MPLX LP (MPLX) 2013 Q2 法說會逐字稿

Welcome to the MPLX second-quarter 2013 earnings conference call. My name is Dawn and I will be the 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. Please note that this conference is being recorded.

I will now turn the call over to Pam Beall. You may begin.

Thank you, Dawn. Good afternoon, everyone, and thank you for joining us for our second-quarter earning's conference call.

You can find the synchronized slides that accompany the call on our website, the MPLX website. On the call today are Garry Peiffer, President of MPLX and Don Templin, Chief Financial Officer.

We direct your attention now 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. Some of the forward-looking statements relate to MPLX's sponsor, Marathon Petroleum Corporation. 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 the filings of both MPLX and Marathon Petroleum with filings with the SEC.

And now I'll turn the call over to Garry Peiffer for opening remarks.

Good afternoon, and thank you for joining us today for the second-quarter earnings conference call for MPLX.

Consistent with our expectations, MPLX reported solid financial results for the quarter, that yielded $26.7 million of adjusted EBITDA and $27.2 million of distributable cash flow. On May 1, MPLX acquired an additional 5% interest in MPLX Pipeline Holdings LP, from a subsidiary of Marathon Petroleum Corporation for $100 million, which was funded with cash on hand. The transaction was immediately accretive, and positions us to support distribution growth in the near term, and is consistent with our intent to provide an attractive growth profile over the long term. We are pleased that our Board of Directors declared a distribution of $0.285 per unit, or $1.14 per unit on an annualized basis.

This represents an increase of $0.0125 per unit, or 4.6% above the first-quarter 2013 distribution of $0.2725 per unit. We continue to be enthusiastic about the prospects for MPLX. We have multiple avenues to achieve our desired growth in distributable cash flow. Shortly I will mention a few of the organic projects that our sponsor is working on, that have drop-down potential. In addition I want to remind you that we have a team dedicated to the pursuit of growth opportunities for MPLX. This team is focused on opportunities to support our sponsor, as well as opportunities unrelated to our sponsor. Marathon Petroleum has agreed to be the anchor shipper for Southern Access Extension, which is a new crude oil pipeline that Enbridge is planning to build from Flanagan, Illinois to Patoka, Illinois.

The pipeline is planned to bring more crude from the Bakken into the Patoka, Illinois area which is a midwest's crude oil hub. MPC also has an option to purchase a 25% equity position in the pipeline. The initial capacity of Southern Access Extension is planned at 300,000 barrels per day, but may be increased depending upon the results of the second open season that closes in mid August. The pipeline is expected to be completed in the second quarter of 2015. Marathon Petroleum is also very active in the Utica shale play in eastern Ohio.

Investments are progressing in adding capacity to a crude oil truck unloading rack in Canton, Ohio and a truck to barge loading facility in Wellsville, Ohio. MPC has also discussed plans for condensate splitter projects at its Canton and Catlettsburg refineries. MPC is currently progressing a pipeline project that will connect multiple central Harrison County and eastern Ohio facilities to Canton. This pipeline will also provide future connectivity to other markets including Wellsville, Lyme, Ohio and potentially the Canadian (inaudible) market. This is part of our strategy to provide a phased approach to grow infrastructure, with growth in production, while providing alternative transportation solutions for producers. We remain committed to positioning MPLX among the top MLPs, and we are targeting a distribution growth rate of 15% to 20% for at least the next several years. We will continue to pursue opportunities that support that intent.

Now I'll turn the call over to Don Templin, to review the financial results for the quarter.

Thanks Garry.

As you will recall, the historical financial statements of MPLX prior to the IPO, included the results of certain undivided pipeline interests that were not contributed to MPLX at the time of the IPO. In addition, certain of the tariffs were adjusted in connection with the IPO. As a result, there are a number of factors affecting the comparability of our pre-IPO financial statements and the current period's results. Given these differences, I thought it might be more helpful to focus my comments today on MPLX's actual second-quarter 2013 results, as compared to the projected results we had included in the prospectus that was prepared at the time of the IPO.

