Q4 2022 MPLX LP Earnings Call

Speaker 1: Welcome to the MPLX 4th quarter 2022 earnings call. My name is Sheila and I will be your operator for today's call. At this time all participants are in a listen only mode. Later we will conduct a question and answer session. Press star one on your touchtone phone to enter the queue. Please note that this conference is being recorded.

Speaker 2: I will now turn the call over to Christina Cazarian. Christina, you may begin.

Speaker 3: Good morning and welcome to the MPLX fourth quarter 2022 earnings conference call. The slides that accompany this call can be found on our website at MPLX.com under the investor tab. Joining me on the call today are Mike Hennigan, Chairman and CEO , John Quaid, CFO , and other members of the executive team. We invite you to read the safe harbor statements and non-GAAP disclaimer on slide two. 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. And with that, I'll turn the call over to Mike. Thanks, Christina. Good morning. Thank you for joining our call.

Speaker 4: First off, I want to recognize a new director on the MPLX board. In November , Christy Breeves, who recently served as CFO for U.S. Steel, was appointed as the new independent director.

Speaker 5: 2022 was a strong year as we successfully executed all of our strategic priorities.

Speaker 6: Full-year adjustity, but it was $5.8 billion, and DCF was $5 billion.

Speaker 7: strong operational performance and customer demand drove record annual pipeline throughputs and increasing gathering processing and fractionation throughputs with each quarter of the year.

Speaker 8: We also realized either growth from recent capital investments and remain focused on cross management.

Speaker 9: Overall, our efforts resulted in a 4% year-over-year adjusted EBITDA and DCF growth.

Speaker 10: In line with our commitment to return capital, for the full year MPLX returned over $3.5 billion of capital back to unit holders through our distribution and unit repurchases.

Speaker 11: We also made progress towards our goal of leading in sustainable energy through our methane reduction program and with the receipt of EPA's Energy Star Award for energy efficiency improvements at several terminals.

Speaker 12: Today, we announced our capital expenditure outlook for 2023 of $950 million.

Speaker 13: Our plan includes approximately $800 million of growth capital and $150 million of maintenance capital.

Speaker 14: Our growth capital plan is anchored in the Marcellus, Permian, and Bakken basins.

Speaker 15: In addition to new gas processing plants in the Marcellus and Permian, the remainder of our capital plan is mostly focused on other investments targeted at expansion or debottlenecking of existing assets to meet customer demand.

Speaker 16: While our capital outlook is primarily focused on our current LNS and GMP footprint, we will continue to evaluate low-carbon opportunities where we can leverage technologies that are complementary with our asset footprint and expertise.

Speaker 17: Moving to our Capital Allocation Framework. First, maintenance capital.

Speaker 18: We remain steadfast in our commitment to safely operate our assets, protect the health and safety of our employees, and support the communities in which we operate.

Speaker 19: Second, we remain focused on delivering a secure distribution.

Speaker 20: Third, after these commitments are met, we will invest to grow while maintaining strict capital discipline.

Speaker 21: And fourth, we also intend to return excess capital to unit holders.

Speaker 22: As I've said in the past, we believe this is both a return on and a return of capital business.

Speaker 23: Last November , based on the strength and growth of our cash flows, we increased our distribution by 10 percent to an annual rate of $3.10 per unit while maintaining a strong distribution coverage ratio of 1.6 times.

Speaker 24: In 2023, we would expect to be similarly focused on our distribution as our primary tool to return capital to unit holders.

Speaker 25: We are optimistic about our opportunities in 2023 and remain focused on executing the strategic priorities of strict capital discipline, fostering a low-cost culture, optimizing our asset portfolio which are foundational to the growth of MPLX's cash flows.

Speaker 26: Now let me turn the call over to John to discuss our operational and financial results for the quarter.

Speaker 27: Thanks, Mike.

Speaker 28: Slide 6 outlines the fourth quarter operational and financial performance highlights for our logistics and storage segment.

