MPLX LP (MPLX) 2016 Q4 法說會逐字稿

Welcome to the MPLX earnings call. My name is Jason and I will be your operator. (Operator Instructions). And please note this conference is being recorded. I will now turn the call over to Lisa Wilson. Lisa, you may begin.

Thanks, Jason. Good morning and welcome to the MPLX fourth-quarter and full-year 2016 earnings webcast and conference call. The synchronized slides that accompany this call can be found on MPLX.com, under the Investors tab.

On the call today are Gary Heminger, Chairman and CEO; Don Templin, President; Pam Beall, Chief Financial Officer; and other members of the management team.

We invite you to read the Safe Harbor statement and non-GAAP disclaimer on slide 2. It is a reminder that we will be making forward-looking statements during the call and 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.

Now I will turn the call over to Gary Heminger for opening remarks on slide 3.

Thanks, Lisa, and good morning to everyone. Despite a challenging environment, particularly in the first half of the year, MPLX had strong operational and financial performance. While I am pleased with what we achieved in 2016, I am even more excited about what lies ahead.

On January 3 we provided an update on the strategic actions we intend to implement at MPLX to provide increased visibility to our distribution growth and to lower our cost of capital. The partnership expects to acquire assets from MPC with approximately $1.4 billion of EBITDA as soon as practicable and expected in 2017.

A proposed transaction representing approximately $250 million of EBITDA has already been offered to MPLX and referred to the conflicts committee of the MPLX Board. This transaction is expected to close in the first quarter of 2017 pending requisite approvals. We expect the partnership to finance the drop-down transactions through approximately equal portions of debt and equity with the equity financing to be funded through LP units issued to MPC.

In conjunction with completion of the drop-downs we also expect to exchange MPC's economic interest in the jumbo partner including incentive distribution rights for newly issued MPLX common units. These actions are expected to provide greater visibility to near-term distribution growth and reduce the partnership's cost of capital enhancing its ability to deliver an attractive distribution growth rate over the long-term.

Importantly all these transactions are subject to requisite approvals, market and other conditions including tax and regulatory clearances. Following the drop-downs the partnership size and scale will be among the largest in the industry with nearly equal contributions from logistics and storage, and gathering and processing segments.

With a simplified structure, full alignment with MPC and additional visibility to an attractive distribution growth rate we are confident about MPLX's compelling value proposition to investors. Now I will turn the call over to Don to cover the financial and operational highlights. Don.

Thanks, Gary. Over the course of 2016 we executed our plan and delivered strong results in all four quarters. We also achieved our financial and distribution growth guidance for the year. This was accomplished by managing our costs, optimizing capital investments and continuing our sharp focus on customer service.

We also substantially reduced our leverage placing the partnership in a strong financial position as we look forward to significant growth in 2017 and beyond. We reported fourth-quarter adjusted EBITDA of $391 million and distributable cash flow of $318 million, marking the fourth straight quarter of growth in both these metrics. Full-year adjusted EBITDA was $1.4 billion and distributable cash flow was over $1.1 billion.

Last week we announced an increase in our quarterly distribution to $0.52 per common unit, a 4% increase over fourth quarter last year. With this increase we delivered 13% distribution growth in 2016 and achieved our targeted distribution growth rate for the year. We also reaffirm our distribution growth guidance of 12% to 15% four 2017 and forecast double-digit distribution growth for 2018.

We remain committed to maintaining a strong balance sheet and an investment grade credit profile. The partnership ended the year with $2.7 billion of liquidity and leverage of 3.4 times, well below our target of around 4 times. We also delivered a strong full-year coverage ratio of 1.23 times.

On the commercial front we have reached an agreement with one of our key producer customers to continue to support their growth in the Marcellus. I am pleased to announce that we recently executed amended gathering, processing and fractionation agreements with Range Resources, one of our largest producer customers.

To support the continued long-term development of Range's substantial rich gas acreage we expect to construct an additional 200 million cubic feet per day processing facility at the Houston complex in Pennsylvania in early 2018. This facility will replace the existing 35 million cubic feet per day Houston I processing plant.

We also expect to commission a new 200 million cubic feet per day plant at the Harmon Creek Complex in Washington County, Pennsylvania by mid to late 2018. The combination of this strategic partnership and an attractive profile -- portfolio of organic growth projects will strengthen our position as the largest processor and fractionator in the prolific Marcellus and Utica Shale's.

