This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk10: Welcome to the MPLX first quarter 2024 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 touchtone phone to enter the queue. Please note that this conference is being recorded. I will now turn the call over to Christina Kazarian. Christina, you may begin.
spk11: Good morning and welcome to the MPLX first quarter 2024 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, 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 that call over to Mike.
spk07: Thanks, Christina. Good morning, and thank you for joining our call. Earlier today, we reported first quarter results. Our business continues to grow and delivered adjusted EBITDA of $1.6 billion and distributable cash flow of $1.4 billion each an 8% increase year-over-year. In line with our commitment to return capital, the growth of MPLX's cash flow supported the return of $951 million to unit holders. Turning to the macro, the United States continues to be a low-cost producer of energy fuels needed across the globe. Oil demand is at a record high globally. We expect oil demand to continue to set records into the foreseeable future. Forecasted outlooks for this year estimate 1.2 to 2 million barrels per day of incremental demand over 2023, primarily driven by the growing need for transportation fuels. Our expectations on the long-term production outlook in our key basins remains unchanged. In the Northeast, longer laterals are resulting in higher volumes, highlighting the strength and opportunities we see across our footprint. We continue to expect volume growth in the Marcellus, as well as the Utica, where producers are targeting economically advantaged, liquids-rich acreage. In the Permian Basin, crew prices remain attractive and associated gas production continues to grow as producers execute drilling and completion activities. In the first quarter, MPLX announced two strategic transactions. First, In the Utica, we enhanced our footprint through the acquisition of additional ownership interest in an existing joint venture and a dry gas gathering system. We have already seen growth in the rich gas window of the Utica, and we see new producers moving into the region. Second, MPLX entered into a definitive agreement to combine the Whistler Pipeline and the Rio Bravo Pipeline project into a newly formed joint venture. The transaction expands MPLX's natural gas value chain, connects Permian supply to additional Gulf Coast demand, and positions MPLX for future growth opportunities. The transaction, subject to required regulatory approvals and other customary closing conditions, is expected to close in the second quarter. We remain committed to growing the partnership through our lens of strict capital discipline. In fact, over the last three years, MPLX holds a peer-leading return on invested capital. The previously mentioned strategic transactions are a continuation of our approach as we seek to grow the cash flows of the partnership. We believe this is a return on and a return of capital business and we'll continue to use our capital allocation framework to evaluate and optimize capital allocation decisions. We're confident in our ability to grow the partnership and our focus 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. Now, let me turn the call over to Chris to discuss our growth as well as our operational and financial results of the quarter. Thanks, Mike. NPLX's 2024 capital expender outlook of $1.1 billion is unchanged and includes $950 million of growth capital and $150 million of maintenance capital. Our 2024 growth capital outlook is anchored in the Marcellus and Permian basins. Our integrated footprint in these basins is a position to the partnership with a steady source of opportunities to expand, particularly around our natural gas and NGL assets. We continue growing these operations through organic projects, investments in our Permian joint ventures, and bolt-on opportunities. In the L&S segment, progress continues on the Agua Dulce to Corpus Christi natural gas pipeline joint venture, which is expected to be in service in the third quarter of 2024. We're also progressing the expansion of the Bengal NGL pipeline joint venture to 200,000 barrels per day, which is expected to be completed in the first half of 2025. In the GMP segment, we're bringing new gas processing plants online to meet increasing customer demand. The Harmon Creek II gas processing plant was placed into service in late February, bringing our Marcellus processing capacity to 6.5 billion cubic feet per day. In the Permian Basin, Preakness II is approaching startup and is expected to be online in May. Additionally, we are progressing the Secretariat processing plant, 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, higher