UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________
FORM 10-Q
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(Mark One) |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 20202021
OR
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☐ | 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)
_____________________________________________
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| | | | | | | | | | | | | | | | | | | |
| Delaware | | | 27-0005456 |
(State or other jurisdiction of incorporation or organization)
| | (I.R.S. Employer Identification No.)
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| | | | | | | | | | | | | | | | |
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)
_____________________________________________
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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. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files.) Yes x 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.
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| | | | | | | | | | |
Large accelerated filer | x | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
Non-accelerated filer | ☐ | 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 1,058,603,5921,029,527,052 common units outstanding at May 1, 2020.April 30, 2021.
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. Additionally, throughout this Quarterly Report on Form 10-Q, we have used terms in our discussion of the business and operating results that have been defined in our Glossary of 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 | An at-the-market program for the issuance of common units |
Barrel | One 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 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 |
| |
EBITDA (a non-GAAP financial measure) | Earnings Before Interest, Taxes, Depreciation and Amortization |
FASB | |
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FASB | Financial Accounting Standards Board |
GAAP | Accounting principles generally accepted in the United States of America |
LIBOR | |
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| |
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LIBOR | London Interbank Offered Rate |
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 |
NGL | Natural gas liquids, such as ethane, propane, butanes and natural gasoline |
NYSE | New York Stock Exchange |
Predecessor | The related assets, liabilities and results of operations of Andeavor Logistics LP (“ANDX”) prior to the date of the acquisition, July 30, 2019, effective October 1, 2018 |
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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 |
Wholesale Exchange | The transfer to MPC of the Western wholesale distribution business, which MPLX acquired as a result of its acquisition of ANDX, on July 31, 2020. |
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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) | 2021 | | 2020 | | | | |
Revenues and other income: | | | | | | | |
Service revenue | $ | 589 | | | $ | 612 | | | | | |
Service revenue - related parties | 872 | | | 928 | | | | | |
Service revenue - product related | 77 | | | 39 | | | | | |
Rental income | 99 | | | 96 | | | | | |
Rental income - related parties | 242 | | | 234 | | | | | |
Product sales | 282 | | | 169 | | | | | |
Product sales - related parties | 42 | | | 33 | | | | | |
| | | | | | | |
Income/(loss) from equity method investments(1) | 70 | | | (1,184) | | | | | |
Other income | 1 | | | 1 | | | | | |
Other income - related parties | 65 | | | 64 | | | | | |
Total revenues and other income | 2,339 | | | 992 | | | | | |
Costs and expenses: | | | | | | | |
Cost of revenues (excludes items below) | 273 | | | 368 | | | | | |
Purchased product costs | 276 | | | 135 | | | | | |
Rental cost of sales | 32 | | | 35 | | | | | |
Rental cost of sales - related parties | 39 | | | 46 | | | | | |
Purchases - related parties | 298 | | | 276 | | | | | |
Depreciation and amortization | 329 | | | 325 | | | | | |
Impairment expense | 0 | | | 2,165 | | | | | |
General and administrative expenses | 86 | | | 97 | | | | | |
| | | | | | | |
Other taxes | 32 | | | 31 | | | | | |
Total costs and expenses | 1,365 | | | 3,478 | | | | | |
Income/(loss) from operations | 974 | | | (2,486) | | | | | |
Related party interest and other financial costs | 0 | | | 3 | | | | | |
Interest expense (net of amounts capitalized of $5 million, $13 million, respectively) | 198 | | | 211 | | | | | |
Other financial costs | 27 | | | 16 | | | | | |
Income/(loss) before income taxes | 749 | | | (2,716) | | | | | |
Provision for income taxes | 1 | | | 0 | | | | | |
Net income/(loss) | 748 | | | (2,716) | | | | | |
Less: Net income attributable to noncontrolling interests | 9 | | | 8 | | | | | |
| | | | | | | |
Net income/(loss) attributable to MPLX LP | 739 | | | (2,724) | | | | | |
Less: Series A preferred unit distributions | 20 | | | 20 | | | | | |
Less: Series B preferred unit distributions | 11 | | | 11 | | | | | |
| | | | | | | |
Limited partners’ interest in net income/(loss) attributable to MPLX LP | $ | 708 | | | $ | (2,755) | | | | | |
Per Unit Data (See Note 6) | | | | | | | |
Net income/(loss) attributable to MPLX LP per limited partner unit: | | | | | | | |
Common - basic | $ | 0.68 | | | $ | (2.60) | | | | | |
Common - diluted | $ | 0.68 | | | $ | (2.60) | | | | | |
Weighted average limited partner units outstanding: | | | | | | | |
Common - basic | 1,037 | | | 1,058 | | | | | |
Common - diluted | 1,037 | | | 1,058 | | | | | |
| | | | | | | |
|
| | | | | | | |
| 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 |
| | — |
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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 |
|
(1) The 2020 period includes $1,264 million of impairment expense. See Note 4.
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(1) | Financial information for the first quarter of 2019 has been retrospectively adjusted for the acquisition of ANDX. See Notes 1 and 3. |
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(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 Comprehensive Income (Unaudited)
| | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | | | |
(In millions) | 2021 | | 2020 | | | | | | |
Net income/(loss) | $ | 748 | | | $ | (2,716) | | | | | | | |
Other comprehensive income/(loss), net of tax: | | | | | | | | | |
Remeasurements of pension and other postretirement benefits related to equity method investments, net of tax | (2) | | | (1) | | | | | | | |
Comprehensive income/(loss) | 746 | | | (2,717) | | | | | | | |
Less comprehensive income attributable to: | | | | | | | | | |
Noncontrolling interests | 9 | | | 8 | | | | | | | |
| | | | | | | | | |
Comprehensive income/(loss) attributable to MPLX LP | $ | 737 | | | $ | (2,725) | | | | | | | |
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| | | | | | | |
| 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 ANDX. See Notes 1 and 3. |
The accompanying notes are an integral part of these consolidated financial statements.
MPLX LP
Consolidated Balance Sheets (Unaudited)
| | | | | | | | | | | |
(In millions) | March 31, 2021 | | December 31, 2020 |
Assets | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 24 | | | $ | 15 | |
| | | |
Receivables, net | 523 | | | 452 | |
Current assets - related parties | 650 | | | 677 | |
Inventories | 128 | | | 118 | |
Assets held for sale | 0 | | | 188 | |
Other current assets | 49 | | | 65 | |
Total current assets | 1,374 | | | 1,515 | |
Equity method investments | 4,040 | | | 4,036 | |
Property, plant and equipment, net | 20,996 | | | 21,218 | |
Intangibles, net | 927 | | | 959 | |
Goodwill | 7,657 | | | 7,657 | |
Right of use assets, net | 296 | | | 309 | |
Noncurrent assets - related parties | 676 | | | 672 | |
Other noncurrent assets | 64 | | | 48 | |
Total assets | 36,030 | | | 36,414 | |
Liabilities | | | |
Current liabilities: | | | |
Accounts payable | 162 | | | 152 | |
Accrued liabilities | 233 | | | 194 | |
| | | |
| | | |
| | | |
Current liabilities - related parties | 338 | | | 356 | |
Accrued property, plant and equipment | 58 | | | 84 | |
| | | |
Long-term debt due within one year | 2 | | | 764 | |
Accrued interest payable | 189 | | | 222 | |
Operating lease liabilities | 63 | | | 63 | |
Liabilities held for sale | 0 | | | 101 | |
Other current liabilities | 151 | | | 150 | |
Total current liabilities | 1,196 | | | 2,086 | |
Long-term deferred revenue | 332 | | | 314 | |
Long-term liabilities - related parties | 279 | | | 283 | |
Long-term debt | 20,052 | | | 19,375 | |
Deferred income taxes | 11 | | | 12 | |
Long-term operating lease liabilities | 230 | | | 244 | |
Deferred credits and other liabilities | 112 | | | 115 | |
Total liabilities | 22,212 | | | 22,429 | |
Commitments and contingencies (see Note 21) | 0 | | 0 |
Series A preferred units | 968 | | | 968 | |
Equity | | | |
Common unitholders - public (385 million and 391 million units issued and outstanding) | 9,226 | | | 9,384 | |
| | | |
Common unitholders - MPC (647 million and 647 million units issued and outstanding) | 2,796 | | | 2,792 | |
| | | |
| | | |
Series B preferred units (.6 million and .6 million units issued and outstanding) | 601 | | | 611 | |
| | | |
Accumulated other comprehensive loss | (17) | | | (15) | |
Total MPLX LP partners’ capital | 12,606 | | | 12,772 | |
Noncontrolling interests | 244 | | | 245 | |
Total equity | 12,850 | | | 13,017 | |
Total liabilities, preferred units and equity | $ | 36,030 | | | $ | 36,414 | |
|
| | | | | | | |
(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 |
|
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) | 2021 | | 2020 |
Increase/(decrease) in cash, cash equivalents and restricted cash | | | |
Operating activities: | | | |
Net income/(loss) | $ | 748 | | | $ | (2,716) | |
Adjustments to reconcile net income/(loss) to net cash provided by operating activities: | | | |
Amortization of deferred financing costs | 17 | | | 14 | |
Depreciation and amortization | 329 | | | 325 | |
Impairment expense | 0 | | | 2,165 | |
| | | |
| | | |
| | | |
(Income)/loss from equity method investments(1) | (70) | | | 1,184 | |
Distributions from unconsolidated affiliates | 119 | | | 119 | |
Changes in: | | | |
Current receivables | (67) | | | 71 | |
Inventories | (11) | | | 3 | |
Fair value of derivatives | 3 | | | (15) | |
Current accounts payable and accrued liabilities | 26 | | | (142) | |
Current assets/current liabilities - related parties | (8) | | | (52) | |
| | | |
Right of use assets/operating lease liabilities | (1) | | | (4) | |
Deferred revenue | 24 | | | 27 | |
All other, net | 15 | | | 30 | |
Net cash provided by operating activities | 1,124 | | | 1,009 | |
Investing activities: | | | |
Additions to property, plant and equipment | (126) | | | (379) | |
| | | |
Disposal of assets | 70 | | | 39 | |
| | | |
Investments in unconsolidated affiliates | (35) | | | (91) | |
| | | |
Distributions from unconsolidated affiliates - return of capital | 0 | | | 69 | |
All other, net | 1 | | | 0 | |
Net cash used in investing activities | (90) | | | (362) | |
Financing activities: | | | |
Long-term debt - borrowings | 1,910 | | | 1,325 | |
- repayments | (2,020) | | | (581) | |
Related party debt - borrowings | 2,241 | | | 1,667 | |
- repayments | (2,241) | | | (2,261) | |
| | | |
| | | |
Unit repurchases | (155) | | | 0 | |
| | | |
| | | |
| | | |
| | | |
Distributions to noncontrolling interests | (10) | | | (9) | |
Distributions to Series A preferred unitholders | (20) | | | (20) | |
Distributions to Series B preferred unitholders | (21) | | | (21) | |
Distributions to unitholders and general partner | (713) | | | (717) | |
| | | |
Contributions from MPC | 7 | | | 14 | |
| | | |
All other, net | (3) | | | (2) | |
Net cash used in financing activities | (1,025) | | | (605) | |
Net increase in cash, cash equivalents and restricted cash | 9 | | | 42 | |
Cash, cash equivalents and restricted cash at beginning of period | 15 | | | 15 | |
Cash, cash equivalents and restricted cash at end of period | $ | 24 | | | $ | 57 | |
|
| | | | | | | |
| 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) The 2020 period includes $1,264 million of impairment expense. See Note 4.
| |
(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) | | (In millions) | Common Unit-holders Public | | Common Unit-holder MPC | | Series B Preferred Unit-holders | | Accumulated Other Comprehensive Loss | | Non-controlling Interests | | | Total |
| | | 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 |
| |
| | Balance at December 31, 2019 | | Balance at December 31, 2019 | $ | 10,800 | | | $ | 4,968 | | | $ | 611 | | | $ | (15) | | | $ | 249 | | | | $ | 16,613 | |
Net (loss)/income (excludes amounts attributable to preferred units) | | Net (loss)/income (excludes amounts attributable to preferred units) | (1,022) | | | (1,733) | | | 11 | | | 0 | | | 8 | | | | (2,736) | |
Distributions to: | | | | | | | | | | | | | | Distributions to: | | | |
Unitholders | (188 | ) | | (327 | ) | | — |
| | — |
| | — |
| | (261 | ) | | (776 | ) | Unitholders | (271) | | | (446) | | | (21) | | | 0 | | | 0 | | | | (738) | |
Noncontrolling interests | — |
| | — |
| | — |
| | — |
| | (6 | ) | | — |
| | (6 | ) | Noncontrolling interests | 0 | | | 0 | | | 0 | | | 0 | | | (9) | | | | (9) | |
Contributions from: | | | | | | | | | | | | | | Contributions from: | | | |
MPC | — |
| | — |
| | — |
| | — |
| | — |
| | 15 |
| | 15 |
| MPC | 0 | | | 225 | | | 0 | | | 0 | | | 0 | | | | 225 | |
Noncontrolling interests | — |
| | — |
| | — |
| | — |
| | 94 |
| | — |
| | 94 |
| |
| Other | 2 |
| | — |
| | — |
| | 1 |
| | — |
| | — |
| | 3 |
| Other | 2 | | | 0 | | | 0 | | | (1) | | | 0 | | | | 1 | |
Balance at March 31, 2019 | 8,326 |
| | (1,632 | ) | | — |
| | (15 | ) | | 250 |
| | 10,801 |
| | 17,730 |
| |
Balance at March 31, 2020 | | Balance at March 31, 2020 | 9,509 | | | 3,014 | | | 601 | | | (16) | | | 248 | | | | 13,356 | |
| | | | | | | | | | | | | | |
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 | ) | |
| | | Balance at December 31, 2020 | | Balance at December 31, 2020 | 9,384 | | | 2,792 | | | 611 | | | (15) | | | 245 | | | | 13,017 | |
| Net income (excludes amounts attributable to preferred units) | | Net income (excludes amounts attributable to preferred units) | 266 | | | 443 | | | 11 | | | 0 | | | 9 | | | | 729 | |
Unit Repurchases | | Unit Repurchases | (155) | | | 0 | | | 0 | | | 0 | | | 0 | | | | (155) | |
| Distributions to: | | | | | | | | | | | | | | Distributions to: | | | |
| Unitholders | (271 | ) | | (446 | ) | | (21 | ) | | — |
| | — |
| | — |
| | (738 | ) | Unitholders | (269) | | | (445) | | | (21) | | | 0 | | | 0 | | | | (735) | |
Noncontrolling interests | — |
| | — |
| | — |
| | — |
| | (9 | ) | | — |
| | (9 | ) | Noncontrolling interests | 0 | | | 0 | | | 0 | | | 0 | | | (10) | | | | (10) | |
Contributions from: | | | | | | | | | | | | | | Contributions from: | | | |
MPC | — |
| | 225 |
| | — |
| | — |
| | — |
| | — |
| | 225 |
| MPC | 0 | | | 7 | | | 0 | | | 0 | | | 0 | | | | 7 | |
| Other | 2 |
| | — |
| | — |
| | (1 | ) | | — |
| | — |
| | 1 |
| Other | 0 | | | (1) | | | 0 | | | (2) | | | 0 | | | | (3) | |
Balance at March 31, 2020 | $ | 9,509 |
| | $ | 3,014 |
| | $ | 601 |
| | $ | (16 | ) | | $ | 248 |
| | $ | — |
| | $ | 13,356 |
| |
| Balance at March 31, 2021 | | Balance at March 31, 2021 | $ | 9,226 | | | $ | 2,796 | | | $ | 601 | | | $ | (17) | | | $ | 244 | | | | $ | 12,850 | |
|
| |
(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, large-cap master limited partnership formed by Marathon Petroleum 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. 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.
MPLX’s business consists of 2 segments based on the nature of services it offers: Logistics and Storage (“L&S”), which relates primarily to crude oil, asphalt and refined petroleum products; and Gathering and Processing (“G&P”), which relates primarily to natural gas and NGLs. See Note 9 for additional information regarding the operations and results of these segments.
On July 30, 2019,31, 2020, MPLX completed its acquisition by merger (the “Merger”the exchange of Western Refining Wholesale, LLC (“WRW”) to Western Refining Southwest, Inc. (now known as Western Refining Southwest LLC) (“WRSW”), a wholly owned subsidiary of Andeavor Logistics LP (“ANDX”). AtMPC, in exchange for the effective timeredemption of the Merger, each common unit held by ANDX’s public unitholders was converted into the right to receive 1.13518,582,088 MPLX common units. ANDX common units held by certain affiliates of MPC were converted into the right to receive 1.0328 MPLX common units.WRSW (the “Wholesale Exchange”). See Note 3 for additional information regarding the Merger.Wholesale Exchange. These financial statements include the results of WRSW through July 31, 2020.
Impairments – During the first quarter of 2021, we have seen improvement in the environment in which our business operates as COVID-19 impacts are beginning to subside. The recent outbreakincreased availability of vaccinations, coupled with an easing of COVID-19 restrictions in certain areas, has been followed by an increase in economic activity, the opening of many businesses and its development into a pandemicschools and an increase 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 acrossand associated travel. No additional events or circumstances arose during the globe. This has significantly reduced global economic activity and resultedfirst quarter of 2021 that would indicate potential impairment beyond those recognized in a decline in2020 as noted below.
During the demand forfirst quarter of 2020, the midstream services we provide. Macroeconomic conditions and global geopolitical events have also resulted in significant price volatility related to those aforementioned products.
The overall deterioration in the economy and the environment in which MPLX and ourits customers operate, as well as a sustained decrease in unit price, were considered triggering events at that time resulting in impairments of the carrying value of certain assets. During the first quarter of 2020 weWe 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 continued to refinerefined and updateupdated production forecasts in response to the current environment at that time, which has impacted their current and expected 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 impairments recognized during the first quarter of 2020 as well as the corresponding 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 Presentation – The accompanying interim consolidated financial statements are unaudited; however, in the opinion of MPLX’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, 2019.2020. The results of
operations for the three months ended March 31, 20202021 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
MPLX’s consolidated financial statements include all majority-owned and controlled subsidiaries. For non whollynon-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
ASU 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments
Effective January 1, 2020, we adopted ASU 2016-13 using the modified 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 expected loss methodology in place of the incurred loss methodology for financial instruments, including trade receivables, and off-balance sheet credit exposures. Adoption of the standardWe did not have a material impact on our financial statements.
