MPLX LP

Welcome to the MPLX First Quarter 2020 Earnings Call. My name is Sheila, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Press star 1 on your touch-tone phone to enter the queue. Please note that this conference is being recorded. I will now turn the call over to Kristina Kazarian. Kristina, you may begin.

Good morning and welcome to the MPLX First Quarter 2020 Earnings Webcast and Conference Call. The synchronized slides that accompany this call can be found on MPLX.com under the Investors tab. On the call today are Mike Hennigan, President and CEO, Cam Beal, CFO, and other members of the management team. We invite you to read the Safe Harbor Statements and Non-Gap Disclaimer on slide two. It's a reminder that we will be making forward-looking statements during the call and during the question and answer session that follows. Actual results may differ materially from what we expect today. Factors that could cause actual results to differ are included there, as well as our filings with the SEC. Now, I'll turn this call over to Mike Hennigan for opening remarks.

Thanks, Kristina. Good morning. Thank you for joining our call. Let me start by sharing with you some of the steps that we've taken in response to the current COVID-19 crisis, which has affected all of us and has impacted the demand for hydrocarbons for which we provide services. To better protect the health and safety of everyone, in mid-March, we asked many employees to start working from home so that those employees who must be on site to run our operations could have the space they need to properly social distance and implement other protective measures. I appreciate the professionalism and flexibility with which all our employees have approached this change to how we work. And I especially want to thank those employees who continue to run our business every day. Thank you for the commitment you've shown to our company and those who rely on the essential products and services we provide by continuing to ensure this important work is done safely and with excellence. Second, we are grateful for everyone working on the front lines of this pandemic. This quarter, to support the efforts of our health care workers across the country, our sponsor, MPC, donated 575,000 N95 masks to 46 different hospitals across the country. We will share some of MPC's local support efforts later in the call. As we progress through the quarter, we work to adapt this very dynamic situation created by COVID-19 pandemic and oil price tensions. MPLX had a relatively strong quarter as the impact of demand destruction began to impact the business in late March. Earlier today, we reported adjusted EBITDA for the first quarter of 2020 of $1.3 billion, which is consistent with the prior year first quarter. In this environment, we are taking proactive steps to reduce our 2020 capital target by over $700 million and and forecasted annual operating expenses by approximately $200 million. You may recall that the process of high grading our capital portfolio has been underway since the combination with AMDX last year. When the combination closed, our initial 2020 growth plan was $2.6 billion. On our third quarter 2019 earnings call, we announced the reduced target to approximately $2 billion. Last quarter, we announced that we had identified additional opportunities to further streamline our growth capital expenditures, focusing on the most attractive returns, reducing our growth target to $1.5 billion. Today, we announced that we are reducing our 2020 growth capital spending by over $600 million to approximately $900 million. Our 2020 growth capital spend target is now primarily related to projects that are already underway, including the Wink to Webster crude oil pipeline, the Whistler natural gas pipeline, and the Mount Airy terminal expansion. Additionally, the original Bangle project scope is no longer being pursued. Instead, we are working with others to optimize existing pipeline capacity while continuing to meet producers' needs for flow assurance and future growth. Also, the associated fractionation capacity and export facility have been deferred. We also announced that we are reducing our 2020 net maintenance capital target by about $100 million to approximately $150 million. Looking forward, we are maintaining our goal to achieve positive free cash flow net of both capital investments and distributions in 2021 and highlight that plan on slide four. This inflection is expected to be achieved through a combination of continued annual earnings growth and the high grading of our growth capital plan. As a result, we believe that we will be positioned to broaden our value creation options and enhance our long-term financial flexibility. Turning to slide five, given the current business environment, we've been getting many questions on the security and stability of our cash flows in both of our business segments. Our logistics and storage segment made up approximately two-thirds of our 2019 EBITDA. The largest part of our L&S business with MPC is Refining Logistics and Fuels Distribution, or RLFD, which had a combined EBITDA of approximately $1.4 billion. This combined RLFD business has a combination of fee-for-capacity and highly stable service fees with minimum volume commitments. Similar to RLFD, our terminals and marine businesses are primarily fee-for-capacity and highly stable service fees with minimum volume commitments. The remainder of our LNS business with MPC includes crude and refined product pipelines and certain equity method investments. Our crude and refined product pipelines are backed by substantial MVCs, and MPC represents approximately 84% of our 2019 volumes. Turning to slide six, we provide a closer look at the characteristics of our Gathering and Processing or GMP segment. GMP represents the remaining one-third of MPLX's 2019 EBITDA. The Marcellus is our largest region within GMP. Approximately 74% of the processing capacity in the Marcellus is backed by MVCs. Processing capacity in our Utica and Southern Appalachia regions is backed by 27% and 24% MVCs respectively. Percentage of Southwest and Mid-Con region processing capabilities backed by MVCs vary. Our key producer customers have significant hedging programs in place in 2020 and 2021. In addition, last week, our largest public customers announced that their 2020 production plans are being maintained as well as additional measures to improve their balance sheets and liquidity in the current environment. A silver lining to the expected decline in Permian crude and associated gas production is the support it provides to the price of natural gas, especially for the Northeast on-purpose gas producers. The natural gas strip is also providing an opportunity for producers to further hedge their production into the future. Turning to slide seven, MPLX has always been a responsible corporate leader. I wanted to take a moment to comment on how this will remain an ongoing focus and highlight some significant recent achievements. In 2019, we earned EPA's Energy Star Challenge Award at several of our terminals. We also now have 32 sites that have been recognized under OSHA's Voluntary Protection Program, or VPP. VPP recognizes employers and workers who have implemented effective safety and health management systems and maintain injury and illness rates below National Bureau of Labor statistic averages for their respective industries. As I mentioned earlier, the COVID-19 pandemic has created unprecedented challenges in the personal and professional lives of many. It also has created an opportunity for us to help our communities in unique ways. In El Paso, Texas, our transport fleet transported an emergency mobile clinic to the El Paso airport to provide medical relief for the area. Marathon Pipeline also donated meals to first responders and staff at local nursing homes throughout its operating regions. Again, we are grateful for everyone working on the front lines of this pandemic and are proud to do our part by contributing supplies to organizations that are supporting those in crisis. Now let me turn the call over to Pam to discuss our first quarter 2020 operational and financial results.