can meet its cash distribution objectives, debt service and capital plans, the Partnership executes a strategy governed by its risk management policy. The Partnership has a committee comprised of senior management that oversees risk management activities, continually monitors the risk management program and adjusts its strategy as conditions warrant. The Partnership enters into certain derivative contracts to reduce the risks associated with unfavorable changes in the prices of natural gas and NGLs. Derivative contracts utilized are swaps traded on the OTC market and fixed price forward contracts. The risk management policy does not allow the Partnership to take speculative positions with its derivative contracts.
To mitigate its cash flow exposure to fluctuations in the price of NGLs, the Partnership has entered into derivative financial instruments relating to the future price of NGLs and crude oil. The Partnership currently manages the majority of its NGL price risk using direct product NGL derivative contracts. The Partnership enters into NGL derivative contracts when adequate market liquidity exists and future prices are satisfactory. A portion of the Partnership’s NGL price exposure is managed by using crude oil contracts. In periods where NGL prices and crude oil prices are not consistent with the historical relationship, the crude oil contracts create increased risk and additional gains or losses. The Partnership may settle its crude oil contracts prior to the contractual settlement date in order to take advantage of favorable terms and reduce the future exposure resulting from the less effective crude oil contracts. Based on its current volume forecasts, the majority of its derivative positions used to manage the future commodity price exposure are expected to be direct product NGL derivative contracts.
To mitigate its cash flow exposure to fluctuations in the price of natural gas, the Partnership primarily utilizes derivative financial instruments relating to the future price of natural gas and takes into account the partial offset of its long and short gas positions resulting from normal operating activities.
As a result of its current derivative positions, the Partnership has mitigated a portion of its expected commodity price risk through the fourth quarter of 2018. The Partnership would be exposed to additional commodity risk in certain situations such as if producers under-deliver or over-deliver product or when processing facilities are operated in different recovery modes. In the event the Partnership has derivative positions in excess of the product delivered or expected to be delivered, the excess derivative positions may be terminated.
Management conducts a standard credit review on counterparties to derivative contracts and has provided the counterparties with a guaranty as credit support for its obligations. A separate agreement with certain counterparties allows MarkWest Liberty Midstream to enter into derivative positions without posting cash collateral. The Partnership uses standardized agreements that allow for offset of certain positive and negative exposures (“master netting arrangements”) in the event of default or other terminating events, including bankruptcy.
The Partnership records derivative contracts at fair value in the Consolidated Balance Sheets and has not elected hedge accounting or the normal purchases and normal sales designation (except for electricity and certain other qualifying contracts,
for which the normal purchases and normal sales designation has been elected). The Partnership’s accounting may cause volatility in the Consolidated Statements of Income as the Partnership recognizes all unrealized gains and losses from the changes in fair value of derivatives in current earnings. The Partnership makes a distinction between realized or unrealized gains and losses on derivatives. During the period when a derivative contract is outstanding, changes in the fair value of the derivative are recorded as an unrealized gain or loss. When a derivative contract matures or is settled, the previously recorded unrealized gain or loss is reversed and the realized gain or loss of the contract is recorded.
Volume of Commodity Derivative Activity
As of September 30, 2017, the PartnershipMarch 31, 2020, MPLX had the followingno outstanding commodity contracts that were executed to managebeyond the cash flow risk associated with future sales of NGLs and purchases of natural gas:embedded derivative discussed below.
|
| | | | | |
Derivative contracts not designated as hedging instruments | | Financial Position | | Notional Quantity (net) |
Crude Oil (bbl) | | Short | | 18,400 |
|
Natural Gas (MMBtu) | | Long | | 1,096,539 |
|
NGLs (gal) | | Short | | 33,387,904 |
|
Embedded Derivatives in Commodity Contracts
The PartnershipDerivative - MPLX has a commodity contractnatural gas purchase commitment embedded in a keep-whole processing agreement with a producer customer in the Southern Appalachian region that creates a floor onexpiring in December 2022. The customer has the frac spreadunilateral option to extend the agreement for gas purchases of 9,000 Dth/d. The commodity contract is a component of a broader regional arrangement that also includes a keep-whole processing agreement.2 consecutive five-year terms through December 2032. For accounting purposes, these contractsthe natural gas purchase commitment and the term extending options have been aggregated into a single contract and are evaluated together. In February 2011, the Partnership executed agreements with the producer customer to extend the commodity contract and the related processing agreement from March 31, 2015 to December 31, 2022, with the producer customer’s option to extend the agreement for two successive five-year terms through December 31, 2032. The purchase of gas at prices based on the frac spread and the option to extend the agreements have been identified as a singlecompound embedded derivative, which is recorded at fair value.derivative. The probability of renewalthe customer exercising its options is determined based on extrapolated pricing curves, a review of the overall expected favorability of the contracts based on such pricing curves and assumptions about the counterparty’scustomer’s potential business strategy decision points that may exist at the time the counterpartythey would elect whether to renew the contract. The changes in fair value of this compound embedded derivative are based on the difference between the contractual and index pricing, the probability of the producer customer exercising its option to extend and the estimated favorability of these contracts compared to current market conditions. The changes in fair value are recorded in earnings through Purchased“Purchased product costs incosts” on the Consolidated Statements of Income. As of September 30, 2017March 31, 2020 and December 31, 2016,2019, the estimated fair value of this contract was a liability of $52$45 million and $54$60 million, respectively.
The PartnershipCertain derivative positions are subject to master netting agreements, therefore, MPLX has a commodity contractelected to offset derivative assets and liabilities that gives it an optionare legally permissible to fix a componentbe offset. As of the utilities cost to an index priceMarch 31, 2020 and December 31, 2019, there were no derivative assets or liabilities that were offset on electricity at a plant location in the Southwest through the fourth quarter of 2018. The contract’s pricing is currently fixed through the fourth quarter of 2017 with the ability to fix the pricing for its remaining year. Changes in the fair value as of the derivative component of this contract were recognized as Cost of Revenues in the Consolidated Statements of Income. As of September 30, 2017, the estimated fair value of this contract was a liability of less than $1 million.
Financial Statement Impact of Derivative Contracts
There were no material changes to the Partnership’s policy regarding the accounting for these instruments as previously disclosed in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2016, as updated by our Current Report on Form 8-K filed on May 1, 2017.Balance Sheets. The impact of the Partnership’sMPLX’s derivative instruments on its Consolidated Balance Sheets is summarized below:
|
| | | | | | | | | | | | | | | | |
| (In millions) | | September 30, 2017 | | December 31, 2016 |
| Derivative contracts not designated as hedging instruments and their balance sheet location | | Asset | | Liability | | Asset | | Liability |
Commodity contracts(1) | | | | | | | | |
| Other current assets / other current liabilities | | $ | — |
| | $ | (15 | ) | | $ | — |
| | $ | (13 | ) |
| Other noncurrent assets / deferred credits and other liabilities | | — |
| | (42 | ) | | — |
| | (47 | ) |
| Total | | $ | — |
| | $ | (57 | ) | | $ | — |
| | $ | (60 | ) |
|
| | | | | | | | | | | | | | | |
| (In millions) | March 31, 2020 | | December 31, 2019 |
| Derivative contracts not designated as hedging instruments and their balance sheet location | Asset | | Liability | | Asset | | Liability |
Commodity contracts(1) | | | | | | | |
| Other current assets / Other current liabilities | $ | — |
| | $ | (2 | ) | | $ | — |
| | $ | (5 | ) |
| Other noncurrent assets / Deferred credits and other liabilities | — |
| | (43 | ) | | — |
| | (55 | ) |
| Total | $ | — |
| | $ | (45 | ) | | $ | — |
| | $ | (60 | ) |
| |
| (1) | Includes embedded derivatives in commodity contracts as discussed above. |
CertainFor further information regarding the fair value measurement of derivative positions are subject to master netting agreements, thereforeinstruments, including the Partnership has elected to offset derivative assets and liabilities that are legally permissible to be offset. The net amounts in the table below equal the balances presented in the Consolidated Balance Sheets:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2017 |
| | Assets | | Liabilities |
| (In millions) | Gross Amount | | Gross Amounts Offset in the Consolidated Balance Sheets | | Net Amount of Assets in the Consolidated Balance Sheets | | Gross Amount | | Gross Amounts Offset in the Consolidated Balance Sheets | | Net Amount of Liabilities in the Consolidated Balance Sheets |
| Current | | | | | | | | | | | |
| Commodity contracts | $ | — |
| | $ | — |
| | $ | — |
| | $ | (5 | ) | | $ | — |
| | $ | (5 | ) |
| Embedded derivatives in commodity contracts | — |
| | — |
| | — |
| | (10 | ) | | — |
| | (10 | ) |
| Total current derivative instruments | — |
| | — |
| | — |
| | (15 | ) | | — |
| | (15 | ) |
| Non-current | | | | | | | | | | | |
| Commodity contracts | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Embedded derivatives in commodity contracts | — |
| | — |
| | — |
| | (42 | ) | | — |
| | (42 | ) |
| Total non-current derivative instruments | — |
| | — |
| | — |
| | (42 | ) | | — |
| | (42 | ) |
| Total derivative instruments | $ | — |
| | $ | — |
| | $ | — |
| | $ | (57 | ) | | $ | — |
| | $ | (57 | ) |
In the table above, the Partnership does not offset a counterparty’s current derivative contracts with the counterparty’s non-current derivative contracts, although the Partnership’seffect of master netting arrangements would allow currentor collateral, see Note 13. There were no material changes to MPLX’s policy regarding the accounting for Level 2 and non-current positions to be offsetLevel 3 instruments as previously disclosed in the event of default. Additionally, in the event of default, the Partnership’s master netting arrangements would allowMPLX’s Annual Report on Form 10-K for the offsettingyear ended December 31, 2019. MPLX does not designate any of all transactions executed under the master netting arrangement. These types of transactions may include non-derivative instruments, derivatives qualifyingits commodity derivative positions as hedges for scope exceptions, receivables and payables arising from settled positions and other forms of non-cash collateral (such as letters of credit).accounting purposes.
The impact of the Partnership’sMPLX’s derivative contracts not designated as hedging instruments and the location of gain or (loss)gains and losses recognized inon the Consolidated Statements of Income is summarized below: |
| | | | | | | |
| | Three Months Ended March 31, |
| (In millions) | 2020 | | 2019 |
| Product sales | | | |
| Realized (loss)/gain | $ | — |
| | $ | — |
|
| Unrealized (loss)/gain | — |
| | — |
|
| Product sales derivative (loss)/gain | — |
| | — |
|
| Purchased product costs | | | |
| Realized (loss)/gain | (1 | ) | | (2 | ) |
| Unrealized gain/(loss) | 15 |
| | (4 | ) |
| Purchased product costs derivative gain/(loss) | 14 |
| | (6 | ) |
| Cost of revenues | | | |
| Realized (loss)/gain | — |
| | — |
|
| Unrealized (loss)/gain | — |
| | — |
|
| Cost of revenues derivative (loss)/gain | — |
| | — |
|
| Total derivative gain/(loss) | $ | 14 |
| | $ | (6 | ) |
|
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (In millions) | 2017 | | 2016 | | 2017 | | 2016 |
| Product sales | | | | | | | |
| Realized (loss) gain | $ | (2 | ) | | $ | — |
| | $ | (3 | ) | | $ | 6 |
|
| Unrealized (loss) gain | (8 | ) | | 2 |
| | 1 |
| | (12 | ) |
| Total derivative (loss) gain related to product sales | (10 | ) | | 2 |
| | (2 | ) | | (6 | ) |
| Purchased product costs | | | | | | | |
Realized loss(1) | (2 | ) | | (1 | ) | | (6 | ) | | (4 | ) |
| Unrealized (loss) gain | (9 | ) | | (3 | ) | | 1 |
| | (12 | ) |
| Total derivative loss related to purchased product costs | (11 | ) | | (4 | ) | | (5 | ) | | (16 | ) |
| Cost of revenues | | | | | | | |
Realized loss(1) | — |
| | — |
| | — |
| | (2 | ) |
| Unrealized (loss) gain | — |
| | (1 | ) | | — |
| | 1 |
|
| Total derivative loss related to cost of revenues | — |
| | (1 | ) | | — |
| | (1 | ) |
| Total derivative losses | $ | (21 | ) | | $ | (3 | ) | | $ | (7 | ) | | $ | (23 | ) |
| |
(1) | Certain prior period amounts have been updated to conform to current period presentation. |
14.
15. Debt
The Partnership’sMPLX’s outstanding borrowings consistedconsist of the following: |
| | | | | | | |
| (In millions) | March 31, 2020 | | December 31, 2019 |
| MPLX LP: | | | |
| Bank revolving credit facility | $ | 750 |
| | $ | — |
|
| Term loan facility | 1,000 |
| | 1,000 |
|
| Floating rate senior notes | 2,000 |
| | 2,000 |
|
| Fixed rate senior notes | 16,887 |
| | 16,887 |
|
| Consolidated subsidiaries: | | | |
| MarkWest | 23 |
| | 23 |
|
| ANDX | 190 |
| | 190 |
|
Financing lease obligations(1) | 14 |
| | 19 |
|
| Total | 20,864 |
| | 20,119 |
|
| Unamortized debt issuance costs | (103 | ) | | (106 | ) |
| Unamortized discount/premium | (290 | ) | | (300 | ) |
| Amounts due within one year | (4 | ) | | (9 | ) |
| Total long-term debt due after one year | $ | 20,467 |
| | $ | 19,704 |
|
|
| | | | | | | |
| (In millions) | September 30, 2017 | | December 31, 2016 |
| MPLX LP: | | | |
| Bank revolving credit facility due 2022 | $ | 420 |
| | $ | — |
|
| Term loan facility due 2019 | — |
| | 250 |
|
| 5.500% senior notes due February 2023 | 710 |
| | 710 |
|
| 4.500% senior notes due July 2023 | 989 |
| | 989 |
|
| 4.875% senior notes due December 2024 | 1,149 |
| | 1,149 |
|
| 4.000% senior notes due February 2025 | 500 |
| | 500 |
|
| 4.875% senior notes due June 2025 | 1,189 |
| | 1,189 |
|
| 4.125% senior notes due March 2027 | 1,250 |
| | — |
|
| 5.200% senior notes due March 2047 | 1,000 |
| | — |
|
| Consolidated subsidiaries: | | | |
| MarkWest - 4.500% - 5.500% senior notes, due 2023-2025 | 63 |
| | 63 |
|
| MPL - capital lease obligations due 2020 | 7 |
| | 8 |
|
| Total | 7,277 |
| | 4,858 |
|
| Unamortized debt issuance costs | (27 | ) | | (7 | ) |
| Unamortized discount | (401 | ) | | (428 | ) |
| Amounts due within one year | (1 | ) | | (1 | ) |
| Total long-term debt due after one year | $ | 6,848 |
| | $ | 4,422 |
|
Credit AgreementsAgreement
OnEffective July 21, 2017,30, 2019, in connection with the Partnership entered into a syndicated credit agreement to replaceclosing of the Merger, MPLX amended and restated its previously outstanding $2.0 billion five-year bankexisting revolving credit facility with a $2.25 billion five-year bank revolving credit facility that expires in July 2022 (the “MPLX Credit Agreement 2022”Agreement”). The financial covenants to, among other things, increase borrowing capacity to up to $3.5 billion and the interest rate terms contained in the new credit agreement are substantially the same as those contained in the previous bank revolving credit facility.extend its term from July 2022 to July 2024. During the ninethree months ended September 30, 2017, the Partnership had no borrowings under the previous bank revolving credit facility. During the nine months ended September 30, 2017, the PartnershipMarch 31, 2020, MPLX borrowed$420 $1,325 million under the MPLX Credit Agreement, 2022, at an average interest rate of 2.7022.139 percent,and repaid $575 million. At September 30, 2017, the PartnershipMarch 31, 2020, MPLX had $420$750 million in outstanding borrowings and $3less than $1 million in letters of credit outstanding under the new facility,MPLX Credit Agreement, resulting in total availability of $1.827$2.75 billion, or 81.278.6 percent of the borrowing capacity.
The $250 millionTerm Loan Agreement
On September 26, 2019, MPLX entered into a Term Loan Agreement which provides for a committed term loan facility wasfor up to an aggregate of $1 billion. Borrowings under the Term Loan Agreement bear interest, at MPLX’s election, at either (i) the Adjusted LIBO Rate (as defined in the Term Loan Agreement) plus a margin ranging from 75.0 basis points to 100.0 basis points per annum, depending on MPLX’s credit ratings, or (ii) the Alternate Base Rate (as defined in the Term Loan Agreement). Amounts borrowed under the Term Loan Agreement will be due and payable on September 26, 2021. As of March 31, 2020, MPLX had drawn in full$1.0 billion on November 20, 2014. On July 19, 2017, MPLX LP prepaid the entire outstanding principal of thisterm loan facility with cash on hand. The borrowings under this facility between January 1, 2017 and July 19, 2017 were at an average interest rate of 2.4072.273 percent.
Floating Rate Senior Notes
On February 10, 2017, the Partnership completed a public offering of $2.25September 9, 2019, MPLX issued $2.0 billion aggregate principal amount of unsecuredfloating rate senior notes in a public offering, consisting of (i) $1.25 billion aggregate principal amount of 4.125 percent senior notes due in March 2027 and (ii) $1.0 billion aggregate principal amount of 5.200 percent senior notes due in March 2047September 2021 and $1.0 billion aggregate principal amount of notes due September 2022 (collectively, the “New“Floating Rate Senior Notes”). The net proceeds from the NewFloating Rate Senior Notes totaled approximately $2.22 billion,were offered at a price to the public of 100 percent of par. The Floating Rate Senior Notes are callable, in whole or in part, at par plus accrued and unpaid interest at any time on or after deducting underwriting discounts,September 10, 2020. Interest on the Floating Rate Senior Notes is payable quarterly in March, June, September and were used for general partnership purposesDecember, commencing on December 9, 2019. The interest rate applicable to the floating rate senior notes due September 2021 is LIBOR plus 0.9 percent per annum. The interest rate applicable to the floating rate senior notes due September 2022 is LIBOR plus 1.1 percent per annum.
Fixed Rate Senior Notes
MPLX’s senior notes, including those issued by consolidated subsidiaries, consist of various series of senior notes expiring between 2022 and capital expenditures.2058 with interest rates ranging from 3.375 percent to 6.375 percent. Interest on each series of the notes is payable semi-annually in arrears on March 1 and September 1, commencingvarious dates depending on September 1, 2017.the series of the notes.
16. Revenue
Disaggregation of Contents
Revenue
15. Supplemental Cash Flow InformationThe following tables represent a disaggregation of revenue for each reportable segment for the three months ended March 31, 2020 and 2019:
|
| | | | | | | | | | | |
| | Three Months Ended March 31, 2020 |
| (In millions) | L&S | | G&P | | Total |
| Revenues and other income: | | | | | |
| Service revenue | $ | 84 |
| | $ | 528 |
| | $ | 612 |
|
| Service revenue - related parties | 920 |
| | 8 |
| | 928 |
|
| Service revenue - product related | — |
| | 39 |
| | 39 |
|
| Product sales | 15 |
| | 154 |
| | 169 |
|
| Product sales - related parties | 4 |
| | 29 |
| | 33 |
|
| Total revenues from contracts with customers | $ | 1,023 |
| | $ | 758 |
| | 1,781 |
|
Non-ASC 606 (loss)/revenue(1) | | | | | (789 | ) |
| Total revenues and other income | | | | | $ | 992 |
|
|
| | | | | | | |
| | Nine Months Ended September 30, |
| (In millions) | 2017 | | 2016 |
| Net cash provided by operating activities included: | | | |
| Interest paid (net of amounts capitalized) | $ | 207 |
| | $ | 158 |
|
| Non-cash investing and financing activities: | | | |
| Net transfers of property, plant and equipment from materials and supplies inventories | $ | 6 |
| | $ | (4 | ) |
Contribution of fixed assets to joint venture(1) | 337 |
| | — |
|
|
| | | | | | | | | | | |
| | Three Months Ended March 31, 2019(2) |
| (In millions) | L&S | | G&P | | Total |
| Revenues and other income: | | | | | |
| Service revenue | $ | 86 |
| | $ | 528 |
| | $ | 614 |
|
| Service revenue - related parties | 803 |
| | — |
| | 803 |
|
| Service revenue - product related | — |
| | 34 |
| | 34 |
|
| Product sales | 11 |
| | 205 |
| | 216 |
|
| Product sales - related parties | 4 |
| | 37 |
| | 41 |
|
| Total revenues from contracts with customers | $ | 904 |
| | $ | 804 |
| | 1,708 |
|
Non-ASC 606 revenue(1) | | | | | 527 |
|
| Total revenues and other income | | | | | $ | 2,235 |
|
| |
| (1) | ContributionNon-ASC 606 Revenue includes rental income, income/(loss) from equity method investments, derivative gains and losses, mark-to-market adjustments, and other income. |
| |
| (2) | Financial information for the first quarter of assets to Sherwood Midstream2019 has been retrospectively adjusted for the acquisition of ANDX. See Notes 1 and Sherwood Midstream Holdings. See Note 4.3. |
Contract Balances
Contract assets typically relate to aid in construction agreements where the revenue recognized and MPLX’s rights to consideration for work completed exceeds the amount billed to the customer or for deficiency payments associated with minimum volume commitments which have not been billed to customers. Contract assets are generally classified as current and included in “Other current assets” on the Consolidated Balance Sheets.
Contract liabilities, which we refer to as “Deferred revenue” and “Long-term deferred revenue,” typically relate to advance payments for aid in construction agreements and deferred customer credits associated with makeup rights and minimum volume commitments. Related to minimum volume commitments, breakage is estimated and recognized into service revenue in instances where it is probable the customer will not use the credit in future periods. We classify contract liabilities as current or long-term based on the timing of when we expect to recognize revenue.
“Receivables, net” primarily relate to our commodity sales. Portions of the “Receivables, net” balance are attributed to the sale of commodity product controlled by MPLX prior to sale while a significant portion of the balance relates to the sale of commodity product on behalf of our producer customers. Both types of transactions are commingled and excluded from the table below. MPLX remits the net sales price back to our producer customers upon completion of the sale. Each period end,
certain amounts within accounts payable relate to our payments to producer customers. Such amounts are not deemed material at period end as a result of when we settle with each producer.
The tables below reflect the changes in our contract balances for the three-month periods ended March 31, 2020 and 2019:
|
| | | | | | | | | | | | | | | |
| (In millions) | Balance at December 31, 2019(1) | | Additions/ (Deletions) | | Revenue Recognized(2) | | Balance at March 31, 2020 |
| Contract assets | $ | 39 |
| | $ | (27 | ) | | $ | — |
| | $ | 12 |
|
| Deferred revenue | 23 |
| | 5 |
| | (3 | ) | | 25 |
|
| Deferred revenue - related parties | 53 |
| | 12 |
| | (16 | ) | | 49 |
|
| Long-term deferred revenue | 90 |
| | 6 |
| | — |
| | 96 |
|
| Long-term deferred revenue - related parties | $ | 55 |
| | $ | 1 |
| | $ | — |
| | $ | 56 |
|
|
| | | | | | | | | | | | | | | |
| (In millions) | Balance at December 31, 2018(1) | | Additions/ (Deletions)(3) | | Revenue Recognized(2)(3) | | Balance at March 31, 2019(3) |
| Contract assets | $ | 36 |
| | $ | (17 | ) | | $ | — |
| | $ | 19 |
|
| Deferred revenue | 13 |
| | 1 |
| | (1 | ) | | 13 |
|
| Deferred revenue - related parties | 65 |
| | 9 |
| | (16 | ) | | 58 |
|
| Long-term deferred revenue | 56 |
| | 1 |
| | — |
| | 57 |
|
| Long-term deferred revenue - related parties | $ | 52 |
| | $ | — |
| | $ | — |
| | $ | 52 |
|
| |
| (1) | Balance represents ASC 606 portion of each respective line item. |
| |
| (2) | NaN significant revenue was recognized related to past performance obligations in the current periods. |
| |
| (3) | Financial information for the first quarter of 2019 has been retrospectively adjusted for the acquisition of ANDX. See Notes 1 and 3. |
Remaining Performance Obligations
The table below includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period.