We are exposed to credit losses, primarily as a result of the midstream services that we provide. We assess each customer’s ability to pay through our credit review process, which considers various factors such as external credit ratings; a review of 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 following ASUadopt any ASUs during the first three months of 2020, which did not2021 that are expected to have a material impact to our financial statements or financial statement disclosures: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 |
| | | |
3. Acquisitions and Dispositions
Sale of Javelina Assets and Liabilities
3. Acquisitions
Acquisition of Andeavor Logistics LP
As previously disclosed, on May 7, 2019, ANDX, Tesoro Logistics GP, LLC, then the general partner of ANDXOn February 12, 2021, MarkWest Energy Operating Company, L.L.C., (“TLGP”MarkWest Energy”), MPLX, MPLX GP LLC, the general partner of MPLX (“MPLX GP”), and MPLX MAX LLC, a wholly owned subsidiary of MPLX, (“Merger Sub”completed the sale of all of MarkWest Energy’s equity interests in MarkWest Javelina Company L.L.C., MarkWest Javelina Pipeline Company L.L.C., and MarkWest Gas Services L.L.C. (collectively, “Javelina”), pursuant to the terms of an Equity Purchase Agreement entered into with a third party on December 23, 2020. The agreement included adjustments for working capital as well as an earnout provision based on the performance of the assets. NaN gain or loss was recorded on the sale. The estimated value of the earnout provision was recorded as a contingent asset shown within “Other noncurrent assets” on the Consolidated Balance Sheet as of March 31, 2021. Javelina’s assets and liabilities sold are shown on the Consolidated Balance Sheet as “Assets held for sale” and “Liabilities held for sale” for the year ended December 31, 2020. Prior to the sale, Javelina was reported within the G&P segment.
Wholesale Exchange
On July 31, 2020, MPLX entered into a Redemption Agreement and Plan of Merger (the “Merger“Redemption Agreement”) that provided for, among other things, the merger 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 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 7 for information on units issued in connection with the 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.”),WRSW, a wholly owned subsidiary of MPC, as the holder ofpursuant to which MPLX agreed to transfer to WRSW 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 ceasedoutstanding membership interests in WRW in exchange for the redemption of MPLX common units held by WRSW. The transaction effected the transfer to exist asMPC of the effective time of the Merger. TheWestern wholesale distribution business that 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. Asacquired as a result of its acquisition of ANDX. Per the Merger, the ANDX Special Limited Partner Interest outstanding immediately prior to the effective timeterms of the MergerRedemption Agreement, MPLX redeemed 18,582,088 common units (the “Redeemed Units”) held by WRSW on July 31, 2020. The number of Redeemed Units was converted into a right for Southwest Inc., ascalculated by dividing WRW’s aggregate valuation of $340 million by the holder of all such interest, to receive a substantially equivalent special limited partner interest in MPLX (the “MPLX Special Limited Partner Interest”). By virtuesimple average of the conversion,volume weighted average NYSE prices of an MPLX common unit for the ANDX Special Limited Partner Interestten trading days ending at market close on July 27, 2020. MPLX canceled the Redeemed Units immediately following the Wholesale Exchange. The carrying value of the net assets of WRW transferred to MPC was cancelled and ceased to existapproximately $90 million as of July 31, 2020, resulting in $250 million being recorded to “Common Unit-holder MPC” within the effective timeConsolidated Statements of Equity, netted against the fair value of the Merger. For information on ANDX’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 crude 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 inredeemed units. Included within the western and inland regions$90 million carrying value of the United States and complement MPLX’s existing business and assets.
MPC accounted for its October 1, 2018 acquisition of Andeavor (including acquiring control of ANDX), using the acquisition method of accounting, which required AndeavorWRW net 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 ANDX have been incorporated into the results of MPLX as of October 1, 2018, which is the date that common control was established. As a result of MPC’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 recognition of assets acquired and liabilities assumed using MPC’s historical carrying value. We recognized $1 million in acquisition costs during the first quarter of 2019 related to the Merger, which are reflected in general and administrative expenses. For the three months ended March 31, 2019, we recognized $589approximately $65 million of revenues and other income and $180 million of net income related to ANDX.goodwill.
4. Investments and Noncontrolling Interests
The following table presents MPLX’s equity method investments at the dates indicated:
| | | | | | | | | | | | | | | | | |
| Ownership as of | | Carrying value at |
| March 31, | | March 31, | | December 31, |
(In millions, except ownership percentages) | 2021 | | 2021 | | 2020 |
L&S | | | | | |
MarEn Bakken Company LLC(1) | 25% | | $ | 462 | | | $ | 465 | |
Illinois Extension Pipeline Company, L.L.C. | 35% | | 259 | | | 254 | |
LOOP LLC | 41% | | 257 | | | 252 | |
Andeavor Logistics Rio Pipeline LLC(2) | 67% | | 193 | | | 194 | |
Minnesota Pipe Line Company, LLC | 17% | | 187 | | | 188 | |
Whistler Pipeline LLC(2) | 38% | | 187 | | | 185 | |
Explorer Pipeline Company | 25% | | 69 | | | 72 | |
W2W Holdings LLC(2)(3) | 50% | | 73 | | | 72 | |
| | | | | |
Other(2) | | | 105 | | | 103 | |
Total L&S | | | 1,792 | | | 1,785 | |
G&P | | | | | |
MarkWest Utica EMG, L.L.C.(2) | 57% | | 696 | | | 698 | |
Sherwood Midstream LLC(2) | 50% | | 552 | | | 557 | |
MarkWest EMG Jefferson Dry Gas Gathering Company, L.L.C.(2) | 67% | | 313 | | | 307 | |
| | | | | |
Rendezvous Gas Services, L.L.C.(2) | 78% | | 157 | | | 159 | |
Sherwood Midstream Holdings LLC(2) | 51% | | 145 | | | 148 | |
| | | | | |
Centrahoma Processing LLC | 40% | | 137 | | | 145 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Other(2) | | | 248 | | | 237 | |
| | | | | |
Total G&P | | | 2,248 | | | 2,251 | |
Total | | | $ | 4,040 | | | $ | 4,036 | |
|
| | | | | | | | | |
| 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 |
|
(1) The investment in MarEn Bakken Company LLC includes our 9.19 percent indirect interest in a joint venture (“Dakota Access”) that owns and operates the Dakota Access Pipeline and Energy Transfer Crude Oil Pipeline projects, collectively referred to as the Bakken Pipeline system or DAPL. (2) Investments deemed to be VIEs. Some investments included within “Other” have also been deemed to be VIEs.
(3) Through our ownership interest in W2W Holdings LLC, we have a 15 percent equity interest Wink to Webster Pipeline LLC.
| |
(1) | Investments deemed to be VIE’s. Some investments included within “Other” have also been deemed to be VIE’s. |
| |
(2) | During the three months ended March 31, 2020, we contributed our ownership in Wink to Webster Pipeline LLC to W2W Holdings LLC. |
For those entities that have been deemed to be VIE’s,VIEs, neither MPLX nor any of its subsidiaries have been deemed to be the primary beneficiary due to voting rights on significant matters. While we have the ability to exercise influence through participation in the management committees which make all significant decisions, since we have equal influence over each committee as a joint interest partner and all significant decisions require the consent of the other investors without regard to economic interest and as such we have determined that these entities should not be consolidated and apply the equity method of accounting with respect to our investments in each entity.
Sherwood Midstream LLC (“Sherwood Midstream”) has been deemed the primary beneficiary of Sherwood Midstream Holdings LLC (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, MPLX also reports its portion of Sherwood Midstream Holdings’ net assets as a component of its investment in Sherwood Midstream. As of March 31, 2020,2021, MPLX has a 24.124.55 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, 2020.2021.
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.interest as discussed in Note 1. 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. No additional impairments have been recorded since that time.
Summarized financial information for MPLX’s equity method investments for the three months ended March 31, 20202021 and 20192020 is as follows:
| | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2021 |
(In millions) | VIEs | | Non-VIEs | | Total |
Revenues and other income | $ | 163 | | | $ | 284 | | | $ | 447 | |
Costs and expenses | 107 | | | 131 | | | 238 | |
Income from operations | 56 | | | 153 | | | 209 | |
Net income | 64 | | | 140 | | | 204 | |
Income from equity method investments(1) | $ | 39 | | | $ | 31 | | | $ | 70 | |
|
| | | | | | | | | | | |
| 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. | |
(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, 2020 |
(In millions) | VIEs | | Non-VIEs | | Total |
Revenues and other income | $ | (217) | | | $ | 337 | | | $ | 120 | |
Costs and expenses | 104 | | | 132 | | | 236 | |
(Loss)/income from operations | (321) | | | 205 | | | (116) | |
Net (loss)/income | (337) | | | 186 | | | (151) | |
(Loss)/income from equity method investments(1) | $ | (1,222) | | | $ | 38 | | | $ | (1,184) | |
|
| | | | | | | | | | | |
| 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) Includes the impact of any basis differential amortization or accretion in addition to the impairment of $1,264 million.
| |
(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, 20202021 and December 31, 20192020 is as follows:
| | | | | | | | | | | | | | | | | |
| March 31, 2021 |
(In millions) | VIEs | | Non-VIEs | | Total |
Current assets | $ | 312 | | | $ | 321 | | | $ | 633 | |
Noncurrent assets | 7,266 | | | 4,967 | | | 12,233 | |
Current liabilities | 338 | | | 194 | | | 532 | |
Noncurrent liabilities | $ | 2,053 | | | $ | 853 | | | $ | 2,906 | |
|
| | | | | | | | | | | |
| 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 |
|
| | | | | | | | | | | | | | | | | |
| December 31, 2020 |
(In millions) | VIEs | | Non-VIEs | | Total |
Current assets | $ | 530 | | | $ | 318 | | | $ | 848 | |
Noncurrent assets | 6,889 | | | 4,997 | | | 11,886 | |
Current liabilities | 323 | | | 187 | | | 510 | |
Noncurrent liabilities | $ | 1,904 | | | $ | 830 | | | $ | 2,734 | |
As of March 31, 2021 and December 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$56 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.and $57 million, respectively. As of March 31, 20202021 and December 31, 2019,2020, 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. $331 million.
At March 31, 20202021 and December 31, 2019,2020, 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.goodwill. At March 31, 20202021 and December 31, 2019,2020, 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.goodwill.
5. Related Party Agreements and Transactions
MPLX 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 are further described below.
MPLX has various long-term, fee-based commercial agreements with MPC. Under these agreements, MPLX provides transportation, terminal, fuels distribution, marketing, storage, management, operational and other services to MPC. MPC has committed to provide MPLX with minimum quarterly throughput volumes on crude oil and refined products and other fees for storage capacity; 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 available capacity for boats, barges and 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 typeservices-type agreements as well as other various agreements.
Related Party Loan
MPLX is party to a loan agreement with MPC Investment LLC (“MPC Investment”) (the “MPC Loan Agreement”). Under the terms of the agreement, MPC Investment makes a loan orextends loans to MPLX on a revolving basis as requested by MPLX and as agreed to by MPC Investment. In connection with the Merger, on July 31, 2019, MPLX and MPC Investment amended and restatedThe borrowing capacity of the MPC Loan Agreement to increase the borrowing capacity under the MPC Loan Agreement tois $1.5 billion in aggregate principal amount of all loans outstanding at any one time. The entire unpaid principal amount ofloan agreement is scheduled to expire, and borrowings under the loan together with all accruedagreement are scheduled to mature and unpaid interest and other amounts (if any), shall become due and payable on 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 July 31, 2024.maturity. Borrowings under the MPC 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 1.25 percent or such lower rate as would be applicable to such loans under the MPLX Credit Agreement.Agreement as discussed in Note 15. Activity on the MPC Loan Agreement was as follows:
| | | | | | | | | | | |
(In millions) | Three Months Ended March 31, 2021 | | Year Ended December 31, 2020 |
Borrowings | $ | 2,241 | | | $ | 6,264 | |
Average interest rate of borrowings | 1.371 | % | | 2.278 | % |
Repayments | $ | 2,241 | | | $ | 6,858 | |
Outstanding balance at end of period(1) | $ | 0 | | | $ | 0 | |
|
| | | | | | | |
(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) | (1) Included in “Current liabilities - related parties” on the Consolidated Balance Sheets. |
Prior to the Merger, ANDX was also party to a loan agreement with MPC (“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:Consolidated Balance Sheets.
|
| | | |
(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 pipeline and trucking transportation services based on tariff/contracted rates; storage, terminal and fuels distribution services based on contracted rates; and marine transportation services. Related party sales to MPC also consist of revenue related to volume deficiency credits.
MPLX also has operating agreements with MPC under which it receives a fee for operating MPC’s retained pipeline assets and a fixed annual fee for providing oversight and management services required to run the marine business. MPLX also receives management fee revenue for engineering, construction and administrative services for operating certain of its equity method investments.
Revenue received from related parties included on the Consolidated Statements of Income was as follows:
| | | Three Months Ended March 31, | | Three Months Ended March 31, | |
(In millions) | 2020 | | 2019 | (In millions) | 2021 | | 2020 | |
Service revenues - related parties | | | | Service revenues - related parties | | | | |
MPC | $ | 927 |
| | $ | 803 |
| MPC | $ | 871 | | | $ | 927 | | |
Other | 1 |
| | — |
| Other | 1 | | | 1 | | |
Total Service revenue - related parties | 928 |
| | 803 |
| Total Service revenue - related parties | 872 | | | 928 | | |
Rental income - related parties | | | | Rental income - related parties | | | | |
MPC | 234 |
| | 325 |
| MPC | 242 | | | 234 | | |
Product sales - related parties(1) | | | | Product sales - related parties(1) | | |
MPC | 33 |
| | 41 |
| MPC | 42 | | | 33 | | |
Other income - related parties | | | | Other income - related parties | | |
MPC | 48 |
| | 10 |
| MPC | 49 | | | 48 | | |
Other | 16 |
| | 16 |
| Other | 16 | | | 16 | | |
| Total Other income - related parties | $ | 64 |
| | $ | 26 |
| Total Other income - related parties | $ | 65 | | | $ | 64 | | |
| |
(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 months ended March 31, 2020, these sales totaled $173 million. For the three months ended March 31, 2019, these sales totaled $223 million. |
(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 months ended March 31, 2021 and March 31, 2020, these sales totaled $168 million and $173 million, respectively.
Related Party 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 in its capacity as general contractor to MPLX, and has certain rent and lease agreements with MPC.
Expenses incurred from MPC under the omnibus and employee services agreements as well as other purchases from MPC included on the Consolidated Statements of Income are as follows:
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
(In millions) | 2021 | | 2020 | | | | |
Rental cost of sales - related parties | | | | | | | |
MPC | $ | 39 | | | $ | 46 | | | | | |
Purchases - related parties | | | | | | | |
MPC | 294 | | | 271 | | | | | |
Other | 4 | | | 5 | | | | | |
Total Purchases - related parties | 298 | | | 276 | | | | | |
General and administrative expenses | | | | | | | |
MPC | $ | 57 | | | $ | 64 | | | | | |
| | | | | | | |
| | | | | | | |
|
| | | | | | | |
| 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, 20202021 and 2019,March 31, 2020, these charges totaled $36$12 million and $41$36 million, respectively.
MPC has also been advancing certain strategic priorities to lay a foundation for long-term success, including plans to optimize its assets and structurally lower costs in 2021 and beyond. In 2020, MPC approved and executed an involuntary workforce reduction plan, which together with employee reductions resulting from MPC's indefinite idling of its Martinez, California and Gallup, New Mexico refineries, affected approximately 2,050 employees. All of the employees that conduct MPLX’s business are directly employed by affiliates of MPC, and certain of those employees were affected by MPC’s workforce reductions. During the third and fourth quarters of 2020, MPLX reimbursed MPC for $37 million related to severance and employee benefits related expenses that MPC recorded in connection with its workforce reductions. There were no such costs in the first quarter of 2021.
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 meet its minimum committed volumes, MPC will pay MPLX a deficiency payment based on the terms of the agreement. The deficiency amounts are recorded as “Current liabilities - related parties.” In many cases, MPC may then apply the amount of any such deficiency payments as a credit for volumes in excess of its minimum volume commitment in future periods under the terms of the applicable agreements. MPLX recognizes related party revenues for the deficiency payments when credits are used for volumes in excess of minimum quarterly volume commitments, where it is probable the customer 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 “Current liabilities - related parties.” In addition, capital projects MPLX is undertaking at the request of MPC are reimbursed in cash and recognized in income over the remaining term of the applicable agreements or in some cases as an equity contribution from its sponsor.
| | | | | | | | | | | |
(In millions) | March 31, 2021 | | December 31, 2020 |
Current assets - related parties | | | |
Receivables - MPC | $ | 586 | | | $ | 615 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
Receivables - Other | 14 | | | 27 | |
Prepaid - MPC | 17 | | | 4 | |
Other - MPC | 1 | | | 1 | |
Lease Receivables - MPC | 32 | | | 30 | |
Total | 650 | | | 677 | |
Noncurrent assets - related parties | | | |
Long-term receivables - MPC | 32 | | | 32 | |
Right of use assets - MPC | 230 | | | 231 | |
Long-term lease receivables - MPC | 388 | | | 386 | |
Unguaranteed residual asset - MPC | 26 | | | 23 | |
Total | 676 | | | 672 | |
Current liabilities - related parties | | | |
Payables - MPC | 213 | | | 215 | |
| | | |
| | | |
| | | |
| | | |
| | | |
Payables - Other | 26 | | | 43 | |
Operating lease liabilities - MPC | 1 | | | 1 | |
| | | |
Deferred revenue - Minimum volume deficiencies - MPC | 65 | | | 66 | |
Deferred revenue - Project reimbursements - MPC | 32 | | | 30 | |
Deferred revenue - Project reimbursements - Other | 1 | | | 1 | |
Total | 338 | | | 356 | |
Long-term liabilities - related parties | | | |
Long-term operating lease liabilities - MPC | 229 | | | 229 | |
| | | |
| | | |
Long-term deferred revenue - Project reimbursements - MPC | 43 | | | 47 | |
Long-term deferred revenue - Project reimbursements - Other | 7 | | | 7 | |
Total | $ | 279 | | | $ | 283 | |
|
| | | | | | | |
(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, 2021 and 2020 were $9 million and 2019.$2 million, respectively. Purchases from related parties were immaterial for the three months ended March 31, 2021 and 2020.