return investments, targeted expansion or de-bottlenecking of existing assets, and projects related to planned increases and producer-customer activity. Slide six outlines the first quarter operational and financial performance highlights for our logistics and storage segment. Adjusted EBITDA increased $72 million compared to the first quarter of 2023, primarily driven by higher rates and growth from our equity affiliate. Crude and product pipelines and terminal volumes were down year over year, primarily due to MPC's planned turnaround activity in the first quarter of 2024. Due to the structure of our contracts with MPC, refinery volume changes had limited impact uh, financial impact to MPLX. Moving to our gathering and processing segment on slide seven, the GMP segment adjusted EBITDA increased $44 million compared to the first quarter of 2023, primarily driven by higher volumes. Total gathered volumes were down 2% year over year, primarily due to decreased dry cast production in the Utica and scheduled maintenance activities in the Southwest. Processing volumes were up 9% year over year, primarily from higher volumes in the Marcellus and Utica, driven by increased customer production. 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 7% for processing, driven by increased drilling and production growth. Marcellus processing utilization was 92% in the first quarter, reflecting the need for our Harmon Creek II processing plant, which was placed in service in late February. Fractionation volumes grew 4% due to higher ethane recoveries and higher processed volumes. Moving to our first quarter financial highlights on slide 8, total adjusted EBIT of $1.6 billion and distributable cash flow of $1.4 billion each increased 8% from prior year. During the quarter, MPLX acquired additional ownership interest in existing joint ventures and a dry gas gathering system located in Utica for $625 million and contributed $92 million for the repayment of our share of the Bakken Pipeline JV debt due in April. MPLX also returned $951 million to unit holders through $876 million in distributions and $75 million in unit repurchases, ending the quarter with a cash balance of $385 million. As a reminder, the first quarter is typically our lowest quarter for project-related expenses. Like prior years, we anticipate these expenses will increase $30 million to $40 million sequentially in the second quarter, reflecting more favorable weather to undertake project-related work. Now let me hand it back to Mike for some final thoughts. Thanks, Chris. In closing, MPLX has a strong history of growing the partnership's cash flows by executing its strategic priorities, all while maintaining strict capital discipline. We continue to aim for mid-single-digit growth rate over multiple multiple year periods. And as you can see in our results, we have a strong start again to this year with adjusted EBITDA and DCF up 8% versus the first quarter of 2023. By deploying capital wisely, controlling our costs, and optimizing operations to get the most out of our assets, we've grown DCF by nearly 8% on a three-year compound annual basis. MPLX is a strategic investment for MPC, and as they each pursue growth opportunities, the value of this strategic relationship will be enhanced. By advancing our high-return growth projects anchored in the Marcellus and Permian basins, along with our focus on cost and portfolio optimization, we intend to grow our cash flows, allowing us to reinvest in the business and continue to return capital to unit holders. In each of the last two years, we've increased our quarterly distribution 10%. The business is expected to continue to generate significant annual free cash flow after distribution, placing us in a strong position to continue to consistently grow our distribution. Now let me turn the call back over to Christina.
spk11: Thanks, Mike. 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, we're ready.
spk10: Thank you. We will now begin the question and answer session. If you have a question, please press star then 1 on your touchtone phone. If you wish to be removed from the queue, please press star then 2. If you are using a speakerphone, you may need to pick up the handset first before pressing the numbers. Once again, if you have a question, please press star then 1 on your touchtone phone. Our first question comes from John McKay with Goldman Sachs. Your line is open.
spk08: Hey, good morning. Thanks for the time. I wanted to start on the buyback. I think it was the first since 22. Maybe spend a minute or two just elaborating on whether or not this is a one-off or maybe a restart of a more normal cadence, and then also how you're thinking about balancing this with potential distribution increases in the future. Thanks.