As of March 31, 2020, the amounts allocated to contract assets and contract liabilities on the Consolidated Balance Sheets are $224 million and are reflected in the amounts below. This will be recognized as revenue as the obligations are satisfied, which is expected to occur over the next 31 years. Further, MPLX does not disclose variable consideration due to volume variability in the table below.
|
| | | |
| (In millions) | |
| 2020 | $ | 1,344 |
|
| 2021 | 1,747 |
|
| 2022 | 1,717 |
|
| 2023 | 1,638 |
|
| 2024 and thereafter | 5,662 |
|
Total revenue on remaining performance obligations(1),(2),(3) | $ | 12,108 |
|
| |
| (1) | All fixed consideration from contracts with customers is included in the amounts presented above. Variable consideration that is constrained or not required to be estimated as it reflects our efforts to perform is excluded. |
| |
| (2) | Arrangements deemed implicit leases are included in “Rental income” and are excluded from this table. |
| |
| (3) | Only minimum volume commitments that are deemed fixed are included in the table above. MPLX has various minimum volume commitments in processing arrangements that vary based on the actual Btu content of the gas received. These amounts are deemed variable consideration and are excluded from the table above. |
We do not disclose information on the future performance obligations for any contract with an original expected duration of
one year or less.
17. Supplemental Cash Flow Information
|
| | | | | | | |
| | Three Months Ended March 31, |
| (In millions) | 2020 | | 2019 |
| Net cash provided by operating activities included: | | | |
| Interest paid (net of amounts capitalized) | $ | 210 |
| | $ | 173 |
|
| Non-cash investing and financing activities: | | | |
| Net transfers of property, plant and equipment from (to) materials and supplies inventories | (1 | ) | | 1 |
|
The Consolidated Statements of Cash Flows exclude changes to the Consolidated Balance Sheets that did not affect cash. The following is the change of additions to property, plant and equipment related to capital accruals:
|
| | | | | | | |
| | Three Months Ended March 31, |
| (In millions) | 2020 | | 2019 |
| (Decrease)/increase in capital accruals | $ | (61 | ) | | $ | (71 | ) |
|
| | | | | | | |
| | Nine Months Ended September 30, |
| (In millions) | 2017 | | 2016 |
| Increase in capital accruals | $ | 55 |
| | $ | — |
|
16.18. Accumulated Other Comprehensive Loss
MPLX LP records an accumulated other comprehensive loss on the Consolidated Balance Sheets relating to pension and other post-retirement benefits provided by LOOP LLC (“LOOP”) and Explorer Pipeline Company (“Explorer”) to their employees. MPLX LP is not a sponsor of these benefit plans.
The following table shows the changes in “Accumulated other comprehensive loss” by component during the period December 31, 2019 through March 31, 2020.
|
| | | | | | | | | | | |
| (In millions) | Pension
Benefits | | Other
Post-Retirement Benefits | | Total |
Balance at December 31, 2019(1) | $ | (14 | ) | | $ | (1 | ) | | $ | (15 | ) |
Other comprehensive loss - remeasurements(2) | — |
| | (1 | ) | | (1 | ) |
Balance at March 31, 2020(1) | (14 | ) | | (2 | ) | | (16 | ) |
The following table shows the changes in “Accumulated other comprehensive loss” by component during the period December 31, 2018 through March 31, 2019.
|
| | | | | | | | | | | |
| (In millions) | Pension
Benefits | | Other
Post-Retirement Benefits | | Total |
Balance at December 31, 2018(1) | $ | (14 | ) | | $ | (2 | ) | | $ | (16 | ) |
Other comprehensive income - remeasurements(2) | — |
| | 1 |
| | 1 |
|
Balance at March 31, 2019(1) | $ | (14 | ) | | $ | (1 | ) | | $ | (15 | ) |
| |
| (1) | These components of “Accumulated other comprehensive loss” are included in the computation of net periodic benefit cost by LOOP and Explorer and are therefore included on the Consolidated Statements of Income under the caption “Income/(loss) from equity method investments.” |
| |
| (2) | Components of other comprehensive income/loss - remeasurements relate to actuarial gains and losses as well as amortization of prior service costs. MPLX records an adjustment to “Comprehensive income” in accordance with its ownership interest in LOOP and Explorer. |
19. Equity-Based Compensation
Phantom Units–
The following is a summary of phantom unit award activity of MPLX LP common units for the ninethree months ended September 30, 2017March 31, 2020:
|
| | | | | | |
| | Number
of Units | | Weighted
Average
Fair Value |
| Outstanding at December 31, 2019 | 1,109,568 |
| | $ | 35.97 |
|
| Granted | 168,212 |
| | 20.49 |
|
| Settled | (174,888 | ) | | 36.29 |
|
| Forfeited | (335 | ) | | 33.55 |
|
| Outstanding at March 31, 2020 | 1,102,557 |
| | $ | 33.56 |
|
|
| | | | | | |
| | Number
of Units | | Weighted
Average
Fair Value |
| Outstanding at December 31, 2016 | 1,173,411 |
| | $ | 33.09 |
|
| Granted | 653,721 |
| | 36.36 |
|
| Settled | (288,584 | ) | | 33.50 |
|
| Forfeited | (113,107 | ) | | 34.59 |
|
| Outstanding at September 30, 2017 | 1,425,441 |
| | 34.39 |
|
Performance Units – The PartnershipMPLX grants performance units under the MPLX LP 2012 Incentive Compensation Plan to certain officers of the general partner and certain eligibleMPC officers who make significant contributions to its business. These performance units pay out 75 percent in cash and 25 percent in MPLX LP common units. Theunits and often contain both market and performance units paying out in unitsconditions based on various metrics. Market conditions are accounted for as equity awards. valued using a Monte Carlo valuation while performance conditions are reevaluated periodically and valued at the compensation cost associated with the performance outcome deemed most probable.
The performance units granted in 20172020 are hybrid awards having a three-year performance period of January 1, 20172020 through December 31, 2019.2022. The payout of the award is dependent on two independent conditions, each constituting 50 percent of the overall target units granted. The awards have a performance condition based on MPLX LP’s DCF during the last twelve months of the performance period,distributable cash flow, and a market condition based on MPLX LP’s total unitholder return over the entire three-year performance period.return. The market condition was valued using a Monte Carlo valuation, with the result being combined with the expected payout of the performance condition as of the grant date, resulting in a grant date fair value of $0.90$0.80 per unit for the 20172020 equity-classified performance units. Grant date fair value of the performance condition is based on potential payouts per unit of up to $2.00 per unit. Compensation cost associated with the performance condition is based on the grant date fair value of the payout deemed most probable to occur and is adjusted as the expectation for payout changes.
During the first quarter of 2018, a performance award was granted; however, due to the nature of the award terms, the grant date for this award was not established until the first quarter of 2020 and we began recognizing units and expense related to this award at that time. The performance units granted in 2018 are hybrid awards having a three-year performance period of January 1, 2018 through December 31, 2020. The payout of the award is dependent on two independent conditions, each constituting 50 percent of the overall target units granted. The awards have a performance condition based on an average of MPLX LP’s distributable cash flow and a market condition based on MPLX LP’s total unitholder return. The market condition was valued using a Monte Carlo valuation, resulting in a grant date fair value of $0.45 per unit for the 2018 equity-classified performance units. Grant date fair value of the performance condition is based on potential payouts per unit of up to $2.00 per unit. Compensation cost associated with the performance condition is based on the grant date fair value of the payout deemed most probable to occur and is adjusted as the expectation for payout changes.
The following is a summary of the equity-classifiedactivity for performance unit award activityawards to be settled in MPLX LP common units for the ninethree months ended September 30, 2017March 31, 2020:
|
| | |
| | Number of
Units |
Outstanding at December 31, 20162019 | 1,799,2492,157,347 |
|
| Granted | 1,407,0622,147,211 |
|
| Settled | (464,5001,169,354 | ) |
| Forfeited | (35,21718,750 | ) |
Outstanding at September 30, 2017March 31, 2020 | 2,706,5943,116,454 |
|
17.20. Leases
For the three months ended March 31, 2020, reimbursements for projects at certain MPLX refining logistics locations were agreed to between MPLX and MPC. These reimbursements relate to the storage services agreements between MPLX and MPC at these locations and required the embedded leases within these agreements to be reassessed under the leasing standard. As a result of the reassessment, one of our leases was reclassified from an operating lease to a sales-type lease. As a result, the underlying assets previously shown on the Consolidated Balance Sheets associated with the sales-type lease were derecognized and the net investment in the lease (i.e., the sum of the present value of the future lease payments and the unguaranteed residual value of the assets) was recorded as a lease receivable. See Note 5 for the location of lease receivables and unguaranteed residual assets on the Consolidated Balance Sheets. The difference between the net book value of the underlying assets and the net investment in the lease has been recorded as a Contribution from MPC in the Consolidated Statements of Equity given that the transaction related to refining logistics was a common control transaction. During the three months ended March 31, 2020, MPLX derecognized approximately $171 million of property, plant and equipment, recorded a lease receivable of approximately $370 million, recorded an unguaranteed residual asset of approximately $10 million and a Contribution from MPC of $209 million.
Lease revenues included on the Consolidated Statements of Income were as follows:
|
| | | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2020 | | Three Months Ended March 31, 2019 |
| (In millions) | Related Party | | Third Party | | Related Party | | Third Party |
| Operating leases: | | | | | | | |
Operating lease revenue(1)(2) | $ | 186 |
| | $ | 63 |
| | $ | 279 |
| | $ | 65 |
|
| | | | | | | | |
| Sales-type leases: | | | | | | | |
| Profit/(loss) recognized at the commencement date | — |
| | N/A |
| | N/A |
| | N/A |
|
| Interest income (Sales-type lease revenue- fixed minimum) | 38 |
| | N/A |
| | N/A |
| | N/A |
|
| Interest income (Revenue from variable lease payments) | $ | — |
| | N/A |
| | N/A |
| | N/A |
|
| |
| (1) | These amounts are presented net of executory costs. |
| |
| (2) | Financial information for the first quarter of 2019 has been retrospectively adjusted for the acquisition of ANDX. See Notes 1 and 3. |
The following is a schedule of future payments on the sales-type leases with MPC as of March 31, 2020:
|
| | | |
| (In millions) | Related Party |
| 2020 | $ | 129 |
|
| 2021 | 157 |
|
| 2022 | 157 |
|
| 2023 | 158 |
|
| 2024 | 158 |
|
| 2025 and thereafter | 461 |
|
| Total minimum future rentals | 1,220 |
|
| Less: present value discount | 795 |
|
| Lease receivable | $ | 425 |
|
21. Commitments and Contingencies
The PartnershipMPLX is the subject of, or a party to, a number of pending or threatened legal actions, contingencies and commitments involving a variety of matters, including laws and regulations relating to the environment. Some of these matters are discussed below. For matters for which the PartnershipMPLX has not recorded an accrued liability, the PartnershipMPLX is unable to estimate a range of possible losses forbecause the reasons discussed in more detail below.issues involved have not been fully developed through pleadings, discovery or court proceedings. However, the ultimate resolution of some of these contingencies could, individually or in the aggregate, be material.
Environmental Matters – The PartnershipMPLX is subject to federal, state and local laws and regulations relating to the environment. These laws generally provide for control of pollutants released into the environment and require responsible parties to undertake remediation of hazardous waste disposal sites. Penalties may be imposed for non-compliance.
At September 30, 2017March 31, 2020 and December 31, 2016,2019, accrued liabilities for remediation totaled $14$17 million and $3$19 million, respectively. However, it is not presently possible to estimate the ultimate amount of all remediation costs that might be incurred or the penalties, if any, which may be imposed. At March 31, 2020 and December 31, 2016,2019, there was less than $1 million in receivables fromwere 0 balances with MPC for indemnification of environmental costs related to incidents occurring prior to the Initial Offering. There were no such receivables at September 30, 2017.costs.
In July 2015, representatives from the EPA and the United States Department of Justice conducted a raid on a MarkWest Liberty Midstream pipeline launcher/receiver site utilized for pipeline maintenance operations in Washington County, Pennsylvania pursuant to a search warrant issued by a magistrate of the United States District Court for the Western District of Pennsylvania. As part of this initiative, the U.S. Attorney’s Office for the Western District of Pennsylvania proceeded with an investigation of MarkWest Liberty Midstream’s launcher/receiver, pipeline and compressor station operations. In response to the investigation, MarkWest initiated independent studies which demonstrated that there was no risk to worker safety and no threat of public harm associated with MarkWest Liberty Midstream’s launcher/receiver operations. These findings were supported by a subsequent inspection and review by the Occupational Safety and Health Administration. After providing these studies, and other substantial documentation related to MarkWest Liberty Midstream's pipeline and compressor stations, and arranging site visits and conducting several meetings with the government’s representatives, on September 13, 2016, the U.S. Attorney’s Office for the Western District of Pennsylvania rendered a declination decision, dropping its criminal investigation and declining to pursue charges in this matter.
MarkWest Liberty Midstream continues to discuss with the EPA and the State of Pennsylvania civil enforcement allegations associated with permitting or other related regulatory obligations for its launcher/receiver and compressor station facilities in the region. In connection with these discussions, MarkWest Liberty Midstream received an initial proposal from the EPA to settle all civil claims associated with this matter for the combination of a proposed cash penalty of approximately $2.4 million and proposed supplemental environmental projects with an estimated cost of approximately $3.6 million. MarkWest Liberty Midstream has submitted a response asserting that this action involves novel issues surrounding primarily minor source emissions from facilities that the agencies themselves considered de minimis and were not the subject of regulation and consequently that the settlement proposal is excessive. In connection with these negotiations, MarkWest Liberty Midstream has received a revised settlement proposal from the EPA which proposes to lower the proposed cash penalty to approximately $1.24 million and the estimated cost of proposed supplemental environmental projects to an estimated cost of approximately $1.6 million. MarkWest Liberty Midstream will continue to negotiate with EPA regarding the amount and scope of the proposed settlement.
The PartnershipMPLX is involved in a number of other environmental enforcement matters arising in the ordinary course of business. While the outcome and impact onto MPLX LP cannot be predicted with certainty, management believes the resolution of these environmental matters will not, individually or collectively, have a material adverse effect on its consolidated results of operations, financial position or cash flows.
Other Lawsuits – In 2003, the State of Illinois brought an action against the Premcor Refining Group, Inc. (“Premcor”) and Apex Refining Company (“Apex”) asserting claims for environmental cleanup related to the refinery owned by these entities in the Hartford/Wood River, Illinois area. In 2006, Premcor and Apex filed third-party complaints against numerous owners and operators of petroleum products facilities in the Hartford/Wood River, Illinois area, including Marathon Pipe Line LLC (“MPL”). These complaints, which have been amended since filing, assert claims of common law nuisance and contribution under the Illinois Contribution Act and other laws for environmental cleanup costs that may be imposed on Premcor and Apex by the State of Illinois. On September 6, 2016, the trial court approved a settlement between Apex and the State of Illinois whereby Apex agreed to settle all claims against it for a $10 million payment. Premcor has objected to this ruling and is seeking an appeal. There are several third-party defendants in the litigation and MPL has asserted cross-claims in contribution against the various third-party defendants. This litigation is currently pending in the Third Judicial Circuit Court, Madison County,
Illinois. While the ultimate outcome of these litigated matters remains uncertain, neither the likelihood of an unfavorable outcome nor the ultimate liability, if any, with respect to this matter can be determined at this time and the Partnership is unable to estimate a reasonably possible loss (or range of losses) for this litigation. Under the omnibus agreement, MPC will indemnify the Partnership for the full cost of any losses should MPL be deemed responsible for any damages in this lawsuit.
The PartnershipMPLX is also a party to a number of other lawsuits and other proceedings arising in the ordinary course of business. While the ultimate outcome and impact to the PartnershipMPLX cannot be predicted with certainty, the Partnershipmanagement believes the resolution of these other lawsuits and proceedings will not, individually or collectively, have a material adverse effect on its consolidated financial position, results of operations, financial position or cash flows.
Guarantees– Over the years, the PartnershipMPLX has sold various assets in the normal course of its business. Certain of the related agreements contain performance and general guarantees, including guarantees regarding inaccuracies in representations, warranties, covenants and agreements, and environmental and general indemnifications that require the PartnershipMPLX to perform upon the occurrence of a triggering event or condition. These guarantees and indemnifications are part of the normal course of selling assets. The PartnershipMPLX is typically not able to calculate the maximum potential amount of future payments that could be made under such contractual provisions because of the variability inherent in the guarantees and indemnities. Most often, the nature of the guarantees and indemnities is such that there is no appropriate method for quantifying the exposure because the underlying triggering event has little or no past experience upon which a reasonable prediction of the outcome can be based.
In connection with our 9.19 percent indirect interest in a joint venture that owns and operates the Dakota Access Pipeline and Energy Transfer Crude Oil Pipeline projects, collectively referred to as the Bakken Pipeline system, we have entered into a Contingent Equity Contribution Agreement whereby MPLX LP, along with the other joint venture owners in the Bakken Pipeline system, have agreed to make equity contributions to the joint venture upon certain events occurring to allow the entities that own and operate the Bakken Pipeline system to satisfy their senior note payment obligations. The senior notes were issued to repay amounts owed by the pipeline companies to fund the cost of construction of the Bakken Pipeline system.
In March 2020, the U.S. District Court for the District of Columbia ordered the U.S. Army Corps of Engineers, which granted permits for the Bakken Pipeline system, to conduct a full environmental impact statement (“EIS”), and further requested briefing on whether an easement permit necessary for the operation of the Bakken Pipeline system should be vacated while the EIS is being prepared. If the permit is vacated pending completion of the EIS and the vacatur is deemed temporary, MPLX would have to contribute its 9.19 percent pro rata share of funds required to pay interest accruing on the notes while the pipeline is shutdown and its 9.19 percent pro rata share of any costs to remediate any deficiencies to reinstate the permit and/or return the pipeline into operation. If the court vacates the permit and such action results in a permanent shutdown of the pipeline, MPLX would have to contribute its 9.19 percent pro rata share of the cost to redeem the bonds (including the 1% redemption premium required pursuant to the indenture governing the notes) and any accrued and unpaid interest, if any. As of March 31, 2020, our maximum potential undiscounted payments under the Contingent Equity Contribution Agreement were approximately $230 million.
Contractual Commitments and Contingencies – At September 30, 2017, the Partnership’sMarch 31, 2020, MPLX’s contractual commitments to acquire property, plant and equipment totaled $520$318 million. These commitments at September 30, 2017 were primarily related to G&P plant expansion, projects for the Marcellusterminal and Southwest Operations.pipeline projects. In addition, from time to time and in the ordinary course of business, the PartnershipMPLX and its affiliates provide guarantees of the Partnership’sMPLX’s subsidiaries payment and performance obligations in the G&P segment. Certain natural gas processing and gathering arrangements require the PartnershipMPLX to construct new natural gas processing plants, natural gas gathering pipelines and NGL pipelines and contain certain fees and charges if specified construction milestones are not achieved for reasons other than force majeure. In certain cases, certain producers may have the right to cancel the processing arrangements if there are significant delays that are not due to force majeure. As of September 30, 2017,March 31, 2020, management does not believe there are any indications that the PartnershipMPLX will not be able to meet the construction milestones, that force majeure does not apply or that such fees and charges will otherwise be triggered.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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 ended December 31, 2016, as updated by our Current2019.
Disclosures Regarding Forward-Looking Statements
This Quarterly Report on Form 8-K filed on May 1, 2017.
10-Q, particularly Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures about Market Risk, includes various forward-looking statements concerning trendsthat are subject to risks, contingencies or events potentially affecting our business.uncertainties. You can identify our forward-looking statements by words such as “anticipate,” “believe,” “estimate,“commitment,” “objective,“could,” “design,” “estimate,” “expect,” “forecast,” “goal,” “guidance,” “imply,” “intend,” “may,” “objective,” “opportunity,” “outlook,” “plan,” “policy,” “position,” “potential,” “predict,” “priority,” “project,” “potential,“proposition,” “prospective,” “pursue,” “seek,” “should,” “strategy,” “target,” “could,“will,” “may,” “should,” “would,” “will”“would” or other similar expressions that convey the uncertainty of future events or outcomes. In accordance with “safe harbor” provisions
Forward-looking statements include, among other things, statements regarding:
future levels of revenues and other income, income from operations, net income attributable to MPLX LP, earnings per unit, Adjusted EBITDA or DCF (see the Non-GAAP Financial Information section below for the definitions of Adjusted EBITDA and DCF);
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;
the amount and timing of future distributions; and
the anticipated effects of actions of third parties such as competitors, activist investors or 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 that we cannot predict. Material differences between actual results and any future performance suggested in our forward-looking statements could result from a variety of factors, including the following:
the effects of the Private Securities Litigation Reform Actrecent outbreak of 1995, these statements are accompaniedCOVID-19 and the adverse impact thereof on our business, financial condition, results of operations and cash flows, including our growth, operating costs, labor availability, logistical capabilities, customer demand for our services and industry demand generally, cash position, taxes, the price of our securities and trading markets with respect thereto, our ability to access capital markets, and the global economy and financial markets generally;
Marathon Petroleum Corporation’s (“MPC”) ability to achieve its strategic objectives and the effects of those strategic decisions on us;
the risk that anticipated opportunities and any other synergies from or anticipated benefits of the Andeavor Logistics LP (“ANDX”) acquisition may not be fully realized or may take longer to realize than expected, including whether the transaction will be accretive within the expected timeframe or at all;
disruption from the ANDX acquisition making it more difficult to maintain relationships with customers, employees or suppliers;
risks relating to any unforeseen liabilities of ANDX;
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 the business, financial condition, results of operations and cash flows;
adverse changes in laws including with respect to tax and regulatory matters;
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; and
the timing and extent of changes in commodity prices and demand for crude oil, refined products, feedstocks or other hydrocarbon-based products;
volatility in or degradation of market and industry conditions as a result of the COVID-19 pandemic, other infectious disease outbreaks 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 cautionary language identifying important factors, though not necessarily allcompetitors;
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 reliability of processing units and other equipment;
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 or other hydrocarbon-based products;
non-payment or non-performance by our producer and other customers;
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 factors, whichfuels 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, including the dropdowns completed by MPC, 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, or those of our suppliers or customers;
acts of war, terrorism or civil unrest that could cause future outcomesimpair our ability to differ materially from those set forth in forward-looking statements. gather, process, fractionate or transport crude oil, natural gas, NGLs or refined products; and
political pressure and influence of environmental groups upon policies and decisions related to the production, gathering, refining, processing, fractionation, transportation and marketing of crude oil or other feedstocks, refined products, natural gas, NGLs or other hydrocarbon-based products.
For additional risk factors affecting our business, see Item“Item 1A. Risk FactorsFactors” below, together with the risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2016.2019. We undertake no obligation to update any forward-looking statements except to the extent required by applicable law.
PARTNERSHIPMPLX OVERVIEW
We are a diversified, growth-oriented master limited partnershiplarge-cap MLP formed by MPC, to own, operate, developthat owns and acquireoperates midstream energy infrastructure assets.and logistics assets, and provides fuels distribution services. We are engaged in the gathering, processing and transportation of natural gas; the gathering, transportation, fractionation, storage and marketing of NGLs; and the transportation, storage and distribution of crude oil and refined petroleum products.products; the gathering, processing and transportation of natural gas; and the gathering, transportation, fractionation, storage and marketing of NGLs. Our operations are conducted in our Logistics and Storage and Gathering and Processing segments.
