MPLX LP

NYSE:MPLX

Earnings Call Transcript 2018-Q4

[Operator]

Welcome to the MPLX Fourth Quarter 2018 Earnings Call. My name is Elan, 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. [Operator Instructions] Please note that this conference is now being recorded.

And I would now like to turn the call over to Kristina Kazarian. Kristina, you may begin.

[Kristina Kazarian, IR]

Good morning, everyone and welcome to the MPLX fourth quarter 2018 earnings webcast and conference call. The synchronized slides that accompany this call can be found on ww.mplx.com under the Investors tab.

On the call today are Gary Heminger, Chairman and CEO; Mike Hennigan, President; Pam Beall, CFO, and other members of the management team. We invite you to read the Safe Harbor statements and non-GAAP disclaimer on slide two. 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.

Now, I will turn the call over to Gary Heminger for opening remarks.

[Gary Heminger, Chairman and CEO]

Thanks, Kristina. Good morning and thank you for joining our call.

2018 was a transformational year for MPLX. At the beginning of the year, we outlined a number of strategic objectives and we finished the year executing these initial plans and much more. We expanded our business through multiple new projects, enhanced the stability of our cash flow, and simplified our financial structure.

2018 marked the single largest increase in annual EBITDA since we became a public company. We reported 2018 adjusted EBITDA of $3.5 billion, which increased $1.5 billion over the prior year, and nearly $400 million of this increase was driven by organic investments. This magnitude of annual organic growth highlights the success of our commercial and operational teams. Their ability to develop and execute strategic projects not only provides the industry solutions in the areas we operate but also showcases our effective deployment of capital.

In our Logistics & Storage segment, we acquired an export terminal, expanded our Ozark and Wood River pipeline systems, added strategic tankage at Texas City and Patoka, and increased the size of our marine fleet. In the Gathering & Processing segment, we added 11 new plants which expanded our processing capacity by nearly 1.5 billion cubic feet per day and our fractionation capacity by 100,000 barrels per day.

Lastly, we delivered on our commitment of enhancing the financial strength of our business. The Company generated $2.8 billion in distributable cash flow during the year, was able to fund this organic growth program without issuing any public equity and returned nearly $2.1 billion to unitholders. We ended the year with coverage of 1.36 times and a prudent leverage of less than 4 times.

Looking forward, we continue to focus on increasing our presence throughout the midstream value chain and developing assets that generate third-party revenue. Our upcoming program of organic growth projects are expected to deliver long-term attractive returns and position the Company for success in 2019 and beyond.

With that, let me turn the call over to Mike.

[Mike Hennigan, President]

Thanks, Gary.

Slide four provides an overview of our Logistics & Storage segment. L&S reported fourth quarter segment adjusted EBITDA of $547 million. Total pipeline throughput averaged a record 3.6 million barrels per day in the fourth quarter, an 11% increase over the same quarter last year. The increased throughput level was primarily driven by higher volumes on our recently expanded Ozark and Wood River-to-Patoka pipeline systems, as well as higher product movements.

During the quarter, we also added crude tanks in Patoka, Illinois. This increased storage capacity is expected to provide logistics opportunities to MPC and other market participants, including the support of a future Capline Reversal. In addition, we completed multiple other projects during 2018, including the commissioning of the Robinson butane cavern, the expansion of our Texas City tank farm, and expansion of our marine fleet.

Slide five highlights the planned Capline Reversal, which ties into our announced Swordfish Pipeline. As operator of Capline, MPLX initiated a binding open season in late January on behalf of the owners of this pipeline, which includes a subsidiary of our sponsor MPC. The expectation is for the reversal to commence operations in September of 2020.

A reverse Capline, which transports crude oil from Patoka, Illinois to St. James, Louisiana, the line is expected to have a connection to the Diamond Pipeline which originates in Cushing and has a connection point to Capline in Collierville, Tennessee. Once the barrels make it to St. James, they can flow on to the Swordfish Pipeline. Swordfish is being designed to transport up to 600,000 barrels per day of crude oil from St. James to the Clovelly storage hub, providing shippers with access to the storage services, connectivity to other carriers at Clovelly and vessels loading through the existing Louisiana Offshore Oil Port, which is commonly referred to as LOOP. Both Capline and Swordfish would largely utilize existing pipe in the ground, making these systems attractive options for the region.

