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spk00: Welcome to the MPLX fourth quarter 2021 earnings call. My name is Kristen 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 one 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 Christina Tarazan. Christina, you may begin.
spk01: Good morning and welcome to the MPLX fourth quarter 2021 earnings conference call. The slides that accompany this call may be found on our website at MPLX.com under the investor tab. Joining me on the call today are Mike Hennigan, chairman and CEO, John Quaid, CFO, and other members of the executive team. We invite you to read the safe harbors statements and non-GAAP 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 in our filings with the SEC. Now with that, I'll turn the call over to Mike.
spk03: Thanks, Christina. Good morning, and thank you for joining our call. Earlier today, we reported adjusted EBITDA of $1.4 billion for the fourth quarter of 2021. and $5.6 billion for the full year. Over the past year, we've executed on each of our three priorities. We exceeded our initial cost reduction target, reducing our annual operating expenses by approximately $400 million as compared to 2019 levels. We've made significant progress in this area over the last two years. And so what began as a cost reduction initiative is being embraced by the organization. Now a low cost culture is being embedded in how we conduct our business. We brought multiple projects into service over the last year while maintaining strict capital discipline. Within the L&S segment, our three Permian takeaway projects, Whistler for natural gas, Wink the Webster for crude oil, and our NGL project were all placed into service, and we expect volumes across these systems to ramp over time. Within the GMP segment, both the Smithsburg I processing plant in the Marcellus and the Preakness Processing Plant in the Permian have started operation. We also continued our portfolio optimization efforts and completed the sale of the Javelina Processing Plant in Texas and some minor gathering assets in southern Wyoming for proceeds of approximately $110 million. In addition to our cost reduction and portfolio optimization efforts, 2021 also benefited from the tailwinds of strong NGL prices and the recovery in U.S. refined product demand. All these items resulted in exceptionally strong cash flow and enabled us to return over $4.2 billion to unit holders through distributions and unit repurchases. On our Alaskan logistic and storage assets, we've been working a sales process since we last communicated. We'll be back to you when we have more details that we can share. Turning this slide forward in your deck, today we announced our capital outlook for 2022 of $900 million. That plan includes approximately $700 million of growth capital, $140 million of maintenance capital, and $60 million for the repayment of our share of the DAPL pipeline joint venture debt due in 2022. Our 2022 capital plan is directed towards investments expected to deliver high capital returns such as expansions, and de-bottlenecking of our existing assets and projects related to the expected increased producer activity. While our capital outlook is primarily focused on our current LNS and GMP footprint, we also continue to evaluate low-carbon opportunities where we can leverage our competitive advantage through technologies that are complementary with our expertise and our asset footprint. Near term, these opportunities are likely to be supported or to be in support of MPC's renewable efforts, such as investment in our logistics assets supporting MPC's Martinez Renewable Fuels Project. Moving to slide five, I'd like to provide some comments on our capital allocation framework, as I mentioned on last quarter's call. The foundation of executing this strategy is a strong balance sheet. We continue to target a leverage ratio of around four times and remain committed to an investment-grade credit profile. Our maintenance capital remains steadfast, and our commitment to safely operating our assets, protect the health and safety of our employees, and support the communities in which we operate. We continue to have a distribution with very strong coverage, and most recently declared a 2.5% increase to the base quarterly distribution on November 2nd. After these commitments are met, our plan focuses on investing to grow the business. In 2022, the majority of capital is expected to be directed at opportunities in the Marcellus, Permian, and Bakken, where we are focused on high capital return projects that expand and to bottleneck our existing assets. As I've stated in the past, we believe this is both a return on and a return of capital business. Each quarter, we will evaluate our free cash flow after distributions and determine the optimal use for those dollars, be it growth capital, buybacks, or additional distributions. As a reminder, 2021 had many one-off tailwinds which drove our return of capital, including strong NGL prices and asset sales. We're optimistic about our opportunity to achieve solid operational performance in 2022, and we'll evaluate the needs of the business as we make decisions on incremental return of capital. Shifting to slide six, we remain focused on leading in sustainable energy by lowering the carbon intensity of our operations and products, improving energy efficiency and conserving natural resources, all while using innovative technologies to do it. And we believe the targets we are setting and our transparent disclosures on how we plan to achieve these targets position us well for the future. Through the end of 20, MPLX was nearly halfway to reaching both our methane and freshwater intensity reduction targets. And later this quarter, we plan to report the progress we made on these initiatives in 2021. Now let me turn the call over to John to discuss our operational and financial results for the quarter.
