Q3 2024 MPLX LP Earnings Call
Sheila: Welcome to the MPOX 3rd Quarter 2020 for earnings call. My name is Sheila and I will be your operator for today's call.
Sheila: At this time, all participants are in a list and only mode.
Sheila: Later we will conduct a question and answer session. Press star when on your touchstone phone to enter the queue.
Sheila: Please note that this conference is being recorded.
Sheila: I will now turn the call over to Kristina Kazarian.
Sheila: and I see me, you may be again.
Kristina Kazarian: Good morning and welcome to MP Alexis 3rd quarter 2024 earnings conference call. This lies that a company this call can be found on our website at MPElex.com under the Investor Cab.
Sheila: and President and CEO, Chris Haggorn, CFO, and other members of the Executive Team. We invite you to read the safe harbor, statements, and non-gap disclaimer on slide 2.
Sheila: 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 are expect today. Factors that could cause actual results to differ are included there, as well as in our findings with the SEC. And with that, I'll turn it over to Maryann.
Maryann: Thanks Kristina. Good morning and thank you for joining our call.
Maryann: We have grown MPLX adjusted it by over 7% through the first nine months of the year when compared to last year, which supported the decision to increase the distribution 12.5% this quarter.
Maryann: while delivering on our commitment to safely operate our assets.
Sheila: Protect the health and safety of arm ployes.
Sheila: and support the communities in which we operate.
Sheila: In the third quarter, MPLX generated record adjusted EBITDA of $1.7 billion.
Sheila: A 7% increase compared to last year's third quarter. Distributable cash flow was $1.4 billion, which supported the return of nearly $950 million to unit holders.
Sheila: We are committed to returning capital to unit holders, primarily through a growing distribution, but also through unit by-backs.
Maryann: and our growing portfolio is expected to support this level of annual distribution increases in the future.
Sheila: and the United States continues to be a low-cost producer of energy fuels needed across the globe, and the outlook for hydrocarbons remains robust.
Sheila: Greta Lecture Fication on Shoring, Nearshoring and Data Center Development are driving natural gas demand growth forecast through the end of the decade.
Sheila: As demanding crisis for natural gas power electricity, we are well positioned to support the development plans of our producer customers.
Sheila: Globally, demand for transportation fuels is expected to grow, outpacing near-term capacity additions.
Sheila: The US refining industry is expected to remain structurally advantage over the rest of the world, and we believe Marathon's refining assets are the most competitive in each region in which they operate. Our operations within these refining value chains will provide future growth opportunities.
Sheila: MPLex advanced its strategic growth objectives with capital spending expected at over a billion dollars for the year.
Sheila: Anchored in the Permian and Marcellus Basins, our integrated footprint positions the partnerships with opportunities to grow our natural gas and NGLS it.
Sheila: with in our gathering and processing businesses, producer activity remains robust across the Marcellus, Utica and Permian Basins.
Sheila: We are bringing new gas processing plants online to meeting increasing customer demand in the permanent and more cellest basins. In the Northeast, drilling efficiencies and longer laterals are allowing producers to hold cost-duty while growing production volumes.
Sheila: and the Yudika producers are targeting economically-advantaged liquids-rich acreage. Our year-to-date processing volumes have increased 50% versus the prior year, produced through interest in working with MPLX remains strong.
Sheila: As new wells are placed online, we are positioned for throughputs to increase in the Udga with minimal capital spending.
Sheila: In the Marcellus, we are building the Harmon Creek 3 Processing Plant in adding fractionation capacity as we work with our customers to align capacity expansion with their drilling plans.
Sheila: This project, further enhanced as MPLX's position as the largest processor of natural gas and fractionator of NGOs in the Northeast.
Sheila: Once online in the second half of 2026 MPLX is expected to have northeast processing capacity of 8.1 billion cubic feet per day and fractionation capacity of 800,000 barrels a day.
Sheila: Demonstrating our commitment to operational excellence, our blue stone plant recently became the first natural gas facility in the country to achieve the U.S. EPA's energy star.