SIGNIFICANT FINANCIAL AND OTHER HIGHLIGHTS
Significant financial highlights including revenues and other highlightsincome, income from operations, net income, adjusted EBITDA attributable to MPLX and DCF attributable to GP and LP unitholders for the three months ended September 30, 2017March 31, 2020 and March 31, 2019 are listedshown in the chart below. Refer toThese results include the recast of ANDX financial information into MPLX’s financial information as a result of the Merger. See the Non-GAAP Financial Information section below for the definitions of Adjusted EBITDA and DCF and the Results of Operations and Liquidity and Capital Resourcessection for further details.details regarding changes in these metrics.
| |
| (1) | Q1 2020 includes impairment related to equity method investments of approximately $1.3 billion within our G&P operating segment. |
| |
| (2) | Q1 2020 includes impairment related to equity method investments of approximately $1.3 billion, goodwill impairment of approximately $1.8 billion and long-lived asset impairments of approximately $0.3 billion, all within our G&P operating segment. |
| |
| (3) | Q1 2019 includes Adjusted EBITDA attributable to Predecessor and portion of DCF adjustments attributable to Predecessor. |
Other Highlights
L&S segment operating income attributable to MPLX LP increased
Recognized approximately $89 million, or 72 percent, for the three months ended September 30, 2017 compared to the same period$3.4 billion of 2016 due to $74 million from the inclusion of HST, WHC and MPLXT results after our acquisition as of March 1, 2017and$7 million from the acquisition of the Ozark pipeline.
G&P segment operating income attributable to MPLX LP increased approximately $56 million, or 19 percent, for the three months ended September 30, 2017 compared to the same period of 2016. The G&P segment realized product price increases and volume increasesimpairments during the third quarter related to goodwill, equity method investments and long-lived assets (including intangibles).
MPC announced the unanimous decision of 2017 primarily dueits board of directors to expansions inmaintain MPC’s current midstream structure, with MPC remaining the Southwest as well as growth at the Sherwood, Majorsvillegeneral partner of MPLX. This was a result of a comprehensive evaluation by a special committee formed by MPC’s board of directors, which included extensive input from multiple external advisors and Bluestone (previously referredsignificant feedback from investors.
MPLX continues to as Keystone) plants. Comparedfocus on portfolio optimization, which could include asset divestitures.
RECENT DEVELOPMENTS
Announced plans to the third quarter of 2016, processing volumes were up approximately 11 percent, fractionated volumes were up approximately 14 percent and gathering volumes were up approximately 13 percent.
Additional highlights for the three and nine months ended September 30, 2017, including a look aheadreduce 2020 capital spending to anticipated growth, are listed below.
Acquisition and Growth Activities
On September 27, 2017, MPC authorized an offer of MPLX Fuels Distributions LLC and MPLX Refining Logistics LLC to MPLX LP in exchange for cash and limited and general partnership units. MPLX Fuels Distribution LLC is structured to provide a broad range of scheduling and marketing services as MPC’s sole and exclusive agent. MPLX Refining Logistics LLC contains the integrated tank farm assets that support MPC’s refining operations. These essential logistics assets include: approximately 56 million barrels storage capacity (crude, finished products and intermediates), 619 tanks, 32 rail and truck racks, and 18 docks and gasoline blenders. This offer, which is projected to contribute approximately $1.0 billion and expect to reduce forecasted annual operating expenses by approximately $200 million. Reduction in capital spending is primarily related to the BANGL project which is no longer being pursued as the company works with others to optimize existing pipeline capacity while continuing to meet producers’ needs for flow assurance and future growth. The reduction in operating expenses will be achieved through the deferral of annual EBITDA, is currently under reviewcertain expense projects.
Announced a first quarter distribution rate of $0.6875 per common unit.
CURRENT ECONOMIC ENVIRONMENT
The recent outbreak of COVID-19 and its development into a pandemic in March 2020 has resulted in significant economic disruption globally. Actions taken by various governmental authorities, individuals and companies around the conflicts committeeworld to prevent the spread of COVID-19 through social distancing have restricted travel, many business operations, public gatherings and the overall level of individual movement and in-person interaction across the globe. This has significantly reduced global economic activity and resulted in a decline in the demand for products for which we provide midstream services. Macroeconomic conditions and global geopolitical events have also resulted in significant price volatility related to those aforementioned products.
We are actively responding to the impacts that these matters are having on our business by:
Canceling or delaying certain capital expenditures that we had expected to make in 2020.
Taking actions to reduce operating expenses across the business.
Continuing to evaluate and high-grade our capital portfolio
Many uncertainties remain with respect to COVID-19, including its resulting economic effects, and we are unable to predict the ultimate economic impacts from COVID-19 and how quickly national economies can recover once the pandemic ultimately subsides. However, the adverse impact will likely continue to have an impact on our business and our customers’ businesses. We believe we have proactively addressed many of the boardknown impacts of directors of our general partner. The transaction is expected to close no later than the end of the first quarter of 2018. If approved, this acquisition will complete a series of planned acquisitions of assets from MPC that began in early 2017. The combined sum of the three transactions totals an estimated $1.4 billion of annual EBITDA. The stable, fee-based earnings from these acquired assets add both scale and diversification to our portfolio of high-quality midstream assets.
On September 1, 2017, we acquired joint-interest ownerships in certain pipelines and storage facilities from MPC for $420 million in cash and the issuance of $653 million in MPLX LP equity. The acquired ownership interests include a 35 percent ownership interest in Illinois Extension, a 40.7 percent ownership interest in LOOP, a 58.52 percent ownership interest in LOCAP, and a 24.51 percent ownership interest in Explorer. The assets held by these entities include a 1,830-mile refined products pipeline, storage facilities, pump stations, and an offshore deep water oil port located along the Gulf Coast. The infrastructure serves primarily the Midwest and Gulf Coast regions of the United States. There is no income associated with the Joint-Interest Acquisition included in the Consolidated Statements of Income since the September 1, 2017 acquisition date, as we account for these equity method investments in arrears using the most recently available information.
On March 1, 2017, we acquired certain pipeline, storage and terminal assets from MPC for $1.5 billion in cash and the issuance of $503 million in MPLX LP equity. As of the acquisition date, the assets consisted of 174 miles of crude oil pipelines and 430 miles of refined products pipelines, nine butane and propane storage caverns located in Michigan with approximately 1.8 million barrels of NGL storage capacity, 59 terminals for the receipt, storage, blending, additization, handling and redelivery of refined petroleum products, along with one leased terminal and partial ownership interest in two terminals. Collectively, the 62 terminals had a combined total shell capacity of approximately 23.6 million barrels. The terminal facilities are located primarily in the Midwest, Gulf Coast and Southeast regions of the United States.
On March 1, 2017, we purchased the 433-mile, 22-inch Ozark crude oil pipeline for $219 million. The pipeline is capable of transporting approximately 230 mbpd and expands the footprint of our logistics and storage segment by connecting Cushing, Oklahoma-sourced volumes to our extensive Midwest pipeline network. An expansion project to increase the line's capacity to approximately 345 mbpd is expected to be completed in the second quarter of 2018.
On February 15, 2017, we acquired a 9.1875 percent indirect equity interest in the Dakota Access Pipeline and Energy Transfer Crude Oil Company Pipeline projects, collectively referred to as the Bakken Pipeline system, for $500 million. The Bakken Pipeline system is currently expected to deliver in excess of 520 mbpd of crude oil from the Bakken/Three Forks production area in North DakotaCOVID-19 to the Midwest through Patoka, Illinoisextent possible and ultimatelywill strive to continue to do so, but there can be no guarantee the Gulf Coast. During the third quarter 2017, MPLX LP benefited from the first full quarter of earnings from its indirect interest in the Bakken Pipeline system. Initial cash distributions related to this investment were also received during the third quarter 2017.measures will be fully effective.
On February 6, 2017, we formed a strategic joint venture with Antero Midstream to process natural gas at the Sherwood Complex and fractionate natural gas liquids at the Hopedale Complex. This unique transaction strengthens our long-term relationship with the largest producer in the Appalachian Basin and provides the Partnership with substantial future growth opportunities. As part of this agreement, Antero Midstream released to the joint venture the dedication of approximately 195,000 gross operated acres located in Tyler, Wetzel and Ritchie counties of West Virginia. We contributed cash of $20 million, along with $353 million of assets, comprised of real property, equipment and facilities, including three 200 MMcf/d gas processing plants then under construction at the Sherwood Complex. Antero Midstream contributed cash of $154 million. The joint venture commenced operations of the first new facility during the first quarter of 2017, the second new facility during the third quarter of 2017 and expects to commence operations of the third new facility during the first quarter of 2018. Construction of a fourth new facility was announced during the first quarter of 2017 and is expected to commence operations in late 2018. In addition to the four new processing facilities, the joint venture contemplates the development of up to another seven processing facilities to support Antero Resources Corporation, which would be located at both the Sherwood Complex and a new location in West Virginia. At the Hopedale Complex, the largest fractionation facility in the Marcellus and Utica shales, the joint venture will also support the growth of Antero Resources Corporation’s NGL production by investing in 20 mbpd of existing fractionation capacity, with options to invest in future fractionation expansions.
Financing Activities
On July 21, 2017, the Partnership entered into a credit agreement to replace its previous $2.0 billion five-year bank revolving credit facility with a $2.25 billion five-year bank revolving credit facility that expires in July 2022. The financial covenants and the interest rate terms contained in the new credit agreement are substantially the same as those contained in the previous bank revolving credit facility. Additionally, on July 19, 2017, MPLX LP prepaid the entire outstanding principal amount of its $250 million term loan with cash on hand.
On February 10, 2017, we completed a public offering of $2.25 billion aggregate principal amount of senior notes (the “New Senior Notes”).
During the nine months ended September 30, 2017, we issued an aggregate of 13,846,998 commons units under our ATM Program, generating net proceeds of approximately $473 million. As of September 30, 2017, $1.7 billion of common units remain available for issuance through the ATM Program.
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 and DCF. The amount of Adjusted EBITDA and DCF generated is considered by the board of directors of our general partner in approving the Partnership’sMPLX’s cash distributions.
We define Adjusted EBITDA as net income adjusted forfor: (i) depreciation and amortization; (ii) provision provision/(benefit) for income taxes; (iii) amortization of deferred financing costs; (iv) extinguishment of debt; (v) non-cash equity-based compensation; (v)(vi) impairment expense; (vi)(vii) net interest and other financial costs; (vii) (income) loss(viii) income/(loss) from equity method investments; (viii) distributions from unconsolidated subsidiaries considering principal payments of debt and certain capital expenditures; (ix) distributions of cash received from Joint-Interest Acquisition entitiesand adjustments related to MPC;equity method investments; (x) unrealized derivative losses (gains)gains/(losses); and (xi) acquisition costs.costs; (xii) noncontrolling interest; and (xiii) other adjustments as deemed necessary. We also use DCF, which we define as Adjusted EBITDA adjusted forfor: (i) deferred revenue impacts; (ii) net interest and other financial costs; (iii) maintenance capital expenditures; (iv) equity method investment capital expenditures paid out; and (iv)(v) other non-cash items. The PartnershipMPLX makes a distinction between realized orand unrealized gains and losses on derivatives. During the period when a derivative contract is outstanding, changes in the fair value of the derivative are recorded as an unrealized gain or loss. When a derivative contract matures or is settled, the previously recorded unrealized gain or loss is reversed and the realized gain or loss of the contract is recorded.
We believe that the presentation of Adjusted EBITDA and DCF 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. Adjusted EBITDA and DCF should not be considered alternatives to GAAP net income or net cash provided by operating activities. Adjusted EBITDA and DCF 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. Adjusted EBITDA and DCF should not be considered in isolation or as substitutes for analysis of our results as reported under GAAP. Additionally, because Adjusted EBITDA and DCF may be defined differently by other companies in our industry, our definitions of Adjusted EBITDA and DCF 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.
Management evaluates contract performance onalso utilizes Segment Adjusted EBITDA in evaluating the basis of net operating margin, a non-GAAP financial measure, which is defined as segment revenue less segment purchased product costs less realized derivative gains (losses) related to purchased product costs. These charges have been excluded for the purpose of enhancing the understanding by both management and investors of the underlying baseline operating performance of our contractual arrangements, which management uses to evaluate our financial performance for purposes of planning and forecasting. Net operating margin does not have any standardized definition and, therefore, is unlikely to be comparable to similar measures presented by other reporting companies. Net operating margin results should not be evaluated in isolation of, or as a substitute for, our financial results prepared in accordance with GAAP. Our use of net operating margin and the underlying methodology in excluding certain charges is not necessarily an indication of the results of operations expected in the future, or that we will not, in fact, incur such charges in future periods.
In evaluating our financial performance, management utilizes the segment performance measures, segment revenues and segment operating income, including total segment operating income.segments. The use of thesethis measures allows investors to understand how management evaluates financial performance to make operating decisions and allocate resources. See Note 9
COMPARABILITY OF OUR FINANCIAL RESULTS
Our acquisitions have impacted comparability of our financial results (see Note 3 of the Notes to Consolidated Financial Statements).
RESULTS OF OPERATIONS
The following tabletables and discussion isare a summary of our results of operations for the three and nine months ended September 30, 2017March 31, 2020 and 2016,2019, including a reconciliation of Adjusted EBITDA and DCF from net income“Net income” and net“Net cash provided by operating activities,” the most directly comparable GAAP financial measures. Prior period financial information has been retrospectively adjusted for the acquisition of HST, WHC and MPLXT.common control transactions.
| | | | Three Months Ended September 30, | | Nine Months Ended September 30, | Three Months Ended March 31, |
| (In millions) | 2017 | | 2016 | | Variance | | 2017 | | 2016 | | Variance | 2020 | | 2019 | | Variance |
Total revenues and other income | $ | 980 |
| | $ | 838 |
| | $ | 142 |
| | $ | 2,782 |
| | $ | 2,181 |
| | $ | 601 |
| $ | 992 |
| | $ | 2,235 |
| | $ | (1,243 | ) |
| Costs and expenses: | | | | | | | | | | | | | | | | |
| Cost of revenues (excludes items below) | 129 |
| | 122 |
| | 7 |
| | 381 |
| | 329 |
| | 52 |
| 368 |
| | 339 |
| | 29 |
|
| Purchased product costs | 170 |
| | 117 |
| | 53 |
| | 441 |
| | 310 |
| | 131 |
| 135 |
| | 194 |
| | (59 | ) |
| Rental cost of sales | 19 |
| | 13 |
| | 6 |
| | 44 |
| | 42 |
| | 2 |
| 35 |
| | 37 |
| | (2 | ) |
| Rental cost of sales - related parties | — |
| | — |
| | — |
| | 1 |
| | 1 |
| | — |
| 46 |
| | 43 |
| | 3 |
|
| Purchases - related parties | 114 |
| | 109 |
| | 5 |
| | 330 |
| | 286 |
| | 44 |
| 276 |
| | 278 |
| | (2 | ) |
| Depreciation and amortization | 164 |
| | 151 |
| | 13 |
| | 515 |
| | 438 |
| | 77 |
| 325 |
| | 301 |
| | 24 |
|
| Impairment expense | — |
| | — |
| | — |
| | — |
| | 130 |
| | (130 | ) | 2,165 |
| | — |
| | 2,165 |
|
| General and administrative expenses | 59 |
| | 56 |
| | 3 |
| | 174 |
| | 172 |
| | 2 |
| 97 |
| | 101 |
| | (4 | ) |
| Other taxes | 14 |
| | 12 |
| | 2 |
| | 40 |
| | 37 |
| | 3 |
| 31 |
| | 30 |
| | 1 |
|
| Total costs and expenses | 669 |
| | 580 |
| | 89 |
| | 1,926 |
| | 1,745 |
| | 181 |
| 3,478 |
| | 1,323 |
| | 2,155 |
|
| Income from operations | 311 |
| | 258 |
| | 53 |
| | 856 |
| | 436 |
| | 420 |
| |
| Income/(loss) from operations | | (2,486 | ) | | 912 |
| | (3,398 | ) |
| Related party interest and other financial costs | 1 |
| | — |
| | 1 |
| | 1 |
| | 1 |
| | — |
| 3 |
| | 1 |
| | 2 |
|
| Interest expense, net of amounts capitalized | 77 |
| | 51 |
| | 26 |
| | 217 |
| | 158 |
| | 59 |
| 211 |
| | 214 |
| | (3 | ) |
| Other financial costs | 15 |
| | 13 |
| | 2 |
| | 40 |
| | 37 |
| | 3 |
| 16 |
| | 9 |
| | 7 |
|
| Income before income taxes | 218 |
| | 194 |
| | 24 |
| | 598 |
| | 240 |
| | 358 |
| |
| Provision (benefit) for income taxes | 1 |
| | — |
| | 1 |
| | 3 |
| | (12 | ) | | 15 |
| |
| Net income | 217 |
| | 194 |
| | 23 |
| | 595 |
| | 252 |
| | 343 |
| |
| Income/(loss) before income taxes | | (2,716 | ) | | 688 |
| | (3,404 | ) |
| (Benefit)/provision for income taxes | | — |
| | (1 | ) | | 1 |
|
| Net income/(loss) | | (2,716 | ) | | 689 |
| | (3,405 | ) |
| Less: Net income attributable to noncontrolling interests | 1 |
| | 2 |
| | (1 | ) | | 3 |
| | 3 |
| | — |
| 8 |
| | 6 |
| | 2 |
|
| Less: Net income attributable to Predecessor | — |
| | 51 |
| | (51 | ) | | 36 |
| | 149 |
| | (113 | ) | — |
| | 180 |
| | (180 | ) |
| Net income attributable to MPLX LP | $ | 216 |
| | $ | 141 |
| | $ | 75 |
| | $ | 556 |
| | $ | 100 |
| | $ | 456 |
| |
| Net income/(loss) attributable to MPLX LP | | (2,724 | ) | | 503 |
| | (3,227 | ) |
| | | | | | | | | | | | | | | | | |
Adjusted EBITDA attributable to MPLX LP(1) | $ | 538 |
| | $ | 375 |
| | $ | 163 |
| | $ | 1,435 |
| | $ | 1,028 |
| | $ | 407 |
| |
DCF(1) | 442 |
| | 301 |
| | 141 |
| | 1,183 |
| | 822 |
| | 361 |
| |
DCF attributable to GP and LP unitholders(1) | 426 |
| | 285 |
| | 141 |
| | 1,134 |
| | 797 |
| | 337 |
| |
Adjusted EBITDA attributable to MPLX LP (excluding Predecessor results)(2) | | 1,294 |
| | 930 |
| | 364 |
|
Adjusted EBITDA attributable to MPLX LP (including Predecessor results)(3) | | N/A |
| | 1,263 |
| | N/A |
|
DCF attributable to GP and LP unitholders (including Predecessor results)(3) | | $ | 1,047 |
| | $ | 991 |
| | $ | 56 |
|
| |
| (1) | Includes impairment expense of approximately $1.3 billion related to three equity method investments in 2020. |
| |
| (2) | Non-GAAP financial measure. See the following tables for reconciliationsreconciliation below to the most directly comparable GAAP measures. Excludes adjusted EBITDA and DCF adjustments attributable to Predecessor. |
| |
| (3) | Non-GAAP measure. See reconciliation below to the most directly comparable GAAP measures. Includes adjusted EBITDA and DCF adjustments attributable to Predecessor. |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (In millions) | 2017 | | 2016 | | Variance | | 2017 | | 2016 | | Variance |
| Reconciliation of Adjusted EBITDA attributable to MPLX LP and DCF attributable to GP and LP unitholders from Net income: | | | | | | | | | | | |
| Net income | $ | 217 |
| | $ | 194 |
| | $ | 23 |
| | $ | 595 |
| | $ | 252 |
| | $ | 343 |
|
| Depreciation and amortization | 164 |
| | 151 |
| | 13 |
| | 515 |
| | 438 |
| | 77 |
|
| Provision (benefit) for income taxes | 1 |
| | — |
| | 1 |
| | 3 |
| | (12 | ) | | 15 |
|
| Amortization of deferred financing costs | 13 |
| | 11 |
| | 2 |
| | 38 |
| | 34 |
| | 4 |
|
| Non-cash equity-based compensation | 4 |
| | 3 |
| | 1 |
| | 10 |
| | 9 |
| | 1 |
|
| Impairment expense | — |
| | — |
| | — |
| | — |
| | 130 |
| | (130 | ) |
| Net interest and other financial costs | 80 |
| | 53 |
| | 27 |
| | 220 |
| | 162 |
| | 58 |
|
| (Income) loss from equity method investments | (23 | ) | | (6 | ) | | (17 | ) | | (29 | ) | | 72 |
| | (101 | ) |
| Distributions from unconsolidated subsidiaries | 70 |
| | 33 |
| | 37 |
| | 136 |
| | 111 |
| | 25 |
|
| Distributions of cash received from Joint-Interest Acquisition entities to MPC | (13 | ) | | — |
| | (13 | ) | | (13 | ) | | — |
| | (13 | ) |
| Other adjustments to equity method investment distributions | 8 |
| | — |
| | 8 |
| | 8 |
| | — |
| | 8 |
|
Unrealized derivative losses (gains)(1) | 17 |
| | 2 |
| | 15 |
| | (2 | ) | | 23 |
| | (25 | ) |
| Acquisition costs | 2 |
| | — |
| | 2 |
| | 6 |
| | (1 | ) | | 7 |
|
| Adjusted EBITDA | 540 |
| | 441 |
| | 99 |
| | 1,487 |
| | 1,218 |
| | 269 |
|
| Adjusted EBITDA attributable to noncontrolling interests | (2 | ) | | (2 | ) | | — |
| | (5 | ) | | (3 | ) | | (2 | ) |
Adjusted EBITDA attributable to Predecessor(2) | — |
| | (64 | ) | | 64 |
| | (47 | ) | | (187 | ) | | 140 |
|
| Adjusted EBITDA attributable to MPLX LP | 538 |
| | 375 |
| | 163 |
| | 1,435 |
| | 1,028 |
| | 407 |
|
| Deferred revenue impacts | 8 |
| | 1 |
| | 7 |
| | 25 |
| | 8 |
| | 17 |
|
| Net interest and other financial costs | (80 | ) | | (53 | ) | | (27 | ) | | (220 | ) | | (162 | ) | | (58 | ) |
| Maintenance capital expenditures | (24 | ) | | (25 | ) | | 1 |
| | (59 | ) | | (58 | ) | | (1 | ) |
| Other | — |
| | (2 | ) | | 2 |
| | — |
| | (2 | ) | | 2 |
|
Portion of DCF adjustments attributable to Predecessor(2) | — |
| | 5 |
| | (5 | ) | | 2 |
| | 8 |
| | (6 | ) |
| DCF | 442 |
| | 301 |
| | 141 |
| | 1,183 |
| | 822 |
| | 361 |
|
| Preferred unit distributions | (16 | ) | | (16 | ) | | — |
| | (49 | ) | | (25 | ) | | (24 | ) |
| DCF attributable to GP and LP unitholders | $ | 426 |
| | $ | 285 |
| | $ | 141 |
| | $ | 1,134 |
| | $ | 797 |
| | $ | 337 |
|
| | | | Nine Months Ended September 30, | Three Months Ended March 31, |
| (In millions) | 2017 | | 2016 | | Variance | 2020 | | 2019 | | Variance |
| Reconciliation of Adjusted EBITDA attributable to MPLX LP and DCF attributable to GP and LP unitholders from Net cash provided by operating activities: | | | | | | |
| Net cash provided by operating activities | $ | 1,338 |
| | $ | 975 |
| | $ | 363 |
| |
| Changes in working capital items | (41 | ) | | 59 |
| | (100 | ) | |
| All other, net | (43 | ) | | (18 | ) | | (25 | ) | |
| Reconciliation of Adjusted EBITDA attributable to MPLX LP and DCF attributable to GP and LP unitholders from Net income: | | | | | | |
| Net income | | $ | (2,716 | ) | | $ | 689 |
| | $ | (3,405 | ) |
| Provision for income taxes | | — |
| | (1 | ) | | 1 |
|
| Amortization of deferred financing costs | | 14 |
| | 7 |
| | 7 |
|
| Net interest and other financial costs | | 216 |
| | 217 |
| | (1 | ) |
| Income from operations | | (2,486 | ) | | 912 |
| | (3,398 | ) |
| Depreciation and amortization | | 325 |
| | 301 |
| | 24 |
|
| Non-cash equity-based compensation | 10 |
| | 9 |
| | 1 |
| 5 |
| | 7 |
| | (2 | ) |
| Net gain on disposal of assets | 1 |
| | 1 |
| | — |
| |
| Net interest and other financial costs | 220 |
| | 162 |
| | 58 |
| |
| Current income taxes | 1 |
| | 4 |
| | (3 | ) | |
| Asset retirement expenditures | 2 |
| | 4 |
| | (2 | ) | |
Unrealized derivative (gains) losses(1) | (2 | ) | | 23 |
| | (25 | ) | |
| Impairment expense | | 2,165 |
| | — |
| | 2,165 |
|
| Loss (Income) from equity method investments | | 1,184 |
| | (77 | ) | | 1,261 |
|
| Distributions/adjustments related to equity method investments | | 124 |
| | 122 |
| | 2 |
|
Unrealized derivative (gains)/losses(1) | | (15 | ) | | 4 |
| | (19 | ) |
| Acquisition costs | 6 |
| | (1 | ) | | 7 |
| — |
| | 1 |
| | (1 | ) |
| Distributions of cash received from Joint-Interest Acquisition entities to MPC | (13 | ) | | — |
| | (13 | ) | |
| Other adjustments to equity method investment distributions | 8 |
| | — |
| | 8 |
| |
| Other | | 1 |
| | — |
| | 1 |
|
| Adjusted EBITDA | 1,487 |
| | 1,218 |
| | 269 |
| 1,303 |
| | 1,270 |
| | 33 |
|
| Adjusted EBITDA attributable to noncontrolling interests | (5 | ) | | (3 | ) | | (2 | ) | (9 | ) | | (7 | ) | | (2 | ) |
Adjusted EBITDA attributable to Predecessor(2) | (47 | ) | | (187 | ) | | 140 |
| — |
| | (333 | ) | | 333 |
|
| Adjusted EBITDA attributable to MPLX LP | 1,435 |
| | 1,028 |
| | 407 |
| |
Adjusted EBITDA attributable to MPLX LP(3) | | 1,294 |
| | 930 |
| | 364 |
|
| Deferred revenue impacts | 25 |
| | 8 |
| | 17 |
| 23 |
| | 9 |
| | 14 |
|
| Net interest and other financial costs | (220 | ) | | (162 | ) | | (58 | ) | (216 | ) | | (217 | ) | | 1 |
|
| Maintenance capital expenditures | (59 | ) | | (58 | ) | | (1 | ) | (34 | ) | | (37 | ) | | 3 |
|
| Maintenance capital expenditures reimbursements | | 14 |
| | 7 |
| | 7 |
|
| Equity method investment capital expenditures paid out | | (7 | ) | | (4 | ) | | (3 | ) |
| Other | — |
| | (2 | ) | | 2 |
| 4 |
| | — |
| | 4 |
|
Portion of DCF adjustments attributable to Predecessor(2) | 2 |
| | 8 |
| | (6 | ) | — |
| | 69 |
| | (69 | ) |
| DCF | 1,183 |
| | 822 |
| | 361 |
| 1,078 |
| | 757 |
| | 321 |
|
| Preferred unit distributions | (49 | ) | | (25 | ) | | (24 | ) | (31 | ) | | (30 | ) | | (1 | ) |
| DCF attributable to GP and LP unitholders | $ | 1,134 |
| | $ | 797 |
| | $ | 337 |
| 1,047 |
| | 727 |
| | 320 |
|
Adjusted EBITDA attributable to Predecessor(2) | | — |
| | 333 |
| | (333 | ) |
Portion of DCF adjustments attributable to Predecessor(2) | | — |
| | (69 | ) | | 69 |
|
| DCF attributable to GP and LP unitholders (including Predecessor results) | | $ | 1,047 |
|
| $ | 991 |
|
| $ | 56 |
|
| |
| (1) | The PartnershipMPLX makes a distinction between realized orand unrealized gains and losses on derivatives. During the period when a derivative contract is outstanding, changes in the fair value of the derivative are recorded as an unrealized gain or loss. When a derivative contract matures or is settled, the previously recorded unrealized gain or loss is reversed and the realized gain or loss of the contract is recorded. |
| |
| (2) | The Adjustedadjusted EBITDA and DCF adjustments related to Predecessor are excluded from Adjustedadjusted EBITDA attributable to MPLX LP and DCF attributable to GP and LP unitholders prior to the acquisition dates. |
Three months ended September 30, 2017 compared to three months ended September 30, 2016
Total revenues and other income increased $142 million in the third quarter of 2017 compared to the same period of 2016. This variance was due mainly to increased pricing on product sales of approximately $54 million, offset by an increased unrealized derivative loss of $10 million, higher revenues from volume growth of $49 million in the Marcellus and the Southwest areas,higher crude and product transportation volumes of $14 million, a $19 million increase from the acquisition of the Ozark pipeline, a $17 million increase from our equity method investments, mainly due to the acquisition of an equity interest in the Bakken Pipeline system, the addition of the Sherwood Midstream joint venture during 2017 and increased dry gas gathering volumes for certain of our equity method investments.
