MPLX LP [MPLX] Conference call transcript for 2022 q4
2023-01-31 13:50:26
Fiscal: 2022 q4
Operator: Welcome to the MPLX Fourth Quarter 2022 Earnings Call. My name is Sheila, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. . Please note that this conference is being recorded. I will now turn the call over to Kristina Kazarian. Kristina, you may begin.
Kristina Kazarian: Good morning, and welcome to the MPLX fourth quarter 2022 earnings conference call. The slides that accompany this call can be found on our Web site at mplx.com, under the Investor tab. Joining me on the call today are Mike Hennigan, Chairman and CEO; John Quaid, CFO; and other members of the executive team. We invite you to read the Safe Harbor statements and non-GAAP disclaimer on Slide 2. It's a reminder that we will be making forward-looking statements during the call and during the question-and-answer session that follows. Actual results may differ materially from what we expect today. Factors that could cause actual results to differ are included there as well as in our filings with the SEC. And with that, I'll turn the call over to Mike.
Mike Hennigan: Thanks, Kristina. Good morning. Thank you for joining our call. First off, I want to recognize a new Director on the MPLX Board. In November, Christy Breves, who recently served as CFO for U.S. Steel, was appointed as a new Independent Director. 2022 was a strong year as we successfully executed on all of our strategic priorities. Full year adjusted EBITDA was $5.8 billion and DCF was $5 billion. Strong operational performance and customer demand drove record annual pipeline throughputs and increasing Gathering and Processing and fractionation throughputs with each quarter of the year. We also realized EBITDA growth from recent capital investments and remain focused on cost management. Overall, our efforts resulted in a 4% year-over-year adjusted EBITDA and DCF growth. In line with our commitment to return capital, for the full year, MPLX returned over $3.5 billion of capital back to unitholders through our distribution and unit repurchases. We also made progress towards our goal of leading in sustainable energy through our methane reduction program and with the receipt of EPA's ENERGY STAR award for energy efficiency improvements at several terminals. Today, we announced our capital expenditure outlook for 2023 of $950 million. Our plan includes approximately $800 million of growth capital and $150 million of maintenance capital. Our growth capital plan is anchored in the Marcellus, Permian and Bakken basins. In addition to new gas processing plants in the Marcellus and Permian, the remainder of our capital plan is mostly focused on other investments targeted at expansion or debottlenecking of existing assets to meet customer demand. While our capital outlook is primarily focused on our current L&S and G&P footprint, we will continue to evaluate low carbon opportunities where we can leverage technologies that are complementary with our asset footprint and expertise. Moving to our capital allocation framework. First, maintenance capital. We remain steadfast in our commitment to safely operate our assets, protect the health and safety of our employees, and support the communities in which we operate. Second, we remain focused on delivering a secure distribution. Third, after these commitments are met, we will invest to grow while maintaining strict capital discipline. And fourth, we also intend to return excess capital to unitholders. As I've said in the past, we believe this is both a return on and a return of capital business. Last November, based on the strength and growth of our cash flows, we increased our distribution by 10% to an annual rate of $3.10 per unit, while maintaining a strong distribution coverage ratio of 1.6x. In 2023, we would expect to be similarly focused on our distribution as our primary tool to return capital to unitholders. We are optimistic about our opportunities in 2023 and remain focused on executing the strategic priorities of strict capital discipline, fostering a low cost culture, optimizing our asset portfolio, which are foundational to the growth of MPLX's cash flows. Now let me turn the call over to John to discuss our operational and financial results for the quarter.
