MPLX LP (MPLX) 2018 Q2 法說會逐字稿

Welcome to the MPLX second quarter earnings call. My name is Elan and I will be your operator for today's call. (Operator Instructions) Later we will conduct a question-and-answer session. (Operator Instructions) Please note that this conference is being recorded. I will now turn the call over to Kristina Kazarian.

Kristina, you may begin.

Sounds great. Good morning and welcome to the MPLX Second Quarter 2018 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; Mike Hennigan, President; Pam Beall, CFO, and other members of the management team.

We invite you to read the safe harbor statements and non-GAAP disclosure on Slide 2. It's 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'll turn the call over to Gary Heminger for opening remarks.

Thanks, Kristina, and good morning to everyone. This was another impressive quarter for our midstream business and I am pleased to report that MPLX performed exceptionally well during the second quarter with record adjusted EBITDA of $867 million. Our distributable cash flow was up 12% sequentially, which provide a strong distribution coverage of 1.36x and a solid leverage level of 3.7x. Not only has our business continued to grow compared to last year, but our growth since first quarter of this year continues to be very strong. We experienced record volumes across our GMP and L&S segments.

We look forward -- as we look forward, the macro backdrop and prospects for our business remain positive. We believe that the U.S. production growth and global demand will remain strong across all of our key hydrocarbons, crude oil, natural gas and NGLs and the opportunity set remains robust in all the regions which we operate. Additionally, this quarter we also announced some exciting new Permian infrastructure projects as well as commenced operations of new plants in the Northeast in STACK both of which Mike will discuss shortly.

As we assess our opportunity set we intend to maintain our focus on self-funding the equity needs of our organic growth with an emphasis on higher coverage and lower leverage as we believe this approach will position the partnership well and help us drive long-term sustainable shareholder value.

With that, let me turn the call over to Mike to review our operational highlights.

Thanks, Gary. Slide 4 provides an overview of our Logistics & Storage segment. The L&S segment reported second quarter adjusted EBITDA of $526 million, which increased 32% year-over-year after adjusting for the impact of dropdowns. Drivers of the increase included 2 of our recent pipeline investments, the Bakken Pipeline and the Ozark Pipeline expansion. Total pipeline throughputs averaged 3.3 million barrels per day, an approximately 10% increase over second quarter 2017. As we completed major expansion work on the Ozark and Wood River-to-Patoka pipeline systems. The system's current capacity is 345,000 barrels per day, which is expected to increase to 360,000 barrels per day by the end of the third quarter. Both of these projects create additional throughputs and incremental fee-based revenue for MPLX. During the quarter, we also added 12 barges to our marine fleet, which is a 5% increase in its overall capacity, taking the opportunity to increase our capabilities while decreasing MPC shipments with third party providers.

Moving to our Gathering & Processing segment. Slide 5 provides an overview of our operations and some highlights for the quarter. Within the G&P segment, we reported second quarter adjusted EBITDA of $341 million, an 18% increase over the same period last year. As we continue to see demand growth across our system, we have commenced operations on 5 of our 8 planned new processing plants for the year, bringing our total system capacity to 8.7 billion cubic feet per day. We also announced multiple new projects across both the Marcellus Utica and the Permian, which I'll talk about shortly, as I get into the specific regions.

Slide 6 provides an overview of our operations in the Marcellus and Utica Shale during the second quarter. Gathered volumes increased 46% over the same quarter last year to an average of 2.8 billion cubic feet per day, setting a new record for the partnership. The increase was primarily driven by higher Utica dry gas volumes. Processed volumes averaged approximately 5.2 billion cubic feet per day in the quarter, representing a 10% increase over the same quarter last year. The increase was primarily driven by new plants that we have placed in service over the last year, including Sherwood 9 and [Houston number 1] plants that commenced operations in the first quarter.