6. Net Income/(Loss) Per Limited Partner Unit
Net income/(loss) per unit applicable to common units is computed by dividing net income/(loss) attributable to MPLX LP less income/(loss) allocated to participating securities by the weighted average number of common units outstanding. Additional MPLX common units, MPLX Series B preferred units, and TexNew Mex units were issued on July 30, 2019 as a result of the merger 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 forDuring the three months ended March 31, 2021 and 2020, MPLX had participating securities consisting of common units, certain equity-based compensation awards, Series A preferred units 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 March 31, 2020Series B preferred units and 2019, MPLX had dilutive potential common units consisting of certain equity-based compensation awards. Potential common units omitted from the diluted earnings per unit calculation for the three months ended March 31, 2021 and 2020 and 2019 were 1 million and less than 1 million, respectively.million.
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
(In millions) | 2021 | | 2020 | | | | |
Net income/(loss) attributable to MPLX LP | $ | 739 | | | $ | (2,724) | | | | | |
Less: Distributions declared on Series A preferred units(1) | 20 | | | 20 | | | | | |
| | | | | | | |
Distributions declared on Series B preferred units(1) | 11 | | | 11 | | | | | |
Limited partners’ distributions declared on MPLX common units (including common units of general partner)(1) | 707 | | | 728 | | | | | |
| | | | | | | |
Undistributed net gain/(loss) attributable to MPLX LP | $ | 1 | | | $ | (3,483) | | | | | |
|
| | | | | | | |
| 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 | ) |
(1) See Note 7 for distribution information. | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2021 |
(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 | $ | 707 | | | | | $ | 20 | | | $ | 11 | | | $ | 738 | |
Undistributed net gain attributable to MPLX LP | 1 | | | | | 0 | | | 0 | | | 1 | |
Net income attributable to MPLX LP(1) | $ | 708 | | | | | $ | 20 | | | $ | 11 | | | $ | 739 | |
Weighted average units outstanding: | | | | | | | | | |
Basic | 1,037 | | | | | | | | | |
Diluted | 1,037 | | | | | | | | | |
Net income attributable to MPLX LP per limited partner unit: | | | | | | | | | |
Basic | $ | 0.68 | | | | | | | | | |
Diluted | $ | 0.68 | | | | | | | | | |
(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.
| |
(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 | ) | | | | | | |
15
| |
(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. |
| | | | | | | | | | | | | | | | | | | | | | | |
| 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) | | | 0 | | | 0 | | | (3,483) | |
Net (loss)/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) | | | | | | | |
(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.
|
| | | | | | | | | | | |
| 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 three months ended March 31, 20202021 are summarized below:
| | | | | | | | | | | |
(In units) | Common | | | | | | |
Balance at December 31, 2020 | 1,038,777,978 | | | | | | | |
Unit-based compensation awards | 143,247 | | | | | | | |
Units redeemed in unit repurchase program | (6,272,981) | | | | | | | |
| | |
(In units) | Common | | | |
Balance at December 31, 2019 | 1,058,355,471 |
|
Unit-based compensation awards | 151,878 |
|
Balance at March 31, 20202021 | 1,058,507,3491,032,648,244 |
| | | | | | |
Unit Repurchase Program
Merger
On November 2, 2020, MPLX announced the board authorization of a unit repurchase program for the repurchase of up to $1 billion of MPLX’s outstanding common units held by the public. MPLX may utilize various methods to effect the repurchases, which could include open market repurchases, negotiated block transactions, tender offers, accelerated unit repurchases or open market solicitations for units, some of which may be effected through Rule 10b5-1 plans. The timing and amount of repurchases will depend upon several factors, including market and business conditions, and repurchases may be initiated, suspended or discontinued at any time. The repurchase authorization has no expiration date. During the three months ended March 31, 2021, 6,272,981 public common units were repurchased at an average cost per unit of $24.78. Total cash paid for units repurchased during 2021 was $155 million with $812 million remaining available under the program for future repurchases as of March 31, 2021. As of March 31, 2021, we had agreements to acquire 291,400 additional common units for $7 million, which settled in April 2021.
Wholesale Exchange
In connection with the Merger andWholesale Exchange as discussed in Note 3, each common unit held18,582,088 units were redeemed by ANDX’s public unitholders was converted intoMPC in exchange for all of the right to receive 1.135outstanding membership interests in WRW. These units were cancelled by MPLX common units while ANDX common units held by certain affiliates of MPC were converted intoimmediately following 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, 2019.transaction.
Series B Preferred Units
Prior to the Merger, ANDX hadMPLX has outstanding 600,000 units of 6.875 percent Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units representing limited partner interests of ANDX atMPLX with 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 MPLXunit (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 unitsunitholders are entitled to receive a fixed distribution of $68.75 per unit, per annum, 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.percent, in each case assuming a distribution is declared by the Board of Directors..
The changes in the Series B preferred unit balance from December 31, 20192020 through March 31, 20202021 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, 2020 | $ | 611 | |
Net income allocated | 11 | |
Distributions received by Series B preferred unitholders | (21) | |
Balance at March 31, 2021 | $ | 601 | |
|
| | | |
(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, 2020,27, 2021, MPLX declared a quarterly cash distribution for the first quarter of 2020,2021, totaling $728$707 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, 202014, 2021 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.7, 2021. MPLX also made a cash distribution payment totaling $21 million to holders of the Series B preferred unitholders inon February 2020 for approximately $21 million.16, 2021.
Quarterly distributions for the first quarterquarters of 20202021 and 20192020 are summarized below:
| | | | | | | | | | | |
(Per common unit) | 2021 | | 2020 |
March 31, | $ | 0.6875 | | | $ | 0.6875 | |
| | | |
| | | |
| | | |
|
| | | | | | | |
(Per common unit) | 2020 | | 2019 |
March 31, | $ | 0.6875 |
| | $ | 0.6575 |
|
The allocation of total quarterly cash distributions to limited and preferred unitholders is as follows for the three months ended March 31, 20202021 and 2019.2020. MPLX’s distributions are declared subsequent to quarter end; therefore, the following table represents total cash distributions applicable to the period in which the distributions were earned.
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
(In millions) | 2021 | | 2020 | | | | |
Common and preferred unit distributions: | | | | | | | |
Common unitholders, includes common units of general partner | $ | 707 | | | $ | 728 | | | | | |
| | | | | | | |
Series A preferred unit distributions | 20 | | | 20 | | | | | |
Series B preferred unit distributions | 11 | | | 11 | | | | | |
Total cash distributions declared | $ | 738 | | | $ | 759 | | | | | |
|
| | | | | | | |
| 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. Series A Preferred Units
On May 13, 2016, MPLX LP issued approximately 30.8 million 6.5 percent Series A Convertible preferred units for a cash purchase price of $32.50 per unit. The Series 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 Series A preferred units are entitled to receive, when and if declared by the board, a quarterly distribution equal to the greater of $0.528125 per unit or the amount of distributions they would have received on an as converted basis. On April 28, 2020,27, 2021, MPLX declared a quarterly cash distribution of $0.6875 per common unit for the first quarter of 2020.2021. Holders of the Series A preferred units will receive the common unit rate in lieu of the lower $0.528125 base amount.
The holders may convert their Series A preferred units into common units at any time, in full or in part, subject to minimum conversion amounts and conditions. After the fourth anniversary of the issuance date, MPLX may convert the Series 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-day trading period immediately preceding the conversion notice date. The conversion rate for the Series A preferred units shall be the quotient of (a) the sum of (i) $32.50, plus (ii) any unpaid cash distributions on the applicable preferred unit, divided by (b) $32.50, subject to adjustment
for unit distributions, unit splits and similar transactions. The holders of the Series A preferred units are entitled to vote on an as-converted basis with the common unitholders and have certain other class voting rights with respect to any amendment to the MPLX partnership agreement that would adversely affect any rights, preferences or privileges of the preferred units. In addition, upon certain events involving a change of control, the holders of preferred units may elect, among other potential elections, to convert their Series A preferred units to common units at the then change of control conversion rate.
Approximately 29.6 million Series A preferred units remaining outstanding as of March 31, 2020.2021. The changes in the redeemable preferred balance from December 31, 20192020 through March 31, 20202021 are summarized below:
| | | | | |
(In millions) | Redeemable Series A Preferred Units |
Balance at December 31, 2020 | $ | 968 | |
Net income allocated | 20 | |
Distributions received by Series A preferred unitholders | (20) | |
| |
Balance at March 31, 2021 | $ | 968 | |
|
| | | |
(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 Series A preferred units are considered redeemable securities under GAAP due to the existence of redemption provisions upon a deemed liquidation event which is outside MPLX’s control. Therefore, they are presented as temporary equity in the mezzanine section of the Consolidated Balance Sheets. The Series 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 decrease the carrying value of the Series A preferred units. As the Series 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 Series A preferred units would become redeemable.
9. Segment Information
MPLX’s chief operating decision maker is the chief executive officer (“CEO”) of its general partner. The CEO reviews MPLX’s discrete financial information, makes operating decisions, assesses financial performance and allocates resources on a type of service basis. MPLX has 2 reportable segments: L&S and G&P. Each of these segments is organized and managed based upon the nature of the products and services it offers.
•L&S – transports, stores, distributes and markets crude oil, asphalt, refined petroleum products and water. Also includes an inland marine business, terminals, rail facilities, storage caverns and refining logistics.
•G&P – gathers, processes and transports natural gas; and gathers, transports, fractionates, stores and markets NGLs.
Our CEO evaluates the performance of our segments using Segment Adjusted EBITDA. 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 interest; 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 revenues and other income, capital expenditures and investments in unconsolidated affiliates as well as total assets for our reportable segments:
|
| | | | | | | |
| 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 |
|
| |
(1) | Financial 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. |
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
(In millions) | 2021 | | 2020 | | | | |
L&S | | | | | | | |
Service revenue | $ | 953 | | | $ | 1,004 | | | | | |
Rental income | 249 | | | 242 | | | | | |
Product related revenue | 4 | | | 19 | | | | | |
Income from equity method investments | 36 | | | 50 | | | | | |
Other income | 52 | | | 51 | | | | | |
Total segment revenues and other income(1) | 1,294 | | | 1,366 | | | | | |
Segment Adjusted EBITDA(2) | 896 | | | 872 | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Capital expenditures | 59 | | | 184 | | | | | |
Investments in unconsolidated affiliates | 9 | | | 54 | | | | | |
G&P | | | | | | | |
Service revenue | 508 | | | 536 | | | | | |
Rental income | 92 | | | 88 | | | | | |
Product related revenue | 397 | | | 222 | | | | | |
Income/(loss) from equity method investments | 34 | | | (1,234) | | | | | |
Other income | 14 | | | 14 | | | | | |
Total segment revenues and other income/(loss)(1) | 1,045 | | | (374) | | | | | |
Segment Adjusted EBITDA(2) | 456 | | | 422 | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Capital expenditures | 30 | | | 134 | | | | | |
Investments in unconsolidated affiliates | $ | 26 | | | $ | 37 | | | | | |
(1) Within the total segment revenues and other income amounts presented above, third party revenues for the L&S segment were $129 million and $158 million for the three months ended March 31, 2021 and 2020, respectively. Third party revenues for the G&P segment were $989 million for the three months ended March 31, 2021 and third party losses were $425 million for the three months ended March 31, 2020.
|
| | | | | | | |
(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 |
|
(2) See below for the reconciliation from Segment Adjusted EBITDA to “Net income.”
| | | | | | | | | | | |
(In millions) | March 31, 2021 | | December 31, 2020 |
Segment assets | | | |
Cash and cash equivalents | $ | 24 | | | $ | 15 | |
L&S | 20,787 | | | 20,938 | |
G&P | 15,219 | | | 15,461 | |
Total assets | $ | 36,030 | | | $ | 36,414 | |
The table below provides a reconciliation between net “Net income/(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 and 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 March 31, | | |
(In millions) | 2021 | | 2020 | | | | |
Reconciliation to Net income/(loss): | | | | | | | |
L&S Segment Adjusted EBITDA | $ | 896 | | | $ | 872 | | | | | |
G&P Segment Adjusted EBITDA | 456 | | | 422 | | | | | |
Total reportable segments | 1,352 | | | 1,294 | | | | | |
Depreciation and amortization(1) | (329) | | | (325) | | | | | |
Provision for income taxes | (1) | | | 0 | | | | | |
Amortization of deferred financing costs | (17) | | | (14) | | | | | |
Non-cash equity-based compensation | (3) | | | (5) | | | | | |
Impairment expense | 0 | | | (2,165) | | | | | |
Net interest and other financial costs | (220) | | | (216) | | | | | |
Gain on extinguishment of debt | 12 | | | 0 | | | | | |
Income/(loss) from equity method investments | 70 | | | (1,184) | | | | | |
Distributions/adjustments related to equity method investments | (121) | | | (124) | | | | | |
Unrealized derivative (losses)/gains(2) | (3) | | | 15 | | | | | |
| | | | | | | |
| | | | | | | |
Other | (2) | | | (1) | | | | | |
Adjusted EBITDA attributable to noncontrolling interests | 10 | | | 9 | | | | | |
| | | | | | | |
Net income/(loss) | $ | 748 | | | $ | (2,716) | | | | | |
(1) Depreciation and amortization attributable to L&S was $147 million for the three months ended March 31, 2021 and $138 million for the three months ended March 31, 2020. Depreciation and amortization attributable to G&P was $182 million for the three months ended March 31, 2021 and $187 million for the three months ended March 31, 2020. (2) 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 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.
10. Inventories
Inventories consist of the following:
| | | | | | | | | | | |
(In millions) | March 31, 2021 | | December 31, 2020 |
NGLs | $ | 5 | | | $ | 5 | |
Line fill | 20 | | | 13 | |
Spare parts, materials and supplies | 103 | | | 100 | |
Total inventories | $ | 128 | | | $ | 118 | |
|
| | | | | | | |
(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 |
|
11. Property, Plant and Equipment
Property, plant and equipment with associated accumulated depreciation is shown below:
| | | | | | | | | | | | | |
(In millions) | | | March 31, 2021 | | December 31, 2020 |
L&S | | | | | |
Pipelines | | | $ | 6,045 | | | $ | 6,026 | |
Refining logistics | | | 2,335 | | | 2,333 | |
Terminals | | | 1,649 | | | 1,643 | |
Marine | | | 965 | | | 965 | |
Land, building and other | | | 1,584 | | | 1,584 | |
Construction-in-progress | | | 277 | | | 262 | |
Total L&S property, plant and equipment | | | 12,855 | | | 12,813 | |
G&P | | | | | |
Gathering and transportation | | | 7,559 | | | 7,547 | |
Processing and fractionation | | | 5,725 | | | 5,721 | |
Land, building and other | | | 510 | | | 507 | |
Construction-in-progress | | | 288 | | | 287 | |
Total G&P property, plant and equipment | | | 14,082 | | | 14,062 | |
Total property, plant and equipment | | | 26,937 | | | 26,875 | |
Less accumulated depreciation | | | 5,941 | | | 5,657 | |
Property, plant and equipment, net | | | $ | 20,996 | | | $ | 21,218 | |
|
| | | | | | | | | |
(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) | 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.
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“Impairment expense” on the Consolidated Statements of Income. Fair valueIncome in the first quarter 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 assurance2020. No additional impairments have been recorded since 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.time.
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. There were no impairments recorded as a result of our November 30, 2020 annual goodwill impairment evaluation.
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“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
Changes 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, 2019 | $ | 7,722 | | | $ | 3,141 | | | $ | 10,863 | |
Accumulated impairment losses | 0 | | | (1,327) | | | (1,327) | |
Balance as of December 31, 2019 | 7,722 | | | 1,814 | | | 9,536 | |
Impairment losses | 0 | | | (1,814) | | | (1,814) | |
| | | | | |
Wholesale Exchange (Note 3) | (65) | | | 0 | | | (65) | |
Balance as of December 31, 2020 | 7,657 | | | 0 | | | 7,657 | |
| | | | | |
| | | | | |
| | | | | |
Balance as of March 31, 2021 | 7,657 | | | 0 | | | 7,657 | |
| | | | | |
Gross goodwill as of March 31, 2021 | 7,657 | | | 3,141 | | | 10,798 | |
Accumulated impairment losses | 0 | | | (3,141) | | | (3,141) | |
Balance as of March 31, 2021 | $ | 7,657 | | | $ | 0 | | | $ | 7,657 | |
|
| | | | | | | | | | | |
(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 werewas 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“Impairment expense” on the Consolidated Statements of Income related to our customer relationships. No additional impairments have been recorded since that time.
MPLX’s remaining intangible assets are comprised of customer contracts and relationships. Gross intangible assets with accumulated amortization as of March 31, 20202021 and December 31, 20192020 is shown below:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | March 31, 2021 | | December 31, 2020 |
(In millions) | | Useful Lives | | Gross | | Accumulated Amortization(1) | | Net | | Gross | | Accumulated Amortization(2) | | Net |
L&S | | 6 - 8 years | | $ | 283 | | | $ | (90) | | | $ | 193 | | | $ | 283 | | | $ | (81) | | | $ | 202 | |
G&P | | 6 - 25 years | | 1,288 | | | (554) | | | 734 | | | 1,288 | | | (531) | | | 757 | |
| | | | $ | 1,571 | | | $ | (644) | | | $ | 927 | | | $ | 1,571 | | | $ | (612) | | | $ | 959 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 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 L&S and G&P segments for the three months ended March 31, 2021 was $9 million and $23 million, respectively. | |
(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. |
(2) Impairment charge of $177 million is included within the G&P accumulated amortization.