spk07: Good morning, John. Thanks for that question. Let me start because we get that question often. I'll try and be as clear as I can. First off, it starts with generating cash. I mean, you've heard in our prepared remarks that our three-year CAGR is about 8% and our first quarter results on DCF and EBITDA were about 8%. So it starts with generating cash. And then the uniqueness to that cash is we kind of color code the cash into two buckets. You know, those buckets that's continuing, we think is going to be there through all types of markets. And I've called that blue bar cash flows. The cash flows that are there intermittent, that could be there sometimes, not sometimes, I call red bar cash flows. So understanding the type of cash flows that we've generated is really important to go into our capital allocation framework. And the way I think about the red bar, you know, red bar may not be there all the time, but it is a source of equity. Blue bar I think of as an ongoing cash flow that's going to support our distribution growth. And we've said a bunch of times that our preferred method of returning capital is primarily distribution growth because we primarily drive blue bar cash flows in our system. But having the flexibility with red bar for buybacks is also important to us. So when we put that all together, you know, the way we think of our capital allocation framework is number one, we're going to take care of our assets. Number two is we're going to continue to grow our distribution, and that's driven by those blue bar cash flows. Number three is we're going to look to invest and continue to grow earnings. And hopefully you've seen our track record on capital discipline and what it's done to earnings. You know, we're very proud of growing this size partnership at about 8% per year over the last three years, and it continued into the first quarter. And then the last piece is our buybacks. And although it's fourth in the capital allocation framework, it's still a tool that we have at our disposal, and we continue to think about when that makes the most sense versus when it doesn't. So if you think, if you step all the way back, we color code the cash flows. We prioritize blue. That's the way we run our business. Stable, continuing cash flows that will be there all the time. Those are more targeted towards distributions. You've heard us say we've done 10% distribution increases the last few years. You've heard us say we believe we have strong financial capabilities to continue to grow our distribution. But we also have the tool of buybacks when we think it makes sense. I hope that was helpful.
spk08: Yeah, thanks, Mike. I appreciate that. Maybe on... Just following up on the wanting to continue to invest to grow, I've obviously seen you guys lean a little bit more towards the kind of bolt-on deals recently with the three announced so far this year. Can you maybe just spend a minute there on general strategy and then maybe how you think about those competing with organic opportunities and maybe how much capital you're willing to allocate in that direction? Thanks.
spk07: Yeah, thanks, John. It's another good question. Let me start off, and then I'll let Greg talk about this recent activity. So, in general, over the last couple of years, you've seen us, you know, mainly driving organic growth. That's where we see good return projects. You know, again, I always say they're not sexy and they're not big headline projects, but they're good return projects, and we've been executing those well, and that's driven growth. But we're also, you know, constantly looking at M&A or organic growth. inorganic activities. And, you know, during this quarter, you know, we were able to make a strategic transaction in the Utica, and I'll let Greg talk a little bit about the details.
spk01: Thanks, Mike. The, you know, the Utica's interesting. We're really excited about what's going on there right now. We've had, we've seen a lot of success over the last few years in the dry lean part of the basin near the Ohio River, and it built out a substantial amount dry gas gathering system, but the rich gas area has not got as much attention, and that now has got a lot of great tailwinds behind it. We're really excited about it. The main things in the favor of the rich gas are the fact that there's a light oil window and a condensate window, the fact that right now we have a frack spread that favors liquids, whether in the crude oil producing regions or in the NGL-heavy regions like we have in Utica. We also have new drilling technology with long laterals, twice the length of laterals that we probably saw back in the day when the Utica was first developed. So you get essentially two or more wells in terms of lateral length for a proportionally less cost. We also have, because of the early build-out, we have existing infrastructure. It's fully integrated with our Marcella system. It's connected to the same fractionation, all the same takeaway pipelines. So bottom line is we're bullish about having a system with spare capacity in an area that now new producers are moving into and existing producers are moving their rigs to. So we're already seeing that growth. The Summit acquisition allowed us to further buy into this area where we're really bullish about And we built the entire system and operate it already, so we know it, and we know the producers and the opportunities there.
spk08: All right. Thank you very much for that. I appreciate it.
spk07: You're welcome, John.
spk10: Thank you. Next, we will hear from Manav Gupta with UBS. You may proceed.
spk02: Good morning, Mike. My only question here relates to that this Whistler pipeline thing you just recently got involved with the JV looks very interesting, looks like a very good growth opportunity. Help us understand this project a little more in detail, and why would this be a strategic fit for MPLX? Thank you.