We remain enthusiastic about the growth prospects of the Marcellus Utica based not only on our internal forecast developed from input from our producer customers, but underpinned by the economics resulting from it being the lowest cost region in the United States. As in-basin growth continues, we were pleased to commence operations of the 200 million cubic feet per day Majorsville 7 plant in July. To support additional growth of the Northeast, we expect to add 600 million cubic feet per day of incremental capacity during the second half of the year through plant additions at our Sherwood and Harmon Creek complexes.

Slide 7 provides a summary of our fractionated volumes in the Marcellus and Utica region. We produced a record 407,000 barrels per day of ethane and heavier NGLs in the quarter, a 16% year-over-year increase. During the second half of the year, we expect to add 100,000 barrels per day of new fractionation capacity, which consists of 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. These capacity additions will further strengthen MPLX's position in the Northeast.

Slide 8 highlights some of our activities in the Southwest in the quarter. Gathered volumes averaged nearly 1.5 billion cubic feet per day for the second quarter, representing a 6% increase over the same quarter last year. Processed volumes averaged over 1.4 billion cubic feet per day for the quarter, an 8% increase over second quarter 2017. Much of this increase was driven by volumes at our newly constructed Argo plant in the Delaware Basin, which continued to ramp up its volumes during the quarter.

In the STACK shale play in Oklahoma, we commenced operations of the 75 million cubic feet per day, Omega processing facility in July. Lastly, we're pleased to report additional progress on our Permian growth strategy and announced additional projects in the Permian Basin. These include a 200 million cubic feet per day gas processing plant called for Torñado in Loving County, a connecting high pressure gathering system and a gas interconnect pipeline system in the Delaware Basin. Also, a 10% equity interest in the Agua Blanca gas pipeline that runs from Orla, Texas, to Waha, Texas. The project currently has 1.1 billion cubic feet per day of long-term commitments and will connect to the Torñado processing plant and associated gathering system along with other additional infrastructure in the region. These midstream assets will continue to expand our footprint in the Southwest and provide MPLX with both growth and diversification of cash flows in some of the most important basins in the country.

Before I turn the call over to Pam, I want to take a moment to summarize where we are strategically. First, in the Logistics & Storage segment, our assets and services are supported by long-term contracts and provide a significant base of stable cash flows. These assets and services are integral to the underlying operations of MPC, but also provide MPLX with a strong growth profile, as we increasingly focus on identifying opportunities to expand third party business and deliver incremental industry infrastructure solutions to the market.

We have a desire to invest in long-haul pipelines in the Permian, both on the crude side as well as the natural gas and NGL side. Also adding export capacity continues to be a focus for the partnership. We continue to evaluate potential investment opportunities, but remain disciplined in our approach. In the Gathering & Processing segment, we remain bullish on U.S. crude and natural gas production and are enthusiastic about the long runway of investment opportunities across all our key regions.

We continue to be bullish on the Marcellus Utica. While associated gas out of the Permian will be an important market dynamic, we continue to believe that the Northeast has the lowest cost structure for natural gas production in the U.S. and will continue to provide attractive opportunities for infrastructure investments.

Industry volume growth forecast and producer commentary around increasing lateral lengths, lower transportation costs as new in-basin takeaway capacity comes online and the shift to capture rich gas economics all contribute to our belief in the long-term structural importance of the Northeast. Obviously, this confidence is backed by our real-time capital investments, as we plan on commissioning Sherwood 10, Sherwood 11 and Harmon Creek gas processing plants as well as the Hopedale IV fractionator towards the end of 2018. In addition, 3 new additional plants supporting Antero Resources are already sanctioned for 2019, Sherwood 12, Sherwood 13 and Smithburg 1. Site preparation has begun on this new site named Smithburg which is located within a couple of miles of Sherwood and includes a layout that can easily accommodate 6 plants for an additional 1.2 bcf of processing capacity as demand and conditions in the region dictate.

We continue to execute a self-funding model and intend to finance our approximately $2 billion of organic growth without issuing equity. Our plan is to fund this growth with retained cash and debt while maintaining an investment grade credit profile and strong distribution coverage. We believe NPL acts as one of the premier offerings in the midstream space and is positioned to deliver long-term sustainable distribution growth to our investors.

