MPLX Earnings: Pipeline Ownership Stakes Drive 10% Distribution Increase

MPLX’s MPLX third-quarter results were solid. We don’t expect to change our $38 fair value estimate or narrow moat rating, as earning are tracking toward our 2023 EBITDA forecast of $6.1 billion. Overall EBITDA increased 9% to $1.6 billion from last year’s levels with the largest contributor being income from its ownership stakes in midstream assets, including Whistler where MPLX owns 38%. The Whistler pipeline expansion to 2.5 billion cubic feet per day (bcf/d) from 2 bcf/d was completed at the end of the third quarter. This pipeline is transporting gas to South Texas from the Permian basin, and a pipeline extension of Whistler, the Agua Dulce Corpus Christi pipeline, is in the works to deliver 1.7 bcf/d gas to Cheniere in 2024. The partnership, like its peers, is leaning heavily into providing the needed takeaway capacity from the Permian to serve robust U.S. LNG export demand and new U.S. terminals coming online.

The ongoing growth has supported an attractive capital return story at MPLX. Historically, MPLX has focused on buying back units, but it has pivoted toward boosting the distribution, which saw a 10% increase this quarter. We would expect management to explicitly retain the flexibility to shift between buybacks and higher distributions as it makes sense to do so versus programmatically pursuing a single approach. Capital spending continues to be more measured, with two gas processing plants in the Permian under development and one in the Marcellus alongside several joint venture pipeline projects.