John Quaid: Thanks, Mike. Slide 6 outlines the fourth quarter operational and financial performance highlights for our Logistics and Storage segment. L&S segment adjusted EBITDA increased $45 million when compared to fourth quarter 2021. The increased results were primarily driven by higher pipeline tariffs and contributions from pipeline equity affiliates, partially offset by higher maintenance project-related expenses in the quarter. Pipeline volumes were flat year-over-year, primarily due to the impacts associated with Marathon's refinery turnarounds in both quarters. Terminal volumes were up 4%. Moving to our Gathering and Processing segment on Slide 7, G&P segment adjusted EBITDA decreased $36 million compared to fourth quarter 2021, as the benefits of higher volumes were more than offset by lower natural gas liquids prices, which averaged $0.78 per gallon for the quarter as compared to $1.05 in the fourth quarter of 2021. In total for the quarter, gathered volumes were up 14% year-over-year due to increased production in the Utica and our Southwest region, which includes our Permian operations. Processing volumes were up 1% year-over-year, primarily from higher volumes in the Southwest, driven by increased customer demand and our investments in processing capacity in the Permian. In the Marcellus, while Gathering and Processing volumes were slightly lower year-over-year, we did see sequential increases for gathering, processing and fractionation volumes in the basin. These activity levels were in line with our expectations for increased producer activity in the back half of the year. Moving to our fourth quarter financial highlights on Slide 8, total adjusted EBITDA of $1.5 billion was roughly flat versus the same period in the prior year, while distributable cash flow of $1.3 billion increased 5%. Results in the quarter were impacted by $23 million special compensation award provided to our employees in recognition of their efforts. We do not anticipate that this expense will structurally impact future costs. In the fourth quarter, we returned $975 million to unitholders through approximately $800 million in distributions and $175 million of repurchases of common units held by the public. MPLX ended the year with nearly $850 million remaining available under its unit repurchase authorizations. Last week, MPLX declared a fourth quarter distribution of 0.775 per unit, resulting in a distribution coverage ratio of 1.6x for the fourth quarter. MPLX ended the year with total debt of around $20 billion and a debt to EBITDA ratio of 3.5x, comfortably below our target of approximately 4x. While our absolute level of debt has remained relatively constant, our leverage has decreased due to the growth in our business. And at these leverage levels, we do not see the need to reduce our absolute level of debt. Earlier today, we announced our intent to redeem the par value, the $600 million of outstanding Series B preferred units in mid February. Subject to market conditions, we expect to refinance these preferred units into long-term debt. In closing, we expect our solid operating performance and growth of our cash flows will enable us to continue to invest in and grow the business while also supporting the return of capital to MPLX unitholders. Now let me turn the call back over to Kristina.
Kristina Kazarian: Thanks, John. As we open the call for questions, we ask that you limit yourself to one question plus a follow up. We may re-prompt for additional questions as time permits. With that, Sheila, we're ready for questions today.
Operator: Thank you. We will now begin the question-and-answer session. . Our first question will come from Brian Reynolds with UBS. Your line is open.
Brian Reynolds: Hi. Good morning, everyone. Perhaps to start off on capital allocation, we saw continued commitments, unit repurchases and the redemption announcement on the preferreds. With the preferred redemption announcement and some of the debt maturities that are coming up in '23 and '24, was just curious if you could opine and discuss on how you expect any change in return of cash via special distribution or buybacks going forward, like we've seen in the past just given the upcoming debt maturities and the path that you expect to refinance as well? Thanks.
John Quaid: Great. Hi, Brian. Good morning. Thanks for the question. We'll try and pick that apart in a couple of pieces. First, as I said in my comments and just to reiterate, right, we provided notice to the Series B holders that we're going to redeem those in February. As you note, we also have 1 billion of senior notes maturing in July. And given our leverage and where we are and as we've done in the past, we'll likely look to refinance both of those into long-term debt, subject to market conditions. So that's the first piece on the Bs and the senior notes. And then thinking about return to capital, as you saw us last year, we've gotten lots of feedback from investors; some prefer distribution, some prefer unit repurchases. We've tried to think about our structure around that framework. As you -- more recently, it seems like it's been tilted towards the distribution, as Mike commented, and as you know, we increased the distribution 10% here effective with the third quarter distribution, still really strong coverage at 1.6x, a strong balance sheet at 3.5x leverage. So I think that will be an area we'll continue to focus on in 2023. And then we'll also I think continue to be opportunistic, perhaps more opportunistic around unit repurchases, right? If you look back to when we began the program, we've done a little over 1 billion and about 29 a unit. In the fourth quarter, we did about 176 million. I think 31.75, somewhere in that ballpark. So I think it'll continue to be a part of our framework, but perhaps a little more opportunistic. And, Mike, do you want to add something as well?