Importantly, these systems would also be a direct feeder into LOOP, the only existing offshore port in the Gulf Coast that can sell a 2 million barrels VLCC without reverse lightering. In December, LOOP loaded 3 VLCCs with 6 million barrels in a seven-day period, which highlights this port’s ability to meet growing export needs. The planned Capline Reversal, Swordfish Pipeline development, and LOOP export connectivity highlights the strategic value MPLX can create.

Slide six provides an overview of our Gathering & Processing operations. Full-year 2018 adjusted EBITDA increased 15% to over $1.4 billion. The increase was largely driven by record gathered, processed, and fractionated volumes. Gathered volumes averaged 4.5 billion cubic feet per day in 2018, a 26% increase versus the prior year. Processed volumes averaged 7 billion cubic feet per day for the year, a 9% increase over 2017. The increase was primarily driven by significant volume growth in the Marcellus Basin. Fractionated volumes averaged 459,000 barrels per day for 2018, representing a 16% increase over 2017. We commissioned eight processing plants and three fractionation facilities over the course of 2018. In total, we increased our processing capacity by nearly 20% to over 9.3 billion cubic feet per day, while also adding 100,000 barrels per day of fractionation capacity.

Slide seven provides some operating highlights for the quarter. Gathered volumes averaged 4.9 billion cubic feet per day in the fourth quarter, representing a 17% increase over the fourth quarter of 2017. Quarterly processed volumes increased 9% versus the same quarter last year to 7.4 billion cubic feet per day. Volume increases would have been higher if not for the unplanned downtime at our Houston complex, which has since resumed normal operation.

We also completed plants 10 and 11 at Sherwood during the quarter, increasing the total capacity of this complex to 2.2 billion cubic feet per day. We are pleased to see Mariner East 2 begin operations in late December. On the fractionation site, we were forced to curtail production at our Hopedale complex in the fourth quarter due to the delayed start-up of the ME2 pipeline. This start-up combined with the capacity added at the end of the year, positions us very well as we head into 2019.

On slide eight, we provide a summary of our 2019 capital outlook that we unveiled at our December Investor Day. Capital program historically was heavily weighted to the Gathering & Processing segment. In 2019, there is more balance between our two segments as we shift a significant amount of capital towards the L&S segment. We remain focused on high grading our opportunity set and being selective towards the best return projects. We have abundant growth opportunities in both segments of our business, affording significant capital deployment options to deliver our forecasted capital expenditure of approximately $2.2 billion in 2019, in line with 2018.

Majority of the capital in the L&S segment is planned for the continued to development and construction of long-haul pipelines in the Permian basin and strategic export facilities along the Gulf Coast. We continue to advance discussions on participating in a Permian crude pipeline project. As we mentioned at our Investor Day, we are pursuing several options which includes the PGC Pipeline JV and combining with the Exxon, Plains, Lotus Wink-to-Webster Pipeline in a UJI structure. We continue to evaluate the merits and details of these project, and we expect to reach a resolution on a definitive path shortly.

Whistler pipeline would support additional natural gas takeaway capacity from the Delaware basin is in the detailed engineering phase. In addition, the BANGL NGL pipeline, fractionation and export project is also in detailed engineering as we remain excited about both projects. We recently acquired the Mt. Airy Terminal, another export facility we continue to develop in the Louisiana Gulf Coast area. This facility is currently equipped with 120,000 barrel per day dock and 4 million barrels per day of fully leased storage. We plan to construct the second dock and this facility has capacity for up to 10 million barrels of total storage.

In the Northeast, we continue to benefit from the increased condensate and natural gas volumes on our Cornerstone and other Utica buildout systems. The next phase of our strategy is to equip these pipelines to handle normal butane, providing another outlet for growing liquids production in the region.

In the Gathering & Processing segment, we expect to add approximately 800 million cubic feet per day of processing capacity and 100,000 barrels per day of fractionation capacity in 2019. This is incremental to the processing capacity that came on line in the fourth quarter of 2018, which will help support the production growth that we anticipate in 2019. We reiterate our commitment to a self-funding model and to finance our organic growth capital plan without issuing any equity, while maintaining an investment grade credit profile and strong distribution coverage.

