MPLX’s capital expenditure

MPLX (MPLX) is expected to see a massive rise in capital expenditure by the end of 2017 compared to the previous year. It expects to spend ~$2.1 billion on capital projects, dropdowns, and maintenance work by the end of the year, which represents a 74.0% rise compared to the previous year. The huge rise is mainly due to two major dropdowns from MPLX’s sponsor, Marathon Petroleum (MPC).

Marathon Petroleum contributed certain pipeline, terminal, and storage assets as part of the first dropdown. For details, read MPLX Gets a Boost with IDR Removal, Accelerated Drop-Down Plan.

What’s Driving the Rise in MPLX’s Capital Spending?

MPLX recently closed the second tranche of dropdown from MPC for ~$1.1 billion. That included MPC’s joint ownership interest in certain pipeline and storage assets. For details, read Marathon Petroleum’s Strategic Path: Drops Down Assets to MPLX.

Apart from dropdowns, the majority of MPLX’s 2017 capital would be allocated on natural gas processing and NGL (natural gas liquids) fractionation capacity expansion. MPLX placed the 200 MMcf/d (million cubic feet per day) Sherwood VII Processing Plant during the first quarter of 2017 and now expects to place the Sherwood VII plant in 3Q17. In total, MPLX expects to add 400 MMcf/d of natural gas processing capacity and 120,000 bpd (barrels per day) of fractionation capacity by the end of this year.

MPLX’s expansion opportunities

MPLX expects the pending dropdown from MPC to be completed in 4Q17 and 1Q18. The remaining dropdown generates ~$1.0 billion of annual EBITDA (earnings before interest, tax, depreciation, and amortization). MPLX also expects to add ~1.5 Bcf/d (billion cubic feet per day) of processing capacity and 40,000 bpd of fractionation capacity by the end of 2018. It also expects to place one pipeline expansion and two storage expansion projects by the end of 2018.

In the next part, we’ll look at MPLX’s financial position.

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