MPLX LP (NYSE:MPLX) Q3 2023 Earnings Call Transcript

MPLX LP (NYSE:MPLX) Q3 2023 Earnings Call Transcript October 31, 2023

MPLX LP beats earnings expectations. Reported EPS is $0.927, expectations were $0.91.

Operator: Welcome to the MPLX Third Quarter 2023 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. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Kristina Kazarian. Kristina, you may begin.

Kristina Kazarian: Thank you, Sheila. Good morning, and welcome to the MPLX third quarter 2023 earnings conference call. The slides that accompany this call can be found on our website at mplx.com under the Investors 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 2. It’s a reminder that we’ll 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. With that, I’ll turn the call over to Mike.

The sun rising over a sprawling network of oil & gas pipelines near Midland, Texas.

Michael Hennigan: Thanks, Kristina. Good morning, everyone. Thank you for joining our call. Earlier today, we reported third quarter adjusted EBITDA of $1.6 billion and distributable cash flow of $1.4 billion, each set a new quarterly record for MPLX with both increasing over 8% year-over-year. Our L&S business set a new record for crude pipeline throughput and saw strong terminal throughputs, demonstrating the value of our relationship with MPC. In our G&P business, we saw record throughput in our processing and fractionation operations driven mainly by our assets in the Permian and Marcellus basins. Our long-term production outlook for our G&P producer customers in our key basins remains largely unchanged. In our largest basin, the Marcellus, the cost to develop remains at the low end of the cost curve and still below current commodity prices, we expect to see maintenance level drilling activity continue.

While in the Permian, crude prices remained strong and prices for associated gas do not significantly impact producer activity. Our integrated footprint in these basins position the partnership with a steady source of growth opportunities. For the second year in a row, based on the strength and continued growth of our cash flows, last week, we announced a 10% increase in the partnership’s distribution, which now stands at $3.40 per unit on an annualized basis. We’re committed to returning capital to unitholders and expect our distribution to be the primary return of capital tool supplemented with opportunistic repurchases. We are well positioned to optimize return of capital given the strength of the business and our balance sheet. Our position on MPLX and its structure is unchanged.

MPLX is a strategic investment for MPC, which now expects to receive $2.2 billion in annual cash flows via the distribution. MPC believes that its current capital allocation priorities are optimal for its shareholders and MPC does not plan to roll up MPLX. We remain confident in our ability to grow the partnership and our focus on executing the strategic priorities of strict capital discipline, fostering a low-cost culture and optimizing our asset portfolio, all of which are foundational to the continued growth of MPLX’s cash flows. Now let me turn the call over to John to discuss our growth as well as our operational and financial results for the quarter.

John Quaid: Thanks, Mike. As you can see on Slide 5, MPLX has a strong history of growing its cash flows by executing the strategic priorities Mike just highlighted. Looking back over the last 3 years, you can see that our growth comes in stair steps as we develop and bring projects online. And through the first 9 months of this year, distributable cash flow has grown over 6% versus the prior year. We are progressing our 2023 capital program, which remains forecasted at $950 million, including $800 million of growth capital and $150 million of maintenance capital. In the L&S segment, our joint venture natural gas, crude and NGL pipeline projects in the Permian are progressing. Whistler’s expansion, the 2.5 billion cubic feet per day was completed at the end of the third quarter, and we’re seeing strong demand for the natural gas pipeline.

Construction is progressing on the associated Agua Dulce Corpus Christi Pipeline lateral, which is expected to be in service in the third quarter of 2024. On the Wink to Webster crude pipeline, we expect volumes to ramp over the next 2 years as the pipeline continues to play segments into service. Turning to our participation in the NGL value chain. We are progressing the expansion of the BANGL pipeline to about 200,000 barrels per day, which is expected to be completed in the first half of 2025. The capital-efficient expansion of this long-haul pipeline is supported by existing and growing demand for NGL takeaway from the Permian’s Delaware and Midland Basins to the fractionation hub in Sweeny, Texas. All of these projects are largely financed at the JV level, and therefore, our portion of the JV finance capital spending is not reflected in our capital outlook.