Estimated future amortization expense related to the intangible assets at March 31, 20202021 is as follows:
| | | | | | | | |
(In millions) | | |
2021 | | $ | 95 | |
2022 | | 127 | |
2023 | | 127 | |
2024 | | 127 | |
2025 | | 113 | |
Thereafter | | 338 | |
Total | | $ | 927 | |
|
| | | | |
(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 MPLX’s derivative positions as discussed in Note 14. The following table presents the financial instruments carried at fair value on a recurring basis as of March 31, 20202021 and December 31, 20192020 by fair value hierarchy level. MPLX has elected to offset the fair value amounts recognized for multiple derivative contracts executed with the same counterparty.
| | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 |
(In millions) | Assets | | Liabilities | | Assets | | Liabilities |
| | | | | | | |
| | | | | | | |
Significant unobservable inputs (Level 3) | | | | | | | |
| | | | | | | |
| | | | | | | |
Embedded derivatives in commodity contracts | $ | 0 | | | $ | (66) | | | $ | 0 | | | $ | (63) | |
Total carrying value on Consolidated Balance Sheets | $ | 0 | | | $ | (66) | | | $ | 0 | | | $ | (63) | |
|
| | | | | | | | | | | | | | | |
| 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 embedded derivative liability relates to a natural gas purchase commitment embedded in a keep-whole processing agreement. The fair value calculation for these Level 3 instruments used significant unobservable inputs including: (1) NGL prices interpolated and extrapolated due to inactive markets ranging from $0.26$0.48 to $0.68$1.36 per gallon with a weighted average of $0.39$0.62 per gallon per the
current term of the embedded derivative and (2) the probability of renewal of 95100 percent for the first five-yearfive-year term and 83.5 percent for the second five-yearfive-year term of the gas purchase commitment and related keep-whole processing agreement. Increases or decreases in the fractionation spread result in an increase or decrease in the fair value of the embedded derivative liability, respectively. An increase in the probability of renewal would result in an increase in the fair value of the related embedded derivative liability. Beyond the embedded derivative discussed above, we had no outstanding commodity contracts as of March 31, 20202021 or December 31, 2019.2020.
Changes in Level 3 Fair Value Measurements
The following table is a reconciliation of the net beginning and ending balances recorded for net assets and liabilities classified as Level 3 in the fair value hierarchy.
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2021 | | Three Months Ended March 31, 2020 |
(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 | $ | 0 | | | | | $ | (63) | | | $ | 0 | | | | | $ | (60) | |
Total (losses)/gains (realized and unrealized) included in earnings(1) | 0 | | | | | (6) | | | 0 | | | | | 14 | |
Settlements | 0 | | | | | 3 | | | 0 | | | | | 1 | |
| | | | | | | | | | | |
Fair value at end of period | 0 | | | | | (66) | | | 0 | | | | | (45) | |
The amount of total (losses)/gains for the period included in earnings attributable to the change in unrealized gains or losses relating to liabilities still held at end of period | $ | 0 | | | | | $ | (5) | | | $ | 0 | | | | | $ | 13 | |
|
| | | | | | | | | | | | | | | |
| 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 | ) |
(1) Gains and losses on commodity derivative contracts classified as Level 3 are recorded in “Product sales”on the Consolidated Statements of Income. Gains and losses on derivatives embedded in commodity contracts are recorded in “Purchased product costs” and “Cost of revenues” on the Consolidated Statements of Income.
| |
(1) | Gains and losses on commodity derivative contracts classified as Level 3 are recorded in “Product sales”on the Consolidated Statements of Income. Gains and losses on derivatives embedded in commodity contracts are recorded in “Purchased product costs” and “Cost of revenues” on the Consolidated Statements of Income.
|
Fair Values – Reported
MPLX’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. MPLX’s fair value assessment incorporates a variety of considerations, including (1) the 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. MPLX 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 14).
The fair value of MPLX’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 MPLX’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-termour debt, excluding finance leases, and SMR liability:leases:
| | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 |
(In millions) | Fair Value | | Carrying Value | | Fair Value | | Carrying Value |
Long-term debt (including amounts due within one year) | $ | 21,988 | | | $ | 20,156 | | | $ | 22,951 | | | $ | 20,244 | |
|
| | | | | | | | | | | | | | | |
| 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 |
|
14. Derivative Financial Instruments
As of March 31, 2020,2021, MPLX had no outstanding commodity contracts beyond the embedded derivative discussed below.
Embedded Derivative - MPLX has a natural gas purchase commitment embedded in a keep-whole processing agreement with a producer customer in the Southern Appalachian region expiring in December 2022. The customer has the unilateral option to extend the agreement for 2 consecutive five-yearfive-year terms through December 2032. For accounting purposes, the natural gas purchase commitment and the term extending options have been aggregated into a single compound embedded derivative. The probability of the customer exercising its options is determined based on assumptions about the customer’s potential business strategy decision points that may exist at the time they 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 product costs” on the Consolidated Statements of Income. As of March 31, 20202021 and December 31, 2019,2020, the estimated fair value of this contract was a liability of $45$66 million and $60$63 million, respectively.
Certain derivative positions are subject to master netting agreements, therefore, MPLX has elected to offset derivative assets and liabilities that are legally permissible to be offset. As of March 31, 20202021 and December 31, 2019,2020, there were no derivative assets or liabilities that were offset on the Consolidated Balance Sheets. The impact of MPLX’s derivative instruments on its Consolidated Balance Sheets is summarized below: | | | | | | | | | | | | | | | | | | | | | | | |
(In millions) | March 31, 2021 | | December 31, 2020 |
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 | $ | 0 | | | $ | (10) | | | $ | 0 | | | $ | (7) | |
Other noncurrent assets / Deferred credits and other liabilities | 0 | | | (56) | | | 0 | | | (56) | |
Total | $ | 0 | | | $ | (66) | | | $ | 0 | | | $ | (63) | |
|
| | | | | | | | | | | | | | | |
(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. | |
(1) | Includes embedded derivatives in commodity contracts as discussed above. |
For further information regarding the fair value measurement of derivative instruments, including the effect of master netting arrangements or collateral, see Note 13. There were no material changes to MPLX’s policy regarding the accounting for Level 2 and Level 3 instruments as previously disclosed in MPLX’s Annual Report on Form 10-K for the year ended December 31, 2019. MPLX does not designate any of its commodity derivative positions as hedges for accounting purposes.2020.
The impact of MPLX’s derivative contracts not designated as hedging instruments and the location of gains and losses recognized on the Consolidated Statements of Income is summarized below: | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
(In millions) | 2021 | | 2020 | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Purchased product costs | | | | | | | |
Realized (loss)/gain | $ | (3) | | | $ | (1) | | | | | |
Unrealized (loss)/gain | (3) | | | 15 | | | | | |
Purchased product costs derivative (loss)/gain | (6) | | | 14 | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Total derivative (loss)/gain | $ | (6) | | | $ | 14 | | | | | |
|
| | | | | | | |
| 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 | ) |
15. Debt
MPLX’s outstanding borrowings consist of the following: | | (In millions) | March 31, 2020 | | December 31, 2019 | (In millions) | March 31, 2021 | | December 31, 2020 |
MPLX LP: | | | | MPLX LP: | | | |
| Bank revolving credit facility | $ | 750 |
| | $ | — |
| Bank revolving credit facility | $ | 835 | | | $ | 175 | |
Term loan facility | 1,000 |
| | 1,000 |
| |
| Floating rate senior notes | 2,000 |
| | 2,000 |
| Floating rate senior notes | 1,000 | | | 1,000 | |
| Fixed rate senior notes | 16,887 |
| | 16,887 |
| Fixed rate senior notes | 18,532 | | | 19,240 | |
Consolidated subsidiaries: | | | | Consolidated subsidiaries: | |
MarkWest | 23 |
| | 23 |
| MarkWest | 23 | | | 23 | |
ANDX | 190 |
| | 190 |
| ANDX | 45 | | | 87 | |
| Financing lease obligations(1) | 14 |
| | 19 |
| Financing lease obligations(1) | 10 | | | 11 | |
Total | 20,864 |
| | 20,119 |
| Total | 20,445 | | | 20,536 | |
Unamortized debt issuance costs | (103 | ) | | (106 | ) | Unamortized debt issuance costs | (112) | | | (116) | |
Unamortized discount/premium | (290 | ) | | (300 | ) | Unamortized discount/premium | (279) | | | (281) | |
Amounts due within one year | (4 | ) | | (9 | ) | Amounts due within one year | (2) | | | (764) | |
Total long-term debt due after one year | $ | 20,467 |
| | $ | 19,704 |
| Total long-term debt due after one year | $ | 20,052 | | | $ | 19,375 | |
(1) See Note 20 for lease information.
Credit Agreement
Effective July 30, 2019, in connection with the closing of the Merger, MPLXMPLX’s amended and restated its existing revolving credit facility (the(as amended, the “MPLX Credit Agreement”) to, among other things, increase, has a borrowing capacity toof up to $3.5 billion and extend itsa term from July 2022that extends to July 2024. During the three months ended March 31, 2020,2021, MPLX borrowed $1,325 million$1.91 billion under the MPLX Credit Agreement, at an average interest rate of 2.1391.347 percent, and repaid $575 million. $1.25 billion. At March 31, 2020,2021, MPLX had $750$835 million in outstanding borrowings and less than $1 million in letters of credit outstanding under the MPLX Credit Agreement, resulting in total availability of $2.75$2.67 billion, or 78.676.1 percent of the borrowing capacity.
Term Loan Agreement
On September 26, 2019, MPLX entered into a Term Loan Agreement which provides for a committed term loan facility for 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 $1.0 billion on the term loan at an average interest rate of 2.273 percent.
Floating Rate Senior Notes
On September 9, 2019, MPLX issued $2.0has $1.0 billion of aggregate principal amount of floating rate senior notes in a public offering, consisting of $1.0 billion aggregate principal amount of notes due September 2021 and $1.0 billion aggregate principal amount of2022. The notes due September 2022 (collectively, the “Floating Rate Senior Notes”). The Floating Rate Senior Notes were offered at a price to the public of 100 percent of par. The Floating Rate Senior Notespar and are callable, in whole or in part, at par plus accrued and unpaid interest at any time on or after September 10, 2020. Interest on the Floating Rate Senior Notes is payable quarterly in March, June, September and December, commencing on December 9, 2019.December. 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 2058 with interest rates ranging from 3.3751.750 percent to 6.3755.500 percent. Interest on each series of notes is payable semi-annually in arrears on various dates depending on the series of the notes.
On December 29, 2020, MPLX announced the redemption of $750 million outstanding aggregate principal amount of 5.250 percent senior notes due January 15, 2025, including approximately $42 million aggregate principal amount of senior notes issued by Andeavor Logistics LP. These amounts are included on the Consolidated Balance Sheet at December 31, 2020 as “Long-term debt due within one year”. The notes were redeemed on January 15, 2021 at a price equal to 102.625 percent of the principal amount, which resulted in a payment of $20 million related to the note premium offset by the immediate recognition of $12 million of unamortized debt premium and issuance costs, which resulted in a loss on extinguishment of debt of $8 million that is included on the Consolidated Statements of Income as “Other financial costs”.
16. Revenue
Disaggregation of Revenue
The following tables represent a disaggregation of revenue for each reportable segment for the three months ended March 31, 20202021 and 2019:2020:
|
| | | | | | | | | | | |
| 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 |
|
| | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2021 |
(In millions) | L&S | | G&P | | Total |
Revenues and other income: | | | | | |
Service revenue | $ | 84 | | | $ | 505 | | | $ | 589 | |
Service revenue - related parties | 869 | | | 3 | | | 872 | |
Service revenue - product related | 0 | | | 77 | | | 77 | |
Product sales | 1 | | | 281 | | | 282 | |
Product sales - related parties | 3 | | | 39 | | | 42 | |
Total revenues from contracts with customers | $ | 957 | | | $ | 905 | | | 1,862 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Non-ASC 606 revenue(1) | | | | | 477 | |
Total revenues and other income | | | | | $ | 2,339 | |
|
| | | | | | | | | | | |
| 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) | Non-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 2019 has been retrospectively adjusted for the acquisition of ANDX. See Notes 1 and 3. |
| | | | | | | | | | | | | | | | | |
| 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 | 0 | | | 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 | |
(1) Non-ASC 606 Revenue includes rental income, income/(loss) from equity method investments, derivative gains and losses, mark-to-market adjustments, and other income.
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.customer. Contract assets are generally classified as current and included in “Other current assets” and “Other noncurrent 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 transactionsThe sales and related “Receivable, net” 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, 20202021 and 2019:2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(In millions) | Balance at December 31, 2020(1) | | Additions/ (Deletions) | | Revenue Recognized(2) | | | | Balance at March 31, 2021 | | | | |
Contract assets | $ | 40 | | | $ | (27) | | | $ | 0 | | | | | $ | 13 | | | | | |
Long-term contract assets | 2 | | | 0 | | | 0 | | | | | 2 | | | | | |
Deferred revenue | 37 | | | 7 | | | (1) | | | | | 43 | | | | | |
Deferred revenue - related parties | 91 | | | 21 | | | (20) | | | | | 92 | | | | | |
Long-term deferred revenue | 119 | | | 4 | | | 0 | | | | | 123 | | | | | |
Long-term deferred revenue - related parties | 48 | | | (4) | | | 0 | | | | | 44 | | | | | |
Long-term contract liability | $ | 6 | | | $ | 0 | | | $ | 0 | | | | | $ | 6 | | | | | |
| | (In millions) | Balance at December 31, 2019(1) | | Additions/ (Deletions) | | Revenue Recognized(2) | | Balance at March 31, 2020 | (In millions) | Balance at December 31, 2019(1) | | Additions/ (Deletions) | | Revenue Recognized(2) | | | Balance at March 31, 2020 | |
Contract assets | $ | 39 |
| | $ | (27 | ) | | $ | — |
| | $ | 12 |
| Contract assets | $ | 39 | | | $ | (27) | | | $ | 0 | | | | $ | 12 | | |
| Deferred revenue | 23 |
| | 5 |
| | (3 | ) | | 25 |
| Deferred revenue | 23 | | | 5 | | | (3) | | | | 25 | | |
Deferred revenue - related parties | 53 |
| | 12 |
| | (16 | ) | | 49 |
| Deferred revenue - related parties | 53 | | | 12 | | | (16) | | | | 49 | | |
Long-term deferred revenue | 90 |
| | 6 |
| | — |
| | 96 |
| Long-term deferred revenue | 90 | | | 6 | | | 0 | | | | 96 | | |
Long-term deferred revenue - related parties | $ | 55 |
| | $ | 1 |
| | $ | — |
| | $ | 56 |
| Long-term deferred revenue - related parties | $ | 55 | | | $ | 1 | | | $ | 0 | | | | $ | 56 | | |
|
(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. |
| | | | | | | | | | | | | | | |
(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, 2020,2021, the amounts allocated to contract assets and contract liabilities on the Consolidated Balance Sheets are $224$301 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 3123 years. Further, MPLX does not disclose variable consideration due to volume variability in the table below.
| | | | | |
(In millions) | |
2021 | $ | 1,435 | |
2022 | 1,838 | |
2023 | 1,674 | |
2024 | 1,546 | |
2025 and thereafter | 4,580 | |
Total revenue on remaining performance obligations(1),(2),(3) | $ | 11,073 | |
|
| | | |
(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. | |
(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. |
(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 |
|
| | | | | | | | | | | |
| Three Months Ended March 31, |
(In millions) | 2021 | | 2020 |
Net cash provided by operating activities included: | | | |
Interest paid (net of amounts capitalized) | $ | 231 | | | $ | 210 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
Non-cash investing and financing activities: | | | |
Net transfers of property, plant and equipment (to)/from materials and supplies inventories | $ | 0 | | | $ | (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) | 2021 | | 2020 |
| | | |
Decrease in capital accruals | $ | (37) | | | $ | (61) | |
| | | |
| | | |
|
| | | | | | | |
| Three Months Ended March 31, |
(In millions) | 2020 | | 2019 |
(Decrease)/increase in capital accruals | $ | (61 | ) | | $ | (71 | ) |
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, 2020 through March 31, 2021.
| | | | | | | | | | | | | | | | | |
(In millions) | Pension Benefits | | Other Post-Retirement Benefits | | Total |
Balance at December 31, 2020(1) | $ | (13) | | | $ | (2) | | | $ | (15) | |
Other comprehensive loss - remeasurements(2) | (2) | | | 0 | | | (2) | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Balance at March 31, 2021(1) | $ | (15) | | | $ | (2) | | | $ | (17) | |
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) | 0 | | | (1) | | | (1) | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Balance at March 31, 2020(1) | $ | (14) | | | $ | (2) | | | $ | (16) | |
|
| | | | | | | | | | | |
(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(1) These components of “Accumulated other comprehensive loss” are included in the computation of net periodic benefit cost by component duringLOOP and Explorer and are therefore included on the period December 31, 2018 through March 31, 2019.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.
|
| | | | | | | | | | | |
(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 three months ended March 31, 2020:2021:
| | | | | | | | | | | |
| Number of Units | | Weighted Average Fair Value |
Outstanding at December 31, 2020 | 644,023 | | | $ | 28.65 | |
Granted | 321,927 | | | 24.88 | |
| | | |
Settled | (143,088) | | | 29.73 | |
Forfeited | (1,270) | | | 33.09 | |
Outstanding at March 31, 2021 | 821,592 | | | $ | 26.98 | |
|
| | | | | | |
| 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 |
|
Performance Units
Performance Units
– MPLX grants performance units to certain officers
The following is a summary of the general partner and certain eligibleMPC officers who make significant contributionsactivity for performance unit awards to its business. These performance units pay out 75 percent in cash and 25 percentbe settled in MPLX LP common units and often contain both market andfor the three months ended March 31, 2021:
| | | | | |
| Number of Units |
Outstanding at December 31, 2020 | 3,092,286 | |
Granted | 375,730 | |
Settled | (1,347,177) | |
Forfeited | (1,761) | |
Outstanding at March 31, 2021 | 2,119,078 | |
No new performance conditions based on various metrics. Market conditions are valued using a Monte Carlo valuation while performance conditions are reevaluated periodically and valued atunit awards were granted during the compensation cost associated with the performance outcome deemed most probable.
three months ended March 31, 2021. The performance units shown above as granted in 2020 are hybrid awards having a three-year performance period of January 1, 2020 through December 31, 2022. The payoutrepresents subsequent tranches of the award is dependent on two independent conditions, each constituting 50 percent of the overall target units granted. The2020 and 2019 performance unit awards havethat were subject to a performance condition based on MPLX LP’s 2021 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 inwhich, due to the nature of the award terms, did not meet the criteria for a grant date fair value until the first quarter of $0.80 per unit for the 2020 equity-classified performance units.2021, at which time we began recognizing units and expense related to these tranches. 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.
