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MPLX Posted Strong 3Q17 Results, Distributions Rose 4%

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MPLX Posted Strong 3Q17 Results, Distributions Rose 4% PART 1 OF 3

MPLX’s 3Q17 Earnings Rose on Higher Volumes

EBITDA rose 43%

MPLX (MPLX) reported its 3Q17 results on October 26, 2017. The company’s EBITDA1 rose 43.0% to $538.0 million from $375.0 million in 3Q16.

MPLX’s 3Q17 EBITDA is 14.0% higher than in 2Q17. Strong gathering, processing, and fractionating volumes contributed to MPLX’s EBITDA growth for the quarter.

MPLX’s 3Q17 Earnings Rose on Higher Volumes

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The chart above compares MPLX’s EBITDA estimates with its adjusted EBITDA over the last ten quarters. We’ll discuss MPLX’s operational performance in detail in the next part of this series.

Distribution increase

MPLX increased its 3Q17 distributions 4.0% over 2Q17. Since MPLX’s IPO (initial public offering) in 2012, it has increased distributions for 19 consecutive quarters. MPLX’s distributable cash flow for 3Q17 was $442.0 million and its coverage ratio was ~1.3x.

MPLX is currently trading at a yield of 6.9%. This is higher than the ~6.7% yield for Enterprise Products Partners (EPD), ~5.4% for ONEOK (OKE), and ~5.2% for Magellan Midstream Partners (MMP).

In comparison, the SPDR S&P 500 ETF (SPY) (SPX-INDEX) currently yields nearly 2.0%. The energy sector forms ~6.0% of the S&P 500 Index.

Asset dropdowns

On September 1, 2017, MPLX acquired joint-interest ownership in certain assets from its sponsor Marathon Petroleum (MPC) for a consideration of ~$1.1 billion. MPC has also offered certain refining logistics assets and fuel distribution services with projected annual EBITDA of $1.0 billion for a dropdown. The transaction is expected to close in 1Q18.

In conjunction with the closing of this dropdown, MPLX expects to exchange newly issued common units for MPC’s GP (general partner) interests, including IDR (incentive distribution rights). This action is in line with the company’s announcement in January 2017.

These actions are aimed at reducing MPLX’s cost of capital and could support its distribution growth over the long term. The planned dropdown and the buy-in of the IDRs are subject to approvals, market conditions, and regulatory clearances.

Next, let’s discuss how MPLX’s segments performed in 3Q17.

  1. earnings before interest, tax, depreciation, and amortization
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