Speaker 29: LNS segment adjusted EBITDA increased $45 million when compared to fourth quarter 2021.

Speaker 30: The increased results were primarily driven by higher pipeline tariffs and contributions from pipeline equity affiliates partially offset by higher maintenance project related expenses in the quarter.

Speaker 31: Pipeline volumes were flat year over year, primarily due to the impacts associated with Marathon's refinery turnarounds in both quarters.

Speaker 32: Terminal volumes were up 4%.

Moving to our gathering and processing segment on slide 7, GNP segment adjusted EBITDA decreased $36 million compared to 4th quarter 2021 as the benefits of higher volumes were more than offset by lower natural gas liquids prices.

which averaged 78 cents per gallon for the quarter as compared to $1.05 in the fourth quarter of 2021.

In total for the quarter, gathered volumes were up 14% year over year due to increased production in the Utica and our Southwest region, which includes our Permian operations.

Processing volumes were up 1% year over year, primarily from higher volumes in the Southwest, driven by increased customer demand and our investments in processing capacity in the Permian.

In a Marcellus, while gathering and processing volumes were slightly lower year over year, we did see sequential increases for gathering, processing, and fractionation volumes in the basin.

These activity levels were in line where there are expectations for increased producer activity in the back half of the year.

Moving to our fourth quarter financial highlights on slide 8, total adjusted EBITDA of $1.5 billion was roughly flat versus the same period in the prior year, while distributable cash flow of $1.3 billion increased 5%.

Results in the quarter were impacted by a $23 million Special Compensation Award provided to our employees in recognition of their efforts.

We do not anticipate that this expense will structurally impact future costs.

In the fourth quarter, we returned $975 million to unit holders through approximately $800 million in distributions and $175 million of repurchases of common units held by the public.

MPLEX ended the year with nearly $850 million remaining available under its unit repurchase authorizations.

Last week MPLX declared a fourth quarter distribution of 77.5 cents per unit, resulting in a distribution coverage ratio of 1.6 times for the fourth quarter.

MPLX ended the year with total debt of around $20 billion and a debt to EBITDA ratio of 3.5 times.

comfortably below our target of approximately four times.

While our absolute level of debt has remained relatively constant, our leverage has decreased due to the growth in our business.

And at these leverage levels, we do not see the need to reduce our absolute level of debt.

Earlier today we announced our intent to redeem at par value the $600 million about standing Series B preferred units in mid February .

Subject to market conditions, we expect to refinance these preferred units into long-term debt.

In closing, we expect our solid operating performance and growth of our cash flows will enable us to continue to invest in and grow the business while also supporting the return of capital to MPLX unit holders.

Now let me turn the call back over to Christina. Thanks, John . As we open the call for questions, we ask that you limit yourself to one question plus a follow-up. We may reprompt for additional questions as time permits. With that, feel like we're ready for questions today.

Thank you. We will now begin the question and answer session. If you have a question, please press star then 1 on your touch tone phone. If you wish to be removed from the queue, please press star then 2. If you are using a speaker phone, you may need to pick up the handset first before pressing the numbers.

Once again, if you have a question, please press star then 1 on your touch tone phone.

Our first question will come from Brian Reynolds with UBS. Your line is open.

Hi, good morning everyone. Perhaps to start off on capital allocation we saw continued commitment to unit repurchases in the redemption announcement on the preferreds.

What's the preferred redemption announcement and some of the demeterities that are coming up in 23 and 24? We're just curious if you could open and discuss on how you expect any change in return of cash via a special distribution or buybacks going forward. Like we've seen in the past just given, they have coming demeterities and the craft that you expect to refine it as well.

Thanks. Great. Hey, Brian . Good morning. Thanks for the question. We'll try and pick that apart in a couple pieces. First, as I said in my comments, and just to reiterate, we provided notice to the Series B holders that we're going to redeem those in February . As you note, we also have a billion of senior notes maturing in July .