spk04: Thanks, Mike. Slide seven outlines the fourth quarter operational and financial performance highlights for our logistics and storage segment. L&S segment adjusted EBITDA increased $50 million when comparing fourth quarter 2021 to 2020. Pipeline volumes were up 18% and terminal volumes were up 11% year over year as the industry rebounded from the pandemic. The benefits of these higher throughputs and higher distributions from our pipeline joint ventures were partially offset by lower contracted marine transportation rates with MPC. Turning to our capital outlook, more than half of our planned 2022 growth capital is directed to the LNS segment. including a number of smaller expansions and de-bottlenecking projects, such as expanding our Permian natural gas and NGL takeaway systems. Moving on to our gathering and processing segment, slide eight provides the segment's fourth quarter operational and financial performance highlights. GNP segment adjusted EBITDA increased $40 million compared to the fourth quarter of 2020, largely due to higher NGL prices. For the quarter, NGL prices averaged $1.05 per gallon, more than double the 52 cents per gallon average in the fourth quarter of 2020. These higher NGL prices and this quarter's asset sale gain of $19 million more than offset the effects of lower volumes. Overall, gathered volumes are up 3%, while processing and fractionation volumes were down 2% and 6% respectively compared to the fourth quarter of 2020. Our lower processing and fractionation volumes were partially due to the vestiture of our Javelina processing plant in early 2021. Focusing on our largest region, in the Marcellus, gathered volumes were up 7%, while processing volumes decreased 2% and fractionation volumes decreased 1%, as compared to the fourth quarter of 2020. During the fourth quarter, as Mike mentioned, we completed commissioning of the 200 million cubic feet per day Preakness Processing Plant in the Delaware Basin. The facility began to ramp up operations in December and is expected to continue to ramp up volumes through the first half of the year. Turning to capital, planned 2022 growth capital for the gathering and processing segment is largely directed to projects in the Permian-Marcellus and Bakken basins, such as the 68,000 barrel per day Smithburg deethanizer in the Marcellus and the 200,000 cubic feet per day Tornado II processing plant in the Delaware Basin, both of which are expected to come online in the second half of 2022. Moving to our fourth quarter financial highlights on slide nine, total adjusted EBITDA was $1.4 billion. up 7% from the prior year and distributable cash flow was $1.2 billion, an increase of almost 5% from the prior year. In the fourth quarter, MPLX returned $1.5 billion to unit holders through $1.3 billion of distributions and $165 million in repurchases of common units held by the public. As of December 31st, MPLX had over $300 million remaining available under the current $1 billion unit repurchase authorization. We declared a fourth quarter distribution of 70.5 cents per unit, resulting in distribution coverage of 1.64 times for the fourth quarter. We ended the year with total debt of around $20 billion and a leverage ratio of 3.7 times. As you recall, during 2021, we repaid about $1.75 billion of maturing long-term debt with cash and availability under our intercompany loan with MPC. As of year end, we had about $1.5 billion drawn on our intercompany loan agreement with MPC, which, subject to market conditions, we expect to opportunistically refinance into long-term debt. In closing, given current business conditions, our commitment to strict capital discipline, and our ongoing adoption of a low-cost culture, we expect to continue to generate strong cash flow. enhancing our financial flexibility to invest and grow the business, while also supporting the incremental return of capital to unit holders. Now let me turn the call back over to Christina.
spk01: Thanks, John. As we open the call for questions, we ask that you limit yourself to one question plus a follow-up. We may reprompt for additional questions as time permits. With that, operator, can you open the call for questions?
spk00: Operator. Thank you. We will now begin the question and answer session. If you have a question, please press star then one on your touch tone phone. If you wish to be removed from the queue, please press star then two. If you are using a speaker phone, you may need to pick up the handset first before pressing the numbers. Once again, if you have a question, please press star, then one on your touch tone phone. Our first question comes from John Makai. Your line is now open. Holden Sachs.
spk08: Hey, good morning, everyone. Thanks for the time. Appreciate the context and some of the color on growth CapEx looking into 22. Just wondering if you could give us a little bit more in terms of, you know, we saw 21 way below where you'd initially guided. So maybe if any of that is kind of 21 spending shifting into 22, and then also just on the energy transition side, is there anything in that bucket related to Martinez? Would that be incremental to this number? Just, just any context on that too. Thanks.
spk03: Good morning, John. On your first point, yeah, there is a little bit of 21 spending that makes its way into 22. So there's a little bit of that. So that was a good observation. In general, I would tell you, and I'm going to let Tim and Greg give some comments here, too. But in general, I would tell you, you know, we don't have any big headline projects this year that we would talk about as large capital. But at the same time, we're pretty excited about we have a lot of smaller, bold-on, de-bottlenecking expansion projects, which tend to be, you know, a little better in return. Obviously, you don't have the headlines, so it's a little tougher for you guys to think about it in general. But I actually like the set that we have now. Tim, Greg, why don't you guys give some examples of what we're talking about?
spk02: Okay. Well, this is Tim. I'll just give maybe a couple and then turn it over to Greg. You are right. We are spending money at Martinez, and really that's spending capital to modify the assets in support of MPC's conversion of the refinery to renewable fuels. So that's a chunk of money there. And then I think maybe another example I'll point to is recently we announced the expansion of the Whistler Midland Basin, 36-inch, up further into the Midland Basin. I think that basically those volumes will essentially fill the capacity on Whistler. And given the tightening gas takeaway situation that's being faced, we're starting to see a lot of producer-customer input and response. As a result, we're starting to consider the potential expansion of Whistler to 2.5 BCF. So those are just a couple examples, but as Mike said, there's a lot of other opportunities for bolt-ons and so forth, and that's a focus.
spk15: This is Greg Flurkey. With regard to gathering and processing capital, the two largest projects that we have underway now are our Smithburg de-ethanizer, and that project's scheduled to come online mid-year. And then the other large plant capital is for our Tornado 2 plant, which will increase our West Texas processing capacity to one VCF per day when it comes online late next year. The other capital is around growth on gathering lines in the Bakken and some in the Utica Dry and Marcellus area.
spk03: So, John, I think it's a really good question, and I know people are going to try to understand that. So what Greg was saying is, hey, we're adding to our Smithburg complex. What Tim was saying is we're adding to the Whistler project as an example. So we have a long list of those. That's what really is in our program for this year, a lot of assets that are already existing that we're going to tweak and bottleneck and expand a little bit. And they're really nice projects because it's relatively small on the capital side, but it can enhance the revenue side pretty good.