Mike Hennigan: Yes, Brian, let me just add a little bit to it. Just on a simple basis, we're generating about 6 billion of EBITDA, about 5 billion of distributable cash flow after that. We've been spending roughly around 1 billion. So we have about $4 billion of free cash flow and distributing 3 billion through our base distribution, which has been leaving about $1 billion of cash after all that. So I think the key is we have a lot of flexibility. And as John said, we'll try and be opportunistic on the buyback side. We'll try and continue to show the market that we continue to grow this partnership. So you'll see us continue to increase distributions over time. So we'll talk about that at some point. But I think we're in a real good position from a financial standpoint, strong balance sheet, excess cash flow, looking for opportunities to deploy but staying strict on returns. And overall, hopefully, that's where the market wants us to be.
Brian Reynolds: Great. Thanks. Really appreciate all that extra color. And maybe just to quickly touch on the operational side of the house, MPC refinery run siding into '23. It seems to be faring much better than peers. And curious if management could just opine on expectations for '23 products, volumes versus '22 and if you're seeing any nuances by products that could perhaps support resiliency and product volumes in '23 after just seeing really strong refinery runs last year? Thanks.
Mike Hennigan: It's a good question, Brian. I'm going to let Shawn give you a little more color. But I will say, at the MPC side of the house, we had a really strong year. Safe, reliable operations is key to our business on that side. We ran 96% utilization. If you've followed some of the activity during the year, we had deferred some turnaround activity to the back half of the year. But overall, it was a very strong utilization. So I'll let Shawn comment a little bit on the L&S side.
Shawn Lyon: Hi, Brian. This is Shawn. As Mike said, we had a strong year in '22. We had several records across our assets on the terminal pipeline side. And in '23, we're continuing to see another strong year. And we'll be matching the refinery rates that MPC and others habits. And then also we're excited about the growth out of the Permian and some of the pipelines coming out of the Permian. So, again, just like '22, we're excited to see again another solid year in '23 as far as volumes and growth.
Brian Reynolds: Great. I'll leave it there. Enjoy the rest of your day. Thanks.
Shawn Lyon: Thanks, Brian.
Mike Hennigan: Thanks, Brian.
Operator: Thank you. Our next question will come from John Mackay with Goldman Sachs. Your line is open.
John Mackay: Hi. Good morning, everyone. Thanks for the time. Maybe I'll pick up on the CapEx guide. You touched on some of the moving pieces. But I'm just curious if you could break it down a little more for us just in terms of -- and it can be loose, I suppose. But just how much of the guide is going towards these kind of named projects you've talked about, like the next Permian processing plants, versus going to the smaller bucket of one-offs versus I guess what we're calling kind of the emerging opportunities on the transmission side, any sort of breakdown there or kind of trend maybe even year-over-year would be interesting? Thank you.
Mike Hennigan: Hi, John. Good morning. I'll start and then I'll let John add some color. So in general, most of the capital program is targeted at what we'll call the smaller expansion to bottlenecking projects. I know people like to see flashy big projects, but we actually get the best returns as producers grow, whether it's in the G&P side or in the L&S side of the business. As production increases, we have a pretty big system that we can continue to bolt-on to add to expand a little bit here and there. It's where we get our higher return projects. Now, we're still going to add to the platform. As you mentioned, we got a couple of processing plants coming on, which will continue to increase our base, which then allows us to add some gathering to support that, et cetera. But the real story behind our growth, and if you step back, we are pretty large, as I just mentioned, about 6 billion of EBITDA. So our face plan is we're going to have mid single digit growth in our system, have good discipline so that we get high return projects, continue to add EBITDA, and at the end of the day look for those other opportunities like you mentioned in low carbon. There hasn't been a lot today. There's been a lot of rhetoric around it. And there's a lot of talk about different things. We're obviously involved in projects that are looking at CCUS. We're involved in a lot of stuff that's down the road, but not going to be hitting the 2023 earnings profile in a strong way yet. I am a believer over time, there are going to be more opportunities for us there. They'll just have to develop as technology advances, et cetera. So in the meantime, our concentration -- we use the term strict capital discipline. It's a nice way of saying we want to make sure we get good high returns that are really going to hit the bottom line every year consistently, because we've continued to grow this partnership year-after-year and obviously a big outcome of that is returning a lot of capital to our investors.
Shawn Lyon: Hi, John. It's Shawn. Just a couple of things to add to Mike's comments. So maybe one is an example of kind of an expansion in debottleneck. The other item we're looking at in the Marcellus is we've got some space on our existing processing plants. So we've got an opportunity to look at those gathering systems and invest the monies and fill up some space on plants we have sitting there and ready to go. And then also remember there's a number of those projects that are listed on the slide there, mainly around our Permian opportunities, where those projects given shipper support, et cetera, we've been financing those at the JV level. So there's a good amount of capital that's going to drive EBITDA growth that's not in our capital outlook just because of that's getting financed down at the joint venture. So just wanted to highlight that as well.
