MPLX Earnings: Ongoing Volume Growth Offsets Lower Natural Gas Liquids Pricing

MPLX’s MPLX second-quarter earnings were a bit better than we expected, primarily due to strength in pipeline volumes and pricing. We attribute the strength of the volumes to ongoing demand recovery, particularly at Marathon Petroleum refineries, while the pricing is likely inflation-linked strength. Pipeline volumes increased 1% from last year’s levels and pricing increased 9%. Gathering and processing volumes remain largely consistent with our expectations, with relatively muted volumes and weak pricing due to lower realized natural gas liquids prices. After updating our model, our fair value increases to $38 per unit from $35, while our narrow moat rating remains unchanged.

MPLX has been a generous capital return story in recent quarters with unit buybacks but didn’t buy back units this quarter. Instead, it boosted its distribution to $0.775 from $0.705 per unit. With leverage at 3.5 times debt/EBITDA, below its targeted 4 times, it has ample flexibility to boost growth spending, resume buybacks, or increase distributions further. A special distribution like the one that was issued in 2021 also remains a possibility. Either way, we like management’s ability to be flexible as opportunities arise.