Notes to Consolidated Financial Statements (Unaudited)
1. Description of the Business and Basis of Presentation
Description of the Business – MPLX LP is a diversified, large-cap master limited partnership formed by Marathon Petroleum Corporation that owns and operates midstream energy infrastructure and logistics assets, and provides fuels distribution services. References in this report to “MPLX LP,” “MPLX,” “the Partnership,” “we,” “ours,” “us,” or like terms refer to MPLX LP and its subsidiaries. References to “MPC” refer collectively to Marathon Petroleum Corporation as our sponsor and its subsidiaries, other than the Partnership. We are engaged in the transportation, storage and distribution of crude oil, asphalt and refined petroleum products; the gathering, processing and transportation of natural gas; and the gathering, transportation, fractionation, storage and marketing of NGLs. MPLX’s principal executive office is located in Findlay, Ohio.
MPLX’s business consists of two segments based on the nature of services it offers: Logistics and Storage (“L&S”), which relates primarily to crude oil, asphalt and refined petroleum products; and Gathering and Processing (“G&P”), which relates primarily to natural gas and NGLs. See Note 9 for additional information regarding the operations and results of these segments.
On July 31, 2020, MPLX completed the exchange of Western Refining Wholesale, LLC (“WRW”) to Western Refining Southwest, Inc. (now known as Western Refining Southwest LLC) (“WRSW”), a wholly owned subsidiary of MPC, in exchange for the redemption of 18,582,088 MPLX common units held by WRSW (the “Wholesale Exchange”). See Note 3 for additional information regarding the Wholesale Exchange. These financial statements include the results of WRSW through July 31, 2020.
Impairments – During the first quarter of 2021, we have seen improvement in the environment in which our business operates as COVID-19 impacts are beginning to subside. The increased availability of vaccinations, coupled with an easing of COVID-19 restrictions in certain areas, has been followed by an increase in economic activity, the opening of many businesses and schools and an increase in in-person interaction and associated travel. No additional events or circumstances arose during the first quarter of 2021 that would indicate potential impairment beyond those recognized in 2020 as noted below.
During the first quarter of 2020, the overall deterioration in the economy and the environment in which MPLX and its customers operate, as well as a sustained decrease in unit price, were considered triggering events at that time resulting in impairments of the carrying value of certain assets. We recognized impairments related to goodwill, certain equity method investments and certain long-lived assets (including intangibles), within our G&P segment. Many of our producer customers refined and updated production forecasts in response to the environment at that time, which impacted their expected future demand for our services, including the future utilization of our assets. Additionally, certain of our contracts have commodity price exposure, including NGL prices, which experienced increased volatility as noted above. The table below provides information related to the impairments recognized during the first quarter of 2020 as well as the corresponding footnote where additional information can be found.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
Impairment
|
|
Footnote Reference
|
|
Goodwill
|
|
$
|
1,814
|
|
|
12
|
|
Equity method investments
|
|
1,264
|
|
|
4
|
|
Intangibles, net
|
|
177
|
|
|
12
|
|
Property, plant and equipment, net
|
|
174
|
|
|
11
|
|
Total impairments
|
|
$
|
3,429
|
|
|
|
Basis of Presentation – The accompanying interim consolidated financial statements are unaudited; however, in the opinion of MPLX’s management, these statements reflect all adjustments necessary for a fair statement of the results for the periods reported. All such adjustments are of a normal, recurring nature unless otherwise disclosed. These interim consolidated financial statements, including the notes, have been prepared in accordance with the rules and regulations of the SEC applicable to interim period financial statements and do not include all of the information and disclosures required by GAAP for complete financial statements.
These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2020. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the full year.
MPLX’s consolidated financial statements include all majority-owned and controlled subsidiaries. For non-wholly owned consolidated subsidiaries, the interests owned by third parties have been recorded as “Noncontrolling interests” on the accompanying Consolidated Balance Sheets. Intercompany investments, accounts and transactions have been eliminated. MPLX’s investments in which MPLX exercises significant influence but does not control and does not have a controlling financial interest are accounted for using the equity method. MPLX’s investments in VIEs in which MPLX exercises significant influence but does not control and is not the primary beneficiary are also accounted for using the equity method.
In preparing the Consolidated Statements of Equity, net income attributable to MPLX LP is allocated to Series A and Series B preferred unitholders based on a fixed distribution schedule. Distributions, although earned, are not accrued until declared. The allocation of net income attributable to MPLX LP for purposes of calculating net income per limited partner unit is described in Note 6.
2. Accounting Standards
Recently Adopted
We did not adopt any ASUs during the first three months of 2021 that are expected to have a material impact to our financial statements or financial statement disclosures.
3. Acquisitions and Dispositions
Sale of Javelina Assets and Liabilities
On February 12, 2021, MarkWest Energy Operating Company, L.L.C., (“MarkWest Energy”) a wholly owned subsidiary of MPLX, completed the sale of all of MarkWest Energy’s equity interests in MarkWest Javelina Company L.L.C., MarkWest Javelina Pipeline Company L.L.C., and MarkWest Gas Services L.L.C. (collectively, “Javelina”) pursuant to the terms of an Equity Purchase Agreement entered into with a third party on December 23, 2020. The agreement included adjustments for working capital as well as an earnout provision based on the performance of the assets. No gain or loss was recorded on the sale. The estimated value of the earnout provision was recorded as a contingent asset shown within “Other noncurrent assets” on the Consolidated Balance Sheet as of March 31, 2021. Javelina’s assets and liabilities sold are shown on the Consolidated Balance Sheet as “Assets held for sale” and “Liabilities held for sale” for the year ended December 31, 2020. Prior to the sale, Javelina was reported within the G&P segment.
Wholesale Exchange
On July 31, 2020, MPLX entered into a Redemption Agreement (the “Redemption Agreement”) with WRSW, a wholly owned subsidiary of MPC, pursuant to which MPLX agreed to transfer to WRSW all of the outstanding membership interests in WRW in exchange for the redemption of MPLX common units held by WRSW. The transaction effected the transfer to MPC of the Western wholesale distribution business that MPLX acquired as a result of its acquisition of ANDX. Per the terms of the Redemption Agreement, MPLX redeemed 18,582,088 common units (the “Redeemed Units”) held by WRSW on July 31, 2020. The number of Redeemed Units was calculated by dividing WRW’s aggregate valuation of $340 million by the simple average of the volume weighted average NYSE prices of an MPLX common unit for the ten trading days ending at market close on July 27, 2020. MPLX canceled the Redeemed Units immediately following the Wholesale Exchange. The carrying value of the net assets of WRW transferred to MPC was approximately $90 million as of July 31, 2020, resulting in $250 million being recorded to “Common Unit-holder MPC” within the Consolidated Statements of Equity, netted against the fair value of the redeemed units. Included within the $90 million carrying value of the WRW net assets was approximately $65 million of goodwill.
4. Investments and Noncontrolling Interests
The following table presents MPLX’s equity method investments at the dates indicated:
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|
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|
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|
|
|
|
|
|
|
|
|
|
Ownership as of
|
|
Carrying value at
|
|
|
March 31,
|
|
March 31,
|
|
December 31,
|
|
(In millions, except ownership percentages)
|
2021
|
|
2021
|
|
2020
|
|
L&S
|
|
|
|
|
|
|
MarEn Bakken Company LLC(1)
|
25%
|
|
$
|
462
|
|
|
$
|
465
|
|
|
Illinois Extension Pipeline Company, L.L.C.
|
35%
|
|
259
|
|
|
254
|
|
|
LOOP LLC
|
41%
|
|
257
|
|
|
252
|
|
|
Andeavor Logistics Rio Pipeline LLC(2)
|
67%
|
|
193
|
|
|
194
|
|
|
Minnesota Pipe Line Company, LLC
|
17%
|
|
187
|
|
|
188
|
|
|
Whistler Pipeline LLC(2)
|
38%
|
|
187
|
|
|
185
|
|
|
Explorer Pipeline Company
|
25%
|
|
69
|
|
|
72
|
|
|
W2W Holdings LLC(2)(3)
|
50%
|
|
73
|
|
|
72
|
|
|
|
|
|
|
|
|
|
Other(2)
|
|
|
105
|
|
|
103
|
|
|
Total L&S
|
|
|
1,792
|
|
|
1,785
|
|
|
G&P
|
|
|
|
|
|
|
MarkWest Utica EMG, L.L.C.(2)
|
57%
|
|
696
|
|
|
698
|
|
|
Sherwood Midstream LLC(2)
|
50%
|
|
552
|
|
|
557
|
|
|
MarkWest EMG Jefferson Dry Gas Gathering Company, L.L.C.(2)
|
67%
|
|
313
|
|
|
307
|
|
|
|
|
|
|
|
|
|
Rendezvous Gas Services, L.L.C.(2)
|
78%
|
|
157
|
|
|
159
|
|
|
Sherwood Midstream Holdings LLC(2)
|
51%
|
|
145
|
|
|
148
|
|
|
|
|
|
|
|
|
|
Centrahoma Processing LLC
|
40%
|
|
137
|
|
|
145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other(2)
|
|
|
248
|
|
|
237
|
|
|
|
|
|
|
|
|
|
Total G&P
|
|
|
2,248
|
|
|
2,251
|
|
|
Total
|
|
|
$
|
4,040
|
|
|
$
|
4,036
|
|
(1) The investment in MarEn Bakken Company LLC includes our 9.19 percent indirect interest in a joint venture (“Dakota Access”) that owns and operates the Dakota Access Pipeline and Energy Transfer Crude Oil Pipeline projects, collectively referred to as the Bakken Pipeline system or DAPL.
(2) Investments deemed to be VIEs. Some investments included within “Other” have also been deemed to be VIEs.
(3) Through our ownership interest in W2W Holdings LLC, we have a 15 percent equity interest Wink to Webster Pipeline LLC.
For those entities that have been deemed to be VIEs, neither MPLX nor any of its subsidiaries have been deemed to be the primary beneficiary due to voting rights on significant matters. While we have the ability to exercise influence through participation in the management committees which make all significant decisions, we have equal influence over each committee as a joint interest partner and all significant decisions require the consent of the other investors without regard to economic interest and as such we have determined that these entities should not be consolidated and apply the equity method of accounting with respect to our investments in each entity.