Cost of revenues increased $7 million in the third quarter of 2017 compared to the same period of 2016. This variance was primarily due to the acquisition of the Ozark pipeline.
Purchased product costs increased $53 million in the third quarter of 2017 compared to the same period of 2016. This variance was primarily due to higher NGL and gas prices of $36 million and increased volumes of $10 million, primarily in the Southwest area, as well as an increase in the unrealized loss of $6 million, of which a majority is related to our Natural Gas Embedded Derivative.
Depreciation and amortization expense increased $13 million in the third quarter of 2017 compared to the same period of 2016. This variance was primarily due to additions to in-service property, plant and equipment as well as approximately $2 million of accelerated depreciation related to adjustments of certain assets’ useful life.
Net interest expense and other financial costs increased $28 million in the third quarter of 2017 compared to the same period of 2016. The increase is mainly due to the New Senior Notes issued in February 2017.
Nine months ended September 30, 2017 compared to nine months ended September 30, 2016
Total revenues and other income increased $601 million in the first nine months of 2017 compared to the same period of 2016. This variance was due mainly to the inclusion of $103 million of revenue generated by MPLXT and its subsidiaries since it was not formed as a business until April 1, 2016, increased pricing on product sales of approximately $177 million as well as higher revenues from volume growth of $146 million in the Marcellus and the Southwest areas, higher crude and product transportation volumes of $28 million, $45 million from the acquisition of the Ozark pipelineand a $12 million increase from our equity method investments. The nine months ended September 30, 2016 also included an impairment expense of $89 million related to our investment in Ohio Condensate as referenced in our Annual Report on Form 10-K for the year ended December 31, 2016, as updated by our Current Report on Form 8-K filed on May 1, 2017.
Cost of revenues increased $52 million in the first nine months of 2017 compared to the same period of 2016. This variance was primarily due to $20 million from the inclusion of MPLXT, as well as $20 million from the acquisition of the Ozark pipeline and an increase in expenses related to the timing of projects.
Purchased product costs increased $131 million in the first nine months of 2017 compared to the same period of 2016. This variance was primarily due to higher NGL and gas prices and purchase volumes in the Southwest area, offset by a $13 million unrealized gain on our Natural Gas Embedded Derivative.
Purchases-related parties increased $44 million in the first nine months of 2017 compared to the same period of 2016. The increase was primarily due to the inclusion of approximately $23 million related party purchases of MPLXT as well as general increases in employee costs due to headcount.
Depreciation and amortization expense increased $77 million in the first nine months of 2017 compared to the same period of 2016. This variance was primarily due to accelerated depreciation expense of approximately $35 million incurred on the decommissioning of the Houston 1 facility in the Marcellus area and other various assets, approximately $10 million of additional depreciation due to the inclusion of MPLXT, as well additions to in-service property, plant and equipment during the fourth quarter of 2016 and the first nine months of 2017.
Impairment expense decreased $130 million in the first nine months of 2017 compared to the same period of 2016. This variance was due to a non-cash impairment to goodwill in two reporting units in the G&P segment during the first six months of 2016.
Net interest expense and other financial costs increased $62 million in the first nine months of 2017 compared to the same period of 2016. The increase is primarily due to the New Senior Notes issued in February 2017.
SEGMENT RESULTS
We classify our business in the following reportable segments: L&S and G&P. Segment operating income represents income from operations attributable to the reportable segments. We have investments in entities that we operate that are accounted for using equity method investment accounting standards. However, we view financial information as if those investments were consolidated. Corporate general and administrative expenses, unrealized derivative (losses) gains, property, plant and equipment impairment, goodwill impairment and depreciation and amortization are not allocated to the reportable segments. Management does not consider these items allocable to or controllable by any individual segment and, therefore, excludes these items when evaluating segment performance. Segment results are also adjusted to exclude the portion of income from operations attributable to the noncontrolling interests related to partially owned entities that are either consolidated or accounted for as equity method investments. Segment operating income attributable to MPLX LP excludes the operating income related to the HSM Predecessor prior to the March 31, 2016 acquisition and the HST, WHC and MPLXT Predecessor prior to the March 1, 2017 acquisition.
The tables below present information about segment operating income for the reported segments.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (In millions) | 2017 | | 2016 | | Variance | | 2017 | | 2016 | | Variance |
| Revenues and other income: | | | | | | | | | | | |
| Segment revenues | $ | 378 |
| | $ | 339 |
| | $ | 39 |
| | $ | 1,095 |
| | $ | 901 |
| | $ | 194 |
|
| Segment other income | 11 |
| | 12 |
| | (1 | ) | | 35 |
| | 42 |
| | (7 | ) |
| Total segment revenues and other income | 389 |
| | 351 |
| | 38 |
| | 1,130 |
| | 943 |
| | 187 |
|
| Costs and expenses: | | | | | | | | | | | |
| Segment cost of revenues | 176 |
| | 153 |
| | 23 |
| | 500 |
| | 392 |
| | 108 |
|
| Segment operating income before portion attributable to noncontrolling interests and Predecessor | 213 |
| | 198 |
| | 15 |
| | 630 |
| | 551 |
| | 79 |
|
| Segment portion attributable to noncontrolling interests and Predecessor | — |
| | 74 |
| | (74 | ) | | 53 |
| | 216 |
| | (163 | ) |
| Segment operating income attributable to MPLX LP | $ | 213 |
| | $ | 124 |
| | $ | 89 |
| | $ | 577 |
| | $ | 335 |
| | $ | 242 |
|
Three months ended September 30, 2017 compared to three months ended September 30, 2016
In the third quarter of 2017 compared to the same period of 2016, segment revenue increased primarily due to a $14 million increase from higher crude and product transportation volumes, a $19 million increase from the acquisition of the Ozark pipeline,a $4 million increase from the annual increase in fees and a $4 million increase from additional barges, partially offset by a $2 million decrease in the recognition of revenue related to volume deficiency payments.
In the third quarter of 2017 compared to the same period of 2016, segment cost of revenues increasedprimarily due to a $12 million increase from the acquisition of the Ozark pipeline, as well as from salaries and compensation due to headcount and other miscellaneous expenses.
In the third quarter of 2017 compared to the same period of 2016, the segment portion attributable to noncontrolling interests and Predecessor decreased due to the acquisition of HST, WHC and MPLXT as of March 1, 2017.
Nine months ended September 30, 2017 compared to nine months ended September 30, 2016
In the first nine months of 2017 compared to the same period of 2016, segment revenue increased primarily due to the inclusion of $103 million of revenue generated by MPLXT and its subsidiaries, a $28 million increase from higher crude and product transportation volumes,a $45 million increase from the acquisition of the Ozark pipeline, a $3 million increase due to the recognition of revenues related to volume deficiency payments,and a $10 million increase from additional barges.
In the first nine months of 2017 compared to the same period of 2016, segment cost of revenues increased primarily due to the acquisitions of MPLXT and the Ozark pipeline, increased expenses related to the timing of projects, salaries and compensation due to headcount, and other miscellaneous expenses.
In the first nine months of 2017 compared to the same period of 2016, the segment portion attributable to noncontrolling interests and Predecessor decreased due to the inclusion of HSM for the first three months of 2016 and the acquisition of HST, WHC and MPLXT as of March 1, 2017.
During both the third quarter and first nine months of 2017, MPC did not ship its minimum committed volumes on certain of our pipeline systems. As a result, for the first nine months, MPC was obligated to make a $37 million deficiency payment, of which $11 million was paid in the third quarter of 2017. We record deficiency payments as Deferred revenue-related parties on our Consolidated Balance Sheets. In the third quarter and first nine months of 2017, we recognized revenue of $7 million and $29 million, respectively, related to volume deficiency credits. At September 30, 2017, the cumulative balance of Deferred revenue-related parties on our Consolidated Balance Sheets related to volume deficiencies was $55 million. The following table presents the future expiration dates of the associated deferred revenue credits as of September 30, 2017:
|
| | | |
| (In millions) | |
| December 31, 2017 | $ | 8 |
|
| March 31, 2018 | 11 |
|
| June 30, 2018 | 11 |
|
| September 30, 2018 | 10 |
|
| December 31, 2018 | 4 |
|
| March 31, 2019 | 3 |
|
| June 30, 2019 | 4 |
|
| September 30, 2019 | 4 |
|
| Total | $ | 55 |
|
We will recognize revenue for the deficiency payments in future periods at the earlier of when volumes are transported in excess of the minimum quarterly volume commitments, when it becomes impossible to physically transport volumes necessary to utilize the accumulated credits or upon expiration of the make-up period. Deficiency payments are included in the determination of DCF in the period in which a deficiency occurs.
G&P Segment
Our assets include approximately 5.9 bcf/d of gathering capacity, 7.8 bcf/d of natural gas processing capacity and 570 mbpd of fractionation capacity.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (In millions) | 2017 | | 2016 | | Variance | | 2017 | | 2016 | | Variance |
| Revenues and other income: | | | | | | | | | | | |
| Segment revenues | $ | 669 |
| | $ | 567 |
| | $ | 102 |
| | $ | 1,869 |
| | $ | 1,595 |
| | $ | 274 |
|
| Segment other income | 1 |
| | 1 |
| | — |
| | 2 |
| | 1 |
| | 1 |
|
| Total segment revenues and other income | 670 |
| | 568 |
| | 102 |
| | 1,871 |
| | 1,596 |
| | 275 |
|
| Costs and expenses: | | | | | | | | | | | |
| Segment cost of revenues | 276 |
| | 239 |
| | 37 |
| | 781 |
| | 662 |
| | 119 |
|
| Segment operating income before portion attributable to noncontrolling interests | 394 |
| | 329 |
| | 65 |
| | 1,090 |
| | 934 |
| | 156 |
|
| Segment portion attributable to noncontrolling interests | 45 |
| | 36 |
| | 9 |
| | 119 |
| | 113 |
| | 6 |
|
| Segment operating income attributable to MPLX LP | $ | 349 |
| | $ | 293 |
| | $ | 56 |
| | $ | 971 |
| | $ | 821 |
| | $ | 150 |
|
Three months ended September 30, 2017 compared to three months ended September 30, 2016
In the third quarter of 2017 compared to the same period of 2016, segment revenue increased due to increased pricing on product sales of approximately $46 million and increased volumes of $15 million, combined with increased fees of approximately $41 million on higher volumes due to new gathering and processing facilities in the Marcellus, Southwest, and Utica areas, as well as additional fractionation capacity in the Marcellus and Utica areas.
In the third quarter of 2017 compared to the same period of 2016, segment cost of revenues increased primarily due to increased product costs resulting from higher NGL and gas prices of $28 million and increased volumes of $10 million primarily in the Southwest area partially offset by lower maintenance costs and other operating efficiencies.
Nine months ended September 30, 2017 compared to nine months ended September 30, 2016
In the first nine months of 2017 compared to the same period of 2016, segment revenue increased due to increased pricing on product sales of approximately $144 million and increased volumes of $38 million, combined with increased fees of approximately $92 million on higher volumes due to new processing plants in the Marcellus and Southwest areas and additional fractionation capacity in the Marcellus and Utica areas.
In the first nine months of 2017 compared to the same period of 2016, segment cost of revenues increased due primarily to increased product costs resulting from higher prices of approximately $102 million and higher volumes of $21 million primarily in the Southwest area partially offset by lower facility costs due to lower maintenance costs and other operating efficiencies.
Segment Reconciliations
The following tables provide reconciliations of segment operating income to our consolidated income from operations, segment revenue to our consolidated total revenues and other income, and segment portion attributable to noncontrolling interests to our consolidated net income attributable to noncontrolling interests for the three and nine months ended September 30, 2017 and 2016. Adjustments related to unconsolidated affiliates relate to our Partnership-operated non-wholly-owned entities that we consolidate for segment purposes. Income (loss) from equity method investmentsrelates to our portion of income (loss) from our unconsolidated joint ventures of which Partnership-operated joint ventures are consolidated for segment purposes. Other income-related parties consists of operational service fee revenues from our operated unconsolidated affiliates. Unrealized derivative activity is not allocated to segments.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (In millions) | 2017 | | 2016 | | Variance | | 2017 | | 2016 | | Variance |
| Reconciliation to Income from operations: | | | | | | | | | | | |
| L&S segment operating income attributable to MPLX LP | $ | 213 |
| | $ | 124 |
| | $ | 89 |
| | $ | 577 |
| | $ | 335 |
| | $ | 242 |
|
| G&P segment operating income attributable to MPLX LP | 349 |
| | 293 |
| | 56 |
| | 971 |
| | 821 |
| | 150 |
|
| Segment operating income attributable to MPLX LP | 562 |
| | 417 |
| | 145 |
| | 1,548 |
| | 1,156 |
| | 392 |
|
| Segment portion attributable to unconsolidated affiliates | (47 | ) | | (41 | ) | | (6 | ) | | (125 | ) | | (130 | ) | | 5 |
|
| Segment portion attributable to Predecessor | — |
| | 74 |
| | (74 | ) | | 53 |
| | 216 |
| | (163 | ) |
| Income (loss) from equity method investments | 23 |
| | 6 |
| | 17 |
| | 29 |
| | (72 | ) | | 101 |
|
| Other income - related parties | 13 |
| | 11 |
| | 2 |
| | 38 |
| | 29 |
| | 9 |
|
Unrealized derivative (losses) gains(1) | (17 | ) | | (2 | ) | | (15 | ) | | 2 |
| | (23 | ) | | 25 |
|
| Depreciation and amortization | (164 | ) | | (151 | ) | | (13 | ) | | (515 | ) | | (438 | ) | | (77 | ) |
| Impairment expense | — |
| | — |
| | — |
| | — |
| | (130 | ) | | 130 |
|
| General and administrative expenses | (59 | ) | | (56 | ) | | (3 | ) | | (174 | ) | | (172 | ) | | (2 | ) |
| Income from operations | $ | 311 |
| | $ | 258 |
| | $ | 53 |
| | $ | 856 |
| | $ | 436 |
| | $ | 420 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (In millions) | 2017 | | 2016 | | Variance | | 2017 | | 2016 | | Variance |
| Reconciliation to Total revenues and other income: | | | | | | | | | | | |
| Total segment revenues and other income | $ | 1,059 |
| | $ | 919 |
| | $ | 140 |
| | $ | 3,001 |
| | $ | 2,539 |
| | $ | 462 |
|
| Revenue adjustment from unconsolidated affiliates | (107 | ) | | (100 | ) | | (7 | ) | | (287 | ) | | (303 | ) | | 16 |
|
| Income (loss) from equity method investments | 23 |
| | 6 |
| | 17 |
| | 29 |
| | (72 | ) | | 101 |
|
| Other income - related parties | 13 |
| | 11 |
| | 2 |
| | 38 |
| | 29 |
| | 9 |
|
Unrealized derivative (losses) gains related to product sales(1) | (8 | ) | | 2 |
| | (10 | ) | | 1 |
| | (12 | ) | | 13 |
|
| Total revenues and other income | $ | 980 |
| | $ | 838 |
| | $ | 142 |
| | $ | 2,782 |
| | $ | 2,181 |
| | $ | 601 |
|
| |
(1) | The Partnership makes a distinction between realized or unrealized gains and losses on derivatives. During the period when a derivative contract is outstanding, changes in the fair value of the derivative are recorded as an unrealized gain or loss. When a derivative contract matures or is settled, the previously recorded unrealized gain or loss is reversed and the realized gain or loss of the contract is recorded. |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (In millions) | 2017 | | 2016 | | Variance | | 2017 | | 2016 | | Variance |
| Reconciliation to Net income attributable to noncontrolling interests and Predecessor: | | | | | | | | | | | |
| Segment portion attributable to noncontrolling interests and Predecessor | $ | 45 |
| | $ | 110 |
| | $ | (65 | ) | | $ | 172 |
| | $ | 329 |
| | $ | (157 | ) |
| Portion of noncontrolling interests and Predecessor related to items below segment income from operations | (21 | ) | | (39 | ) | | 18 |
| | (84 | ) | | (157 | ) | | 73 |
|
| Portion of operating income attributable to noncontrolling interests of unconsolidated affiliates | (23 | ) | | (18 | ) | | (5 | ) | | (49 | ) | | (20 | ) | | (29 | ) |
| Net income attributable to noncontrolling interests and Predecessor | $ | 1 |
| | $ | 53 |
| | $ | (52 | ) | | $ | 39 |
| | $ | 152 |
| | $ | (113 | ) |
OUR G&P CONTRACTS WITH THIRD PARTIES
We generate the majority of our revenues in the G&P segment from natural gas gathering, transportation and processing; NGL gathering, transportation, fractionation, exchange, marketing and storage; and crude oil gathering and transportation. We enter into a variety of contracts to provide services under the following types of arrangements: fee-based, percent-of-proceeds, percent-of-index and keep-whole. In many cases, we provide services under contracts that contain a combination of more than one of the arrangements described below. See Item 1. Business – Our G&P Contracts With Third Parties in our Annual Report on Form 10-K for the year ended December 31, 2016 for further discussion of each of these types of arrangements.
The following table does not give effect to our active commodity risk management program. For further discussion of how we manage commodity price volatility for the portion of our net operating margin that is not fee-based, see Note 13 of the Notes to Consolidated Financial Statements. We manage our business by taking into account the partial offset of short natural gas positions primarily in the Southwest region of our G&P segment. The calculated percentages for net operating margin for percent-of-proceeds, percent-of-index and keep-whole contracts reflect the partial offset of our natural gas positions. The calculated percentages are less than one percent for percent-of-index due to the offset of our natural gas positions and, therefore, not meaningful to the table below.