And given our leverage and where we are and as we've done in the past, we'll likely look to refinance both of those into long-term debt subject to market conditions.

So that's the first piece on the on the B's and the series notes, senior notes, excuse me. And then thinking about return to capital, you know, as you saw us last year, you know, we, we've, we've, we've gotten lots of feedback from investors, some prefer distribution, some prefer unit repurchases, we've tried to think about our structure.

point six times a strong balance sheet at three and a half times leverage. So I think that'll be an area we'll continue to focus on in 2023. And then we'll also I think, continue to be opportunistic, perhaps more opportunistic around unit repurchases, right if you

Look back to when we began the program we've done a little over a billion at about 29 a unit In the fourth quarter we did what about a hundred and seventy six million at I think thirty one seventy five somewhere in that ballpark so I think it'll continue to be a part of our framework, but perhaps a little more opportunistic and

free cash flow and distributing 3 billion through our base distribution, which has been leaving about a billion dollars of cash after all that. So I think the key is we have a lot of flexibility and as John said, we'll try and be opportunistic on the buyback side.

We'll try to continue to show the market that we continue to grow this partnership so you'll see us continue to increase distributions over time. So we'll talk about that at some point But I think we're in a real good position from a financial standpoint strong balance sheet excess cash flow Looking for opportunities to deploy but stay in strict on returns

And overall, hopefully that's where the market wants us to be.

Great, thanks. Really appreciate all that extra color. Maybe just to quickly touch on the operational side of the house, MPC Refinery runs heading to 23 seem to be very much better than peers. Curious if management could just opine on expectations for 23 products, volumes versus 22 zoom.

And if you're seeing any nuances by products that could perhaps support resiliency and product volumes in 23, you're just seeing really strong refinery runs last year. Thanks.

It's a good question, Brian . I'm going to let Sean give you a little more color, but I will say at the MPC side of the house, I mean, we had a really strong year. You know, safe, reliable operations is key to our business on that side. We ran 96% utilization. You know, if you followed some of the activity during the year, we had deferred some turnaround activity to the back half of the year.

and at twenty three work where we continue to see another strong year and and where you know will be matching uh... you know the refinery rates that you know npc and others uh... have us and then also were you know excited about the growth out of the per me and in some of the pipelines coming out of the pot uh... the per me and so again we're we're just like twenty two were excited to see uh...

your line is open.

Good morning, everyone. Thanks for the time. Maybe I'll pick up on the CapEx guide. You touched on some of the moving pieces, but I'm just curious if you could break it down a little more for us just in terms of, you know, and it can be loose, I suppose, but just how much of the guide is going towards these kind of named projects you've talked about, like the next Permian processing plants.

versus going to the smaller bucket of one-offs versus, I guess what we're calling kind of the emerging opportunities on the transition side. Any sort of breakdown there or kind of trend, maybe even year over year would be interesting. Thank you.

John , good morning. I'll start and then I'll let John add some color. So. In general, most of the capital program is targeted at what we'll call the smaller expansion to bottleneck in projects. I know people like to see flashy big projects, but.

We actually get the best returns as producers grow, whether it's in the GMP side or in the L&S side of the business. As production increases, we have a pretty big system that we can continue to bolt on to, to expand a little bit here and there. It's where we get our higher return projects.

Now, we're still going to add to the platform, as you mentioned, we've got a couple processing plans coming on, which will continue to increase our base, which then allows us to add some gathering to support that, etc. But the real story behind our growth, and if you step back, I mean, we are pretty large, as I just mentioned, about 6 billion of ebit, so...