Before I turn the call over to Pam, I want to summarize where we are strategically. Our core regions continue to provide many attractive investment opportunities. At the same time, we are committed to remaining disciplined on capital deployment. In the Northeast, we are optimistic on the production growth profile in the Marcellus and Utica basins. We actively engage with our producer customers in these regions, and our planning process is real-time and dynamic. We expect to add 400 million cubic feet per day of processing capacity in 2019, which is in addition to the 600 million cubic feet per day brought on line in the fourth quarter. We have further capacity expansions planned in 2020 and beyond.

Our goal is to complete these new facilities on a just-in-time basis to meet our producer customer needs. We expect growth in the Northeast to be further enhanced by pipelines that have recently been placed in service. Natural gas pipeline, such as NEXUS, Atlantic Sunrise and Rover, which is now fully operational, provide optionality to producers in the region while Mariner East 2 provides a similar solution for NGLs. These pipelines are expected to increase netbacks for our producers on both the natural gas and NGL side of the business. The positive production growth profile and the enhanced takeaway capacity clearly benefits our investments in the region.

In the Delaware basin, we are focused on developing a super system, very similar to what we have in the Northeast. We’re currently operating two processing plants, have two additional plants, Torñado and Apollo under construction, and plans to move forward on fifth plant called Preakness. This now gives us 1 billion cubic feet per day of processing capacity and approximately 125,000 barrels per day of liquids production in the Delaware basin once these are completed. These plants are expected to provide gas and liquids for the long-haul pipelines we have in development, moving this supply to the demand markets along the Gulf Coast.

We’re also intently focused on building out our export capabilities. We've identified five locations along the Texas and Louisiana Gulf Coast that are expected to provide increased opportunities to connect growing domestic supply to global demand centers. We're excited about the growth opportunities in our core regions and remain confident in the growth guidance we provided at our Investor Day.

I will now turn the call over to Pam to cover our financial highlights.

[Pam Beall, CFO]

Thanks, Mike.

The fourth quarter concluded a very strong year for MPLX. The $3.5 billion of EBITDA we reported for 2018 was in line with the guidance provided on our third quarter earnings call. The guidance implied approximately $936 million of EBITDA for the quarter.

There were a few notable events in the fourth quarter that I wanted to highlight. Net income for the fourth quarter was reduced by $82 million, approximately $22 million was due to unplanned downtime at the Houston complex and production curtailments due to the delayed start-up of ME2 that Mike just mentioned, as well as contract-related accrual adjustments.

Debt extinguishment costs were $60 million, which were reflected in interest costs for the quarter. $14 million of these costs had a cash impact for premium paid. Adjusted EBITDA was reduced by approximately $22 million and distributable cash flow was reduced by approximately $36 million for the quarter. I wanted to highlight these events and the impact, because our reported numbers in the press release and the slides do not adjust for these impacts.

Turning to our financial highlights slide on slide nine. We reported adjusted EBITDA of $911 million for the quarter, of which $547 million was in Logistics & Storage segment, and $364 million was in the Gathering & Processing segment.

Full-year adjusted EBITDA was approximately $3.5 billion with nearly 60% generated by the Logistics & Storage segment. For the year, we generated $2.8 billion of distributable cash flow and returned approximately $2.1 billion to our unitholders. The remainder supported our $2.2 billion organic growth capital program.

Turning to slide 10, the bridge shows the change in adjusted EBITDA for the fourth quarter of 2017 to the fourth quarter of 2018. Since the prior year quarter, we increased adjusted EBITDA by $342 million. The dropdowns from MPC were $262 million of the increase. Remaining increase in the Logistics & Storage segment was primarily driven by record crude oil and product throughput, as well as contributions from other recently completed investments. The $26 million increase in Gathering & Processing segment adjusted EBITDA was primarily driven by higher gathered, processed and fractionated volumes, and these benefits were partially offset by lower product margins.