John Mackay: That's helpful. I appreciate all the stuff. Maybe turning to the quarter, two things. John, I think you mentioned some higher expenses maybe on the L&S side in the quarter. And then you also mentioned the $23 million special comp award. Is there any kind of total number there that you might be able to give us for the quarter that maybe won't be there in a run rate if we're trying to look at 2023 going forward? Is it as simple as kind of adding back $23 million or maybe $25 million? And that's kind of a more representative run rate of the base business.
John Quaid: Yes. John. Thanks for the question. So a couple of pieces there. The special compensation award by it's kind of term we're using there, that's a one-time item we decided to do here in the quarter and that was the expense for the entire items. So I don't know that we anticipate having another award in the first quarter, right? That was really our effort to look at our employees, kind of non-executive level employees' efforts in achieving our 2022 results and wanting to recognize that. So that's a little unique. The other piece gets around our frequent discussion around kind of project maintenance expenses. Certainly, we tend to be a little more back half loaded, sometimes that can move with MPC's turnaround schedules, et cetera. So that number year-over-year I think we see being roughly the same amount of expenses as we continue to focus on cost management. But it will move quarter-to-quarter, John, but I don't know that today we're going to provide that number. Just a flag for you, as in the past, first quarter does tend to be our lowest spend quarter around that activity just due to weather and other items. So hopefully, that's helpful.
John Mackay: Great. I appreciate it. Thank you very much.
John Quaid: You're welcome.
Operator: Our next question comes from Keith Stanley with Wolfe Research. Your line is open.
Keith Stanley: Hi. Good morning. I wanted to start just -- I know this is a very recent data point, but just any updated commentary you're hearing from producers unplanned Marcellus and Utica activity, given the very rapid decline in gas prices that we've seen and how that might be impacting your expectations as well?
Mike Hennigan: Keith, that's a good question. I'm going to let Greg take that one.
Greg Floerke: Thanks, Keith. Really the 2022 prices, whether it be crude NGL or gas, were very supportive of increased drilling activity by producers and this is not just in the Permian Delaware, or even the Marcellus. It was across all basins. We've seen increased activity, so increased drilling in 2022 and some completions, and then completions into '23 mean higher volume outlook for '23. Certainly, there has been price volatility. We've seen prices over $10 per MMBtu in the summer, which, at a high and now we're kind of back to more of a normal level. But in the Permian, in places like the Bakken, even the condensate when on the Utica is really crude price driven. And the drilling is related to crude price, and we see the benefits of associated gas and NGLs that come off of that. So short-term price swings really, we don't expect right now will impact the volume as much because a lot of that activity was set up by drilling activity in 2022.
Keith Stanley: Got it. Thanks. Second question, I just wanted to follow up on the distribution. So you had the 10% hike last quarter. Growth in the distribution I think was pretty small in the couple of years before that. How should investors think about distribution growth over the next several years for the company? Does it tie in your head to overall growth and cash flows of the business? Do you see some excess cushion and excess cash flow, so the distribution could grow potentially faster? Just how are you thinking about that over the next few years?
John Quaid: Hi, Keith. It's John. I'll start and then I'm sure Michael will have some comments as well. Again, as you said, last quarter really driven off our confidence in the strength of our cash flows, we moved to the 10% distribution increase. But as I noted, still a really strong coverage ratio of 1.6x. And I think you've highlighted part of it, right? We've continued to grow the partnership. We've been focused on cost. And while we may have slowed on the distribution for a few years, we essentially built up our coverage. So that was partly -- you heard Mike talk about our target of kind of mid single digit growth. Ultimately, you would see the distribution getting towards that sort of run rate. But we probably have built up some capacity here to think about how we might look at the distribution later this year.
