Welcome to the MPLX Second Quarter 2025 Earnings Call. My name is Ted, and I'll be your operator for today's call. Please note that this conference is being recorded. I will now turn the call over to Kristina Kazarian. Kristina, you may begin.

Welcome to MPLX's Second Quarter 2025 Earnings Conference Call. The slides that accompany this call can be found on our website at mplx.com under the Investor's tab. Joining me on the call today are Maryann Mannen, President and CEO; Kris Hagedorn, CFO; and other members of the executive team. We invite you to read the safe harbor statements on Slide 2. We will be making forward-looking statements today. Actual results may differ. Factors that could cause actual results to differ are included there as well as in our filings with the SEC. With that, I will turn the call over to Maryann.

Thanks, Kristina. Good morning, and thank you for joining our call. Last week, we announced the strategic acquisition of Northwind Midstream for just under $2.4 billion. Northwind provides sour gas gathering and treating services in Lea County, New Mexico. The system adds over 200,000 dedicated acres in the Delaware Basin, 200-plus miles of gathering pipelines, two operating acid gas injection wells and one-third permitted. The system currently has 150 million cubic feet per day of sour gas treating capacity. We will be completing the expansion to 440 million cubic feet per day expected to be online in the second half of next year. The system is supported by minimum volume commitments by top regional producers. The transaction is expected to be immediately accretive to MPLX's distributable cash flow and represents a 7x multiple on forecasted 2027 EBITDA after the treating system reaches full capacity. The anticipated mid-teen unlevered return is inclusive of incremental capital spend associated with process expansion activity. Increased crude drilling activity in the eastern edge of the Northern Delaware Basin has been enabled by increased sour gas treating and AGI well capacity provided by these assets. The assets will provide prompt treatment solutions for existing and new producer customers. Our fee structure comprises gathering, compression, processing as well as more extensive CO2 and H2S treating. The higher levels of CO2 and H2S merits a higher fee structure compared to other regions. On average, this gets to an aggregated rate significantly above other regions. These assets are complementary and adjacent to our existing Delaware Basin natural gas system and will expand MPLX's treating and blending operations. The addition of 200,000 dedicated acres will increase MPLX's access to natural gas and NGL volumes, the optionality to direct these new volumes through our integrated system will accelerate our growth opportunities in the Permian. MPLX has also completed two previously announced Permian-based acquisitions. In June, we closed on the acquisition of an incremental 5% stake in the Matterhorn Express pipeline further enhancing our integrated natural gas value chain in the Permian Basin. In July, we closed on the remaining 55% interest in the BANGL NGL pipeline system. Full ownership of BANGL and its expansion opportunities enhance our Permian platform as we connect growing NGL production from the wellhead to our recently announced Gulf Coast fractionation facilities. The progress and execution of our strategic initiatives give us conviction in the sustainability of our mid-single-digit adjusted EBITDA growth outlook for 2025 and beyond. In the second quarter, we reported adjusted EBITDA of $1.7 billion, a 2% increase year-over-year. For the first half of the year, we achieved 5% adjusted EBITDA growth versus the first half of 2024. In the Marcellus and Utica, rig counts remain steady and volumes remain strong. Longer laterals are resulting in higher production volumes and we expect volumes to grow in the second half of the year. Producer consolidation further illustrates the value seen in the liquids-rich acreage of the Utica where condensate development activity continues to increase. In the Permian, steady drilling activity, rising gas oil ratios and the progression of export projects will support growth opportunities for our business. More broadly, we expect natural gas demand will accelerate over the next few years to provide increased electricity generation required for data centers and overall electric grid demand. As demand for natural gas-powered electricity rises, MPLX is well positioned to support the development plans of its producer customers. MPLX is expanding its core business by constructing processing facilities on a just-in-time basis, maximizing the utilization of existing assets, optimizing value chains and strengthening its strategic partnership with MPC. MPLX is advancing its strategic growth objectives within the Permian. Our seventh processing plant, Secretariat, is expected to be online by the end of 2025. Secretariat's 200 million cubic feet per day of processing capacity will increase MPLX's total Permian processing capacity to 1.4 billion cubic feet per day. We are progressing the expansion of BANGL's mainline from 250,000 to 300,000 barrels per day, which we expect to enter service in the second half of next year. BANGL is an instrumental piece of MPLX's integrated Permian NGL value chain and it will deliver volumes to MPLX's two Gulf Coast fractionation facilities, which are being constructed near the Galveston Bay refinery. The first frac, as well as our joint venture export terminal, is expected to enter service in 2028. And we anticipate the second frac will enter service in late 2029. Once complete, MPLX's fully integrated NGL value chain will stretch from the wellhead to water on the Gulf Coast and will supply LPGs to a growing global market. Within natural gas, we are advancing our value chain strategy. MPLX and its partners recently upsized the Traverse natural gas pipeline from 1.75 to 2.5 Bcf per day following strong customer demand. The additional capacity for bidirectional service between Agua Dulce and the Houston area highlights the value shippers describe to accessing multiple premium markets on the Gulf Coast. The continued build-out of our Permian to Gulf Coast natural gas system enhances our ability to provide shippers with premium market access and superior flexibility while enhancing MPLX's natural gas value chain through additional growth opportunities. MPLX has announced $3.5 billion of bolt-on transactions in 2025 and we remain on track to invest $1.7 billion in our organic growth plans in 2025, having already deployed 40% of this capital in the first half of the year. Over 90% of MPLX's total growth capital is being allocated to opportunities within our natural gas and NGL services segment. In the Marcellus, our largest operating region, construction of our Harmon Creek III processing plant and fractionation capacity aligned with producer drilling plans. This new complex will feature a 300 million cubic feet per day gas processing plant and a 40,000 barrel per day de-ethanizer supported by strong producer commitments. By the second half of next year, we anticipate MPLX's gas processing capacity in the Northeast will reach 8.1 billion cubic feet per day and fractionation capacity will reach 800,000 barrels per day. In our crude oil and products logistics segment, we are expanding crude gathering infrastructure in the Permian and Bakken basins, advancing butane blending initiatives at our product terminals, developing new market outlets, driving organic volume growth through our integrated network and pursuing other high-return projects aimed at maximizing the utilization of our assets. We are firmly committed to growing the partnership through our lens of strict capital disciplines. We expect mid-teen returns on our investments and our confidence that successful execution of these projects will extend the durability of our mid-single-digit growth trajectory. This positions us to continue reinvesting in the business while supporting consistent annual distribution increases. Our strong financial flexibility enables us to pursue strategic acquisitions that complement our organic growth plans. We stay disciplined in our approach and have ample capacity to pursue more opportunities while maintaining leverage below 4x. With a pipeline of growth opportunities, we are well positioned to generate resilient cash flows that underpin our commitment to deliver long-term value and return capital to unitholders. Now let me turn the call over to Kris to discuss our operational and financial results for the quarter.