Sheila: This requires reducing energy intensity by 10% within 5 years and I am proud to share our team achieved an intensity reduction at Bluestone of approximately 12% in just 24 months.
Sheila: This accomplishment demonstrates our approach to continuous improvements and will reduce operating costs at the processing plant. Moving to the Permian, the Precness 2 processing plant began operations in July and we are constructing the secretariat processing plant.
Sheila: and PLX processing capacity in the Delaware basin in the Permanent is expected to be 1.4 BCF per day, one secretariat is online in the second half of 2025.
Sheila: and the LNS segment strong production in the Permian continues to create opportunities to execute on our well-head water strategy across crude, natural gas and NGOs.
Sheila: In the third quarter we closed the acquisition of additional interest in the Bengal pipeline, bringing our ownership interest to 45%.
Sheila: The expansion of this pipeline to 250,000 barrels a day is expected to be completed in the first quarter of 2025 as we progress the development of this strategic asset in our NGO value chain and well-head to water strategy.
Sheila: Additionally, progress continues on the Black Home and Rio Bravo Pipelines, which will connect Permian Basin's supply to golf coast domestic and export markets.
Sheila: Both pipelines are anticipated in service in the second half of 2026.
Sheila: The remainder of our capital plan is mostly comprised of smaller, higher return investments targeted at expansion or the bottleneck of existing assets.
Sheila: For example, we have increased the size of our inland marine fleet to enhance product placement flexibility, expanded pipelines to serve regional demand growth, and added storage to optimize crude blending for third parties.
Sheila: We have been able to execute our growth strategies and cash from operations.
Sheila: Funding Organic Opportunities, like the Precness 2, Secretary of Enharman Creek 2 and 3, Processing Plants, and inorganic growth opportunities, likes a summit, Yudika acquisition, and our acquisition of additional interest in the Bangalide Pipelines.
Sheila: We are confident in the potential of these growth opportunities to generate durable cash flow for MPLX, supporting our commitment to return capital to unit holders. Now let me turn the call over to Chris to discuss our operational and financial results for the quarter.
Chris Haggorn: Thanks, Maryann.
Chris Haggorn: Slide 6 outlines the third quarter operational and financial performance highlights for our logistics and storage segments.
Chris Haggorn: LNS segment adjusted EBITDA set a new record, increasing $66 million when compared to third quarter 2023.
Sheila: This was driven by higher rates and throughputs, including growth from equity affiliates, offset my higher associated operating expenses.
Sheila: Pipeline volumes were up year over year, primarily due to a lower volume impact from refinery maintenance and higher throughputs on the west coast.
Sheila: Terminal volumes were also up year or year, primarily due to higher throughputs on the West Coast.
Sheila: Moving to our gathering of processing segment highlight on Flight 7, the GMP segment also established a new record to adjust the E-Bidda.
Sheila: Increas, as a just city that increased 52 million dollars compared to the third quarter 2023. This was driven by increased volumes, including contributions from recently acquired assets and the Udokund Permian Basins.
Sheila: Total Gathered Volumes, Rup 8% year over a year, primarily due to increased production in the Marcellus, and the addition of dry gas volumes from Uduk assets acquired earlier this year.
Sheila: Processing volumes are up 9% year-year, primarily from higher volumes in the Udkug, Southwest in the Marcellus.
Sheila: Our recently placed in service processing plants, Harmon Creek 2 and Pre-Knowst 2, continue to see increased volumes and are expected to reach capacity within the next 12 months.
Sheila: In the Yudika, volumes have increased 43% year over year, highlighting the value producers are seeing in the liquids rich acreage.
Sheila: Total Fractionation Volumes Group 4% year over year. Primarily due to higher volumes, process, and ethane recoveries in the Marcellus in Utica.
Sheila: Bocazing on the Marcellus by far a largest basin of GMP operations. We saw year over year volume increases of 11% for gathering and 4% for processing driven by production growth.
Sheila: Marcel's processing utilization was 92% in the quarter reflecting the continued ramp of our
Sheila: Our gathering and processing business continues to grow and today MPLX handles over 10% of all natural gas produced the United States.