Sherwood Midstream LLC (“Sherwood Midstream”) has been deemed the primary beneficiary of Sherwood Midstream Holdings LLC (Sherwood Midstream Holdings”) due to its controlling financial interest through its authority to manage the joint venture. As a result, Sherwood Midstream consolidates Sherwood Midstream Holdings. Therefore, MPLX also reports its portion of Sherwood Midstream Holdings’ net assets as a component of its investment in Sherwood Midstream. As of March 31, 2021, MPLX has a 24.55 percent indirect ownership interest in Sherwood Midstream Holdings through Sherwood Midstream.
MPLX’s maximum exposure to loss as a result of its involvement with equity method investments includes its equity investment, any additional capital contribution commitments and any operating expenses incurred by the subsidiary operator in excess of its compensation received for the performance of the operating services. MPLX did not provide any financial support to equity method investments that it was not contractually obligated to provide during the three months ended March 31, 2021.
During the first quarter of 2020, we recorded an other than temporary impairment for three joint ventures in which we have an interest as discussed in Note 1. Impairment of these investments was $1,264 million, of which $1,251 million was related to MarkWest Utica EMG, L.L.C. and its investment in Ohio Gathering Company, L.L.C. The impairment was recorded through “Income from equity method investments.” The impairments were largely due to a reduction in forecasted volumes gathered and processed by the systems operated by the joint ventures. No additional impairments have been recorded since that time.
Summarized financial information for MPLX’s equity method investments for the three months ended March 31, 2021 and 2020 is as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2021
|
|
(In millions)
|
VIEs
|
|
Non-VIEs
|
|
Total
|
|
Revenues and other income
|
$
|
163
|
|
|
$
|
284
|
|
|
$
|
447
|
|
|
Costs and expenses
|
107
|
|
|
131
|
|
|
238
|
|
|
Income from operations
|
56
|
|
|
153
|
|
|
209
|
|
|
Net income
|
64
|
|
|
140
|
|
|
204
|
|
|
Income from equity method investments(1)
|
$
|
39
|
|
|
$
|
31
|
|
|
$
|
70
|
|
(1) Includes the impact of any basis differential amortization or accretion.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2020
|
|
(In millions)
|
VIEs
|
|
Non-VIEs
|
|
Total
|
|
Revenues and other income
|
$
|
(217)
|
|
|
$
|
337
|
|
|
$
|
120
|
|
|
Costs and expenses
|
104
|
|
|
132
|
|
|
236
|
|
|
(Loss)/income from operations
|
(321)
|
|
|
205
|
|
|
(116)
|
|
|
Net (loss)/income
|
(337)
|
|
|
186
|
|
|
(151)
|
|
|
(Loss)/income from equity method investments(1)
|
$
|
(1,222)
|
|
|
$
|
38
|
|
|
$
|
(1,184)
|
|
(1) Includes the impact of any basis differential amortization or accretion in addition to the impairment of $1,264 million.
Summarized balance sheet information for MPLX’s equity method investments as of March 31, 2021 and December 31, 2020 is as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
(In millions)
|
VIEs
|
|
Non-VIEs
|
|
Total
|
|
Current assets
|
$
|
312
|
|
|
$
|
321
|
|
|
$
|
633
|
|
|
Noncurrent assets
|
7,266
|
|
|
4,967
|
|
|
12,233
|
|
|
Current liabilities
|
338
|
|
|
194
|
|
|
532
|
|
|
Noncurrent liabilities
|
$
|
2,053
|
|
|
$
|
853
|
|
|
$
|
2,906
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
(In millions)
|
VIEs
|
|
Non-VIEs
|
|
Total
|
|
Current assets
|
$
|
530
|
|
|
$
|
318
|
|
|
$
|
848
|
|
|
Noncurrent assets
|
6,889
|
|
|
4,997
|
|
|
11,886
|
|
|
Current liabilities
|
323
|
|
|
187
|
|
|
510
|
|
|
Noncurrent liabilities
|
$
|
1,904
|
|
|
$
|
830
|
|
|
$
|
2,734
|
|
As of March 31, 2021 and December 31, 2020, the underlying net assets of MPLX’s investees in the G&P segment exceeded the carrying value of its equity method investments by approximately $56 million and $57 million, respectively. As of March 31, 2021 and December 31, 2020, the carrying value of MPLX’s equity method investments in the L&S segment exceeded the underlying net assets of its investees by $331 million.
At March 31, 2021 and December 31, 2020, the G&P basis difference was being amortized into net income over the remaining estimated useful lives of the underlying assets, except for $31 million of excess related to goodwill. At March 31, 2021 and December 31, 2020, the L&S basis difference was being amortized into net income over the remaining estimated useful lives of the underlying assets, except for $167 million of excess related to goodwill.
5. Related Party Agreements and Transactions
MPLX engages in transactions with both MPC and certain of its equity method investments as part of its normal business; however, transactions with MPC make up the majority of MPLX’s related party transactions. Transactions with related parties are further described below.
MPLX has various long-term, fee-based commercial agreements with MPC. Under these agreements, MPLX provides transportation, terminal, fuels distribution, marketing, storage, management, operational and other services to MPC. MPC has committed to provide MPLX with minimum quarterly throughput volumes on crude oil and refined products and other fees for storage capacity; operating and management fees; as well as reimbursements for certain direct and indirect costs. MPC has also committed to provide a fixed fee for 100 percent of available capacity for boats, barges and third-party chartered equipment under the marine transportation service agreement. MPLX also has a keep-whole commodity agreement with MPC under which MPC pays us a processing fee for NGLs related to keep-whole agreements and delivers shrink gas to the producers on our behalf. We pay MPC a marketing fee in exchange for assuming the commodity risk. Additionally, MPLX has obligations to MPC for services provided to MPLX by MPC under omnibus and employee services-type agreements as well as other various agreements.
Related Party Loan
MPLX is party to a loan agreement with MPC Investment LLC (“MPC Investment”) (the “MPC Loan Agreement”). Under the terms of the agreement, MPC Investment extends loans to MPLX on a revolving basis as requested by MPLX and as agreed to by MPC Investment. The borrowing capacity of the MPC Loan Agreement is $1.5 billion aggregate principal amount of all loans outstanding at any one time. The loan agreement is scheduled to expire, and borrowings under the loan agreement are scheduled to mature and become due and payable on July 31, 2024, provided that MPC Investment may demand payment of all or any portion of the outstanding principal amount of the loan, together with all accrued and unpaid interest and other amounts (if any), at any time prior to maturity. Borrowings under the MPC Loan Agreement bear interest at LIBOR plus 1.25 percent or such lower rate as would be applicable to such loans under the MPLX Credit Agreement as discussed in Note 15. Activity on the MPC Loan Agreement was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
Three Months Ended March 31, 2021
|
|
Year Ended December 31, 2020
|
|
Borrowings
|
$
|
2,241
|
|
|
$
|
6,264
|
|
|
Average interest rate of borrowings
|
1.371
|
%
|
|
2.278
|
%
|
|
Repayments
|
$
|
2,241
|
|
|
$
|
6,858
|
|
|
Outstanding balance at end of period(1)
|
$
|
—
|
|
|
$
|
—
|
|
(1) Included in “Current liabilities - related parties” on the Consolidated Balance Sheets.
Related Party Revenue
Related party sales to MPC consist of crude oil and refined products pipeline and trucking transportation services based on tariff/contracted rates; storage, terminal and fuels distribution services based on contracted rates; and marine transportation services. Related party sales to MPC also consist of revenue related to volume deficiency credits.
MPLX also has operating agreements with MPC under which it receives a fee for operating MPC’s retained pipeline assets and a fixed annual fee for providing oversight and management services required to run the marine business. MPLX also receives management fee revenue for engineering, construction and administrative services for operating certain of its equity method investments.
Revenue received from related parties included on the Consolidated Statements of Income was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
(In millions)
|
2021
|
|
2020
|
|
|
|
|
|
Service revenues - related parties
|
|
|
|
|
|
|
|
|
MPC
|
$
|
871
|
|
|
$
|
927
|
|
|
|
|
|
|
Other
|
1
|
|
|
1
|
|
|
|
|
|
|
Total Service revenue - related parties
|
872
|
|
|
928
|
|
|
|
|
|
|
Rental income - related parties
|
|
|
|
|
|
|
|
|
MPC
|
242
|
|
|
234
|
|
|
|
|
|
|
Product sales - related parties(1)
|
|
|
|
|
|
|
|
|
MPC
|
42
|
|
|
33
|
|
|
|
|
|
|
Other income - related parties
|
|
|
|
|
|
|
|
|
MPC
|
49
|
|
|
48
|
|
|
|
|
|
|
Other
|
16
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other income - related parties
|
$
|
65
|
|
|
$
|
64
|
|
|
|
|
|
(1) There were additional product sales to MPC that net to zero within the consolidated financial statements as the transactions are recorded net due to the terms of the agreements under which such product was sold. For the three months ended March 31, 2021 and March 31, 2020, these sales totaled $168 million and $173 million, respectively.
Related Party Expenses
MPC provides executive management services and certain general and administrative services to MPLX under the terms of our omnibus agreements (“Omnibus charges”). Omnibus charges included in “Rental cost of sales - related parties” primarily relate to services that support MPLX’s rental operations and maintenance of assets available for rent. Omnibus charges included in “Purchases - related parties” primarily relate to services that support MPLX’s operations and maintenance activities, as well as compensation expenses. Omnibus charges included in “General and administrative expenses” primarily relate to services that support MPLX’s executive management, accounting and human resources activities. MPLX also obtains employee services from MPC under employee services agreements (“ESA charges”). ESA charges for personnel directly involved in or supporting operations and maintenance activities related to rental services are classified as “Rental cost of sales - related parties.” ESA charges for personnel directly involved in or supporting operations and maintenance activities related to other services are classified as “Purchases - related parties.” ESA charges for personnel involved in executive management, accounting and human resources activities are classified as “General and administrative expenses.” In addition to these agreements, MPLX purchases products from MPC, makes payments to MPC in its capacity as general contractor to MPLX, and has certain lease agreements with MPC.