Thanks, Maryann. Slide 10 outlines the second quarter operational and financial performance highlights for our crude oil and products logistics segment. Segment adjusted EBITDA increased $39 million when compared to the second quarter of 2024. The increase was driven by higher rates and throughputs across our systems, partially offset by higher variable operating expenses. Pipeline volumes were up year-over-year, primarily due to increased refinery demand and incremental gathering volumes in the Permian. Terminal volumes were flat year-over-year. Moving to our Natural Gas and NGL Services segment on Slide 11. Segment adjusted EBITDA decreased by $2 million compared to the second quarter of 2024 as growth from equity affiliates was offset by higher operating expenses and project spending. Higher project spending in the second quarter included significant planned maintenance at 13 plants in the Marcellus, Bakken and Rockies regions, all of which were safely and successfully executed by our operations teams. Gathered volumes decreased 1% year-over-year as growth in the Southwest was primarily offset by less dry gas production in the Utica and declining production in the Rockies. Processing volumes increased 2% year-over-year, primarily from increased throughput in the Utica and Permian basins. Processing volumes in the Utica have increased 13% year-over-year, showing the value of the liquids-rich acreage. Marcellus processing utilization was 92% for the quarter, reflecting strong producer activity in the region. Total fractionation volumes declined 5% year-over-year, primarily due to lower ethane recoveries in the Marcellus due to downstream third-party maintenance and outage time. Moving to our second quarter financial highlights on Slide 12. Adjusted EBITDA of $1.7 billion and distributable cash flow of $1.4 billion increased 2% and 1%, respectively, from the prior year. Project-related expenses increased over $30 million in the quarter, and we anticipate an incremental $40 million increase from second quarter to third quarter, primarily due to some planned tank maintenance within refinery logistics. MPLX returned nearly $1 billion to unitholders in distributions and $100 million in unit repurchases. We retired $1.2 billion of senior notes scheduled to mature in June and ended the quarter with a cash balance of $1.4 billion. Looking forward, MPLX intends to finance its recently completed acquisition of the remaining 55% of the BANGL pipeline system and its announced acquisition of Northwind Midstream with that. MPLX maintains a strong balance sheet and the ability to keep leverage below our comfort level of 4x. Now let me hand it back to Maryann for some concluding thoughts.