spk04: Hey, and John, it's John Quaid. Good morning. One other, just while we're talking about capital, one other item just to be thinking about, maybe a little bit abnormal from prior years, I would say, as we look at the plan right now, it's probably more front-end loaded towards the beginning of the year than what you might have seen from us in prior years. And again, we've got this nuance as well where there's some maturing debt at a JV. We've got to fund our equity partner there to make that payment. And we know that's going to happen in the first quarter just based on when the debt matures. So just another little context, too. It's probably a little bit more front-end loaded this year than what you've seen in the past.
spk08: That was great. Super thorough and clear across the board. Definitely appreciate that. Maybe just my follow-up here. Overall quarter looked pretty good. Some kind of puts and takes. Products, volumes look good. GMP looks good. Utica was processing a little weak again. Just curious if you could give us some context on, you know, you're looking at into 2022, just some of the general, you know, upside, downside drivers for EBITDA that we should be watching. Thank you.
spk04: Yeah, John, maybe one way to think about that is to think about the tailwinds, or as Mike's called them in the past, the red bars that may be affected 2021. I mean, certainly, while we're largely a fee-based business on the GNP side, you know, we do have some sensitivity to NGL prices, which moved up significantly throughout the year, right? You know, and we roughly say, you know, five cents on NGLs is roughly 20 million a year of an annual impact. So, we start to see that when, um, you know, for the year we go from 43 cents to 87 cents, you know, the fourth quarter was a dollar five. What's it going to be for all of 22? That's something we don't know. So that's, um, you know, certainly something we'll be watching that, you know, I think drove 21 results, but it's early in 22 to understand how that might drive 22. Um, you know, we also would have had some asset sales as Mike referred to, um, you know, over, 110 million of proceeds. So, you know, are we going to have those again or not? Again, we continue to review our portfolio and look for opportunities, but, you know, those may come, those may not. We also, you know, had reduced capital spending. You know, again, some of that was certainly our kind of continuing focus on strict capital discipline, but some of that maybe to just producer activity and their uncertainty around COVID that, you know, maybe we're seeing knock on wood, you know, maybe start to look a little less concerning as the cases come down on Omicron. We had some favorable working capital last year, too, that we wouldn't necessarily count on that repeating as well. So, Mike, I don't know if there's some things you want to add to that.
spk03: Yeah, John, I just want to add. John used one of the terms that I use internally, and it's one that I used in my prior life. I should probably explain a little bit more. I color code cash flows. And I use the term blue bar to refer to cash flows that I think are there in all markets, you know, very stable that they're in all markets. And then I put, you know, red on cash flows that could be, you know, one time or not, you know, not necessarily going to repeat themselves, et cetera, things that we don't count on as much. And since John just referred to that, I thought I would explain that a little bit. So, you know, I think about blue bar and red bars are cash flows. And as we think about the year, you know, we're hopeful there are going to be some other, you know, red bar cash flows, but we try not to count on that. You know, John mentioned, you know, NGL prices, you know, maybe they'll stay strong through the, you know, through the full year or who knows, right? That's the way the market goes on commodity pricing. So that's got a little bit of red element to it. Like John said, sales are clearly red. You know, we'll evaluate those as those come along. So that's kind of the way we think about, you know, our capital allocation in general as we get to the, to the back part of the capital allocation, which are blue, which are red, and helps us make determinations on distributions versus buybacks, et cetera. So hopefully that helps.
spk08: That's great. I appreciate the time. Thank you. You're welcome.
spk00: Thank you. Our next question comes from Michael Bloom, Wells Fargo. Your line is now open.
spk12: Thanks. Good morning, everybody. Good morning, Michael. I just wanted to follow up on the Whistler comment about expansion to 2.5 BCF a day. I just want to clarify, is that something that's actually in the budget and planned for 2022, or is that still something that you're considering? And if it is in the budget, any details on timing or cost would be really helpful.
spk02: So this is Tim. I'll take that one. Currently, that expansion is being contemplated by the JV partners and so forth. It is not a budget item that is currently in there. What I was trying to draw attention to is that as we continue to extend up into the Midland Basin and so forth, we've essentially tapped out some of the existing capacity and we'll be looking to grow that capacity on Whisper overall. Okay. As far as timing, that remains to be seen. So more to come later.
spk03: Hey, Michael, it's Mike. I'll just add to Tim's. What he was referring to is at the end of January, the partners made this announcement of this extension lateral. We have a little bit of capacity beyond the NBC commitments, so that extension kind of gives us another little geographic area to us to put into the project. And then, you know, the next step as the Permian continues to grow is, you know, can we add some more additional assets to take the capacity up some more? So what Tim was describing, kind of a two-pronged thing, what we just announced in January is near-end committed. We're doing that. The second part of it is we expect this to happen. You know, we have a good asset, and it'll be tough to beat, you know, the expansion economics that we'll be able to provide, if that makes sense.
spk12: Absolutely. Appreciate that. Thank you. The second question I had was really, I guess, a capital allocation question. In light of all the inflationary pressures we're seeing in the market, just wanted to know if that impacts your thinking on the mix of distribution growth versus buybacks and all the other options in 2022. Meaning, do you see the need to raise the distribution faster? John Quaid, To offset inflation for investors, or do you just sort of continue your rateable distribution increases even doing year after year thanks.
spk04: John Quaid, yeah hey Michael john quaid good morning, you know I think as we think about where we are and go back to my comments right, we look at the balance sheet, we want to be around four times we're very comfortable around 3.7 times now. Right, we'll focus on maintaining our assets, securing the distribution, looking at growth opportunities, and then looking at kind of where we're left. And is that growth capital opportunity, is that buybacks, or is that more distributions? Again, we've got a pretty strong payout ratio and distribution, as you know. So it's certainly one of the avenues we look at as we think about return of capital.
