uploads///MPLXs changed business mix

How MarkWest Changed MPLX’s Business Mix

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Sep. 30 2016, Updated 1:04 p.m. ET

MPLX’s segments

MPLX (MPLX) has two reportable segments:

  • Logistics and Storage
  • Gathering and Processing

Operating income from the gathering and processing segment for 2Q16 was $271 million, which was almost double the income from the logistics and storage segment of $123 million.

In 1Q16, MPLX’s first full quarter after the MarkWest acquisition, the company’s operating income rose to $345 million from $82 million in 1Q15. The growth continued in 2Q16 with operating income increasing from $88 million in 2Q15 to $394 million the 2Q16.

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Changed business mix

The above graph shows the segmental contribution to MPLX’s operating income over the last seven quarters. As the graph shows, the company’s operating income rose substantially after the MarkWest acquisition. Moreover, the business mix shifted from primarily crude oil and refined products’ logistics and storage prior to the acquisition to the current mix where natural gas gathering and processing contributes to the major chunk of the company’s operating income.

Areas of operations

MPLX’s crude oil and refined products business operates in the Midwest and Gulf Coast regions of the United States. It operates its natural gas gathering systems in six states including the Marcellus Shale, the Utica Shale, the Appalachia region, and the Southwest region. The Marcellus and Utica natural gas plays account for ~20% of total US gas plays.

MPLX is an MLP formed in 2012 by Marathon Petroleum (MPC) to engage in midstream energy operations. In 2015 MPLX merged with MarkWest, the second-largest processor of natural gas in the United States.

In March 2016, MPLX completed the acquisition of Marathon Petroleum’s inland marine business, which is expected to bring $120 million in annual EBITDA (earnings before interest, tax, depreciation, and amortization) from its business.

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