In the G&P segment, we remain focused on growth investments in the Permian and Marcellus basins in response to producer demand. We are bringing online new gas processing plants in the Permian Delaware Basin to meet increasing demand while targeting strong returns with strict capital discipline. We’re progressing construction of Preakness II, which we expect to be online in the first half of 2024. And announced last quarter, we would be building our seventh gas processing plant in the basin Secretariat, which is expected to be online in the second half of 2025. Once operational, these plants will bring our total processing capacity in the Delaware Basin up to 1.4 Bcf per day. In the Marcellus Basin, we are also advancing construction of the Harmon Creek II gas processing plant, which we expect will be online in the first half of 2024.

Slide 6 outlines the third quarter operational and financial performance highlights for our Logistics & Storage segment. The L&S segment reported its third consecutive quarter with $1 billion of adjusted EBITDA. L&S segment adjusted EBITDA increased $122 million when compared to third quarter ’22, primarily driven by higher rates and throughputs, including growth from equity affiliates. Third quarter 2023 segment adjusted EBITDA excludes Garyville incident response cost of $63 million. Crude pipeline volumes were up 9% and represent a new quarterly record for the partnership as we grew crude oil throughputs through expansion and debottlenecking activities. Product pipeline volumes were down 9%, driven by less favorable market dynamics and effects from Marathon’s refinery downtime.

Terminal volumes were up 7% due to higher customer demand, including effects from Marathon’s refinery turnarounds in both quarters. Looking ahead to the fourth quarter, we do expect some headwinds of approximately $30 million to $40 million to sequential L&S segment results from lower throughput volumes as a result of MPC’s planned turnaround activity, as well as higher operating expenses due to the timing of maintenance projects. Moving to our Gathering & Processing segment on Slide 7. G&P segment adjusted EBITDA increased $3 million compared to third quarter 2022 as the benefits of higher volumes and throughput fees were offset by lower NGL prices. While our G&P segment is largely a fee-based business, we do have some direct sensitivity to natural gas liquids prices.

For the quarter, NGL prices averaged $0.68 per gallon as compared to $1.01 in the third quarter of 2022, resulting in a $32 million unfavorable effect. Total gathered volumes were up 3% year-over-year due to increased production in the Permian and the Marcellus. Processing volumes were up 5% year-over-year, primarily from higher volumes in the Marcellus and Permian, driven by increased customer demand and our investment in Permian processing capacity. Focusing in on the Marcellus, by far, our largest basin of operations, we saw year-over-year volume increases of 4% for gathering and 5% for processing, driven by increased customer demand and fractionation volumes grew 10%, primarily due to increases to our fractionation capacity to meet in-basin demand for ethane.

Moving to our third quarter financial highlights on Slide 8. Total adjusted EBITDA of $1.6 billion and distributable cash flow of $1.4 billion increased 8.5% and 8.6%, respectively, from the prior year. As Mike discussed, based on our confidence in the continued growth of our cash flows, we increased the base distribution 10% to $0.85 per common unit while maintaining strong coverage of 1.6 times. We are committed to returning capital to unitholders and year-to-date we have returned $2.4 billion through our distributions. Our capital allocation framework remains unchanged, and we continue to expect the distribution will be our primary tool to return capital. Opportunistic repurchases of units held by the public also remain a tool to supplement capital returns.

The growth of our cash flows and our strong balance sheet, including a quarter end cash balance of $960 million and leverage of 3.4 times, provides us with financial flexibility to optimize capital allocation. Now let me hand it back to Mike for some final thoughts.

Michael Hennigan: Thanks, John. In closing, the growth of our cash flows continues to enable us to invest in and grow the business while supporting our commitment to return capital to unitholders. We continue to expect our distribution to be the primary return of capital tool. And with the recently announced 10% increase to the partnership’s base distribution, MPC now receives $2.2 billion annually from MPLX’s distributions, illustrating its strategic value as part of MPC’s portfolio. As MPLX pursues its growth opportunities, we believe the value of this strategic relationship will continue to be enhanced. We are confident in our growth opportunities and ability to generate strong cash flows. By advancing our high-return growth projects anchored in the Marcellus and Permian Basins, along with our focus on cost and portfolio optimization, we intend to grow our cash flows, allowing us to reinvest in the business and return capital to unitholders.

Now let me turn the call back over to Kristina.

Kristina Kazarian: Thanks, Mike. As we open the call for questions, we ask that you limit yourself to one question plus a follow-up. We may re-prompt for additional questions as time permits. And with that, Sheila, we’re ready for the questions today.

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Q&A Session

Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from John Mackay with Goldman Sachs. Your line is open.

John Mackay: Good morning, everyone. Thanks for the time. I wanted to start on maybe the distribution increase last week. Maybe if you could just frame up for us how you were thinking about the 10% level, what that kind of means for cadence going forward? And if you could kind of touch about – touch on that in the context of leverage now being down at 3.4 [ph] versus the 4.0 [ph] ceiling? Thanks.

John Quaid: Hey. Good morning, John. Thanks for the question. Yes, I think it all gets down to we’ve got a significant amount of financial flexibility here. I think as you can see where we stand as we’ve been very focused around our capital allocation to growth, but also making sure we’re returning capital to unitholders. As you know, we’ve talked in the past, we stay very focused on where our coverage is and digging into that, very comfortable here with this increase staying at 1.6 times, certainly some capacity there. Again, very happy where the balance sheet is. But I think, as I think about – I’m sure Michael has some comments as well. I mean, that’s not just return of but also looking for opportunities to invest and drive return on capital as well. So I think we’re in a very comfortable spot. Happy to do 10% for the second year in a row and continue to be focused on both growing the partnership and also driving returns to unitholders.

Michael Hennigan: And John, it’s Mike. I’ll just add that the way we think about it from an investor perspective is, at the end of the day, we’re trading around a 9% yield roughly, and we’ve been saying to the market. And I think we’ve demonstrated in our results, we’re going to continue to grow earnings somewhere around that mid-single digit. It will be a little stairsteppy. But if you look at our CAGR since 2019, it’s been a little north of 6%. So as I think about the investment opportunity for people, our yield plus growth should give a pretty strong opportunity for people to invest in the equity. And the way we think about it, as John just said, is we’re thinking about this over the longer term. We have a lot of financial flexibility right now.

We have cash on the balance sheet, which is both blue bar and red bar. So we have more distribution growth capable. We have opportunistic capabilities. If we see more volatility come back into the equity, which we haven’t seen for a little bit of time, but we’ll see how that changes. But overall, we’re trying to position ourselves as a good investment for people that are interested in the type of cash flows that we’re generating. So hopefully, that gives you some perspective as the way to think about it from an investor angle.

John Mackay: I appreciate that. Thanks. And maybe picking up on the themes of continuing to invest in the business, obviously, reiterated growth CapEx guidance for the year. We’ve also seen – I think if we look at third quarter, growth CapEx came in a little lighter than we would have been than we expected. Maybe you can just talk about the cadence of growth spending from here, where opportunities might sit beyond the project backlog you’ve announced so far? Thanks.

John Quaid: Yes. Thanks, John. I’ll jump in on that one. I think as we’ve said before to it, our capital doesn’t – right, it tends to move quarter-to-quarter. So you’re not going to see kind of ratable amounts again here this morning. We stated again, we’re still looking around that $800 million of growth capital for this year. And again, in my remarks and on Slide 5, we’ve tried to summarize kind of the major projects we’re working towards. We’ve got two processing plants, one in the Marcellus, one in the Permian, coming online in the first half of next year. We announced last quarter another processing plant in the Permian, which will be out in 2025, right? So you’ll probably start to see us spend some money on that. And then we’ve got a number of the different JV pipeline projects that we’re progressing as well.

So again, I think you’ve asked before and we’ve said, hey, that plus or minus $1 billion of kind of run rate CapEx is probably a comfortable zone for us. And I think the opportunities kind of remain in those main basins. And then also, too, we also continue to look for opportunities around our large L&S footprint in support of MPC, where there are opportunities for us to find smaller bolt-on acquisitions where we can operate a midstream asset and MPC can commercially create value around that.

Operator: Thank you…

John Mackay: Appreciate the time. Thank you.

John Quaid: Thanks, John. You’re welcome.

Operator: Our next question will come from Theresa Chen with Barclays. You may proceed.

Theresa Chen: Good morning. Thank you for taking my question. John, maybe if I can touch on your last point about potential bolt-on acquisitions, especially at the asset level. We’ve received multiple announcements from some of your competitors and peers about wanting to disperse assets into the market. Are there particular areas along your infrastructure value chain that you find more attractive to invest in, given what’s out in the market from companies today as well as potentially a piece of TMX later on?

John Quaid: Theresa, I’ll maybe ask Dave to chime in on that one.

David Heppner: Theresa. So this is Dave. So yes, that’s a great question. So as we look at opportunities to pursue, number one, we always look into high-quality assets that are aligned with our long-term strategies. And also provide the ability to integrate and capture synergies along our value chains, mainly around crude, nat gas and NGLs and also finally, of course, is a return of capital – return on capital, I’m sorry. They always have to give us the appropriate acceptable risk-adjusted return. So I think as you think through that, it’s really – there’s a lot of M&A out there, as you stated. We continue to look at them, but we’re looking through the lens of strict capital discipline on those key tenants, high-quality assets and synergies and integration value. So that’s kind of how we’re thinking through it.

John Quaid: And Theresa, it’s John again. Maybe just to add on to that with some examples. And again, these are what we like to call kind of singles, maybe they’re even bunts [ph] But – earlier this year, we were able to acquire some boats and barges to expand our marine fleet to provide increased flexibility to MPC on moving product. Last year, we had a rail facility near our Dickinson MPCs, Dickinson refinery that MPLX was able to acquire to move product there too. So that’s the piece is that value of interacting with our sponsor or again, we can kind of find those. So I’d say it’s across, as Dave said, that whole value chain, where do we – those are assets we know how to run and operate, and we’ve got a customer that needs them too. So I’d say it’s around those kind of examples as well. Mike, did you want to…

Michael Hennigan: Yes. Theresa, I’m going to add on to John’s comment there. So obviously, on the calls, people like to hear big sexy [ph] projects, and that’s not been our forte. But we have been investing in smaller – where we get a really good return for a little to no capital. As an example, we had record crude throughput it’s not sexy to come out and say we added a pump here or something along those lines, but where you can deploy small amounts of capital and get large returns, we think those are really great opportunities for us. And the magnitude of the size of our asset base enables Shawn’s team and Greg’s team to look throughout all of our assets and come back. And even though the total capital number seems to some people to say, how are you getting this growth?

Well, part of it is because we’re getting some really good returns out of that deployment. And to me, that’s part of the game that we’re trying to do is get the highest possible returns out of the lowest capital deployment. And at the end of the day, to me, it still comes down to are you generating cash flows. And we feel very confident that at the end of the day, our cash flow generation is showing a consistent pattern that we think investors should find appealing. Hopefully, that’s answering your question in a little bit more detail.

Theresa Chen: It does. Thank you. And within the context of capital allocation, you have a healthy balance sheet, ample coverage, JV finance projects and the cash on your balance sheet is building to nearly $1 billion. Can you just remind us how much cash you want to keep on the balance sheet on a ratable basis? Should we just assume that the cash continues to build? What’s the best uses of that cash over the near and medium term?

John Quaid: Theresa, great question. I don’t think we’ve really talked about kind of a targeted cash level for MPLX, right, as a kind of stable midstream entity. It’s not something we’ve been focused on. I think for us, we’ve been focused on how do we optimize that capital allocation. How do we maintain that flexibility for both opportunities to invest in and grow the cash flows of the partnership and other opportunities to continue to grow our return of capital as well. So I think it’s just been a spot of where we are, but we like that flexibility that it gives us for those two levers. Mike, would you…

Michael Hennigan: Yes, Theresa, I’ll add that it wasn’t our desire. We didn’t set out to say let’s end up with $1 billion of cash on the balance sheet. What has disappeared a little bit from the market is the volatility in the unit price. We have a decent amount of that cash that I call red bar that’s targeted to repurchase units. Now we haven’t done that for a little bit of time. It’s not that we’ve given up on that. We just have been surprised at how much tighter the equity price is traded. But if they’re ready to deploy? Is it suboptimal? You could argue that sometimes, but we’re getting a decent interest rate on it right at the moment as we sit here. So it’s not hurting us real bad. And we’re just looking for that opportunity.

So it’s ready to be deployed if we see what we call that opportunistic. At the same time, there’s a portion of that cash that’s what I call blue bar, which is there for the long term. And back to the question that was asked earlier, could we have pushed the distribution more? Yes, we could. We have the financial flexibility to do that. But in our opinion, what we’re trying to do is convince investors that it’s a good longer-term play. We’re not just going to come out and bang it really high and then kind of disappear. We want to show people that we’re going to generate cash flows very consistently. That’s why you’ve heard me say over the last couple of quarters, we’re going to do midstream, I mean, mid-single-digit growth. And it’s not aspirational.

We’ve been doing that since 2019. So that’s part of what we’re trying to convince the market is that we understand if you invest in us, that you want to get a good return, you want to see a growing distribution. We think 10% a couple of years in a row is a good number. By your question, you know that we have more financial capability to do more, and we can just decide to try and manage that over the long term. And if we get a little volatility in the equity, we’ll deploy some repurchasing power as well.

Theresa Chen: Thank you.

Michael Hennigan: You’re welcome.

Operator: Our next question will come from Brian Reynolds with UBS. Your line is open.

Brian Reynolds: Hi. Good morning, everyone. Maybe to follow up on some of the growth expectations for MPLX of which Permian is the large driver. While we’ve seen some of the activity in the Permian weekend as of late, the medium-term outlook for the Permian kind of remains intact with some forecast pointing to greater than 1 million barrels per day of growth from today through year-end ’25. So kind of curious if maybe you can talk a little bit more macro, but it would be great if you could just talk Permian fundamentals from an MPLX perspective, and whether you’re seeing some similar growth trends over a multiyear outlook at the MPLX level? Thanks.

Michael Hennigan: Brian, it’s a good question. I’m going to let Shawn talk a little bit about what were going on in the pipes, whether it’s Wink to Webster or BANGL et cetera, I’ll let them do it, and then let Greg talk a little bit about what we got going in the processing area. As you know, it is an area of focus for us, it’s no secret that there’s a lot of growth in the Permian. And we’re just trying to enable our own ability to get in there and invest prudently and generate cash flows along with all the other competitors are trying to do the same. So Shawn, why don’t you give a little more color on what we got going there?

Shawn Lyon: Sure. Hey, Brian, this is Shawn. Really, I’ll first touch on our NGL pipeline BANGL. Last quarter, we talked about the expansion on that pipeline. And really, that’s been a capital efficient pipeline for us. And as volume has come available, we’ve said we would announce the expansion, and we did that last quarter. So we’re really pleased with that, and that will take us to the Sweeny hub there in Sweeny, Texas. The other Wink to Webster, if you look at that pipeline there, it continues to ramp up as per plan. And really, we’re seeing those cash flows increase over the next couple of years as the commitments continue to ramp up. So again, really pleased with both those long-haul strategic pipelines. And again, they’re measured, but they’re steady and it’s meeting the expectations we thought to return cash to the partnership.

Brian Reynolds: Great. Thanks. And maybe to touch on the Permian natural gas takeaway. We continue to work through all available brownfield capacity here over the next, call it, 6 months to a year. But beyond that, more greenfield is needed. MPLX has some unique relationships there, but MPLX is in a much different position today than it was a few years ago, just given a much larger processing capacity position in its existing balance sheet. So kind of curious how MPLX’s participation in future Permian natural gas takeaway or LNG supply made different a year or 2 from now versus how it participated in prior cycles? Thanks.

John Quaid: Brian, it’s John. I’ll start and let some of the team jump in as well. As you know, really excited with our relationship there with the – resulted in the Whistler project, right, building that line, expanding it, adding lines to the end to get from Agua Dulce markets. We’re a small player in the Matterhorn pipeline, right, coming online in third quarter ’24, again, would have loved to have been a bigger player. But I think as you know, the way those work, your participation is driven by the producer volume you bring to the project. So we’ll continue to look for those opportunities where it makes sense. But I’d also say, look, we’ve got a platform there right now that we can continue to optimize as well off of that base, whether, again, it’s more straws on the front end or more pipe on the tail end to get the other end customer markets and other opportunities to expand there. So again, we remain really bullish the Permian.

Brian Reynolds: Great. thanks. I’ll leave it there.

Operator: Our next question will come from Jeremy Tonet with JPMorgan. Your line is open.

Bharath Reddy: Hey, guys. This is Bharath Reddy on for Jeremy. I think in the past, you guys have discussed the potential for renewed Utica activity to improve processing plant utilization and flows on regional pipes such as Cornerstone. So just wondering if you could provide any updated thoughts here. Thanks.

Michael Hennigan: Yes. Utica is an area, and I’ll let Greg comment in a second. Like we were talking about earlier. We do have already deployed capital there and we have excess capacity. So going back to the question Theresa asked earlier, we love when that opportunity starts to present itself. Greg, why don’t you give a little update there?

Gregory Floerke: Yes. This is Greg. The Utica is an area that had strong growth early on, along with the Marcellus and then some of the rigs moved from there more of the Marcellus now with sustainable crude prices and good levels. That’s driven better prices for condensate and for the light oil in the western portion of the Utica window. So we are seeing more activity there and even new producers moving into the area and leasing acreage and starting to make plans. So we’re excited to start to see some growth again in the Utica and volumes pick up there. And as Mike said, we’ve got capacity now that we can grow into by connecting pads and we essentially already have the gathering system and the processing capacity there to handle that.

Bharath Reddy: Got it. That’s helpful. And I think previously discussed Capline as a potential midstream asset within the MPC portfolio that could kind of be dropped down. So just curious on updated thoughts on how MPC could drop down interest in remaining logistics assets?

John Quaid: Yes, it’s John. I’ll take that. We’ve kind of said, look, we’ve got some assets, whether it’s Capline, Gray Oak, as some other midstream-type assets that are up on the sponsor’s balance sheet. I think right now, we’re kind of – we can save those for a rainy day, not something that’s really on the front burner for us, but it certainly gives us some optionality looking out into the future.

Bharath Reddy: Great. Thanks.

John Quaid: You’re welcome.

Operator: Our next question will come from Keith Stanley with Wolfe Research. You may proceed.

Keith Stanley: Hi. Good morning. Two follow-up questions. First, on the Permian. Are you considering larger opportunities at all to expand the value chain further downstream? Or do you think your strategy will stay focused on processing plants and pipelines?

John Quaid: No, no, great question, Keith. I appreciate it. We’ve said, look, we’ll continue to look at where we might be able to participate up and down that whole value chain. Certainly, to date, right, it’s been on the processing side and then the takeaway capacity. But we like participating in that, and if there’s more opportunities to touch the molecule along that chain. That’s something we can certainly consider and take a look at.

Keith Stanley: Great. Second one, just on the distribution, just to clarify, is there an ultimate level of kind of long-term cash flow coverage you would look at? Or any other metric that you think could help investors think about multiyear distribution growth relative to the growth you expect in the underlying business?