spk12: Great, thank you.
spk00: Thank you. Our next question comes from Jeremy Tonette, JP Morgan Chase. Your line is now open.
spk10: Hi, good morning. Morning, Jeremy. Just wanted to pick up with some of your comments at the beginning of the call there with regard to the asset sales. I just wanted to catch that. That was a bit over $100 million of sales there in Wyoming. And just wondering if this was a process that you're continuing to evaluate your assets and check out kind of what the value is on the market there, or did someone else approach you? And just in general, I guess, how are you seeing, you know, the appetite for GMP assets out there? Are they starting to close in on the valuation that you see that maybe there could be more rotation?
spk04: Hey, morning, Jeremy. It's John Quaid. I'll start with the first part of that. So just to clarify, the $110 million is the proceeds for the year from two sales. So that includes the about $70 million from the sale of Javelina and earlier in 2021, and then $40 million from the sale of those gathering assets in southern Wyoming. So there's actually two pieces to that. Again, in the quarter, it was just the sale of the gathering assets in Wyoming for proceeds of about $40 and a gain of about $19 million, just to kind of wreck those numbers. And I'd say both of those just resulted from our continuing kind of portfolio review to look at our assets and optimize them what makes sense in our portfolio versus what might make sense in someone else's. Um, you know, I think, uh, you know, maybe I'll start on, on kind of our, the, the basin question we talk about every quarter. I'll let some others chime in as well. You know, again, I, I, I think we're still in the same spot where, you know, while in some of these basins, um, uh, we're continuing to generate cash flows. So we're not in a rush to sell those. And, um, you know, we'll see, uh, as the market moves, if that bid ask starts to compress a little bit, and certainly something we'll actively review, but I don't think we have any significant updates here on that right now.
spk10: Got it. That's helpful there, unless anyone else is going to jump in there.
spk04: I'm getting thumbs up around the room, so I think everybody's good with that. Jeremy, have you got another question?
spk10: Yeah, great. I just wanted to touch on the Northeast a bit more in producer activity there. You have Mariner East looking like it's getting completed here, which would add needed NGO egress. And then you have the Shell Cracker in the middle of this year, and this could really help NGO price realizations in the basin and incentivize drilling. At the same time, the basin has been challenged for takeaway over time, although there's been incremental capacity additions coming in here. Just wondering, you know, how you think the basin, you know, production progresses at this point. Do you see shifting activity dry to wet that benefits you? How are producer activity conversations, you know, going at this point?
spk15: Jeremy, this is Greg Flurkey again. You know, I think as we've talked before, and most of our producers in the Northeast are, you know, they're focused on free cash flow generation and on, you know, making sure that even with good NGL prices in gas that they match the takeaway capacities you mentioned, both residue and natural gas liquids. Mariner East capacity has incrementally expanded over the last few years as Mariner East 2 and 2X have worked towards completion. And so I think that's more of an incremental gain, and it does free up room for more ethane production along with the Monaca plant coming online mid-year. We mentioned our SmithBird 2 deethanizer plant down in West Virginia, along with our existing fleet of deethanizers. This is going to open up even more capacity to help fill that Monaca plant. We expect upwards of 80% of the supply to come off our system. And otherwise, some producers will continue to kind of slowly bring on new pads. Some are in decline, and some have maybe single-digit growth. So overall, we're looking at continued flat production in the Northeast that's going to be a series of some producers up, some down, but overall in balance.
spk10: Got it. That's very helpful. Thank you.
spk03: You're welcome, Joanne.
spk00: Thank you. Our next question comes from Spiro Dunas. Credit Suisse, your line is now open.
spk13: Thanks, operator. Morning, team. Wanted to go back to growth capex quickly. Just given that a lot of these projects are smaller in scale and brownfield in nature, just curious if it's fair to assume that the majority of that $700 million in capex could actually be cash flowing by year-end, or is that a little too aggressive?
spk04: Yes, it's Spiro, it's John here. I think maybe a little aggressive. You know, I mean, some of these, as Greg talked about, some of those plants, you know, coming up mid-year, you know, some of those will be ramping throughout the year. You know, timing-wise, we're spending some capital on the Martinez Renewables Project, right, but MPC is not finishing that project this year. You know, so that's not going to cash flow. So I think that might be a little bit strong. You know, some of them, and some of them, right, kind of come on in pieces, too, throughout the year. So I think I'd be a little hesitant to say they're all going to be cash flow at the end of the year.
spk03: It's true. It's Mike. I'll just add. In general, you know, the capital you spend in one year has a lag before the cash flow, especially if, you know, if it's going to be ramping volumes as well. So, yeah, it's kind of aggressive to think of this capital to hit the cash flow. It's really capital that we spent the year before, and the year before that, it really starts to play itself into this year's cash flows.
spk13: Understood. That makes sense. I just like setting a high bar for you, Mike, so apologies on that one. Next one's just on. Thanks for the help. You got it. Next one, just on processing capacity. I noticed that some of the capacity, I guess, in three of your basins fell quarter over quarter from 3Q. And just curious, what exactly drove that? Sorry if I missed it in the prepared remarks.
spk04: Yeah, so if you look year over year, you know, there's some slight decreases there. I think I'll let Greg chime in as well. I think some of that's just going to be timing, you know, in the basin as producers move through activity. The other thing, don't forget, because the volumes year over year on the quarters, you know, while they're slightly down, remember we had the Javelina facility that we sold. So like fourth quarter year over year, if we're down 2%, like it's a small decrease in half of that's probably the fact that we had Javelina in one period and not the other. So I think it's both the sale of Javelina and then maybe just timing on the producer side. Greg, I don't know if you wanted to.