On slide 11, the bridge shows the change in adjusted EBITDA for the full-year 2018, which increased by nearly $1.5 billion over 2017. The dropdowns in 2017 and the first quarter of 2018 generated an increase in EBITDA of approximately $1.1 billion for the year. Excluding dropdowns, the Logistics & Storage segment increased more than 20% year-over-year. The significant increase was primarily driven again by record pipeline throughputs on our base business, higher volumes on our expanded Ozark and Wood River-to-Patoka systems, as well as contributions from other pipeline and storage investments. $189 million increase in the Gathering & Processing segment was primarily driven by record gathered, processed and fractionated volumes. Segment results also benefited from higher commodity prices in 2018 compared with 2017.

I'd like to remind everyone that while almost 95% or approximately 95% of our net operating margin is driven by fee-based business, a portion of our revenue is subject to NGL price sensitivity. Every $0.05 change in the weighted average NGL price is equal to approximately $23 million of annual distributable cash flow, and that's based on our current volume outlook.

Turning to slide nine, we provide a summary of some key financial highlights and select balance sheet information. In December -- sorry, slide 12. Thank you. In December, MPLX redeemed all $750 million the aggregate principal amount with 5.5% senior notes due in 2023, which resulted in $60 million of debt extinguishment costs which were reflected in interest costs for the quarter. As I mentioned, approximately $14 million was cash premium paid on this redemption, which was made with proceeds from new notes issued at a lower coupon with an extended maturity date with an attractive payback.

We ended 2018 with approximately $3.3 billion of liquidity, including $2.2 billion available on our bank revolver and $1 billion available on the intercompany facility with our sponsor. We’re committed to maintaining a strong balance sheet and we ended the year with the leverage ratio of 3.9 times and a distribution coverage ratio for the year of 1.36 times.

MPLX has a strong track record of returning capital to unitholders. And in late January, we declared a distribution of $0.6475 per common unit. Since our IPO in 2012, we've returned $4.4 billion to our unitholders.

Slide 13 provides our financial outlook for 2019 and 2020. As outlined at our Investor Day, we’re focused on growing our EBITDA by at least 10% per year. In 2019, we’ve guided to approximately $3.9 billion of adjusted EBITDA and $3.1 billion of distributable cash flow. Based on the guidance provided, we expect to return approximately $2.2 billion to our unitholders, and remainder will support our $2.2 billion organic growth capital program without the need to issue any public equity. We remain committed to maintaining a solid investment grade credit profile. And with our strong balance sheet and a robust organic growth opportunities, we’re confident in the long-term value proposition for our investors.

And now, let me turn the call back to Kristina.

[Kristina Kazarian, IR]

Thanks, Pam. As we open the call for questions, we ask that you limit yourself to one question plus one follow-up .You may reprompt for additional questions as time permits. And with that, we'll now open the line for questions. Elan.

[Operator]

[Operator Instructions] Our first question today is from Jeremy Tonet from JP Morgan.

[Jeremy Tonet, JP Morgan]

Good morning. I just want to start off with the Northeast Appalachian Gathering & Processing, there. You called out $22 million of onetime items in the PR. But, I was just wondering, was there anything else happening there in that segment? It seemed a bit light when normalizing for that, given how many new facilities were coming on line during the quarter. So, I was wondering how much they contributed. And moreover, it seems like Appalachian producers are reigning in the production forecast for 2019. So, could you provide more color on what you're seeing in Appalachia and what underpins your confidence in hitting your ‘19 and ‘20 guide here?

[Mike Hennigan, President]

So, a lot of question in there, but let me try and break it down. So, we did face some headwinds the quarter with our Houston plant unplanned downtime as you mentioned. But, there was actually two headwinds there. One was the Houston plant down for some time, and then the second was we actually curtailed because of ME2 and not being on line. And if you recall, for several conference calls, I was saying that we were in pretty good shape until we get towards the end of the year, which is when we needed ME2 to come up. So, we actually had to curtail a little bit in the quarter due to that. We had the Houston complex unplanned downtime, which led us to have a little bit of reduction in volumes in the quarter. Roughly, it was about 5% to 6% of our processing capacity was off as a result of that. We expect that to be onetime and we’re in normal operations as of this point. So, we’re feeling pretty good about going forward and we still feel very good about our guidance.