spk07: Yeah, thanks, Manav. Appreciate that question. I'm going to let Dave give you a little more detail on it. I would tell you in general, though, as we've been saying, you know, we're concentrating a lot of our activity in our key basins. And, you know, Greg just mentioned a lot of what's going up in the northeast. And I'll let Dave talk a little bit about what's going on down in the Permian.
spk06: So let me dig a little deeper. So as Mike stated, the Permian is, in addition to our other basins, one of our key focus basins. And this JV partnership, which is with MPLX along with Whitewater and I-squared as part of the existing Whistler JV, entered in that dependent agreement with Enbridge to strategically combine that JV with the Rio Bravo pipeline project into this newly formed JV. So that's step number one. And the justification for that, while we monetize a small portion of our equity ownership in Whistler at a low double-digit multiple, The Real Key has enabled us to build out, continue to build out our wellhead to water growth strategy and enhancing our value chain from the Permian to the U.S. Gulf Coast. So think of it this way, that the Rio Barbaro Pipeline Project provides Whistler with that value chain connectivity to the Rio Grande LNG export facility in Brownsville, Texas, which is not a lot different to the strategy around the ADCC pipeline. a pipeline project that is under construction right now at the Cheniers LNG facility in Corpus Christi. So it's that last-mile connectivity to the LNG pole. So as we look forward, both from our Perbian supply that Mike touched on earlier and the U.S. Gulf Coast LNG demand, which we all anticipate to grow, this strategic partnership provides a strong platform and positions Whistler under the new JV to participate in this growth and the development of incremental pipeline projects, which again, of course, will further enhance MPL's wellhead to water strategy. Let me be clear with that, that any potential projects that we look at going forward must provide two things, acceptable financial returns and the right commercial terms through our lens of strict capitalism as we look at all projects, whether it be bolt-on, organic, or these growth projects. So hopefully that gives you a little more color.
spk02: Thank you very much.
spk07: Since Dave gave you a little bit of detail on that project, why don't you talk a little bit about NGLs as well, since we're talking about natural gas and what we're doing in the Permian?
spk06: Sure thing, Mike. So very similar to NatGas, we've been pretty public about our plans to expand our value chains in the NGL platform. And again, it's all about strengthening our competitive position through forward integration. So think of it from wellhead to the consumers. So back on the wellhead, you know, Greg and his team with all our gas processing plants, we got our Bengal pipeline expansion project going. And so whether we extend these value chains independently or with partners, extend to the water and have an export optionality as part of that strategy. At this time, you know, we don't have any major updates to provide on the Texas City NGO FRAC. in storage projects, but that is a project we continue to evaluate. So if you recall, on that project back in December of last year, we submitted our air permit application to the TCEQ for the NGO FRAC and storage facility in Texas City, Texas. I want to be clear that filing these permits is one of the many steps we take in evaluation of the potential projects. and we'll continue to evaluate any commercial framework around those. Again, very similar to our net gas strategy. Acceptable returns, the right commercial terms, you know, through the lines of strict capital placement will help us determine if we go that alone or do it with business partners going forward. So hopefully that gives you a little more color on our NGL strategy, which I would say very similar to our net gas strategy is through for MPLX is well head to water, participate in the whole value chain, both from equity and from commercial optionality.
spk02: Thank you.
spk06: You're welcome, Ana.
spk10: Thank you. Thank you. Our next question comes from Jeremy Tenet with JP Morgan. Your line is open.
spk04: Hi, good morning. Good morning, Jeremy. I want to come back to the banks of the river, if I could, and just how MPOX seems to have achieved single-digit EBITDA growth historically, and it seems like the prospects are there for continued growth. And if I think about the summit acquisition, kind of these bolt-on acquisitions, I think of it as kind of one of the components of staying in that range, and it would be larger acquisitions that would drive you above the range, and it Is that a fair way of thinking about things here? And how do you think about, I guess, other, you know, the potential acquisition environment out there?