For the three months ended September 30, 2017, we calculated the following approximate percentages of our net operating margin from the following types of contracts:
|
| | | | | | | | |
| | Fee-Based | | Percent-of-Proceeds(1) | | Keep-Whole(2) |
| L&S | 100 | % | | — | % | | — | % |
G&P(3) | 86 | % | | 12 | % | | 2 | % |
| Total | 92 | % | | 7 | % | | 1 | % |
For the nine months ended September 30, 2017, we calculated the following approximate percentages of our net operating margin from the following types of contracts:
|
| | | | | | | | |
| | Fee-Based | | Percent-of-Proceeds(1) | | Keep-Whole(2) |
| L&S | 100 | % | | — | % | | — | % |
G&P(3) | 87 | % | | 11 | % | | 2 | % |
| Total | 93 | % | | 6 | % | | 1 | % |
| |
(1) | Includes condensate sales and other types of arrangements tied to NGL prices. |
| |
(2) | Includes condensate sales and other types of arrangements tied to both NGL and natural gas prices.date. |
| |
| (3) | Includes unconsolidated affiliates (See Note 4For the three months ended March 31, 2020, the L&S and G&P segments made up $872 million and $422 million of Adjusted EBITDA attributable to MPLX LP, respectively. For the Notesthree months ended March 31, 2019, the L&S and G&P segments made up $559 million and $371 million of Adjusted EBITDA attributable to Consolidated Financial Statements).MPLX LP, respectively. |
The following table presents a reconciliation40
|
| | | | | | | | | | | | | | | |
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| (In millions) | 2017 | | 2016 | | 2017 | | 2016 |
| Reconciliation of net operating margin to income from operations: | | | | | | | |
| Segment revenues | $ | 1,047 |
| | $ | 906 |
| | $ | 2,964 |
| | $ | 2,496 |
|
| Purchased product costs | (170 | ) | | (117 | ) | | (441 | ) | | (310 | ) |
| Total derivative loss related to purchased product costs | 11 |
| | 4 |
| | 5 |
| | 16 |
|
| Other | (1 | ) | | — |
| | (5 | ) | | (5 | ) |
| Net operating margin | 887 |
| | 793 |
| | 2,523 |
| | 2,197 |
|
Revenue adjustment from unconsolidated affiliates(2) | (107 | ) | | (100 | ) | | (287 | ) | | (303 | ) |
Realized derivative loss related to purchased product costs(1) | (2 | ) | | (1 | ) | | (6 | ) | | (4 | ) |
| Other | 2 |
| | 1 |
| | 6 |
| | 4 |
|
Unrealized derivative (losses) gains(1) | (17 | ) | | (2 | ) | | 2 |
| | (23 | ) |
| Income (loss) from equity method investments | 23 |
| | 6 |
| | 29 |
| | (72 | ) |
| Other income | 2 |
| | 2 |
| | 5 |
| | 5 |
|
| Other income - related parties | 22 |
| | 22 |
| | 69 |
| | 67 |
|
| Cost of revenues (excludes items below) | (129 | ) | | (122 | ) | | (381 | ) | | (329 | ) |
| Rental cost of sales | (19 | ) | | (13 | ) | | (44 | ) | | (42 | ) |
| Rental cost of sales - related parties | — |
| | — |
| | (1 | ) | | (1 | ) |
| Purchases - related parties | (114 | ) | | (109 | ) | | (330 | ) | | (286 | ) |
| Depreciation and amortization | (164 | ) | | (151 | ) | | (515 | ) | | (438 | ) |
| Impairment expense | — |
| | — |
| | — |
| | (130 | ) |
| General and administrative expenses | (59 | ) | | (56 | ) | | (174 | ) | | (172 | ) |
| Other taxes | (14 | ) | | (12 | ) | | (40 | ) | | (37 | ) |
| Income from operations | $ | 311 |
| | $ | 258 |
| | $ | 856 |
| | $ | 436 |
|
|
| | | | | | | | | | | |
| | Three Months Ended March 31, |
| (In millions) | 2020 | | 2019 | | Variance |
| Reconciliation of Adjusted EBITDA attributable to MPLX LP and DCF attributable to GP and LP unitholders from Net cash provided by operating activities: | | | | | |
| Net cash provided by operating activities | $ | 1,009 |
| | $ | 853 |
| | $ | 156 |
|
| Changes in working capital items | 112 |
| | 196 |
| | (84 | ) |
| All other, net | (30 | ) | | (15 | ) | | (15 | ) |
| Non-cash equity-based compensation | 5 |
| | 7 |
| | (2 | ) |
| Net gain/(loss) on disposal of assets | — |
| | (1 | ) | | 1 |
|
| Net interest and other financial costs | 216 |
| | 217 |
| | (1 | ) |
| Current income taxes | — |
| | 1 |
| | (1 | ) |
Unrealized derivative (gains)/losses(1) | (15 | ) | | 4 |
| | (19 | ) |
| Acquisition costs | — |
| | 1 |
| | (1 | ) |
| Other adjustments to equity method investment distributions | 5 |
| | 7 |
| | (2 | ) |
| Other | 1 |
| | — |
| | 1 |
|
| Adjusted EBITDA | 1,303 |
| | 1,270 |
| | 33 |
|
| Adjusted EBITDA attributable to noncontrolling interests | (9 | ) | | (7 | ) | | (2 | ) |
Adjusted EBITDA attributable to Predecessor(2) | — |
| | (333 | ) | | 333 |
|
Adjusted EBITDA attributable to MPLX LP(3) | 1,294 |
| | 930 |
| | 364 |
|
| Deferred revenue impacts | 23 |
| | 9 |
| | 14 |
|
| Net interest and other financial costs | (216 | ) | | (217 | ) | | 1 |
|
| Maintenance capital expenditures | (34 | ) | | (37 | ) | | 3 |
|
| Maintenance capital expenditures reimbursements | 14 |
| | 7 |
| | 7 |
|
| Equity method investment capital expenditures paid out | (7 | ) | | (4 | ) | | (3 | ) |
| Other | 4 |
| | — |
| | 4 |
|
Portion of DCF adjustments attributable to Predecessor(2) | — |
| | 69 |
| | (69 | ) |
| DCF | 1,078 |
| | 757 |
| | 321 |
|
| Preferred unit distributions | (31 | ) | | (30 | ) | | (1 | ) |
| DCF attributable to GP and LP unitholders | 1,047 |
| | 727 |
| | 320 |
|
Adjusted EBITDA attributable to Predecessor(2) | — |
| | 333 |
| | (333 | ) |
Portion of DCF adjustments attributable to Predecessor(2) | — |
| | (69 | ) | | 69 |
|
| DCF attributable to GP and LP unitholders (including Predecessor results) | $ | 1,047 |
| | $ | 991 |
| | $ | 56 |
|
| |
| (1) | The PartnershipMPLX makes a distinction between realized orand unrealized gains and losses on derivatives. During the period when a derivative contract is outstanding, changes in the fair value of the derivative are recorded as an unrealized gain or loss. When a derivative contract matures or is settled, the previously recorded unrealized gain or loss is reversed and the realized gain or loss of the contract is recorded. |
| |
| (2) | These amounts relateThe adjusted EBITDA and DCF adjustments related to Partnership-operated unconsolidated affiliates. The chief operating decision makerPredecessor are excluded from adjusted EBITDA attributable to MPLX LP and management include theseDCF attributable to evaluateGP and LP unitholders prior to the segment performance as we continueacquisition date. |
| |
| (3) | For the three months ended March 31, 2020, the L&S and G&P segments made up $872 million and $422 million of Adjusted EBITDA attributable to operateMPLX LP, respectively. For the three months ended March 31, 2019, the L&S and manageG&P segments made up $559 million and $371 million of Adjusted EBITDA attributable to MPLX LP, respectively. |
Three months ended March 31, 2020 compared to three months ended March 31, 2019
Total revenues and other income decreased $1,243 million in the first quarter of 2020 compared to the same period of 2019. The large decrease was driven by our ownership in MarkWest Utica EMG, L.L.C. (“Markwest Utica EMG”), our indirect ownership in Ohio Gathering Company, L.L.C. through our investment of MarkWest Utica EMG and our ownership in Uintah Basin Field Services, L.L.C., as we recognized impairments related to these investments in the first quarter of 2020 in the amount of $1,264 million. The remaining increase of $21 million was primarily due to a $32 million increase in pipeline transportation volumes, prices and fees; $5 million from increased fees and shell capacity from Refining Logistics; a $13 million increase from additional marine vessels; $5 million from decreased expenses on the Explorer pipeline; and $38 million
from higher fees as a result of higher volumes in the Marcellus, Southwest, Bakken and Rockies. These increases were partially offset by a decrease of $71 million due to lower prices, primarily in the Southwest, Southern Appalachia and Marcellus.
Cost of Revenues increased $29 million in the first quarter of 2020 compared to the same period of 2019, primarily due to higher project-related costs, which include repairs, maintenance and operating cost, in the L&S segment as well as in the Marcellus region within the G&P segment. These were partially offset by lower repairs, maintenance and operating costs in the Southwest, Southern Appalachia and Rockies regions in the G&P segment and lower miscellaneous costs and expenses within the L&S segment.
Purchased product costs decreased $59 million in the first quarter of 2020 compared to the same period of 2019. This was primarily due to lower prices of $46 million in the Southwest and Southern Appalachia, partially offset by higher volumes of $6 million in the Southwest. In addition, there was a decrease of $18 million in unrealized derivative gains from prior year.
Depreciation and amortization expense increased $24 million in the first quarter of 2020 compared to the same period of 2019, primarily due to additions to in-service property, plant and equipment throughout 2019 and the first three months of 2020 as well as accelerated depreciation of certain gathering assets, partially offset by a decrease due to the classification of certain assets as a sales-type lease.
Impairment expense increased $2,165 million in the first quarter of 2020 compared to the same period of 2019. During the first quarter of 2020 we recorded impairment expense for goodwill, intangible assets and property, plant and equipment of $1,814 million, $177 million and $174 million, respectively. The impairment of goodwill related to our Eastern G&P reporting unit while the intangible asset and property, plant and equipment impairments relate to certain assets in our Southwest region. The impairments were primarily driven by the slowing of drilling activity, which has reduced production growth forecasts from our producer customers.
Net interest expense and other financial costs increased $6 million in the first quarter of 2020 compared to the same period of 2019. The increase is primarily related to costs associated with debt facilities that were entered into during the second half of 2019
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) provision/(benefit) for income taxes; (iii) amortization of deferred financing costs; (iv) extinguishment of debt; (v) non-cash equity-based compensation; (vi) impairment expense; (vii) net interest and other financial costs; (viii) income/(loss) from equity method investments; (ix) distributions and adjustments related to equity method investments; (x) unrealized derivative gains/(losses); (xi) acquisition costs; (xii) noncontrolling interests; and (xiii) other adjustments as deemed necessary. These items are either: (i) believed to be non-recurring in nature; (ii) not believed to be allocable or controlled by the segment; or (iii) are not tied to the operational performance of the segment.
The tables below present information about Segment Adjusted EBITDA for the reported segments for the three months ended March 31, 2020 and 2019. Prior period financial information has been retrospectively adjusted for common control transactions.
L&S Segment
| |
| (1) | Includes adjusted EBITDA attributable to Predecessor. |
|
| | | | | | | | | | | |
| Three Months Ended March 31, |
| (In millions) | 2020 |
| 2019 |
| Variance |
| Service revenue | $ | 1,004 |
|
| $ | 889 |
|
| $ | 115 |
|
| Rental income | 242 |
|
| 335 |
|
| (93 | ) |
| Product related revenue | 19 |
|
| 15 |
|
| 4 |
|
| Income from equity method investments | 50 |
|
| 45 |
|
| 5 |
|
| Other income | 51 |
|
| 12 |
|
| 39 |
|
| Total segment revenues and other income | 1,366 |
|
| 1,296 |
|
| 70 |
|
| Cost of revenues | 238 |
|
| 226 |
|
| 12 |
|
| Purchases - related parties | 199 |
|
| 190 |
|
| 9 |
|
| Depreciation and amortization | 138 |
|
| 126 |
|
| 12 |
|
| General and administrative expenses | 52 |
|
| 51 |
|
| 1 |
|
| Other taxes | 16 |
|
| 16 |
|
| — |
|
| Segment income from operations | 723 |
|
| 687 |
|
| 36 |
|
| Depreciation and amortization | 138 |
|
| 126 |
|
| 12 |
|
| Income from equity method investments | (50 | ) |
| (45 | ) |
| (5 | ) |
| Distributions/adjustments related to equity method investments | 57 |
|
| 54 |
|
| 3 |
|
| Acquisition costs | — |
|
| 1 |
|
| (1 | ) |
| Non-cash equity-based compensation | 3 |
|
| 5 |
|
| (2 | ) |
| Other | 1 |
| | — |
| | 1 |
|
| Adjusted EBITDA attributable to Predecessor | — |
|
| (269 | ) |
| 269 |
|
Segment adjusted EBITDA(1) | 872 |
|
| 559 |
|
| 313 |
|
|
|
|
|
|
|
| Capital expenditures | 184 |
|
| 198 |
|
| (14 | ) |
| Investments in unconsolidated affiliates | $ | 54 |
|
| $ | 7 |
|
| $ | 47 |
|
| |
| (1) | See the operations. Therefore,Reconciliation of Adjusted EBITDA attributable to MPLX LP and DCF attributable to GP and LP unitholders from Net income table for the impactreconciliation to the most directly comparable GAAP measure. |
Three months ended March 31, 2020 compared to three months ended March 31, 2019
Service revenue increased $115 million in the first quarter of 2020 compared to the same period of 2019. This was primarily due to a $55 million increase due to the classification of lease income between service revenue, rental income and other income based on the nature of the contract; a $32 million increase in pipeline transportation volumes, prices and fees; $5 million from increased fees and shell capacity from Refining Logistics; a $13 million increase from additional marine vessels; and $10 million from various immaterial items.
Rental income decreased $93 million in the first quarter of 2020 compared to the same period of 2019, primarily due to a net decrease of $93 million due to the classification of lease income between service revenue, rental income and other income based on the nature of the contract.
Income from equity method investments increased $5 million in the first quarter of 2020 compared to the same period of 2019, primarily due to lower expenses on the Explorer pipeline.
Other Income increased $39 million in the first quarter of 2020 compared to the same period of 2019, primarily due to an increase of $38 million due to the classification of lease income between service revenue, rental income and other income based on the nature of the contract.
Cost of Revenues increased $12 million in the first quarter of 2020 compared to the same period of 2019, primarily due to higher project-related costs partially offset by lower other miscellaneous expenses.
Purchases - related parties increased $9 million in the first quarter of 2020 compared to the same period of 2019, primarily due to increased employee-related costs and other miscellaneous expenses from MPC partially offset by higher reimbursements from MPC for reimbursable projects.
Depreciation and amortization increased $12 million in the first quarter of 2020 compared to the same period of 2019, primarily due to additions to in-service property, plant and equipment throughout 2019 and the first quarter of 2020 partially offset by a decrease due to the classification of certain assets as a sales-type lease.
G&P Segment
| |
| (1) | Includes impairment of equity method investments of $1,264 million. |
| |
| (2) | Includes impairment of goodwill of $1,814 million, long-lived assets including intangibles of $351 million and equity method investments of $1,264 million. |
| |
| (3) | Includes adjusted EBITDA attributable to Predecessor. |
|
| | | | | | | | | | | |
| Three Months Ended March 31, |
| (In millions) | 2020 | | 2019 |
| Variance |
| Service revenue | $ | 536 |
|
| $ | 528 |
|
| $ | 8 |
|
| Rental income | 88 |
|
| 89 |
|
| (1 | ) |
| Product related revenue | 222 |
|
| 276 |
|
| (54 | ) |
| (Loss)/income from equity method investments | (1,234 | ) |
| 32 |
|
| (1,266 | ) |
| Other income | 14 |
|
| 14 |
|
| — |
|
| Total segment revenues and other (loss)/income | (374 | ) |
| 939 |
|
| (1,313 | ) |
| Cost of revenues | 211 |
|
| 193 |
|
| 18 |
|
| Purchased product costs | 135 |
|
| 194 |
|
| (59 | ) |
| Purchases - related parties | 77 |
|
| 88 |
|
| (11 | ) |
| Depreciation and amortization | 187 |
|
| 175 |
|
| 12 |
|
| Impairment expense | 2,165 |
| | — |
| | 2,165 |
|
| General and administrative expenses | 45 |
|
| 50 |
|
| (5 | ) |
| Other taxes | 15 |
|
| 14 |
|
| 1 |
|
| Segment (loss)/income from operations | (3,209 | ) |
| 225 |
|
| (3,434 | ) |
| Depreciation and amortization | 187 |
|
| 175 |
|
| 12 |
|
| Impairment expense | 2,165 |
| | — |
| | 2,165 |
|
| Loss/(income) from equity method investments | 1,234 |
|
| (32 | ) |
| 1,266 |
|
| Distributions/adjustments related to equity method investments | 67 |
|
| 68 |
|
| (1 | ) |
Unrealized derivative (gains)/losses(1) | (15 | ) |
| 4 |
|
| (19 | ) |
| Non-cash equity-based compensation | 2 |
|
| 2 |
|
| — |
|
| Adjusted EBITDA attributable to Predecessor | — |
| | (64 | ) | | 64 |
|
| Adjusted EBITDA attributable to noncontrolling interests | (9 | ) |
| (7 | ) |
| (2 | ) |
Segment Adjusted EBITDA(2) | 422 |
|
| 371 |
|
| 51 |
|
|
|
|
|
|
|
| Capital expenditures | 134 |
|
| 306 |
| | (172 | ) |
| Investments in unconsolidated affiliates | $ | 37 |
|
| $ | 128 |
|
| $ | (91 | ) |
| |
| (1) | MPLX makes a distinction between realized and unrealized gains and losses on derivatives. During the period when a derivative contract is outstanding, changes in the fair value of the revenuederivative are recorded as an unrealized gain or loss. When a derivative contract matures or is includedsettled, the previously recorded unrealized gain or loss is reversed and the realized gain or loss of the contract is recorded. |
| |
| (2) | See the Reconciliation of Adjusted EBITDA attributable to MPLX LP and DCF attributable to GP and LP unitholders from Net income table for segment reporting purposes, but removed forthe reconciliation to the most directly comparable GAAP purposes.measure. |
Three months ended March 31, 2020 compared to three months ended March 31, 2019
Service revenue increased $8 million in the first quarter of 2020 compared to the same period of 2019. This was primarily due to higher fees from higher volumes in the Marcellus, Southwest and Bakken of $30 million, offset by lower volumes of $5 million in the Rockies as well as other miscellaneous decreases.
Product related revenue decreased $54 million in the first quarter of 2020 compared to the same period of 2019. This was primarily due to lower prices in the Southwest, Southern Appalachia and Marcellus of approximately $71 million. This was partially offset by $13 million of volume increases in the Southwest, Marcellus, Bakken and Rockies as well as other miscellaneous increases.
Income from equity method investments decreased $1,266 million in the first quarter of 2020 compared to the same period of 2019. The large decrease was driven by our ownership in MarkWest Utica EMG, L.L.C. (“Markwest Utica EMG”), our indirect ownership in Ohio Gathering Company, L.L.C. through our investment of MarkWest Utica EMG and our ownership in Uintah Basin Field Services, L.L.C., as we recognized impairments related to these investments in the first quarter of 2020 in the amount of $1,264 million. Additionally, there was a decrease in various joint ventures due to lower volumes processed and lower NGL prices compared to the same period of 2019, offset by an increase in the Sherwood Midstream LLC joint venture due to additional plants coming online during 2019.
Cost of revenues increased $18 million in the first quarter of 2020 compared to the same period of 2019. The majority of the increase is attributable to aligning various expenses as a result of the ANDX acquisition as well as higher repairs, maintenance and operating costs in the Marcellus offset by lower repairs, maintenance and operating costs in the Southwest, Southern Appalachia and Rockies.
Purchased product costs decreased $59 million in the first quarter of 2020 compared to the same period of 2019. This was primarily due to lower prices of $46 million in the Southwest and Southern Appalachia, partially offset by higher costs from higher volumes of $6 million in the Southwest. In addition, there was an increase of $18 million in unrealized derivative gains from prior year.
Purchases - related parties decreased $11 million in the first quarter of 2020 compared to the same period of 2019, with this decrease primarily being attributable to aligning various expenses as a result of the ANDX acquisition.
Depreciation and amortization increased $12 million in the first quarter of 2020 compared to the same period of 2019, with the majority of the increase being due to additions to in-service property, plant and equipment throughout 2019 and the first three months of 2020 as well as accelerated depreciation of certain gathering assets.
Impairment expense increased $2,165 million in first quarter of 2020 compared to the same period of 2019. During the first quarter of 2020 we recorded impairment expense for goodwill, intangible assets and property, plant and equipment of $1,814 million, $177 million and $174 million, respectively. The impairment of goodwill related to our Eastern G&P reporting unit while the intangible asset and property, plant and equipment impairments relate to certain assets in our Southwest region. The impairments were primarily driven by the slowing of drilling activity, which has reduced production growth forecasts from our producer customers.
General and Administrative expenses decreased $5 million in the first quarter of 2020 compared to the same period of 2019, primarily due to lower employee related costs.
SEASONALITY
The volume of crude oil and refined products transported on our pipeline systems, at our barge dock and stored atutilizing our storage assets is directly affected by the level of supply and demand for crude oil and refined products in the markets served directly or indirectly by our assets. Many effects of seasonality on the L&S segment’s revenues will be mitigated through the use of our fee-based transportation and storage services agreements with MPC that include minimum volume commitments.
Our G&P segment can be affected by seasonal fluctuations in the demand for natural gas and NGLs and the related fluctuations in commodity prices caused by various factors such as changes in transportation and travel patterns andincluding variations in weather patterns from year to year. However, weWe are able to manage the seasonality impactimpacts through the execution of our marketing strategy. We have access to up to 50 million gallons of propanestrategy and via our storage capacity in the Southern Appalachia region provided by an arrangement with a third party which provides us with flexibility to manage the seasonality impact.capabilities. Overall, our exposure to the seasonalseasonality fluctuations in the commodity markets is declining due to our growth in fee-based business.
