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MPLX Produces Record Lower 48 Volumes in First Quarter

Northeast midstream giant MPLX LP produced a record 395,000 b/d of ethane and heavier natural gas liquids in the Marcellus and Utica shales during the first quarter of 2018, up 18% year/year, President Michael Hennigan said Monday.

Total gathered volumes increased 46% from 1Q2017 to an average of 2.7 Bcf/d, also setting a new record for the master limited partnership (MLP), Hennigan said on a call to discuss quarterly earnings.

During the second half of 2018, MPLX expects to add 20,000 b/d of ethane fractionation capacity at both the Sherwood and Harmon Creek processing facilities and 60,000 b/d propane-plus fractionation capacity at its Hopedale complex. “These capacity additions will further strengthen our position as the largest fractionator in the Northeast,” Hennigan said.

During the quarter, MPLX also doubled its processing capacity in the Delaware sub-basin of the Permian when it commenced operations at its 200 MMcf/d Argo plant. Work continues on the Omega processing plant in the Sooner Trend, Anadarko, Canadian and Kingfisher play of Oklahoma (STACK), with completion still expected by mid-year.

MPLX’s southwest operations also included a 10% increase sequentially in gathered volumes, which averaged nearly 1.5 Bcf/d in 1Q2018. Processed volumes averaged more than 1.3 Bcf/d for the quarter, a 5% increase over 1Q2017.

MPLX sponsor Marathon Petroleum Corp. will substantially expand its Permian footprint with its announced takeover of Andeavor. Marathon Petroleum CEO Gary Heminger said the companies’ midstream business segments, which include MPLX and Andeavor Logistics, would continue to operate as separate entities for the foreseeable future.

Heminger said at the closing of the transaction, Marathon Petroleum would own the general partner of both MLPs, as well as the majority of the limited partner units.

While both MPLX and Andeavor Logistics would continue to operate as separate MLPs, Marathon Petroleum would “evaluate structural considerations at the appropriate time following the close of the Andeavor transaction,” Heminger said.

As for MPLX’s processing segment, volumes averaged about 5.1 Bcf/d in the quarter, representing a 10% increase from a year ago. While volumes were up versus the first quarter of 2017, there were a couple of factors that resulted in lower processing volume versus the fourth quarter of last year, Hennigan said.

First, some of the decline was planned as producers temporarily shut in wells that were producing in the fourth quarter in order to safely fracture and complete wells in the vicinity of the existing wells.

“This practice is common in the industry where you take one step back in order to gain two steps forward in terms of volume levels,” Hennigan said.

MPLX also had a planned shutdown at its Houston complex in Pennsylvania to complete maintenance and turnaround work in advance of placing the Argo plant in service. In addition to the two planned reductions, the company also experienced “unexpectedly harsh winter conditions in the Northeast that impacted producer volumes and some of our facilities.

“With these activities behind us, we expect new wells to come online in the second quarter, leading the higher volumes in the quarter and continuing the growth trend throughout the year,” Hennigan said.

As for the company’s logistics and storage segment, the Robinson butane cavern began operations during the quarter, and the first phase of the expansions of the Ozark and Wood River-to-Patoka crude oil pipeline systems, which deliver Cushing crude sourced to Wood River and Patoka, was also completed. The full expansion to 360,000 b/d is expected to be available by mid-2018.

MPLX reported earnings of $760 million and distributable cash flow of $619 million for the quarter, both of which are records for the partnership. The company also announced a quarterly distribution of 61.75 cents/share, a 14% increase over the distribution in 1Q2017. The MLP confirmed its distribution growth guidance of 10% for 2018 and its intent to continue to execute a self-funding model with no expected new units to be issued this year to fund organic capital investments.

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