Sheila: Having recently processed the new daily record of over 10 BC F per day.
Sheila: Moving to our third quarter financial highlights on slide eight, total adjusted EBITDA of $1.7 billion, and distributable cash flow of $1.4 billion, increase 7% and 5% respectively from the prior year.
Sheila: MPLex returned $873 million in distributions and $76 million in unripersions to its unit holders this quarter.
Speaker Change: As Maryann discussed, based on our confidence and the growth of the business, we increased the distribution by 12.5% to approximately 383 per unit annualized while maintaining strong distribution coverage of 1.5 times.
Sheila: MPLX into the quarter with a cash balance of $2.4 billion.
Sheila: As a reminder, MPLex expects to retire $1.65 billion of senior notes, maturing in December 2024 and February 2025.
Sheila: At the end of the quarter our leverage was 3.4 times.
Sheila: and now let me hand it back to Maryann for some final thought.
Maryann: Thanks, Chris.
Maryann: We have delivered over 6% adjusted EBITDA growth and just under 8% DCF growth on a three-year compound annual basis.
Maryann: We are executing our strategy in advancing growth opportunities across our value chains. In the Permian, we continue to see growth opportunities in our natural gas, NGL and crude value chains.
Maryann: and the Marcellus in Utica produced her activity remains robust, supporting growth of our gathering, processing, and fractionation footprint.
Maryann: Advancing these high return growth projects positioned us to grow our cash flow.
Sheila: MPLX is a strategic investment for Marathon and with the distribution increase, MPC now expects to receive nearly $2.5 billion annually from MPLX, illustrating the strategic value of MPLX within MPC's portfolio.
Sheila: and of both pursue growth opportunities, the value of this strategic relationship is further in hand.
Sheila: The growth and durability of our cash flows, combined with strong coverage and low leverage, provides MPLX considerable financial flexibility driving the decision to increase the distribution by 12.5% this quarter.
Sheila: Our commitment to operational excellence.
Speaker Change: Our growth opportunities and our financial flexibility position us to support this level of annual distribution increase in the future. Now let me turn the call back over to Kristina. Thanks, Marianne. 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.
Kristina Kazarian: Tula, we're ready for the questions.
Speaker Change: Thank you. We will now begin the question and answer session. If you have a question, please press star then 1 on your touchtone phone.
Tula: If you wish to be removed from the queue, please press star then 2. If you are using a speakerphone, 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 touchtone phone.
Speaker Change: Our first question will come from John McKay with Goldman Sachs. Your line is open.
John McKay: Hey, good morning. Thank you for the time. I appreciate all the comments around the distribution increase. Just curious if you could frame up a little more what drove the increase this year for 12.5 versus 10 prior and how should we think about the forward pace of distribution growth from here?
Tula: David Heppner, David Heppner, David Heppner, David Heppner,
David Heppner: Good morning, John. Thanks for the question. You know, first I'd say, look, the durability of our cash flows have really been the impetus for our decision to increase the distribution twelve and a half percent versus the, you know, prior a few years at ten percent.
David Heppner: We're executing our strategy. We're identifying and completing growth projects as we've talked about. We've announced a few of them here recently. I mentioned a few of them in my comments as well. We continue to reinvest in the business.
Tula: and we're utilizing our portfolio of assets when you look at our capabilities in the Utica, as an example.
Sheila: and then we think what we're trying to do here is
Sheila: really responsibly return capital to unit holders through this distribution and using share buyback appropriately as well. You know, we think we've demonstrated over the last three-year period distributable cash flow that just under a percent.
Sheila: We hope that you see our ability to continue to grow that. We've talked about our opportunities in the short term. We talked about our wellhead to water strategy. We've announced over the last couple of quarters our commitment to build out our NGL and NatGas.
Sheila: strategies as well and so as we look out to the future the strength of that mid single-digit growth opportunity gives us the confidence to share that 12 percent distribution increase and give you some visibility for that into the future.
Speaker Change: Appreciate that. Thank you. And maybe just turning to the Marcellus. Yeah, this is one of the...