spk13: And sorry to cut you off. It was more around not so much the volumes that went through, but just the capacity specifically at the property.
spk04: Oh, I'm sorry. I'm sorry, Phil. My apologies. So as we look at our regions, we do kind of an annual review of our capacities. And as you noted, in southern Appalachia and the Rockies, in those particular regions, we frankly, and really this is part of our cost reduction efforts to some degree, You know, we had some units that really were not needed based on demand in the region, and we don't see them to be needed. So we've kind of permanently idled or disconnected those units from our capacities in those regions, saved some costs for us. So those are adjustments we made, again, primarily in those two regions to the processing numbers. Just an annual process we do. Instead of changing that every quarter, we kind of flow those through here at the end of the year. My apologies for answering the wrong question.
spk13: No, no worries. That was really helpful. So that's all I had today, guys. Thank you very much.
spk03: You're welcome.
spk00: Thank you. Our next question comes from Teresa Chen, Barclays. Your line is now open.
spk09: Morning. I'd love to ask a little bit more about MPLX's overall decarbonization plans and potential participation in MPC's decarbonization efforts. So first, in addition to the logistics assets serving Martinez, is there any appetite to take up some bigger capital projects, maybe with the processing units?
spk02: So this is Tim Light. I'll take that one. I think maybe it would be helpful to kind of give you a little bit of an overview of our strategy. It really involves a two-prong approach. First, MPLX is going to support MPC in its renewable fuels build-out. Now, that's primarily through the associated logistics opportunities. We talked a lot about Martinez already this morning, so that's the prompt example. I think second is just as important, though, and that's we're going to look to be part of developing and executing industry solutions for decarbonization. As we've announced previously, we're participating in the Houston Area CCS Consortium and are discussing other similar efforts as well. But I think beyond that, we continue to evaluate really a wide array of low-carbon opportunities. Unfortunately, there's none that I can publicly discuss at this time, but stay tuned. I think as a general rule, when you look at the timeline that we're working off of, We see RD and SAF as being really the prompt and shorter-term opportunities. CCS and maybe RNG would come in the midterm. And then certainly hydrogen and distributed power is something we're looking at that's probably more capital deployed in the longer term. And, of course, as we've noted before, we're bullish natural gas, and so we really see natural gas as a – important transitional energy source, and that's going to play a key role in the energy mix well into the future. So we have a lot of opportunities in that regard as well that's tied to energy evolution. So hopefully that answers your question.
spk09: That does, very comprehensively. Thank you. Speaking of natural gas, maybe pivoting towards some of the earlier comments related to the Whistler potential expansion, Granted that you're still going through the process and imagine having discussions with the partners and producers and such. But in terms of getting to that two and a half BCF per day, how do you view the economics with the expansion relative to other possibilities for expanding different assets within the basin of competitors? How does your project stack up versus competitors' projects? Certainly, I imagine it's more competitive than any sort of greenfield project. And what are the gating factors in getting producers to sign on? And are there any initial thoughts about how much this would cost?
spk02: So I'll answer a few parts of that. I think when you look at the forecast, they continue to indicate a need for increased takeaway out of the Permian Basin. And some of this could be served by a Whistler expansion. But I think even beyond that, another pipeline is viewed as being necessary in the next two to three years. But certainly, I think the goal of the industry and certainly the goal of our JV would be to fill up existing assets first. Obviously, that's the most capital efficient path forward. We like our project as it exists today with Whistler, and we see that as a very capital efficient way to move forward. But again, that would get you about a half a B. The basin is looking to grow, we think, a lot more than that. As far as project capital and so forth, I'm not able to get into any of that. So I would just tell you that as is customary for gas, we would require MVCs to expand existing systems or to participate in any new pipeline as is customary.
spk09: Thank you.
spk12: Thank you.
spk00: Our next question comes from Keith Stanley, Wolf Research. Your line is now open.
spk11: Hi, good morning. I wanted to ask first on your pipeline volumes, oil and products. They continue to run solidly ahead of where they even were before COVID in 2019. So is it still the dynamics of just lower exports and higher volumes through MPLX pipes? And do you expect this to be sustained into the future?
spk04: Good morning, Keith. It's John. That's a great question and maybe another tailwind that benefited us last year that we've got to watch this year that I maybe failed to mention before. Certainly, there's a portion of that as we saw less exports, but recovering U.S. demand, we were able to utilize those assets more. Certainly, we're looking to go after market share, et cetera, but if exports kind of pick back up, that might be a headwind then on those volumes. As you know, they're pretty strong.
spk11: Great. And one on operating costs. So I think last quarter you talked to a $40 million increase for Q4. Did that materialize in the quarter? And I guess more importantly, how should we think about operating costs in 2022 relative to fourth quarter levels?
spk04: Yeah. Thanks, Keith. Great question. And yeah, I think I talked about perhaps up to $40 I think I might have to stop losing my bet with Tim and Greg because they continue to find other ways in their teams to offset those increases. So while we did see it in certain areas, the team was able to find other areas to reduce costs and offset a good bit of what we were maybe seeing in our forecast. um you know great job by the team and you know we'll be you know fighting to you know maintain that as we go through next year but you know certainly um no major swings pluses or minuses to kind of say going into next year on on project expense okay so we should for now we should assume 2022 is pretty similar to kind of where you were in q4 uh on cost yeah yeah i mean we're you know again the teams you know as mike talked about you know going back to 2019 we've We feel we've taken about $400 million of cost out of our cost structure, and the teams are really focused on maintaining that, looking for other opportunities, managing costs with some of our growth capitals. We bring new operations on. So we're going to be fighting to embed that and look for more opportunities as we continue to work to really move from this low-cost initiative into a low-cost culture.