On slide 4 we provide a summary of our capital expenditure program for 2017. Our organic growth forecast increased slightly from the guidance we provided last quarter to a range of $1.4 billion to $1.7 billion. Maintenance capital remains forecast at approximately $100 million.

The increased guidance in growth capital reflects incremental investments to support additional gathering and processing infrastructure for Range Resources. Approximately $1 billion to $1.3 billion of our 2017 capital is directed -- or growth capital is directed to the gathering and processing segment primarily in the prolific Marcellus Shale region.

We expect to complete an additional 400 million cubic feet per day of natural gas processing capacity and 120,000 barrels per day of fractionation capacity to support our producer's ongoing development of rich gas acreage in Pennsylvania and West Virginia.

The remainder of our investments will support the logistics and storage segment. Projects include the Utica infrastructure buildout in connection with the recently completed Cornerstone Pipeline; a butane cavern in Robinson, Illinois; and a tank farm expansion in Texas City, Texas.

Shifting to our gathering and processing segment, slide 5 provides an overview of our operations in the Marcellus and Utica Shale. Fourth-quarter process gas volumes averaged 4.4 billion cubic feet per day representing a 2% increase over the third quarter. Our complexes were 81% utilized during the quarter.

We achieved full utilization at the Sherwood Complex in December with volumes averaging around 1.2 billion cubic feet per day. Full-year 2016 Marcellus and Utica process volumes increased 14% compared to 2015 while gathered volumes were up 20% versus the prior year. The positive production growth outlook from our major producer customers such as Antero, Range Resources and EQT give us confidence in delivering continued volume growth. Overall we expect an additional 10% to 15% increase in process volumes in 2017.

On slide 6 we provide a summary of our fractionated volumes from Marcellus and Utica where we reproduced 314,000 barrels per day of ethane and heavier NGLs during the fourth quarter. As the largest provider of fractionation services in the basin, our 2016 volumes increased by 29% versus the prior year. We expect this robust growth to continue with a 15% to 20% increase forecast for next year.

To support this growth we have recently commenced operations of a third fractionation train at our Hopedale Complex. We are also constructing additional fractionation facilities at the Keystone and Majorsville complexes with a total of 60,000 barrels per day of incremental de-ethanization capacity. Those facilities are expected to be placed into service during the second half of the year.

Slide 7 provides an overview of our Southwest operations where we have diversified gathering and processing assets across established resource plays in Texas and Oklahoma. For the fourth quarter we processed 1.2 billion cubic feet per day of natural gas while plant utilization was 81%.

We continue to see increased volume at our recently completed Hidalgo Complex in the Delaware Basin of West Texas. With a 90% utilization rate for the quarter this plant supports growing production from Cimarex and Chevron's ongoing development program. For the full year 2016 process volumes increased 14% while gathered volumes were also up slightly.

For 2017 we forecast process volumes to increase by another 3% to 8% with growth driven by both the Hidalgo Complex as well as incremental infrastructure to support Newfield stack resource play in the Cana Woodford Shale.

Turning to slide 8 we provide an update on our logistics and storage segment. The Cornerstone Pipeline became fully operational in October and we also completed the supporting Hopedale connection during the quarter. The completion of this connection combined with the reversal of MPC's RIO pipeline in December now allows for the movement of natural gasoline from our Hopedale fractionation complex all the way to MPC's Robinson, Illinois refinery.

We continue to progress on the expansion of existing pipelines and the construction of new pipelines as part of our larger Utica buildout strategy. These projects remain targeted for completion in mid-2017. With this mix of new and existing pipelines we are seizing a unique opportunity to support producer customer growth by connecting NGLs to downstream markets in the Midwest and Canada through our extensive distribution network.

Now I will turn it over to Pam to review our financial position and strategy.

Thank you, Don. Turning to our financial highlights on slide 9, we reported adjusted EBITDA of $391 million and distributable cash flow of $318 million for the fourth quarter of 2016. Full-year adjusted EBITDA was $1.4 billion and distributable cash flow was over $1.1 billion. Total segment operating income was $429 million with approximately 70% generated by the gathering and processing segment.

The bridge on slide 10 shows the change in adjusted EBITDA from the fourth quarter of 2015 compared to the fourth quarter of 2016. Since the prior year quarter we increased adjusted EBITDA by $93 million. The increase in the gathering and processing segment adjusted EBITDA was primarily driven by higher volumes and increased NGL prices , while the addition of the Marine business accounted for the majority of the change in the logistics and storage segment.