spk07: Hey, Jeremy, that's a good question. First off, let me correct you. The M&A activity that we do, even if it's on the smaller side, is not included or would be additive to our goal of driving for mid-single-digit growth. So we think of the mid-single-digit growth as our organic program in general. And then when these other opportunities come up, you know, through inorganic opportunities like we just talked about, that would be additive. So, you know, our base is always things that we can control. You know, trying to compete for, you know, growth, Harmon Creek 2, Preakness 2, Secretariat. You just heard Dave talk about our natural gas pipeline strategy down in the Permian and NGL growth. You know, all those things come into our base feeling about growth. you know, grow in the partnership at least mid-single-digit cash flows. When we do something like the acquisition of the JV partner in Utica that Craig talked about, we think of that as additive to our goal.
spk04: Got it. That's very helpful. And maybe just digging in on that, you know, acquisition, I think the seller put out certain numbers around there that implied certain EBITDA for the asset. And I was just wondering if you could provide any thoughts with regards to how, you know, what type of economics you're seeing with this deal and how that could maybe improve over time.
spk01: Jeremy, this is Greg. Yeah, we really look at the Utica story. As I mentioned, we're very bullish about it. The rigs are there. The activity is coming up. We're already seeing growth. And we think this is a volume story. utilizing facilities that have existing capacity. So, you know, in an ideal situation, you would see new drilling off of even off of existing pads with no new investment, but even in the case of new pads, it's essentially well connects into our system. And then we take advantage of existing trunk pipelines compression in our processing and fractionation facilities that are already there with capacity. So we think there's upside. in value related primarily to volume and not having to spend a lot of additional capital to capture that volume.
spk07: Jeremy, it's Mike. Just to add on to what Greg said, obviously we think the multiple is going to be better than what was put out there earlier. We're just cognizant of not putting our you know, our data out too soon. We just want to show it in the results, and then we can talk about it later.
spk04: Got it. That's very helpful. And maybe just kind of circling back to the point at the top there, you talked about, you know, as it relates to capital allocation, red bar, blue bar, I think there might have been some purple bar points in the past. But just wondering, as you think about, I guess, you know, the potential red bar there and further, I guess, bolt-ons, would you look to retain more for the, you know, to improve the balance sheet if there are future opportunities that materialize or is leverage low enough at this point or is buybacks really kind of the focus for that?
spk07: Yeah, you know, Jeremy, we always say it's a good problem to have. You know, we think we're in a great position on financial flexibility and Like you mentioned, the balance sheet's in good shape. We're generating excess cash beyond distributions and capital at this point. We also feel like we have different opportunities for us. And you're right. Thanks for that reference. Sometimes the cash flows are hard to debate, and we sometimes call them purple. But in general, I'm hoping the takeaway is we're going to generate enough cash to put ourselves in a good financial flexibility position. You know, that's where it all starts. And then we debate, you know, the color of the cash flows and how we think we can get the most shareholder value. You know, we've been leaning more towards distribution because it's blue. And as you know, you know, the way we run the business is to generate cash flows that we think will be there long term. So that's why they're mostly blue. I know people have been asking a little bit about, you know, our buyback strategy. And hopefully when I answer John's question, I gave you a little bit more color around that. But So we'll have that flexibility. We have the financial flexibility for where we are. We're going to continue to look at our organic growth. We'll evaluate some organic as it comes along. And at the end of the day, all we're trying to do day in and day out is create more value for our unit holders.
spk04: Got it. Makes sense. Thank you for that. You're welcome, Jeremy.
spk10: Our next question comes from Teresa Chen with Barclays. Your line is open.