Speaker Change: Larger projects you've announced up there in a while. Maybe we can kind of just frame up what you're seeing from the broader opportunity set there. Obviously the Utica has recovered nicely. It looks like this would be some kind of incremental growth on the Marcellus side. Curious on just, you know, is Harmon 3
Speaker Change: A one-off, let's say, or could there be more in the future? Thanks.
Speaker Change: I'm going to pass this to Greg because I think he'll share with you a bit more as to how he sees the opportunities unfolding in the Marcellus.
Speaker Change: Thank you.
Speaker Change: For more information visit www.FEMA.gov
Speaker Change: John
Greg: You know, we look at the Marcellus, it's 6 billion cubic feet a day of our 10 billion cubic feet total that we process every day. It's our largest area.
John: You saw utilization up towards 95% before we brought Harmon Creek 2 online earlier this year. That plant continues to ramp, you know, temporarily drop utilization down. But we're at high utilization there, and a lot of it is just driven by longer laterals, flatter declines on the new wells.
John: There may be opportunities incrementally to build out, but this is a big project for us and certainly will help drive that volume forward on our processing and gathering, as well as liquid fractionation.
Speaker Change: Greg, Maryann, thank you both very much. Appreciate the time.
John: Next we will hear from Jeremy Tenet with J.P. Morgan. You may proceed.
Jeremy Tenet: Hi, good morning.
Speaker Change: Good morning, Jeremy.
Jeremy Tenet: You listed, you know, quite a good list of organic growth initiatives and so realize that's probably going to be front and center but as it relates to future growth was just curious I guess on
Jeremy Tenet: You've done some bolt-ons recently, and how do you see the opportunities set for this organic, as you said, or even some of these other bolt-ons out there? And at the same time, we've seen some of your peers make some larger M&A moves there. Just wondering how you think about balancing all that right now.
Speaker Change: We continue to see organic growth opportunities that will allow us really to deliver mid-single-digit growth.
Speaker Change: You know, we've shared a couple of smaller bolt-on JV types, as you know, those...
Speaker Change: JVs are not part of our capital program. We've been spending about a billion dollars a year, give or take, depending on how you look at that.
Speaker Change: You know, those opportunities to expand our JVs are not part of that capital program and we'll continue to look for opportunities there.
Speaker Change: We did a recent one, as you know, first quarter of this year, Utica Summit bought out a JV partner where we think provided us fairly quick
Speaker Change: Ibbett Dahl Growth in a JV that we knew well. So we believe there are sufficient organic growth opportunities. You know, we've been talking a bit about
Speaker Change: our Whale Head to Water Strategy as well.
Speaker Change: that gives us some capabilities for the future. We've taken an incremental position in Bangalore. You heard us talk about closing that.
Speaker Change: as well. So, you know, our focus here is...
Speaker Change: organic opportunities that will allow us to maintain that mid-single digit growth that we are committing to.
Speaker Change: https://www.youtube.com or www.facebook.com
Speaker Change: Got it, that's helpful there and then just want to kind of pivot a little bit towards I guess the LNG side or really Rio Bravo pipeline project more specifically in that twin venture and now that the DC you know circuit court vacated FERC authorization I guess how do you think about
Speaker Change: Progression on this project steps forward at this point, given this setback.
Speaker Change: First of all, the project is moving forward on schedule while all of that DC activity is happening. There's been a request for a re-hearing filed at the DC Circuit Court.
Speaker Change: You know, this is not necessarily abnormal in terms of activities that happen. So, as of right now, I would tell you project moving forward.
Speaker Change: We'll continue to update as the results of that re-hearing come to fruition, and we'll provide you incremental activity around that as well.
Speaker Change: Got it. That's helpful. I'll leave it there. Thanks.
Speaker Change: Our next question will come from Manav Gupta with UBS. Your line is open.
Speaker Change: For more information, visit www.fema.gov
Manav Gupta: Good morning, Maryann. On your opening comments, you mentioned that you do expect, you know, incremental demand for electricity driven by, you know, data centers and natural gas, the role natural gas will play in it.