20. Leases
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 activity for performance unit awards to be settled in MPLX LP common units for the three months ended March 31, 2020:
|
| | |
| Number of Units |
Outstanding at December 31, 2019 | 2,157,347 |
|
Granted | 2,147,211 |
|
Settled | (1,169,354 | ) |
Forfeited | (18,750 | ) |
Outstanding at March 31, 2020 | 3,116,454 |
|
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,first quarter of 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, 2021 | | Three Months Ended March 31, 2020 |
(In millions) | Related Party | | Third Party | | Related Party | | Third Party |
Operating leases: | | | | | | | |
Operating lease revenue(1) | $ | 202 | | | $ | 68 | | | $ | 186 | | | $ | 63 | |
| | | | | | | |
Sales-type leases: | | | | | | | |
Profit/(loss) recognized at the commencement date | 0 | | | 0 | | | 0 | | | N/A |
Interest income (Sales-type lease revenue- fixed minimum) | 37 | | | 0 | | | 38 | | | N/A |
Interest income (Revenue from variable lease payments) | $ | 0 | | | $ | 0 | | | $ | 0 | | | N/A |
|
| | | | | | | | | | | | | | | |
| 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) | (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
MPLX 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 MPLX has not recorded an accrueda liability, MPLX is unable to estimate a range of possible lossesloss because the 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 – MPLX 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 March 31, 20202021 and December 31, 2019,2020, accrued liabilities for remediation totaled $18 million and $17 million, and $19 million, respectively. However, itIt is not presently possible to estimate the ultimate amount of all remediation costs that might be incurred or the penalties, if any, whichthat may be imposed. At March 31, 20202021 and December 31, 2019,2020, there were 0 balances with MPC for indemnification of environmental costs.
MPLX is involved in environmental enforcement matters arising in the ordinary course of business. While the outcome and impact to MPLX 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.
MPLX 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 MPLX cannot be predicted with certainty, management 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, MPLX 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 MPLX to perform upon the occurrence of a triggering event or condition. These guarantees and indemnifications are part of the normal course of selling assets. MPLX 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 (“Dakota Access”) that owns and operates the Dakota Access Pipeline and Energy Transfer Crude Oil Pipeline projects, collectively referred to as the Bakken Pipeline system or DAPL, we have entered into a Contingent Equity Contribution Agreement whereby MPLX LP, along with the other joint venture owners in the Bakken Pipeline system, havehas 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 (the “D.D.C.”) ordered the U.S. Army Corps of Engineers (“Army Corps”), which granted permits and an easement 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.
On July 6, 2020, the D.D.C. ordered vacatur of the easement to cross Lake Oahe during the pendency of an EIS and further ordered a shut down of the pipeline by August 5, 2020. The D.D.C. denied a motion to stay that order. Dakota Access and the Army Corps appealed the D.D.C.’s orders to the U.S. Court of Appeals for the District of Columbia Circuit (the “Court of Appeals”). On July 14, 2020, the Court of Appeals issued an administrative stay while the court considered Dakota Access and the Army Corps’ emergency motion for stay pending appeal. On August 5, 2020, the Court of Appeals stayed the D.D.C.’s injunction that required the pipeline be shutdown and emptied of oil by August 5, 2020. The Court of Appeals denied a stay of the D.D.C.’s March order, which required the EIS, and further denied a stay of the D.D.C.’s July order, which vacated the easement. On January 26, 2021, the Court of Appeals upheld the D.D.C.’s order vacating the easement while the Army Corps prepares the EIS. The Court of Appeals reversed the D.D.C.’s order to the extent it directed that the pipeline be shutdown and emptied of oil. In the D.D.C., briefing has been completed for a renewed request for an injunction. The pipeline remains operational.
If the permitpipeline is vacatedtemporarily shut down 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 and any portion of the principal that matures while the pipeline is shutdown andshutdown. MPLX also expects to contribute 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 vacatesvacatur of the easement 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.interest. As of March 31, 2020,2021, our maximum potential undiscounted payments under the Contingent Equity Contribution Agreement were approximately $230 million.
Other Legal Proceedings – In early July 2020, Tesoro High Plains Pipeline Company, LLC (“THPP”), a subsidiary of MPLX, received a Notification of Trespass Determination from the Bureau of Indian Affairs (“BIA”) relating to a portion of the Tesoro High Plains Pipeline that crosses the Fort Berthold Reservation in North Dakota. The notification covered the rights of way for 23 tracts of land and demanded the immediate cessation of pipeline operations. The notification also assessed trespass damages of approximately $187 million. THPP appealed this determination, which triggered an automatic stay of the requested pipeline shutdown and payment. On October 29, the Assistant Secretary - Indian Affairs issued an order vacating the BIA’s trespass order and requiring the Regional Director for the BIA Great Plains Region to issue a new decision on or before December 15 covering all 34 tracts at issue. On December 15, 2020, the Regional Director of the BIA issued a new trespass notice to THPP consistent with the Assistant Secretary - Indian Affairs order vacating the prior trespass order. The new order found that THPP was in trespass and assessed trespass damages of approximately $4 million (including interest), which has been paid. The order also required THPP to immediately cease and desist use of the portion of the pipeline that crosses the property at issue. THPP has complied with the Regional Director’s December 15, 2020 notice. On February 12, 2021, landowners filed suit in the U.S. District Court for the District of North Dakota (the “District of North Dakota”) against THPP, the Department of the Interior, the Assistant Secretary - Indian Affairs, the Interior Board of Indian Appeals and the BIA, requesting, among other things, that decisions by the Assistant Secretary - Indian Affairs and the Interior Board of Indian Appeals be vacated as to the award of damages to plaintiffs. In March 2021, THPP received a copy of an order purporting to vacate all orders related to THPP’s alleged trespass issued by the BIA between July 2, 2020 and January 14, 2021. The order directs the Regional Director of the BIA to reconsider the issue of THPP’s alleged trespass and issue a new order, if necessary, after all interested parties have had an opportunity to be heard. Subsequently, landowners voluntarily dismissed the suit filed in the District of North Dakota. On April 23, 2021, THPP filed a lawsuit in the District of North Dakota against the United States of America, the U.S. Department of the Interior and the BIA challenging the March order purporting to vacate all previous orders related to THPP’s alleged trespass.
We continue to work towards a settlement of this matter with holders of the property rights at issue.
Contractual Commitments and Contingencies – At March 31, 2020,2021, MPLX’s contractual commitments to acquire property, plant and equipment totaled $318$101 million. These commitments were primarily related to G&P plant expansion, terminal and pipeline projects. In addition, from time to time and in the ordinary course of business, MPLX and its affiliates provide guarantees of MPLX’s subsidiaries payment and performance obligations in the G&P segment. Certain natural gas processing and gathering arrangements require MPLX 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 March 31, 2020,2021, management does not believe there are any indications that MPLX 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, 2019.2020.
Disclosures Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q, particularly Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures about Market Risk, includes forward-looking statements that are subject to risks, contingencies or uncertainties. You can identify forward-looking statements by words such as “anticipate,” “believe,” “commitment,” “could,” “design,” “estimate,” “expect,” “forecast,” “goal,” “guidance,” “imply,” “intend,” “may,” “objective,” “opportunity,” “outlook,” “plan,” “policy,” “position,” “potential,” “predict,” “priority,” “project,” “proposition,” “prospective,” “pursue,” “seek,” “should,” “strategy,” “target,” “will,” “would” or other similar expressions that convey the uncertainty of future events or outcomes.
Forward-looking statements include, among other things, statements regarding:
•future levels of revenuesfinancial 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);operating results;
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 amounttiming and timingamount of future distributions;distributions or unit repurchases; 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:
•general economic, political or regulatory developments, including changes in governmental policies relating to refined petroleum products, crude oil, natural gas or NGLs, or taxation;
•the effectsmagnitude and duration of the recent outbreak of COVID-19 pandemic and its restrictions, including travel restrictions, business and school closures, increased remote work, stay-at-home orders and other actions taken by individuals, governments and the adverse impact thereof on our business, financial condition, resultsprivate sector to stem the spread 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 pricevirus;
•the ability 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”) abilityMPC 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 resultconditions;
•changes to the expected construction costs and timing of projects and planned investments, and the ability to obtain regulatory and other approvals with respect thereto;
•completion of midstream infrastructure by competitors;
•disruptions due to equipment interruption or failure, including electrical shortages and power grid failures;
•the suspension, reduction or termination of MPC’s obligations under MPLX’s commercial agreements;
•modifications to financial policies, capital budgets, and earnings and distributions;
•the ability to manage disruptions in credit markets or changes to credit ratings;
•compliance with federal and state environmental, economic, health and safety, energy and other policies and regulations or enforcement actions initiated thereunder;
•adverse results in litigation;
•the 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 fuels or vehicles;
•actions taken by our competitors, including pricing adjustments and the expansion and retirement of pipeline capacity, processing, fractionation and treating facilities in response to market conditions;
•expectations regarding joint venture arrangements and other acquisitions 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 impair our ability to gather, process, fractionate or transport crude oil, natural gas, NGLs or refined products; and
•political pressure and influence of environmental groups upon policies and decisions related to the production, gathering, refining, processing, fractionation, transportation and marketing of crude oil or other feedstocks, refined products, natural gas, NGLs or other hydrocarbon-based products.
For additional risk factors affecting our business, see “Item 1A. Risk Factors” below, together with the risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2019.2020. We undertake no obligation to update any forward-looking statements except to the extent required by applicable law.
MPLX OVERVIEW
We are a diversified, large-cap MLP formed by MPC, that owns and operates midstream energy infrastructure and logistics assets, and provides fuels distribution services. We are engaged in the transportation, storage and distribution of crude oil and refined petroleum 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 income, income from operations, net income, adjusted EBITDA attributable to MPLX and DCF attributable to GP and LP unitholders for the three months ended March 31, 20202021 and March 31, 20192020 are shown in the chart below. These 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 section for further details regarding changes in these metrics.
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(1) | Q1 2020 includes impairment related to equity method investments of approximately $1.3 billion within our G&P operating segment. |
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(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. |
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(3) | Q1 2019 includes Adjusted EBITDA attributable to Predecessor and portion of DCF adjustments attributable to Predecessor. |
Other Highlights
Recognized approximately $3.4 billion of impairments during the quarter related to goodwill, equity method investments and long-lived assets (including intangibles).
MPC announced the unanimous decision of its board of directors to maintain MPC’s current midstream structure, with MPC remaining the general 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 significant feedback from investors.
MPLX continues to focus on portfolio optimization, which could include asset divestitures.
RECENT DEVELOPMENTS
Announced plans to reduce 2020 capital spending to 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 certain expense projects.
•Announced a first quarter 2021 distribution rate of $0.6875 per common unit.
•During the first quarter of 2021, we returned $155 million to unitholders through the repurchase of 6,272,981 public common units under our unit repurchase program. As of March 31, 2021, total repurchases of $188 million have been made under the unit repurchase program since the program was launched in the fourth quarter of 2020.
•In line with previously announced efforts around portfolio optimization, the company closed on the sale of our Javelina plant in Corpus Christi, Texas, on February 12, 2021, for $70 million of cash in addition to future consideration contingent on the performance of the facility.
37•On January 15, 2021 we redeemed $750 million outstanding aggregate principal amount of 5.250 percent senior notes due January 15, 2025, at 102.625 percent of the principal amount.
CURRENT ECONOMIC ENVIRONMENT
During the first quarter of 2021, we have seen improvement in the environment in which our business operates as COVID-19 impacts are beginning to subside. The recentincreased availability of vaccinations, coupled with an easing of COVID-19 restrictions in certain areas, has been followed by an increase in economic activity, the opening of many businesses and schools and an increase in in-person interaction and associated travel.
In the first quarter of 2020, the 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 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 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 respondingtook actions to respond to the impacts that these matters are havinghave had on our business by:including:
Canceling or delaying certain•Emphasizing strict capital expendituresdiscipline by focusing on investments that deliver the most attractive returns
•Identifying areas where we had expected to make in 2020.
Taking actions tocan reduce operating expenses across the business.business
Continuing to evaluate•Evaluating and high-gradehigh-grading 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 fully recover once the pandemic ultimately subsides. However, the adverse impact will likely continue to have an impact on our business and our customers’ businesses.pre-pandemic levels. We believe we have proactively addressed many of the known impacts of COVID-19 to the extent possible and will strive to continue to do so, but there can be no guarantee the measures will be fully effective.
NON-GAAP FINANCIAL INFORMATION
Our management uses a variety of financial and operating metrics to analyze our performance. These metrics are significant factors in assessing our operating results and profitability and include the non-GAAP financial measures of Adjusted EBITDA, DCF, free cash flow (“FCF”) and DCF.excess/deficit cash flow. The amount of Adjusted EBITDA and DCF generated is considered by the board of directors of our general partner in approving MPLX’s cash distributions.
We define Adjusted EBITDA as net income adjusted for: (i) depreciation and amortization; (ii) provision/(benefit) for income taxes; (iii) amortization of deferred financing costs; (iv) (gain)/loss on 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 interest; and (xiii) other adjustments as deemed necessary. We also use DCF, which we define as Adjusted EBITDA adjusted for: (i) deferred revenue impacts; (ii) net interest and other financial costs; (iii) net maintenance capital expenditures; (iv) equity method investment capital expenditures paid out; and (v) other non-cash items.adjustments as deemed necessary. We make 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 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 define FCF as net cash provided by operating activities adjusted for (i) net cash used in investing activities; (ii) contributions from MPC; (iii) contributions from noncontrolling interests and (iv) distributions to noncontrolling interests. We define excess/deficit cash flow as FCF adjusted for distributions to common and preferred unitholders.
We believe that the presentation of Adjusted EBITDA, DCF, FCF and excess/deficit cash flow provides useful information to investors in assessing our financial condition and results of operations. The GAAP measures most directly comparable to Adjusted EBITDA and DCF are net income and net cash provided by operating activities while the GAAP measure most directly comparable to FCF and excess/deficit cash flow is net cash provided by operating activities. These non-GAAP financial measures should not be considered alternatives to GAAP net income or net cash provided by operating activities as they have important limitations as analytical tools because they exclude some but not all items that affect net income and net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. These non-GAAP financial measures should not be considered in isolation or as substitutes for analysis of our results as reported under GAAP. Additionally, because non-GAAP financial measures may be defined differently by other companies in our industry, our definitions may not be comparable to similarly titled measures of other companies, thereby diminishing their utility. For a reconciliation of Adjusted EBITDA and DCF to their most directly comparable measures calculated and presented in accordance with GAAP, see the Results of Operations section. For a reconciliation of FCF and excess/deficit cash flow to their most directly comparable measure calculated and presented in accordance with GAAP, see the Liquidity and Capital resources section.
Management also utilizes Segment Adjusted EBITDA in evaluating the financial performance of our segments. The use of this measure allows investors to understand how management evaluates financial performance to make operating decisions and allocate resources.
COMPARABILITY OF OUR FINANCIAL RESULTS
Our acquisitions and dispositions have impacted comparability of our financial results (see Note 3 of the Notes to Consolidated Financial Statements).
RESULTS OF OPERATIONS
The following tables and discussion are a summary of our results of operations for the three months ended March 31, 2021 and 2020, including a reconciliation of Adjusted EBITDA and DCF from “Net income” and “Net cash provided by operating activities,” to the most directly comparable GAAP financial measures.
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| Three Months Ended March 31, | | |
(In millions) | 2021 | | 2020 | | Variance | | | | | | |
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Total revenues and other income(1) | $ | 2,339 | | | $ | 992 | | | $ | 1,347 | | | | | | | |
Costs and expenses: | | | | | | | | | | | |
Cost of revenues (excludes items below) | 273 | | | 368 | | | (95) | | | | | | | |
Purchased product costs | 276 | | | 135 | | | 141 | | | | | | | |
Rental cost of sales | 32 | | | 35 | | | (3) | | | | | | | |
Rental cost of sales - related parties | 39 | | | 46 | | | (7) | | | | | | | |
Purchases - related parties | 298 | | | 276 | | | 22 | | | | | | | |
Depreciation and amortization | 329 | | | 325 | | | 4 | | | | | | | |
Impairment expense | — | | | 2,165 | | | (2,165) | | | | | | | |
General and administrative expenses | 86 | | | 97 | | | (11) | | | | | | | |
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Other taxes | 32 | | | 31 | | | 1 | | | | | | | |
Total costs and expenses | 1,365 | | | 3,478 | | | (2,113) | | | | | | | |
Income/(loss) from operations | 974 | | | (2,486) | | | 3,460 | | | | | | | |
Related party interest and other financial costs | — | | | 3 | | | (3) | | | | | | | |
Interest expense, net of amounts capitalized | 198 | | | 211 | | | (13) | | | | | | | |
Other financial costs | 27 | | | 16 | | | 11 | | | | | | | |
Income/(loss) before income taxes | 749 | | | (2,716) | | | 3,465 | | | | | | | |
Provision for income taxes | 1 | | | — | | | 1 | | | | | | | |
Net income/(loss) | 748 | | | (2,716) | | | 3,464 | | | | | | | |
Less: Net income attributable to noncontrolling interests | 9 | | | 8 | | | 1 | | | | | | | |
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Net income/(loss) attributable to MPLX LP | 739 | | | (2,724) | | | 3,463 | | | | | | | |
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Adjusted EBITDA attributable to MPLX LP(2) | 1,352 | | | 1,294 | | | 58 | | | | | | | |
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DCF attributable to GP and LP unitholders(2) | $ | 1,106 | | | $ | 1,047 | | | $ | 59 | | | | | | | |
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(1) The three months ended March 31, 2020 includes impairment expense of approximately $1.3 billion related to three equity method investments.
(2) Non-GAAP measure. See reconciliation below to the most directly comparable GAAP measures.