Expenses incurred from MPC under the omnibus and employee services agreements as well as other purchases from MPC included on the Consolidated Statements of Income are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
(In millions)
|
2021
|
|
2020
|
|
|
|
|
|
Rental cost of sales - related parties
|
|
|
|
|
|
|
|
|
MPC
|
$
|
39
|
|
|
$
|
46
|
|
|
|
|
|
|
Purchases - related parties
|
|
|
|
|
|
|
|
|
MPC
|
294
|
|
|
271
|
|
|
|
|
|
|
Other
|
4
|
|
|
5
|
|
|
|
|
|
|
Total Purchases - related parties
|
298
|
|
|
276
|
|
|
|
|
|
|
General and administrative expenses
|
|
|
|
|
|
|
|
|
MPC
|
$
|
57
|
|
|
$
|
64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Some charges incurred under the omnibus and ESA agreements are related to engineering services and are associated with assets under construction. These charges are added to “Property, plant and equipment, net” on the Consolidated Balance Sheets. For the three months ended March 31, 2021 and March 31, 2020, these charges totaled $12 million and $36 million, respectively.
MPC has also been advancing certain strategic priorities to lay a foundation for long-term success, including plans to optimize its assets and structurally lower costs in 2021 and beyond. In 2020, MPC approved and executed an involuntary workforce reduction plan, which together with employee reductions resulting from MPC's indefinite idling of its Martinez, California and Gallup, New Mexico refineries, affected approximately 2,050 employees. All of the employees that conduct MPLX’s business are directly employed by affiliates of MPC, and certain of those employees were affected by MPC’s workforce reductions. During the third and fourth quarters of 2020, MPLX reimbursed MPC for $37 million related to severance and employee benefits related expenses that MPC recorded in connection with its workforce reductions. There were no such costs in the first quarter of 2021.
Related Party Assets and Liabilities
Assets and liabilities with related parties appearing on the Consolidated Balance Sheets are detailed in the table below. This table identifies the various components of related party assets and liabilities, including those associated with leases (see Note 20 for additional information) and deferred revenue on minimum volume commitments. If MPC fails to meet its minimum committed volumes, MPC will pay MPLX a deficiency payment based on the terms of the agreement. The deficiency amounts are recorded as “Current liabilities - related parties.” In many cases, MPC may then apply the amount of any such deficiency payments as a credit for volumes in excess of its minimum volume commitment in future periods under the terms of the applicable agreements. MPLX recognizes related party revenues for the deficiency payments when credits are used for volumes in excess of minimum quarterly volume commitments, where it is probable the customer will not use the credit in future periods or upon the expiration of the credits. The use or expiration of the credits is a decrease in “Current liabilities - related parties.” In addition, capital projects MPLX is undertaking at the request of MPC are reimbursed in cash and recognized in income over the remaining term of the applicable agreements or in some cases as an equity contribution from its sponsor.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
March 31, 2021
|
|
December 31, 2020
|
|
Current assets - related parties
|
|
|
|
|
Receivables - MPC
|
$
|
586
|
|
|
$
|
615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables - Other
|
14
|
|
|
27
|
|
|
Prepaid - MPC
|
17
|
|
|
4
|
|
|
Other - MPC
|
1
|
|
|
1
|
|
|
Lease Receivables - MPC
|
32
|
|
|
30
|
|
|
Total
|
650
|
|
|
677
|
|
|
Noncurrent assets - related parties
|
|
|
|
|
Long-term receivables - MPC
|
32
|
|
|
32
|
|
|
Right of use assets - MPC
|
230
|
|
|
231
|
|
|
Long-term lease receivables - MPC
|
388
|
|
|
386
|
|
|
Unguaranteed residual asset - MPC
|
26
|
|
|
23
|
|
|
Total
|
676
|
|
|
672
|
|
|
Current liabilities - related parties
|
|
|
|
|
Payables - MPC
|
213
|
|
|
215
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payables - Other
|
26
|
|
|
43
|
|
|
Operating lease liabilities - MPC
|
1
|
|
|
1
|
|
|
|
|
|
|
|
Deferred revenue - Minimum volume deficiencies - MPC
|
65
|
|
|
66
|
|
|
Deferred revenue - Project reimbursements - MPC
|
32
|
|
|
30
|
|
|
Deferred revenue - Project reimbursements - Other
|
1
|
|
|
1
|
|
|
Total
|
338
|
|
|
356
|
|
|
Long-term liabilities - related parties
|
|
|
|
|
Long-term operating lease liabilities - MPC
|
229
|
|
|
229
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term deferred revenue - Project reimbursements - MPC
|
43
|
|
|
47
|
|
|
Long-term deferred revenue - Project reimbursements - Other
|
7
|
|
|
7
|
|
|
Total
|
$
|
279
|
|
|
$
|
283
|
|
Other Related Party Transactions
From time to time, MPLX may also sell to or purchase from related parties, assets and inventory at the lesser of average unit cost or net realizable value. Sales to related parties for the three months ended March 31, 2021 and 2020 were $9 million and $2 million, respectively. Purchases from related parties were immaterial for the three months ended March 31, 2021 and 2020.
6. Net Income/(Loss) Per Limited Partner Unit
Net income/(loss) per unit applicable to common units is computed by dividing net income/(loss) attributable to MPLX LP less income/(loss) allocated to participating securities by the weighted average number of common units outstanding.
During the three months ended March 31, 2021 and 2020, MPLX had participating securities consisting of common units, certain equity-based compensation awards, Series A preferred units and Series B preferred units and had dilutive potential common units consisting of certain equity-based compensation awards. Potential common units omitted from the diluted earnings per unit calculation for the three months ended March 31, 2021 and 2020 were less than 1 million.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
(In millions)
|
2021
|
|
2020
|
|
|
|
|
|
Net income/(loss) attributable to MPLX LP
|
$
|
739
|
|
|
$
|
(2,724)
|
|
|
|
|
|
|
Less: Distributions declared on Series A preferred units(1)
|
20
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions declared on Series B preferred units(1)
|
11
|
|
|
11
|
|
|
|
|
|
|
Limited partners’ distributions declared on MPLX common units (including common units of general partner)(1)
|
707
|
|
|
728
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Undistributed net gain/(loss) attributable to MPLX LP
|
$
|
1
|
|
|
$
|
(3,483)
|
|
|
|
|
|
(1) See Note 7 for distribution information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2021
|
|
(In millions, except per unit data)
|
Limited Partners’
Common Units
|
|
|
|
Series A Preferred Units
|
|
Series B Preferred Units
|
|
Total
|
|
Basic and diluted net income attributable to MPLX LP per unit
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to MPLX LP:
|
|
|
|
|
|
|
|
|
|
|
Distributions declared
|
$
|
707
|
|
|
|
|
$
|
20
|
|
|
$
|
11
|
|
|
$
|
738
|
|
|
Undistributed net gain attributable to MPLX LP
|
1
|
|
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
Net income attributable to MPLX LP(1)
|
$
|
708
|
|
|
|
|
$
|
20
|
|
|
$
|
11
|
|
|
$
|
739
|
|
|
Weighted average units outstanding:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
1,037
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
1,037
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to MPLX LP per limited partner unit:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.68
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
$
|
0.68
|
|
|
|
|
|
|
|
|
|
(1) Allocation of net income attributable to MPLX LP assumes all earnings for the period had been distributed based on the distribution priorities applicable to the period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2020
|
|
(In millions, except per unit data)
|
Limited Partners’
Common Units
|
|
Series A Preferred Units
|
|
Series B Preferred Units
|
|
Total
|
|
Basic and diluted net income attributable to MPLX LP per unit
|
|
|
|
|
|
|
|
|
Net income attributable to MPLX LP:
|
|
|
|
|
|
|
|
|
Distributions declared
|
$
|
728
|
|
|
$
|
20
|
|
|
$
|
11
|
|
|
$
|
759
|
|
|
Undistributed net loss attributable to MPLX LP
|
(3,483)
|
|
|
—
|
|
|
—
|
|
|
(3,483)
|
|
|
Net (loss)/income attributable to MPLX LP(1)
|
$
|
(2,755)
|
|
|
$
|
20
|
|
|
$
|
11
|
|
|
$
|
(2,724)
|
|
|
Weighted average units outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
1,058
|
|
|
|
|
|
|
|
|
Diluted
|
1,058
|
|
|
|
|
|
|
|
|
Net income attributable to MPLX LP per limited partner unit:
|
|
|
|
|
|
|
|
|
Basic
|
$
|
(2.60)
|
|
|
|
|
|
|
|
|
Diluted
|
$
|
(2.60)
|
|
|
|
|
|
|
|
(1) Allocation of net income attributable to MPLX LP assumes all earnings for the period had been distributed based on the distribution priorities applicable to the period.
7. Equity
The changes in the number of common units outstanding during the three months ended March 31, 2021 are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In units)
|
Common
|
|
|
|
|
|
|
|
Balance at December 31, 2020
|
1,038,777,978
|
|
|
|
|
|
|
|
|
Unit-based compensation awards
|
143,247
|
|
|
|
|
|
|
|
|
Units redeemed in unit repurchase program
|
(6,272,981)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2021
|
1,032,648,244
|
|
|
|
|
|
|
|
Unit Repurchase Program
On November 2, 2020, MPLX announced the board authorization of a unit repurchase program for the repurchase of up to $1 billion of MPLX’s outstanding common units held by the public. MPLX may utilize various methods to effect the repurchases, which could include open market repurchases, negotiated block transactions, tender offers, accelerated unit repurchases or open market solicitations for units, some of which may be effected through Rule 10b5-1 plans. The timing and amount of repurchases will depend upon several factors, including market and business conditions, and repurchases may be initiated, suspended or discontinued at any time. The repurchase authorization has no expiration date. During the three months ended March 31, 2021, 6,272,981 public common units were repurchased at an average cost per unit of $24.78. Total cash paid for units repurchased during 2021 was $155 million with $812 million remaining available under the program for future repurchases as of March 31, 2021. As of March 31, 2021, we had agreements to acquire 291,400 additional common units for $7 million, which settled in April 2021.
Wholesale Exchange
In connection with the Wholesale Exchange as discussed in Note 3, 18,582,088 units were redeemed by MPC in exchange for all of the outstanding membership interests in WRW. These units were cancelled by MPLX immediately following the transaction.
Series B Preferred Units
MPLX has outstanding 600,000 units of 6.875 percent Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units representing limited partner interests of MPLX with a price to the public of $1,000 per unit (the “Series B preferred
units”). The Series B preferred units are pari passu with the Series A preferred units with respect to distribution rights and rights upon liquidation. Series B preferred unitholders are entitled to receive a fixed distribution of $68.75 per unit, per annum, payable semi-annually in arrears on the 15th day, or the first business day thereafter, of February and August of each year up to and including February 15, 2023. After February 15, 2023, the holders of Series B preferred units are entitled to receive cumulative, quarterly distributions payable in arrears on the 15th day of February, May, August and November of each year, or the first business day thereafter, based on a floating annual rate equal to the three-month LIBOR plus 4.652 percent, in each case assuming a distribution is declared by the Board of Directors..
The changes in the Series B preferred unit balance from December 31, 2020 through March 31, 2021 are summarized below. Series B preferred units are included in the Consolidated Balance Sheets and Consolidated Statements of Equity within “Series B preferred units”.
|
|
|
|
|
|
|
|
(In millions)
|
Series B Preferred Units
|
|
Balance at December 31, 2020
|
$
|
611
|
|
|
Net income allocated
|
11
|
|
|
Distributions received by Series B preferred unitholders
|
(21)
|
|
|
Balance at March 31, 2021
|
$
|
601
|
|
Cash distributions – In accordance with the MPLX partnership agreement, on April 27, 2021, MPLX declared a quarterly cash distribution for the first quarter of 2021, totaling $707 million, or $0.6875 per common unit. This rate will also be received by Series A preferred unitholders. These distributions will be paid on May 14, 2021 to common unitholders of record on May 7, 2021. MPLX also made a cash distribution payment totaling $21 million to Series B unitholders on February 16, 2021.
Quarterly distributions for the first quarters of 2021 and 2020 are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Per common unit)
|
2021
|
|
2020
|
|
March 31,
|
$
|
0.6875
|
|
|
$
|
0.6875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The allocation of total quarterly cash distributions to limited and preferred unitholders is as follows for the three months ended March 31, 2021 and 2020. MPLX’s distributions are declared subsequent to quarter end; therefore, the following table represents total cash distributions applicable to the period in which the distributions were earned.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
(In millions)
|
2021
|
|
2020
|
|
|
|
|
|
Common and preferred unit distributions:
|
|
|
|
|
|
|
|
|
Common unitholders, includes common units of general partner
|
$
|
707
|
|
|
$
|
728
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A preferred unit distributions
|
20
|
|
|
20
|
|
|
|
|
|
|
Series B preferred unit distributions
|
11
|
|
|
11
|
|
|
|
|
|
|
Total cash distributions declared
|
$
|
738
|
|
|
$
|
759
|
|
|
|
|
|
8. Series A Preferred Units
On May 13, 2016, MPLX LP issued approximately 30.8 million 6.5 percent Series A Convertible preferred units for a cash purchase price of $32.50 per unit. The Series A preferred units rank senior to all common units and pari passu with all Series B preferred units with respect to distributions and rights upon liquidation. The holders of the Series A preferred units are entitled to receive, when and if declared by the board, a quarterly distribution equal to the greater of $0.528125 per unit or the amount of distributions they would have received on an as converted basis. On April 27, 2021, MPLX declared a quarterly cash distribution of $0.6875 per common unit for the first quarter of 2021. Holders of the Series A preferred units will receive the common unit rate in lieu of the lower $0.528125 base amount.
The holders may convert their Series A preferred units into common units at any time, in full or in part, subject to minimum conversion amounts and conditions. After the fourth anniversary of the issuance date, MPLX may convert the Series A preferred units into common units at any time, in whole or in part, subject to certain minimum conversion amounts and conditions, if the closing price of MPLX common units is greater than $48.75 for the 20-day trading period immediately preceding the conversion notice date. The conversion rate for the Series A preferred units shall be the quotient of (a) the sum of (i) $32.50, plus (ii) any unpaid cash distributions on the applicable preferred unit, divided by (b) $32.50, subject to adjustment
for unit distributions, unit splits and similar transactions. The holders of the Series A preferred units are entitled to vote on an as-converted basis with the common unitholders and have certain other class voting rights with respect to any amendment to the MPLX partnership agreement that would adversely affect any rights, preferences or privileges of the preferred units. In addition, upon certain events involving a change of control, the holders of preferred units may elect, among other potential elections, to convert their Series A preferred units to common units at the then change of control conversion rate.
Approximately 29.6 million Series A preferred units remaining outstanding as of March 31, 2021. The changes in the redeemable preferred balance from December 31, 2020 through March 31, 2021 are summarized below:
|
|
|
|
|
|
|
|
(In millions)
|
Redeemable Series A Preferred Units
|
|
Balance at December 31, 2020
|
$
|
968
|
|
|
Net income allocated
|
20
|
|
|
Distributions received by Series A preferred unitholders
|
(20)
|
|
|
|
|
|
Balance at March 31, 2021
|
$
|
968
|
|
The Series A preferred units are considered redeemable securities under GAAP due to the existence of redemption provisions upon a deemed liquidation event which is outside MPLX’s control. Therefore, they are presented as temporary equity in the mezzanine section of the Consolidated Balance Sheets. The Series A preferred units have been recorded at their issuance date fair value, net of issuance costs. Income allocations increase the carrying value and declared distributions decrease the carrying value of the Series A preferred units. As the Series A preferred units are not currently redeemable and not probable of becoming redeemable, adjustment to the initial carrying amount is not necessary and would only be required if it becomes probable that the Series A preferred units would become redeemable.
9. Segment Information
MPLX’s chief operating decision maker is the chief executive officer (“CEO”) of its general partner. The CEO reviews MPLX’s discrete financial information, makes operating decisions, assesses financial performance and allocates resources on a type of service basis. MPLX has two reportable segments: L&S and G&P. Each of these segments is organized and managed based upon the nature of the products and services it offers.
•L&S – transports, stores, distributes and markets crude oil, asphalt, refined petroleum products and water. Also includes an inland marine business, terminals, rail facilities, storage caverns and refining logistics.
•G&P – gathers, processes and transports natural gas; and gathers, transports, fractionates, stores and markets NGLs.
Our CEO evaluates the performance of our segments using Segment Adjusted EBITDA. Amounts included in net income and excluded from Segment Adjusted EBITDA include: (i) depreciation and amortization; (ii) provision/(benefit) for income taxes; (iii) amortization of deferred financing costs; (iv) extinguishment of debt; (v) non-cash equity-based compensation; (vi) impairment expense; (vii) net interest and other financial costs; (viii) income/(loss) from equity method investments; (ix) distributions and adjustments related to equity method investments; (x) unrealized derivative gains/(losses); (xi) acquisition costs; (xii) noncontrolling interest; and (xiii) other adjustments as deemed necessary. These items are either: (i) believed to be non-recurring in nature; (ii) not believed to be allocable or controlled by the segment; or (iii) are not tied to the operational performance of the segment.
The tables below present information about revenues and other income, capital expenditures and investments in unconsolidated affiliates as well as total assets for our reportable segments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
(In millions)
|
2021
|
|
2020
|
|
|
|
|
|
L&S
|
|
|
|
|
|
|
|
|
Service revenue
|
$
|
953
|
|
|
$
|
1,004
|
|
|
|
|
|
|
Rental income
|
249
|
|
|
242
|
|
|
|
|
|
|
Product related revenue
|
4
|
|
|
19
|
|
|
|
|
|
|
Income from equity method investments
|
36
|
|
|
50
|
|
|
|
|
|
|
Other income
|
52
|
|
|
51
|
|
|
|
|
|
|
Total segment revenues and other income(1)
|
1,294
|
|
|
1,366
|
|
|
|
|
|
|
Segment Adjusted EBITDA(2)
|
896
|
|
|
872
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
59
|
|
|
184
|
|
|
|
|
|
|
Investments in unconsolidated affiliates
|
9
|
|
|
54
|
|
|
|
|
|
|
G&P
|
|
|
|
|
|
|
|
|
Service revenue
|
508
|
|
|
536
|
|
|
|
|
|
|
Rental income
|
92
|
|
|
88
|
|
|
|
|
|
|
Product related revenue
|
397
|
|
|
222
|
|
|
|
|
|
|
Income/(loss) from equity method investments
|
34
|
|
|
(1,234)
|
|
|
|
|
|
|
Other income
|
14
|
|
|
14
|
|
|
|
|
|
|
Total segment revenues and other income/(loss)(1)
|
1,045
|
|
|
(374)
|
|
|
|
|
|
|
Segment Adjusted EBITDA(2)
|
456
|
|
|
422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
30
|
|
|
134
|
|
|
|
|
|
|
Investments in unconsolidated affiliates
|
$
|
26
|
|
|
$
|
37
|
|
|
|
|
|
(1) Within the total segment revenues and other income amounts presented above, third party revenues for the L&S segment were $129 million and $158 million for the three months ended March 31, 2021 and 2020, respectively. Third party revenues for the G&P segment were $989 million for the three months ended March 31, 2021 and third party losses were $425 million for the three months ended March 31, 2020.
(2) See below for the reconciliation from Segment Adjusted EBITDA to “Net income.”