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

Thanks, Mike. Turning to our financial highlights on Slide 9. We reported adjusted EBITDA of $867 million and distributable cash flow of $695 million for the second quarter, both of which are quarterly records for the partnership. The Logistics & Storage segment adjusted EBITDA was $526 million while the Gathering & Processing segment contributed $341 million in adjusted EBITDA. The bridge on Slide 10 shows the change in adjusted EBITDA from the second quarter of 2017 to the second quarter of 2018. Since the prior year quarter, we increased adjusted EBITDA by $393 million. The assets and services acquired from Marathon Petroleum in the third of 2017 and the first quarter of 2018 generated an increase in adjusted EBITDA of $283 million with each of the dropdown's contribution broken out separately here on the waterfall.

Excluding the impact of the dropdowns, the increase in the Logistics & Storage segment was primarily driven by record pipeline throughputs and the investments in the Bakken and Ozark Pipeline systems. The quarter also benefited from the completion of the Robinson butane cavern and the expansion of our marine fleet. Lastly, the increase in the Gathering & Processing segment was primarily driven by our record volumes, but we also benefited from higher commodity prices.

Slide 11 provides a summary of key financial highlights and select balance sheet information. We had approximately $3.1 billion of liquidity at the end of the quarter with approximately $2.2 billion available on our bank revolver and nearly $900 million available on the intercompany facility with MPC. Consistent with our intent to manage [through a] self-funding model, no public equity was issued in the second quarter and our distributable cash flow supported a 1.36x coverage for the quarter. We're committed to maintaining a strong balance sheet and we ended the quarter with a leverage ratio of 3.7x, comfortably within levels appropriate for an investment grade credit profile. MPLX has a strong track record of growing distributions to unitholders and yesterday, the Board of Directors of our general partner declared a distribution of $0.6275 per common unit. This distribution supports our prior guidance and we continue to expect 2018 calendar year distribution growth of approximately 10%. With our strong balance sheet and robust growth -- organic growth opportunities, we remain confident in our long-term value proposition for our investors.

And now, let me turn the call back over to Kristina.

Thanks, Pam. Before we start the Q&A, I want to note that we will not be taking any questions today around the future plans concerning MPLX and ANDX following the combination of the parent companies and request you refrain from doing so. We will provide updates to the market when appropriate on this topic. Additionally, we ask that you limit yourself to one question, plus one follow-up. You may re-prompt for additional questions as time permits.

With that, we will now open the call to questions. Operator?

(Operator Instructions) Our first question today is from Jeremy Tonet from JPMorgan.

Just wanted to start off with the L&S segment and it seems like quite a big step-up there year-over-year and quarter-over-quarter. I was wondering if you could dive in a little bit more, 2Q, what were the drivers over -- versus 1Q of '18? What led to that step-up? Is there seasonality or is that ratable? How should we be thinking about this level that you achieved in the quarter?

Yes, Jeremy, we're feeling really good about our results in the quarter. Specifically in L&S, as we mentioned, we had record pipeline throughputs on both the crude and the product side. Also contributing was Ozark as well as DAPL. So our pipelines were a large portion of the contribution. In addition, our terminal volumes were up. Mentioned on the call that we bought additional marine equipment, so marine was contributing and Pam mentioned the Robinson butane cavern. So pipelines, terminals, marine and cavern activities were all contributing, so feeling pretty good about the L&S contribution for the quarter.

So that sounds like it's pretty ratable in nature is kind of our take there I guess. Mike, you've also kind of discussed with the investment community kind of your thoughts on -- or looking for thoughts on what is the optimal mix of growth -- distribution growth, distribution coverage and leverage. I was just wondering if you could touch base with kind of where MPLX sees the optimal balance at this point and kind of how that's going to influence how you run the business past this year, 2019 and beyond?