Thanks, Kris. MPLX has demonstrated its ability to grow both cash flows and unitholder distributions by executing on its strategic priorities. Year-to-date, we have returned $2.2 billion to unitholders inclusive of $200 million in unit repurchases as the value proposition for our units remains strong. Through prudent capital allocation, cost control and operational optimization, we've achieved a 7% compound annual growth rate in both adjusted EBITDA and distributable cash flows over the past four years. Year-to-date, MPLX has announced $3.5 billion of bolt-on transactions. These assets create immediate value for unitholders and enhance MPLX's growth platform in a capital-disciplined manner. We believe the integration of these assets will further strengthen MPLX's ability to deliver mid-single-digit adjusted EBITDA growth. Our strong and growing cash flow profile supported by a robust 1.5x distribution coverage and low leverage has enabled us to support our quarterly distribution, which most recently increased by 12.5% in the third quarter of last year. Looking ahead, our growing portfolio is well positioned to sustain this pace of annual distribution growth. In summary, MPLX is well positioned to capitalize on opportunities that fit our strategic road map as we execute our strategy targeting mid-single-digit adjusted EBITDA growth, as a strategic asset for Marathon, MPLX currently provides $2.5 billion annually in cash to MPC through its growing distribution. MPLX plays a vital role in advancing shared value creation initiatives, further reinforcing the strength of our partnership. Our unwavering focus on safety and operational excellence, strategic growth opportunities and strong financial flexibility enable us to generate resilient cash flows. This, in turn, supports our commitment to delivering peer-leading capital returns to unitholders. Now let me turn the call over to Kristina.

Thanks, Maryann. As we open the call for your questions, as a courtesy to all participants, we ask that you limit yourself to one question and one follow-up. If time permits, we'll reprompt for additional questions. Operator, we're now ready for questions.

Our first question in the queue is from John Mackay with Goldman Sachs.

Can you talk about the ramp on Northwind from here through the second half of 26? And then after that, how to think about some of the downstream processing and NGL growth opportunities? And maybe as part of that, just clarify whether or not those downstream opportunities are reflected in the 7x 27 multiple?

John, thanks for the question. First of all, I just want to say we think the economics in this transaction are extremely compelling, as you can see. Any incremental capital, and I'll share with you how that should unfold here. Any of the incremental capital that we have assumed is already embedded in those economics as well. But to answer your question, when we look at the completion by 2026, so by the end of next year, we should be at the run rate EBITDA that we are referencing that supports our roughly 7x EBITDA multiple, which means by 2027, we will have reached that EBITDA that will be ongoing. So throughout this time period, 2026, these projects to complete to get us to the 440 as well as the permitted third AGI well, all of those activities are well in hand. I'm going to ask Dave to address your second question, which is the opportunities further beyond that.

Yes. Thank you, Maryann. And so John, just to touch on that, let me be first clear that those incremental growth opportunities are not in our base economics and our base assumptions of Northwind. With that being said, it does provide the platform for a lot of incremental growth opportunities that we are currently evaluating. And not only just growth, but also incremental optimization and commercial optionality as we go forward with the Northwind. So I think over the next year or so, as we continue to build out and ramp up the Northwind volume, we'll continue to evaluate those commercial and growth opportunities. And I think those will be all accretive to the base investment.

All right. That's great. I appreciate that. Maybe looking a little wider, you've announced a lot of bolt-ons and projects over the last year. It's given some longer-term visibility on EBITDA growth. Could you talk a little bit about the distribution, one, kind of what you're thinking for this year? And then looking forward, kind of how many years of 12.5% growth could we expect from here?

Yes. Sure, John. Thank you. So look, we believe our 12.5% distribution increase is supported very durably by the growth that we are trying to deliver. I mentioned 7% growth. We've seen that over the last few years, both in EBITDA and in distributable cash flows. So certainly, as we've been committing, we think that 12.5% for 2026 and beyond, certainly for the next few years is very durable. So most definitely 12.5% is well within our sights, and you can continue to see the opportunities. Dave mentioned a few of them here. You know the work that we're putting together, both on our capital plan. We've got assets in the Permian coming online. I mentioned Secretariat that will be completed by the end of this year. All of these commitments support our durable cash flows and therefore, the 12.5% distribution increase that we've been committing to.

The next question in the queue is from Manav Gupta with UBS.

Congrats on the good deal. My first question is, Maryann, there were some recent comments made about LPG exports being in the bear market and why it probably is not good to invest in these. You are obviously building your fracs and then your partner is going to export some of the stuff. So just trying to understand what gives you the confidence that you and your partner can make the economics work on the new fracs as well as exporting them given some of the bearish market sentiment on LPG exports.