OPERATING DATA(1)
|
| | | | | | | | | | | | | | | |
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| L&S | | | | | | | |
Pipeline throughput (mbpd)(1) | | | | | | | |
| Crude oil pipelines | 2,046 |
| | 1,775 |
| | 1,901 |
| | 1,665 |
|
| Product pipelines | 1,131 |
| | 992 |
| | 1,051 |
| | 989 |
|
| Total pipelines | 3,177 |
| | 2,767 |
| | 2,952 |
| | 2,654 |
|
| | | | | | | | |
Average tariff rates ($ per barrel)(1)(2) | | | | | | | |
| Crude oil pipelines | $ | 0.54 |
| | $ | 0.55 |
| | $ | 0.57 |
| | $ | 0.57 |
|
| Product pipelines | 0.75 |
| | 0.69 |
| | 0.74 |
| | 0.67 |
|
| Total pipelines | 0.62 |
| | 0.60 |
| | 0.63 |
| | 0.61 |
|
| | | | | | | | |
| Terminal throughput (mbpd) | 1,496 |
| | 1,517 |
| | 1,470 |
| | 1,510 |
|
| | | | | | | | |
Marine Assets (number in operation)(3) | | | | | | | |
| Barges | 232 |
| | 217 |
| | 232 |
| | 217 |
|
| Towboats | 18 |
| | 18 |
| | 18 |
| | 18 |
|
| | | | | | | | |
| G&P | | | | | | | |
| Gathering Throughput (MMcf/d) | | | | | | | |
| Marcellus Operations | 1,005 |
| | 946 |
| | 965 |
| | 922 |
|
Utica Operations(4) | 1,324 |
| | 916 |
| | 1,065 |
| | 936 |
|
Southwest Operations(5) | 1,400 |
| | 1,444 |
| | 1,385 |
| | 1,455 |
|
| Total gathering throughput | 3,729 |
| | 3,306 |
| | 3,415 |
| | 3,313 |
|
| | | | | | | | |
| Natural Gas Processed (MMcf/d) | | | | | | | |
| Marcellus Operations | 3,986 |
| | 3,273 |
| | 3,778 |
| | 3,166 |
|
Utica Operations(4) | 1,000 |
| | 1,050 |
| | 982 |
| | 1,068 |
|
| Southwest Operations | 1,331 |
| | 1,339 |
| | 1,310 |
| | 1,209 |
|
| Southern Appalachian Operations | 264 |
| | 244 |
| | 266 |
| | 248 |
|
| Total natural gas processed | 6,581 |
| | 5,906 |
| | 6,336 |
| | 5,691 |
|
| | | | | | | | |
| C2 + NGLs Fractionated (mbpd) | | | | | | | |
Marcellus Operations(6) | 326 |
| | 274 |
| | 310 |
| | 254 |
|
Utica Operations(4)(6) | 39 |
| | 41 |
| | 40 |
| | 43 |
|
| Southwest Operations | 18 |
| | 19 |
| | 19 |
| | 17 |
|
Southern Appalachian Operations(7) | 14 |
| | 14 |
| | 15 |
| | 16 |
|
Total C2 + NGLs fractionated(8) | 397 |
| | 348 |
| | 384 |
| | 330 |
|
| | | | | | | | |
| Pricing Information | | | | | | | |
| Natural Gas NYMEX HH ($ per MMBtu) | $ | 2.96 |
| | $ | 2.80 |
| | $ | 3.05 |
| | $ | 2.34 |
|
C2 + NGL Pricing ($ per gallon)(9) | $ | 0.66 |
| | $ | 0.46 |
| | $ | 0.62 |
| | $ | 0.44 |
|
|
| | | | | | | |
| | Three Months Ended
March 31, |
| | 2020 | | 2019 |
| L&S | | | |
| Pipeline throughput (mbpd) | | | |
| Crude oil pipelines | 3,210 |
| | 3,105 |
|
| Product pipelines | 1,905 |
| | 1,897 |
|
| Total pipelines | 5,115 |
| | 5,002 |
|
| | | | |
Average tariff rates ($ per barrel)(2) | | | |
| Crude oil pipelines | $ | 0.93 |
| | $ | 0.96 |
|
| Product pipelines | 0.79 |
| | 0.68 |
|
| Total pipelines | $ | 0.88 |
| | $ | 0.85 |
|
| | | | |
| Terminal throughput (mbpd) | 2,966 |
| | 3,220 |
|
| | | | |
Marine Assets (number in operation)(3) | | | |
| Barges | 305 |
| | 256 |
|
| Towboats | 23 |
| | 23 |
|
|
| | | | | |
| | Three Months Ended
March 31, 2020 |
| | MPLX LP(4) | | MPLX LP Operated(5) |
| G&P | | | |
| Gathering Throughput (MMcf/d) | | | |
| Marcellus Operations | 1,420 |
| | 1,420 |
|
| Utica Operations | — |
| | 1,800 |
|
| Southwest Operations | 1,557 |
| | 1,601 |
|
| Bakken Operations | 156 |
| | 156 |
|
| Rockies Operations | 592 |
| | 775 |
|
| Total gathering throughput | 3,725 |
| | 5,752 |
|
| | | | |
| Natural Gas Processed (MMcf/d) | | | |
| Marcellus Operations | 4,198 |
| | 5,522 |
|
| Utica Operations | — |
| | 648 |
|
| Southwest Operations | 1,648 |
| | 1,679 |
|
| Southern Appalachian Operations | 243 |
| | 243 |
|
| Bakken Operations | 156 |
| | 156 |
|
| Rockies Operations | 539 |
| | 539 |
|
| Total natural gas processed | 6,784 |
| | 8,787 |
|
| | | | |
| C2 + NGLs Fractionated (mbpd) | | | |
Marcellus Operations(6) | 456 |
| | 456 |
|
Utica Operations(6) | — |
| | 34 |
|
| Southwest Operations | 15 |
| | 15 |
|
Southern Appalachian Operations(7) | 12 |
| | 12 |
|
| Bakken Operations | 31 |
| | 31 |
|
| Rockies Operations | 5 |
| | 5 |
|
Total C2 + NGLs fractionated(8) | 519 |
| | 553 |
|
|
| | | | | |
| | Three Months Ended
March 31, 2019 |
| | MPLX LP(4) | | MPLX LP Operated(5) |
| G&P | | | |
| Gathering Throughput (MMcf/d) | | | |
| Marcellus Operations | 1,282 |
| | 1,282 |
|
| Utica Operations | — |
| | 2,109 |
|
| Southwest Operations | 1,581 |
| | 1,581 |
|
| Bakken Operations | 152 |
| | 152 |
|
| Rockies Operations | 642 |
| | 827 |
|
| Total gathering throughput | 3,657 |
| | 5,951 |
|
| | | | |
| Natural Gas Processed (MMcf/d) | | | |
| Marcellus Operations | 4,152 |
| | 5,148 |
|
| Utica Operations | — |
| | 817 |
|
| Southwest Operations | 1,599 |
| | 1,599 |
|
| Southern Appalachian Operations | 235 |
| | 235 |
|
| Bakken Operations | 152 |
| | 152 |
|
| Rockies Operations | 570 |
| | 570 |
|
| Total natural gas processed | 6,708 |
| | 8,521 |
|
| | | | |
| C2 + NGLs Fractionated (mbpd) | | | |
Marcellus Operations(6) | 420 |
| | 420 |
|
Utica Operations(6) | — |
| | 44 |
|
| Southwest Operations | 17 |
| | 17 |
|
Southern Appalachian Operations(7) | 13 |
| | 13 |
|
| Bakken Operations | 16 |
| | 16 |
|
| Rockies Operations | 4 |
| | 4 |
|
Total C2 + NGLs fractionated(8) | 470 |
| | 514 |
|
|
| | | | | | | |
| | Three Months Ended
March 31, |
| | 2020 | | 2019 |
| Pricing Information | | | |
| Natural Gas NYMEX HH ($ per MMBtu) | $ | 1.87 |
| | $ | 2.87 |
|
C2 + NGL Pricing ($ per gallon)(9) | $ | 0.40 |
| | $ | 0.62 |
|
| |
| (1) | Pipeline throughput and tariff rates asOperating data is inclusive of September 30, 2016 have been retrospectively adjusted to reflect the acquisition of HST.operating data for ANDX. |
| |
| (2) | Average tariff rates calculated using pipeline transportation revenues divided by pipeline throughput barrels. |
| |
| (3) | Represents total at end of period. |
| |
| (4) | Includes unconsolidated equity method investmentsThis column represents operating data for entities that are shownhave been consolidated for segment purposes only.into the MPLX financial statements. |
| |
| (5) | Includes approximately two MMcf/d related toThis column represents operating data for entities that have been consolidated into the unconsolidatedMPLX financial statements as well as operating data for MPLX-operated equity method investment, Wirth, for the three months ended September 30, 2017, and 230 MMcf/d related to unconsolidated equity method investments, Wirth and MarkWest Pioneer, for the nine months ended September 30, 2017. Includes approximately 307 MMcf/d and 299 MMcf/d related to unconsolidated equity method investments, Wirth and MarkWest Pioneer, for the three and nine months ended September 30, 2016, respectively.investments. |
| |
| (6) | Hopedale is jointly owned by Ohio Fractionation and MarkWest Utica EMG. Ohio Fractionation is a subsidiary of MarkWest Liberty Midstream. MarkWest Liberty Midstream and MarkWest Utica EMG are entities that operate in the Marcellus and Utica regions, respectively. The Marcellus Operations includes itsOhio Fractionation’s portion utilized of the jointly owned Hopedale Fractionation Complex. The Utica Operations includes Utica’sMarkWest Utica EMG’s portion utilized of the jointly owned Hopedale Fractionation Complex. Additionally, Sherwood Midstream has the right to fractionation revenue and the obligation to pay expenses related to 2040 mbpd of capacity in the Hopedale 3 fractionator.and Hopedale 4 fractionators. |
| |
| (7) | Includes NGLs fractionated for the Marcellus Operations and Utica Operations. |
| |
| (8) | Purity ethane makes up approximately 164190 mbpd and 160189 mbpd of total MPLX Operated, fractionated products for the three and nine months ended September 30, 2017, respectively,March 31, 2020 and 2019, respectively. Purity ethane makes up approximately 137183 mbpd and 125176 mbpd of total MPLX LP consolidated, fractionated products for the three and nine months ended September 30, 2016,March 31, 2020 and 2019, respectively. |
| |
| (9) | 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. |
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Our cash and cash equivalents balance was $3$57 million at September 30, 2017 compared to $234March 31, 2020 and $15 million at December 31, 2016.2019. The change in cash, and 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, | Three Months Ended March 31, |
| (In millions) | 2017 | | 2016 | 2020 | | 2019 |
| Net cash provided by (used in): | | | | | | |
| Operating activities | $ | 1,338 |
| | $ | 975 |
| $ | 1,009 |
| | $ | 853 |
|
| Investing activities | (1,837 | ) | | (892 | ) | (362 | ) | | (700 | ) |
| Financing activities | 268 |
| | 82 |
| (605 | ) | | (116 | ) |
| Total | $ | (231 | ) | | $ | 165 |
| $ | 42 |
| | $ | 37 |
|
Net cash provided by operating activities increased $363$156 million in the first ninethree months of 20172020 compared to the first ninethree months of 2016, the majority2019, primarily due to increased net income of which is$24 million, excluding impairments, as well as other changes related to an increasedepreciation and amortization and changes in adjusted EBITDA of $269 million. The favorable change in adjusted EBITDA was driven primarily by higher prices and volumes, the inclusion of MPLXT, since it was not formed as a business until April 1, 2016, and the acquisition of the Ozark pipeline. In addition, there was an increase in distributions received from unconsolidated affiliates of $25 million due to the acquisition of an equity interest in the Bakken Pipeline system and the joint-interest acquisitions.working capital items.
Net cash used in investing activities increased $945decreased $338 million in the first ninethree months of 20172020 compared to the first ninethree months of 2016,2019, primarily due to the acquisition of an equity interest in the Bakken Pipeline system for $513 million, investments in other unconsolidated entities of approximately $177 million, $219 million for the acquisition of the Ozark pipeline, $30 million for the buy-out of an equity method investment partner, an increase in cash used for additions to property, plant and equipmentdecreased spending related to variousthe capital projects, as well as a net decrease of $23 million in investment loans with MPC. Partially offsetting these items wasbudget, a return of capital of $24 million from our acquisitioninvestment in Wink to Webster, decreased contributions to equity method investments as well as cash received from the sale of equity interests in Sherwood Midstream and Sherwood Midstream Holdings.certain assets.
Financing activities were a $268$605 million sourceuse of cash in the first ninethree months of 20172020 compared to a $82$116 million sourceuse of cash in the first ninethree months of 2016.2019. The sourceuse of cash infor the first ninethree months of 20172020 was primarily due to $2.2 billiondistributions of net proceeds from$717 million to common unitholders, distributions of $20 million to Series A preferred unitholders, distributions of $21 million to Series B preferred unitholders, distributions of $9 million to noncontrolling interests, repayment of $575 million on the New Senior Notes, $420MPLX Credit Agreement, payments of $6 million related to financing leases, and repayment of proceeds under$2,261 million on the bankMPC Loan Agreement. These uses of cash were offset by borrowings of $1,325 million on the revolving credit facility, $128$1,667 million inon the MPC Loan Agreement, and $14 million of contributions from noncontrolling interests and $483 million of net proceeds from sales of units under the ATM Program. These items were partially offset by distributions to MPC of $1.9 billion for the acquisition of HST, WHC, MPLXT and the Joint-MPC.
Interest Acquisition, $250 million repayment of the term loan facility, distributions of $49 million to Preferred unitholders, and increased distributions of $188 million to unitholders and our general partner due mainly to the increase in units outstanding as well as a 10 percent increase in the distribution per limited partner unit.
Debt and Liquidity Overview
Our outstanding borrowings at September 30, 2017 and DecemberMarch 31, 2016 consisted2020 consist of the following:
|
| | | | | | | |
| (In millions) | September 30, 2017 | | December 31, 2016 |
| MPLX LP: | | | |
| Bank revolving credit facility due 2022 | $ | 420 |
| | $ | — |
|
| Term loan facility due 2019 | — |
| | 250 |
|
| 5.500% senior notes due February 2023 | 710 |
| | 710 |
|
| 4.500% senior notes due July 2023 | 989 |
| | 989 |
|
| 4.875% senior notes due December 2024 | 1,149 |
| | 1,149 |
|
| 4.000% senior notes due February 2025 | 500 |
| | 500 |
|
| 4.875% senior notes due June 2025 | 1,189 |
| | 1,189 |
|
| 4.125% senior notes due March 2027 | 1,250 |
| | — |
|
| 5.200% senior notes due March 2047 | 1,000 |
| | — |
|
| Consolidated subsidiaries: | | | |
| MarkWest - 4.500% - 5.500%, due 2023-2025 | 63 |
| | 63 |
|
| MPL - capital lease obligations due 2020 | 7 |
| | 8 |
|
| Total | 7,277 |
| | 4,858 |
|
| Unamortized debt issuance costs | (27 | ) | | (7 | ) |
| Unamortized discount | (401 | ) | | (428 | ) |
| Amounts due within one year | (1 | ) | | (1 | ) |
| Total long-term debt due after one year | $ | 6,848 |
| | $ | 4,422 |
|
|
| | | |
| (In millions) | March 31, 2020 |
| MPLX LP: | |
| Bank revolving credit facility | 750 |
|
| Term loan facility | 1,000 |
|
| Floating rate senior notes | 2,000 |
|
| Fixed rate senior notes | 16,887 |
|
| Consolidated subsidiaries: | |
| MarkWest | 23 |
|
| ANDX | 190 |
|
| Financing lease obligations | 14 |
|
| Total | 20,864 |
|
| Unamortized debt issuance costs | (103 | ) |
| Unamortized discount/premium | (290 | ) |
| Amounts due within one year | (4 | ) |
| Total long-term debt due after one year | $ | 20,467 |
|
The increase in debt as of September 30, 2017 compared to year-end 2016 was due to the public offering of the New Senior Notes in the first quarter of 2017 and from borrowings on the intercompany loan with MPC and the bank revolving credit facility for general partnership purposes including the acquisitions of HST, WHC, MPLXT and the Joint-Interest Acquisition from MPC, the acquisition of our equity interest in MarEn Bakken, the acquisition of the Ozark pipeline and capital expenditures. See Notes 3, 4 and 14 of the Notes to Consolidated Financial Statements for additional information.
On July 21, 2017, the Partnership entered into a credit agreement to replace its previous $2.0 billion five-year bank revolving credit facility with a $2.25 billion five-year bank revolving credit facility that expires in July 2022 (“MPLX Credit Agreement 2022”). The financial covenants and the interest rate terms contained in the new credit agreement are substantially the same as those contained in the previous bank revolving credit facility. Additionally, on July 19, 2017, MPLX LP prepaid the entire outstanding principal amount of its $250 million term loan with cash on hand.
The MPLX Credit Agreement 2022 includes certain representations and warranties, affirmative and negative covenants and events of default that we consider usual and customary for an agreement of that type, and that could, among other things, limit our ability to pay distributions to our unitholders. The financial covenant requires us 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 2022) for the prior four fiscal quarters of no greater than 5.0 to 1.0 (or 5.5 to 1.0 for up to two fiscal quarters following certain acquisitions). Consolidated EBITDA is subject to adjustments for certain acquisitions completed and capital projects undertaken during the relevant period. As of September 30, 2017, we were in compliance with this financial covenant with a ratio of Consolidated Total Debt to Consolidated EBITDA of 3.4 to 1.0, as well as other covenants contained in the MPLX Credit Agreement 2022. As disclosed in Note 2 of the Notes to Consolidated Financial Statements, we expect the adoption of the lease accounting standards update to result in the recognition of a significant lease obligation. The MPLX Credit Agreement 2022 contains provisions under which the effects of the new accounting standard are not recognized for purposes of financial covenant calculation violations.
Our intention is to maintain an investment grade credit profile. As of September 30, 2017,April 23, 2020, the credit ratings on our senior unsecured debt were at or above investment grade level as follows:
|
| | |
| Rating Agency | | Rating |
| Moody’s | | Baa3 (stableBaa2 (negative outlook) |
| Standard & Poor’s | | BBB- (stableBBB (negative outlook) |
| Fitch | | BBB- (stableBBB (negative outlook) |
The ratings reflect the respective views of the rating agencies. Although it is our intention to maintain a credit profile that supports an investment grade rating, there is no assurance that these ratings will continue for any given period of time. The ratings may be revised or withdrawn entirely by the rating agencies if, in their respective judgments, circumstances so warrant.
The MPLX Credit Agreement 2022 doesand Term Loan Agreement contain 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 of March 31, 2020, we were in compliance with the covenants, including the financial covenant with a ratio of Consolidated Total Debt to Consolidated EBITDA of 3.8 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 wouldcould, among other things, increase the applicable interest rates and other fees payable under the MPLX Credit Agreement 2022and the Term Loan Agreement and may limit our flexibilityability to obtain future financing.financing, including refinancing existing indebtedness.
Our liquidity totaled $2.1$4.3 billion at September 30, 2017March 31, 2020 consisting of:
| | | | September 30, 2017 | March 31, 2020 |
| (In millions) | Total Capacity | | Outstanding Borrowings | | Available Capacity | Total Capacity | | Outstanding Borrowings | | Available Capacity |
MPLX LP - bank revolving credit facility expiring 2022(1) | $ | 2,250 |
| | $ | (423 | ) | | $ | 1,827 |
| |
| MPC Investment - loan agreement | 500 |
| | (202 | ) | | 298 |
| |
Bank revolving credit facility due 2024(1) | | $ | 3,500 |
| | $ | (750 | ) | | $ | 2,750 |
|
| MPC Loan Agreement | | 1,500 |
| | — |
| | 1,500 |
|
| Total liquidity | $ | 2,750 |
| | $ | (625 | ) | | $ | 2,125 |
| $ | 5,000 |
| | $ | (750 | ) | | 4,250 |
|
| Cash and cash equivalents | | | | | 3 |
| | | | | 57 |
|
| Total liquidity | | | | | $ | 2,128 |
| | | | | $ | 4,307 |
|
| |
| (1) | Outstanding borrowings include $3less than $1 million in letters of credit outstanding under this facility. |
We expect our ongoing sources of liquidity to include cash generated from operations and borrowings under our revolving credit agreementsthe MPC Loan Agreement, the MPLX Credit Agreement and issuances of additional debt and equity securities.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, repayment of debt maturities and quarterly cash distributions. MPC manages our cash and cash equivalents on our behalf directly with third-party institutions as part of the treasury services that it provides to us under our omnibus agreement. From time to time, we may also consider utilizing other sources of liquidity, including the formation of joint ventures or sales of non-strategic assets.
Equity and Preferred Units Overview
Common units
The table below summarizes the changes in the number of units outstanding through September 30, 2017:March 31, 2020:
|
| | | | | | | | | | | |
| (In units) | Common | | Class B | | General Partner | | Total |
| Balance at December 31, 2016 | 357,193,288 |
| | 3,990,878 |
| | 7,371,105 |
| | 368,555,271 |
|
| Unit-based compensation awards | 183,509 |
| | — |
| | 3,745 |
| | 187,254 |
|
| Issuance of units under the ATM Program | 13,846,998 |
| | — |
| | 282,591 |
| | 14,129,589 |
|
| Contribution of HST/WHC/MPLXT | 12,960,376 |
| | — |
| | 264,497 |
| | 13,224,873 |
|
| Contribution of the Joint-Interest Acquisition | 18,511,134 |
| | — |
| | 377,778 |
| | 18,888,912 |
|
| Class B conversion | 4,350,057 |
| | (3,990,878 | ) | | 7,330 |
| | 366,509 |
|
| Balance at September 30, 2017 | 407,045,362 |
| | — |
| | 8,307,046 |
| | 415,352,408 |
|
|
| | |
| (In units) | |
| Balance at December 31, 2019 | 1,058,355,471 |
|
| Unit-based compensation awards | 151,878 |
|
| Balance at March 31, 2020 | 1,058,507,349 |
|
For more details on equity activity, see Notes 7 and 8 of the Notes to Consolidated Financial Statements.ATM
On July 1, 2017, all of the remaining 3,990,878 Class B units automatically converted into 1.09 MPLX LP common units and the right to receive $6.20 per unit in cash. MPC funded this cash payment, which reduced our liability payable to Class B
unitholders by approximately $25 million on July 1, 2017. As a result of the Class B units conversion on July 1, 2017, MPLX GP contributed less than $1 million in exchange for 7,330 general partner units to maintain its two percent general partner interest. As common units outstanding as of the August 7, 2017 record date, the converted Class B units participated in the second quarter distribution.
The Partnership expects the net proceeds, if any, from sales under theour ATM Program will be used for general partnershipbusiness purposes including repayment or refinancing of debt and funding for acquisitions, working capital requirements and capital expenditures. During the ninethree months ended September 30, 2017, the sale ofMarch 31, 2020, we issued no common units under theour ATM Program generated net proceeds of approximately $473 million.program. As of September 30, 2017,March 31, 2020, $1.7 billion of common units remain available for issuance through the ATM Program under the Distribution Agreement.Program.
MPC agreed to waive two-thirds of the first quarter 2017 distributions on the common units issued in connection with the acquisition of HST, WHC and MPLXT. As a result of this waiver, MPC did not receive general partner distributions or IDRs that would have otherwise accrued on such common units with respect to the first quarter 2017 distributions. The value of these waived distributions was $6 million. Additionally, in connection with our acquisition of a partial, indirect equity interest in the Bakken Pipeline system on February 15, 2017, MPC agreed to waive its right to receive incentive distributions of $1.6 million per quarter for twelve consecutive quarters beginning with the distributions declared in the first quarter of 2017 and paid to MPC in the second quarter of 2017, which was prorated from the acquisition date. Lastly, MPC agreed to waive two-thirds of the third quarter 2017 distributions on the common units issued in connection with the Joint-Interest Acquisition. As a result of this waiver, MPC did not receive the distributions or IDRs that would have otherwise accrued on such common units with respect to the third quarter 2017 distributions. The value of these waived distributions was $10 million.Distributions
We intend to pay at least thea minimum quarterly distribution to the holders of our common units of $0.2625 per unit, or $1.05 per quarter, which equatesunit on an annualized basis, to $109the 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 $278 million per quarter, or $436$1,111 million per year, based on the number of common and general partner units outstanding at September 30, 2017.March 31, 2020. On October 25, 2017,April 28, 2020, we announced the board of directors of our general partner had declared a distribution of $0.5875$0.6875 per unit that will be paid on November 14, 2017May 15, 2020 to unitholders of record on November 6, 2017.May 8, 2020. This represents an increase of $0.0250 per unit, or four percent, aboveis consistent with the secondfourth quarter 20172019 distribution of $0.5625$0.6875 per unit and an increase of 144.6 percent over the thirdfirst quarter 20162019 distribution. This increase in the distribution is consistent with our intent to maintain an attractive distribution growth profile over an extended period of time.rate will also be received by Series A preferred unitholders. Although our Partnership Agreementpartnership 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. Series B preferred unitholders are entitled to receive a fixed distribution of $68.75 per unit, per annum, payable semi-annually in arrears on February 15 and August 15, or the first business day thereafter, up to and including February 15, 2023. After February 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. MPLX made a cash distribution to holders of the Series B preferred unitholders in February 2020 for approximately $21 million.
The allocation of total quarterly cash distributions to general and limited partners is as follows for the three and nine months ended September 30, 2017March 31, 2020 and 2016. Our2019. 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 September 30, | | Nine Months Ended September 30, | Three Months Ended March 31, |
| (In millions) | 2017 | | 2016 | | 2017 | | 2016 | 2020 | | 2019 |
| Distribution declared: | | | | | | | | | | |
| Limited partner units - public | $ | 170 |
| | $ | 135 |
| | $ | 481 |
| | $ | 393 |
| $ | 270 |
| | $ | 191 |
|
| Limited partner units - MPC | 54 |
| | 44 |
| | 152 |
| | 114 |
| 458 |
| | 332 |
|
| Limited partner units - GP | 8 |
| | — |
| | 15 |
| | — |
| |
| General partner units - MPC | 7 |
| | 5 |
| | 18 |
| | 13 |
| |
| IDRs - MPC | 81 |
| | 49 |
| | 211 |
| | 135 |
| |
| Total GP & LP distribution declared | 320 |
| | 233 |
| | 877 |
| | 655 |
| |
| Redeemable preferred units | 16 |
| | 16 |
| | 49 |
| | 25 |
| |
| Total LP distribution declared | | 728 |
| | 523 |
|
| Series A preferred units | | 20 |
| | 20 |
|
| Series B preferred units | | 11 |
| | — |
|
| Total distribution declared | $ | 336 |
| | $ | 249 |
| | $ | 926 |
| | $ | 680 |
| 759 |
| | 543 |
|
| | | | | | | | | | | |
| Cash distributions declared per limited partner common unit | $ | 0.5875 |
| | $ | 0.5150 |
| | $ | 1.6900 |
| | $ | 1.5300 |
| $ | 0.6875 |
| | $ | 0.6575 |
|
Our intentions regarding the distribution growth profile expressed above include forward-looking statements. Such forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and are difficult to predict. Factors that could cause actual results to differ materially from those implied in the forward-looking statements include: the adequacy of our capital resources and liquidity, including, but not limited to, the availability of sufficient cash flow to pay distributions and execute our business plan; negative capital market conditions, including an increase of the current yield on common units; the timing and extent of changes in commodity prices
and demand for natural gas, NGLs, crude oil, feedstocks or refined petroleum products; volatility in and/or degradation of market and industry conditions; completion of midstream capacity by our 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 our commercial agreements; our ability to successfully implement our growth plan, whether through organic growth or acquisitions; modifications to earnings and distribution objectives; state and federal environmental, economic, health and safety, energy and other policies and regulations; changes to our capital budget; financial stability of our producer customers and MPC; other risk factors inherent to our industry; and the factors set forth under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016. In addition, the forward-looking statements included herein could be affected by general domestic and international economic and political conditions. Unpredictable or unknown factors not discussed here or in our SEC filings could also have material adverse effects on forward-looking statements.