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
March 31, 2021
|
|
December 31, 2020
|
|
Segment assets
|
|
|
|
|
Cash and cash equivalents
|
$
|
24
|
|
|
$
|
15
|
|
|
L&S
|
20,787
|
|
|
20,938
|
|
|
G&P
|
15,219
|
|
|
15,461
|
|
|
Total assets
|
$
|
36,030
|
|
|
$
|
36,414
|
|
The table below provides a reconciliation between “Net income/(loss)” and Segment Adjusted EBITDA.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
(In millions)
|
2021
|
|
2020
|
|
|
|
|
|
Reconciliation to Net income/(loss):
|
|
|
|
|
|
|
|
|
L&S Segment Adjusted EBITDA
|
$
|
896
|
|
|
$
|
872
|
|
|
|
|
|
|
G&P Segment Adjusted EBITDA
|
456
|
|
|
422
|
|
|
|
|
|
|
Total reportable segments
|
1,352
|
|
|
1,294
|
|
|
|
|
|
|
Depreciation and amortization(1)
|
(329)
|
|
|
(325)
|
|
|
|
|
|
|
Provision for income taxes
|
(1)
|
|
|
—
|
|
|
|
|
|
|
Amortization of deferred financing costs
|
(17)
|
|
|
(14)
|
|
|
|
|
|
|
Non-cash equity-based compensation
|
(3)
|
|
|
(5)
|
|
|
|
|
|
|
Impairment expense
|
—
|
|
|
(2,165)
|
|
|
|
|
|
|
Net interest and other financial costs
|
(220)
|
|
|
(216)
|
|
|
|
|
|
|
Gain on extinguishment of debt
|
12
|
|
|
—
|
|
|
|
|
|
|
Income/(loss) from equity method investments
|
70
|
|
|
(1,184)
|
|
|
|
|
|
|
Distributions/adjustments related to equity method investments
|
(121)
|
|
|
(124)
|
|
|
|
|
|
|
Unrealized derivative (losses)/gains(2)
|
(3)
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
(2)
|
|
|
(1)
|
|
|
|
|
|
|
Adjusted EBITDA attributable to noncontrolling interests
|
10
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss)
|
$
|
748
|
|
|
$
|
(2,716)
|
|
|
|
|
|
(1) Depreciation and amortization attributable to L&S was $147 million for the three months ended March 31, 2021 and $138 million for the three months ended March 31, 2020. Depreciation and amortization attributable to G&P was $182 million for the three months ended March 31, 2021 and $187 million for the three months ended March 31, 2020.
(2) MPLX makes a distinction between realized and unrealized gains and losses on derivatives. During the period when a derivative contract is outstanding, changes in the fair value of the derivative are recorded as an unrealized gain or loss. When a derivative contract matures or is settled, the previously recorded unrealized gain or loss is reversed and the realized gain or loss of the contract is recorded.
10. Inventories
Inventories consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
March 31, 2021
|
|
December 31, 2020
|
|
NGLs
|
$
|
5
|
|
|
$
|
5
|
|
|
Line fill
|
20
|
|
|
13
|
|
|
Spare parts, materials and supplies
|
103
|
|
|
100
|
|
|
Total inventories
|
$
|
128
|
|
|
$
|
118
|
|
11. Property, Plant and Equipment
Property, plant and equipment with associated accumulated depreciation is shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
L&S
|
|
|
|
|
|
|
Pipelines
|
|
|
$
|
6,045
|
|
|
$
|
6,026
|
|
|
Refining logistics
|
|
|
2,335
|
|
|
2,333
|
|
|
Terminals
|
|
|
1,649
|
|
|
1,643
|
|
|
Marine
|
|
|
965
|
|
|
965
|
|
|
Land, building and other
|
|
|
1,584
|
|
|
1,584
|
|
|
Construction-in-progress
|
|
|
277
|
|
|
262
|
|
|
Total L&S property, plant and equipment
|
|
|
12,855
|
|
|
12,813
|
|
|
G&P
|
|
|
|
|
|
|
Gathering and transportation
|
|
|
7,559
|
|
|
7,547
|
|
|
Processing and fractionation
|
|
|
5,725
|
|
|
5,721
|
|
|
Land, building and other
|
|
|
510
|
|
|
507
|
|
|
Construction-in-progress
|
|
|
288
|
|
|
287
|
|
|
Total G&P property, plant and equipment
|
|
|
14,082
|
|
|
14,062
|
|
|
Total property, plant and equipment
|
|
|
26,937
|
|
|
26,875
|
|
|
Less accumulated depreciation
|
|
|
5,941
|
|
|
5,657
|
|
|
Property, plant and equipment, net
|
|
|
$
|
20,996
|
|
|
$
|
21,218
|
|
Long-lived assets used in operations are assessed for impairment whenever changes in facts and circumstances indicate that the carrying value of the assets may not be recoverable based on the expected undiscounted future cash flow of an asset group. For purposes of impairment evaluation, long-lived assets must be grouped at the lowest level for which independent cash flows can be identified, which is at least at the segment level and in some cases for similar assets in the same geographic region where cash flows can be separately identified. If the sum of the undiscounted cash flows is less than the carrying value of an asset group, fair value is calculated, and the carrying value is written down if greater than the calculated fair value.
During the first quarter of 2020, we identified an impairment trigger relating to asset groups within our Western G&P reporting unit as a result of significant impacts to forecasted cash flows for these asset groups resulting from the first quarter events and circumstances as discussed in Note 1. The cash flows associated with these assets were significantly impacted by volume declines reflecting decreased forecasted producer customer production as a result of lower commodity prices. After assessing each asset group within the Western G&P reporting unit for impairment, only the East Texas G&P asset group resulted in the fair value of the underlying assets being less than the carrying value. As a result, an impairment of $174 million was recorded to “Impairment expense” on the Consolidated Statements of Income in the first quarter of 2020. No additional impairments have been recorded since that time.
12. Goodwill and Intangibles
Goodwill
MPLX annually evaluates goodwill for impairment as of November 30, as well as whenever events or changes in circumstances indicate it is more likely than not that the fair value of a reporting unit with goodwill is less than its carrying amount. There were no impairments recorded as a result of our November 30, 2020 annual goodwill impairment evaluation.
During the first quarter of 2020, we determined that an interim impairment analysis of the goodwill recorded was necessary based on consideration of a number of first quarter events and circumstances as discussed in Note 1. Our producer customers in our Eastern G&P region reduced production forecasts and drilling activity in response to the global economic downturn. Additionally, a decline in NGL prices impacted our future revenue forecast. After performing our evaluations related to the interim impairment of goodwill during the first quarter of 2020, we recorded an impairment of $1,814 million within the Eastern G&P reporting unit, which was recorded to “Impairment expense” on the Consolidated Statements of Income. The
impairment was primarily driven by additional guidance related to the slowing of drilling activity, which reduced production growth forecasts from our producer customers.
Changes in the carrying amount of goodwill were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
L&S
|
|
G&P
|
|
Total
|
|
Gross goodwill as of December 31, 2019
|
$
|
7,722
|
|
|
$
|
3,141
|
|
|
$
|
10,863
|
|
|
Accumulated impairment losses
|
—
|
|
|
(1,327)
|
|
|
(1,327)
|
|
|
Balance as of December 31, 2019
|
7,722
|
|
|
1,814
|
|
|
9,536
|
|
|
Impairment losses
|
—
|
|
|
(1,814)
|
|
|
(1,814)
|
|
|
|
|
|
|
|
|
|
Wholesale Exchange (Note 3)
|
(65)
|
|
|
—
|
|
|
(65)
|
|
|
Balance as of December 31, 2020
|
7,657
|
|
|
—
|
|
|
7,657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2021
|
7,657
|
|
|
—
|
|
|
7,657
|
|
|
|
|
|
|
|
|
|
Gross goodwill as of March 31, 2021
|
7,657
|
|
|
3,141
|
|
|
10,798
|
|
|
Accumulated impairment losses
|
—
|
|
|
(3,141)
|
|
|
(3,141)
|
|
|
Balance as of March 31, 2021
|
$
|
7,657
|
|
|
$
|
—
|
|
|
$
|
7,657
|
|
Intangible Assets
During the first quarter of 2020, we also determined that an impairment analysis of intangibles within our Western G&P reporting unit was necessary. See Note 11 for additional information regarding our assessment around the Western G&P reporting unit, and more specifically our East Texas G&P asset group. The fair value of the intangibles in our East Texas G&P asset group was determined based on applying the multi-period excess earnings method, which is an income approach. Key assumptions included management’s best estimates of the expected future cash flows from existing customers, customer attrition rates and the discount rate. After performing our evaluations related to the impairment of intangible assets associated with our East Texas G&P asset group during the first quarter of 2020, we recorded an impairment of $177 million to “Impairment expense” on the Consolidated Statements of Income related to our customer relationships. No additional impairments have been recorded since that time.
MPLX’s remaining intangible assets are comprised of customer contracts and relationships. Gross intangible assets with accumulated amortization as of March 31, 2021 and December 31, 2020 is shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
(In millions)
|
|
Useful Lives
|
|
Gross
|
|
Accumulated Amortization(1)
|
|
Net
|
|
Gross
|
|
Accumulated Amortization(2)
|
|
Net
|
|
L&S
|
|
6 - 8 years
|
|
$
|
283
|
|
|
$
|
(90)
|
|
|
$
|
193
|
|
|
$
|
283
|
|
|
$
|
(81)
|
|
|
$
|
202
|
|
|
G&P
|
|
6 - 25 years
|
|
1,288
|
|
|
(554)
|
|
|
734
|
|
|
1,288
|
|
|
(531)
|
|
|
757
|
|
|
|
|
|
|
$
|
1,571
|
|
|
$
|
(644)
|
|
|
$
|
927
|
|
|
$
|
1,571
|
|
|
$
|
(612)
|
|
|
$
|
959
|
|
(1) Amortization expense attributable to the L&S and G&P segments for the three months ended March 31, 2021 was $9 million and $23 million, respectively.
(2) Impairment charge of $177 million is included within the G&P accumulated amortization.
Estimated future amortization expense related to the intangible assets at March 31, 2021 is as follows:
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
|
|
2021
|
|
$
|
95
|
|
|
2022
|
|
127
|
|
|
2023
|
|
127
|
|
|
2024
|
|
127
|
|
|
2025
|
|
113
|
|
|
Thereafter
|
|
338
|
|
|
Total
|
|
$
|
927
|
|
13. Fair Value Measurements
Fair Values – Recurring
Fair value measurements and disclosures relate primarily to MPLX’s derivative positions as discussed in Note 14. The following table presents the financial instruments carried at fair value on a recurring basis as of March 31, 2021 and December 31, 2020 by fair value hierarchy level. MPLX has elected to offset the fair value amounts recognized for multiple derivative contracts executed with the same counterparty.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
(In millions)
|
Assets
|
|
Liabilities
|
|
Assets
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant unobservable inputs (Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Embedded derivatives in commodity contracts
|
$
|
—
|
|
|
$
|
(66)
|
|
|
$
|
—
|
|
|
$
|
(63)
|
|
|
Total carrying value on Consolidated Balance Sheets
|
$
|
—
|
|
|
$
|
(66)
|
|
|
$
|
—
|
|
|
$
|
(63)
|
|
Level 3 instruments include all NGL transactions and embedded derivatives in commodity contracts. The embedded derivative liability relates to a natural gas purchase commitment embedded in a keep-whole processing agreement. The fair value calculation for these Level 3 instruments used significant unobservable inputs including: (1) NGL prices interpolated and extrapolated due to inactive markets ranging from $0.48 to $1.36 per gallon with a weighted average of $0.62 per gallon and (2) the probability of renewal of 100 percent for the first five-year term and second five-year term of the gas purchase commitment and related keep-whole processing agreement. Increases or decreases in the fractionation spread result in an increase or decrease in the fair value of the embedded derivative liability, respectively. Beyond the embedded derivative discussed above, we had no outstanding commodity contracts as of March 31, 2021 or December 31, 2020.