Manav Gupta: Some of your peers have been more vocal about it, can you help us understand multiple ways in which MPLX can win if suddenly by 2030 you do need 5-6 BCFs to support electricity generation in the US?
Manav Gupta: We're ready to support the development plans of our producer customers, and we'll continue to monitor the activity around data centers, etc. We stand ready. I'll pass it to Greg and see if he's got any incremental thoughts for you on that.
Greg: I would say that I support what Maryann says. We're very well positioned in the Northeast. It's it's 70% of our total processing and we also gather dry and lean gas there. So if you look at all the molecules we touch
Manav Gupta: We're the largest player by far there and I think we're very well positioned.
Manav Gupta: The data center demand is further downstream on the residue lines or whether eventually there could even be co-location of generation facilities and data centers closer to
Manav Gupta: to some of our facilities in the rich gas area. So we're excited about the opportunity. We'll be prepared to follow our customers there as required.
Speaker Change: A quick follow-up here is, can we get an update on the Texas City Frac and the storage project? Thank you.
Manav Gupta: Thank you.
Speaker Change: Hey Manav, this is Dave. Yeah, I'm happy to give you an update there.
Speaker Change: You know, as we look at our NGL value chain, our wellhead-to-water strategy,
Speaker Change: both from
Manav Gupta: both from the GMP side through the Long Haul Pipes, the Bangle, and all the way down to the Gulf Coast.
Manav Gupta: We look at the Texas City Frac and storage and terminal and dock as one of the options that we're evaluating to continue to build out that value chain. So that process is continuing. We want to make sure as we do with any investments that
Speaker Change: is, you know, strict capital discipline, commercial flexibility, and evaluating strategic alternatives. So as we continue that and have some, you know, more clarity, we'll update you when we can. So look forward to doing that in the future.
Speaker Change: Thank you so much.
Speaker Change: Next we will hear from Keith Stanley with Wolfe Research. Your line is open.
Keith Stanley: Hi. Good morning. First, just wanted to follow up on the commentary of continuing the 12.5% distribution growth in the future.
Keith Stanley: Can you give any sense of what time period that comment would apply to or guideposts to look at for how long that's sustainable, whether it's coverage thresholds or leverage or anything else?
Speaker Change: Yeah Keith, sure. So as you know, and we've been trying to convey, we think we've got quite a bit of financial flexibility. One, as we look at the strength of our balance sheet, we look at our commitment around, you know, debt to EBITDA ratios. We've said, you know, we're comfortable in and about of four times, you know, we're below that.
Keith Stanley: but probably most importantly as we think about the duration of that.
Speaker Change: Go to Beadaholique.com for all of your beading supplies needs! See you next time! Bye bye!
Speaker Change: distribution increase, we're looking at the ability to continue those cash flow growth. So as I mentioned over the last three years, right, you've seen that distributable cash flow just under 8%. As we look at the projects that we are putting to work, I mentioned a few of them that will grow our EBITDA 25, 26.
Keith Stanley: You know, we see a period of time where 12 1⁄2 is very doable. You know, it's tough to give you an extremely long horizon. You know that as well as I do.
Keith Stanley: You know, we certainly are trying to convey to you that that distribution at twelve and a half has the potential, notwithstanding all of the things that we talked about, to be durable for a period of time.
Speaker Change: Thank you. Thank you.
Speaker Change: Thanks for that. Second question is just...
Speaker Change: I wanted to revisit the drop-down concept, so Marathon's cash balance, if you take out the MPLX cash, has come down a lot over the past year because buybacks have been obviously very robust.
Speaker Change: Should we think of the timeline to consider drop downs of MPC assets into MPLX as more driven by cash needs at marathon for their capital return targets?
Speaker Change: Or is it more tied to MPLX needing acquisitions to help meet its growth targets?
Speaker Change: First of all, what I would say to you with respect to the way that we MPLX think about
Speaker Change: Capital Allocation, we maintain strict capital discipline. So when we are evaluating where to put capital to work, we do that through our lens of strict capital discipline. We need to be sure that when we're putting capital to work, that capital is generating the returns that you all expect.