You know, our base plan is we're going to have mid-single digit growth in our system. You know, have good discipline so that we get high return projects, continue to add EVADA, and at the end of the day, look for those other opportunities like you mentioned in low carbon. There hasn't been a lot to date. There's been a lot of rhetoric around it. There's a lot of talk about different...

because we've continued to grow this partnership year after year, and obviously a big outcome of that is returning a lot of capital to our investors. Hey, John . It's John . Just a couple things to add to Mike's comments. I mean, one is an example of kind of an expansion in the bottleneck. The other item we're looking at in the Marcellus is we've got some space on our existing processing plants. So we've got an opportunity to look at those gathering systems and invest some monies and fill up some space on plants we have sitting there and ready to go. And then also remember, and there's a number of those projects that are listed on the slide there, mainly around our chemicalS

million special comp award. I mean, is there any kind of total number there that you might be able to give us for the quarter that maybe won't be there in a run rate if we're trying to look at 2023 going forward? Is it as simple as kind of adding back to 23 or maybe $25 million and

That's kind of a more representative run rate of the business. Yeah. Yeah. Thank John . Thanks for the question So a couple of pieces there. I mean the special compensation award by it's kind of term. We're using there That's a one-time item we decided to do here in the quarter and and that was the expense for the entire item so

I don't know that we anticipate having another award in the first quarter, right? That was really our effort to look at our employees, kind of non-executive level employees efforts in achieving our 2022 results and wanting to recognize that, so that's a little unique. That seems to be kind of natural, I guess,

The other piece gets around our frequent discussion around kind of project maintenance expenses. Certainly we tend to be a little more back half loaded. Sometimes that can move with NPCs turn around schedules, etc. So that number year over year, I think we see being roughly the same amount of expenses as we continue.

appreciate it. Yeah thank you very much.

You're welcome.

Our next question comes from Keith Stanley with Wolf Research. Your line is open.

Hi, good morning. I wanted to start just...I know this is a very recent data point, but just any updated commentary.

from producers on planned Marcellus and eutic activity given the very rapid decline in gas versus that we've seen and how that might be impacting ear expectations as well.

Yeah, Keith, that's a good question. I'm going to let Greg take that one.

Thanks Keith.

You know, really the 2022 prices, whether it be crude, NGL or gas, were very supportive of increased drilling activity by producers. And this is not just...

In the Permian Delaware or even the Marcellus, it was across all basins. We've seen increased activity. So increased drilling in 2022 and some completions and then completions into 23 mean higher volume outlook for 23.

certainly there has been price volatility. We've seen prices over $10 per MMBTU in the summer which at a high and now we're kind of back to more of a normal level but in the Permian and places like the Bakken even the condensate went on the Utica is really crude price driven and the drilling is really the crude price.

set up by drilling activity in 2022.

Got it. Thanks. Second question, I just wanted to follow up on the distribution.

So you have the 10% high-class quarter growth in the distribution. I think it was pretty small in the couple years before that. How should investors think about distribution growth over the next several years for the company? Does it tie in your head to overall growth and cash flows of the business? Do you see...

some excess cushion and excess cash flow so the distribution could grow potentially faster. Just how are you thinking about that over the next few years?

Hey, Keith, it's John . I'll start and then I'm sure Michael have some some comments as well. You know again as you said last quarter really driven off our confidence in the strength of our cash flows we moved to the 10% distribution increase, but as I noted still a really strong coverage ratio of 1.6 times, and I thank you.

kind of mid-single digit growth, you know, ultimately you would see the distribution getting towards that sort of run rate. But we probably have built up some capacity here to think about, you know, how we might look at the distribution later this year.

I'm just going to add a little bit of repeat, a little bit of what I said earlier. I've got to keep in mind the law of large numbers. We're roughly 6 billion of EBITDA. If we grow that at mid-single digit, that's $300 million more EBITDA, which we translate to.

more financial flexibility for us, whether we increase the base distribution, do buybacks or whatever. But the nice thing about our system is we're large enough that even mid-single-digit growth will add a significant amount of additional cash flow to a distribution that today is about $3 billion roughly.

