MPLX Earnings: Steady Growth With Attractive Permian Expansions on the Horizon

MPLX’s MPLX first-quarter results were solid, in our view, with steady growth. We do not expect to change our $35 fair value estimate or narrow moat rating. EBITDA increased modestly to $1.5 billion from $1.4 billion last year, primarily helped by higher volumes and rates from the logistics segment. We expect future growth to be led by the Whistler projects due online in 2023 and 2024 that will let MPLX benefit from Permian gas growth and high export demand.

MPLX is making some capital allocation shifts at the margin, in our view. Historically, the partnership has bought back far more units than most peers and employed a base/bonus distribution approach. We considered this a thoughtful approach that balanced competing capital allocation priorities during an uncertain market. Now, management is indicating that it is likely to focus on increasing the base distribution payout, versus allocating more capital to unit buybacks. With the stock trading right around our fair value estimate, we think this approach is realistic, especially as we don’t expect MPLX to pursue unmaintainable distribution increases that could lead to unwelcome cuts at a later date. With leverage at 3.5 times, MPLX has no need to reduce leverage further, as its levels are already reasonable.