MPLX(MPLX) - 2020 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Adjusted EBITDA for Q2 2020 was reported at $1.2 billion, relatively flat compared to Q1 2020 EBITDA, indicating stability despite challenges [10][30] - Distributable cash flow for the quarter was $1 billion, providing a distribution coverage of 1.39 times and a leverage ratio of 4.1 times [17][33] - The company achieved a reduction in capital spending target for 2020 by over $700 million and operating expenses by approximately $200 million [7][11] Business Line Data and Key Metrics Changes - The Logistics and Storage (L&S) segment reported adjusted EBITDA of $839 million, while the Gathering and Processing (G&P) segment contributed $388 million in adjusted EBITDA [30] - L&S segment experienced a decrease in pipeline and terminal throughput due to lower refinery utilization at MPC's refineries [18] - G&P segment saw a decrease in gathered and processed volumes primarily due to production curtailments and shut-ins driven by low commodity prices [26] Market Data and Key Metrics Changes - Gathered volumes in the Marcellus increased by 9%, while in the Utica, they decreased by 1% due to a shift to dry gas production [27] - Overall, the company noted a decrease in gathered and processed volumes compared to Q2 2019, primarily due to lower NGL prices and production curtailments [32] Company Strategy and Development Direction - The company is focused on maintaining capital discipline and targeting about 75% of growth capital towards the L&S side of the business, with ongoing projects like the Wink-to-Webster crude oil pipeline and the Whistler natural gas pipeline [12][19] - A joint venture was formed with WhiteWater Midstream and West Texas Gas to provide NGL takeaway capacity, optimizing existing infrastructure with limited initial construction [21] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the ongoing challenges posed by the COVID-19 pandemic but expressed confidence in the company's ability to generate stable EBITDA and achieve positive free cash flow in 2021 [8][9] - The company emphasized its commitment to sustainability and diversity, highlighting the publication of its 2019 sustainability report [14][15] Other Important Information - The company entered into a redemption agreement with MPC, transferring its Western wholesale distribution business in exchange for the redemption of $340 million MPLX common units [23] - Regulatory and legal challenges are being faced by the Bakken assets, including the DAPL pipeline, with a potential maximum annual EBITDA impact of less than $100 million [24][25] Q&A Session Summary Question: Impact of COVID-19 on Distribution - Management reaffirmed the distribution at the current level, emphasizing its importance to MPLX's value proposition and the stability of its EBITDA profile [39][42] Question: Refinery Utilization and Minimum Volume Commitments - Management expects volumes to pick up in Q3, reflecting a rebound in demand, with some systems running below minimum volume commitments during Q2 [45] Question: Impact of Refinery Closures - No expected impact on EBITDA from the Gallup refinery closure, as crude will be redirected to other logistics systems [54][56] Question: Gathering and Processing Recovery Trends - Some curtailed wells have come back online, with utilization in the Marcellus close to 90% as of July [58] Question: Use of Proceeds from Speedway Sale - The priority for proceeds from the Speedway sale is to strengthen the balance sheet and return capital to shareholders, with no plans to buy back MPLX assets [63][64] Question: Tesoro High Plains Pipeline Situation - The system could continue to run with minimal impact, maintaining a large share of EBITDA despite regulatory challenges [87][89] Question: Future Capital Expenditures and Returns - The new NGL pipeline project is expected to be capital efficient, with construction completion anticipated by Q4 2021 [82]