Slide 11 provides a summary of key financial highlights and select balance sheet information. At the end of the fourth quarter we had approximately $2 billion available on our bank revolver and a full $500 million available on our intercompany facility with our sponsor, Marathon petroleum. During the quarter we opportunistically issued 8.6 million new common units through an ATM program and receive net proceeds of approximately $277 million.

As Gary mentioned earlier, we expect to finance the drop-down transaction through approximately equal portions of debt and equity. With equity financing funded through LP units issued to MPC, we do not expect to raise public equity for the drop-downs.

We remain committed to maintaining an investment grade credit profile as demonstrated by our actions last year. A significant focus of 2016 was strengthening the balance sheet of the partnership. We reduced the leverage from 4.7 times at the end of 2015 to 3.4 times at the end of 2016, which is well within our target of 4.0 times or less. In addition, we delivered a strong full-year coverage ratio of 1.23 times.

With $2.7 billion of liquidity and access to the capital markets, the partnership is well positioned to finance its robust growth capital investment plan and the drop-down acquisitions in 2017.

On slide 12 we provide our commodity price sensitivity forecast highlighting the annual unhedged impact to distributable cash flow of our exposure to natural gas, natural gas liquids and crude oil. For 2017 we forecast net operating margin to be 92% fee-based. For the commodity exposed portion we continue to employ an active and disciplined hedging strategy and have hedged approximately 35% of our 2017 exposure.

On slide 13 we provide our 2017 forecast, which is based on expectations for producer volumes, commodity prices and our strategy of deploying capital on a just in time basis. Excluding the impact of drop-downs and third-party acquisitions we forecast 2017 net income in a range of $500 million to $650 million, adjusted EBITDA in the range of $1.5 billion to $1.65 billion, and distributable cash flow of $1.15 billion to $1.3 billion. We continue to expect distribution growth of 12% to 15% in 2017 and double-digit growth in 2018.

MPLX has a consistent record of growing distributions to unitholders. Based on our quarterly financial performance the Board of Directors of our general partner declared a distribution of $0.52 per common unit. The fourth-quarter 2016 distribution represents a 4% increase over the same period last year and marks the 16th consecutive quarterly increase since our initial public offering in October 2012. Full-year 2016 distributions were $2.05 per common unit, which represents a 13% increase over the full year of 2015.

The accelerated drop-down of logistics and storage assets will add significant fee-based stable cash flow to the partnership that will enhance visibility of near-term distribution growth. The drop-downs combined with the exchange of the GP IDR interest for LP units are expected to lower our cost of capital and strengthen our ability to provide unitholders an attractive distribution growth profile over the long-term.

With a strong balance sheet and an improving cost to capital we are well-positioned to participate and opportunities in the Midstream space. Our strategically located assets, long-term producer customer relationships and the compelling backlog of organic projects are a strong foundation to provide sustainable returns well into the future. With that I would like to turn the call back to Lisa.

Thanks, Pam. As we open the call for your questions we ask that you limit yourself to one question plus a follow-up. You may re-prompt for additional questions as time permits. With that we will now open the call to questions. Thank you, Jason.

(Operator Instructions). Kristina Kazarian, Deutsche Bank.

Sticking more on the fundamental side, could you guys talk a little bit about volume guidance in the Marcellus Utica? So you guys have gathered up 3 to 6, processed 10 to 15 and frac up 15 to 20. Just, could you touch on the trends between each and what is kind of driving the differences as we step along the value chain?

Sure, Kristina, this is Don. As we are looking into 2017 I think you will recall that at the end of the third quarter on the gathered volumes we were generally guiding flat and we are seeing some incremental positive information and feedback from our producer customers that we would expect that to increase slightly from what we had commuted to you all at the end of the third quarter.

In terms of the process volumes at 10% to 15% over last year, over 2016, some of that is going to be driven by the addition to our processing that we are building at Sherwood. So Sherwood 7 and 8, we'll be adding those in 2017, that is 400 million cubic feet per day of incremental processing capacity. Our Sherwood plant is right now operating essentially at full capacity, it is at 1.2 Bcf a day. And so, we are expecting that that will clearly be an addition to our processed volumes.

So a lot of -- I would say a lot of our growth will be driven by adding that capacity, but that capacity will come online sort of over the period. So that is 400 million cubic feet per day on sort of 4.4 of processing that we have. So that is sort of 10% but it gets feathered in during the year.

We are going to also probably spend less money and capital in the Utica, but we are going to be driving increased capacity utilization. So we have assets there that aren't fully utilized and our goal in 2017 is to make sure that we are driving a fuller utilization of those assets. And we will deploy incremental capital when it appears that those are getting more full or more fully utilized and we have an opportunity to deploy capital there.

A lot of our capital would be deployed on the Marcellus side and we are actually expecting to deploy more capital in the Southwest than we are in Utica just given the opportunity set that presents itself.

Okay. And then my follow up is context of that comment and the $1.4 billion to $1.7 billion CapEx number. And you guys said it was about 75% Marcellus-NGL related. How much incremental infrastructure is really needed? And what I am really trying to get at is how do I think about the [longer-term] annual growth rate for a Company like of your size? And any specifics would be great.

Yes, I think at the time the combination was announced we had indicated that we thought over the longer-term that we had probably $1.5 billion of growth capital that was available to us sort of on an annual basis. And I would say, Kristina, that we feel, given the opportunity set that we see, the optimism that our producer customers are communicating, and drilling plans that we see for 2017 and beyond, that -- I would think that that is probably on the conservative side, not on the aggressive side. So we do see a good strong opportunity set for that type of investment.

All right, I will leave it there. Thanks, guys.

Jeremy Tonet, JPMorgan.

I was just hoping that you could build on a little bit more from what you said at the MPC call with regards to the wholesale fuels business and the PLR status there. And just wondering, if you don't have full clarity, is there any chunk of it that you feel comfortable has clarity, half of it at this point or any other color that you could provide around that would be helpful.

Jeremy, it is Pam Beall and I will take that question. So we are very encouraged that the final regulations were published and our team is evaluating all of the information contained in those regulations. And we hope that very soon we will be in a position to understand better the path forward.

As we have indicated and as MPC has indicated, we expect that we are still likely to seek a PLR. We don't view it as being kind of a part of the loaf; we need to do it on the entire loaf. It is a very sizable amount of EBITDA that will be coming into the partnership.

And we think that the parameters of the fuels distribution service agreement that we have structured here is unique enough that we just don't want to -- we think it is just most prudent to get the -- have absolute clarity that it will be qualifying income. It is just not a risk that would make sense given the size that would be dropped into the partnership.

And dropping in part of it and then having a different view of about the qualifying income just would not be prudent; we wouldn't be acting in the best interest of the unitholders to take on that (multiple speakers).

Okay, that makes sense. And just wanted to turn to growth outside of Northeast, and just wondering with the Delaware Basin, with the STACK, you continue to see volumes ramping there. Just wondering what you think about the prospects for incremental processing plants that could be developed there to service producer needs.

Sure, Jeremy, I mean we are very optimistic about what is happening in the Southwest. And I -- our Hidalgo plant, the first plant that we put into service in that region, is nearly at 90% utilization or maybe on a daily basis slightly higher than that. So typically we would have a ramp up that would be 12 to 18 months; that was put into service in the May time period. We are already at 90% utilization.

And so, I would expect that we will continue to invest in that region. We are actively in dialogue with producer customers around being able to grow our assets, particularly processing assets, around there.

In the STACK we support Newfield and we are very constructive on sort of what they are doing there as well and we continue to grow with them and we will look to continue to grow with them.

Great, that is helpful. Thank you.

TJ Schultz, RBC Capital Markets.

I think just first the amendments and extensions to the Range agreements -- I guess just what was the impetus to work through amendments? If you can give any more detail on changes to contract structure, pricing and tenor on that arrangement.

Yes, so we are not going to provide details around sort of those amendments and extensions. But I guess what I can say is that one of the reasons that Marcellus exists in the Marcellus is that Range Resources was our key customer there. And we grew with them over the last number of years and we are really excited about growing with Range in the years ahead.

So we believe that this positions us to be able to grow with Range as they continue to grow. As we have indicated, we have committed to building incremental complexes. So an incremental processing at our Houston facility, an incremental processing at Harmon Creek. And so, we feel like we are well-positioned with Range for the long-term to continue to grow as they grow.

Okay, thanks. I guess just second on guidance. Assumptions included full-year investment in the Bakken pipeline system and guidance for 2017?

So, in terms of that Bakken pipeline system, we have indicated that if and when the conditions, and we do expect the conditions to close, will be met -- when the conditions to close are met we expect to make a $500 million investment and to take an ownership interest that is slightly more than 9% of that pipeline.

So that would be -- we would expect that that, especially given some of the positive communication that is coming out of Washington DC and with the administration, we are optimistic that something on that will happen nearer-term rather than longer-term. And maybe I will have Pam comment as well.

Yes, I was just going to add that the guidance that we provided does not include the impact of acquisitions or drop-downs.

Okay, perfect. Thank you.

Eric Genco, Citi.

I was just curious, baked into your guidance right now what do you have sort of in terms of expectations for Rover? If they were to not get their certificate and miss the tree clearing deadline, is there downside to this guidance? And then on the converse, if they actually are able to meet the deadline then is there upside and how would that work in your perspective?

So, Eric, we have obviously expectations around all of the infrastructure that is being contemplated to be constructed in the basin. I mean Rover is obviously an important piece of it, we expect that it will be constructed and be completed. But we have not provided any guidance around the impact sort of month-to-month or quarter-to-quarter on our results.

I guess I would just say this, I feel very comfortable with the guidance that we are given -- that we are currently giving knowing what we know about completion dates of infrastructure. And we believe and we believe we have been very -- we have had the ability to be very flexible in meeting and accommodating our producer customers' needs.

So last summer around NGLs, so summer of 2016, we were loading unit trains of propane and sending them to Kansas in order to allow our producer customers to continue to grow the way that they wanted to grow. And I would expect that going into 2017 and 2018 we will be flexible and so will our producer customers in being able to grow their business.

That's very helpful. And then I guess just as a follow-up or separate question, as I think about the guidance you have given and kind of where you are at now and kind of post all of the drop-downs, I think you mentioned in the last call that you expect to be above your 1.1 times sort of coverage long-term target once the drop-downs are complete. And you cited here a 4.0 longer-term target on debt to EBITDA.

But sort of back of the envelope math suggests that if you are a 3.4 now and you do 50-50 debt to equity like you are going to be, I mean, likely at 3.5 times or less maybe once all this is done and with much, much higher covered. So I am just curious, how are you thinking about that? And in terms of yield compression, is that part of it or maintaining the distribution growth guidance. I am just curious of your thoughts on that overall.

I think the answer is probably yes to both of the comments you made at the end. We are committed to our distribution growth guidance, both the 12% to 15% for 2017 and the double-digit for 2018. We believe that the actions that we are taking will actually provide increased visibility to investors around our ability to meet that distribution growth guidance.

In terms of -- one of the things I do think that is important over time as we make the acquisitions from MPC and we have -- and we have essentially acquired the drop-down portfolio from MPC, we do think it is important and our investors want incremental visibility into our growth profile.

So I would say if our coverage rises a little bit above the sort of 1.1 times that we historically had when we were predominantly a drop-down story, I don't think that is a bad result. I think that will actually give our investors a lot of confidence in our growth profile and allow us to continue to drive a lower cost of capital.

Okay, thank you.

Robert Balsamo, FBR.

Congrats on a nice quarter. I was wanting just some more clarity on the arrangement with Range. Any potential there for expansion into North Louisiana or other basins? I assume that that is on the table?

Yes, our primary focus on -- and the announcement that we made was really a Marcellus based focus. But maybe I will have Randy Nickerson comment around sort of the continuing relationship with Range.

As Don said, Range is a big part of why we are there. When we wrote that -- first entered into the arrangement with Range, we have to realize that was the very first time we moved into Marcellus. And honestly at the time, if I think back to that, we thought sort of our base case was 50 million a day growing to 90 million a day, not really knowing the extent of the rock or the production.

So honestly, part of it is a natural evolution and maturing of the relationship between us and Range. We just needed to rework through the arrangements at the same time. We needed to expand both at the new complex at Harmon Creek, replacing Houston. So both of those were the key drivers in why we did -- we wanted to rework the arrangement. It is good for both Range and for MarkWest, solidifies the arrangement for us, we are delighted by it, we get to expand. I think everything is all positives on both sides.

Okay, thank you very much.

Brian Zarahn, Mizuho.

With drop-downs and organic projects and the DAPL investment it's going to be an active 2017. Given the parent will be taking equity for the drop-downs, can you provide some color on financing expectations for the roughly $2 billion combined of organic investments in DAPL?

Yes, Brian, it is Pam and I will take that question. I think it is important for us to always look at where we ended the year and how well-positioned the partnership is. So we ended 2016 with $2.7 billion of liquidity and $234 million of cash on the balance sheet. So as we are entering this phase of significant growth the partnership is in a really good position to take on these commitments.

We know that the market for -- the debt markets are very strong. They are certainly strong for energy names. And we think that they are going to be very strong for the sector in which we operate today. And we think that, based on the fact that the sponsor is going to take back the equity portion of the consideration, it really limits the amount of equity that we need to raise in the capital markets.

So, we are very confident in our ability to raise the capital that we will need to fund both the organic portion of our growth strategy, the drop-downs and the acquisition of DAPL.

As of now the organic investments in DAPL are expected to be funded with public equity?

Well, keep in mind we did raise equity opportunistically in the fourth quarter of 2016. So we have already issued a fair bit of equity and the ATM market was very -- was a good way to raise equity capital through 2016 and we see no reason why it won't be a good source of equity capital as we move through 2017 as well.

And then as you are moving ahead with the simplification process, what are your thoughts about potentially changing the timing of the GP buy in perhaps a bit sooner than initially expected?

Yes, Brian, this is Don. I guess we the acquirer of the assets that were being offered by MPC will acquire them when they are offered to us. And I guess I would say the same thing would be true around an IDR transaction. We can't affect an IDR type transaction until the GP makes that available to us. So I expect that what MPC announced is their strategic plan and we are operating under the presumption that that strategic plan will be carried out on that timetable and in that sequence.

Thank you, Don.

Theresa Chen, Barclays.

I wanted to ask you about your positioning in the ethane market. I believe, based on your current capacity, you have the ability to generate another 70,000 barrels per day of production in ethane. And there is, in addition to that, an opportunity to invest anywhere between $500 million to $1 billion in the Northeast.

Can you just talk about the factors that caused that delta? And how do you get to the low end versus the high end? Where do you stand now? And is this at all contingent on export demand out of the Northeast?

Sure, this is Randy Nickerson, I will take that and then maybe Greg can even follow up with that. One of the things that we did in the Marcellus and in the Utica that is really different is we have very distributed de-ethanization. So we have ethane recovery at each and every plant.

That gives us incredible flexibility because each and every producer is positioned differently relative to their take away, relative to their perspective on ethane and so forth. And we can install additional de-ethanizers really customized to match each and every one of our producers. You see us doing that, we are installing at Bluestone, we have de-ethanization at some plants and not total de-ethanization at others.

The other thing we can do, because of the way we've designed this system that is really unique is that we can include smaller de-ethanization integrated with the plants at the complexes or we can install larger standalone de-ethanizers. So we have almost unlimited flexibility sort of meet the market, particularly as we talked about the crackers coming on at the end of 2018 and into 2019.

It is still to be seen what the price of ethane is going to happen. Is it really going to occur like this, like people are projecting that we are going to be perhaps even short of ethane and those crackers are going to have to reach up into the Northeast to pull out a lot more ethane than what we have.

Today we are primarily just recovering the minimum amount, which we all talked about as must recover. But realize that number can double and even in some cases triple if ethane becomes highly profitable to recover. And that is what drives it for us. The neat thing about that as well is we can install those additional facilities, sort of a just-in-time basis so they are fully utilized.

So we are really in a unique and a very good position to match the market as the ethane cracking capacity, both in the Northeast, particularly in the Gulf Coast, the expand is going to be great.

The other thing we are fortunate to be is we can send -- ethane is leaving our facilities and being exported out to the East Coast, if we have crackers in the Northeast when they come online, Shell and others and then we ship -- our producers transport ethane down to the Gulf Coast. We really access almost all the major markets.

So we are really in an ideal position, or our producers are, and we are in an ideal position to support those producers when they decide to meet those markets. So that is why there is such a big variability in the cost. It goes with the good part of having enormous flexibility.

Thanks, Randy, this is Greg Floerke, I just would add to what Randy said. We -- in addition to all of the distributed de-ethanization facilities which are at our cryogenic plants, we have a connecting purity ethane pipeline to all of those. And that purity pipeline allows us to deliver ethane into our Houston, Pennsylvania hub and our Cadiz, Ohio hub which are interconnects with ATEX, Mariner West, Mariner East and eventually Utopia which will originate from our Cadiz facility.

We also will be -- have two origin points for the two interconnecting origin points or pipeline will eventually connect the Shell cracker that has been announced so that is another takeaway point.

So we hope to grow on our current position where we recover about 80% of all the ethane in the region. And as we continue to dial up our ability with existing utilization and expanding as we are at our Majorsville and Keystone plants, we'll move with our customers' demand to grow that capacity.

That is very helpful. And how much of that investment opportunity is baked into your near-term CapEx guidance for 2017?

Those big projects are not -- or that incremental project is not baked into our existing CapEx.

Great, thank you very much.

I mean we do have -- in the 2017 budget, I mean we have -- and we announced this previously I guess, Teresa, is that we have 60,000 barrels a day of de-ethanization that will come on line in 2017 so that is in our budget. But I guess I thought you were asking about the incremental stuff and the bigger takeaway above what we already have.

Just the $500 million to $1 billion?

Yes, yes, that is not in this.

Got it, thank you very much.

Corey Goldman, Jefferies.

Just wanted to run through the 2017 EBITDA guidance quickly if I can. Just annualizing 4Q, that kind of gets us within the range already for 2017 and you guys are forecasting some nice growth at least on the gathering, processing and frac side. Just can you give us some color as to what can get us to maybe just the low end of the guidance that had given us just for the legacy side?

Well, let me start, Corey, I guess. As we see that -- obviously we have announced incremental processing capacity. So we will have that that will help to drive on the G&P side. On the L&S side, we acquired the Marine business at the end of the first quarter so there is $30 million of incremental EBITDA in 2017 that wouldn't have been around in 2016 if you are kind of comparing those two quarters.

L&S has historically grown at a pace and at percentages that would be typical of pipeline type growth. And then the bigger pieces will really be around the G&P growth that we are experiencing.

Yes, and then the Cornerstone pipeline just came online in December. So you are going to have a full year of operation of Cornerstone.

Yes, I guess that is kind of my question is that if we use just 4Q on the 391 and annualize that, that gets us north of the low end of your 2017 guidance range. And so you have full-year Cornerstone, you have additional gathering, processing, fractionation volumes. Just is it being a conservative on the NGL side given that there is still some sensitivity on that front? Just wondering why the low end would be lower than what 4Q would be kind of indicating to us on 4Q 2016, sorry -- yes, 4Q 2016.

I would say it would just reflect caution and conservatism around the commodity price environment. We are optimistic; I think there is a lot of optimism by producer customers. But we just try to provide a range of guidance that could reflect the full spectrum of what could occur in 2017.

(Multiple speakers) I was going to say if you guys can provide just that NGL forecast just so we can get some gauge on that maybe.

So you want the weighted average NGL price that is in our forecast?

If you guys can provide it, yes.

It is $0.65.

Perfect. Okay, that is helpful. And then just as a follow up. The new CapEx implies somewhere around $300 million to $500 million of additional projects. The additional Range processing plant, that explains a good portion of it assuming Harmon was already included in the guidance.

Can you guys just give some color as to what would drive us beyond -- I mean to get to that $500 million? Is there additional projects in the Southwest that you guys are considering?

I'm sorry, which $500 million, Corey?

Just the delta between the $1 billion and $2 billion on the high end in the previous guidance and on the $1.7 billion.

I am sorry -- I would say as we think about that capital I think we are probably much closer to the high end of that range than we are to the bottom end of that range. And I think when we originally provided the range that sort of the gathering -- the gathering capital is typically the one where we have maybe the least visibility and probably the most flexibility in managing that to be timed up to when our producer customers are putting wells online.

I would say the rest of the -- the fractionation and the processing, the capital around that and the capital around the L&S part of the business I think is relatively fixed and probably has more upside probability than downside probability.

That is really helpful. And if I could just squeeze one very quick one in there. The 35% hedges that you have on the prices, is that a target you are comfortable with or are you going to look to add hedges on top of that already?

Well, we are likely to continue to add as we go through the year.

Perfect. Thanks, guys.

Thank you. We have no further questions at this time. I will now turn the call back to Lisa Wilson.

Thank you, Jason. And thank you for your interest in MPLX. Should you have additional questions or would like clarification on any of the topics discussed this morning, Doug Wendt, Denice Myers and I will be available to take your call. Thank you for joining us today.

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