Manav, thank you for the question. We are very confident in our ability to fill those fracs. As you know, we've committed to complete frac 1 by 2028, frac 2 by 2029. One of the other elements that we've been sharing in addition to that, we've got third-party contracts that will also expire, that will obviously come across our system. We continue to believe the economics will be there. We recognize some of those comments as well. But we're highly confident in our ability both to fill those fracs and see the economics in that export model.

Perfect. And then a quick follow-up. The overall Permian growth strategy, you're pursuing multiple ways to grow your Permian alone with JV partners. Can you just talk about how you're looking to decide this Permian growth strategy for over the next 2 or 3 years?

You're welcome. Thank you. As you know, we've been working on our Permian growth strategy for the last few years. We think this acquisition that we've talked about, Northwind, is both adjacent and complementary to our current system. We have completed other acquisitions, the completion of BANGL as an example. We just closed that, giving us 100%. We've talked about moving that from 250 to 300. That's well on its way. When you look at our capabilities in this region, obviously, this particular northern edge of the Delaware has some of the best rock, we think, in the Permian with lower gas to oil ratios. Obviously, it comes with some complexity given the H2S and CO2 content, but we can provide the processing and treating capabilities here and works extremely nicely with the rest of the commitments we've made in the Permian. So we think for the next few years, we can continue to look for other opportunities. And as we build out this comprehensive system, we should be able to demonstrate our commitment and our ability to deliver on this Permian strategy.

And the next question in the queue comes from Keith Stanley with Wolfe Research.

Maryann, you said at the end of your prepared remarks that acquisitions will strengthen the ability to generate mid-single-digit growth. As you get larger, should we think of acquisitions as a component of getting to the mid-single-digit growth? Or should we think of that as incremental to the growth rate?

Yes, Keith, as we consider our strategy, we plan to invest capital organically, which for this year is around 1.7%. We have the Secretariat project, the first phase of our frac, and the Harmon Creek well making progress. Thus, we certainly see avenues for organic growth. Additionally, we believe there are opportunities in mergers and acquisitions. Our approach isn't to predetermine how much goes to M&A versus capital; instead, we assess all opportunities based on our strategic rationale. Our goal of achieving mid-single-digit growth is essential, and we also want to ensure these efforts can deliver mid-teen returns. Overall, our capital allocation strategy should enhance our EBITDA growth and, consequently, support our distributions. I hope that addresses your question.

It does. Second one, on Northwind, can you say any sense of how long the existing processing and transportation contracts are for those assets? And maybe walk through the mechanics of how you would eventually control the NGLs as the gatherer and treater, would you need to add processing to the footprint? Or any details you can provide.

Sure. To answer your first question, the duration of the processing contracts is typically between 2 to 3 years. Overall, the average contract life for our MVCs is about 13 years, which means that 80% of our revenue comes from MVC. Some of our top producer customers are currently using our system. Let me check with Dave for more information on your question.

Thank you, Maryann. So Keith, I touched on it a little bit earlier. So as these contracts roll off and we have control and access to the NGLs, we don't need that volume in our announced BANGL acquisition and our Gulf Coast fractionation and export project, this incremental volume, as I tried to touch on a little bit earlier, gives us flexibility and optionality on how and where and when we want to move those volumes. And that's probably the most exciting part about this. So as we look forward, not only this opportunity, but as we think about some of the growth opportunities that Maryann touched on, it's not just grow to grow, but as growth increases the integration, the optionality and flexibility of our entire value chains. Hopefully, that helps a little bit.

That helps, and I missed the 13-year commentary. So thanks for that as well.

The next question in the queue is from Theresa Chen with Barclays.

Following up on the commentary related to Northwind. Just a question of clarification on the CapEx. From here, the current capacity to the full 440 MMcf per day. How much incremental CapEx do you think will be necessary to achieve that?

Yes. So we estimate in a range of about $500 million between now and the next 12 months that will complete the $440 million as well as the third already permitted AGI well. So two of them currently operating, one-third is permitted. So within the next 12 months, just under $500 million, and most of that's already been started.

Turning to the residue gas sector, alongside your NGL infrastructure expansion, you've made meaningful advancements in growing this asset base through your joint ventures. Considering the long-term demand drivers for gas, Maryann, what do you see as the strategic initiatives to enhance your exposure in this area? Is it primarily more gas transmission, a focus on gas-to-power initiatives, or perhaps liquefaction? What are your thoughts?

Yes. Thanks, Theresa. I'm going to pass it to Dave and he'll take your questions.