To your point, some producers have guided slightly differently, mentioning Antero, since that's one of our largest players in the region. We brought on two plants also to your point. But, those two plants for Antero that came onshore with 10 and 11, came on towards the latter part of the quarter. So, you’re really seeing them in full steam in the first part of ‘19. We also have Sherwood 12 and 13 planned in 2019 for the Northeast. I would also add that we have a plant in the stack planned in 2019, as well as a plant in the Permian in 2019. So, we’re still feeling pretty good about our guidance, despite the fact we had some loss of volume in the quarter.

[Jeremy Tonet, JP Morgan]

And turning to Capline real quick here. Point to talk about kind of a 3Q ‘20 in-service date for light oil and early 2022 in-service for heavy oil movement. Are these the dates that you guys see for in-service -- and what do you see for the timeline for more heavy oil reach in Patoka. And when these volumes leave a Capline, how much of that do you think can touch your system downstream to get kind of the operating leverage and synergies?

[Mike Hennigan, President]

Yes. So, a couple things there. So, we expect light service to begin in September of 2020. So, we are in the process right now of still evacuating the line, and it takes about 18 months of work and in the next couple of months, we will be ready to start the work. So, that gets us to September of 2020. The expectation or the market need is mostly light crude evacuation. So, we’re talking about that as the early start. Heavy crude, we talk about a little bit later because there is limitations of heavy crude getting into Patoka right now out of Canada. We’re expecting those to be relieved by about that time. There is some contractual limitations as well as some pipeline changes that need to occur there. So, our expectation is, light crude should be able to reach down into the system. To your point on operating leverage, Capline will feed into Swordfish which will ultimately feed into LOOP. So, we’ll have export capability, as well as having the ability to get some of that light crude into the refining system into Marathon's Garyville refinery is also a beneficiary of the light crude getting over there.

[Operator]

Thank you. Our next question is from Shneur Gershuni from UBS.

[Shneur Gershuni, UBS]

I was wondering, if you can expand a little bit on your response to Jeremy about the Northeast expectations. Are you able to sort of delineate a little bit more about how the cuts are reflected in your guidance, because you gave your guidance out in November. And can you talk about the incremental capital? I think, you were talking about the Sherwood plants that are coming on line. Are there new NBCs coming in place, is that what gives you the confidence, given the drop in rigs around your assets, given drop in docks and so forth? I was just wondering if you can sort of expand on it a little bit to give us a little more confidence in the numbers.

[Mike Hennigan, President]

Yes. Shneur, I will comment exactly what I just said for Jeremy but I'll try and give you little bit more details what you're asking. So, our philosophy of there, as I said in my prepared remarks, is to be real-time and dynamic and work with the producers on a real-time basis. So, we’re not looking to deploy capital in the region unless we think we're going to process gas there. So, we have that communication going on. Without getting into some details, we do have some NBC protection as part of our contractual obligations up there, so that's also an important point of what we're looking at. But, the bottom line is we’re staying in contact. I mentioned the Antero just is such a large player that has a lot of the growth in Sherwood complex, and they have adjusted guidance but there is still showing 17% to 20% growth in their guidance for 2019. That's very consistent, as I said through our meetings with them, as we look at what's going on. And then our other big customers in that area, whether it's Range or EQT or Southwestern or Ascent or anything -- we're having real-time conversations with them. And at this point, we still feel very good about the growth in the region.

I mean, if you look at the numbers year-on-year, they are still pretty strong up in the Marcellus and Utica. As I look at the development in the area, continues to be very strong, despite I understand some people are concerned about potential cutbacks. We’re not seeing that in the areas that we are operating. And in addition to that, I pointed out in the prepared remarks that the netbacks up in the Northeast are getting better as a result of all these gas residue pipeline takeaways and then ME2 liquid takeaways will also change the netback on the liquid side of it. So, we’re still pretty confident and feel pretty good about our development program. It's two plants up in the Northeast, 1 plant in the stack, 1 plant in the Permian for 2019.

[Shneur Gershuni, UBS]

Okay. And as a follow-up question, just kind of wanted to talk about potential CapEx. You've got Capline as well as the PGC pipe as well too. Can you give us a sense of what the gross cost would be of executing a reversal of Capline? And on PGC, are there enough firm commitments to PGC already to proceed if you don’t get a deal with Exxon?