John Quaid: No, it’s a great question, Keith. I appreciate it. I mean it’s one, we haven’t given a framework. We’ve talked more conceptually about it. You heard Mike talk a little bit about red bar and blue bar cash flows. So we really dig into our results to understand what’s that year in and year out stable cash flow that we call blue bar when we think about where the distribution is and where we might want to head. I would just say, I think we’ve got ample capacity there as we look forward to manage that. And again, we want to continue to keep growing the cash flows at kind of that plus or minus mid-single digits as well, which should drive an opportunity around distribution growth.

Michael Hennigan: Keith, it’s Mike. I’ll repeat what I said earlier a little bit as I think about it from an investor standpoint, what type of return is the investor getting if they invest in us. So – so I look at our – where we’re going to trade from a yield standpoint. Again, we personally think we should trade a little lower in yield, but the market has kept us around that around 9% or so, somewhere in that range. And then we look at the growth and try and put ourselves in a position that we offer the market a good total return opportunity. So that’s the way I think about it long term. We kind of evaluate where the market is going to trade us. We think out in time as to where that distribution needs to be to be one part of the equation.

We think of how much cash flows need to grow to be part of that equation. And then we kind of manage it across time, if that makes sense to you. And kind of like people have asked earlier, we didn’t set out to have $1 billion of cash on the balance sheet. That wasn’t a stated goal. It’s kind of the way the market has played out for us. We’re not opposed to it. Financial flexibility is not a bad thing. It’s just the way it’s played out that we haven’t gotten to deploy some of the repurchasing that we would have liked up until this point. And like I said, we have more capacity on the blue side, but we want to make sure investors see it as a better long-term investment.

Keith Stanley: Got it. Thank you.

Michael Hennigan: You’re welcome.

Operator: [Operator Instructions] Our next question will come from Michael Blum with Wells Fargo. Your line is open.

Michael Blum: Thanks. Good morning, everyone. I just had two quick questions really. One, I’m sure you’re aware there’s been many NGL pipeline expansion announcements out of the Permian. So just can you remind us if your – the BANGL expansion is contracted? And second question is in the L&S segment. You had a big increase in the average pipeline tariff year-over-year 13%. How much of that was just driven by the inflation escalators? Or are there other factors contributing to that really big increase? Thanks.

Michael Hennigan: Hey. Michael, good morning. Thanks for the questions. I’ll maybe take the first one and then pass it over to Shawn. So when you think about BANGL, we certainly have dedications to that line, but right, you’re not going to have commitments on a natural gas liquids line. But we do look and see, you can kind of imply those same producers do have commitments, for example, on natural gas takeaway lines. So we know they’re committed there. It gives us some comfort on how the volume might flow through BANGL. But typical with NGL lines, right, it’s dedications not commitments. And I’ll leave it – turn it to Shawn for the first question.

Shawn Lyon: Hey, Michael, this is Sean. Thanks for the question. Really, if you look at our average tariff pipeline average pipeline tariff, it’s around the 13%. It just so happens that, that’s exactly the FERC rate that we announced – that FERC announced July 1. But that just happens to be the same right there. It’s really due to the tariff mix that it just happens on the pipelines that we use the most on our increased throughput that helped drive that. The other piece I would say that is something that we try to make sure that people are aware of FERC-directed – directly FERC tied to our assets. It’s only about 20% of our overall NPLX EBITDA is tied to the FERC index there. So hopefully, that gives you a little more color on your question there as far as the FERC rate there.

Michael Hennigan: And Michael, it’s Mike. I’ll just add that, obviously, what FERC is trying to do is to look at all those impacts that are raising costs and they’re hitting us as well. And what we do as a team is to say we got to be better than that average. We’ve got to look for opportunities for us where we can run it at a lower cost compared to where the average of the industry is. And in that way, we’ll create a little bit of value. But our costs definitely move up with those impacts, and we try and optimize around that.

Michael Blum: Perfect. Thank you.

Michael Hennigan: You’re welcome.

Operator: Our next question comes from Doug Irwin with Citi. Your line is open.

Doug Irwin: Hi. Thanks for the question. Just another on the balance sheet. Looking at Slide 10 in the earnings presentation. It looks like you have almost $3 billion of debt maturing over the next couple of years. I’m just curious if you could talk about how you’re thinking about the securities here in the high rate environment, particularly in the context of all the cash you have on the balance sheet and already being below your leverage target?