Mike Hennigan: I'm just going to add a little bit of -- repeat a little bit of what I said earlier, got to keep in mind the law of large numbers. We're roughly 6 billion of EBITDA. So if we grow that at mid single digit, that's $300 million more EBITDA, which would translate to more financial flexibility for us, whether we increase the base distribution, do buybacks or whatever. But the nice thing about our system is we're large enough that even mid single digit growth will add a significant amount of additional cash flow to a distribution that today is about $3 billion roughly. So if you think about the math of where does that even translate? It provides flexibility for us to make more moves. And to your point, everybody in this space kind of paused a little bit during COVID. And I think one of the things that I hoped the market recognized, we still grew earnings during that year, even though it was a tough year on the refining side of the house with reduced demand, et cetera. So part of it is to try and recognize where we are financially, part of it is to try and recognize where our growth potential is. And then, like I said, if you go to the simple math, you can start to kind of look at where our financial flexibility will be. And I keep saying it's a good problem to have. It's a good place to be. We'll try and reward investors in the best way that we can to get an overall total return in the manner that we think is most efficient at the time. We've traditionally said it's an all of the above approach. As John mentioned, we leaned in a little harder on distribution last year for the point that you made, as well as what John just made. We got strong coverage. We got continued line of sight for growth. So I think we're in a really good position to continue to grow the partnership.
Keith Stanley: Thank you.
Mike Hennigan: You're welcome.
Operator: Our next question will come from Theresa Chen with Barclays. Your line is open.
Theresa Chen: Good morning. Mike, I'd love to get some of your thoughts on the potential low carbon expansion opportunities and generally growth beyond what you have in the slate right now? As far as your ability and willingness to invest in the low carbon renewable space, are there hurdles at this point a matter of technology, financial hurdles? And given that MPC has made significant progress in its renewable investments, is there volition down the line to do something together with a C-Corp?
Mike Hennigan: Yes. Theresa, so at a high level, most of our low carbon activity in the short term is geared at the MPC side of the house. So we'll talk a little bit more about that at the 11 o'clock call. A little less right now on the MPLX side. But as I mentioned earlier, we are a believer that technology will continue to advance. One example that everybody's aware of is gathering carbon and sequestering it. So that's a great opportunity on the MPLX side of the house. We're active in several projects, but they're not 2023 projects. They're not going to happen to -- are not going to impact earnings profile this year. So overall, as you're very aware on the MPC side of the house, we have a couple of renewable diesel plants. There's going to be more growth in that area. So to get a little more color on the MPC call as far as what's happening on low carbon, so I'll just ask you to listen in on that. We'll give a little more detail. And then on the MPLX side, we think things are coming. They're just not ready for primetime at this time.
John Quaid: And then, Theresa, itâs John. I might just jump in real quick. Just as a reminder, if you think about like the Martinez renewable fuels facility project that MPC is doing, those logistics assets around that were and remain MPLX assets. And we don't have a lot of investments to move around the different liquids. So to some degree, it maybe extends the life of the assets we have with minimal investments around those facilities.
Mike Hennigan: Theresa, itâs Mike again. The one last thing to your question on what's limiting technology or whatever, in a lot of the areas, the returns that we can get on those opportunities are not quite meeting what we would like to implement. But I think over time, the technologies will evolve and that will be an area for us to invest. As we've been talking throughout the call, we have a lot of financial flexibility on this side of the house. John mentioned, we're 3.5x on the balance sheet, we're generating $1 billion a year of excess cash beyond growing distribution. So we have the financial flexibility. We are ready and able, but we are going to be strict on returns. So part of what has held us back from some of what I'll call the splashier discussions that the returns just are not at a level that we think is investable at this point. But we think they're going to get there. It's just a matter of time.
Theresa Chen: Thank you for the thorough response and I agree, John, that we definitely look forward to that 2026 re-contracting on the Martinez logistics assets. Maybe turning to the Northeast for a second. Following the startup and ramp up of your deethanizer, would love to get your take on how that facility is doing to support feedstock delivery to the Monaca cracker as well as your general outlook for economics in the Northeast, given the recent price volatility?