Yes, Jeremy, for 2019, obviously, we're not going to give that guidance at this point. You'll get that at the end of the year when we have our Analyst Day. But as you know from our previous meetings, we have been talking to investors quite a bit and basically, we're saying self-funding is our #1 goal. We want to show strong coverage and I think you saw in our results, we're at 1.36x for the quarter, 1.33x for the first half. So that was the commitment we made that we were going to continue to show strong coverage. And our balance sheet continues to be very strong, 3.7x debt to EBITDA as far as leverage concerns. And we're still offering pretty attractive growth in this space. But as we've talked about, investors are not valuing that growth at the same level that they were previously. So we'll have to talk with Gary towards the end of the year and come out with where we want to be next year. But I don't think you're going to see any variations on the first couple of components. We want to be self-funding, we want to show good coverage, and we want to have a good balance sheet and then we'll have to find out what's the optimum growth going forward.

Our next question is from Shneur Gershuni from UBS.

Just a quick clarification from your prepared remarks before my questions. On Slide 10, you were talking about $1 billion of L&S drop and you talked about contracts and so forth. Did you have the average duration of the contracts available to share with us as well as what the typical length of the contracts are for the assets that were dropped?

Yes, Shneur, what we typically do is try and set up contracts at market-related numbers. So in a pipeline world, you'll typically see 10 years as a typical pipeline commitment. Obviously there are variations where you might have a 5-year or something longer. Terminals tend to be a little shorter in duration, depending on where they are, but our goal is to be market related and make sure that we have terms and rates that are consistent with where the market is.

Did you have the average length of the portfolio as it stands right now?

No, I don't have that number of the top of my head, Shneur.

Yes, Shneur -- Shneur this is Pam. So the very first assets that were dropped into the partnership would be the first to have their contracts matured and those were a significant amount of our pipeline operations and those were 10-year contracts. So October 2012 is when we IPO-ed the partnership. So we're looking at 2022 as kind of the first date that some of our contracts will start to mature. So we still have a very long average life of the assets and considering that we just dropped $1 billion of EBITDA on the partnership here in the first quarter and those contract lives are 10 years.

Our next question is from Tom Abrams from Morgan Stanley.

One quick question on Smithburg, you have one plant in '19, I think you indicated in your comments. But there are 6 in your slide that are indicated for I believe it was '18 and '19. So I just wanted to know if that means all come in '20 or just what the timing is of those would you say?

Yes, Tom. So what we're saying there is, well, let me backtrack just to orient you for a second, we said we are going to do 8 plants in 2018, 5 of which we've already completed, so execution is still a key goal for us. We have 3 additional plants still to come online, which is Sherwood 10, 11 and Harmon Creek 1. So that's the 2018. We're not giving full 2019 guidance, but we wanted to tell you what we've already sanctioned in 2019 and that's the Torñado plant which is our next plant down in the Permian Basin and we've already sanctioned 12, 13 and Smithburg 1 up in the Northeast, but we're also commenting about a new site. So you're going to hear us talk about Smithburg more in the future and we were telling everybody that this site itself as we go in and prepare it for additional growth, this site can handle an additional 6 plants. So you'll get more color on the full 2019 plan towards the end of this year, but we wanted to show the market even though we're at the midpoint of this year, we've already sanctioned 4 plants into next year, we expect to do more, we'll give you more color on that as it plays out. And we're obviously executing on the 8 plants that we are going to do in 2018. So that's what that was.

Got it. Okay. And then my follow-up, which is unrelated goes to your Permian infrastructure expansion press release and the phrase in that which was positioning the partnership to evolve its business model to include participation in a number of oil and gas pipelines. So just wonder if you could elaborate a little bit on that.

