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  • Roger S. Conrad

Second-Quarter Earnings: Highlights from the Portfolio

By Roger S. Conrad on Aug. 1, 2016

The partnership reiterated its guidance for full-year distribution growth of 12 percent to 15 percent, raised its forecast for distributable cash flow to between $1 and $1.1 billion, and called for a double-digit increase to its payout in 2017. Management expects MPLX to achieve its targets for 2016 without any additional drop-down transactions from its sponsor.

Much of this guidance hinges on a 15 percent increase in MPLX’s gas-processing volumes and a 20 percent increase in its gathering volumes in the Marcellus Shale and Utica Shale. With flattish volumes in the Marcellus Shale and a slight decline in the Utica Shale, management expects the recent recovery in natural-gas prices to drive drilling and completion activity in the back half of the year.

MPLX’s gathering and processing operations in Appalachia should benefit over the long haul as takeaway capacity from these low-cost basins improves.

The partnership also continues to work on its own solutions to improve NGL takeaway capacity from the Marcellus Shale and Utica Shale, including rail capacity to the East Coast, a butane-to-alkylate project and a potential joint-venture pipeline with Enterprise Products Partners that would transport these hydrocarbons to the Gulf Coast.

Royal Dutch Shell’s final investment decision on a world-scale ethane cracker in Appalachia could also create $500 to $1 billion worth of investment opportunities related to NGL fractionation, transportation and storage capacity in the Northeast.

Besides these organic-growth opportunities, MPLX could pursue asset drop-downs from Marathon Petroleum, which still holds MLP-qualifying infrastructure that generates $1.5 billion in operating cash flow annually.

Although the acquisition of MarkWest Energy Partners LP increased MPLX’s sensitivity to commodity prices, the deal gives the MLP a platform for organic growth and should pay off over the longer haul.

Management also deserves credit for shifting away from MarkWest Energy Partners’ Field of Dreams—“If you build it, they will come”—strategy in the Marcellus Shale.

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    • Elliott H. Gue

      Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor

    • Roger S. Conrad

      Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor