MPLX LP (MPLX) 2017 Q4 法說會逐字稿

Welcome to the MPLX fourth quarter earnings call. My name is Elon, and I will be your operator for today's call. (Operator Instructions) Please note that this conference is being recorded.

I will now turn the call over to Lisa Wilson. Lisa, you may begin.

Thank you. Good morning and welcome to the MPLX Fourth Quarter 2017 Earnings Webcast and Conference Call. The synchronized slides that accompany this call can be found on mplx.com under the Investors Center tab.

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

We invite you to read the safe harbor statements and non-GAAP disclaimer on Slide two. It is 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.

Now I will turn the call over to Gary Heminger, for opening remarks on Slide three.

Thanks, Lisa, and good morning to everyone. We issued two press releases today, our usual fourth quarter earnings announcement, and one announcing the completion of our previously announced strategic actions. I am pleased to report that MPLX delivered another exceptional quarter, continuing our track record of sequential earnings growth in all four quarters of 2017. The outstanding performance for the quarter and year was driven by record gathered, processed and fractionated volumes, resulting in high plant utilization as well as contributions from our logistics and storage assets.

We also announced a robust organic growth plan for 2018, including the addition of eight processing plants, representing nearly 1.5 billion cubic feet per day of incremental processing capacity as well as 100,000 barrels per day of additional fractionation capacity in the prolific Marcellus, Utica and Permian basins. These additions will increase the partnership's processing capacity by nearly 19% to over 9.4 billion cubic feet per day.

Before I turn the call over to Mike to cover additional highlights for the fourth quarter and full year, I want to take a moment to recognize MPLX's 5-year anniversary. Since its initial public offering in 2012, MPLX has delivered 20 consecutive quarters of increased cash distributions for unitholders, representing a compound annual growth rate of 18.3% over the minimum quarterly distribution established at the partnership's formation. The partnership's asset base and earnings profile has also been transformed over this time period. In late 2015, the partnership expanded into the midstream natural gas business with the addition of MarkWest.

Over the last year, we announced a strategic action plan to enhance shareholder value, which we completed today. As part of the strategic actions, we executed dropdowns to MPLX of assets and services that are projected to generate approximately $1.4 billion of annual EBITDA as well as exchanged MPC's GP economic interest, including IDRs for newly issued MPLX common units. These transactions have transformed MPLX, nearly doubling the partnership's earnings base and improving the partnership's cost of capital by permanently eliminating the IDR burden. The addition of the high-quality fee-based revenue streams further diversifies our earnings and contributes substantially to the distributable cash flow base of the partnership.

Earlier this week, we were pleased to see Standard & Poor's recognize MPLX's transformation and strong credit profile by upgrading the partnership's corporate credit rating to BBB. MPLX is now among the largest diversified master limited partnerships in the energy sector, with a very competitive cost of capital. We are enthusiastic about the future of MPLX, given our robust portfolio of organic projects in the Marcellus, Utica, Permian and STACK, which are among the most prolific and economic shale plays in the country and a diversified suite of logistics assets, we are extraordinarily well-positioned to deliver long-term sustainable growth for our investors.

With that, let me turn the call over to Mike, to review our quarterly financial and operational highlights on Slide four. Mike?

Thanks, Gary. First, let me start out by saying how excited we are to complete the strategic actions with MPC. The IDR buy-in is expected to be accretive, common unitholders in the third quarter and for the full year 2018. We too believe this buy-in creates one of the fastest paths to accretion compared to similar GP transactions and positions the partnership extraordinarily well for the future.

Turning to fourth quarter and full year highlights, we were pleased to report record quarterly financial results with adjusted EBITDA of $569 million and distributable cash flow of $445 million. The partnership ended the quarter with strong distribution coverage of 1.24x and 1.28x for the full year.

Full year adjusted EBITDA was $2 billion, and distributable cash flow was over $1.6 billion. As Gary mentioned, we announced our 20th consecutive increase in our quarterly distribution to $0.6075 per common unit, a 17% increase over fourth quarter last year. With this increase, we delivered 12.1% distribution growth in 2017, meeting our targeted distribution growth rate for the year. We also reaffirm our distribution growth guidance of 10% for 2018. The partnership ended the year with leverage of 3.6x, comfortably within levels appropriate for an investment-grade credit profile.

Turning to Slide five. We provide an update on our Logistics and Storage segment. We continue to make progress on several capital projects. Expansions of our Ozark and Wood River-to-Patoka Pipeline systems, which deliver Cushing's sourced crude to Patoka are on schedule and expected to be complete in mid-2018.

Work on the Robinson butane cavern is nearing completion and is expected to be in service in the second quarter. This is a win for both MPLX and MPC. We are replacing storage services previously provided to MPC by third party midstream companies. MPLX has garnered a fee for capacity arrangement, providing incremental revenue for the partnership, and MPC is able to more effectively optimize its butane storage and handling.

Moving to our Gathering and Processing segment. Slide six provides an overview of our operations in the Marcellus and Utica shales. For the fourth quarter, gathered volumes averaged nearly 2.7 billion cubic feet per day, a new record for the partnership. We continue to experience significant growth in our Utica gathered volumes, with fourth quarter volumes up 19% over third quarter 2017, and up 70% over fourth quarter 2016.

Processed volumes averaged approximate 5.2 billion cubic feet per day in the quarter, also a new record for the partnership. Plant utilization was very strong at 89%. We continue to be encouraged with the volume growth at our Sherwood complex. For the quarter, process volumes at Sherwood averaged over 1.6 billion cubic feet per day. Consistent with our strategy of constructing plants on a just-in-time basis, we initiated start-up of Sherwood IX at year-end. This is the first of three plants that we plan on completing at Sherwood in 2018. We are also pleased with the volume growth at our other facilities in the Marcellus, as each complex set new production records in the fourth quarter.

For the full year, gathered volumes increased 19% over 2016. Higher Utica gathering activity drove this increase, and we expect to grow these volumes in 2018. Full year process volumes increased 14% over 2016 and full year plant utilization increased to 86%, a notable achievement considering we added nearly 400 million cubic feet per day of processing capacity in 2017.

To support continued growth in this basin, we have three additional plants beyond Sherwood under construction. The Houston I processing plant is scheduled to complete in the first quarter, followed by the Harmon Creek and Majorsville VII plants in the second half of the year.

Slide seven provides a summary of our fractionated volumes in the Marcellus and Utica regions. We produced a record 389,000 barrels a day of ethane and heavier NGLs in the fourth quarter, representing a 24% increase over the same quarter last year. Full year volumes increased 19% over 2016. Further strengthening our position as the largest fractionator in the Northeast, we commenced operations of a 40,000 barrels a day de-ethanization plant at Majorsville in November. Additionally, in 2018, we expect to add 20,000 barrels per day of ethane fractionation capacity at both Sherwood and Harmon Creek, and 60,000 barrels per day of propane-plus fractionation capacity at our Hopedale Complex.

Moving to our Southwest operations on Slide eight. Gathered volumes averaged nearly 1.5 billion cubic feet per day for the fourth quarter, representing a 9% increase over the same quarter last year, and setting a new record for the partnership. Process volumes averaged nearly 1.4 billion cubic feet per day for the quarter, also a new record. Our utilization rate for the quarter was strong at 85%. For the year, total processed volumes averaged over 1.3 billion cubic feet per day, representing an 8% increase over full year 2016.

With volumes at our Hidalgo complex continuing to rise during the quarter, we eagerly anticipate the full commissioning of our Argo Plant set to come online in the first quarter. The addition of this plant will double our processing capacity in the highly economic and prolific Delaware Basin. We also continue construction of the Omega plant in the STACK shale play of Oklahoma. This plant is expected to complete by mid-2018. The addition of these two processing plants will increase our Southwest processing capacity by nearly 300 million cubic feet per day in 2018.

We are also pleased to announce our investment in two processing plants through our Centrahoma joint venture with Targa Resources. These Southeast Oklahoma plants, Hickory Hills and Tupelo, will add 270 million cubic feet per day of natural gas processing capacity and are expected to contribute earnings to the joint venture in the fourth quarter of 2018. We will maintain our 40% ownership in the expanded joint venture.

On Slide nine, we provide a summary of our capital outlook. We forecast organic growth capital of approximately $2 billion and maintenance capital of approximately $190 million for 2018. The majority of the organic spend is targeted for our Gathering and Processing segment, primarily in the Marcellus, Utica and Permian basins.

We expect to complete 8 processing plants this year, adding nearly 1.5 billion cubic feet per day of gas processing capacity and 100,000 barrels per day of fractionation capacity. These additions will enhance our position as one of the largest processors and fractionators in the United States.

The remainder of our organic growth capital supports the logistics and storage segment. As I mentioned earlier, the expansions of the Ozark and Wood River-to-Patoka Pipeline systems are targeted for completion in mid-2018, while the Robinson butane cavern is expected to complete in the second quarter.

Additional projects include tank farm expansions in Texas City, Texas and Patoka, Illinois, as well as an expansion of our Marine fleet, which will displace third-party barges currently utilized by MPC. These projects are expected to trade additional fee-based revenues for the partnership, while providing logistics solutions to MPC and other market participants.

Before I turn the call over to Pam to cover financial highlights, let me summarize our strategy. Our G&P assets are located in some of the most economic and prolific basins in the United States and are supported by long-term relationships with a diverse set of producer customers. Several of our largest producers have guided to double-digit production growth over the next couple of years, providing us a long runway of investment opportunities. Demand for natural gas and NGLs is expected to grow well into the future, and we are well-positioned to take advantage of that growth.

On the L&S side, we have high-quality, well-maintained assets that are integral to the extensive operations of MPC. Our strategy is to continue being a great service provider to MPC, while also identifying opportunities to expand third-party business and deliver incremental industry infrastructure solutions.

We are also looking at opportunities to invest in long-haul pipelines, both on the crude side as well as the natural gas and NGL side of our portfolio. We have set our 2018 organic growth capital plan at a level where we intend to fund with retained cash and debt, while maintaining strong coverage and an investment-grade profile.

We do not plan to issue public equity to fund our organic growth capital. Although we only give guidance one year at a time, inventors should have confidence in MPLX and our ability to create long-term value. We are targeting strong coverage and attractive and sustainable distribution growth rate for the long-term, all done while using the appropriate levers to fund the partnership's growth. We believe MPLX is one of the most attractive offerings in the MLP space.

I will now turn the call over to Pam to cover financial highlights. Pam?

Yes. Thank you, Mike. Turning to our financial highlights on Slide 10. We reported record adjusted EBITDA of $569 million and distributable cash flow of $445 million for the fourth quarter. Full year adjusted EBITDA was $2 billion and distributable cash flow was over $1.6 billion. Focusing on the bottom half of this slide, total segment operating income for the full year was $2.117 billion with approximately 63% generated by the Gathering and Processing segment.

After the dropdowns in 2018 and with the full year impact of the 2017 drops, we expect the largest share of the segment income to be generated by Logistics and Storage segment.

On Slide 11, the bridge slide shows the change in adjusted EBITDA from the fourth quarter of 2016 to the fourth quarter of 2017. Since the prior year quarter, we increased adjusted EBITDA by $178 million. The terminal pipeline and storage assets acquired from MPC in the first quarter of 2017 generated $64 million of adjusted EBITDA this quarter, while the joint interest pipelines and storage assets dropped in the third quarter contributed an additional $35 million of adjusted EBITDA.

The increase in the logistics and storage segment was primarily driven by our investment in the Dakota Access Pipeline as well as earnings from the Ozark pipeline. Higher gathered, processed and fractionated volumes accounted for the majority of the change in the gathering and processing segment, which also benefited from higher commodity prices versus the fourth quarter last year.

Slide 12 shows the change in adjusted EBITDA for the full year of 2017. Total adjusted EBITDA increased $585 million over 2016. The Marine assets acquired from MPC in the first quarter of 2016 contributed an additional $35 million of adjusted EBITDA in 2017. $226 million of the increase over 2016 was generated by the acquisition of the terminal pipeline and storage assets acquired from MPC in the first quarter of 2017, while the joint interest pipelines and storage assets dropped in the third quarter of 2017 contributed an additional $48 million of adjusted EBITDA.

Our Logistics and Storage segment adjusted EBITDA increased by $66 million, primarily driven by investments in Dakota Access Pipeline and earnings from Ozark Pipeline. And again, the $210 million increase in Gathering and Processing segment was primarily driven by record gathered, processed and fractionated volumes. Again, segment results also benefited from higher commodity prices in 2017 versus 2016.

On Slide 13, we provide a summary of key financial highlights and select balance sheet information. At the end of the year, we had approximately $1.7 billion available on our bank revolver and $114 million available on the intercompany facility with MPC. We're committed to maintaining a strong balance sheet and ended the year with leverage ratio of 3.6x, comfortably below appropriate levels for an investment-grade credit profile.

Consistent with our strategy to fund organic capital with retained cash and debt, we issued no public equity in the fourth quarter. And as Mike mentioned, we do not anticipate the need to issue public equity to fund our 2018 organic growth capital of approximately $2 billion. Based on the scale and diversity of cash flows following the strategic actions with MPC, we believe the partnership can target a leverage ratio in the low 4s, and safely maintain a solid investment-grade credit rating.

We have a strong record of growing distributions to unitholders, and last week, the Board of Directors of our general partner declared a distribution of $0.6075 per common unit. Full year distributions were nearly $2.30 per common unit, a 12.1% increase over 2016. Consistent with our prior guidance, we expect 2018 calendar year distribution growth of approximately 10%.

With our strong balance sheet and lower cost of capital from the IDR exchange and robust organic growth opportunities, the partnership is well-positioned to deliver attractive long-term returns for our unitholders.

So now let me turn the call back over to Lisa for your questions.

Thanks, Pam. (Operator Instructions) With that, we will now open the call to questions.

(Operator Instructions) Our first question today is from Justin Jenkins from Raymond James.

I guess, just starting out, it seems like the growth opportunities in the Marcellus are very clear. But thinking more on the Southwest side, with the STACK JV and Permian opportunities, how should we think about reaching a bigger mass there on both the processing side, and maybe venturing out into other activities, whether it's through gathering or long-haul transportation on the crude or NGL side to maybe integrate with the refining system that MPC has on the Gulf Coast?

Justin, this is Mike. It's a great question, and it's exactly what we're concentrating on. We're very proud of the position we have in the Northeast, and as we've already discussed, we have a lot of activity there. But you hit it on the head, one of the big opportunities that I think we still have in front of us is to get more active in the Permian. So we are going to be starting up our second plant as well as the STACK. So those two other areas, we need to get better penetration. It's very highly competitive, but we're going to be trying to put a lot of effort in that area to try and grow our presence. And you also hit one of our other strategic initiatives, we do want to try and get into long-haul transport pipelines, whether it be crude or natural gas or NGLs, it's an area of focus, obviously, highly competitive, but it's an area that we're going to try and concentrate on. So expanding our Permian presence is a priority for us as well as continuing the buildout of growth that we have going on up in the Northeast.

Perfect. Appreciate that color, Mike. And just one quick clarification question, if I could. Is there any volume or seasonal component to the fuels distribution contract? Or is that just a fixed quarterly payment?

It's pretty steady overall. It's based on volume in general, but I think you're going to see pretty steady numbers around that $600 million that we have guided previously.

Our next question is from Jeremy Tonet from JPMorgan.

Mike, I want to pick up on the volumes that you had talked about at the G&P business and talk about the potential for double-digit growth you're hearing from your producers. I was wondering if you could provide a little bit more color there as far as where that is across your footprint? And is it kind of greater in some areas versus others? Just trying to feel out for our models how that could shake out for 2018?

Yes. So good question, Jeremy. Overall, there's been two of our largest customers that have been public. Antero came out with guidance for what they're going to be doing as far as growth over the next couple of years, and they're looking at 20% growth for a couple of years. Range has also been public with some pretty strong double-digit type numbers up in the Marcellus area. We've also talked about previously, and you'll see in our results, that the Utica dry gas is an area of concentration for a couple of the large producers in that area as well. So overall, we're pretty bullish that the activity that's occurring on the natural gas side is pretty encouraging for us. Obviously, that's why we're looking at 6 plants up in the Northeast as well as one in the Permian and one in the STACK.

Okay. And then, just want to expand on Ozark a little bit there. If you could just provide a little bit more color on the timing and the side commitments, kind of where the flows are going with that project, that'll be helpful.

Yes. So Ozark, we're looking at the expansion, about 115,000 barrels of expansion for about mid-year, roughly, in that timing. This is on top of the base business that we had only originally acquired it. So it's an area of concentration on our L&S side. In addition to Ozark, we're continuing the expansion from Wood River-to-Patoka as well. We're also building tanks in Patoka as well. So that entire system, we're expanding and upgrading, and we expect it to be online in about mid-year.

Great. And sorry, if I could just clarify, as far as when you're talking about long-haul pipes, is that more on the build it side? Or the buy it side? When you were referencing that earlier?

Well, we're obviously going to look at both. We think there's going to be some assets that come for sale that we'll always evaluate. Absent that, we have a plan that doesn't count on any M&A. So our internal plan is always based on growth organically. So we're going to look at both, but we would like to just get into that business a little bit more. The legacy MarkWest system has been terrific from wellhead to plant, but we also think we should get involved in some of the takeaway projects that are applicable to this growth as well. And then, on the crude side, we're looking to expand our system where we have opportunities to feed MPC assets as well as third party assets.

Our next question is from Kristina Kazarian from Credit Suisse.

Mike, so first, a quick question on volume in the Northeast. Can you talk a little bit more about those operating leverage and how you're kind of thinking about that on the existing asset basis production ramp as well as how we should be thinking about the cadence of cash flow uplift from the 1.5 BCF of processing capacity or the 100,000 barrels of fracs that are coming online this year?

Yes. What we tried our best to do and we put this in our materials, is give you our best estimate of the timing that we see. So as everybody knows, we started up Sherwood VIII back in 2017 and it filled rather quickly. We have Sherwood IX just started up in this last month or so. And then, we have X and XI scheduled midyear and then, towards the end of the year. So we'll see how the production ramps behind that. Same thing on the other assets that we have up in the Northeast, Majorsville and Harmon Creek. So what we tried to do is give you our best estimate of timing, that's in our public materials, and you can see the plant throughout the year. Once all those plants are up, we'll have about 1.5 billion capacity, and we'll try and give more color as the year progresses as to the exact months or better timing. But for right now, what we have in our public materials is our best timing as we see it for those plants coming online.

Perfect. And then, just turning back to the Southwest. A little expansion on the question that got asked earlier. Can you, maybe, talk a little bit more around the expanded Targa JV that was announced earlier this year as well as additional opportunities for things like, maybe, another Omega plant?

Yes. So down in that area, we have two initiatives going on. So we have the Omega plant, which will be coming on mid-year, and then we looked at an opportunity with Targa, where we are a partner with Targa in a JV, where Targa is a 60% owner and we're a 40% owner. There's two separate plants. The Tupelo plant was a 100% owned by Targa, and we've negotiated a deal with them where we will contribute that into the JV with Targa, so we'll pick up 40% ownership there. And then, our Hickory Hills plant is a new plant, it's actually being a relocated plant that Targa had up into the Hickory Hills area in Hughes County. So both of those are additions that we put together in this large JV that we have with Targa, but it's all meant to expand our presence in the Oklahoma area, to complement what we have going on with our Omega plant as well.

Our next question is from Brian Zarahn from Mizuho.

Just following up on the Permian. Obviously, the basin is poised for a continued robust production growth. And how do you view the attractiveness of potential investments in the Permian against the increasingly rising competition from midstream players and pressures on returns?

Yes. It's a good question Brian. We would really like, strategically, to enhance our presence in the Permian. It's one of our strategic initiatives, but as you mentioned, it's very highly competitive out in that area. So we'll be disciplined in our approach. We'll look at a lot of different opportunities, whether it's on our own or in a JV capacity or with some key business partners. But ultimately, I hope you're going to see us grow our presence there, both on the G&P side as well as on the pipeline side of the business.

And then, as a follow-up to fuels distribution since it is a new business for MPLX, can you give a little more color on the volume fee structure behind the $600 million of expected EBITDA? And are all the volumes going to MPC or any third parties?

Yes. So fuels distribution, it is a volume-related metric. Overall, we think it's pretty stable. So the minimum volume we expect MPC to hit pretty easily, the higher end of the volume will be pretty tough. So we think it's going to be in that sweet spot that will be pretty easy to hit. It was asked earlier whether there's some seasonality, there's a little bit of seasonality, just that, in the normal course of the year. But overall, I think it's very stable and the most important thing about fuels distribution, I think not everybody in the market has picked up, is that it is a service contract, so it comes with no maintenance capital. So we've often talked about this drop that just occurred of $1 billion of EBITDA, $600 million of it is fuels distribution, which has no maintenance capital to it. So obviously, it's much closer to DCF than it is to EBITDA. So we're pretty excited about that source of cash flow. We think it's very stable. Obviously, it's aligned with MPC's interest. So we're pretty excited about that $600 million.

Our next question is from Eric Genco from Citi Investment Research.

Just wanted to follow-up. We talked in the past about trying to expand out the legacy system third party revenue opportunity. Now that everything is kind of into the portfolio, is there anything that you could maybe update us on there? Something that you're seeing? Opportunities?

Nothing specific yet at this point, Eric. As you know, we just did the drop today, but we are going to be looking at that. Our whole L&S team is poised to look for two things: we're looking how can we better serve MPC with a focused, concentrated effort on the logistics side, and we hope to do some real good things there; as well as look for opportunities for some third-party participation. But too early to give you any specifics, obviously, we're pretty excited about picking up 10,000 miles of pipe, 60-some terminals. So we're excited that we got to be able to find some opportunities.

Okay. And then, I guess, separately, maybe a bit of a follow-up, I appreciate that some of the plants in the Northeast are scheduled to come on midway through the year. If there was, hypothetically, another 6-month delay in ME2, given the latest actions by the Pennsylvania DEP, how sensitive do you see 2018 to that sort of event? Is that something where you might push out some of those plants? Or what would be the option for NGL takeaway if that were to occur?

Now we're very confident we can continue to clear the basin. Obviously, we're doing it with a large rail facility in Ohio. We have a keen interest in ME2 coming online, and we would love to see that pipeline be successful, in the short-term, but absent it coming online, to your point, if it were delayed another six months or so, we don't see any impact to our system. So we're trying to stay ahead of that and have our own contingency. Obviously, we do not want to be in a situation where we're not able to continue this path of processing plant growth. So we're feeling pretty good about it, but we're also hopeful that ME2 will come online as soon as it can.

Our next question is from Jerren Holder from Goldman Sachs.

Just wanted to check, just given strengthening NGL prices, are you seeing producer customers shift drilling programs more to wet gas acreage versus dry gas acreage? Or would you expect that to happen if you were to see higher commodity prices from here?

Obviously, Jerren, the NGL prices are very supportive for wet gas development. I don't know that we're seeing a lot of switching. We're just seeing a lot of growth on both sides. So we're pleased that the Utica dry gas side, particularly in Jefferson County has picked up throughout the year. If you look at our first quarter versus fourth quarter results on that side of the business, we've gotten a big increase in the amount of Gathering and Processing that's occurring there. And then, on the wet side, we're pretty full through Sherwood VIII, that was the most recent plant. And now Sherwood IX coming on. So I just that I think there's a good opportunity for growth on both sides of the wet and the dry right now.

And just as a follow-up. Now that Utopia is online, have you seen an increase already in utilization of some of your assets? Or should we expect like an earnings uplift from that project beyond?

No. One of the things that we have going on is, I think, ethane will be an opportunity for us in the future. We do have two de-ethanizers in the Northeast planned for 2018. But short-term, it's a relatively small impact to our existing system in our Seneca and Cadiz system to supply that a little bit of incremental volume up into Canada. It's about 10,000 barrels a day. So it's a relatively small number, but when we bring on two 20,000 barrels a day of de-ethanization, you'll see a 40,000 barrel a day increase in our de-ethanization capacity.

Our next question is from Michael Blum from Wells Fargo.

Just following up on the ethane question. Just curious, as you're adding this de-ethanization capacity, where is that incremental volume going?

The incremental volume is going to several locations. We have access to the ATEX pipeline of the Gulf. We have access to Mariner East to the East Coast, Mariner East 1. We have access to Mariner West to Ontario. And now as was mentioned the Utopia line, which ties into our Cadiz, Ohio plant, so we are moving some incremental production on the Utopia, but we also still are moving incremental on to the other lines as well. As those start to fill up, the Utopia has capacity to take more ethane as well as the Mariner East 2 line. When it comes on there'll be more capacity to the East Coast. So those are the primary drivers. And then, of course, longer-term, the shale plant, cracker plant, within the next couple of years, and potential other growth within region.

Okay. And then, my other question is just to clarify. So are you now not going to be providing forward year guidance going forward? And then, I guess, related to that, I think you had at least started to talk a little bit about distribution growth beyond 2018? I was wondering if you could comment on either of those two?

Yes. Michael, obviously, you know me from the past. I am not a fan of giving EBITDA guidance, but I do think we've given quite a bit of guidance that everybody can kind of get their models in line. We are showing 10% distribution growth, so we've guided to that. We've also guided that we're targeting for greater than 1.2 coverage. We've given our capital estimates of approximately $2 billion on the organic side of growth, and $190 million on the maintenance side. And we've given our best estimate that we can on the timing of when those plants come on. So I think you have a package together that can help your model as best as we can do it. As far as long-term guidance, more of a fan of doing one year at a time, evaluating the market. I do think we're offering two things that, I think, is compelling for investors. We are offering an attractive distribution growth rate, especially compared to other large-cap MLPs. I mean, with today's transaction, we're going to be approximately a $30 billion market cap company. And we're also providing good stability. Investors, obviously, over the last six months or so, have shown large interest in stability, and we're showing that through two venues. One is, good coverage, we finished the year at 1.28, and a strong balance sheet. We finished the year at 3.6 debt-to-EBITDA, and we feel we have considerable room there, as Pam mentioned. Our credit profile supports low-4s on debt-to-EBITDA, and we are going to target for strong coverage. So I think we have a pretty attractive offering, both on stability and growth. And we've given you, in our view, a good amount of guidance to show you what we're thinking, and we'll try and update as best we can the timing of the capital as it comes online during the year.

And our next question is from Dennis Coleman from Bank of America.

A lot of mine have been asked already, but I wonder, some of the growth that you're talking about could be inorganic or M&A-driven, and you've been very clear about no equity issuance for organic growth. How do you think about funding, something say, if it's a little bigger maybe on the corporate side and balanced between debt and equity financing there?

Yes. That's a great question. Obviously, we have said, for our organic program, we don't plan to issue any new equity, but if we were able to find a large project or M&A or something along those lines that we thought was attractive and could create value for us, in that case, we would issue equity. So our base plan doesn't include any M&A activity and that's why we told everybody we're in a self-funding model for organic, but we want to participate in the assets that are available. We have a few ideas ourselves, and we'll continue to look. We'll be a disciplined investor, obviously, that's our mantra. And if we find something that can work for us, then we'll finance it accordingly.

Okay. And then, more of just the one off. A lot of the larger growth-oriented questions have been asked, but the Marine assets, you talked about adding some vessels there, I think. What kind of scale are we talking about?

Yes, that's a great opportunity for us. So John Swearingen's team provides Marine services, predominately the MPC at this point, and we're using roughly 40% outside contract equipment, 60%, roughly, in-house. And we're looking for opportunities to increase our equipment there. So it's one of our targeted goals is to move that percentage up. We've made the first move with the announcement that we've done recently, and John and his team are going to continue to look for assets that are at a good price that we can take in house and bring onto our fleet.

And we do have time for one final question. Our last question today is from Corey Goldman from Jefferies.

Just one quick one, on ME2. Can we expect additional process train and frac trains at MPLX post ME2 in service? Or will MPLX be changing from kind of sourcing local demand in rail and truck to ME2?

I think our goal there is, we're supportive of that project as additional takeaway in the region. So anything that provides opportunities for our producers to enhance their netbacks, we're supportive of. At the same time, we're going to look to participate in any of the logistics assets that we can. One of the things that we'll be doing on a go-forward basis is look at all the opportunities, whether it's takeaway pipes such as ME2 or any other logistics assets to continue to enhance our earnings stream up in that area. It doesn't matter to me which consultant you've used, but if you look at natural gas projections into the future, the Marcellus Utica will continue to be a very strong part of the equation. So we're going to stay active in that area and continue to try and be a very good service provider to the industry.

Sorry, maybe I didn't ask it specifically. Because you don't need ME2 right now for the projects you have announced for frac and processing, when ME2 does come into service, do you expect additional frac and processing trains at MPLX to then fill that? Or will you be moving those volumes that you're already making and sourcing through truck and rail to ME2?

No. We expect to continue to grow our frac and our processing. Sorry if I misinterpreted your question there. But yes, if there's additional outlets and there's additional growth. We plan to continue to process that gas and frac that material, and continue to support the producers' goals.

Got you. Okay. No, that certainly answered it. And just one really, really quick one. I didn't see it in the presentation. I don't know if it's not being disclosed anymore. But just given the run in NGL prices, and the expected netback enhancement post some of these projects coming into service, can you guys provide the NGL and gas sensitivities in 2018?

Yes. That hasn't changed. So what we've said historically is a $0.05 move in the NGL basket would be about $18 million a year of DCF.

Thank you for your questions today and your interest in MPLX. Should you have additional questions or would like clarification on any of the topics we discussed today, feel free to give Doug Wendt, Denice Myers, and myself, a call. Thank you.

Thank you. And this does conclude today's conference. You may disconnect at this time.