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MPLX confident in distribution growth, pleased with response to private placement

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MPLX confident in distribution growth, pleased with response to private placement

executives are confidentthat the partnership will be able to continue to grow distributions as it focuseson organic growth projects and taking advantage of its position in the prolificMarcellus and Utica shale plays.

Duringan April 28 earnings call, executives reaffirmed MPLX's distribution growth guidanceof 12% to 15% for 2016 and double digits for 2017, but declined to offer specificsbeyond next year.

"Wedo have a lot of tools that will allow us to support the business and the partnershipover the long term. So, we are as well positioned, or better positioned than, manyor most of the MLPs to deliver that strong [distribution] growth," MPLX PresidentDonald Templin said. "And we're very confident in 2016, and we're very confidentin the double-digit growth in 2017, and I don't see anything in the underlying businessthat would cause us to be concerned about that."

In February,because of the low commodity price environment, MPLX revised downward its previous distribution growth guidanceof 25%, which caused a sell-offat the time. MPLX is targeting a long-term distribution coverage ratio of 1.1x.It also hopes to bring its leverage ratio down to about 4.0x by year-end.

Commentingon the partnership's April 27 rolloutof a $1 billion private placement of convertible preferred units, Chairman and CEOGary Heminger said the offering elicited strong enthusiasm from investors.

"Whilethis transaction was originally contemplated with [Marathon Petroleum Corp.], we elected to take advantage ofstrong investor interest in equity securities with attractive terms for the partnership,"Heminger said. "The combination of some opportunistic [at-the-market] issuancesin the first quarter along with this transaction provides for our anticipated fundingneeds for the remainder of 2016 and into 2017, therefore enabling us to continueour execution of attractive organic growth projects that will contribute to distributablecash flow and long-term value for our unit holders."

CFO NancyBuese noted that the partnership's yield had moved around a lot during the quarter,so they liked the opportunity to lock in a rate. "It also gives us the abilityto indicate that we've taken our financing needs for the balance of the year offthe table," she said.

Turningto operations, MPLX remains bullish on the Marcellus and Utica. "Currently,these plays account for over one-quarter of U.S. gas production and over 23 [Bcf/d].And over one-third of total gas rigs in the U.S. are in the areas of the Marcellusand Utica, where we operate," Templin told analysts.

Templinsaid the partnership would continue pursuing its Utica build-out strategy, giventhe synergies available when connecting its midstream position to its downstreamoperations. MPLX's organic growth CapEx forecast is in the range of $800 millionto $1.2 billion. It will continue to evaluate spending to take into account forecastchanges in producers' drilling activity.

MPLX'sleaders noted that Marathon still holds about $1.5 billion of MLP qualifying earnings,which they expect will be made available to the partnership over time.