spk11: Great. Thank you.
spk00: Thank you. Next up, we have Brian Reynolds, UBS. Your line is now open.
spk14: Hi. Good morning, everyone. To follow up on some of the earlier return of capital questions, when we look ahead into 22, we appear to be seeing some similar trends as 21 in terms of sub-poor leverage and free cash flow in addition to some growth. Just given that there's roughly 300 million left on the buyback authorization, curious if you could talk about interest in expanding and extending the buyback program and how we should ultimately think about, you know, an additional special distribution in 22.
spk04: Yeah, thanks. You know, I think on the buyback, obviously, that's a discussion with the board that will take up with them at the appropriate time. So I wouldn't want to get ahead of that discussion. And then the overall return of capital, again, we've kind of walked through a number of times kind of how we think about the framework and the priorities there. That's something we're going to evaluate each quarter end, looking at where we are and thinking about our avenues for return of capital, whether it be distribution increase, unit repurchases, or a special, again, driven by where we are and what we're seeing. I think that's an ongoing, maybe somewhat more dynamic kind of assessment than maybe to some degree what was dynamic but looked a little programmatic last year.
spk03: Yeah, Brian, it's Mike. I'm going to add to John's point there. The way we think about it is we want to put the portfolio in a position that we're generating this excess cash beyond distribution, beyond capital. Now, to what level that turns out to be, some of these other factors that we talked about, blue and red bar cash flows, kind of come into play. So his point about being dynamic is the way we think about it. We look at the year. We try and assess things. We're committed to returning capital. It's something I feel strongly about. And at the end of the day, whether it comes in the form of distribution, whether it comes in the form of buybacks, we discuss that throughout the year. And I've said this on many calls. We also ask the owners, the unit holders, and there is a bifurcation. There are those who really support buybacks, and there are those who really support distributions. So part of what you saw last year was some balancing in our view of people that want buybacks. We think we did a good portion of that with the capital that we had for people that want distributions. We were a little cautious because of some red bars, so we put it in the form of special as opposed to permanent. But we also did a little bump up on permanent as we continue to feel good about our blue bar cash flows. So Dynamic's a good word. John said it well. I think people think of it more programmatic because it's been around the same level, but that's mainly because as we sat down and looked at it, we were forecasting about the same level for a while, and then things came our way a little bit, and we ended up with a little bit more, and then we made an adjustment. So we'll proceed into 22 very similarly. We have a base plan that obviously we we're going to execute on and we'll see how the market, you know, plays itself out. We'll see where, you know, the equity trades, we'll see how the capital projects kind of progress throughout the year. Uh, and we'll just continue to evaluate it. And then each quarter, you know, try and give you guys an update on, on how things have played out.
spk14: Great. Appreciate all that color. Um, maybe it's a pivot. I know, appreciate all the, you know, color on, on the gas takeaway from the Permian. But maybe to talk about the NGL side of things and the new Bengal solution and bringing in the new JV partner. Just curious if you could provide some color about how you see, you know, that project and JV evolving over time. You know, while the gas pipes, you know, needs appear to be first, you know, how do you see the NGL take away, you know, in the future? And how do you see Bengal being a part of that, you know, solution over the long term? Thanks.
spk02: Okay. This is Tim. I'll take a stab at that. You're right. We did recently announce a you know, the addition of another partner that was Rattler Midstream to the Bengal JV. So that program or that project rather, you know, kicked off operations, you know, early fourth quarter last year with deliveries to Sweeney. So that project continues. As the basin continues to recover, we're seeing increases in NGL demand for takeaway. As a result, I see that platform, much like the Whistler on the natural gas side, being a good platform for growth for the JV. I think there's certainly an appetite for more volumes to head towards Sweeney. We have capital-efficient expansions that we can do on a just-in-time basis, and that's what we're looking to accomplish.
spk14: Great. As a quick follow-up, is there any CapEx related to Bangal in this year's budget in terms of expansions, or would that be more of 23 of them?
spk02: There is some. I can't speak to the quantity on individual projects, but yes.
spk14: Great. I appreciate it. I'll leave it there. Have a good day, everyone. Thank you.
spk03: Yeah, Brian, let me just add a little bit to what Tim just said. And I was hoping that we were clear, but maybe we haven't been. So if you look at our asset base across all of our portfolio, you know, as Greg mentioned and Tim mentioned in the beginning, think about we're doing little projects across our whole asset portfolio. That's kind of the way this is shaping up this year. So there's not that, I use the term, there's not a headline project, but there's a little bit of opportunity throughout our asset base. I hope that's a little bit clearer, maybe not, but trying to give you guys as much color on that as I can.
spk00: Thank you. Next up is Chase Mulvihill, Bank of America. Your line is now open.
spk05: Hey, good morning, everybody. So I guess, you know, I want to come back to Whistler. A lot of questions around Whistler. You know, you kind of talked about the potential for half a bee a day of additions. But if demand was actually there, could you do more than half a bee, or is the half a bee kind of the limit of what your brownfield expansion could be on that pipeline?
spk02: Okay, this is Tim Wright. Relative to a Whistler expansion, a half a bead would be the max you could get through the 42-inch pipe with the compression. So what I was pointing out earlier is that the basin is expected to continue to grow obviously beyond that, and most projections again suggest two to three years another pipe would be necessary. So as is the case, you know, the industry is looking to potentially solve that problem. We're also looking to solve that problem as well, but that's kind of the outlook. A Whistler expansion in and of itself would would not be deemed enough to meet the basin's needs.
