MPLX LP

fourth quarter 2023 earnings conference call. The slides that accompany this call can be found on our website at MPLX.com under the investor tab. Joining me on the call today are Mike Hennigan, Chairman and CEO, Chris Hagedorn, CFO, also with us is John Quaid as our CFOs transition into their new roles and other members of the executive 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 in our filings with the SEC. With that, I'll turn the call over to Mike.

Thanks, Christina. Good morning, everyone. Thank you for joining our call. I'd like to acknowledge Chris Hagedorn, MPLX's new CFO, joining our call. We look forward to Chris's financial leadership, having served in various roles in the midstream sector, previously being the controller of MPLX, and most recently, controller of MPC. 2023 was a strong year as we successfully executed our strategic priorities. Full year adjusted EBITDA was $6.3 billion, distributable cash flow was $5.3 billion, and adjusted free cash flow was $4.1 billion. Our results reflect the continued growth of the partnership and its cash flows. In our L&S segment, strong operational performance and customer demand drove record pipeline throughput and strong growth in terminal throughput, demonstrating the value of our relationship with MPC. In our GMP segment, we saw record throughput in our gathering, processing, and fractionation operations, driven mainly by our assets in the Marcellus and Permian basins. Our focus on cost management, strong operational performance, and growth from recent capital investments resulted in adjusted EBITDA growth of nearly 9 percent and DCF growth of over 7 percent for the year. In line with our commitment to return capital, the growth of MPLX's cash flow supported the return of $3.3 billion to unit holders through distributions. We've increased our quarterly distribution 10 percent each of the last two years which now stands at $3.40 per unit on an annualized basis, and we still have strong distribution coverage of 1.6 times. Turning to the macro, the United States continues to be a low-cost producer of energy fuels needed across the globe. Our expectations on the long-term production outlook in our key basins are unchanged. We expect strong demand for hydrocarbons will support growth across our asset footprint. In our largest base in the Marcellus, the cost to develop is at the low end of the cost curve and below current commodity prices. In the fourth quarter, process utilization reached 96 percent, and we expect producer drilling activity to support continued volume growth in the Marcellus. We've seen similar growth rates in the Utica, where processing utilization increased 10 percent year over year. Both basins are seeing wells with longer laterals, which are resulting in higher volumes, highlighting the strength and opportunities we see in our northeast footprint. In the Permian Basin, crude prices remain attractive, and associated gas production continues to grow as producers execute drilling and completion activities. As part of our Permian growth strategy, we acquired the remaining interest of a gathering and processing joint venture in the Delaware Basin for approximately $270 million at an attractive multiple. This acquisition illustrates our ability to grow the cash flow of the partnership through the lens of strict capital discipline. We're confident in our ability to grow the partnership and are focused on executing the strategic priorities of strict capital discipline, fostering a low-cost culture, and optimizing our asset portfolio, all of which are foundational to the growth of MPLX's cash flows. Turning to our capital plans, today we announced the capital expenditure outlook of $1.1 billion for 2024. Our plan includes $950 million of growth capital and $150 million of maintenance capital. We remain committed to capital discipline, and our 2024 growth capital outlook is anchored in the Marcellus and Permian basins. Our integrated footprints in these basins have positioned the partnership with a steady source of opportunities to expand our value chains, particularly around natural gas and MGL assets. We plan to continue growing these operations through organic projects, investment in our Permian joint ventures, and bolt-on opportunities. In the L&S segment, construction is progressing on the Whistler-Aguadulce to Corpus Christi, or ADCC, natural gas pipelines. which is expected to be in service in the third quarter of 2024. We're also progressing the expansion of the Bengal Joint Venture NGL pipeline to approximately 200,000 barrels per day, which is expected to be completed in the first half of 2025. These projects are largely financed at the JV level. Therefore, our portion of the JV finance capital spending is not reflected in our capital outlook. In a GMP segment, we're bringing new gas processing plants online to meet increasing customer demand. In the Marcellus Basin, we advanced construction of the Harmon Creek II gas processing plant, which is expected to be online at the end of the first quarter. Similarly, in the Permian Basin, we progressed construction of Preakness II, which is expected to be online early in the second quarter. Additionally, we are building our seventh gas processing plant in the basin, Secretariat, which is expected to be online in the second half of 2025. Once operational, our total processing capacity in the Delaware Basin will be approximately 1.4 billion cubic feet per day. Outside of these strategic basins, the remainder of our capital plan is mostly comprised of smaller, high-return investments targeted at expansion or the bottlenecking of existing assets and projects related to expected increased producer activity. While our capital outlook is primarily focused on our L&S and G&P footprint, we will evaluate low-carbon opportunities to leverage technologies that are complementary with our asset footprint to create a competitive advantage. Moving to capital allocation, we're optimistic about our opportunities in 2024. First, maintenance capital. We are steadfast in our commitment to safely operate our assets protect the health and safety of our employees, and support the communities we operate in. Second, we're focused on delivering a secure distribution and expect this will remain our primary return of capital tool. Third, we'll invest to grow the business. This is both a return on and a return of capital business. As we look at 2024, our priority is to invest to grow the business at superior returns. After these priorities, we will assess the opportunistic return of capital to unit holders. Recent industry consolidation has not changed our perspectives on the structure of MPLX. MPLX is a strategic investment for MPC, and MPC does not plan to roll up the partnership. Now let me turn the call over to Chris to discuss our operational and financial results for the quarter.

Thanks, Mike. Slide seven outlines the fourth quarter operational and financial performance highlights for our logistics and storage segment. The L&S segment reported its fourth consecutive quarter of $1 billion adjusted EBITDA. Adjusted EBITDA increased $110 million when compared to the fourth quarter of 2022, primarily driven by higher rates and throughputs, including growth from equity affiliates. Improved pipeline volumes were up 4%, primarily because of refinery maintenance schedules in the prior year. Product pipeline volumes and terminal volumes were flat. Moving to our gathering and processing segment on slide eight, the GMP segment adjusted EBITDA increased $59 million compared to fourth quarter 2022. This was driven by higher gathering and processing volumes. Total gathered volumes were up 1% year over year, primarily due to increased production in the Marcellus and the Southwest. Processing volumes were up 9% year over year, primarily from higher volumes in the Marcellus and the Utica, driven by increased customer demand. Focusing in on the Marcellus, by far our largest basin of GMP operations, we saw year-over-year volume increases of 10% for gathering and 9% for processing, driven by increased drilling and production growth. Marcellus processing utilization reached 96% in the fourth quarter, illustrating the need for our Harmon Creek II facility. Fractionation volumes grew 1%, due to higher processed volumes which were offset by lower ethane recoveries. Moving to our fourth quarter financial highlights on slide nine, total adjusted EBITDA of $1.6 billion and distributable cash flow of $1.4 billion increased 12% and 9% respectively from prior year. Turning to our balance sheet on slide 10, growth of our cash flows has continued to reduce MPLX leverage, which now stands at 3.3 times. We believe the stability of our cash flow supports leverage in the range of four times, and while MPLX has just over $1 billion of notes maturing later this year, we currently do not expect to structurally lower our debt. When evaluating the short-term maturity, we'll consider all opportunities available to us to optimize our cost of debt. MPLX's strong balance sheet, including a year-end cash balance of $1 billion, plus the ability to utilize the intercompany facility with MPC, provides us with financial flexibility to invest in the business and optimize capital allocation. Now let me hand it back to Mike for some final thoughts.