MPC Strategic Actions
On January 3, 2017, MPC announced its plans to offer the Partnership the opportunity to acquire assets contributing an estimated $1.4 billion of annual EBITDA. The Partnership's plans for funding the dropdowns include debt and equity in approximately equal proportions, with the equity financing to be funded through transactions with MPC. In conjunction with the completion of the dropdowns, MPC announced its intentions to offer to exchange its IDRs and two percent GP Interest for common units. Following these transactions, we expect to internally fund a greater portion of our future growth from internal cash flows. The first drop of assets contributing approximately $250 million of annual EBITDA took place in the first quarter of 2017 and was financed through cash and equity, as discussed in Note 3 of the Notes to Consolidated Financial Statements. The second drop of assets contributing approximately $138 million of annual EBITDA took place in the third quarter of 2017 and was financed through cash and equity, as discussed in Note 3 of the Notes to Consolidated Financial Statements. The remaining dropdown, which includes refinery logistics assets and fuels distribution services, with projected annual EBITDA of approximately $1.0 billion has been offered to the Partnership and referred to the conflicts committee of the board of directors of our general partner. The transaction is expected to close no later than the end of the first quarter of 2018.
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 to increase 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 the acquisition of equipment or the construction costs associated with new well connections, and the development or acquisition of additional pipeline, processing or storage capacity. In general, growth capital includes costs that are expected to generate additional or new cash flow for us.MPLX.
Our capital expenditures are shown in the table below:
|
| | | | | | | |
| | Nine Months Ended September 30, |
| (In millions) | 2017 | | 2016 |
| Capital expenditures: | | | |
| Maintenance | $ | 59 |
| | $ | 58 |
|
| Expansion | 1,002 |
| | 889 |
|
| Total capital expenditures | 1,061 |
| | 947 |
|
| Less: Increase in capital accruals | 55 |
| | — |
|
| Asset retirement expenditures | 2 |
| | 4 |
|
| Additions to property, plant and equipment | 1,004 |
| | 943 |
|
Capital expenditures of unconsolidated subsidiaries(1) | 306 |
| | 94 |
|
| Total gross capital expenditures | 1,310 |
| | 1,037 |
|
Less: Joint venture partner contributions(2) | 132 |
| | 45 |
|
| Total capital expenditures, net | 1,178 |
| | 992 |
|
| Less: Maintenance capital | 60 |
| | 58 |
|
| Total growth capital | $ | 1,118 |
| | $ | 934 |
|
|
| | | | | | | |
| | Three Months Ended March 31, |
| (In millions) | 2020 | | 2019 |
| Capital expenditures: | | | |
| Maintenance | $ | 34 |
|
| $ | 37 |
|
| Maintenance reimbursements | (14 | ) | | (7 | ) |
| Growth | 284 |
| | 467 |
|
| Growth reimbursements | — |
| | (5 | ) |
| Total capital expenditures | 304 |
| | 492 |
|
| Less: Increase (decrease) in capital accruals | (61 | ) | | (71 | ) |
Additions to property, plant and equipment, net of reimbursements(1) | 365 |
| | 563 |
|
| Investments in unconsolidated affiliates | 91 |
| | 135 |
|
| Acquisitions | — |
|
| (1 | ) |
| Total capital expenditures and acquisitions | 456 |
| | 697 |
|
| Less: Maintenance capital expenditures (including reimbursements) | 20 |
| | 30 |
|
| Acquisitions | — |
| | (1 | ) |
Total growth capital expenditures(2) | $ | 436 |
| | $ | 668 |
|
| |
| (1) | Includes amounts relatedThis amount is represented in the Consolidated Statements of Cash Flows as Additions to unconsolidated, Partnership-operated subsidiaries.property, plant and equipment after excluding growth and maintenance reimbursements. Reimbursements are shown as Contributions from MPC within the Financing activities section of the Consolidated Statements of Cash Flows. |
| |
| (2) | This represents estimatedAmount excludes contributions from noncontrolling interests of zero and $94 million for the three months ended March 31, 2020 and 2019, respectively, as reflected in the financing section of our statement of cash flows. Also excludes a $69 million return of capital from our Wink to Webster joint venture partners’ sharewhich is reflected in the investing section of growth capital.our statement of cash flows for the three months ended March 31, 2020. |
Our organic growth capital plan range has not been revised for the remainder of 2017. We anticipate finishing the year near below the previously reported range. This range excludes acquisition costs for the dropdowns of HST, WHC, MPLXT and the Joint-Interest Acquisition, the acquisition of the Ozark pipeline and the MarEn Bakken investment, as discussed in Notes 3 and 4 of the Notes to Consolidated Financial Statements. The range also excludes non-affiliated joint venture members’ share of capital expenditures. The G&P segment capital plan includes investments that are expected to support producer customers and complete certain processing plants currently under construction at the Sherwood Complex. The L&S segment capital plan includes the development of various crude oil and refined petroleum products infrastructure projects, a butane cavern and a tank farm expansion, and an expansion project to increase line capacity on the Ozark pipeline. We also have large organic growth prospects associated with the anticipated growth of MPC’s operations and third-party activity in our areas of operation that we anticipate will provide attractive returns and cash flows. We continuously evaluate our capital plan and make changes as conditions warrant.
Contractual Cash Obligations
As of September 30, 2017,March 31, 2020, our contractual cash obligations included long-term debt, capitalfinance and operating lease obligations, purchase obligations for services and to acquire property, plant and equipment, and other liabilities. During the ninethree months ended September 30, 2017,March 31, 2020, our third-party, long-term debt obligations increased by $4.1 billion due$750 million and was primarily used to the new senior notes issued and contracts to acquire property, plant and equipment increased $317 million largely due to new and growing projects.repay our MPC Loan Agreement. There were no other material changes to these obligations outside the ordinary course of business since December 31, 2016.2019.
Off-Balance Sheet Arrangements
As of September 30, 2017, we have not entered into any transactions, agreements or otherOff-balance sheet arrangements comprise those arrangements that would result inmay potentially impact our liquidity, capital resources and results of operations, even though such arrangements are not recorded as liabilities under U.S. GAAP. Our off-balance sheet liabilities.
Forward-looking Statements
Our opinions concerningarrangements are limited to indemnities and guarantees that are described in Note 21. Although these arrangements serve a variety of our business purposes, we are not dependent on them to maintain our liquidity and capital resources, and our abilitywe are not aware of any circumstances that are reasonably likely to avail ourselves incause the future of the financing options mentioned in the above forward-looking statements are basedoff-balance sheet arrangements to have a material adverse effect on currently available information. If this information proves to be inaccurate, future availability of financing may be adversely affected. Factors that affect the availability of financing include our performance (as measured by various factors, including cash provided by operating activities), the state of worldwide debt and equity markets, investor perceptions and expectations of past and future performance, the global financial climate, and, in particular, with respect to borrowings, the levels of our outstanding debt and future credit ratings by rating agencies. The discussion of liquidity and capital resources above also contains forward-looking statements regarding expected capital spending. The forward-looking statements about our capital budget are based on current expectations, estimates and projections and are not guarantees of future performance. Actual results may differ materially from these expectations, estimates and projections and are subject to certain risks, uncertainties and other factors, some of which are beyond our control and are difficult to predict. Some factors that could cause actual results to differ materially include negative capital market conditions, including an increase of the current yield on common units, adversely affecting the Partnership’s ability to meet its distribution growth guidance; the time, costs and ability to obtain regulatory or other approvals and consents and otherwise consummate the strategic initiatives discussed herein and other proposed transactions; the satisfaction or waiver of conditions in the agreements governing the strategic initiatives discussed herein and other proposed transactions; our ability to achieve the strategic and other objectives related to the strategic initiatives and transactions discussed herein, including the dropdown from MPC and the proposed exchange of common units for MPC’s economic interests in the general partner, the joint venture with Antero Midstream, the Ozark pipeline acquisition, and other proposed transactions; adverse changes in laws including with respect to tax and regulatory matters; the inability to agree with respect to the timing of and value attributed to assets identified for dropdown and/or the economic interests in the general partner; the adequacy of the Partnership’s capital resources and liquidity, including, but not limited to, availability of sufficient cash flow to pay distributions, and the ability to successfully execute its business plans and growth strategy; continued/further volatility in and/or degradation of market and industry conditions; changes to the expected construction costs and timing of projects; civil protests and resulting legal/regulatory uncertainty regarding environmental and social issues, including pipeline infrastructure, may prevent or delay the construction and operation of such infrastructure and realization of associated revenues; 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 the Partnership’s commercial agreements; modifications to earnings and distribution growth objectives; the level of support from MPC, including dropdowns, alternative financing arrangements, taking equity units, and other methods of sponsor support, as a result of the capital allocation needs of the enterprise as a whole and its ability to provide support on commercially reasonable terms; compliance with federal and state environmental, economic, health and safety, energy and other policies and regulations and/or enforcement actions initiated thereunder; changes to the Partnership’s capital budget; prices of and demand for natural gas, NGLs, crude oil and refined products; delays in obtaining necessary third-party approvals and governmental permits; changes in labor, material and equipment costs and availability; planned and unplanned outages, the delay of, cancellation of or failure to implement planned capital projects; project overruns, disruptions or interruptions of our operations due to the shortage of skilled labor; unforeseen hazards such as weather conditions, acts of war or terrorist acts and the governmental or military response; and other operating and economic considerations. These factors, among others, could cause actual results to differ materially from those set forth in the forward-looking statements. For additional information on forward-looking statements and risks that can affect our business, see “Disclosures Regarding Forward-Looking Statements” and Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2016.resources.
TRANSACTIONS WITH RELATED PARTIES
At September 30, 2017,March 31, 2020, MPC owned our non-economic general partnership interest and held a twoapproximately 63 percent GP Interest and a 28.4 percent limited partner interest in MPLX LP.of our outstanding common units.
Excluding revenues attributable to volumes shipped by MPC under joint tariffs with third parties that are treated as third-party revenues for accounting purposes, and excluding losses for impairment of equity method investments, MPC accounted for 3655 percent and 4053 percent of our total revenues and other income for the thirdfirst quarter of 20172020 and 2016,2019, respectively. We provide to MPC crude oil and product pipeline transportation services based on regulated tariff rates and storage services and inland marine transportation based on contracted rates.
Of our total costs and expenses, excluding impairment expense, MPC accounted for 2229 percent and 2529 percent for the thirdfirst quarter of 20172020 and 2016,2019, respectively. MPC performed certain services for us related to information technology, engineering, legal, accounting, treasury, human resources and other administrative services.
We believe that transactions with related parties were conducted under terms comparable to those with unrelated parties. 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, 20162019 and Note 5 of the Notes to 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 of September 30, 2017,March 31, 2020, there have been no significant changes to our environmental matters and compliance costs since our Annual Report on Form 10-K for the year ended December 31, 2016, as updated by our Current Report on Form 8-K filed on May 1, 2017.2019.
CRITICAL ACCOUNTING ESTIMATES
As of September 30, 2017,March 31, 2020, there have been no significant changes to our critical accounting estimates since our Annual Report on Form 10-K for the year ended December 31, 2016,2019, except as updated bynoted below.
Impairment Assessments of Long-Lived Assets, Intangible Assets, Goodwill and Equity Method Investments
Fair value calculated for the purpose of testing our Current Reportlong-lived assets, intangible assets, goodwill and equity method investments for impairment is estimated using the expected present value of future cash flows method and comparative market prices when appropriate. Significant judgment is involved in performing these fair value estimates since the results are based on Form 8-K filedforecasted assumptions. Significant assumptions include:
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| • | Future Operating Performance. Our estimates of future operating performance are based on our analysis of various supply and demand factors, which include, among other things, industry-wide capacity, our planned utilization rate, end-user demand, capital expenditures and economic conditions as well as commodity prices. Such estimates are consistent with those used in our planning and capital investment reviews. |
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| • | Future volumes. Our estimates of future throughput of crude oil, natural gas, NGL and refined product volumes are based on internal forecasts and depend, in part, on assumptions about our customers’ drilling activity which is inherently subjective and contingent upon a number of variable factors (including future or expected pricing considerations), many of which are difficult to forecast. Management considers these volume forecasts and other factors when developing our forecasted cash flows. |
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| • | Discount rate commensurate with the risks involved. We apply a discount rate to our cash flows based on a variety of factors, including market and economic conditions, operational risk, regulatory risk and political risk. This discount rate is also compared to recent observable market transactions, if possible. A higher discount rate decreases the net present value of cash flows. |
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| • | Future capital requirements. These are based on authorized spending and internal forecasts. |
Assumptions about the effects of COVID-19 and the macroeconomic environment are inherently subjective and contingent upon the duration of the pandemic and its impact on May 1, 2017.the macroeconomic environment, which is difficult to forecast. We base our fair value estimates on projected financial information which we believe to be reasonable. However, actual results may differ from these projections.
The need to test for impairment can be based on several indicators, including a significant reduction in prices of or demand for commodities, a poor outlook for profitability, a significant reduction in pipeline throughput volumes, a significant reduction in natural gas or NGL volumes processed, other changes to contracts or changes in the regulatory environment in which the asset or equity method investment is located.
ACCOUNTING STANDARDS NOT YET ADOPTEDLong-lived assets used in operations are assessed for impairment whenever changes in facts and circumstances indicate that the carrying value of the assets may not be recoverable based on the expected undiscounted future cash flow of an asset group. For purposes of impairment evaluation, long-lived assets must be grouped at the lowest level for which independent cash flows can be identified, which is at least at the segment level and in some cases for similar assets in the same geographic region where cash flows can be separately identified. If the sum of the undiscounted cash flows is less than the carrying value of an asset group, fair value is calculated, and the carrying value is written down if greater than the calculated fair value.
AsDuring the first quarter of 2020, we identified an impairment trigger relating to asset groups within our Western G&P reporting unit as a result of significant impacts to forecasted cash flows for these asset groups resulting from the first quarter events and circumstances as discussed in Note 21 of the Notes to Consolidated Financial Statements. The cash flows associated with these assets were significantly impacted by volume declines reflecting decreased forecasted producer customer production as a result of lower commodity prices. After assessing each asset group within the Western G&P reporting unit for impairment, only the East Texas G&P asset group resulted in the fair value of the underlying assets being less than the carrying value. As a result, an impairment of $174 million of property, plant and equipment and $177 million of intangibles was recorded to Impairment expense on the Consolidated Statements of Income. Fair value of our PP&E was determined using a combination of an income and cost approach. The income approach utilized significant assumptions including management’s best estimates of the expected future cash flows and the estimated useful life of the asset group. The cost approach utilized assumptions for the current replacement costs of similar assets adjusted for estimated depreciation and deterioration of the existing equipment and economic obsolescence. The fair value of the intangibles was determined based on applying the multi-period excess earnings method, which is an income approach. Key assumptions included management’s best estimates of the expected future cash flows from existing customers, customer attrition rates and the discount rate. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. As a result, there can be no assurance that the estimates and assumptions made for purposes of our impairment analysis will prove to be an accurate prediction of the future. The fair value measurements for the asset group fair values represent Level 3 measurements.
Unlike long-lived assets, goodwill must be tested for impairment at least annually, and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Goodwill is tested for impairment at the reporting unit level. A goodwill impairment loss is measured as the amount by which a reporting unit’s carrying value exceeds its fair value, without exceeding the recorded amount of goodwill.
The “Current Economic Environment” section describes the effects that the recent outbreak of COVID-19 and its development into a pandemic and the recent decline in commodity prices have had on our business. Due to these developments, we performed impairment assessments as discussed further below.
Prior to performing our goodwill impairment assessment as of March 31, 2020, MPLX had goodwill totaling approximately $9,536 million. As part of that assessment, MPLX recorded approximately $1,814 million of impairment expense in the first quarter of 2020 related to our Eastern G&P reporting unit within the G&P operating segment, which brought the amount of goodwill recorded within this reporting unit to zero. The impairment was primarily driven by updated guidance related to the slowing of drilling activity which has reduced production growth forecasts from our producer customers. For the remaining reporting units with goodwill, we determined that no significant adjustments to the carrying value of goodwill were necessary. The interim impairment assessment resulted in the fair value of the reporting units exceeding their carrying value by percentages ranging from approximately 8.5 percent to 270.0 percent. The reporting unit whose fair value exceeded its carrying amount by 8.5 percent, our Crude Gathering reporting unit, had goodwill totaling $1.1 billion at March 31, 2020. The operations which make up this reporting unit were acquired through the merger with ANDX. MPC accounted for its October 1, 2018 acquisition of Andeavor (including acquiring control of ANDX), using the acquisition method of accounting, which required Andeavor assets and liabilities to be recorded by MPC at the acquisition date fair value. The Merger was closed on July 30, 2019 and has been treated as a common control transaction, which required the recognition of assets acquired and liabilities assumed using MPC’s historical carrying value. As such, given the short amount of time from when fair value was established to the date of the impairment test, the amount by which the fair value exceeded the carrying value within this
reporting unit is not unexpected. An increase of one percentage point to the discount rate used to estimate the fair value of this reporting unit would not have resulted in goodwill impairment as of March 31, 2020. No other reporting units had had fair values exceeding carrying values of less than 20 percent.
Significant assumptions used to estimate the reporting units’ fair value included estimates of future cash flows and market information for comparable assets. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. As a result, there can be no assurance that the estimates and assumptions made for purposes of the impairment tests will prove to be an accurate prediction of the future. See Note 12 of the Notes to Consolidated Financial Statements for additional information relating to goodwill.
Equity method investments are assessed for impairment whenever factors indicate an other than temporary loss in value. Factors providing evidence of such a loss include the fair value of an investment that is less than its carrying value, absence of an ability to recover the carrying value or the investee’s inability to generate income sufficient to justify our carrying value. During the first quarter of 2020, we assessed certain of our equity method investments for impairment as a result of a number of first quarter events and circumstances as discussed in Note 1 of the Notes to Consolidated Financial Statements. As a result, we recorded an other than temporary impairment for three joint ventures in which we have an interest. Impairment of these investments was $1,264 million, of which $1,251 million was related to MarkWest Utica EMG, L.L.C. and its investment in Ohio Gathering Company, L.L.C. The fair value of the investments was determined based upon applying the discounted cash flow method, which is an income approach. The discounted cash flow fair value estimate is based on known or knowable information at the interim measurement date. The significant assumptions that were used to develop the estimate of the fair value under the discounted cash flow method include management’s best estimates of the expected future cash flows, including prices and volumes, the weighted average cost of capital and the long-term growth rate. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. As such, the fair value of these equity method investments represents a Level 3 measurement. As a result, there can be no assurance that the estimates and assumptions made for purposes of the impairment test will prove to be an accurate prediction of the future. The impairment was recorded through “Income from equity method investments.” The impairments were largely due to a reduction in forecasted volumes gathered and processed by the systems operated by the joint ventures. At March 31, 2020 we had $3,992 million of equity method investments recorded on the Consolidated Balance Sheets.
An estimate of the sensitivity to net income resulting from impairment calculations is not practicable, given the numerous assumptions (e.g., pricing, volumes and discount rates) that can materially affect our estimates. That is, unfavorable adjustments to some of the above listed assumptions may be offset by favorable adjustments in other assumptions. See Note 4 of the Notes to Consolidated Financial Statements for additional information relating to equity method investments.
ACCOUNTING STANDARDS NOT YET ADOPTED
While new financial accounting pronouncements will be effective for our financial statements in the future.future, there are no standards that have not yet been adopted that are expected to have a material impact on our financial statements. Accounting standards are discussed in Note 2 of the Notes to Consolidated Financial Statements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Market risk includesWe are exposed to market risks related to the riskvolatility of loss arising from adversecommodity prices. We employ various strategies, including the potential use of commodity derivative instruments, to economically hedge the risks related to these price fluctuations. We are also exposed to market risks related to changes in market rates and prices. We face market risk from commodity price changes and,interest rates. As of March 31, 2020, we did not have any open financial derivative instruments to a lesser extent,economically hedge the risks related to interest rate fluctuations or commodity derivative instruments to economically hedge the risks related to the volatility of commodity prices; however, we continually monitor the market and our exposure and may enter into these arrangements in the future. While there is a risk related to changes and non-performancein fair value of derivative instruments we may enter into; such risk is mitigated by our customers and counterparties.price or rate changes related to the underlying commodity or financial transaction.
Commodity Price Risk
The information about commodity price risk for the three and nine months ended September 30, 2017March 31, 2020 does not differ materially from that discussed in Item 7A. Quantitative and Qualitative Disclosures about Market Risk of our Annual Report on Form 10-K for the year ended December 31, 2016.2019.
Outstanding Derivative Contracts
The following tables provide information on the volume of our derivative activity for positions related to long liquids price risk at September 30, 2017, including the weighted-average prices (“WAVG”):
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| WTI Crude Swaps | | Volumes (Bbl/d) | | WAVG Price
(Per Bbl) | | Fair Value
(in thousands) |
| 2017 (Oct - Dec) | | 200 |
| | $ | 54.25 |
| | $ | 42 |
|
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| Natural Gas Swaps | | Volumes (MMBtu/d) | | WAVG Price
(Per MMBtu) | | Fair Value
(in thousands) |
| 2017 (Oct - Dec) | | 1,832 |
| | $ | 3.03 |
| | $ | (30 | ) |
| 2018 | | 2,542 |
| | $ | 2.78 |
| | $ | 4 |
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| Ethane Swaps | | Volumes (Gal/d) | | WAVG Price
(Per Gal) | | Fair Value
(in thousands) |
| 2017 (Oct - Dec) | | 54,600 |
| | $ | 0.27 |
| | $ | (47 | ) |
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| Propane Swaps | | Volumes (Gal/d) | | WAVG Price
(Per Gal) | | Fair Value
(in thousands) |
| 2017 (Oct - Dec) | | 119,932 |
| | $ | 0.61 |
| | $ | (3,164 | ) |
| 2018 | | 16,925 |
| | $ | 0.64 |
| | $ | (506 | ) |
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| IsoButane Swaps | | Volumes (Gal/d) | | WAVG Price
(Per Gal) | | Fair Value
(in thousands) |
| 2017 (Oct - Dec) | | 10,730 |
| | $ | 0.81 |
| | $ | (236 | ) |
| 2018 | | 1,655 |
| | $ | 0.80 |
| | $ | (38 | ) |
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| Normal Butane Swaps | | Volumes (Gal/d) | | WAVG Price
(Per Gal) | | Fair Value
(in thousands) |
| 2017 (Oct - Dec) | | 31,622 |
| | $ | 0.75 |
| | $ | (823 | ) |
| 2018 | | 4,595 |
| | $ | 0.75 |
| | $ | (120 | ) |
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| Natural Gasoline Swaps | | Volumes (Gal/d) | | WAVG Price
(Per Gal) | | Fair Value
(in thousands) |
| 2017 (Oct - Dec) | | 41,827 |
| | $ | 1.13 |
| | $ | (346 | ) |
| 2018 | | 3,089 |
| | $ | 1.18 |
| | $ | (20 | ) |
We have a commodity contractnatural gas purchase commitment embedded in a keep-whole processing agreement with a producer customer in the Southern Appalachian region that creates a floor onexpiring in December 2022. The customer has the frac spread for gas purchases of 9,000 Dth/d. The commodity contract is a component of a broader regional arrangement that also includes a keep-whole processing agreement. For accounting purposes, these contracts have been aggregated into a single contract and are evaluated together. In February 2011, we executed agreements with the producer customer to extend the commodity contract and the related processing agreement from March 31, 2015 to December 31, 2022, with the producer customer’sunilateral option to extend the agreement for two successiveconsecutive five-year terms through December 31, 2032. TheFor accounting purposes, the natural gas purchase of gas at prices based on the frac spreadcommitment and the option to extend the agreementsterm extending options have been identified asaggregated into a single compound embedded derivative, which is recorded at fair value.derivative. The probability of renewalthe customer exercising its options is determined based on extrapolated pricing curves, a review of the overall expected favorability of the contracts based on such pricing curves and assumptions about the counterparty’scustomer’s potential
business strategy decision points that may exist at the time the counterpartythey would elect whether to renew the contracts.contract. The changes in fair value of this compound embedded derivative are based on the difference between the contractual and index pricing, the probability of the producer customer exercising its option to extend and the estimated favorability of these contracts compared to current market conditions. The changes in fair value are recorded in earnings through Purchased“Purchased product costs incosts” on the Consolidated Statements of Income. As of September 30, 2017,March 31, 2020 and December 31, 2019, the estimated fair value of this contract was a liability of $52 million.$45 million and $60 million, respectively.