Greg Floerke: Theresa, this is Greg. I'll answer that question on several -- there's several layers to it. We have within MPLX over 300,000 barrels a day of deethanization capacity in our fleet. We're unique and then our fleet is -- our deethanizer actually fleet is spread across all of our processing plants. So we have the ability to reject or recover ethane almost by customer, but definitely by plant. All those plants are connected by purity ethane line and we deliver to Mariner East, Marina West, Utopia, ATEX as well as the Shell Falcon line for pipeline for Monaca. The Smithburg deethanizer is the latest addition to our fleet. It adds a little over 40,000 barrels a day of purity ethane production capability to our fleet, which I mentioned is over 300,000 barrels a day. So that plant is in operation. It's operating well. It's ramping up along with the rest of our fleet to not only supply Monaca but also all of the Gulf Coast, East Coast and even Canadian takeaway points. In terms of the economics, the fractionation spread between ethane and natural gas, whether it's rejected or not, recently we've seen natural gas prices drop at a little higher rate than the ethane price drop. So the economics for recovery have improved. But it's really up to the producer in terms of whether we recover more or reject. We have the ability to do both. We have the capacity to do it. And frankly, in the Northeast, most of the recovery is tied to commitments that are already made by the producers for those takeaway pipelines and to the Shell plant. So we continue to ramp up towards as we increase our utilization there.
Theresa Chen: Thank you very much.
Mike Hennigan: You're welcome, Theresa.
Operator: Thank you. . Our next question comes from Jeremy Tonet with JPMorgan. Your line is open.
Jeremy Tonet: Hi. Good morning.
Mike Hennigan: Hi, Jeremy.
Jeremy Tonet: Just want to shift over to the Permian a little bit if I could, as it relates to natural gas egress. And just wondering any high level thoughts you might be willing to share as far as takeaway tightness. We've seen Waha touch negative prices recently, not too long ago, and was just curious I guess that the Whistler expansion with Matterhorn, is there any ability to kind of start partial service ahead of the dates that you've said, or just trying to get a feel for how you see Permian egress tightness unfolding and what MPLX could do there?
Shawn Lyon: Hi, Jeremy. This is Shawn. I'll touch on gas takeaway out of the Permian there. As you know, we've got the Whistler Pipeline. And as we said, last quarter, we're really pleased by the ramp up of the volumes on there, again, showing that -- again, that gas takeaway as needed there. That volume and those commitments have continued to be strong, and we anticipate those will continue on into '23 here. We've got the half B expansion coming online in the third quarter of '23 for Whistler, and again we're seeing really meeting in expectations for that committed volume coming out of the Permian. And then on top of that, you got Matterhorn that we're a small participant in that really matches our producer and customers' needs coming out of there. So again, I think, as Greg said earlier, you're going to see volatility up and down on natural gas. But again, there's strong volume demand for the gas takeaway out of the Permian.
Jeremy Tonet: Got it. Thanks for that. And I was just curious I guess as it relates to weather, during the quarter there was some freezing conditions across country. Wondering if that impacted your operations at all, if there's any weather headwinds that you would be willing to quantify for us if they did materialize?
John Quaid: Hi, Jeremy. It's John. Thanks for the question. I'll start and Greg and Shawn can chime in if they want to as well on the ops. So across our platform, in the fourth quarter, we probably had mostly lost profit opportunity as some of our producers mainly on the G&P side, obviously, when it gets that cold, they run into some issues. So that reduced our operations there for 10 to 14 days, give or take, different across the basins in the fourth quarter. That probably was a lost opportunity of somewhere around $10 million in the quarter. And as we look to this quarter, Q1 '23, partly impacts on MPC's operations, partly remember I'm talking adjusted EBITDA. And when we think about our joint ventures on the G&P side, that really is distributions. So there's part of the effect in Q4 that shows up as lower distributions in Q1 as well. So probably 10 million of lost opportunity in both Q4 and Q1.
Jeremy Tonet: Got it. That's helpful. Thank you.
Mike Hennigan: You're welcome.
Operator: Our next question will come from Neal Dingmann with Truist Securities. Your line is open.
Neal Dingmann: Good morning, all. My question is on your Marcellus G&P, specifically number of E&Ps, I haven't heard too much from them as far as plan for any change of activity but yet I did hear from a flag provider last week that suggested that you could see some slowdown in fracking activity for the next few months or a bit longer in Appalachia. So I would just love to hear, I did know you're -- looking at Slide 7, it was down a little bit, not a whole lot there versus the year-over-year. So I'm just curious more on your overall thoughts in the area for the remainder of the year.
Greg Floerke: Neal, this is Greg. At this point, we still -- we're in close communication with producer customers and we track over time well pads that are being drilled and completion rates. And depending on rig availability, depending on weather, depending on pricing, those things, obviously, those forecasts can and do change. But we still -- as I mentioned before, a lot of the activity in the volume drive that we forecast into '23 is based on activity, drilling activity in '22 and then some completion activity that already has been underway. So there could be pads delayed, not aware of those, but that's always a possibility. But at this point, we still feel bullish about volume this year.