spk00: Good morning. Thank you for taking my questions. Going back to Dave's comments about the expansion and the Permian NGL platform, in relation to the Texas City FAC and the storage project, can you just help us think about how a long-haul pipeline connectivity solution could come about, whether it would be independent or an extension of the, I believe, 42% UJI that Bangalow has in Epic NGL. And then also, from that, is there space in Texas City on MPC's Galveston Bay docks for LPG export opportunities if the Texas City fracking storage projects do come to fruition? And would it be the parent that would be marketing those volumes and taking the commodities risk? Just help think about how that value chain could play out.
spk07: Yeah, Teresa, thanks for the question. I'll let Dave give a little more detail there. But you kind of laid out a lot of optionality that we have. And we're going to continue to evaluate all the different options. But let me let Dave give a little more color.
spk06: Yeah, Teresa, I think Mike said it extremely well. There's a couple questions. A couple of key things to think about as we look at these large projects, multi-year value chain build-up projects. One is how do we leverage the existing assets we have either in the ground or in the vicinity, number one. Number two, how do we leverage and incorporate existing partnerships and JVs we have such as Bangle? Third is how do we leverage our parent company, MPC, back to Galveston Bay? And so as we look at all those and we think through the scenarios and the options of both near-term, you know, build-out and commercialization but long-term value creation, right now we're going through multiple scenarios. And as you can see, As you can imagine, we want to make sure we look through all those, both from a financial return perspective, near-term, a commerciality and flexibility, and then also a long-term growth platform. So I think, as you stated, there's a lot of pieces to that puzzle, and we're in all the work of doing that right now. But we feel... We feel good about our options and our flexibility, and now we're just trying to determine how we bring it to realization. Hopefully it helps a little bit.
spk00: Thank you. And maybe turning to the rescue side, can you give us an update on the in-service timeline for Matterhorn? And given your partnership with Eldridge and Whitewater and combining Whistler ADCC with Rio Bravo, would you be evaluating participation in another bullet residue pipe that is evidently necessary out of the basin come a couple of years?
spk06: Yeah, so I'll touch on Matterhorn and then I'll turn it over to Sean. He can give a little more update. First of all, I think Matterhorn is planning to come on 3Q of this year, so let's start with that. So as you think about clearing natural gas out of the Permian, you can think of Whistler, Whistler Expansion, Matterhorn. You can think of ADCC. Not that we're Participate Day, but you have Blackfin out there, and then you have Rio Bravo. So as you go forward, our view is that you've got two sides of the equation. You've got the poll coming from these LNG facilities down on the Gulf Coast, which are majority of them backstop by 20-year take or pays, which is a nice long-term poll. And then you've got the growth platform that Mike touched on earlier out of the Permian. And you really look at those by the 2030 timeframe, their substantial growth profile. So To answer your question, whether it be continued expansions that we've done very similar to Whistler and Matterhorn or is it new pipes, I think you can maybe read the tea leaves that there is incremental capacity needed to clear the barrels out of the Permian to the Gulf Coast.
spk07: Hey, Trace, it's Mike. I'll just add, you know, the main drive between what Dave has mentioned as far as us, you know, doing these partnerships, et cetera, is to get to the very point that you just made. There's going to be more takeaway out of the basin. We want to participate in that, whether it's another residue pipe or not, and we're trying to position ourselves to be part of that.
spk00: Thank you.
spk10: Thank you. You're welcome. Our next question will come from Keith Stanley with Wolf Research. Your line is open.
spk09: Hi, good morning. First, just wanted to ask, can you talk to the conversion of some of the preferreds? It looks like it was a lot in Q1. And I just want to make sure, did that factor at all into the decision to buy back stock in Q1 since you had new stock coming into the market?
spk07: No, thank you, Keith. You're correct. You did see some significant conversions happen during the quarter. I think with the investor base in those units, they have that ability to do that at their leisure quarterly. It did not have any impact on our unit buyback program. That capital allocation strategy is unchanged, as Mike had hit on.
spk09: Okay, great. And sorry if I missed this, but for the JV buy-ins program, bolt-ons that you've done. Can you say, Summit, it sounds like you were pretty excited about. Can you say if you initiated these transactions with partners or if partners are looking to sell and came to you? I'm more curious just looking forward. Are you optimistic there could be other opportunities? The company has a lot of JVs that potentially you could look at buying other partners' interests. Just any thoughts there?
