MPLX LP (MPLX) Update - Nov 7

[dan_s]

MPLX is one of the largest and safest companies in our High Yield Income Portfolio.

Comments below are from BofA Equity Research

Still the best cash return story in midstream; Reiterate Buy
Reiterate Rating: BUY | PO: 39.00 USD | Price: 31.02 USD

PM Summary: outperformance on tails of solid print
MPLX closed +2.1% on Tuesday (11/2), materially outperforming AMNAX (-0.5%) and the
SPX (+0.4%) after (1) reporting a strong 3Q21 beat (see our report here), (2) announcing
a special distribution along with continuation of buybacks, and (3) providing updated
thoughts on 2022 capex and capital allocation plans. We believe the general
outperformance was driven by mgmt’s positive outlook regarding continued unitholder
returns, which is underpinned by the stability of MPLX’s L&S business and strong
Northeast G&P performance. Reiterate Buy and bump PO $2 to $39 (10.4x our '22E
EBITDA) on updated 4Q21/’21/ '22/ '23E EBITDA of $1.40bn/$5.51bn/$5.89bn /$6.05bn.

Strong returns in ’21, still see +ve excess FCF in ’22
In the qtr, MPLX (1) increased its base qtrly distribution by 2.5% to $0.705/shr, (2)
declared a $0.505/shr special distribution (~$600mm), and (3) executed $155mm in unit
repurchases which, in total for 3Q/YTD, amounted to $1.46bn/$2.8bn cash to
shareholders. This $2.8bn amounts to 9% of MPLX’s market cap. MPLX has been
deliberate in repurchasing units in 2021 ($465mm YTD of $1bn authorization) and noted
it believes some investors prefer continued repurchases while others prefer a cash
return (i.e. distributions). Going forward, mgmt. will not differ from the current approach
of making capital allocation decisions dynamically qtr by qtr. Regardless, we continue to
forecast MPLX generating strong excess FCF in ‘22 / ’23 of $1.10bn / $1.24bn.

2021 capex adjusted down; 2022 capex to be higher y/y
For ‘21, MPLX expects $650mm in total capex spend, which is split between $550mm
for growth (vs previous guide of $700mm) and $100mm for maintenance. This implies a
higher rate of capital spending in 4Q21 vs 1Q-3Q21. MPLX is towards the end of its
sanctioned capex runway, with two G&P projects (Preakness and Torñado 2 processing
plant) slated to be in-service in 2022 while the majority of L&S projects are already in
service: NGL takeaway system (ISD Oct 2021), (2) Whistler pipeline (ISD Aug 2021) and
(3) W2W pipeline (ISD throughout 2021). Looking into ‘22, mgmt. expects a higher level
of capital spending y/y, in part due to core business opportunities as well as energy
evolution opportunities.