We have a commodity contract that gives us an option to fix a component of the utilities cost to an index price on electricity at a plant location in the Southwest through the fourth quarter of 2018. The contract’s pricing is currently fixed through the fourth quarter of 2017 with the ability to fix the pricing for its remaining year. Changes in the fair value as of the derivative component of this contract were recognized as Cost of Revenues in the Consolidated Statements of Income. Open Derivative Positions and Sensitivity Analysis
As of September 30, 2017, the estimated fair valueMarch 31, 2020, we have no open commodity derivative contracts. We evaluate our portfolio of this contract was a liabilitycommodity derivative instruments on an ongoing basis and add or revise strategies in anticipation of less than $1 million.changes in market conditions and in risk profiles.
Interest Rate Risk
Sensitivity analysis of the effect of a hypothetical 100-basis-point change in interest rates on long-term debt, excluding capitalfinance leases, is provided in the following table. Fair value of cash and cash equivalents, receivables, accounts payable and accrued interest approximate carrying value and are relatively insensitive to changes in interest rates due to the short-term maturity of the instruments. Accordingly, these instruments are excluded from the table.
| | | (In millions) | Fair value as of
September 30, 2017(1) | | Change in Fair Value(2) | | Change in Income Before Income Taxes for the Nine Months Ended September 30, 2017(3) | Fair value as of March 31, 2020(1) | | Change in Fair Value(2) | | Change in Income Before Income Taxes for the Three Months Ended March 31, 2020(3) |
| Long-term debt | | | | | | | | | | |
| Fixed-rate | $ | 7,199 |
| | $ | 575 |
| | N/A |
| $ | 14,638 |
| | $ | 1,249 |
| | N/A |
|
| Variable-rate | $ | 420 |
| | N/A |
| | $ | 2 |
| $ | 3,714 |
| | $ | 37 |
| | $ | 8 |
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(1) Fair value was based on market prices, where available, or current borrowing rates for financings with similar terms and maturities.
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(1) | Fair value was based on market prices, where available, or current borrowing rates for financings with similar terms and maturities. |
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(2) | Assumes a 100-basis-point decrease in the weighted average yield-to-maturity at September 30, 2017. |
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(3) | Assumes a 100-basis-point change in interest rates. The change to net income was based on the weighted average balance of all outstanding variable-rate debt for the nine months ended September 30, 2017. |
(2) Assumes a 100-basis-point decrease in the weighted average yield-to-maturity at March 31, 2020.
(3) Assumes a 100-basis-point change in interest rates. The change to net income was based on the weighted average balance of all outstanding variable-rate debt for the three months ended March 31, 2020.
At September 30, 2017,March 31, 2020, our portfolio of long-term debt consisted of fixed-rate instruments and variable-rate instruments underincluding our term loan, floating rate senior notes and our revolving credit facility. The fair value of our fixed-rate debt is relatively sensitive to interest rate fluctuations. Our sensitivity to interest rate declines and corresponding increases in the fair value of our debt portfolio unfavorably affects our results of operations and cash flows only when we elect to repurchase or otherwise retire fixed-rate debt at prices above carrying value. Interest rate fluctuations generally do not impact the fair value of borrowings under our bank revolving credit or term loan facilities, but may affect our results of operations and cash flows. As of September 30, 2017,March 31, 2020, we did not have any financial derivative instruments to hedge the risks related to interest rate fluctuations; however, we continually monitor the market and our exposure and may enter into these agreements in the future.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13(a)-15(e)13a-15(e) and 15(d)-15(e)15d-15(e) under the Securities Exchange Act of 1934, as amended) was carried out under the supervision and with the participation of management, including the chief executive officer and chief financial officer of our general partner. Based upon that evaluation, the chief executive officer and chief financial officer of our general partner concluded that the design and operation of these disclosure controls and procedures were effective as of September 30, 2017March 31, 2020, the end of the period covered by this report.
Changes in Internal Control Over Financial Reporting
During the quarter ended September 30, 2017,March 31, 2020, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Part II – Other Information
Item 1. Legal Proceedings
We are the subject of, or a party to, a number of pending or threatened legal actions, contingencies and commitments involving a variety of matters, including laws and regulations relating to the environment.
As Except as described below, there have been no material changes to the legal proceedings previously reporteddisclosed in our Annual Report on Form 10-K for10-K.
Litigation
In connection with our 9.19 percent indirect interest in a joint venture that owns and operates the year ended December 31, 2016,Dakota Access Pipeline and Energy Transfer Crude Oil Pipeline projects, collectively referred to as the Bakken Pipeline system, we have entered into a Contingent Equity Contribution Agreement whereby MPLX LP, along with the other joint venture owners in July 2015, representatives from the EPABakken Pipeline system, have agreed to make equity contributions to the joint venture upon certain events occurring to allow the entities that own and operate the United States DepartmentBakken Pipeline system to satisfy their senior note payment obligations. The senior notes were issued to repay amounts owed by the pipeline companies to fund the cost of Justice conducted a raid on a MarkWest Liberty Midstream pipeline launcher/receiver site utilized for pipeline maintenance operations in Washington County, Pennsylvania pursuant to a search warrant issued by a magistrateconstruction of the United StatesBakken Pipeline system.
In March 2020, the U.S. District Court for the Western District of Pennsylvania. As part of this initiative,Columbia ordered the U.S. Attorney’s OfficeArmy Corps of Engineers, which granted permits for the Western DistrictBakken Pipeline system, to conduct a full environmental impact statement (“EIS”), and further requested briefing on whether an easement permit necessary for the operation of Pennsylvania proceeded with an investigationthe Bakken Pipeline system should be vacated while the EIS is being prepared. If the permit is vacated pending completion of MarkWest Liberty Midstream’s launcher/receiver,the EIS and the vacatur is deemed temporary, MPLX would have to contribute its 9.19 percent pro rata share of funds required to pay interest accruing on the notes while the pipeline is shutdown and compressor station operations. In responseits 9.19 percent pro rata share of any costs to remediate any deficiencies to reinstate the permit and/or return the pipeline into operation. If the court vacates the permit and such action results in a permanent shutdown of the pipeline, MPLX would have to contribute its 9.19 percent pro rata share of the cost to redeem the bonds (including the 1% redemption premium required pursuant to the investigation, MarkWest initiated independent studies which demonstrated that there was no risk to worker safetyindenture governing the notes) and no threatany accrued and unpaid interest, if any.
Environmental Proceedings
On April 10, 2020, we received a Notice of public harm associated with MarkWest Liberty Midstream’s launcher/receiver operations. These findings were supported by a subsequent inspectionProbable Violation and review byProposed Civil Penalty from the OccupationalPipeline and Hazardous Materials Safety and Health Administration. After providing these studies, and other substantial documentation related to MarkWest Liberty Midstream's pipeline and compressor stations, and arranging site visits and conducting several meetings withAdministration’s Office of Pipeline Safety (OPS) for alleged violations arising from the government’s representatives,release at the Hospah Station pump station in New Mexico on September 13, 2016,7, 2018. The NOPV alleged a failure to follow written procedures for responding to, investigating, and correcting the U.S. Attorney’s Officecause of an increase in pressure of flow rate outside its normal operating limits, and a failure to follow appropriate procedures regarding related personnel performance. This matter was resolved for the Western District of Pennsylvania rendered a declination decision, dropping its criminal investigation and declining to pursue charges in this matter.
MarkWest Liberty Midstream continues to discuss with the EPA and the State of Pennsylvania civil enforcement allegations associated with permitting or other related regulatory obligations for its launcher/receiver and compressor station facilities in the region. In connection with these discussions, MarkWest Liberty Midstream received an initial proposal from the EPA to settle all civil claims associated with this matter for the combination of a proposed cash penalty of approximately $2.4 million and proposed supplemental environmental projects with an estimated cost of approximately $3.6 million. MarkWest Liberty Midstream has submitted a response asserting that this action involves novel issues surrounding primarily minor source emissions from facilities that the agencies themselves considered de minimis and were not the subject of regulation and consequently that the settlement proposal is excessive. In connection with these negotiations, MarkWest Liberty Midstream has received a revised settlement proposal from the EPA which proposes to lower the proposed cash penalty to approximately $1.24 million and the estimated cost of proposed supplemental environmental projects to an estimated cost of approximately $1.6 million. MarkWest Liberty Midstream will continue to negotiate with EPA regarding the amount and scope of the proposed settlement.$236,000.
Item 1A. Risk Factors
We are subject to various risks and uncertainties inExcept as described below, there have been no material changes from the course of our business. The discussion of such risks and uncertainties may be found under Item 1A. Risk Factorsrisk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2016.2019.
The recent outbreak of COVID-19 and certain developments in the global oil markets have had, and may continue to have, material adverse consequences for general economic, financial and business conditions, and could materially and adversely affect our business, financial condition, results of operations and cash flows and those of our customers, suppliers and other counterparties.
The recent outbreak of COVID-19 and the responses of governmental authorities, companies and the self-imposed restrictions by many individuals across the world to stem the spread of the virus have significantly reduced global economic activity, as there has been a dramatic decrease in the number of businesses open for operation and substantially fewer people across the world have been traveling to work or leaving their home to purchase goods and services. This has also resulted, for example, in a dramatic reduction in airline flights and has reduced the number of cars on the road. As a result, there has been a decline in the demand for the fuels distribution services we provide and for the petroleum products that we transport and store.
Item 2. Unregistered SalesConcerns over the negative effects of Equity Securities
In connectionCOVID-19 on economic and business prospects across the world have contributed to increased market and oil price volatility and have diminished expectations for the global economy. These factors, coupled with the issuanceemergence of 14,887 common units upondecreasing business and consumer confidence and increasing unemployment resulting from the vestingCOVID-19 outbreak and the recent abrupt oil price decline, may precipitate a prolonged economic slowdown and recession. Any such prolonged period of phantom units undereconomic slowdown or recession, or a protracted period of depressed prices for crude oil or refined petroleum products could have significant adverse consequences for our financial condition and the MPLX LP 2012 Incentive Compensation Plan, 359,179 common units as a resultfinancial condition of our customers, suppliers and other counterparties, and could diminish our liquidity or trigger additional impairments.
The ultimate extent of the conversionimpact of Class B unitsCOVID-19 on our business, financial condition, results of operations and cash flows will depend largely on future developments, including the duration and spread of the outbreak, particularly within the geographic areas where we operate, the related impact on overall economic activity and the timing of the lifting of restrictions and return of customer confidence, all of which are uncertain and cannot be predicted with certainty at this time.
The Court of Chancery of the State of Delaware will be, to common unitsthe extent permitted by law, the sole and 1,184,335 common units underexclusive forum for substantially all disputes between us and our limited partners.
Our limited partnership agreement provides that the ATM Program,Court of Chancery of the State of Delaware will be the sole and exclusive forum for any claims, actions or proceedings:
arising out of or relating in any way to our limited partnership agreement, or the rights or powers of, or restrictions on, our limited partners or the limited partnership;
brought in a derivative manner on behalf of the limited partnership;
asserting a claim of breach of a duty owed by any director, officer, or other employee of the limited partnership or the general partner, or owed by the general partner, to the partnership or the limited partners;
asserting a claim arising pursuant to any provision of the Delaware Revised Uniform Limited Partnership Act; or
asserting a claim governed by the internal affairs doctrine.
The forum selection provision may restrict a limited partner's ability to bring a claim against us or directors, officers or other employee of ours or our general partner purchasedin a forum that it finds favorable, which may discourage limited partners from bringing such claims at all. Alternatively, if a court were to find the forum selection provision contained in our limited partnership agreement to be inapplicable or unenforceable in an aggregateaction, we may incur additional costs associated with resolving such action in another forum, which could materially adversely affect our business, financial condition and results of 31,803 general partner units for $1,059,390.81 in cash duringoperations. However, the three months ended September 30, 2017,forum selection provision does not apply to maintain its two percent general partner interest in us. The general partner units were issued in reliance on an exemption from registrationany claims, actions or proceedings arising under Section 4(a)(2) of the Securities Act of 1933, as amended.or the Exchange Act.
On September 1, 2017, in connection with the Joint-Interest Acquisition, we issued 377,778 general partner units to our general partner. The number of general partner units issued were calculated by dividing $12,600,000 by 33.3529, the simple average of the ten day trading volume weighted average NYSE price of an MPLX LP common unit for the ten trading days ending at market close on August 31, 2017. The general partner units were issued in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended.
Item 5. Other Information
Amended Restricted Stock Award Agreement
On October 26, 2017, C. Corwin Bromley entered into an Amended Restricted Stock Award Agreement with MPC (the “Amended Award Agreement”) to provide for the immediate vesting of a restricted stock award upon Mr. Bromley’s retirement effective January 1, 2018, which was announced by MPLX LP (the “Partnership”) on August 4, 2017. Mr. Bromley was a named executive officer in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2016.
The foregoing description of the Amended Award Agreement is summary in nature and subject to, and qualified in its entirety by, the full text of the Amended Award Agreement, a copy of which is attached as Exhibit 10.2 to this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2017 and is incorporated herein by reference.
MPLX LP Executive Change in Control Severance Benefits Plan
Effective October 26, 2017, the board of directors of Marathon Petroleum Corporation (the “Corporation”) and the board of directors of MPLX GP LLC, the general partner (the “General Partner”) of MPLX LP (“the Partnership”), adopted the MPLX LP Executive Change in Control Severance Benefits Plan (the “MPLX Plan”).
The purpose of the MPLX Plan is to recognize the contributions of the senior executives who provide services to the Corporation or the Partnership and to assure the continued provision of services by these senior executives. The MPLX Plan is intended to operate as a companion plan to the Marathon Petroleum Corporation Amended and Restated Executive Change in Control Severance Benefits Plan (the “MPC Plan”). It is intended that the MPLX Plan shall not result in a duplication of benefits in the event a participant would be eligible to receive benefits under both the MPLX Plan and the MPC Plan. The following is a summary of the MPLX Plan:
The MPLX Plan applies to certain senior executives who provide services to the Partnership, the Corporation or any of their respective subsidiaries or affiliates.
A participant is generally entitled to receive benefits under the MPLX Plan if within two years following a Partnership Change in Control (as defined in the MPLX Plan), the participant’s employment is terminated without cause or for good reason, with good reason generally being defined in the MPLX Plan as a reduction in the participant’s roles, responsibilities, pay or benefits or the participant is required to relocate more than 50 miles from his or her current location. However, benefits are not payable if the termination is for cause or due to mandatory retirement, death, disability or resignation (other than for good reason) by the participant.
In addition to any earned but unpaid salary, a lump sum cash amount equal to the value of the participant’s unused vacation days and any normal post-termination compensation and benefits under the retirement, insurance and other compensation and benefit plans in which the participant participates, upon a Partnership Change in Control and Qualified Termination (as defined in the MPLX Plan), participants are eligible to receive: (i) a cash payment equal to three times the sum of the participant’s base salary and the highest bonus paid in the three years before the Qualified Termination or, if higher, in the three years before the Partnership Change in Control; (ii) life and health insurance benefits for up to 36 months after termination at the active employee cost; (iii) benefits that are equivalent to the retiree medical and life benefit provided under the MPC Plan; and (iv) a cash payment that is equivalent to the supplemental retirement benefit and supplemental savings benefit provided under the MPC Plan.
Participants who incur a Qualified Termination or who separate from service with all of the Partnership, the General Partner and any applicable buyer or successor entity within two years after the Partnership Change in Control under circumstances that would have resulted in a Qualified Termination had such separation occurred at the time of the Partnership Change in Control and participants who remain in service with the Corporation (and its affiliates) following the Partnership Change in Control may become eligible for the following benefits: (i) all Partnership equity awards that vest based solely upon the passage of time will be become vested and exercisable; and (ii) all Partnership equity awards that vest based on the attainment of performance goals will become vested as to the entire award with payment as follows (a) with respect to the period prior to the Partnership Change in Control (“Pre-CiC Period”), the award will be determined using actual performance during the Pre-CiC Period; and (b) with respect to the period after the Partnership Change in Control, the award will be determined assuming performance goals were satisfied at target levels. Participants who incur a Qualified Termination and participants who remain in or commence services with the Partnership, General Partner or any applicable buyer or successor entity (or any of their affiliates) following the Partnership Change in Control are eligible for the following benefits: (i) all Corporation equity awards will become vested and exercisable; (ii) the vesting of any Corporation equity awards that otherwise would vest based on the attainment of performance goals shall remain subject to the attainment of applicable performance goals at the end of the regularly scheduled performance period.
The Corporation and the General Partner may at any time amend or terminate the MPLX Plan, provided that, for a period of two years following a Partnership Change in Control, the MPLX Plan may not be amended in a manner adverse to a participant with respect to that Partnership Change in Control. Any amendment or termination shall be set out in an instrument in writing and executed by an appropriate officer.
The foregoing description of the MPLX Plan is summary in nature and subject to, and qualified in its entirety by, the full text of the MPLX Plan, a copy of which is attached as Exhibit 10.3 to this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2017 and is incorporated herein by reference.
Item 6. Exhibits
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| | | | | | | | | | | | | | | |
| | | | | Incorporated by Reference | | | | |
Exhibit Number | | Exhibit Description | | Form | | Exhibit | | Filing Date | | SEC File No. | | Filed Herewith | | Furnished Herewith |
| | | | 8-K | | 2.1 |
| | 9/1/2017 | | 001-35714 | | | | |
| | | | S-1 | | 3.1 |
| | 7/2/2012 | | 333-182500 | | | | |
| | | | S-1/A | | 3.2 |
| | 10/9/2012 | | 333-182500 | | | | |
| | | | 10-Q | | 3.3 |
| | 10/31/2016 | | 001-35714 | | | | |
| | | | 10-K | | 3.4 |
| | 2/24/2017 | | 001-35714 | | | | |
| | Credit Agreement, dated as of July 21, 2017, among MPLX LP, as borrower, Wells Fargo Bank, National Association, as administrative agent, each of Wells Fargo Securities, LLC, JPMorgan Chase Bank, N.A., Barclays Bank PLC, Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Mizuho Bank, Ltd., The Bank of Tokyo-Mitsubishi UFJ, Ltd. and RBC Capital Markets, as joint lead arrangers and joint bookrunners, JPMorgan Chase Bank, N.A., as syndication agent, each of Bank of America, N.A., Barclays Bank PLC, Citigroup Global Markets Inc., Mizuho Bank, Ltd., The Bank of Tokyo-Mitsubishi UFJ, Ltd., and Royal Bank of Canada, as documentation agents, and the other lenders and issuing banks that are parties thereto. | | 8-K | | 10.1 |
| | 7/27/2017 | | 001-35714 | | | | |
| | | | | | | | | | | | X | | |
| | | | | | | | | | | | X | | |
| | | | | | | | | | | | X | | |
| | | | | | | | | | | | X | | |
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| | | | | | | | | | | | | | | |
| | | | | Incorporated by Reference From | | | | |
Exhibit Number | | Exhibit Description | | Form | | Exhibit |
| | Filing Date | | SEC File No. | | Filed Herewith | | Furnished Herewith |
| 1.1 | | | | 8-K | | 1.1 |
| | 9/9/2019 | | 001-35714 | | | | |
| 2.1* | | | | 8-K | | 2.1 |
| | 5/8/2019 | | 001-35714 | | | | |
| 3.1 | | | | S-1 | | 3.1 |
| | 7/2/2012 | | 333-182500 | | | | |
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| | | | | | | | | | | | | | | |
| | | | | Incorporated by Reference From | | | | |
Exhibit Number | | Exhibit Description | | Form | | Exhibit |
| | Filing Date | | SEC File No. | | Filed Herewith | | Furnished Herewith |
| 3.2 | | | | S-1/A | | 3.2 |
| | 10/9/2012 | | 333-182500 | | | | |
| 3.3 | | | | 8-K/A | | 3.1 |
| | 8/14/2019 | | 001-35714 | | | | |
| 10.1 | | | | | | | | | | | | X | | |
| 10.2 | | | | | | | | | | | | X | | |
| 10.3 | | | | | | | | | | | | X | | |
| 10.4 | | | | | | | | | | | | X | | |
| 31.10 | | | | | | | | | | | | X | | |
| 31.20 | | | | | | | | | | | | X | | |
| 32.10 | | | | | | | | | | | | | | X |
| 32.20 | | | | | | | | | | | | | | X |
| 101.INS | | XBRL Instance Document: The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document. | | | | | | | | | | | | |
| 101.SCH | | Inline XBRL Taxonomy Extension Schema Document. | | | | | | | | | | X | | |
| 101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | | | | | | | | | | X | | |
| 101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document. | | | | | | | | | | X | | |
| 101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document. | | | | | | | | | | X | | |
| 101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | | | | | | | | | | X | | |
| 104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | |
| * | | | | Incorporated by Reference | | | | |
Exhibit
Number
| | Exhibit Description | | Form | | Exhibit | | Filing Date | | SEC File No. | | Filed
Herewith
| | Furnished
Herewith
|
| | | | | | | | | | | | | | X |
| | | | | | | | | | | | | | X |
101.INS | | XBRL Instance Document | | | | | | | | | | X | | |
101.SCH | | XBRL Taxonomy Extension Schema | | | | | | | | | | X | | |
101.CAL | | XBRL Taxonomy Extension Calculation Linkbase | | | | | | | | | | X | | |
101.DEF | | XBRL Taxonomy Extension Definition Linkbase | | | | | | | | | | X | | |
101.LAB | | XBRL Taxonomy Extension Label Linkbase | | | | | | | | | | X | | |
101.PRE | | XBRL Taxonomy Extension Presentation Linkbase | | | | | | | | | | X | | furnish supplementally a copy of any omitted schedule upon request by the SEC. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| | | |
| | MPLX LP | | |
| | | | |
| | By: | | MPLX GP LLC |
| | | | Its general partner |
| | | | |
Date: October 30, 2017May 7, 2020 | By: | | /s/ Paula L. Rosson
C. Kristopher Hagedorn |
| | | | Paula L. RossonC. Kristopher Hagedorn |
| | | | Senior Vice President and Chief Accounting OfficerController of MPLX GP LLC
(the (the general partner of MPLX LP)
|