John Quaid: Yes. Hey, Doug, it’s John. Thanks for the question. Yes, we’ve got, what, about $1.150 billion [ph] due December of next year and then the next several years at plus or minus $1 billion, $1.4 billion [ph] So I think as you’ve seen us in the recent past, we’ll look to be thoughtful about how we do that. Certainly, you’re spot on, given where rates are today versus the last refinancing we did. Again, we’ve got some financial flexibility there. And I’d say it’s not only the cash on our balance sheet, but we’ve got revolver with our parent as well, which gives us some flexibility to be thoughtful about the right time to look to refinance.

Doug Irwin: Got it. Thanks. And then you talked about potential growth opportunities with MPC. And I think one that came up last quarter was hydrogen. And I think MPC is involved in at least one of the hydrogen hubs that was just selected for funding negotiations. Wondering if you could kind of talk about what you see MPLX’s potential role being here and maybe just help frame that opportunity to that.

David Heppner: Yes, Doug, this is Dave. So yes, you are correct, actually. Of the 7 hydrogen hubs that received DOE funding at $7 billion, MPC/MPLX is involved in 2 of those. One in Appalachia and one end one in the Heartland. And so specifically around MPLX involvement, it’s going to be more around the storage and transportation of hydrogen and CO2 rather than constructing hydrogen production facilities. That would be more on the MPC side of the equation. The last piece I’ll leave you with, why all these projects have received DOE funding. That’s just the first step. It’s a big milestone, first of all. It’s good to get narrowed down and secure the funds from the DOE. But that’s the first step in a long journey to secure the agreements with DOE, design and construct the project. So we’ll talk more about these into next year, but I appreciate you bringing that up. And like I say, we’re excited on the first step of receiving funding on those 2 projects.

Doug Irwin: Great. Thanks.

David Heppner: You’re welcome.

Operator: And our final question will come from Neal Dingmann with Truist Securities. Your line is open.

Neal Dingmann: Good morning, guys. Thanks for getting me in. You’ve talked around this and my first question, maybe just around general activity thoughts. I’m just wondering, is the long-term production outlook for your G&P producer customers, would you all consider that as good today as you thought it would be at the beginning of the year or maybe even it sounds like it would be slightly better than you initially expected. Just wondering sort of general thoughts.

Gregory Floerke: Neal, this is Greg. I would say that if you look at a year ago where prices were, they were about double on gas and NGLs. And a lot of the forecast was built around some expectation of that as the prices came down, we did see some slowing of growth in terms of rig activity and bringing new pads on. So yes, I think that, that was expected based on the pricing changes, but we have been seeing growth maybe beyond even what you would expect. And I think that shows that people are still very – producers are still bullish on where pricing is going with the LNG plants that are going to come online over the next couple of years. NGL prices have been supportive. And really, the production – drilling and production costs have come down as the producers are drilling longer laterals.

That brings more volume in faster and it keeps the cost level below even where some of the lower prices are. So yes, we have seen growth single-digit low to medium single-digit across most of the basins, and that’s been really good to see.

Neal Dingmann: That’s great detail. And then just my second, maybe just around your capital program, specifically, given the – it sounds like just continuous efficiencies you all see, would you expect maybe going forward, that maintenance capital declined slightly from the current 150 level?

John Quaid: Neal, it’s John. I don’t know that I’d expect the change in maintenance capital, right? When we think about our capital allocation framework, that first kind of step is making sure we’re investing to maintain the safety and reliability of our assets. So I don’t know that I’d expect a change there.

Neal Dingmann: Okay. Thank you, all. Appreciate it.

John Quaid: You’re welcome.

A – Kristina Kazarian: All right. Sheila. Well, if there’s nobody else in the queue. Thank you for joining us today, and thank you for your interest in MPLX. Should you have additional questions or would you like clarification on any of the topics discussed today. Members of the Investor Relations team will be available to take your call. Thank you.

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