spk07: Yeah, Keith, I think you hit it on the head. We're excited about all of them. and we were able to kind of voice into the summit, show some real numbers with first quarter activity. When it comes to the evaluation of additional opportunities, we're evaluating them all. The good thing with these types of acquisitions, we're very familiar with the assets and we're very familiar with the partners. With all of these opportunities though, we view them with the lens of strict capital discipline. So from our perspective, it has to be at the right value for us and our unit holders.
spk09: Thank you.
spk05: You're welcome, Keith.
spk10: Thank you. And our last question will come from Neil Dingman with Truist Securities. Your line is open.
spk05: Morning, guys. Thanks for getting me in. My question a little bit on what you've been talking about on just the return of capital framework post. to SMLP, I'm just wondering, were you all suggesting that sort of post this, you would continue, you would consider substantially boosting the DPU materially again or, you know, even more buybacks or, you know, would you consider even a sizable acquisition? I'm just wondering how you sort of think about things post this.
spk07: Yeah, it's all of the above. You know, so, you know, hopefully we've been clear that we're going to continue to generate more cash. We're going to grow the cash flows. As a result of that, we're going to continue to increase the distribution as our primary return of capital. We're going to look at buybacks as, you know, part of our capital allocation framework. We're going to continue to invest organically. And then we're going to, you know, look at the inorganic stuff that's available. You know, I'm much more of a believer in the organic opportunities because they get us a higher return, more efficient capital, et cetera. And that's what you've seen over the last, you know, couple years in general. But like I said at the start of this, it all starts with growing cash flows, and whether it's doing it organically or through some of these bolt-ons that we've talked about, at the end of the day, grow the cash flows, invest wisely. That's why I always say it's a return on and a return of business, and then I'm a big believer in return capital to our unit holders. So hopefully we're going to continue to show you that we're going to grow this distribution continually over time. as you've seen over the last couple of years, and that's certainly our goal.
spk05: No, that's very clear. Just a quick follow-up on the Marcellus gathering. It's really nice to see another significant year-over-year increase there on your last quarter. I'm just wondering, make sure I understand, what's sort of the capacity situation there as it appears that area continues to be positively trending? I'm just wondering, is there still potentially more upside as you've been seeing?
spk01: Yes, we do have additional upside, but we run that system at very high utilization, as you've seen. We continue to be over 90% utilized on processing in the Marcellus, and that really matches up with our Liberty Gathering system capacity. We only gather for some customers in Marcellus. We process for a lot of customers. We don't necessarily gather for all of them, but So when you see gathering numbers, it's typically our Liberty system in Washington County. And we do try to add capacity just in time, uh, to match the, uh, the processing growth.
spk07: You know, we've anticipated the market has for a long time of MVP coming online up in the Northeast. Uh, you know, we think that'll be a significant change to the activity up there, you know, two DCF pipeline coming on to what has been a constrained area for some time. And then as Greg mentioned, you know, we're pretty excited about the renewed interest in the Utica, particularly the rich area, you know, as liquids compared to the dry price is certainly pushing people more into the liquids rich area. So it's one of our key growth areas. It has been, will continue to be. I think you've heard throughout the call today, you know, Greg talked a lot about what's happening on the gas side of the business up in the Northeast. Dave talked a lot about what we're doing as far as, natural gas expansion and NGL expansion down in the Permian. So we're pretty confident and optimistic that our plan is working, our strategy continues to be good, and we're going to grow cash flows and return capital to unit holders. So that's how we feel at this point.
spk05: That's a great addition. Thank you.
spk07: You're welcome.
spk11: All right, with that, thank you 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 today, members of our investor relations team will be available today to help you with your calls. Thank you so much.
spk10: Thank you. That does conclude today's conference. Thank you once again for your participation. You may disconnect at this time.
Disclaimer