[Mike Hennigan, President]

Yes. So, I won't give you the individual capital costs. What I will tell you on Capline is, one of the things that is very important obviously is to see what happens in the open season. So, that's going to play itself out into the end of April and will get a good sense of how much support is on that pipeline. On your question on PGC, yes, we do have committed volumes that put us in a position where we could go on that project. But, we continue to evaluate the scenario, which is to join forces with the Exxon, Plains, Lotus project. As you know, they also have committed volumes to go forward. So, the carrot there is capital efficiency. If we combine in a UJI. So, we have separate commercial arrangements on each of the pipelines. So, it would be a UJI situation if we combine. Absent that, we continue to progress PGC as well.

[Operator]

Thank you. Our next question is from Spiro Dounis from Credit Suisse.

[Spiro Dounis, Credit Suisse]

I just want to follow-up on some comments from the MPC call with respect to Gray Oak. I believe you mentioned that you don't plan on dropping it down now to ANDX. And so, I guess, the next logical question for me is, does that apply to MPLX? And then, how should we think about funding that going forward?

[Gary Heminger, Chairman and CEO]

We had several questions on this as we met with investors and just wanted to get the fact out there that's how we see it, since it is being funded by MPC and prior by endeavor. We will make the determination, a timing -- when the timing might be and if we were to drop that down in our future. Right now, we're going to focus on as we've mentioned in the MPC call, we have advisors, Jefferies for MPLX, Goldman Sachs for ANDX, and we will let them do their work, let the conflicts committees do their work, and then, we’ll determined down the road the path forward for Gray Oak.

[Spiro Dounis, Credit Suisse]

Second one is just on ME2, and I know you mentioned, you call that out as potential factor in 4Q. Just curious, if you are seeing any similar impact now with ME1 down temporarily on the sub surface issues?

[Mike Hennigan, President]

No, not at this point. So, ME1 is mainly in ethane service and we’re moving the ethane that we processed through the other outlets that are in the area.

[Operator]

Thank you. Our next question is from Michael Blum from Wells Fargo.

[Michael Blum, Wells Fargo]

I just wanted to go back to the comments you made earlier, Mike, on PGC versus moving to Webster type. I guess, the first is, just to clarify, the PGC 5 is FIDed is moving forward on its own? That's kind of the first question, and that’s my impression, I wanted to confirm that. And then, the second is your commented made it sound like -- I wasn’t sure if you meant the pipeline as a whole is looking at combining or you as a company were looking at combining on and on to the Exxon-Plains, and maybe leaving PGC or just wanted to get some clarification on those two?

[Mike Hennigan, President]

Yes. So, Michael, on the first question, so PGC has not reached FID because we are still evaluating. What I was saying though was we received enough commitments that that's one of the options that’s on the table for us. As far as the second comment, it's the whole PGC group is in conversation with Exxon, Plains and Lotus to combine into one pipeline, and the main carrot, the industrial logic there is capital efficiency. So, as you saw Exxon announced that they're going forward and we are in conversations with them, and we continue to work through the details of that . As you can imagine, there is a lot of participants. And the structure would be such that it would be UJI. So, commercially, there would be two types to the project. But the real carrot is getting a better return, utilizing one pipe, one set of construction, et cetera, et cetera. But right at the moment, we’re still doing parallel passes to see which do we think is the best option for our self.

[Michael Blum, Wells Fargo]

Okay. And if -- so then in the UJI structure, if you did combine with the total capacity yet rationalize or it would just be one plus one equals two?

[Mike Hennigan, President]

It's more towards the latter. Again, we are not into that level of detail publicly yet. But, that's some of the discussion that we’re talking about, the capacity that we need for our site commercially and the capacity that the other side needs commercially. Those are some of the details, as well as construction details, operating details, governance details, all of those types of things are what we're discussing with the participants, as we speak.

[Operator]

Thank you. Our next question is from TJ Schultz from RBC Capital Markets.

[TJ Schultz, RBC Capital Markets]

I guess, just a question on BANGL maybe for the frac and export project. Does that still consider additional partners on the two proposed fractionators that bring more volumes into the project?