spk05: Right. And what would be the timing, you know, if you sanction, you know, that today, the incremental half of these, what would be the timing to kind of bring that incremental capacity online?
spk02: It's really going to come down to the lead times on compression. With the supply chain issues, I would say a good timeline is probably minimum 18, but probably closer to 24 months.
spk05: Okay. All right. And the quick follow-up here on kind of Permian takeaway capacity, you know, the issue is probably getting contracts for, you know, 10-year contracts for some of these, you know, whether it be brownfield expansion or greenfield expansion. You know, obviously the demographics of the Permian production growth are changing, you know, more profits. Profits have, you know, less drilling inventory. They certainly don't, most of them don't have 10 years of drilling inventory to sign a 10-year take or pay contract. So, you know, somebody's going to have to absorb more risk to get more pipe built. So how do you think this ultimately plays out?
spk02: Well, I think the LNG market is continuing to grow and is forecasted to grow in a pretty big way over the course of time. So I think the producers are looking to make sure that they have adequate takeaway capacity. And as a result, I think, you know, it's – It's going to come down to making those commitments. I do believe that several producer customers have north of 10 years of drilling capacity. There's also, you know, reduced amount of flaring and so forth. So I believe the gas is out there and will continue to be with the outlook on LNG exports being what it is.
spk05: Yeah, it makes sense. If you'll let me kind of squeeze one more in, you know, obviously MVP is very topical these days. you know, having kind of continued permitting issues and, you know, just political issues there. How would – can you kind of just walk through the puts and takes of MVP delays and how this will impact your Marcellus business?
spk15: Greg Flurkey, you know, in terms of – The delays, you know, there have been a number of hurdles there. The pipe is, as we understand it, is over 90% complete. So it's down to, you know, the distance is probably less important remaining than what kind of crossings and permits are required. I can't speculate not being involved in that project on what the delays mean or what the timing would be. I can say that in terms of takeaway capacity for uh, our producer customers, most of them were early players that, that took out capacity and have firm capacity on the existing lines. And with the, uh, go flat to very limited amount of growth, uh, near term to medium term, um, uh, they, they've got sufficient capacity and weren't depending on most, I think most were not depending on, uh, uh, on that expansion, obviously longer term, the basin needs more takeaway, uh, to, to experience more growth and, uh, So we're hopeful that eventually the pipeline's completed.
spk05: Okay, perfect. I'll turn it back over. Thanks.
spk15: Thanks.
spk00: Next up, we have Tristan Richardson, Truist Securities. Your line is now open.
spk07: Hey, good morning, guys. I love all the red bar, blue bar references. It's a great throwback. You've covered a lot of ground already, so just one for me, but can you talk about just capital and activity levels you're seeing in the BAC and obviously small asset, but you noted some debottlenecking spend there and just curious on the capital that's going in and then also activity levels and if over time you see any need for additional potential processing on your footprint there.
spk03: I'll start off and I'll let Greg do it. First of all, thanks for the throwback. You know, sometimes, you know, can't change my stripes from the past. But, yeah, like I was saying earlier, I'll let Greg comment a little bit more. But, yeah, all of our areas, what I was trying to say is we're doing a little bit in each of these areas. So, you know, we're doing some Marcellos, we're doing some Permian, we're doing some Bakken, you know, et cetera. You know, as the market's recovering and as, you know, the commodity cycle is what it is, you know, we have assets that can participate. And, you know, we're putting little bolt-ons and little expansions to incrementally, you know, increase our asset base. Do you want to add, Greg?
spk15: Yeah, thanks, Mike. I'll add. Obviously, high crude prices and crude rig activities driving not only expansion opportunities for us on the crude gathering side for MPLX, but also the associated gas prices. There is a large amount of gas, even with the existing production that was being flared. Obviously, the flaring is not something that's sustainable, whether it's in the Permian or the Bakken. So there's opportunity to pick up more rich associated gas. There's gathering opportunities and processing opportunities. In terms of future expansion, yes, I would say there's definitely opportunities for – there's going to be opportunities in the current pricing regime for additional processing. We have high utilization there. We don't have the amount of processing capacity build out that we do in some other areas, but we do have some capacity we continue to fill and also look at other potential joint venture opportunities as well if there's existing capacity that can be utilized and that we can gather and work with.
spk04: Yeah, interesting, Sean, just to be clear, as Greg was saying, so I think a lot of the capital now in the Bakken is probably more on the gathering side and filling up systems we have or looking at opportunities to fill up another system that's there. So while we'll look at processing, there's no processing in the Bakken in our plans right now.
spk07: That's great. Super helpful. Thank you guys very much. You're welcome.
spk00: Our next question comes from James Carriker, U.S. Capital Advisors. Your line is now open.
spk06: Hi, thanks for the question. Just wondering if you could talk a little bit more about Q4 results, you know, a pretty nice step up in adjusted EBITDA relative to the prior three quarters in 2021. And then just thinking about You know, is there anything that happened in Q4 that maybe shouldn't carry over into 2022 as we look to, you know, what EBITDA could be then and kind of thinking about, you know, what a run rate EBITDA could be? I'll just leave it there, I guess.