Yes, Tom. I've said for a few call here, one of our strategic goals is to take a very strong GMP model and expand it. So we want to expand that model, which to me means, I want to get into long-haul pipelines, which can be on both the residue gas side, NGL side and as well as the GMP model. We're also still very interested in expanding into the crude world as well down in the Permian. So we've talked for a couple of quarters how we continue to assess a potential crude project, a long-haul crude project that's still in progress. Hopefully, we'll have something shortly to tell you on that one. In addition, we did disclose that we have picked up a small equity interest in a residue pipeline out in the Permian. But really what the comment refers to is we're going to expand our Permian presence that's a strategic goal. We want to expand the model on the GMP side, that's a strategic goal. We want to get into more long-haul pipelines, that's a strategic goal. So all of those things, we're trying to mention and then execute on.

Does it make sense for you to have a pipe into Cushing now that you have Ozark out of Cushing and particularly with the cap line dynamic in a couple of years?

Yes, it's definitely an area that we're going to continue to look at. As you know, we're up to 345,000 on Ozark today. We're going to expand up to 360,000 barrels. We hope at some future date that cap line becomes an important part of the portfolio, but that continues to progress. We have nothing new to report there at this point. But, yes, I think you're thinking about it right. We're bullish on U.S. crude production, we're bullish on the Permian, we want to look for opportunities, whether it be the Ozark type expansions that we've been doing or some other activity as far as crude pipelines to the Gulf Coast. We're also very interested in exports. That's an area that we're going to put focus on. We've mentioned that we have a Texas City tank farm that we're just starting to build out. And over time, we hope to give you guys updates on how that progresses. But exports is another area that we continue to focus on.

And we do have a follow-up question from Shneur Gershuni from UBS.

Just a follow-up and sort of building on the question that Tom just asked. In your pursuit of acquisitions in the Permian, obviously, the potential fear always with acquisitions is that you can overpay certainly in a footprint like the Permian where there is such a lot of activity and so forth. Are you -- can you walk us through kind of your strategy around that? Have there been a bunch of assets that you have looked at and have not purchased because of price? I mean what can you do to dissuade the fears or concerns out there that you won't end up in a position where you over -- or the market fears that you've overpaid for an acquisition?

Yes, Shneur, to the first part, we are active looking to get every package that's out there. So we are doing a lot of asset evaluations in the Permian and elsewhere. But you're right, there's been a lot that's occurring in the Permian. The best way that I can alleviate the fears is to tell you that our model inside the Marathon family is to stay disciplined. And that's what we continue to do. So have we bid? Yes, we bid on assets. Have we come close to winning? No, we have not. And that's partly because we take an approach that says, this is how we evaluate based on our discipline and at the end of the day, we're not unhappy if we're not successful if it goes for a much higher price. We continue to believe that the pricing that's occurred has been above the values that we place on the assets. So we'll continue to participate, we'll look for an opportunity, but we're not going to put ourselves in a position where we overpay for an asset.

So I think the best way to -- this is Gary, I think the best way to illustrate that is we haven't bought anything. So we've been very capital disciplined and will continue to be capital disciplined. Mike hit it right on the head.

And then maybe one last follow-up on the Northeast. Obviously, there's a thesis out there about concerns about Northeast gas and so forth. I was wondering if you can talk about movements of rigs on your acreage in the Northeast. It looked like they were falling during the first quarter, looks like they may have been picking up during the second quarter. Can you sort of talk about what producers are doing on your acreage and if they're moving to wet versus dry? Any color as to how things are playing out for your acreage in the Northeast?

Yes, Shneur, I'll give you a couple of comments. First off, obviously we're pleased with the growth that we continue to see in the Northeast. We recognize the concept out there of associated gas in the Permian, it's free, and I've said many times it can't be free, but after free we believe the Marcellus Utica area is the lowest cost natural gas production in the U.S. and will continue to be a growth area for us. You're seeing it in our results. To date, you're seeing it as we continue to invest capital as I mentioned earlier, we're putting 8 plants in 2018 in service, 6 of them are in the Northeast, we've already told you that we have sanctioned 4 plants next year, 3 of them are in the Northeast. As far as the specifics on rigs, I'll give you 2 comments. One is obviously you track all the parameters, but one of the things that's common in the industry right now is the length of laterals that's been deployed in the spaces. So you could have the same amount of rigs or even less rigs yet produce more gas because you have longer laterals. And the amount of wells that are going [on in a pad is also] important part of what's happening here. So I wouldn't look at just that one parameter. You have to look at multiple parameters. So rig count is important, number of wells per pad is important, length of laterals is important. So all those things kind of come together and what we do is, we are obviously in constant communication with all of our producer customers so that we know how to service them going forward and we're feeling really good about the runway that we have particularly in the Northeast as you mentioned.