So if you think about the math of where does that even translate, it provides flexibility for us to make more moves. And to your point, everybody in the space kind of paused a little bit during COVID. And I think one of the things that I hope the market recognized, we still grew earnings.

during that year, even though it was a tough year on the refining side of the house with reduced demand, etc. So part of it is to try and recognize where we are financially, part of it is to try and recognize where our growth potential is. And then, like I said, if you go to the simple math, you can start to kind of look at...

where our financial flexibility will be. And I keep saying it's a good problem to have. It's a good place to be. We'll try and reward investors in the best way that we can to get an overall total return in the manner that we think is most efficient at the time.

We've traditionally said it's an all the above approach. As John mentioned, we leaned in a little harder on distribution last year for the point that you made, as well as what John just made. We got strong coverage. We got continued line of sight for growth. So I think we're in a really good position to continue to grow the partnership. Who are you?

Thank you.

Thank you. You're welcome.

Our next question will come from Teresa Chen with Barclays. Your line is open.

Good morning. Mike, I'd love to get some of your thoughts on the potential low-carbon expansion opportunities and generally gross beyond what you have in the slate right now. As far as your ability and willingness to invest in the low-carbon renewal.

Yeah, Teresa, so, you know, at a high level, most of our low carbon activity in the short term is geared at the MPC side of the house. So we'll talk a little bit more about that at the 11 o'clock call. You know, a little less right now on the MPLX side, but as I mentioned earlier. You know, we are a believer that technology will continue to advance.

You know, one example that everybody's aware of is, you know, gathering carbon and sequestering it. So that's a great opportunity on the MPLX side of the house. We're active in several projects, but they're not 2023 projects. You know, they're not going to happen.

to you know are not going to impact earnings profile this year so you know overall you know as you're very aware on the MPC side of the house we have a couple renewable diesel plants there's going to be more growth in that area so you get a little more color on the on the MPC call as far as what's happening on low carbon so I'll just ask you to listen in on that we'll give a little more detail.

And then on the MPLX side, we think things are coming. They're just not ready for prime time at this time.

And then Teresa, John , I might just jump in real quick just as a reminder. If you think about like the Martinez Renewable Fuels Facility project that MPC is doing, those logistics assets around that were and remain MPLX assets, and we don't have a lot of investments to move around a different liquid. So to some degree it may be extensive.

And in a lot of the areas, you know, the returns that we can get on those opportunities are not quite meeting what we would like to implement. But I think over time, the technologies will evolve and that will be an area for us to invest.

As we've been talking throughout the call, you know, we have a lot of financial flexibility on this side of the house. You know, John mentioned, you know, we're at three and a half times on the balance sheet. We're generating a billion dollars a year of excess cash beyond a growing distribution. So we have the financial flexibility. We are ready and able.

But we are going to be strict on returns. So part of what has held us back from some of what I'll call the splashier discussions, that the returns just are not at a level that we think is investable at this point. But we think they're going to get there. It's just a matter of time.

Thank you for the thorough response and agree, John , that we definitely look forward to that 2026 recontracting on the Martinez logistics assets. Maybe turning to the Northeast for a second, following the startup and ramp up of your de-ethanizer, would love to get your take on how that facility is doing.

There's several layers to it.

We have, within MPLX, over 300,000 barrels a day of de-ethanization capacity in our fleet. We're unique in that our fleet is...

our deethanizer actually, fleet is spread across all of our processing plants. So we have the ability to reject or recover ethane almost by customer, but definitely by plant. All those plants are connected by pure deethane lines and we deliver to.

