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MPLX Eyeing More Permian ‘Penetration’ as Argo Plant Readies Ramp-Up

MPLX LP plans to bring online its Argo natural gas processing plant in the Permian Basin in the first quarter of this year, a move that aligns with goals to enhance its footprint in the prolific play, President Michael Hennigan said Thursday.

With volumes rising during the fourth quarter 2017 at MPLX’s Hidalgo complex in the Delaware sub-basin of the Permian, acquired through its merger in 2015 with MarkWest Energy Partners LP, the addition of the Argo plant should double the company’s processing capacity in the region.

“We need to get better penetration” in the Permian, and while it’s a highly competitive play, “we are going to be trying to put a lot of effort in that area to grow our presence,” Hennigan said during a call to discuss 4Q2017 earnings.

Also on Thursday, sponsor Marathon Petroleum Corp. (MPC) said it is completing transactions to drop down assets and services to MPLX that are projected to generate about $1.4 billion/year in earnings. The deal would also exchange MPC's general partner (GP) economic interests, including its incentive distribution rights, for newly issued MPLX common units, eliminating the GP cash distribution requirements of the partnership.

“The addition of the high-quality, fee-based revenue streams further diversifies our earnings and contributes substantially to the distributable cash flow base of the partnership,” CEO Gary Heminger said.

MPLX continues work on its Omega natural gas processing plant in the Sooner Trend, Anadarko, Canadian and Kingfisher play of Oklahoma (STACK), with completion expected by mid-2018. The Omega and Argo plants are expected to increase MPLX’s processing capacity in the Midcontinent region by nearly 300 Mcf/d in 2018.

In addition, the company is investing in two processing plants through Centrahoma Processing LLC, MPLX’s joint venture with Targa Resources Corp. that serves producers working in Oklahoma’s Arkoma Woodford Basin.

Meanwhile, work on the Robinson butane cavern is nearing completion and is expected to be in service in the second quarter. Start-up also was initiated at the end of 2017 at MPLX’s Sherwood 9 processing facility in West Virginia, the first of three plants set to be completed this year at Sherwood.

The expansion at the Sherwood facility comes as MPLX has seen volume growth at each complex throughout the Marcellus/Utica region set new production records in the fourth quarter. Gathered volumes rose to a record 1.5 Bcf/d in 4Q2017, while processed volumes increased to a record 1.4 Bcf/d. MPLX reported 8% growth in full-year processed volumes over 2016.

MPLX expects to complete a total of eight processing plants system wide in 2018, adding nearly 1.5 Bcf/d of gas processing capacity and 100,000 b/d of fractionation capacity.

The remainder of the company’s organic growth capital plan is to support the logistics and storage segment, including the 115,000 b/d expansion of the Ozark crude oil pipeline and the 130,000 b/d expansion of the Wood River-to-Patoka pipeline system that are targeted for completion in mid-2018.

Additional 2018 projects include tank expansions in Patoka, IL, and Texas City, TX, and an expansion of the partnership's marine fleet.

MPLX’s 2018 capital investment plan includes about $2.2 billion of organic growth capital and $190 million of maintenance capital. The partnership plans to fund its 2018 organic growth capital plan with retained cash and debt. MPLX, which did not issue any public equity in the fourth quarter, does expect to issue public equity to fund its capital plans this year.

"With a robust portfolio of organic projects in the Marcellus, Utica, Permian and STACK, which are among the most prolific and economic shale plays in the country, and a diversified suite of logistics assets, we believe MPLX is extraordinarily well positioned to deliver attractive long-term returns,” Heminger said.

MPLX reported net earnings for 4Q2017 of $238 million, up from $133 million for 4Q2016. For the entire year, net earnings were reported to be $794 million, versus $233 million in 2016.

Distributable cash flow (DCF) in 4Q2017 was reported to be $445 million (60.75 cents/share), compared with $318 million (52 cents) in the fourth quarter 2016. For 2017, MPLX reported DCF at $1.6 billion ($2.30/share), up from $1.1 billion ($2.05) in 2016.

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