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Q4 2012 Earnings Call

January 30, 2013 2:00 PM ET


Pamela Beall - Vice President, Investor Relations

Gary Heminger - Chairman and Chief Executive Officer

Garry Peiffer - President

Donald Templin - Vice President and Chief Financial Officer.


Jerren Holder - Barclays



Welcome to the MPLX Corporation's fourth quarter 2012 earnings conference call. (Operator Instructions) I now turn the call over to Pam Beall.

Pamela Beall

Welcome to the MPLX inaugural fourth quarter 2012 earnings webcast and conference call. The synchronized slides that accompany this call can be found on our MPLX website. On the call today are Gary Heminger, Chairman and CEO; Garry Peiffer, President of MPLX; and Don Templin, Chief Financial Officer.

Turning to Slide 2, please read the Safe Harbor statement. It is a reminder that we will be making forward-looking statements during the presentation and during the question-and-answer session. Actual results may differ materially from what we expect today. And factors that could cause actual results to differ are included here as well as in our filings with these Securities and Exchange Commission.

Now, I'll turn the call over to Gary Heminger for opening remarks.

Gary Heminger

Thanks, Pam, and good afternoon and thank you for joining us today for the first earnings conference call for MPLX. Please turn to Slide 3. On October 26, we announced the final terms of the IPO of MPLX. So we are just beginning our first full quarter as a new public entity. We believe we have created a premier MLP, one that has some very attractive features for MLP investors.

MPLX is a fee-based business with stable cash flows and multiple avenues to grow earnings and distributions over an extended period of time. MPLX is sponsored by an investment grade parent, Marathon Petroleum Corporation, with a significant and growing portfolio of logistics assets that could be acquired by MPLX in the future.

MPLX assets are integral to MPC's integrated logistics and marketing system, providing MPC's refineries access to foreign, Canadian and domestic crude sources, and finished products to its wholesale and retail marketing consumers. The growing production of crude oil and natural gas liquids and changing supply patterns create opportunities for MPLX to play a vital role in the fast-changing energy landscape.

MPC intends for MPLX to be its primary vehicle to own, operate and grow its midstream business. Additionally, MPC has a large portfolio of MLP qualifying assets, including the 49% retained interest in MPLX's initial pipeline assets that can be offered to MPLX over time to help us achieve our desired annual distribution growth rate.

An example of the growing portfolio of MPC logistics assets are those related to logistics assets including three NGL pipelines and four light product storage terminals embedded in the acquisition of BP's assets in the Western Gulf. That acquisition is targeted to close on Friday, February 1.

An additional example is MPC's recent agreement to be the anchor shipper on the proposed 3,000 barrel per day Southern Access Extension pipeline from Flanagan, Illinois, near Chicago to Patoka, Illinois, for which MPC will have an option to acquire the 25% equity interest. Over 70% of MPLX's 2013 estimated revenue is expected to be generated through farm commitment, sea based transportation, and storage agreements with the MPC.

Growth in cash flows are expected to come from annual increases in FERC based transportation rates, drop downs in organic expansion projects within our owned current geographic footprint or new areas of the country. In addition, we may pursue the acquisitions either independently or cooperatively with MPC.

MPLX is well capitalized with $500 million undrawn revolving credit facility and minimal current debt. To foster organic growth MPLX retained $192 million of IPO proceeds, to pre-fund identified organic capital spending projects over the next two years. The majority of this capital will be allocated to an expansion an upgrade project at the Patoka, Illinois to Catlettsburg, Kentucky crude oil pipeline.

MPLX will also have significant opportunities to grow third-party business that it can evaluate independently or in cooperation with MPC. An example of these opportunities is a lot of intent that MPC recently signed with Harvest Pipeline Company to jointly develop infrastructure that will facilitate transportation on the Ohio River of hydrocarbon liquids production from Utica Shale in Eastern Ohio and Western Pennsylvania.

Marathon Pipeline has signed an agreement with Marathon Oil Corporation to extend the operating agreement associated with MOC's Red Butte pipeline. The term extends MPL's operatorship to December 31, 2018, five years beyond the current term that expires at yearend 2013. The extension allows a continuation of this third-party business, operating the Red Butte system, and we look forward to continuing to expand to our third-party business.

In our business we regard health and safety as core values. When our operations are safe and our people healthy, we know our results will be much better. That certainly has held true as MPC employees and contractors helped us achieve our best ever safety performance in 2012, an accomplishment of which we can all be proud.

We are enthusiastic about the prospects for MPLX. We announced our first distribution on January 25, prorated for the post-IPO period commencing October 31, 2012. The announced distribution of $0.1769 per unit for this abbreviated period is equivalent to the $0.2625 minimum quarterly distribution disclosed in our prospectus. As I said, we have multiple avenues to achieve our desired growth and distributable cash flow, and we look forward to updating you each quarter with our growth prospects.

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