Changes in Level 3 Fair Value Measurements
The following table is a reconciliation of the net beginning and ending balances recorded for net assets and liabilities classified as Level 3 in the fair value hierarchy.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2021
|
|
Three Months Ended March 31, 2020
|
|
(In millions)
|
Commodity Derivative Contracts (net)
|
|
|
|
Embedded Derivatives in Commodity Contracts (net)
|
|
Commodity Derivative Contracts (net)
|
|
|
|
Embedded Derivatives in Commodity Contracts (net)
|
|
Fair value at beginning of period
|
$
|
—
|
|
|
|
|
$
|
(63)
|
|
|
$
|
—
|
|
|
|
|
$
|
(60)
|
|
|
Total (losses)/gains (realized and unrealized) included in earnings(1)
|
—
|
|
|
|
|
(6)
|
|
|
—
|
|
|
|
|
14
|
|
|
Settlements
|
—
|
|
|
|
|
3
|
|
|
—
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value at end of period
|
—
|
|
|
|
|
(66)
|
|
|
—
|
|
|
|
|
(45)
|
|
|
The amount of total (losses)/gains for the period included in earnings attributable to the change in unrealized gains or losses relating to liabilities still held at end of period
|
$
|
—
|
|
|
|
|
$
|
(5)
|
|
|
$
|
—
|
|
|
|
|
$
|
13
|
|
(1) Gains and losses on commodity derivative contracts classified as Level 3 are recorded in “Product sales” on the Consolidated Statements of Income. Gains and losses on derivatives embedded in commodity contracts are recorded in “Purchased product costs” and “Cost of revenues” on the Consolidated Statements of Income.
Fair Values – Reported
MPLX’s primary financial instruments are cash and cash equivalents, receivables, receivables from related parties, lease receivables from related parties, accounts payable, payables to related parties and long-term debt. MPLX’s fair value assessment incorporates a variety of considerations, including (1) the duration of the instruments, (2) MPC’s investment-grade credit rating and (3) the historical incurrence of and expected future insignificance of bad debt expense, which includes an evaluation of counterparty credit risk. MPLX believes the carrying values of its current assets and liabilities approximate fair value. The recorded value of the amounts outstanding under the bank revolving credit facility, if any, approximates fair value
due to the variable interest rate that approximates current market rates. Derivative instruments are recorded at fair value, based on available market information (see Note 14).
The fair value of MPLX’s long-term debt is estimated based on recent market non-binding indicative quotes. The long-term debt fair values are considered Level 3 measurements. The following table summarizes the fair value and carrying value of our debt, excluding finance leases:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
(In millions)
|
Fair Value
|
|
Carrying Value
|
|
Fair Value
|
|
Carrying Value
|
|
Long-term debt (including amounts due within one year)
|
$
|
21,988
|
|
|
$
|
20,156
|
|
|
$
|
22,951
|
|
|
$
|
20,244
|
|
14. Derivative Financial Instruments
As of March 31, 2021, MPLX had no outstanding commodity contracts beyond the embedded derivative discussed below.
Embedded Derivative - MPLX has a natural gas purchase commitment embedded in a keep-whole processing agreement with a producer customer in the Southern Appalachian region expiring in December 2022. The customer has the unilateral option to extend the agreement for two consecutive five-year terms through December 2032. For accounting purposes, the natural gas purchase commitment and the term extending options have been aggregated into a single compound embedded derivative. The probability of the customer exercising its options is determined based on assumptions about the customer’s potential business strategy decision points that may exist at the time they would elect whether to renew the contract. The changes in fair value of this compound embedded derivative are based on the difference between the contractual and index pricing, the probability of the producer customer exercising its option to extend and the estimated favorability of these contracts compared to current market conditions. The changes in fair value are recorded in earnings through “Purchased product costs” on the Consolidated Statements of Income. As of March 31, 2021 and December 31, 2020, the estimated fair value of this contract was a liability of $66 million and $63 million, respectively.
Certain derivative positions are subject to master netting agreements, therefore, MPLX has elected to offset derivative assets and liabilities that are legally permissible to be offset. As of March 31, 2021 and December 31, 2020, there were no derivative assets or liabilities that were offset on the Consolidated Balance Sheets. The impact of MPLX’s derivative instruments on its Consolidated Balance Sheets is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
March 31, 2021
|
|
December 31, 2020
|
|
Derivative contracts not designated as hedging instruments and their balance sheet location
|
Asset
|
|
Liability
|
|
Asset
|
|
Liability
|
|
Commodity contracts(1)
|
|
|
|
|
|
|
|
|
Other current assets / Other current liabilities
|
$
|
—
|
|
|
$
|
(10)
|
|
|
$
|
—
|
|
|
$
|
(7)
|
|
|
Other noncurrent assets / Deferred credits and other liabilities
|
—
|
|
|
(56)
|
|
|
—
|
|
|
(56)
|
|
|
Total
|
$
|
—
|
|
|
$
|
(66)
|
|
|
$
|
—
|
|
|
$
|
(63)
|
|
(1) Includes embedded derivatives in commodity contracts as discussed above.
For further information regarding the fair value measurement of derivative instruments, see Note 13. There were no material changes to MPLX’s policy regarding the accounting for Level 2 and Level 3 instruments as previously disclosed in MPLX’s Annual Report on Form 10-K for the year ended December 31, 2020.
The impact of MPLX’s derivative contracts not designated as hedging instruments and the location of gains and losses recognized on the Consolidated Statements of Income is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
(In millions)
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased product costs
|
|
|
|
|
|
|
|
|
Realized (loss)/gain
|
$
|
(3)
|
|
|
$
|
(1)
|
|
|
|
|
|
|
Unrealized (loss)/gain
|
(3)
|
|
|
15
|
|
|
|
|
|
|
Purchased product costs derivative (loss)/gain
|
(6)
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative (loss)/gain
|
$
|
(6)
|
|
|
$
|
14
|
|
|
|
|
|
15. Debt
MPLX’s outstanding borrowings consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
March 31, 2021
|
|
December 31, 2020
|
|
MPLX LP:
|
|
|
|
|
|
|
|
|
|
Bank revolving credit facility
|
$
|
835
|
|
|
$
|
175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating rate senior notes
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate senior notes
|
18,532
|
|
|
19,240
|
|
|
Consolidated subsidiaries:
|
|
|
|
|
MarkWest
|
23
|
|
|
23
|
|
|
ANDX
|
45
|
|
|
87
|
|
|
|
|
|
|
|
Financing lease obligations(1)
|
10
|
|
|
11
|
|
|
Total
|
20,445
|
|
|
20,536
|
|
|
Unamortized debt issuance costs
|
(112)
|
|
|
(116)
|
|
|
Unamortized discount/premium
|
(279)
|
|
|
(281)
|
|
|
Amounts due within one year
|
(2)
|
|
|
(764)
|
|
|
Total long-term debt due after one year
|
$
|
20,052
|
|
|
$
|
19,375
|
|
(1) See Note 20 for lease information.
Credit Agreement
MPLX’s amended and restated revolving credit facility (as amended, the “MPLX Credit Agreement”), has a borrowing capacity of up to $3.5 billion and a term that extends to July 2024. During the three months ended March 31, 2021, MPLX borrowed $1.91 billion under the MPLX Credit Agreement, at an average interest rate of 1.347 percent, and repaid $1.25 billion. At March 31, 2021, MPLX had $835 million in outstanding borrowings and less than $1 million in letters of credit outstanding under the MPLX Credit Agreement, resulting in total availability of $2.67 billion, or 76.1 percent of the borrowing capacity.
Floating Rate Senior Notes
MPLX has $1.0 billion of aggregate principal amount of floating rate senior notes due September 2022. The notes were offered at a price to the public of 100 percent of par and are callable, in whole or in part, at par plus accrued and unpaid interest at any time on or after September 10, 2020. Interest is payable quarterly in March, June, September and December. The interest rate applicable to the notes is LIBOR plus 1.1 percent per annum.
Fixed Rate Senior Notes
MPLX’s senior notes, including those issued by consolidated subsidiaries, consist of various series of senior notes expiring between 2022 and 2058 with interest rates ranging from 1.750 percent to 5.500 percent. Interest on each series of notes is payable semi-annually in arrears on various dates depending on the series of the notes.
On December 29, 2020, MPLX announced the redemption of $750 million outstanding aggregate principal amount of 5.250 percent senior notes due January 15, 2025, including approximately $42 million aggregate principal amount of senior notes issued by Andeavor Logistics LP. These amounts are included on the Consolidated Balance Sheet at December 31, 2020 as “Long-term debt due within one year”. The notes were redeemed on January 15, 2021 at a price equal to 102.625 percent of the principal amount, which resulted in a payment of $20 million related to the note premium offset by the immediate recognition of $12 million of unamortized debt premium and issuance costs, which resulted in a loss on extinguishment of debt of $8 million that is included on the Consolidated Statements of Income as “Other financial costs”.