Our next question is from TJ Schultz from RBC Capital Markets.

Just a follow-up in the Permian and your interest in long-haul projects. There are obviously several projects out there, but just from a timing perspective for those to come online, do you have any view just that additional flaring would impact the outlook for any ramp on your assets as they are coming online or online now? And then does that increase your need to or level of interest in participating in some of those gas takeaway options?

Yes -- no, I don't think that phenomenon is going to impact our plan or our strategy at this point. What we disclosed today is that we plan on building a Torñado plant and that should be online roughly mid 2019. Hopefully, we're onto the next project at this point, and at a later date we will be able to give you some more color if we develop another. We are still pretty bullish [in the] area. The signal that we're sending is we're going to continue to be a player in the Permian. We're going to expand the model as we look to participate in other facets of the business. And hopefully over time continue to show you that we have more expansion into the long-haul pipes, additional plants and more activity down in that area. And we are very proud of our position we have up in the Northeast. But we also want to diversify our cash flows and have a bigger and better presence in the Permian.

Okay, got it. I guess just a follow-up from me would be back on the distribution coverage versus growth. I think just more broadly, has your view changed at all on what type of distribution coverage you want longer term in this market or what you think the market evolves to just that would give the most comfort for Investors as far as moving forward self-funding?

Yes, as I mentioned earlier, TJ, we're committed to the self-funding model and we're committed to showing strong coverage. We're north of [1.3x today]. So I think we're giving investors what they're looking for as far as our model, our business model. We're also very attentive to the balance sheet, we're showing [3.7x] on a leverage ratio. So we're feeling really good about that. We are continuing to evaluate what do we think is a better long-term growth. In meantime we wanted to live up to our word of 10% average distribution growth for this year. But I will tell you, we remain a little frustrated that our equity trades where it does when we think we're offering the market a pretty strong midstream offering.

Our next question is from Chris Sighinolfi from Jefferies.

Mike, just wanted to follow up on maybe a question Shneur was asking with regard to some of the sequential movement in your process volumes. Obviously noticed growth, and you talked about the number of plants you have in the pipe and the announcements for next year. But looking specifically at Seneca, it looks like there was about a 55 million cubic feet a day drop sequentially from last quarter. Is that just Antero moving to dry areas or is there something else you could speak to on that? Just any color would be of help.

Yes, Chris, in that area, a couple of things are going on. As you know Antero was concentrating on their Marcellus activity as we talk about Sherwood and Smithburg. The Utica activity has been mostly drive related, but obviously pricing where it is today, we're expecting movement and we are seeing some rigs move from the dry to the wet area in the Utica. I would also comment one of our producer customers, Ascent put out a big announcement at the end of June that they've acquired additional acreage in the wet area. So I think you're going to see some additional volumes come up there and you're right to point out that it's the one area where our utilization is not as high as in the other areas, but we're still looking forward to some growth continuing in that area as we move forward.

Okay. And then in terms of, I think you had mentioned benefiting in the period from the rise in NGL price. Can you just remind me the, I guess, aggregate NGL length at this point?

Well the rule of thumb that we've been providing is that every $0.05 increase in the NGL price is worth about $18 million a year in DCF. And so from -- we had a nice move in NGL prices sequentially from the first quarter to the second as well as from the second quarter of 2017 [to the] second quarter of 2018. So that's one way to think about it.