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| Three Months Ended March 31, | | |
(In millions) | 2021 | | 2020 | | Variance | | | | | | |
Reconciliation of Adjusted EBITDA attributable to MPLX LP and DCF attributable to GP and LP unitholders from Net income: | | | | | | | | | | | |
Net income/(loss) | $ | 748 | | | $ | (2,716) | | | $ | 3,464 | | | | | | | |
Provision for income taxes | 1 | | | — | | | 1 | | | | | | | |
Amortization of deferred financing costs | 17 | | | 14 | | | 3 | | | | | | | |
Gain on extinguishment of debt | (12) | | | — | | | (12) | | | | | | | |
Net interest and other financial costs | 220 | | | 216 | | | 4 | | | | | | | |
Income/(loss) from operations | 974 | | | (2,486) | | | 3,460 | | | | | | | |
Depreciation and amortization | 329 | | | 325 | | | 4 | | | | | | | |
Non-cash equity-based compensation | 3 | | | 5 | | | (2) | | | | | | | |
Impairment expense | — | | | 2,165 | | | (2,165) | | | | | | | |
(Income)/loss from equity method investments | (70) | | | 1,184 | | | (1,254) | | | | | | | |
Distributions/adjustments related to equity method investments | 121 | | | 124 | | | (3) | | | | | | | |
Unrealized derivative losses/(gains)(1) | 3 | | | (15) | | | 18 | | | | | | | |
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Other | 2 | | | 1 | | | 1 | | | | | | | |
Adjusted EBITDA | 1,362 | | | 1,303 | | | 59 | | | | | | | |
Adjusted EBITDA attributable to noncontrolling interests | (10) | | | (9) | | | (1) | | | | | | | |
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Adjusted EBITDA attributable to MPLX LP(2) | 1,352 | | | 1,294 | | | 58 | | | | | | | |
Deferred revenue impacts | 22 | | | 23 | | | (1) | | | | | | | |
Net interest and other financial costs | (220) | | | (216) | | | (4) | | | | | | | |
Maintenance capital expenditures | (18) | | | (34) | | | 16 | | | | | | | |
Maintenance capital expenditures reimbursements | 7 | | | 14 | | | (7) | | | | | | | |
Equity method investment capital expenditures paid out | (1) | | | (7) | | | 6 | | | | | | | |
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Other | (5) | | | 4 | | | (9) | | | | | | | |
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DCF | 1,137 | | | 1,078 | | | 59 | | | | | | | |
Preferred unit distributions | (31) | | | (31) | | | — | | | | | | | |
DCF attributable to GP and LP unitholders | $ | 1,106 | | | $ | 1,047 | | | $ | 59 | | | | | | | |
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(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 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(2) For the presentationthree months ended March 31, 2021, the L&S and G&P segments made up $896 million and $456 million of Adjusted EBITDA and DCF provides useful informationattributable 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.MPLX LP, respectively. 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 also utilizes Segment Adjusted EBITDA in evaluating the financial performance of our segments. The use of this measures allows investors to understand how management evaluates financial performance to make operating decisions and allocate resources.
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 tables and discussion are a summary of our results of operations for the three months ended March 31, 2020, the L&S and 2019, including a reconciliationG&P segments made up $872 million and $422 million of Adjusted EBITDA and DCF from “Net income” and “Net cash provided by operating activities,” the most directly comparable GAAP financial measures. Prior period financial information has been retrospectively adjusted for common control transactions.attributable to MPLX LP, respectively.
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| Three Months Ended March 31, |
(In millions) | 2020 | | 2019 | | Variance |
Total revenues and other income(1) | $ | 992 |
| | $ | 2,235 |
| | $ | (1,243 | ) |
Costs and expenses: | | | | | |
Cost of revenues (excludes items below) | 368 |
| | 339 |
| | 29 |
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Purchased product costs | 135 |
| | 194 |
| | (59 | ) |
Rental cost of sales | 35 |
| | 37 |
| | (2 | ) |
Rental cost of sales - related parties | 46 |
| | 43 |
| | 3 |
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Purchases - related parties | 276 |
| | 278 |
| | (2 | ) |
Depreciation and amortization | 325 |
| | 301 |
| | 24 |
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Impairment expense | 2,165 |
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| | 2,165 |
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General and administrative expenses | 97 |
| | 101 |
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Other taxes | 31 |
| | 30 |
| | 1 |
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Total costs and expenses | 3,478 |
| | 1,323 |
| | 2,155 |
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Income/(loss) from operations | (2,486 | ) | | 912 |
| | (3,398 | ) |
Related party interest and other financial costs | 3 |
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Interest expense, net of amounts capitalized | 211 |
| | 214 |
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Other financial costs | 16 |
| | 9 |
| | 7 |
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Income/(loss) before income taxes | (2,716 | ) | | 688 |
| | (3,404 | ) |
(Benefit)/provision for income taxes | — |
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Net income/(loss) | (2,716 | ) | | 689 |
| | (3,405 | ) |
Less: Net income attributable to noncontrolling interests | 8 |
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Less: Net income attributable to Predecessor | — |
| | 180 |
| | (180 | ) |
Net income/(loss) attributable to MPLX LP | (2,724 | ) | | 503 |
| | (3,227 | ) |
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Adjusted EBITDA attributable to MPLX LP (excluding Predecessor results)(2) | 1,294 |
| | 930 |
| | 364 |
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Adjusted EBITDA attributable to MPLX LP (including Predecessor results)(3) | N/A |
| | 1,263 |
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DCF attributable to GP and LP unitholders (including Predecessor results)(3) | $ | 1,047 |
| | $ | 991 |
| | $ | 56 |
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(1) | Includes impairment expense of approximately $1.3 billion related to three equity method investments in 2020. |
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(2) | Non-GAAP measure. See reconciliation below to the most directly comparable GAAP measures. Excludes adjusted EBITDA and DCF adjustments attributable to Predecessor. |
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(3) | Non-GAAP measure. See reconciliation below to the most directly comparable GAAP measures. Includes adjusted EBITDA and DCF adjustments attributable to Predecessor. |
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| Three Months Ended March 31, |
(In millions) | 2021 | | 2020 | | 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 | $ | 1,124 | | | $ | 1,009 | | | $ | 115 | |
Changes in working capital items | 34 | | | 112 | | | (78) | |
All other, net | (15) | | | (30) | | | 15 | |
Non-cash equity-based compensation | 3 | | | 5 | | | (2) | |
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Gain on extinguishment of debt | (12) | | | — | | | (12) | |
Net interest and other financial costs | 220 | | | 216 | | | 4 | |
Current income taxes | 1 | | | — | | | 1 | |
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Unrealized derivative losses/(gains)(1) | 3 | | | (15) | | | 18 | |
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Other adjustments to equity method investment distributions | 2 | | | 5 | | | (3) | |
Other | 2 | | | 1 | | | 1 | |
Adjusted EBITDA | 1,362 | | | 1,303 | | | 59 | |
Adjusted EBITDA attributable to noncontrolling interests | (10) | | | (9) | | | (1) | |
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Adjusted EBITDA attributable to MPLX LP(2) | 1,352 | | | 1,294 | | | 58 | |
Deferred revenue impacts | 22 | | | 23 | | | (1) | |
Net interest and other financial costs | (220) | | | (216) | | | (4) | |
Maintenance capital expenditures | (18) | | | (34) | | | 16 | |
Maintenance capital expenditures reimbursements | 7 | | | 14 | | | (7) | |
Equity method investment capital expenditures paid out | (1) | | | (7) | | | 6 | |
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Other | (5) | | | 4 | | | (9) | |
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DCF | 1,137 | | | 1,078 | | | 59 | |
Preferred unit distributions | (31) | | | (31) | | | — | |
DCF attributable to GP and LP unitholders | $ | 1,106 | | | $ | 1,047 | | | $ | 59 | |
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(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 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 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 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 | 5 |
| | 7 |
| | (2 | ) |
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 | — |
| | 1 |
| | (1 | ) |
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) | 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 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 adjusted EBITDA and DCF adjustments related to Predecessor are excluded from adjusted EBITDA attributable to MPLX LP and DCF attributable to GP and LP unitholders prior to the acquisition date. |
| |
(3) | (2) For the three months ended March 31, 2021, the L&S and G&P segments made up $896 million and $456 million of Adjusted EBITDA attributable to MPLX LP, respectively. 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 MPLX LP, respectively. For the three months ended March 31, 2019, the L&S and G&P segments made up $559 million and $371 million of Adjusted EBITDA attributable to MPLX LP, respectively. |
|
| | | | | | | | | | | |
| 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) | 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 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 adjusted EBITDA and DCF adjustments related to Predecessor are excluded from adjusted EBITDA attributable to MPLX LP and DCF attributable to GP and LP unitholders prior to the acquisition 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 MPLX LP, respectively. For the three months ended March 31, 2019, the L&S and G&P segments made up $559 million and $371 million of Adjusted EBITDA attributable to MPLX LP, respectively. |
Three months ended March 31, 20202021 compared to three months ended March 31, 20192020
Total revenues and other income decreased $1,243increased $1,347 million in the first quarter of 20202021 compared to the same period of 2019. The large decrease2020. This increase was driven byprimarily due to impairments recorded in the first quarter of 2020 of $1,264 million. Impairments were recognized related to 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 ofin 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 $83 million increase of $21 million wasis primarily due to a $32higher product related revenue due to higher prices in all G&P regions of approximately $192 million increase in pipeline transportation volumes, prices and fees; $5 millionas well as from increased feespipeline tariff rates and shell capacityincreased revenue 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.terminal storage. These increases were partially offset by a decrease of $71 million due to lower prices, primarilyfees from lower volumes in the Southwest Southern Appalachia and Marcellus.Bakken of $46 million, which includes impacts related to severe weather in the Southwest. There were also decreases due to the Wholesale Exchange, lower marine transportation fees, decreased volume deficiency payments and lower L&S terminal and pipeline volumes, including decreased throughputs on certain of our equity method investments.
Cost of Revenues increased $29decreased $95 million in the first quarter of 20202021 compared to the same period of 2019,2020. This was 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 project-related spend, both as a result of cost reduction initiatives. The Wholesale Exchange as well as other miscellaneous costs and expenses withinalso contributed to the L&S segment.decrease.
Purchased product costs decreased $59increased $141 million in the first quarter of 20202021 compared to the same period of 2019.2020. This was primarily due to loweran increase of $18 million related to unrealized derivative gains in the prior year compared to unrealized
derivative losses in the current year and higher prices of $46$136 million in the Southwest and Southern Appalachia, partially offset by higherlower volumes of $6$14 million in the Southwest. In addition, there was a decrease
Rental cost of $18 million in unrealized derivative gains from prior year.
Depreciation and amortization expense increased $24sales - related parties decreased $7 million in the first quarter of 20202021 compared to the same period of 2019,2020. This was primarily due to additions to in-service property, plant and equipment throughout 2019 and the first three months of 2020lower operating costs as well as accelerated depreciationdecreased project spend from overall cost reduction initiatives.
Purchases - related parties increased $22 million in the first quarter of certain gathering assets, partially offset by a decrease2021 compared to the same period of 2020. This was primarily due to higher prices in the classification of certain assets as a sales-type lease.Rockies and higher employee related costs.
Impairment expense increaseddecreased $2,165 million in the first quarter of 20202021 compared to the same period of 2019.2020. 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 expenseGeneral and other financial costs increased $6administrative expenses decreased $11 million in the first quarter of 20202021 compared to the same period of 2019. The increase is2020. This was primarily relateddue to decreased employee costs associated with debt facilities that were entered into during the second halffrom MPC as a result of 2019cost reduction initiatives as well as decreased other miscellaneous expenses.
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) (gain)/loss on 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, 20202021 and 2019. Prior period financial information has been retrospectively adjusted for common control transactions.2020.
L&S Segment
| |
(1) | Includes adjusted EBITDA attributable to Predecessor. |
First Quarter L&S Segment Financial Highlights (in millions) |
| | | | | | | | | | | |
| 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 Reconciliation of Adjusted EBITDA attributable to MPLX LP and DCF attributable to GP and LP unitholders from Net income table for the reconciliation to the most directly comparable GAAP measure. |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
(In millions) | 2021 | | 2020 | | Variance | | | | | | |
Service revenue | $ | 953 | | | $ | 1,004 | | | $ | (51) | | | | | | | |
Rental income | 249 | | | 242 | | | 7 | | | | | | | |
Product related revenue | 4 | | | 19 | | | (15) | | | | | | | |
Income from equity method investments | 36 | | | 50 | | | (14) | | | | | | | |
Other income | 52 | | | 51 | | | 1 | | | | | | | |
Total segment revenues and other income | 1,294 | | | 1,366 | | | (72) | | | | | | | |
Cost of revenues | 144 | | | 238 | | | (94) | | | | | | | |
Purchases - related parties | 215 | | | 199 | | | 16 | | | | | | | |
Depreciation and amortization | 147 | | | 138 | | | 9 | | | | | | | |
General and administrative expenses | 46 | | | 52 | | | (6) | | | | | | | |
| | | | | | | | | | | |
Other taxes | 19 | | | 16 | | | 3 | | | | | | | |
Segment income from operations | 723 | | | 723 | | | — | | | | | | | |
Depreciation and amortization | 147 | | | 138 | | | 9 | | | | | | | |
Income from equity method investments | (36) | | | (50) | | | 14 | | | | | | | |
Distributions/adjustments related to equity method investments | 58 | | | 57 | | | 1 | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Non-cash equity-based compensation | 2 | | | 3 | | | (1) | | | | | | | |
Other | 2 | | | 1 | | | 1 | | | | | | | |
| | | | | | | | | | | |
Segment adjusted EBITDA(1) | 896 | | | 872 | | | 24 | | | | | | | |
| | | | | | | | | | | |
Capital expenditures | 59 | | | 184 | | | (125) | | | | | | | |
Investments in unconsolidated affiliates | $ | 9 | | | $ | 54 | | | $ | (45) | | | | | | | |
(1) See the Reconciliation of Adjusted EBITDA attributable to MPLX LP and DCF attributable to GP and LP unitholders from Net income table for the reconciliation to the most directly comparable GAAP measure.
Three months ended March 31, 20202021 compared to three months ended March 31, 20192020
Service revenue increased $115decreased $51 million in the first quarter of 20202021 compared to the same period of 2019.2020. This was primarily due to a $55$26 million increasedecrease in marine transportation fees, an $11 million decrease in volume deficiency payments, a $25 million decrease due to the classification of lease income between service revenue, rental incomeWholesale Exchange as well as other immaterial decreases associated with terminal and other income based on the nature of the contract; a $32 million increase in pipeline transportation volumes, pricesvolumes. These decreases were partially offset by increased pipeline tariff rates 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.associated with Mt. Airy.
Rental income decreased $93increased $7 million in the first quarter of 20202021 compared to the same period of 2019,2020. This was primarily due to a net decreaseincreased terminal storage fees as well as additional refining logistics fees associated with increased storage capacity and annual fee escalations.
Product related revenue decreased $15 million in the first quarter of 2021 compared to the same period of 2020. This was primarily due to the classification of lease income between service revenue, rental income and other income based on the nature of the contract.Wholesale Exchange.
Income from equity method investments increased $5decreased $14 million in the first quarter of 20202021 compared to the same period of 2019,2020. This was primarily due to lower expensesdecreased throughput volumes on theMarEn Bakken Company LLC, Explorer pipeline.Pipeline Company, Illinois Extension Pipeline Company L.L.C. and LOCAP LLC.
Other Income increased $39Cost of revenues decreased $94 million in the first quarter of 20202021 compared to the same period of 2019,2020. This was primarily due to an increasethe Wholesale Exchange as well as lower project-related spend as a result 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 reduction initiatives.
Cost of RevenuesPurchases - related parties increased $12$16 million in the first quarter of 20202021 compared to the same period of 2019,2020. This was primarily due to higher project-related costs partially offset by lower other miscellaneous expenses.employee related costs.
Purchases - related partiesDepreciation and amortization increased $9 million in the first quarter of 20202021 compared to the same period of 2019,2020. This was primarily due to increased employee-related costsaccelerated depreciation related to assets at an indefinitely idled MPC refinery, as well as property, plant and other miscellaneousequipment placed in service in the last nine months of 2020 and the first three months of 2021.
General and administrative expenses from MPC partially offset by higher reimbursements from MPC for reimbursable projects.
Depreciation and amortization increased $12decreased $6 million in the first quarter of 20202021 compared to the same period of 2019,2020. This was 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 assetsdecreased employee costs from MPC as a sales-type lease.result of cost reduction initiatives.
G&P Segment
First Quarter G&P Segment Financial Highlights (in millions)
| |
(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. |
(1) Includes impairment of equity method investments of $1,264 million for 2020.
(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 for 2020.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
(In millions) | 2021 | | 2020 | | Variance | | | | | | |
Service revenue | $ | 508 | | | $ | 536 | | | $ | (28) | | | | | | | |
Rental income | 92 | | | 88 | | | 4 | | | | | | | |
Product related revenue | 397 | | | 222 | | | 175 | | | | | | | |
Income/(loss) from equity method investments(1) | 34 | | | (1,234) | | | 1,268 | | | | | | | |
Other income | 14 | | | 14 | | | — | | | | | | | |
Total segment revenues and other income/(loss) | 1,045 | | | (374) | | | 1,419 | | | | | | | |
Cost of revenues | 200 | | | 211 | | | (11) | | | | | | | |
Purchased product costs | 276 | | | 135 | | | 141 | | | | | | | |
Purchases - related parties | 83 | | | 77 | | | 6 | | | | | | | |
Depreciation and amortization | 182 | | | 187 | | | (5) | | | | | | | |
Impairment expense | — | | | 2,165 | | | (2,165) | | | | | | | |
General and administrative expenses | 40 | | | 45 | | | (5) | | | | | | | |
| | | | | | | | | | | |
Other taxes | 13 | | | 15 | | | (2) | | | | | | | |
Segment income/(loss) from operations | 251 | | | (3,209) | | | 3,460 | | | | | | | |
Depreciation and amortization | 182 | | | 187 | | | (5) | | | | | | | |
Impairment expense | — | | | 2,165 | | | (2,165) | | | | | | | |
(Income)/loss from equity method investments | (34) | | | 1,234 | | | (1,268) | | | | | | | |
Distributions/adjustments related to equity method investments | 63 | | | 67 | | | (4) | | | | | | | |
| | | | | | | | | | | |
Unrealized derivative losses/(gains)(2) | 3 | | | (15) | | | 18 | | | | | | | |
Non-cash equity-based compensation | 1 | | | 2 | | | (1) | | | | | | | |
| | | | | | | | | | | |
Adjusted EBITDA attributable to noncontrolling interests | (10) | | | (9) | | | (1) | | | | | | | |
Segment Adjusted EBITDA(3) | 456 | | | 422 | | | 34 | | | | | | | |
| | | | | | | | | | | |
Capital expenditures | 30 | | | 134 | | | (104) | | | | | | | |
Investments in unconsolidated affiliates | $ | 26 | | | $ | 37 | | | $ | (11) | | | | | | | |
(1) Includes impairment of equity method investments of $1,264 million for 2020.