Speaker Change: As it relates specifically to your question around drop downs, you know, one of the things that we've said is they are certainly not a priority. We'll continue to look at them and when and if they make sense versus the other organic opportunities that we have to continue to grow the EBITDA of MPLX.
Speaker Change: we will employ them. You made a comment about MPC cash, and you're right, certainly, you know, we have seen that.
Speaker Change: cash balance over the last several quarters as we continue to meet our commitment of returning all cash that is not otherwise required via share buyback.
Speaker Change: and we continue to be committed to do that. But the growth opportunities for MPLX will follow strict capital discipline and we'll evaluate whether or not a drop-down versus another alternative putting capital to work yields the returns that you all expect.
Speaker Change: Thank you for that.
Speaker Change: You're welcome.
Speaker Change: Next we will hear from Teresa Chen with Barclays. You may proceed.
Teresa Chen: Good morning. As a follow-up to the Permian NGL question,
Teresa Chen: In terms of the Texas City FROC, should we think about timing related to that project as
Teresa Chen: that it should be in tandem of when your TNF contracts come up for renewal.
Speaker Change: You're long gathering, processing, have more long-haul transportation in clearly short graph right now. Maybe it doesn't make sense for that facility to come up prior. And then in the same vein of thought, would you likely bring export up at the same time so as to keep that molecule along your own well-hedged water value chain, or would it be more of a step process?
Speaker Change: Yeah, good morning, Teresa. Thanks for your question.
Speaker Change: We are really looking at a series of alternatives as we continue to progress around that strategy.
Speaker Change: both the NGL and the NatGas wellhead to water approach really focuses on the integrated value chain strategies both in the Permian and they're a really important piece of what we are trying to accomplish in MPLX.
Speaker Change: So we are trying to maintain flexibility as we work through all of the opportunities that we see to complete that very important value chain and growth opportunity for MPLX. I'm going to ask Dave to give you a little more color as we're progressing through that strategy.
David Heppner: Thanks, Maryann. So, Teresa, we throw around the word wellhead to water, integrated value chain strategies quite a bit, so maybe if I step back...
Speaker Change: and talk about how we think about it in PLX. And, as you would expect, it all starts, the value chain all starts back at the wellhead.
Speaker Change: So, you know, as you've heard, we've, you know, incrementally grown processing capacity over the last few years to serve some of the best producer customers in the Permian Basin.
Speaker Change: and the secretary plant coming online, which was done earlier in the second half of 2025.
Speaker Change: We expect to have a total of 1.4 BCF a day of natural gas processing capacity.
Speaker Change: While this is the first step in serving our customers and processing gas, the also very integral part of that is the ability to clear the resid gas and the NGLs out of the basin.
Speaker Change: That leads us into the second.
Speaker Change: piece of that value chain, which is our investment long-haul pipelines, which of course, you know, is the move of volumes out of the basin to the Gulf Coast markets. So for NGLs, as we touched on earlier, Bangle is the key strategic asset to do that.
Speaker Change: and you know...
Speaker Change: And then third quarter, we increased, as we touched on earlier, our stake in that. So we increased it 45%. And progress continues on the expansion of 250,000 barrels a day, which we expect to be in service, you know, in first quarter 2025, so not too far down the road.
Speaker Change: For more information visit www.FEMA.gov
Speaker Change: So with that, we're seeing strong volumes and we're confident in the growth profile of that asset. So on the NGL side, we're feeling very well. And then at gas side...
Speaker Change: Our strategy is really anchored around our Whistler JV platform. So in addition to the Whistler mainline, which has been in service for a while, last quarter we announced the FID at Blackcomb, which is that additional 42-inch pipeline that will connect the Permian Basin to the Gulf Coast.
Speaker Change: The final stage is what you touched on in your comments of the wellhead to water strategy is really down at the water. And that's focused on connecting the volumes to our customers while creating an optionality for our shippers.