Mariner east, Mariner west, A-TEX, as well as the shell Falcon line for pipeline for Manaca. The Smithburg de-ethanizer is the latest addition to our fleet. It adds

40,000, a little over 40,000 barrels a day of purity ethane product production capability to our fleet which I mentioned is over 300,000 barrels a day. So that plant is is in operation. It's operating well, it's ramping up along with the rest of our fleet to not only supply Menaka but also

all of the Gulf Coast, East Coast, and even Canadian takeaway points.

in terms of the economics.

the fractionation spread between ethane and natural gas, whether it's rejected or not. You know, recently we've seen natural gas prices drop at a little higher rate than the ethane price drop. So the economics for recovery have improved, but it's really up to the producer in terms of...

whether we recover more or reject, we have the ability to do both. We have the capacity to do it. And frankly, in the Northeast, most of the recovery is tied to commitments that are already made by the producers for those takeaway pipelines and to the shell plant.

So we continue to wrap up towards as we increase our utilization there.

Thank you very much.

You're welcome, Theresa.

Thank you. And once again, if you would like to ask a question at this time, you can press star one and record your name when prompted. Our next question comes from Jeremy Tannette with JP Morgan. Your line is open. Thank you.

Hi, good morning.

Hi, good morning. Hi Jeremy.

Just want to shift over to the Permian a little bit if I could as it relates to natural gas egress. And just wondering any high level thoughts you might be willing to share as far as takeaway tightness. We've seen Waha touch negative prices recently, not too long ago. And was just curious I guess with the Whistler expansion with Matterhorn.

Is there any ability to kind of start partial service ahead of the dates that you've said or just trying to get a feel for how you see perming egress tightness unfolding in what

Hey Jeremy, this is Sean. I'll touch on the gas takeaway out of the Permian there. As you know, we've got the Whistler pipeline, and as we said last quarter, we're really pleased by the ramp up of the volumes on there, again, showing that, again, that gas takeaway is needed there. aids on Paul Peter This one

That volume and those commitments have continued to be strong and we anticipate those will continue on into 23 here. You know, we've got the half B expansion coming online in the third quarter of 23 for Whistler. And again, we're seeing really, you know, meeting and expectations for that committed volume coming out of the Permian.

for the gas takeaway out of the Permian.

Thanks for that. And I was just curious, I guess, as it relates to weather during the quarter, there was some freezing conditions across the country. I'm wondering if that impacted your operations at all, if there's any weather headwinds that you would be willing to quantify for us if they did materialize.

Hey Jeremy it's John thanks for the question I'll start and Greg and Sean can chime in if they want to as well on the ops. So across our platform in the fourth quarter we probably had mostly lost the proper opportunity as some of our producers on mainly on the GMP side obviously when it gets that cold.

they run into some issues. So that reduced our operations there for 10 to 14 days, give or take different across the basins in the fourth quarter. That probably was a lost opportunity of somewhere around $10 million in the quarter. And as we look.

to this quarter, Q-123, partly impacts on MPCs operations. Partly, remember, I'm talking adjusted EBIDA, and when we think about our joint ventures on the GNP side, that really is distributions. So there's part of the effect in Q-4 that shows up as lower distributions in Q-1.

from Neil Dingman with Truist Securities. Your line is open. Morning all. My question is on the your Marcellus GMP specifically. Number of E&P's I haven't heard too much from them as far as plans for any change of activity. But yet, I did hear from a FRAQ provider last week that suggested that you could see some slowdown in

fracking activity and you know for the next few months or a bit longer than the Appalachians. I'd just love to hear you know I did know you're looking at slide seven was down a little bit not not a whole lot there versus the the year over year so I'm just curious more on your overall thoughts in the area for the remainder of the year.

Yes, Neil, this is Greg.

At this point, we're in close communication with producer customers and we track

over time well pads that are being drilled and completion rates and

depending on rig availability, depending on weather, depending on...

pricing, those things, obviously those forecasts can and do change. But we still, as I mentioned before, a lot of the activity in the volume drive that we forecast into 23 is based on

on activity, drilling activity in 22 and then some completion activity that already has been underway.

So, you know, there could be pads delayed, not aware of those, but that's always a possibility. But at this point, we still feel bullish about volume this year.