(2) 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 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.
(3) See the Reconciliation of Adjusted EBITDA attributable to MPLX LP and DCF attributable to GP and LP unitholders from Net income table for the reconciliation to the most directly comparable GAAP measure.
|
| | | | | | | | | | | |
| 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 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) | See the Reconciliation of Adjusted EBITDA attributable to MPLX LP and DCF attributable to GP and LP unitholders from Net income table for the reconciliation to the most directly comparable GAAP measure. |
Three months ended March 31, 20202021 compared to three months ended March 31, 20192020
Service revenue increased $8decreased $28 million in the first quarter of 20202021 compared to the same period of 2019.2020. This was primarily due to lower fees from lower volumes in the Southwest andBakken, which includes impacts related to severe weather in the Southwest.
Product related revenue increased $175 million in the first quarter of 2021 compared to the same period of 2020. This was primarily due to higher fees from higher volumesprices in all of the regions of approximately $192 million and a slight increase in volume in the Marcellus, Southwest and Bakken of $30 million,Rockies, partially offset by lower volumes of $5 million in the Rockies as well as other miscellaneous decreases.Southwestof $18 million, which includes impacts related to severe weather in the Southwest.
Product related revenue decreased $54Income from equity method investments increased $1,268 million in the first quarter of 20202021 compared to the same period of 2019.2020. This increase was primarily due to lower prices in the Southwest, Southern Appalachia and Marcellus of approximately $71 million. This was partially offsetdriven 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 millionimpairments recorded in the first quarter of 2020 comparedof $1,264 million. Impairments were recognized related 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 ofin MarkWest Utica EMG and our ownership in Uintah Basin Field Services, L.L.C., as we recognized impairments related Also contributing to these investmentsthe increase was higher volumes associated with our Sherwood Midstream LLC and Ohio Condensate Company joint ventures.
Cost of revenues decreased $11 million 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 prices2021 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 increase2020. This decrease is attributable to aligning various expenses as a result of the ANDX acquisition as well as higherlower repairs, maintenance and operating costs in the Marcellus and Southwest as a result of cost reduction initiatives, partially offset by lower repairs, maintenance and operating costshigher prices in the Southwest, Southern Appalachia and Rockies.
Purchased product costs decreased $59increased $141 million in the first quarter of 20202021 compared to the same period of 2019.2020. This was primarily due to loweran increase of $18 million related to unrealized derivative gains in the prior year compared to unrealized derivative losses in the current year and higher prices of $46$136 million in the Southwest and Southern Appalachia, partially offset by higher costs from higherlower volumes of $6$14 million in the Southwest. In addition, there was an increase of $18 million in unrealized derivative gains from prior year.
Purchases - related parties decreased $11increased $6 million in the first quarter of 20202021 compared to the same period of 2019, with this decrease2020. This was primarily being attributabledue to aligning various expenses as a result ofhigher prices in the ANDX acquisition.Rockies partially offset by lower employee related costs.
Depreciation and amortization increased $12Impairment expense decreased $2,165 million in the first quarter of 20202021 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 2019.2020. 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 $5 million in the first quarter of 2020 compared to the same period of 2019, primarily due to lower employee related costs.
SEASONALITY
The volume of crude oil and refined products transported and stored utilizing our assets is directly affected by the level of supply and demand for crude oil and refined products in the markets served directly or indirectly by our assets. ManyAny effects of seasonality on the L&S segment’s revenues will be mitigated through the use of our fee-based transportation and storage services agreements with MPC that include minimum volume commitments.
OurIn our G&P segment, can be affected bywe experience minimal impacts from seasonal fluctuations inwhich impact the demand for natural gas and NGLs and the related fluctuations in commodity prices caused by various factors including variations in weather patterns from year to year. We are able to manage the seasonality impacts through the execution of our marketing strategy and via our storage capabilities. Overall, our exposure to the seasonality fluctuations is declining due to our growth in our fee-based business.
OPERATING DATA
OPERATING DATA(1)
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2021 | | 2020 | | | | |
L&S | | | | | | | |
Pipeline throughput (mbpd) | | | | | | | |
Crude oil pipelines | 3,282 | | | 3,210 | | | | | |
Product pipelines | 1,858 | | | 1,905 | | | | | |
Total pipelines | 5,140 | | | 5,115 | | | | | |
| | | | | | | |
Average tariff rates ($ per barrel)(1) | | | | | | | |
Crude oil pipelines | $ | 0.96 | | | $ | 0.93 | | | | | |
Product pipelines | 0.79 | | | 0.79 | | | | | |
Total pipelines | $ | 0.90 | | | $ | 0.88 | | | | | |
| | | | | | | |
Terminal throughput (mbpd) | 2,613 | | | 2,966 | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Marine Assets (number in operation)(2) | | | | | | | |
Barges | 297 | | | 305 | | | | | |
Towboats | 23 | | | 23 | | | | | |
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, 2021 | | Three Months Ended March 31, 2020 |
| MPLX LP(3) | | MPLX LP Operated(4) | | MPLX LP(3) | | MPLX LP Operated(4) |
G&P | | | | | | | |
Gathering Throughput (MMcf/d) | | | | | | | |
Marcellus Operations | 1,298 | | | 1,298 | | | 1,420 | | | 1,420 | |
Utica Operations | — | | | 1,566 | | | — | | | 1,800 | |
Southwest Operations | 1,373 | | | 1,448 | | | 1,557 | | | 1,601 | |
Bakken Operations | 146 | | | 146 | | | 156 | | | 156 | |
Rockies Operations | 470 | | | 627 | | | 592 | | | 775 | |
Total gathering throughput | 3,287 | | | 5,085 | | | 3,725 | | | 5,752 | |
| | | | | | | |
Natural Gas Processed (MMcf/d) | | | | | | | |
Marcellus Operations | 4,249 | | | 5,677 | | | 4,198 | | | 5,522 | |
Utica Operations | — | | | 513 | | | — | | | 648 | |
Southwest Operations | 1,295 | | | 1,367 | | | 1,648 | | | 1,679 | |
Southern Appalachian Operations | 227 | | | 227 | | | 243 | | | 243 | |
Bakken Operations | 145 | | | 145 | | | 156 | | | 156 | |
Rockies Operations | 441 | | | 441 | | | 539 | | | 539 | |
Total natural gas processed | 6,357 | | | 8,370 | | | 6,784 | | | 8,787 | |
| | | | | | | |
C2 + NGLs Fractionated (mbpd) | | | | | | | |
Marcellus Operations(5) | 489 | | | 489 | | | 456 | | | 456 | |
Utica Operations(5) | — | | | 28 | | | — | | | 34 | |
Southwest Operations | 8 | | | 8 | | | 15 | | | 15 | |
Southern Appalachian Operations(6) | 11 | | | 11 | | | 12 | | | 12 | |
Bakken Operations | 19 | | | 19 | | | 31 | | | 31 | |
Rockies Operations | 4 | | | 4 | | | 5 | | | 5 | |
Total C2 + NGLs fractionated(7) | 531 | | | 559 | | | 519 | | | 553 | |
45
|
| | | | | |
| 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, | | |
| 2021 | | 2020 | | | | |
Pricing Information | | | | | | | |
Natural Gas NYMEX HH ($ per MMBtu) | $ | 2.72 | | | $ | 1.87 | | | | | |
C2 + NGL Pricing ($ per gallon)(8) | $ | 0.73 | | | $ | 0.40 | | | | | |
(1) Average tariff rates calculated using pipeline transportation revenues divided by pipeline throughput barrels.
(2) Represents total at end of period.
(3) This column represents operating data for entities that have been consolidated into the MPLX financial statements.
(4) This column represents operating data for entities that have been consolidated into the MPLX financial statements as well as operating data for MPLX-operated equity method investments.
(5) 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. Marcellus Operations includes Ohio Fractionation’s portion utilized of the jointly owned Hopedale Fractionation Complex. Utica Operations includes MarkWest 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 40 mbpd of capacity in the Hopedale 3 and Hopedale 4 fractionators.
(6) Includes NGLs fractionated for the Marcellus Operations and Utica Operations.
(7) Purity ethane makes up approximately 199 mbpd and 190 mbpd of total MPLX Operated, fractionated products for the three months ended March 31, 2021 and 2020, respectively. Purity ethane makes up approximately 194 mbpd and 183 mbpd of total MPLX LP consolidated, fractionated products for the three months ended March 31, 2021 and 2020, respectively.
(8) 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.
|
| | | | | |
| 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) | Operating data is inclusive of 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) | This column represents operating data for entities that have been consolidated into the MPLX financial statements. |
| |
(5) | This column represents operating data for entities that have been consolidated into the MPLX financial statements as well as operating data for MPLX-operated equity method investments. |
| |
(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. Marcellus Operations includes Ohio Fractionation’s portion utilized of the jointly owned Hopedale Fractionation Complex. Utica Operations includes MarkWest 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 40 mbpd of capacity in the Hopedale 3 and Hopedale 4 fractionators. |
| |
(7) | Includes NGLs fractionated for the Marcellus Operations and Utica Operations. |
| |
(8) | Purity ethane makes up approximately 190 mbpd and 189 mbpd of total MPLX Operated, fractionated products for the three months ended March 31, 2020 and 2019, respectively. Purity ethane makes up approximately 183 mbpd and 176 mbpd of total MPLX LP consolidated, fractionated products for the three months ended 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 was $57were $24 million at March 31, 20202021 and $15 million at December 31, 2019.2020. The change in cash, cash equivalents and restricted cash was due to the factors discussed below. Net cash provided by (used in) operating activities, investing activities and financing activities were as follows:
| | | | | | | | | | | |
| Three Months Ended March 31, |
(In millions) | 2021 | | 2020 |
Net cash provided by (used in): | | | |
Operating activities | $ | 1,124 | | | $ | 1,009 | |
Investing activities | (90) | | | (362) | |
Financing activities | (1,025) | | | (605) | |
Total | $ | 9 | | | $ | 42 | |
|
| | | | | | | |
| Three Months Ended March 31, |
(In millions) | 2020 | | 2019 |
Net cash provided by (used in): | | | |
Operating activities | $ | 1,009 |
| | $ | 853 |
|
Investing activities | (362 | ) | | (700 | ) |
Financing activities | (605 | ) | | (116 | ) |
Total | $ | 42 |
| | $ | 37 |
|
Net cash provided by operating activities increased $156$115 million in the first three months of 20202021 compared to the first three months of 2019,2020, primarily due to increased net income of $24 million, excluding impairments, as well as other changes related to depreciation and amortization and changes in working capitaladjusted for non-cash items.
Net cash used in investing activities decreased $338$272 million in the first three months of 20202021 compared to the first three months of 2019,2020, primarily due to decreased spending related to the capital budget a return of capital from our investment in Wink to Webster,and decreased contributions to equity method investments as well as cash received from the sale of certain assets.investments.
Financing activities were a $1,025 million use of cash in the first three months of 2021 compared to a $605 million use of cash in the first three months of 2020 compared to a $116 million2020. The primary reason for the increase in the use of cash was due to the return of capital to unitholders through the unit repurchase program as well as net repayments on long-term debt in the firstcurrent year compared to net borrowing on long-term debt in the prior year.
Free Cash Flow
The following table provides a reconciliation of FCF and excess/deficit cash flow from net cash provided by operating activities for the three months ended March 31, 2021 and March 31, 2020.
Table of 2019. The use of cash for the first three months of 2020 was primarily due to distributions of $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 MPLX Credit Agreement, payments of $6 million related to financing leases, and repayment of $2,261 million on the MPC Loan Agreement. These uses of cash were offset by borrowings of $1,325 million on the revolving credit facility, $1,667 million on the MPC Loan Agreement, and $14 million of contributions from MPC.Contents
| | | | | | | | | | | | | | | | | | | | |
| | | | | Three Months Ended March 31, | | |
(In millions) | | | | | | | | 2021 | | 2020 | | |
Net cash provided by operating activities | | | | | | | | $ | 1,124 | | | $ | 1,009 | | | |
Adjustments to reconcile net cash provided by operating activities to free cash flow | | | | | | | | | | | | |
Net cash used in investing activities | | | | | | | | (90) | | | (362) | | | |
Contributions from MPC | | | | | | | | 7 | | | 14 | | | |
| | | | | | | | | | | | |
Distributions to noncontrolling interests | | | | | | | | (10) | | | (9) | | | |
Free cash flow | | | | | | | | 1,031 | | | 652 | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Distributions to common and preferred unitholders | | | | | | | | (754) | | | (758) | | | |
Excess (deficit) cash flow | | | | | | | | $ | 277 | | | $ | (106) | | | |
Debt and Liquidity Overview
On January 15, 2021, MPLX redeemed $750 million outstanding aggregate principal amount of 5.250 percent senior notes due January 15, 2025, at 102.625 percent of the principal amount.
Our outstanding borrowings at March 31, 2021 and December 31, 2020 consist of the following:
| | | | | | | | | | | |
(In millions) | March 31, 2021 | | December 31, 2020 |
MPLX LP: | | | |
| | | |
| | | |
| | | |
Bank revolving credit facility | $ | 835 | | | $ | 175 | |
| | | |
| | | |
| | | |
| | | |
Floating rate senior notes | 1,000 | | | 1,000 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
Fixed rate senior notes | 18,532 | | | 19,240 | |
Consolidated subsidiaries: | | | |
MarkWest | 23 | | | 23 | |
ANDX | 45 | | | 87 | |
| | | |
Financing lease obligations | 10 | | | 11 | |
Total | 20,445 | | | 20,536 | |
Unamortized debt issuance costs | (112) | | | (116) | |
Unamortized discount/premium | (279) | | | (281) | |
Amounts due within one year | (2) | | | (764) | |
Total long-term debt due after one year | $ | 20,052 | | | $ | 19,375 | |
|
| | | |
(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 |
|
Our intention is to maintain an investment grade credit profile. As of April 23, 2020,20, 2021, the credit ratings on our senior unsecured debt were at or above investment grade level as follows:
|
| | | | | | | |
Rating Agency | | Rating |
Moody’s | | Baa2 (negative outlook) |
Standard & Poor’s | | BBB (negative outlook) |
Fitch | | BBB (negative(stable outlook) |
The ratings reflect the respective views of the rating agencies. Although it is our intention to maintain a credit profile that supports an investment grade rating, there is no assurance that these ratings will continue for any given period of time. The ratings may be revised or withdrawn entirely by the rating agencies if, in their respective judgments, circumstances so warrant.
The MPLX Credit Agreement and Term Loan Agreement containcontains 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)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, 2020,2021, 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 could, among other things, increase the applicable interest rates and other fees payable under the MPLX Credit Agreement and the Term Loan Agreement and may limit our ability to obtain future financing, including refinancing existing indebtedness.
Our liquidity totaled $4.3$4.2 billion at March 31, 20202021 consisting of:
| | | | | | | | | | | | | | | | | |
| March 31, 2021 |
(In millions) | Total Capacity | | Outstanding Borrowings | | Available Capacity |
Bank revolving credit facility due 2024(1) | $ | 3,500 | | | $ | (835) | | | $ | 2,665 | |
| | | | | |
MPC Loan Agreement | 1,500 | | | — | | | 1,500 | |
Total liquidity | $ | 5,000 | | | $ | (835) | | | 4,165 | |
Cash and cash equivalents | | | | | 24 | |
Total liquidity | | | | | $ | 4,189 | |
|
| | | | | | | | | | | |
| March 31, 2020 |
(In millions) | Total Capacity | | Outstanding Borrowings | | Available Capacity |
Bank revolving credit facility due 2024(1) | $ | 3,500 |
| | $ | (750 | ) | | $ | 2,750 |
|
MPC Loan Agreement | 1,500 |
| | — |
| | 1,500 |
|
Total liquidity | $ | 5,000 |
| | $ | (750 | ) | | 4,250 |
|
Cash and cash equivalents | | | | | 57 |
|
Total liquidity | | | | | $ | 4,307 |
|
(1) Outstanding borrowings include less than $1 million in letters of credit outstanding under this facility. | |
(1) | Outstanding borrowings include less 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 the MPC Loan Agreement, the MPLX Credit Agreement and access to capital markets. We believe that cash generated from these sources will be sufficient to meet our short-term and long-term funding requirements, including working capital requirements, capital expenditure requirements, contractual obligations, and quarterly cash distributions. 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 March 31, 2020:
| | | | | | | | | |
(In units) | | | | | |
Balance at December 31, 2020 | | | | | 1,038,777,978 | |
Unit-based compensation awards | | | | | 143,247 | |
Units redeemed in Unit Repurchase Program | | | | | (6,272,981) | |
| | |
(In units) | | |
Balance at December 31, 2019 | 1,058,355,471 |
|
Unit-based compensation awards | 151,878 |
|
Balance at March 31, 20202021 | 1,058,507,349 |
| | | 1,032,648,244 | |
ATM
MPLX expects the net proceeds, if any, from sales under our ATM Program will be used for general business purposes including repayment or refinancing of debt and funding for acquisitions, working capital requirements and capital expenditures. During the three months ended March 31, 2020, we issued no common units under our ATM program. As of March 31, 2020, $1.7 billion of common units remain available for issuance through the ATM Program.