Speaker Change: So, on the NatGas side, some examples of that strategy that we've already put in service are the ADCC pipeline, which came in service in July of last year, I'm sorry, of this year, I apologize, and the Rio Grande pipeline, which is expected to be in service second half of 2026, and Maryann touched on that a little bit.
Speaker Change: And as we touched on earlier on the NGL side, as we look at, you know, our Texas City FRACs, DOCs, and terminals, we continue to evaluate those options to bring that last link of that value chain of the NGL.
Speaker Change: hopefully
Speaker Change: you know, from both a NatGas and NGL perspective.
Speaker Change: You can see how over
Speaker Change: Over the recent past, we've been building out those strong value chains from the Permian Basin to the Gulf Coast and access to the water. So hopefully that gives you a little additional color. Thank you.
Speaker Change: Thank you. And turning to the West Coast, following Philips' announced closure of its Southern California refinery later this year into next year,
Speaker Change: I'm sure you will touch on the implications for MPC at your later call today, but...
Speaker Change: Hey, Tresa, this is Sean. I'll touch on your question there. Really, we don't see any near-term change, you know, out of the gate here. It's really we've got an integrated value chain all the way from water to the refinery and the logistics to move it around the basin down there. So we don't see any near-term there. And if you look at the, you know, the demand and supply out there, it's all...
Tresa: Thank you.
Speaker Change: And once again, if you would like to ask a question at this time, you can press star 1 and record your name when prompted. Our next question comes from Michael Bloom with Wells Fargo. Your line is open.
Speaker Change: Go to Beadaholique.com for all of your beading supply needs!
Michael Bloom: Thank you. Good morning everyone. I wanted to ask about Harmon Creek 3. I noticed on the slide you point to a 20% return there. So I'm wondering is that, would you say, is that like a higher return than normal or would you say that now on incremental investments this is kind of a new hurdle rate?
Speaker Change: Michael, this is Greg. I would say we target that that type of return rate on on any of our new projects.
Speaker Change: We have strong relationships with our customers, strong contractual support when we make these incremental organic project decisions.
Speaker Change: and we feel strongly about the project and we're excited about it.
Speaker Change: Great. And then I just wanted to ask about...
Speaker Change: CapEx in 2025 and beyond. Obviously, you're laying out a lot of new high-return projects. I'm just wondering if the cadence you've been on, which is roughly 1 to 1.1 billion of total CapEx, is that still kind of the right kind of run rate, or do you think that's going to trend higher over time? Thanks.
Speaker Change: Hey Michael, thanks for the question. You're right, over the last few years on average, you know, we've been putting about a billion dollars to work to grow the enterprise.
Speaker Change: You know, as you continue to think about the size of EBITDA and what it would take for mid-single-digit growth beyond that.
Speaker Change: You know, it's possible that our capital spend would need to increase above a billion dollars.
Speaker Change: in order to maintain mid-single-digit growth on a growing EBITDA. But we're a little early for 2025 yet. We'll give you good color as we head into the next earnings call.
Speaker Change: But, you know, certainly when we see those organic opportunities, like the project you mentioned, Harman Creek 3, when you look at the return on that project, you look at the producer-customer relationship, you look at our ability to have just-in-time, and you look for that to continue to deliver the Ibbett-Dodd growth that we're talking about.
Speaker Change: We think, again, maintaining strict capital discipline and putting that kind of capital to work will allow us to grow in mid-single-digit growth. But we'll give you greater insight into the amount of capital as we head into the 25 outlook. I hope that helped you, Michael.
Speaker Change: Perfect. Thank you.
Speaker Change: Our next question comes from Neil Dingman with Truist Securities. Your line is open.
Neil Dingman: Morning, thanks for the time. I've got my first question just on your Marcellus organic activity.
Neil Dingman: So, typically, you know, there was a number of public Appalachian MPs last week that just mentioned no surprise that they're going to defer a few more ducks and tills until things improve. And I'm just wondering, with these type of minor adjustments, does this impact either existing or sort of your near-term future plans?
Neil Dingman: Neil, this is Greg again. We don't see any current impact, material impact on our volumes.