Yeah, good. Go ahead Mike. Sorry. Yeah, let me just add, you know, even outside of the more sellers, I think, you know, everybody realizes now there's a structural change in gas from a lot of perspective. So, you know, in some of the areas that had not seen a lot of activities, you know, Greg mentioned earlier in 22.

you know, you're starting to see rigs in other basins, you know, outside of the Marcellus that haven't had a lot of activity. So I think overall people are recognizing a structural change in gas now. Very short term. It's been a little warm, you know, relative to expectation coming into the into the winter. But if you pull back up to it to a higher level.

structural change, more activity, rigs being used in basins that there has not been activity for a while, I think shows that there's a changing in guess potential going forward.

Yeah, well said Mike and then one just clarification maybe to follow up on to make sure on the the Gathering you continue to have nice increase on the on the Gathering the other side and non non Marcellus. So can you remind me of just capacity I still think you have a bit there on the Permian at all. I'm just wondering again what is I think you talked about this earlier today.

I just want to make clear on what is still the capacity available on the gather inside there.

In terms of the permeant Delaware, the capacity, we basically build out and connect new wells and add compression.

as we need it to fill the processing capacity that we have.

Yeah, Neil, it's John . I mean, specifically in the Permian, if that's what you were asking about, right? We've got our five plants, we're building our six, they're each about 200 million a day. So that's the size and scale of that operation, which in our numbers, it's part of the southwest region that we show.

We're at a B heading to 1.2 B. And we match the gathering, which I believe you specifically asked for, to that capacity.

That's right. Okay. Thanks guys. Great

Thank you. Our next question will come from Spiro Dunis with Citi. Your line is open.

Thanks operator, Morning Team. I wanted to go back and follow up on one of Brian's questions just as we think about Refinery run rates for 23. And if we zoom out a bit and just look at the industry as a whole, I believe it's supposed to be kind of a heavier Refinery maintenance year this year. So, curious how you're all thinking about the impact year system overall, whether or not that ships close.

on the export side or internal leads, curious how you're thinking about the net benefit or negative there.

So I'll start off, you know, MPC had a back end weighted turnaround year in 22. You know, we're going to talk about, you know, a front end weighted, you know, 23. But even with our activity there, I think one of the things that has been part of our success on the MPC side.

in the front half of the other on the MPC side. You know, at the same time, even with that activity, you know, we ran 96% utilization last year. We still expect a pretty strong year. It'll start off with, you know, more activity in the first quarter, but, you know, as Sean mentioned earlier, you know, we're still expecting, even though we had a record year this.

this year on the LNS side, we're still expecting a pretty strong year in 23.

Got it, so thanks Mike. Second question, just thinking about CAPEX going forward, you guys have been utilizing joint ventures pretty effectively over the last few years.

I'm curious as you look back and assess that strategy, I think you would be satisfied with it but I'm curious how you are thinking about it going forward. Is that a strategy using joint ventures something you plan on doing from here on any larger multiyear project? And ultimately do you see these joint ventures as a pathway to own more?

of these current assets or even maybe some of these joint venture partners over time.

Thanks, Peru, it's John . I'll start and then let Mike chime in. I think certainly to your first point, we definitely have been very pleased with our investments in the Permian. I don't know that we started those from a financial aspect as well as other considerations, right, when you're entering a joint venture relationship, sharing of risks, commercial opportunity, et cetera.

So I think it depends on the situation, because as you know, we certainly have a strong balance sheet in generating a good bit of cash. So those have worked really well for us. I think where there's opportunities that have both commercial, operational, and perhaps financial reasons we can look at JV opportunities. But...

given the strength of the balance sheet, I don't know that financially we would need to leverage them in that regard. Yes, Vera, I was just going to add to what John said. You know, it's pretty specific to the opportunity and the desire of all the partners. You know, we try and be a good partner is...