16. Revenue
Disaggregation of Revenue
The following tables represent a disaggregation of revenue for each reportable segment for the three months ended March 31, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2021
|
|
(In millions)
|
L&S
|
|
G&P
|
|
Total
|
|
Revenues and other income:
|
|
|
|
|
|
|
Service revenue
|
$
|
84
|
|
|
$
|
505
|
|
|
$
|
589
|
|
|
Service revenue - related parties
|
869
|
|
|
3
|
|
|
872
|
|
|
Service revenue - product related
|
—
|
|
|
77
|
|
|
77
|
|
|
Product sales
|
1
|
|
|
281
|
|
|
282
|
|
|
Product sales - related parties
|
3
|
|
|
39
|
|
|
42
|
|
|
Total revenues from contracts with customers
|
$
|
957
|
|
|
$
|
905
|
|
|
1,862
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-ASC 606 revenue(1)
|
|
|
|
|
477
|
|
|
Total revenues and other income
|
|
|
|
|
$
|
2,339
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2020
|
|
(In millions)
|
L&S
|
|
G&P
|
|
Total
|
|
Revenues and other income:
|
|
|
|
|
|
|
Service revenue
|
$
|
84
|
|
|
$
|
528
|
|
|
$
|
612
|
|
|
Service revenue - related parties
|
920
|
|
|
8
|
|
|
928
|
|
|
Service revenue - product related
|
—
|
|
|
39
|
|
|
39
|
|
|
Product sales
|
15
|
|
|
154
|
|
|
169
|
|
|
Product sales - related parties
|
4
|
|
|
29
|
|
|
33
|
|
|
Total revenues from contracts with customers
|
$
|
1,023
|
|
|
$
|
758
|
|
|
1,781
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-ASC 606 (loss)/revenue(1)
|
|
|
|
|
(789)
|
|
|
Total revenues and other income
|
|
|
|
|
$
|
992
|
|
(1) Non-ASC 606 Revenue includes rental income, income/(loss) from equity method investments, derivative gains and losses, mark-to-market adjustments, and other income.
Contract Balances
Contract assets typically relate to aid in construction agreements where the revenue recognized and MPLX’s rights to consideration for work completed exceeds the amount billed to the customer. Contract assets are included in “Other current assets” and “Other noncurrent assets” on the Consolidated Balance Sheets.
Contract liabilities, which we refer to as “Deferred revenue” and “Long-term deferred revenue,” typically relate to advance payments for aid in construction agreements and deferred customer credits associated with makeup rights and minimum volume commitments. Related to minimum volume commitments, breakage is estimated and recognized into service revenue in instances where it is probable the customer will not use the credit in future periods. We classify contract liabilities as current or long-term based on the timing of when we expect to recognize revenue.
“Receivables, net” primarily relate to our commodity sales. Portions of the “Receivables, net” balance are attributed to the sale of commodity product controlled by MPLX prior to sale while a significant portion of the balance relates to the sale of commodity product on behalf of our producer customers. The sales and related “Receivable, net” are commingled and excluded from the table below. MPLX remits the net sales price back to our producer customers upon completion of the sale. Each period end, certain amounts within accounts payable relate to our payments to producer customers. Such amounts are not deemed material at period end as a result of when we settle with each producer.
The tables below reflect the changes in our contract balances for the three-month periods ended March 31, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
Balance at December 31, 2020(1)
|
|
Additions/ (Deletions)
|
|
Revenue Recognized(2)
|
|
|
|
Balance at
March 31, 2021
|
|
|
|
|
|
Contract assets
|
$
|
40
|
|
|
$
|
(27)
|
|
|
$
|
—
|
|
|
|
|
$
|
13
|
|
|
|
|
|
|
Long-term contract assets
|
2
|
|
|
—
|
|
|
—
|
|
|
|
|
2
|
|
|
|
|
|
|
Deferred revenue
|
37
|
|
|
7
|
|
|
(1)
|
|
|
|
|
43
|
|
|
|
|
|
|
Deferred revenue - related parties
|
91
|
|
|
21
|
|
|
(20)
|
|
|
|
|
92
|
|
|
|
|
|
|
Long-term deferred revenue
|
119
|
|
|
4
|
|
|
—
|
|
|
|
|
123
|
|
|
|
|
|
|
Long-term deferred revenue - related parties
|
48
|
|
|
(4)
|
|
|
—
|
|
|
|
|
44
|
|
|
|
|
|
|
Long-term contract liability
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
Balance at December 31, 2019(1)
|
|
Additions/ (Deletions)
|
|
Revenue Recognized(2)
|
|
|
|
Balance at
March 31, 2020
|
|
|
|
|
|
Contract assets
|
$
|
39
|
|
|
$
|
(27)
|
|
|
$
|
—
|
|
|
|
|
$
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue
|
23
|
|
|
5
|
|
|
(3)
|
|
|
|
|
25
|
|
|
|
|
|
|
Deferred revenue - related parties
|
53
|
|
|
12
|
|
|
(16)
|
|
|
|
|
49
|
|
|
|
|
|
|
Long-term deferred revenue
|
90
|
|
|
6
|
|
|
—
|
|
|
|
|
96
|
|
|
|
|
|
|
Long-term deferred revenue - related parties
|
$
|
55
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
|
|
$
|
56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Balance represents ASC 606 portion of each respective line item.
(2) No significant revenue was recognized related to past performance obligations in the current periods.
Remaining Performance Obligations
The table below includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period.
As of March 31, 2021, the amounts allocated to contract assets and contract liabilities on the Consolidated Balance Sheets are $301 million and are reflected in the amounts below. This will be recognized as revenue as the obligations are satisfied, which is expected to occur over the next 23 years. Further, MPLX does not disclose variable consideration due to volume variability in the table below.
|
|
|
|
|
|
|
|
(In millions)
|
|
|
2021
|
$
|
1,435
|
|
|
2022
|
1,838
|
|
|
2023
|
1,674
|
|
|
2024
|
1,546
|
|
|
2025 and thereafter
|
4,580
|
|
|
Total revenue on remaining performance obligations(1),(2),(3)
|
$
|
11,073
|
|
(1) All fixed consideration from contracts with customers is included in the amounts presented above. Variable consideration that is constrained or not required to be estimated as it reflects our efforts to perform is excluded.
(2) Arrangements deemed implicit leases are included in “Rental income” and are excluded from this table.
(3) Only minimum volume commitments that are deemed fixed are included in the table above. MPLX has various minimum volume commitments in processing arrangements that vary based on the actual Btu content of the gas received. These amounts are deemed variable consideration and are excluded from the table above.
We do not disclose information on the future performance obligations for any contract with an original expected duration of
one year or less.
17. Supplemental Cash Flow Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
(In millions)
|
2021
|
|
2020
|
|
Net cash provided by operating activities included:
|
|
|
|
|
Interest paid (net of amounts capitalized)
|
$
|
231
|
|
|
$
|
210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
Net transfers of property, plant and equipment (to)/from materials and supplies inventories
|
$
|
—
|
|
|
$
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Consolidated Statements of Cash Flows exclude changes to the Consolidated Balance Sheets that did not affect cash. The following is the change of additions to property, plant and equipment related to capital accruals:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
(In millions)
|
2021
|
|
2020
|
|
|
|
|
|
|
Decrease in capital accruals
|
$
|
(37)
|
|
|
$
|
(61)
|
|
|
|
|
|
|
|
|
|
|
|
18. Accumulated Other Comprehensive Loss
MPLX LP records an accumulated other comprehensive loss on the Consolidated Balance Sheets relating to pension and other post-retirement benefits provided by LOOP LLC (“LOOP”) and Explorer Pipeline Company (“Explorer”) to their employees. MPLX LP is not a sponsor of these benefit plans.
The following table shows the changes in “Accumulated other comprehensive loss” by component during the period December 31, 2020 through March 31, 2021.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
Pension
Benefits
|
|
Other
Post-Retirement Benefits
|
|
Total
|
|
Balance at December 31, 2020(1)
|
$
|
(13)
|
|
|
$
|
(2)
|
|
|
$
|
(15)
|
|
|
Other comprehensive loss - remeasurements(2)
|
(2)
|
|
|
—
|
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2021(1)
|
$
|
(15)
|
|
|
$
|
(2)
|
|
|
$
|
(17)
|
|
The following table shows the changes in “Accumulated other comprehensive loss” by component during the period December 31, 2019 through March 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
Pension
Benefits
|
|
Other
Post-Retirement Benefits
|
|
Total
|
|
Balance at December 31, 2019(1)
|
$
|
(14)
|
|
|
$
|
(1)
|
|
|
$
|
(15)
|
|
|
Other comprehensive loss - remeasurements(2)
|
—
|
|
|
(1)
|
|
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2020(1)
|
$
|
(14)
|
|
|
$
|
(2)
|
|
|
$
|
(16)
|
|
(1) These components of “Accumulated other comprehensive loss” are included in the computation of net periodic benefit cost by LOOP and Explorer and are therefore included on the Consolidated Statements of Income under the caption “Income/(loss) from equity method investments.”
(2) Components of other comprehensive income/loss - remeasurements relate to actuarial gains and losses as well as amortization of prior service costs. MPLX records an adjustment to “Comprehensive income” in accordance with its ownership interest in LOOP and Explorer.
19. Equity-Based Compensation
Phantom Units
The following is a summary of phantom unit award activity of MPLX LP common units for the three months ended March 31, 2021:
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Number
of Units
|
|
Weighted
Average
Fair Value
|
|
Outstanding at December 31, 2020
|
644,023
|
|
|
$
|
28.65
|
|
|
Granted
|
321,927
|
|
|
24.88
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|
|
|
|
|
|
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Settled
|
(143,088)
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|
|
29.73
|
|
|
Forfeited
|
(1,270)
|
|
|
33.09
|
|
|
Outstanding at March 31, 2021
|
821,592
|
|
|
$
|
26.98
|
|
Performance Units
The following is a summary of the activity for performance unit awards to be settled in MPLX LP common units for the three months ended March 31, 2021:
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|
|
|
|
|
|
|
|
Number of
Units
|
|
Outstanding at December 31, 2020
|
3,092,286
|
|
|
Granted
|
375,730
|
|
|
Settled
|
(1,347,177)
|
|
|
Forfeited
|
(1,761)
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|
|
Outstanding at March 31, 2021
|
2,119,078
|
|
No new performance unit awards were granted during the three months ended March 31, 2021. The performance units shown above as granted represents subsequent tranches of the 2020 and 2019 performance unit awards that were subject to a performance condition based on MPLX LP’s 2021 distributable cash flow, which, due to the nature of the award terms, did not meet the criteria for a grant date fair value until the first quarter of 2021, at which time we began recognizing units and expense related to these tranches. Grant date fair value of the performance condition is based on potential payouts of up to $2.00 per unit. Compensation cost associated with the performance condition is based on the grant date fair value of the payout deemed most probable to occur and is adjusted as the expectation for payout changes.