Neil Dingman: the producers, various producers, depending on whether it's lean gas or rich gas.
Neil Dingman: have different plans and economics around their wells, so we don't see an issue there.
Speaker Change: Great, great response. And then just a quick follow-up on your Marcellus as well. Just wondering, specifically on the Marcellus processing, I'm just wondering have you all seen, you know, from the continued, seems like there's been a continued ramp as MVP continues to go forward. I'm just wondering, have you seen this continuing to help boost your, the Mobley processing plan of yours?
Speaker Change: Yeah, I think that NBC...
Speaker Change: Excuse me, MVP is a boost for the entire region. Anything that provides more residue gas takeaway is a boost. I think the other thing that we see is that there's a higher proportion of rich gas well pads that come online versus the higher volume lean gas, which is a sweet spot of ours because processing and fractionation in the Northeast is our sweet spot.
Speaker Change: You actually see lower residue gas production versus lean. That opens up capacity as well out of the basin on existing lines other than MVP.
Speaker Change: Very helpful. Thanks, Craig.
Neil Dingman: Thank you.
Speaker Change: And our last question will come from Neil Mitra with Bank of America. You may proceed.
Neil Mitra: Hi, thanks for taking my question. You've been very active in your downstream NGL operations, expanding the angle and talking about the Texas City Frac.
Neil Mitra: Can you talk about how your producer's view, Sweeney, as an alternative to the Montbelview and just how you see the logistics there and the opportunity to continue to grow with fractionation and possibly an export facility?
Neil Dingman: Thank you very much.
Speaker Change: This is Greg. In terms of our producer customers, we started on that on that end when we build our first plants out west with solid customers, and they've continued to rely on us to find outlets for them for the residue gas and for their NGLs, and we've continued to do that. And incrementally, as we've grown that capacity, you know, we've used various options. Obviously, we'd like to have as much optionality as possible. So to get into
Neil Dingman: down into the Galveston, the Houston area and have access to Bellevue and some of the storage there is just is going to provide that much more optionality and opportunity for our customers, so we continue to focus on all the above.
Speaker Change: Okay, perfect. And you've been very active in a short period of time.
Speaker Change: MPC with Grey Oak or Loop or possibly a JV just with with three pipelines in the Permian. Wanted to understand how you view that business now that you have natural gas and NGLs.
Speaker Change: Yes, Neal, thanks. It's Maryann. Just first and foremost, when we think about drop-downs, I think you were asking sort of how we think about that.
Speaker Change: We continue to believe that our growth opportunities organically have
Neil Dingman: the opportunity to support our mid-single-digit growth. So they remain largely a lower priority than the other projects that we've got and are evaluating, but I'll pass it to Dave and let him give you some of the specifics that you're asking for.
David Heppner: Hey Neal, yeah you touched on, we spent a lot of time talking about our NatGas energy L value chains and we don't want to forget about our crude value chains and you know we have a pretty sizable platform in the Permian for crude for crude gathering and blending benefits up there and so
Neil Dingman: And as you've seen in the space, there's been a lot of activity in the recent past on the M&A side of the equation. So, you know, very similar to what we touched on earlier, we continue to look at opportunities to grow out that platform. Very similar to...
Neil Dingman: how we've grown out the NatGas and NGL. Sometimes it's buying out JV partners, very low risk, but because we know the assets very well. Sometimes it's maybe buying single bolt-on assets and sometimes it may be looking at, you know,
Neil Dingman: Maybe a little more sizable M&A opportunities. So a lot of activity in that space. We continue to look at them. And I appreciate you bringing that up because we don't want to forget about the third leg of our value chains, the crude side of the equation. So I appreciate that.
Neil Dingman: Great, thank you very much, appreciate it.
Speaker Change: We are showing no further questions at this time.
Speaker Change: Perfect. Well, thank you all for joining us today and for your interest in MPLX. Should you have any additional questions or like clarification on any of the topics discussed this morning, members of the IR team will be available today to help with your calls.
Speaker Change: That does conclude today's conference. Thank you for participating. You may disconnect at this time.