Neal Dingmann: Yes, I agree. Go ahead, Mike. Sorry.
Mike Hennigan: Yes. Let me just add, even outside of the Marcellus, I think everybody realizes now there's a structural change in gas from a lot of perspective. So in some of the areas that had not seen a lot of activity, as Greg mentioned earlier, in '22, you're starting to see rigs in other basins outside of the Marcellus that haven't had a lot of activity. So I think overall, people are recognizing a structural change in gas now. Very short term, it's been a little warm relative to expectation coming into the winter. But if you pull back up to a higher level of structural change, more activity, rigs being used in basins that there has not been activity for a while, I think shows that there's a change in gas potential going forward.
Neal Dingmann: Yes. Well said, Mike. And then one just clarification, I want to make sure on the gathering, you continue to have nice increase on the gather on the other side, non-Marcellus. Shawn, can you remind me of just capacity? I still think you have a bit there on the Permian at all. I'm just wondering again what is -- I think you talked about this earlier today. I just want to make clear on what is still the capacity available on the gathering side there.
Shawn Lyon: In terms of the Permian Delaware, the capacity, we basically build out and connect new wells and add compression as we need it to fill the processing capacity that we have.
John Quaid: Neal, it's John. Specifically in the Permian, if that's what you're asking about, right, we've got our five plants, we're building our sixth. They're each about 200 million a day. So that's the size and scale of that operation, which, in our numbers, it's part of the Southwest region that we show. We're at a B heading to 1.2B. And we match the gathering which I believe you specifically asked for to that capacity.
Neal Dingmann: That's right. Okay. Thanks, guys. Great details.
Operator: Thank you. Our next question will come from Spiro Dounis with Citi. Your line is open.
Spiro Dounis: Thanks, operator. Good morning, team. Wanted to go back and follow up on one of Brian's questions just as we think about refinery run rates for '23. And if we zoom out a bit and just look at the industry as a whole, I believe it's supposed to be kind of a heavier refinery maintenance year this year. So curious how you're all thinking about the impact to your system overall, whether or not that ship flows on the export side or internally, just curious how you're thinking about the net benefit or negative there?
Mike Hennigan: Spiro, it's Mike. So I'll start off. MPC had a backend weighted turnaround year in '22. We're going to talk about a frontend weighted '23. But even with our activity there, I think one of the things that has been part of our success on the MPC side is to figure out a way to keep our utilizations high, despite taking our needed turnaround activities for safe, reliable operation. So it is a heavier year for us, especially if you think of the back half of the one year and the front half of the other on the MPC side. At the same time, even with that activity, we ran 96% utilization last year. We still expect a pretty strong year. It'll start off with more activity in the first quarter. But as Shawn mentioned earlier, we're still expecting -- even though we had a record year this year on the L&S side, we're still expecting a pretty strong year in '23.
Spiro Dounis: Got it. That's helpful. Thanks, Mike. Second question, just thinking about CapEx going forward, you guys have been utilizing joint ventures pretty effectively over the last few years. And I guess I'm curious -- and you sort of look back and assess that strategy. I think you'd be satisfied with it. But I'm just curious how you're thinking about it going forward. Is that a strategy using joint ventures something you plan on doing from here on any sort of larger multiyear projects? And ultimately, do you see these joint ventures as a pathway to own more of these current assets or even maybe some of these joint venture partners over time?
John Quaid: Hi, Spiro. It's John. I'll start and then let Mike chime in. I think certainly, to your first point, we definitely have been very pleased with our investments in the Permian. I don't know that we started those from a financial aspect as well as other considerations, right, when you're entering a joint venture relationship, sharing of risks, commercial opportunity, et cetera. So I think it depends on the situation, because as you know, we certainly have a strong balance sheet and generating a good bit of cash. So those have worked really well for us. I think where there's opportunities that have both commercial, operational, and perhaps financial reasons, we can look at JV opportunities. But given the strength of the balance sheet, I don't know that financially we would need to leverage them in that regard.