spk04: Hey James, it's John. Thanks for the question. I think I might circle back to our tailwinds and talk a little bit about some of those that were in the fourth quarter, right? So we talked about, you know, nearly a 20 million asset sale gain in the quarter, right? That's not going to repeat every quarter. We talked about NGL prices, which were their, you know, the highest quarter of last year was the fourth quarter at $1.05. Again, would we love to see $1.05 all this year? Yeah, but is that going to happen? You I think we too, we probably, you would have noticed on the L&S side of the business, we had some higher distributions from our pipeline joint ventures. Some of that would have been with, remember, Hurricane Ida in Q3, so some of the Q3 distributions might have pushed into Q4. And again, too, I think there's some timing there on when distributions are made from those ventures that maybe kind of piled into Q4 that's not going to, you know, maybe be a normal run rate looking into next year. So there are certainly some things I'd be careful just taking Q4 and timesing it by four, given, you know, kind of the drivers of those results.
spk06: Yeah, that's helpful. That's exactly what I was looking for. But then I guess that should be offset. I assume you're going to continue to have growth on a number of your JV pipes, DAPL, Wink to Webster, Whistler, Bangle. those should all contribute meaningfully more in 22 than 21?
spk04: Yeah, I mean, you know, as we look at the volumes on those, again, you know, Whistler will keep ramping up as Tim has commented. You know, certainly I'd say this year was probably, you know, less about the Permian joint ventures and more about our other kind of crude line joint ventures. You know, so we'll, you know, it was probably more on that side, right, where We're not really, you know, changing those pipes. And Whistler will come on. Again, remember, we finance some of that as well. So, you know, that will affect how that comes through cash flow.
spk06: Gotcha. And then I guess maybe the final question. Can you talk about how much maybe impacts the FERC tariff adder could have on your business? I know it's not until July 1st, but potentially a 9% increase. Can you remind us how much that impacts your L&S segments?
spk02: So this is Tim. I'll take that one. You know, I guess as a kind of a reminder, the escalators are meant to cover the cost increases that come with inflationary pressures. So while we do expect to see an increase in the FERC index rate and therefore the revenue, we don't really expect to see a material change to our EBITDA. Again, those are meant to offset. We do plan to manage any inflationary pressures that might come up. through either increased efficiencies or these index adjustments. I guess relative to the amount, I can't give you specifics on that, but I'll just kind of remind you that less than a third of the L&S revenue comes from PERC-regulated assets. So most, but not all, revenue streams do have some form of inflation escalator attached to them. One exception to that is the storage revenues. They're generally not indexed. but all the other revenue sources would have either a fixed inflation adjustment or maybe a PPI or CPI adjustment or some other formulaic path. So hopefully you find that helpful. I do.
spk06: Thank you.
spk02: You're welcome.
spk00: Next up, we have Tim Schneider for our last question with Citi. Your line is now open.
spk16: Hey, thanks. And good morning. I see here your deck colors actually match the red bar blue bar as well. So there you go. First question real quick on Whistler and apologies if I missed it. So did the the um the potential expansion is has that already is already interest from shippers on that or you just taking talking hypothetically about that.
spk02: Yeah, if I heard the question right, you were asking about the expansion and whether there's interest already. Yeah, I would say we're in constant communication with producer customers, and there is interest. So I can't get into specifics on shippers and potential shippers, et cetera, but it's not really hypothetical. There's interest out there.
spk16: Okay, got it. As a follow-up to this, and this is maybe – A little bit more longer dated impact here, but let's assume Permian gas egress gets jammed again like we saw a couple of quarters ago. Do you think there's a big kind of marketing opportunity on Whistler to realize some of those basis differentials between Oaxaca and Acre Dulce? And then how much of that capacity or high potential capacity is actually available for kind of marketing activities versus what's committed?
spk03: Yeah, Tim, it's Mike. You know, it's a great question. It's a good hypothetical. You know, I don't want to speculate on it, but, you know, I think what Tim was trying to say, and it kind of got a little bit of runaway here, was he was trying to say, look, we have some good bolt-on projects. We announced one just, you know, last week, and that's why we were trying to explain this lateral into Midland. And then it sets up an expansion at Whistler, and he said conversations are occurring. But I think he said it also very well earlier is this is going to continue to evolve. This is in a this week or this month issue. Over time, we expect producers to continue to spend money in the Permian to increase their production there. So you have a fair point. Could it eventually bottle up the way it was before? It's possible. Personally, I think the market is aware of that and probably going to look to avoid that and talk to us and other players to make sure that doesn't happen the way it happened in the past. That's just my own personal guess. As I said, it's speculation. It's not a bad thought, but my own personal view is people are going to be conscious of that and get out in front of it and talk to midstream players like ourselves and see if they can put a plan together.
spk16: All right, great. My last question is just in a debt. I mean, look, you're at call it 3.7 now. You said you're comfortable with 4x. You don't have a ton of debt maturities due in 2022. A couple of things in 23. Last time I checked, I think your 10 years were yield to worst was sub 3%. How do you think about retiring that debt versus just rolling it and just using that cash flow for other things?
spk04: Yeah, Tim, it's John. I mean, certainly it's something we take a look at all the time, right, looking at optimizing that debt portfolio. And frankly, you know, when you look at where rates are both short and long term, the cost of trying to go after that debt really doesn't work for us to do that. So, you know, I think, you know, if the numbers change, we'll take a look at it. But right now, you know, looking over that portfolio, it's just it's not cost effective to go after that longer term debt.
spk16: All right, that's it for me and go Bengals.
spk03: There you go. Love the Ohio connection, Tim. Thanks.
spk01: All right, operator with that. Thanks everyone for joining us today and thank you for your interest in MPLX. Should you have additional questions or would like clarification on any of the topics discussed this morning, Members of the IR team are here to help you. Please just reach out. Thank you, everybody.
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