20. Leases
During the first quarter of 2020, reimbursements for projects at certain MPLX refining logistics locations were agreed to between MPLX and MPC. These reimbursements relate to the storage services agreements between MPLX and MPC at these locations and required the embedded leases within these agreements to be reassessed under the leasing standard. As a result of the reassessment, one of our leases was reclassified from an operating lease to a sales-type lease. As a result, the underlying assets previously shown on the Consolidated Balance Sheets associated with the sales-type lease were derecognized and the net investment in the lease (i.e., the sum of the present value of the future lease payments and the unguaranteed residual value of the assets) was recorded as a lease receivable. See Note 5 for the location of lease receivables and unguaranteed residual assets on the Consolidated Balance Sheets. The difference between the net book value of the underlying assets and the net investment in the lease has been recorded as a Contribution from MPC in the Consolidated Statements of Equity given that the transaction related to refining logistics was a common control transaction. During the first quarter of 2020, MPLX derecognized approximately $171 million of property, plant and equipment, recorded a lease receivable of approximately $370 million, recorded an unguaranteed residual asset of approximately $10 million and a Contribution from MPC of $209 million.
Lease revenues included on the Consolidated Statements of Income were as follows:
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Three Months Ended March 31, 2021
|
|
Three Months Ended March 31, 2020
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|
(In millions)
|
Related Party
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|
Third Party
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|
Related Party
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Third Party
|
|
Operating leases:
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|
|
|
|
|
|
|
|
Operating lease revenue(1)
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$
|
202
|
|
|
$
|
68
|
|
|
$
|
186
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|
|
$
|
63
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|
|
|
|
|
|
|
|
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|
Sales-type leases:
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|
|
|
|
|
|
|
Profit/(loss) recognized at the commencement date
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—
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|
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—
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|
|
—
|
|
|
N/A
|
|
Interest income (Sales-type lease revenue- fixed minimum)
|
37
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|
|
—
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|
|
38
|
|
|
N/A
|
|
Interest income (Revenue from variable lease payments)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
N/A
|
(1) These amounts are presented net of executory costs.
21. Commitments and Contingencies
MPLX is the subject of, or a party to, a number of pending or threatened legal actions, contingencies and commitments involving a variety of matters, including laws and regulations relating to the environment. Some of these matters are discussed below. For matters for which MPLX has not recorded a liability, MPLX is unable to estimate a range of possible loss because the issues involved have not been fully developed through pleadings, discovery or court proceedings. However, the ultimate resolution of some of these contingencies could, individually or in the aggregate, be material.
Environmental Matters – MPLX is subject to federal, state and local laws and regulations relating to the environment. These laws generally provide for control of pollutants released into the environment and require responsible parties to undertake remediation of hazardous waste disposal sites. Penalties may be imposed for non-compliance.
At March 31, 2021 and December 31, 2020, accrued liabilities for remediation totaled $18 million and $17 million, respectively. It is not presently possible to estimate the ultimate amount of all remediation costs that might be incurred or the penalties, if any, that may be imposed. At March 31, 2021 and December 31, 2020, there were no balances with MPC for indemnification of environmental costs.
MPLX is involved in environmental enforcement matters arising in the ordinary course of business. While the outcome and impact to MPLX cannot be predicted with certainty, management believes the resolution of these environmental matters will not, individually or collectively, have a material adverse effect on its consolidated results of operations, financial position or cash flows.
MPLX is also a party to a number of other lawsuits and other proceedings arising in the ordinary course of business. While the ultimate outcome and impact to MPLX cannot be predicted with certainty, management believes the resolution of these other lawsuits and proceedings will not, individually or collectively, have a material adverse effect on its consolidated financial position, results of operations or cash flows.
Guarantees – Over the years, MPLX has sold various assets in the normal course of its business. Certain of the related agreements contain performance and general guarantees, including guarantees regarding inaccuracies in representations, warranties, covenants and agreements, and environmental and general indemnifications that require MPLX to perform upon the occurrence of a triggering event or condition. These guarantees and indemnifications are part of the normal course of selling assets. MPLX is typically not able to calculate the maximum potential amount of future payments that could be made under such contractual provisions because of the variability inherent in the guarantees and indemnities. Most often, the nature of the guarantees and indemnities is such that there is no appropriate method for quantifying the exposure because the underlying triggering event has little or no past experience upon which a reasonable prediction of the outcome can be based.
In connection with our 9.19 percent indirect interest in a joint venture (“Dakota Access”) that owns and operates the Dakota Access Pipeline and Energy Transfer Crude Oil Pipeline projects, collectively referred to as the Bakken Pipeline system or DAPL, we have entered into a Contingent Equity Contribution Agreement whereby MPLX LP, along with the other joint venture owners in the Bakken Pipeline system, has agreed to make equity contributions to the joint venture upon certain events occurring to allow the entities that own and operate the Bakken Pipeline system to satisfy their senior note payment obligations.
The senior notes were issued to repay amounts owed by the pipeline companies to fund the cost of construction of the Bakken Pipeline system.
In March 2020, the U.S. District Court for the District of Columbia (the “D.D.C.”) ordered the U.S. Army Corps of Engineers (“Army Corps”), which granted permits and an easement for the Bakken Pipeline system, to conduct a full environmental impact statement (“EIS”), and further requested briefing on whether an easement necessary for the operation of the Bakken Pipeline system should be vacated while the EIS is being prepared.
On July 6, 2020, the D.D.C. ordered vacatur of the easement to cross Lake Oahe during the pendency of an EIS and further ordered a shut down of the pipeline by August 5, 2020. The D.D.C. denied a motion to stay that order. Dakota Access and the Army Corps appealed the D.D.C.’s orders to the U.S. Court of Appeals for the District of Columbia Circuit (the “Court of Appeals”). On July 14, 2020, the Court of Appeals issued an administrative stay while the court considered Dakota Access and the Army Corps’ emergency motion for stay pending appeal. On August 5, 2020, the Court of Appeals stayed the D.D.C.’s injunction that required the pipeline be shutdown and emptied of oil by August 5, 2020. The Court of Appeals denied a stay of the D.D.C.’s March order, which required the EIS, and further denied a stay of the D.D.C.’s July order, which vacated the easement. On January 26, 2021, the Court of Appeals upheld the D.D.C.’s order vacating the easement while the Army Corps prepares the EIS. The Court of Appeals reversed the D.D.C.’s order to the extent it directed that the pipeline be shutdown and emptied of oil. In the D.D.C., briefing has been completed for a renewed request for an injunction. The pipeline remains operational.
If the pipeline is temporarily shut down pending completion of the EIS, MPLX would have to contribute its 9.19 percent pro rata share of funds required to pay interest accruing on the notes and any portion of the principal that matures while the pipeline is shutdown. MPLX also expects to contribute its 9.19 percent pro rata share of any costs to remediate any deficiencies to reinstate the permit and/or return the pipeline into operation. If the vacatur of the easement permit results in a permanent shutdown of the pipeline, MPLX would have to contribute its 9.19 percent pro rata share of the cost to redeem the bonds (including the 1% redemption premium required pursuant to the indenture governing the notes) and any accrued and unpaid interest. As of March 31, 2021, our maximum potential undiscounted payments under the Contingent Equity Contribution Agreement were approximately $230 million.
Other Legal Proceedings – In early July 2020, Tesoro High Plains Pipeline Company, LLC (“THPP”), a subsidiary of MPLX, received a Notification of Trespass Determination from the Bureau of Indian Affairs (“BIA”) relating to a portion of the Tesoro High Plains Pipeline that crosses the Fort Berthold Reservation in North Dakota. The notification covered the rights of way for 23 tracts of land and demanded the immediate cessation of pipeline operations. The notification also assessed trespass damages of approximately $187 million. THPP appealed this determination, which triggered an automatic stay of the requested pipeline shutdown and payment. On October 29, the Assistant Secretary - Indian Affairs issued an order vacating the BIA’s trespass order and requiring the Regional Director for the BIA Great Plains Region to issue a new decision on or before December 15 covering all 34 tracts at issue. On December 15, 2020, the Regional Director of the BIA issued a new trespass notice to THPP consistent with the Assistant Secretary - Indian Affairs order vacating the prior trespass order. The new order found that THPP was in trespass and assessed trespass damages of approximately $4 million (including interest), which has been paid. The order also required THPP to immediately cease and desist use of the portion of the pipeline that crosses the property at issue. THPP has complied with the Regional Director’s December 15, 2020 notice. On February 12, 2021, landowners filed suit in the U.S. District Court for the District of North Dakota (the “District of North Dakota”) against THPP, the Department of the Interior, the Assistant Secretary - Indian Affairs, the Interior Board of Indian Appeals and the BIA, requesting, among other things, that decisions by the Assistant Secretary - Indian Affairs and the Interior Board of Indian Appeals be vacated as to the award of damages to plaintiffs. In March 2021, THPP received a copy of an order purporting to vacate all orders related to THPP’s alleged trespass issued by the BIA between July 2, 2020 and January 14, 2021. The order directs the Regional Director of the BIA to reconsider the issue of THPP’s alleged trespass and issue a new order, if necessary, after all interested parties have had an opportunity to be heard. Subsequently, landowners voluntarily dismissed the suit filed in the District of North Dakota. On April 23, 2021, THPP filed a lawsuit in the District of North Dakota against the United States of America, the U.S. Department of the Interior and the BIA challenging the March order purporting to vacate all previous orders related to THPP’s alleged trespass.
We continue to work towards a settlement of this matter with holders of the property rights at issue.
Contractual Commitments and Contingencies – At March 31, 2021, MPLX’s contractual commitments to acquire property, plant and equipment totaled $101 million. These commitments were primarily related to G&P plant expansion, terminal and pipeline projects. In addition, from time to time and in the ordinary course of business, MPLX and its affiliates provide guarantees of MPLX’s subsidiaries payment and performance obligations in the G&P segment. Certain natural gas processing and gathering arrangements require MPLX to construct new natural gas processing plants, natural gas gathering pipelines and
NGL pipelines and contain certain fees and charges if specified construction milestones are not achieved for reasons other than force majeure. In certain cases, certain producers may have the right to cancel the processing arrangements if there are significant delays that are not due to force majeure. As of March 31, 2021, management does not believe there are any indications that MPLX will not be able to meet the construction milestones, that force majeure does not apply or that such fees and charges will otherwise be triggered.