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Morningstar | MPLX Faces Challenges Extracting Value From the Andeavor Logistics Deal

MPLX recently completed a period of significant change, and for the better, in our view. In 2017, the entity acquired or agreed to acquire nearly $12 billion worth of assets, adding about $1.5 billion in EBITDA for a fair price, in our opinion. The $10.1 billion incentive distribution rights transaction removes another hurdle for the partnership. Now, MPLX can pursue an aggressive expansion program for its new assets as well as its existing core portfolio of gathering and processing assets in the Appalachian region. It can also work to optimize the soon to be acquired Andeavor Logistics assets. We’re optimistic about the near-term growth prospects for Appalachian gas production and MPLX’s assets, but we don’t expect MPLX’s two-thirds share of processing capacity to be sustainable as production increases. With the massive production growth expected out of the region, the loss of share is unlikely to materially affect MPLX’s growth prospects. Its 55% fractionation market share looks more defendable, as the fractionation facilities handle Appalachian volumes because is uneconomic to transport the natural gas liquids to Mont Belvieu.The end game for MPLX is building a significant asset base at the developing NGL market hub in the northeastern United States, similar to Mont Belvieu in importance, including eventual control over NGL exporting capabilities from the East Coast. MPLX has nearly all of the assets in place to do this, with the exception of direct ethane and propane (or LPG) exporting facilities. Much of the partnership’s efforts over the past few years have focused on debottlenecking NGL volumes out of the Appalachian region and providing Midwestern and western Canadian producers with access to cheaper natural gasoline and condensate. We like the plan. The Mariner East 2 and 2X projects (led by Sunoco) plans to connect MPLX’s Houston (Pennsylvania) and Hopedale (Ohio) complexes to transport propane and butane to Marcus Hook in Pennsylvania, where it can be delivered to domestic and international markets. After substantial delays, the Mariner East 2 pipeline began service in December 2018, and the 2X should be online in late 2019.