Your next question is from Jerren Holder from Goldman Sachs.

Just starting off with maybe equity earnings. What drove the distributions from equity method investments up quite a bit from the first quarter into the second quarter and is that a good run rate to use going forward?

Yes, we don't typically provide that level of detail and break it out by equity method a company that we get distributions for -- from. There can be variations in timing. Obviously that's the part of the business that we don't operate or control. And just a reminder for people that includes [some loop] low cap and then there are other equity method investments that are not included in that particular set of drops that we made in the third quarter last year. So there can be some variations to that. Again those are assets that we don't necessarily control. We don't have as much line of sight into those as we do the assets that we operate ourselves, but there can be some variability.

Okay. And then what were the volumes on Ozark in the second quarter and what should we expect in the third quarter?

Yes, we don't provide that level of detail either on the volumes by specific pipeline.

Our next question is from Dennis Coleman from Bank of America Merrill Lynch.

Just to maybe swing back to the -- all the questions on the Permian and the Permian expansion just for a minute. One of the ways that mostly producers have been able to get a foothold is through support from the sponsor. And while obviously not a producer, I wonder just is that a possible avenue for capturing pieces of these projects that might be available to you, sponsorship or take-away commitments from MPC?

Yes, one of the things that we look at, while we may not be a producer, we have a very big refinery in Galveston Bay that certainly has requirements and is a big purchaser of Permian based crudes every day. So, while we're not a producer, you can look at it as the sponsors has a strong demand in that area. And to the question earlier, do we have interest in barrels over into Cushing and as we get to Cushing you can get to anywhere. So the sponsor is, as always, very interested in what makes the most sense.

And then maybe somewhat related follow up and I don't know how to quite phrase this. But there's been a couple of big midstream packages that have transacted recently and it seems that perhaps a little bit more reasonable prices. And so I guess the question is do you think about -- you've announced some smaller acquisitions today. But can you get better prices if you're willing to buy a $3 billion package or a $5 billion package?

Yes, Dennis, I would say, I don't think the size of the package determines what we think the reasonable misses of the value. What I would tell you is what I mentioned earlier is, we have a disciplined approach. We look at each asset package, we value it at a level that we think is appropriate to create shareholder value, unit holder value for our unit holders and that's where we bid. And when we make it to the second round we continue to due diligence and fine-tune our numbers. And Gary mentioned it earlier, at the end of the day we're going to stay disciplined. Whether it's a small package [or a large package], we're interested in looking at all the packages out there. If we think we can acquire them and create value, then we're going to bid at the number that that makes sense for us.

Our next question is from Matthew Phillips from Guggenheim.

Just a couple of model questions. Did the Wood-Pat expansion and the Ozark expansion contribute materially during 2Q or is it more of a 3Q event?

Yes, definitely it was a nice contribution in the second quarter and we expect the volumes will continue to ramp up. So going from [3.45 to 3.60] is really -- that's been at the tail end of the development. So we would expect to continue to see some benefit in higher volumes prospectively.

And then on the GMP side, did the Mariner East 1 shut in impact volumes at all? I mean frac utilization and GMP utilization were both up, but was that lower than it should have been due to the shut in?

Yes, ME 1shut in had a small impact on us. We did have to obviously arrange for more railcar movements on the C3+ ethane how to get diverted to additional line. So it did have some impact to us, would not say it was a major impact, but it did have a little bit of an impact on us.

Our next question is from Michael Blum from Wells Fargo.

A follow-up on the same topic. I wanted to get your thoughts just more broadly on the NGL takeaway situation in the Northeast and to the extent that Mariner East 2 and 2X are delayed further for any reason. Is there a point where you see that becoming an issue in terms of NGL takeaway where even rail doesn't support the growth that's going on there?