[Mike Hennigan, President]

Yes. TJ, we are still in development on that. And as I mentioned in the prepared remarks, we’re doing detailed engineering. There is actually three pieces to that project. There is a BANGL pipeline portion. The fractionation, as you mentioned, down in the Sweeney area, as well as the export terminal. So, there is different partnering relationships as we go through the different phases. And we’re doing detailed engineering on all portions of it, as well as having discussions about how much volume commitments each section has as well as the partnering. So, that's still all in play. We continue to be excited about the development. But, as you can imagine, there is a lot of details that you need to get worked out, and we’re working through those.

[TJ Schultz, RBC Capital Markets]

Okay. Just a follow-up on the export. Would you consider or are you considering ethane exports as well?

[Mike Hennigan, President]

That will be something that comes in time. The early part will be concentrated on propanes and heavier, but yes, ethane will be part of the long-term plan, as far as getting NGLs to the market.

[Operator]

Thank you. Our next question is from Dennis Coleman from Bank of America Merrill Lynch.

[Dennis Coleman, Bank of America Merrill Lynch]

Mike, I wonder there is a lot of different moving parts here, you talked about five export locations that you identified and maybe I missed this. But, is that 5 that you -- total that you would consider using or you’re looking at these as options and what products are we talking about, I think some of this has been covered but I missed a little bit while you were giving your comments?

[Mike Hennigan, President]

Yes. Dennis, what we're talking about strategically, we have a large emphasis across the Marathon family on the exports in the Gulf Coast. The five that I talk about are LOOP, which I mentioned, which has been involved with Capline and Swordfish, but the only VLCC capable forward. We also have the Mt. Airy terminal that we purchased, which is also on the Eastern Gulf in Louisiana. Texas City, we have the MPLX, Texas City tank farm, which is in development. We've added crude tank to storage today. The other Texas City terminal is related to the BANGL project, so that will be NGLs as was just asked.; And then, the fifth is part of the marathon family. It sits in ANDX at this point, which is South Gateway down in Corpus Christi. So, two export facilities on the Eastern Gulf, two in the Texas City area, one in Corpus Christi that are all part of the midstream asset base. Not to mention what MPC has as world-class export facilities at both Garyville and Galveston Bay. Were just putting a lot of emphasis on that part of the molecule because if you attended our Investor Day, we are big believers in exports, exports, exports as all the hydrocarbon chains continue to evolve to demand centers outside of the U.S.

[Dennis Coleman, Bank of America Merrill Lynch]

And then, I guess if I can just ask a little bit about, Pam, you talked about the NGL sensitivity -- price sensitivity, and that seemed a little more than I had been thinking. Can you talk a little bit about your the contract structures. I guess, it’s POP contracts where they stand and sort of any specifics you can give, exposure by regions, perhaps and maybe also as you’re recontracting -- or contracting these new structures to those -- to any of those contain -- I mean new processing plants to any of those have exposure to commodity prices?

[Pam Beall, CFO]

Yes. So, really, the change is simply the volumes that we expect that are increasing under existing contract that have been in place for some time, it's not that we’re signing new contracts that have a significant POP exposure. As I mentioned, when you look at the total enterprise, only 5% of our business is really exposed to that price commodity sensitivity. I know, this is not a huge change, I mean, we said it was -- used to say it was the $20 million a year annual impact for every $0.05 and we’ve moved that upto $23 million. So, not a huge change but just reflecting higher volumes.

[Operator]

Thank you. Our next question is from Ross Payne from Wells Fargo.

[Ross Payne, Wells Fargo]

I guess, my biggest question is equity cost of capital for both MPLX and ANDX. You’re obviously self funding, so it’s probably not first on your mind right now. But, how important is your equity cost to capital while the people are obviously looking at C-corps and they obviously hold their MLP inside. So, would it make sense to walk down similar avenues or what are your thoughts there?

[Pam Beall, CFO]

Well, we continue to discuss the merits of the MLP structure versus the potential C-Corp conversion. We did talk about this a little bit at the Investor ay back in December. And I'll just start with the fact that we haven't seen any evidence that the valuation is much different from midstream companies that have converted to a C-Corp instead of staying in an MLP wrapper. We believe there are sustained benefits with the MLP structure with respect to the pass-through nature of the entity and no federal income tax. So, with the change in the congress and over time you just don’t know what these tax cuts that have been afforded corporations will remain in place. So, that's certainly a big consideration. Valuation and access to deeper, wider pools of capital, I think is of the reasons that some have considered moving to a C-Corp.