The waterfall chart on slide 4 compares the estimated second-quarter 2013 net income shown in the prospectus, to the second-quarter 2013 actual net income. The primary drivers for the decrease in our net income were lower throughput volumes on our pipelines, partially offset by higher tariff revenue. While our crude and product pipeline throughputs were down, minimum volume commitments from MPC allowed us to maintain a stable stream of cash flow to MPLX. These payments are included in distributable cash flow in the current accounting period, but are classified as deferred revenue in the financial statements. Revenue will be recorded when the credits are used or expire. Turning to slide 5, distributable cash flow for the second quarter 2013 was $27.2 million, compared to the $22.8 million estimate included in the prospectus.

While the MPC deficiency payments I just discussed don't immediately enter into the determination of net income, they are included in determining distributable cash flow for the quarter. As you can see on this slide, there was an addition of $2.8 million related to MPC deficiency payments in arriving at the $27.2 million of distributable cash flow for the 2013 second quarter. Just as a reminder, the reverse will be true when the credits are either utilized or expire. That is, there will be revenue and earnings recognition, but no impact on distributable cash flow in the period.

As Garry mentioned, our board declared a cash distribution of it today $0.285 per unit, which represents a $0.0125 per unit increase over our first-quarter distribution, and $0.0225 per unit over our minimum quarterly distribution. The total cash distribution for the second quarter will be $21.5 million, and represents a coverage ratio of 1.27 times. We plan to target an annual coverage ratio of 1.1 times, however we do not necessarily expect to achieve a 1.1 times coverage ratio each quarter, primarily due to see seasonality in some of our spending profile.

Slide 6 shows that at the end of the second quarter we had $115.3 million of cash, primarily consisting of proceeds from MPLX's initial public offering, which we retained to pre-fund capital projects. As Garry mentioned, we did use a portion of this prevented cash to purchase the additional 5% equity interest in pipeline holdings. We also have a $500 million unused revolving credit facility to fund organic growth opportunities, or acquisitions from MPC or from third parties. With minimal debt our consolidated total debt to consolidated EBITDA covenant ratio is close to zero at 0.1 times, which is well below the maximum allowed of 5 times.

Now I will turn the call back to Pam Beall.

Thanks Don. Dawn, our conference call operator, we are ready to open the line for questions.

(Operator Instructions)

Jeff Birnbaum, UBS.

Garry, on the first-quarter call I think you mentioned that the volumetric guidance for the year still seem reasonable. The guidance from the S1 and the MPCs hadn't been hit largely because of timing of seasonality, and I just wanted to ask with another quarter in the books and the MPC by MPC not hit, do you still think that the second-half guidance for the S1 is reasonable or should we be thinking about something more in line with the first-half volumes?

Thank you.

No, we still think the second-half guidance is reasonable. As we said, and it is still continues today, these were 10 year agreements we put in place between Marathon Petroleum Corporation and MPLX so there will be a certain amount of seasonality or variability in the throughputs. But again as Don mentioned in his remarks, we still have various -- very substantial distributable cash flow so we are very confident with the prior guidance.

Two more quick ones. Don could you remind me when the MPC credits expire if they are not used?

They are typically for four quarters so you will have, as we generated the credits, if they are not used they would start rolling off four quarters after the quarter in which it was generated, Jeff.

Okay, thanks.

And then last one, sorry if I missed it, I hopped in a couple minutes late, but on slide 4, did you break out what went into the $3 million of other, that detracted from second-quarter net income?

I guess there were a number of items that were in there. There weren't any that were material. I guess there was a little bit of depreciation expense that was above what we had originally anticipated in the S1, but nothing of any significance, Jeff.

Okay, great, thanks so much.

Thank you. At this time I'd like to turn the call back to Pam Beall for closing remarks.

Okay, well thanks everyone for joining us today. We will be in the office all afternoon if you would like to call or if you have any follow-up questions you can reach out to Beth Hunter or Jerry Ewing, who is a recent addition to our team, or to me. And thanks for your interest in MPLX.

Thank you ladies and gentlemen. This concludes today's conference. Thank you for participating, you may now disconnect.