Mike Hennigan: Yes. Spiro, I was just going to add to what John said. It's pretty specific to the opportunity and to the desire of all the partners. We try and be a good partner, as John said, in a couple of these instances, we had the financial capability to finance it ourselves. When other members want to do it at the project level and we can live with that, we're okay with it. We're not opposed to it. And if it makes for a better partnership, that's fine for us. But I would tell you, it's specific to the project itself and who the partners are. But John mentioned earlier, when we quote our capital, that's the capital that we're typically doing on our side of the house, and then there is additional capital that comes from those projects that gets financed at that project level. So it's hard to answer your question other than it's specific to John's point. We have been happy with them. We've had good partners. We're usually aligned. The goal, obviously, in any JV is already aligned in the intent of the project, et cetera. And we've been fortunate to have good alignment with our partners. And where we finance it at the project level, we've been okay with that as well.
Spiro Dounis: Helpful as always. Thanks for the time, guys.
Mike Hennigan: You're welcome.
Operator: And our last question will come from Neel Mitra with Bank of America. Your line is open.
Neel Mitra: Hi. Good morning. I wanted to touch on the MPC Galveston Bay upgrades. I was wondering if that would have any impact on the L&S segment once that's completed?
Mike Hennigan: I'll start and I'll let Shawn jump in. We're probably going to talk about that in a lot more specifics on the MPC call. But just in general, that project is pretty strategic for us. It's a lot more crude processing and upgrading. So as you know, obviously down on Galveston Bay, we have flexibility to bring barrels in via pipeline and/or water. So depending on the specifics of where the best crude opportunity is, it could hit our system or it could come waterborne on the crude side. But obviously, the outcome of the products, that tends to move on some other pipes as well. So it's much more of an MPC impacting project than it is an MPLX project.
Neel Mitra: Okay, got it. Thank you. And then my second question on the G&P side, can you sum up how you look at the Permian portfolio? You have some good gathering and processing, natural gas takeaway with Whistler and a little bit with Matterhorn. How far downstream do you want to go? Are you thinking about NGL pipelines? And then do you feel like you need more scale on the G&P side to feed some of the downstream assets? I'm just wondering how you envision this portfolio looking like in the intermediate to longer term.
Mike Hennigan: Yes. At a high level, yes, we would like to continue to expand our footprint there. But I'll let Greg and Shawn touch or Dave.
Dave Heppner: Neel, this is Dave. I think as you look at it, one of our strategies is to leverage the existing infrastructure and assets we have in place from gathering to processing in the long haul pipelines down to the export opportunities or the other infrastructure out there. So I think as you see, whether it be organic or inorganic growth opportunities, it's really going to keep that in the back of our mind. Again, all anchored by strict capital discipline and ensuring that we get the acceptable returns.
Neel Mitra: And if I could just ask a follow up to that. Are you seeing some synergies between your gathering and processing and possibly being able to win contracts by having the Whistler capacity there, given the lack of natural gas takeaway and possibly bundling contracts between pipelines and G&P?
Greg Floerke: Yes, they're definitely synergies. On the G&P side, for example, we're building and operating some of the crude gathering assets as we tie in new wells and put new units in. There's associated gas that comes with that. So we connect the gas wells and bring the gas, and G&P operates that gathering system as well, the gas NOL, and then we operate the processing plants. But we're reliant then on handing off the residue gas to Whistler to bangle the NGLs. And then, of course, the crude coming from the pads is going to L&S operated downstream pipelines as well. So we operate seamlessly there.
John Quaid: Neel, it's John. Definitely right to the point of your question, those producer customers want that product to the coast, and that's the solution we've built and we'll continue to look to think about how we can move further downstream across that value chain.
Mike Hennigan: It's Mike. I'll just add. We try or make every effort to be a full service provider. We will gather crude, we will gather gas. We will process the gas. We will transport the crude. Our intent is to be a partner to the producers or whoever needs to make infrastructure work for them or logistics work for them. So we try to be a full service provider and get into conversations, like you said on contracts or discussions as to what are their needs and how can we help them? And hopefully they turn into win-win situations.
Neel Mitra: Great. I appreciate all the color. Thank you very much.
Mike Hennigan: You're welcome.
Kristina Kazarian: All right. With that, thank you guys for joining us today and thank you for your interest in MPLX. Should you have additional questions or if you'd like clarification on any of the topics we discussed this morning, members of our IR team will be available to take your call, so please just reach out. Thank you, everybody.
Operator: Thank you. That does conclude today's conference. Thank you for participating. You may disconnect at this time.