As John said in a couple of these instances, we had the financial capability to finance it ourselves. When other members want to do it at the project level, and we can live with that, we're okay with it. We're not opposed to it, and if it makes for a better partnership, that's fine for us. But I would tell you, it's specific to the project itself and who the partners are.

And to John's point, we have been happy with them. We've had good partners. We're usually aligned. The goal, obviously, in any JV is are you aligned in the intent of the project, et cetera. And we've been fortunate to have good alignment with our partners. And where we financed it at the project level, we've been OK with that as well.

Thanks for the time, guys.

as always. Thanks for the time, guys. You're welcome.

And our last question will come from Neil Metra with Bank of America. Your line is open.

Hi, good morning. I wanted to touch on the MPC Galveston Bay upgrades.

I was wondering if that would have any impact on the LNF segment once that's completed.

I'll start and I'll let Sean jump in. We're probably going to talk about that in a lot more specifics on the MPC call, but just in general, that project is pretty strategic for us.

It's a lot more crude processing and Brazil upgrading. So as you know, obviously down on Galveston Bay we have flexibility to bring barrels in via pipeline and or water. So depending on the specifics of where the best crude opportunity is, it could hit our system or it could come waterborne on the crude side.

But obviously the outcome of the products tends to move on some other pipes as well. So it's much more of an MPC impacting project than it is an MPLX project.

Okay, got it. Thank you. And then my second question on the GNP side. Can you...

Some up how you look at the Permian portfolio, you have some good gathering and processing natural gas takeaway with Whistler and a little bit with Matterhorn. How far downstream do you want to go? Are you thinking about NGL pipelines and then?

Do you feel like you need more scale on the GMP side to feed some of the downstream assets? I'm just wondering how you envision this portfolio looking like in the intermediate to longer term.

Yeah, at a high level, yeah, we would like to continue to expand our footprint there, but I'll let Greg and Sean touch or Dave.

Neil, this is Dave. I think as you look at it, one of our strategies is to leverage the existing infrastructure and assets we have in place from gathering the process and the long haul pipelines down to the export opportunities or the other infrastructure out there. So, thank you very much.

I think as you see, whether it be organic or inorganic growth opportunities is really going to keep that in the back of our mind. Again, all anchored by strict capital discipline and ensuring that we get the acceptable returns.

And if I could just ask a follow up to that, are you seeing some synergies between your gathering and processing and possibly being able to win contracts by having the Whistler capacity there given the lack of natural gas take away?

possibly bundling contracts between pipelines and GMP.

Yeah, they're definitely synergies.

You know, on the GMP side, for example, we're building and operating, you know, some of the crew gathering assets. The crew gathering assets as we tie a new wells and put new lacked units in. There's associated gas that comes with that, so we connect the gas wells and bring the gas in.

GMP operates that gathering system as well, the gas and oil, and then we operate the processing plants, but we're reliant then on handing off the residue gas to Whistler to Bangle, the NGLs, and then of course the crude coming from the pads is going to L&S operated downstream pipelines as well, so we operate.

seamlessly there. But Neil, it's John , definitely right to the point of your question, right? Those producer customers want that product to the coast and that's the solution we've built and we'll continue to look to think about how we can move further downstream across that value chain.

And I'll just add, you know, we.

try or make every effort to be a full service provider. We'll gather crude, we'll gather gas, we'll process the gas, we'll transport the crude. Our intent is to be a partner to the producers or whoever needs to make infrastructure work for them or logistics work for them. So.

We try to be a full-service provider and get into conversations, like you said, on contracts or discussions as to what are their needs and how can we help them, and hopefully they turn into win-win situations. Great. I appreciate all the callers. Thank you very much.

You're welcome.

All right, with that, thank you guys for joining us today. And if you have, and thank you for your interest in MPLX, should you have additional questions or if you'd like clarification on any of the topics we discussed this morning, members of RIR team will be available to take your call. So please just reach out. Thank you, everybody.

That does conclude today's conference. Thank you for participating. You may disconnect at this time.