Yes, obviously we're very supportive of ME2 starting up and we've said many times in the past that it's not impacting us at this point. We don't see it impacting us in the near future. But you're right, Michael, at some point if the delays were to continue to occur, we would have to adjust. The way we've been handling the growth to date is we've been just handling additional railcars at our Hopedale Complex. As you know we are in the process of building Hopedale 4. Expect that to come online towards the end of the year in the fourth quarter. So we continue to see NGL growth in the area, and we're looking forward to ME2 coming online. If it doesn't, then we obviously have to continue to adjust our planning. To-date, it hasn't had any impact on us. And we'll just keep an eye on the situation and keep you updated as time progresses.

Our next question is from Ross Payne from Wells Fargo.

Gary, you mentioned earlier that leverage could potentially get lower and you're obviously at a very attractive 3.7x right now. Pam, is that kind of a range we can expect in the future or can we see that maybe tick down and obviously both are below recent targets of [4-ish] or slightly below?

Yes. So we are committed to maintaining an investment grade credit profile. What we said is we're comfortable around [4], we're really committed to also not issuing equity. So there could be quarters where you could see the leverage tick up even higher than 4 . And we'd be comfortable with that so long as we also had the view that we would be able to manage the total leverage around the low [4s]. We know that the investors really prefer something at 4 or less. So we plan to maintain a pretty conservative view there, but again it's a balance between not wanting to issue equity and maintaining an appropriate leverage profile. And that will really all depend on the earnings profile, the cash flow profile, the business and the organic opportunities that we see ahead of us. And what we have said though, Ross, is if we found ourselves in a situation where we had a significant strategic acquisition and we needed equity funding, we would pursue the equity funding if we had the right opportunity where we felt that was the right thing to do to maintain that investment grade credit profile.

But beyond that, we always have the option as the sponsor to step in if it makes sense. And that's one of the things that I still am amazed that the investment community has not given us credit for as our growth profile is one of the best in the business, but the risk profile is one of the lowest in the business. If you look at the risk profile due to having a very strong sponsor supporting NPLX that has not been recognized I don't believe in our equity value and that's something that I think certainly needs to be recognized and I think we can certainly justify a much higher multiple than what we're achieving today.

Gary, that's a good point. And I mean, we've seen other guys like Enterprise have sponsors that step in as needed and that certainly adds a big backstop to needed growth when you need it.

Our next question is from Craig Shere from Tuohy Brothers.

Keeping takeaway constraints in perspective, ethane pricing has really rallied in the last couple of months. Could you discuss how much uplift you might have across your system and the GMP side if you are in full ethane recovery and that would be incremental to the $0.05 NGL price sensitivity to [18 million bcf] impact? Wouldn't it?

Yes, Craig, so we haven't given much color on the breakdown between C2s and C3s in our system. Pam gave kind of a rule of thumb is the way we see liquids on the equity side. What really matters to us in that regard is as ethane become stronger, much more value is created for the producers and we get the follow-on effect of additional growth in the wet areas people were mentioning earlier. The dry economics have been good because you get a lot of volume, but the wet economics are obviously supported by the NGL pricing. And as all the pricing you're mentioning C2s but as C2s, C3s, C4s as all of that pricing continues to move up, you start to move more economics towards the wet side. We remain bullish in general on NGLs but I think you're hitting just one component of it, but I think if you put the composite of it together it's been a good story for us.

Any specific contribution that might have on the fractionation side?

Well, I think one of the things that we just talked about is we are in the process of adding 2 de-ethanizing plants before the end of the year, one at our Sherwood complex and one at our Harmon Creek complex. So you're right, I am kind of agreeing with you that as ethane gets stronger we will have more opportunities to do de-ethanizers. We have a couple committed to towards the end of this year and as the basin continues to grow and there's more recoverable ethane, we think that'll provide us much more opportunity as well.

(Operator Instructions) I am showing no further questions ...

All right. Well, it looks like we don't have any other questions in the queue. So thank you for joining us today and we thank you for your interest in MPLX. Should you have additional questions or would like clarification on any topics discussed on the call today, our team will be available to take calls as well. Thank you, operator.

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