Distributions
We intend to pay a minimum quarterly distribution to the holders of our common units of $0.2625 per unit, or $1.05 per unit on an annualized basis, to the extent we have sufficient cash from our operations after the establishment of cash reserves and the payment of costs and expenses, including reimbursements of expenses to our general partner. The amount of distributions paid under our policy and the decision to make any distributions is determined by our general partner, taking into consideration the terms of our partnership agreement. Such minimum distribution would equate to $278$271 million per quarter, or $1,111$1,084 million per year, based on the number of common units outstanding at March 31, 2020.2021. On April 28, 2020,27, 2021, we announced the board of directors of our general partner had declared a distribution of $0.6875 per unit that will be paid on May 15, 202014, 2021 to unitholders of record on May 8, 2020.7, 2021. This is consistent with the fourthprior quarter 2019 distribution of $0.6875 per unit and an increase of 4.6 percent over the first quarter 2019 distribution. This rate will also be received by Series A preferred unitholders. Although our partnership agreement requires that we distribute all of our available cash each quarter, we do not otherwise have a legal obligation to distribute any particular amount per common unit.
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 madeAccordingly, a cash distribution payment totaling $21 million was paid to holders of the Series B preferred unitholders inon February 2020 for approximately $21 million.
16, 2021.
The allocation of total quarterly cash distributions is as follows for the three months ended March 31,
20202021 and
2019.2020. 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.
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| | | | | | | |
| Three Months Ended March 31, |
(In millions) | 2020 | | 2019 |
Distribution declared: | | | |
Limited partner units - public | $ | 270 |
| | $ | 191 |
|
Limited partner units - MPC | 458 |
| | 332 |
|
Total LP distribution declared | 728 |
| | 523 |
|
Series A preferred units | 20 |
| | 20 |
|
Series B preferred units | 11 |
| | — |
|
Total distribution declared | 759 |
| | 543 |
|
| | | |
Cash distributions declared per limited partner common unit | $ | 0.6875 |
| | $ | 0.6575 |
|
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
(In millions, except per unit data) | 2021 | | 2020 | | | | |
Distribution declared: | | | | | | | |
Limited partner units - public | $ | 262 | | | $ | 270 | | | | | |
Limited partner units - MPC | 445 | | | 458 | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Total LP distribution declared | 707 | | | 728 | | | | | |
Series A preferred units | 20 | | | 20 | | | | | |
Series B preferred units | 11 | | | 11 | | | | | |
Total distribution declared | 738 | | | 759 | | | | | |
| | | | | | | |
Cash distributions declared per limited partner common unit | $ | 0.6875 | | | $ | 0.6875 | | | | | |
Capital Expenditures
Our operations are capital intensive, requiring investments to expand, upgrade, enhance or maintain existing operations and to meet environmental and operational regulations. Our capital requirements consist of maintenance capital expenditures and growth capital expenditures. Examples of maintenance capital expenditures are those made to replace partially or fully depreciated assets, to maintain the existing operating capacity of our assets and to extend their useful lives, or other capital expenditures that are incurred in maintaining existing system volumes and related cash flows. In contrast, growth capital expenditures are those incurred for 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 of additional pipeline, processing or storage capacity. In general, growth capital includes costs that are expected to generate additional or new cash flow for MPLX.
Our capital expenditures are shown in the table below:
| | | | | | | | | | | |
| Three Months Ended March 31, |
(In millions) | 2021 | | 2020 |
Capital expenditures: | | | |
Growth capital expenditures | $ | 71 | | | $ | 284 | |
Growth capital reimbursements | — | | | — | |
Investments in unconsolidated affiliates | 35 | | | 91 | |
Return of capital | — | | | (69) | |
| | | |
Capitalized interest | (5) | | | (13) | |
Total growth capital expenditures | 101 | | | 293 | |
Maintenance capital expenditures | 18 | | | 34 | |
Maintenance capital reimbursements | (7) | | | (14) | |
Total maintenance capital expenditures | 11 | | | 20 | |
| | | |
Total growth and maintenance capital expenditures | 112 | | | 313 | |
Investments in unconsolidated affiliates(1) | (35) | | | (91) | |
Return of capital(1) | — | | | 69 | |
| | | |
Growth and maintenance capital reimbursements(2) | 7 | | | 14 | |
Decrease in capital accruals | 37 | | | 61 | |
Capitalized interest | 5 | | | 13 | |
Additions to property, plant and equipment, net(1) | $ | 126 | | | $ | 379 | |
|
| | | | | | | |
| 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) | This amount is represented(1) Investments in unconsolidated affiliates, return of capital and additions to property, plant and equipment, net are shown as separate lines within investing activities in the Consolidated Statements of Cash Flows as Additions to 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) | Amount 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 which is reflected in the investing section of our statement of cash flows for the three months ended March 31, 2020. |
(2) Growth and maintenance capital reimbursements are included in the Contributions from MPC line within financing activities in the Consolidated Statements of Cash Flows.
Contractual Cash Obligations
As of March 31, 2020,2021, our contractual cash obligations included long-term debt, finance and operating lease obligations, purchase obligations for services and to acquire property, plant and equipment, and other liabilities. During the three months ended March 31, 2020,2021, our third-party long-term debt obligations increaseddecreased by $90 million, primarily due to the redemption of $750 million and was primarily used to repay our MPC Loanoutstanding aggregate principal amount of 5.250 percent senior notes due January 15, 2025 discussed above, partially offset by increased borrowings on the MPLX Credit Agreement. There were no other material changes to theseour contractual obligations outside the ordinary course of business since December 31, 2019.2020.
Off-Balance Sheet Arrangements
Off-balance sheet arrangements comprise those arrangements that may potentially impact our liquidity, capital resources and results of operations, even though such arrangements are not recorded as liabilities under U.S. GAAP. Our off-balance sheet arrangements 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 we are not aware of any circumstances that are reasonably likely to cause the off-balance sheet arrangements to have a material adverse effect on our liquidity and capital resources.
TRANSACTIONS WITH RELATED PARTIES
At March 31, 2020,2021, MPC owned our non-economic general partnership interest and held approximately 63 percent 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 5551 percent and 5355 percent of our total revenues and other income for the first quarter of 20202021 and 2019,2020, respectively. We provide 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 29 percent and 29 percent for the first quarter of 20202021 and 2019,2020, respectively. MPC performed certain services for us related to information technology, engineering, legal, accounting, treasury, human resources and other administrative services.
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, 20192020 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 March 31, 2020,2021, 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, 2019.2020.
CRITICAL ACCOUNTING ESTIMATES
As of March 31, 2020,2021, 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, 2019, except as noted below.2020.
Impairment Assessments of Long-Lived Assets, Intangible Assets, Goodwill and Equity Method Investments
Fair value calculated for the purpose of testing our long-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 forecasted 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.
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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 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.
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.
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 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, 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
We are exposed to market risks related to the volatility of commodity 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 interest rates. As of March 31, 2020,2021, we did not have any open financial derivative instruments to 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 in fair value of derivative instruments we may enter into;into, such risk is mitigated by price or rate changes related to the underlying commodity or financial transaction.
Commodity Price Risk
The information about commodity price risk for the three months ended March 31, 20202021 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, 2019.2020.
Outstanding Derivative Contracts
We have a natural gas purchase commitment embedded in a keep-whole processing agreement with a producer customer in the Southern Appalachian region expiring in December 2022. The customer has the unilateral option to extend the agreement for two consecutive five-year terms through December 2032. For accounting purposes, the natural gas purchase commitment and the term extending options have been aggregated into a single compound embedded derivative. The probability of the customer exercising its options is determined based on assumptions about the customer’s potential business strategy decision points that may exist at the time they 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 and the probability of the producer customer exercising its option to extend and the estimated favorability of these contracts compared to current market conditions.extend. The changes in fair value are recorded in earnings through “Purchased product costs” on the Consolidated Statements of Income. As of March 31, 20202021 and December 31, 2019,2020, the estimated fair value of this contract was a liability of $45$66 million and $60$63 million, respectively.
Open Derivative Positions and Sensitivity Analysis
As of March 31, 2020,2021, we have no open commodity derivative contracts. We evaluate our portfolio of commodity derivative instruments on an ongoing basis and add or revise strategies in anticipation of 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 finance 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 March 31, 2020(1) | | Change in Fair Value(2) | | Change in Income Before Income Taxes for the Three Months Ended March 31, 2020(3) | (In millions) | Fair value as of March 31, 2021(1) | | Change in Fair Value(2) | | Change in Income Before Income Taxes for the Three Months Ended March 31, 2021(3) |
Long-term debt | | | | | | |
Long-term debt (including amounts due within one year) | | Long-term debt (including amounts due within one year) | | | | | |
Fixed-rate | $ | 14,638 |
| | $ | 1,249 |
| | N/A |
| Fixed-rate | $ | 20,152 | | | $ | 1,843 | | | N/A |
Variable-rate | $ | 3,714 |
| | $ | 37 |
| | $ | 8 |
| Variable-rate | $ | 1,836 | | | $ | 14 | | | $ | 4 | |
(1) Fair value was based on market prices, where available, or current borrowing rates for financings with similar terms and maturities.
(2) Assumes a 100-basis-point decrease in the weighted average yield-to-maturity at March 31, 2020.2021.
(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, 2020.2021.
At March 31, 2020,2021, our portfolio of long-term debt consisted of fixed-rate instruments and variable-rate instruments including our term loan,fixed rate senior notes, 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,facility, but may affect our results of operations and cash flows. As of March 31, 2020,2021, 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 13a-15(e) and 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 March 31, 2020,2021, the end of the period covered by this report.
Changes in Internal Control Over Financial Reporting
During the quarter ended March 31, 2020,2021, 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. While it is possible that an adverse result in one or more of the lawsuits or proceedings in which we are a defendant could be material to us, based upon current information and our experience as a defendant in other matters, we believe that these lawsuits and proceedings, individually or in the aggregate, will not have a material adverse effect on our consolidated results of operations, financial position or cash flows. Except as described below, there have been no material changes to the legal proceedings previously disclosed in our Annual Report on Form 10-K.
Litigation
Tesoro High Plains Pipeline
In connection with our 9.19 percent indirect interestearly July 2020, Tesoro High Plains Pipeline Company, LLC (“THPP”), a subsidiary of MPLX, received a Notification of Trespass Determination from the Bureau of Indian Affairs (“BIA”) relating to a portion of the Tesoro High Plains Pipeline that crosses the Fort Berthold Reservation in North Dakota. The notification covered the rights of way for 23 tracts of land and demanded the immediate cessation of pipeline operations. The notification also assessed trespass damages of approximately $187 million. THPP appealed this determination, which triggered an automatic stay of the requested pipeline shutdown and payment. On October 29, the Assistant Secretary - Indian Affairs issued an order vacating the BIA’s trespass order and requiring the Regional Director for the BIA Great Plains Region to issue a joint venture that owns and operatesnew decision on or before December 15 covering all 34 tracts at issue. On December 15, the Dakota Access Pipeline and Energy Transfer Crude Oil Pipeline projects, collectively referredRegional Director of the BIA issued a new trespass notice to as the Bakken Pipeline system, we have entered into a Contingent Equity Contribution Agreement whereby MPLX LP, alongTHPP consistent with the other joint venture ownersAssistant Secretary - Indian Affairs order vacating the prior trespass order. The new order found that THPP was in trespass and assessed trespass damages of approximately $4 million (including interest). The order also required THPP to immediately cease and desist use of the Bakken Pipeline system, have agreed to make equity contributions toportion of the joint venture upon certain events occurring to allowpipeline that crosses the entities that ownproperty at issue. The new order was appealed, and operate the Bakken Pipeline system to satisfy their senior note payment obligations. The senior notes were issued to repay amounts owedwas upheld by the pipeline companies to fundAssistant Secretary - Indian Affairs. THPP has complied with the cost of construction of the Bakken Pipeline system.
In MarchRegional Director’s December 15, 2020 notice. On February 12, 2021, landowners filed suit in the U.S. District Court for the District of Columbia orderedNorth Dakota (the “District of North Dakota”) against THPP, the Department of the Interior, the Assistant Secretary - Indian Affairs, the Interior Board of Indian Appeals and the BIA, requesting, among other things, that decisions by the Assistant Secretary - Indian Affairs and the Interior Board of Indian Appeals be vacated as to the award of damages to plaintiffs. In March 2021, THPP received a copy of an order purporting to vacate all orders related to THPP’s alleged trespass issued by the BIA between July 2, 2020 and January 14, 2021. The order directs the Regional Director of the BIA to reconsider the issue of THPP’s alleged trespass and issue a new order, if necessary, after all interested parties have had an opportunity to be heard. Subsequently, landowners voluntarily dismissed the suit filed in the District of North Dakota. On April 23, 2021, THPP filed a lawsuit in the District of North Dakota against the United States of America, 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 operationDepartment of the Bakken Pipeline system should be vacated whileInterior and the EIS is being prepared. IfBIA challenging the permit is vacated pending completionMarch order purporting to vacate all previous orders related to THPP’s alleged trespass.
We continue to work towards a settlement of this matter with holders 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.property rights at issue.
Environmental Proceedings
On April 10, 2020,
Item 103 of Regulation S-K promulgated by the SEC requires disclosure of certain environmental matters when a governmental authority is a party to the proceedings and such proceedings involve potential monetary sanctions, unless we receivedreasonably believe that the matter will result in no monetary sanctions, or in monetary sanctions, exclusive of interest and costs, of less than $300,000. The following matters are disclosed in accordance with that requirement. We do not currently believe that the eventual outcome of any such matters, individually or in the aggregate, could have a Noticematerial adverse effect on our business, financial condition, results of Probable Violation and Proposed Civil Penalty fromoperations or cash flows.
There have been no material changes to the Pipeline and Hazardous Materials Safety Administration’s Office of Pipeline Safety (OPS) for alleged violations arising from the release at the Hospah Station pump stationenvironmental proceedings previously disclosed in New Mexicoour Annual Report on September 7, 2018. The NOPV alleged a failure to follow written procedures for responding to, investigating, and correcting the cause 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 a cash penalty of approximately $236,000.Form 10-K.
Item 1A. Risk Factors
Except as described below, thereThere have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019.2020.
Item 2. Unregistered Sales of Equity Securities
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 thosefollowing table sets forth a summary of our customers, suppliers and other counterparties.
The recent outbreakpurchases during the quarter ended March 31, 2021, of COVID-19 and the responses of governmental authorities, companies and the self-imposed restrictionsequity securities that are registered by many individuals across the worldMPLX pursuant to stem the spreadSection 12 of the virus have significantly reduced global economic activity,Securities Exchange Act of 1934, as there has beenamended.
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Period | | Total Number of Units Purchased | | Average Price Paid per Unit(1) | | Total Number of Units Purchased as Part of Publicly Announced Plans or Programs | | Maximum Dollar Value of Units that May Yet Be Purchased Under the Plans or Programs(2) |
1/01/2021-1/31/2021 | 879,708 | | | $ | 23.47 | | | 879,708 | | | $ | 946,504,250 | |
2/01/2021-2/28/2021 | 2,148,970 | | | $ | 24.24 | | | 2,148,970 | | | $ | 894,403,501 | |
3/01/2021-3/31/2021 | 3,244,303 | | | $ | 25.49 | | | 3,244,303 | | | $ | 811,694,451 | |
Total | 6,272,981 | | | $ | 24.78 | | | 6,272,981 | | | |
(1)Amounts in this column reflect the weighted average price paid for units purchased under our unit repurchase authorization. The weighted average price includes commissions paid to brokers on shares repurchased under our unit repurchase authorization.
(2)On November 2, 2020, we announced the board authorization of 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 demandunit repurchase program for the fuels distribution services we provide and for the petroleum products that we transport and store.
Concerns over the negative effectsrepurchase of COVID-19 on economic and business prospects across the world have contributedup to increased market and oil price volatility and have diminished expectations for the global economy. These factors, coupled with the emergence$1 billion of decreasing business and consumer confidence and increasing unemployment resulting from the COVID-19 outbreak and the recent abrupt oil price decline, may precipitate a prolonged economic slowdown and recession. Any such prolonged period of economic 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 financial condition of our customers, suppliers and other counterparties, and could diminish our liquidity or trigger additional impairments.
The ultimate extent of the impact of COVID-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 the extent permitted by law, the sole and exclusive forum for substantially all disputes between us and our limited partners.
Our limited partnership agreement provides that the 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 owedMPLX’s common units held by the general partner, to the partnership or the limited partners;public. This unit repurchase authorization has no expiration date.
asserting a claim arising pursuant to any provision
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 in 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 action, 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 operations. However, the forum selection provision does not apply to any claims, actions or proceedings arising under the Securities Act or the Exchange Act.
Item 6. Exhibits
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| | | | Incorporated by Reference From | | | | |
Exhibit Number | | Exhibit Description | | Form | | Exhibit | | Filing Date | | SEC File No. | | Filed Herewith | | Furnished Herewith |
2.1† | | | | 8-K | | 2.1 | | | 5/8/2019 | | 001-35714 | | | | |
3.1 | | | | S-1 | | 3.1 | | | 7/2/2012 | | 333-182500 | | | | |
3.2 | | | | S-1/A | | 3.2 | | | 10/9/2012 | | 333-182500 | | | | |
3.3 | | | | 8-K | | 3.1 | | | 2/3/2021 | | 001-35714 | | | | |
10.1 | | | | 10-K | | 10.106 | | 2/26/2021 | | 001-35714 | | | | |
31.1 | | | | | | | | | | | | X | | |
31.2 | | | | | | | | | | | | X | | |
32.1 | | | | | | | | | | | | | | X |
32.2 | | | | | | | | | | | | | | 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). | | | | | | | | | | | | |
† The exhibits and schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K and will be provided to the Securities and Exchange Commission upon request
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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 | | | | |
|
| | | | | | | | | | | | | | | |
| | | | 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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* | Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. MPLX LP hereby undertakes to 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 | | |
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| MPLX LPBy: | | |
| | | |
| By: | | MPLX GP LLC |
| | | Its general partner |
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Date: May 7, 20206, 2021 | By: | | /s/ C. Kristopher Hagedorn |
| | | C. Kristopher Hagedorn |
| | | Vice President and Controller of MPLX GP LLC (the general partner of MPLX LP) |