It's important to us. I mean, clearly, we want to create value for our unitholders, and that comes in a couple of different ways. And returning on lot of cash through distributions is certainly one which we’re distributing about 70% of our cash from operations and distributable cash flow. So, that's a pretty high payout. Over time and I would not in the next year, maybe not in the next year or two, but as we build more financial flexibility in their financial profile, certainly one thing that Mike and I had a lot of conversations about is, can we position the partnership in a way that we could potentially buyback some of our units. So, we have some really good organic growth opportunities. We think that's where we should place the emphasis where we're deploying our capital today. But, it's something that we will continue to evaluate.

[Ross Payne, Wells Fargo]

And is MPC happy with the MLP structure currently, or is it something that just generally speaking doesn’t make sense to consider rolling it into the MPC box?

[Gary Heminger, Chairman and CEO]

I have Tim Griffith, our CFO, I'd rather have Tim cover that.

[Tim Griffith, SVP and CFO, Marathon Petroleum Corporation]

Well, Ross, I think it's akin to a lot of what Pam said. I mean, the structure still has some tax benefits to it. There is nothing that compelled us. It's something we’ll continue to evaluate as we go longer term. But, I think we've certainly been frustrated with equity valuations over the last several quarters. But there is -- I don’t think there is anything that would compel or change at this point. I mean, the fantastic news is that we're not dependent on the equity markets to fund the business as we go forward, and we can continue to evaluate our options. And that's exactly what we will do.

[Operator]

Thank you. And we do have a follow-up from Jeremy Tonet from JP Morgan.

[Jeremy Tonet, JP Morgan]

I just want to see, you were talking about crude oil projects and possibly combining some of those and just want to turn towards the natural gas side with the Whistler here. It seems like there is some other Permian gas takeaway projects out there. Would it make sense to envision combining projects there or kind of Whistler as it is you think is really clearly in a way the best option?

[Mike Hennigan, President]

So, we continue to develop Whistler on its own. We still feel very good about that project. But, as you stated and as you are seeing similar in crude, we’re always looking to optimize and get a better return, if we can do that. So, we also have conversations going along with some of the partners in that project, as well as others. And one of the things that I was trying to emphasize is, we're doing detailed engineering to make sure we understand the cost of the project, we continue to feel really good about it on a standalone basis, but we’re always looking to see if we can optimize the project as we move forward.

[Operator]

Thank you. And our final question today is from Shneur Gershuni from UBS.

[Shneur Gershuni, UBS]

Just wondering if we can talk about the simplification elephant in the room a little bit here. You talk about ANDX needing to look attractive to MPLX on a standalone basis without support and so forth. You also mentioned in your press release earlier today about a need for higher coverage and so forth. If MPLX were to do a simplification with ANDX, in theory, that would be a backdoor cut and the coverage ratio would be significantly higher and possibly enhancing to MPLX. Is that part of the thought process that you're thinking about and so forth as you go through the simplification review?

[Tim Griffith, SVP and CFO, Marathon Petroleum Corporation]

Again, I think, we're looking at all aspects. So, what we want to make clear is that the way that the partnership should be managed should be more consistent than they have been historically. We've highlighted that coverage is a priority for both partnerships in terms of the self funding model. So, I think we are looking at all of the elements that would make for a very good outcome for potential combined MLP. But again, we’re -- as I think we said this morning, this is a process that's underway. It's inappropriate for us to get out in front of it. We will certainly report back at the appropriate time when we’re able to in terms of what that potential combination could look like back. But, we're not going to get out in front of a process that’s underway currently.

[Kristina Kazarian, IR]

With that, thank you everyone for joining us today and thank you for your interest in MPLX. Should you have additional questions or would like clarification on any of the topics discussed this morning, we will be available to take your calls. And Elan, I'll turn it back to you.

[Operator]

Thank you. This does conclude today's conference. You may disconnect at this time.