Theresa, I'll start and then I can invite some of my colleagues to add their thoughts. Regarding data centers and other growth areas, you’ve already mentioned several key points. Specifically, when we consider the Permian region, our strategy focuses heavily on long-haul pipelines, and we don't see an overbuild situation in that area. Whether it’s Whistler, Blackcomb, Matterhorn, or our increasing equity in these projects, we have strong confidence in the growth potential, especially concerning natural gas. The demand side is robust too, particularly with increased LNG activity in the Gulf Coast and growing data center operations. We believe there's significant opportunity from both supply and demand perspectives, as shown by our recent project announcements. One project we haven't discussed is Traverse, which not only involves long-haul pipelines but also provides our shipping clients with flexibility to access premium markets while exiting the basin. Moving forward, our focus will be on enhancing growth, enhancing options, ensuring flexibility, and accessing those premium markets for gas from the Permian. I hope this offers some insight into our strategy.

Next question in the queue is from Jeremy Tonet with JPMorgan.

I was just wondering if you could expand a bit post the acquisition on your New Mexico strategy here. It's a bit more difficult to operate in the state given the regulatory framework and the handling that's needed with this production, but the growth is very strong as noted. And it seems like this toehold gives you even more opportunity there and there's not too many players right now. So just wondering if you could talk a bit more on your New Mexico strategy and competitive backdrop.

Yes, Jeremy, we'd be happy to because I think you characterized it well, and I think it's consistent really with the way that we think about growth. I'm going to ask Greg to give you some incremental thoughts here.

Thanks, Maryann. Yes. This is Jeremy, this is a really exciting area for us. We have been growing this space organically in terms of our processing plants to producer customers, acreage dedication that is starting on the Texas side of the line, but it's gradually expanded into Lea County, New Mexico. And even though our plants are right on the Texas side of that line, a lot of our growth has continued to be on the Lea County, New Mexico side. The growth is also in terms of crude oil production moved to the north and east towards that North-South New Mexico, Texas border. And that's because it's some of the best crude oil rock in the whole basin, particularly the Avalon formation, which is shallower. It's about 8,500 feet depth instead of 12,000. So it is more economic to produce, it's higher IPs, it's lower gas-oil ratio. So it's the most attractive economic crude production area. The issue is that that gas comes with more CO2 and H2S; it's much more sour. And that really is what the Northwind developers recognized when they built that system. Some of our existing base customers have moved further to that side, and we've deployed treating throughout our system, particularly on the New Mexico side of our gathering system. This acquisition is really going to augment our ability to treat even more sour gas and also provide blending opportunities because of the proximity and potential connectivity here. This system, if you look on a map, it wraps around the north and east side of our existing gathering system. So it really is adjacent and complementary as Maryann has mentioned. So we think there'll be more organic opportunities that can take advantage of this expanded treating capability and gathering that we have in one of the most attractive areas to drill in the basin.

Got it. That's helpful there. Maybe just continuing, do you see more bolt-on opportunities adjacent to your footprint that could offer the types of benefits that you see with Northwinds?

I believe that if we were to develop a system from the ground up, it would resemble the Northwind system. While I wouldn't say there are necessarily opportunities for bolt-ons, we will always consider them if they align strategically and make sense. This particular system could have been developed organically just as easily as it could have been a bolt-on. Its proximity to our existing system and its location in a high-growth area enhance our plans that we likely would have pursued organically anyway.

Jeremy, this is Maryann. Greg has already mentioned this, but I want to emphasize that we consider it adjacent and complementary. In our view, the situation is about as ideal as one could hope for, and the economics we’ve shared with you appear quite compelling, highlighted by the average contract life of 13 years and over 200,000 dedicated acres in the Delaware. Importantly, the 7x multiple we discussed does not account for any upside potential. Overall, we are very satisfied with this, and we believe it will create further growth opportunities beyond what we've already shared.

And the final question in the queue is from Michael Blum with Wells Fargo.

Apologies, one more clarification question on the Northwind deal. I guess as it relates to the gas and liquids that you'll gain access to eventually, can you just clarify, will you be able to accommodate those incremental volumes on your existing planned NGL pipe fracs, export docks, etc.? Or would you need to add capacity? And if so, what type of investment will we be looking at?

I'm going to ask Kris to share his thoughts on your questions.

Yes. Michael, what I would remind you of is that when we announced the Gulf Coast fractionators and related NGL value chain, we actually had full line of sight to filling those fracs and BANGL. So as we sit today, that value chain is full. So when we think about the 70 of liquids that come with this, and I will say the liquid side of this come immediately. When I say this, the Northwind liquids. So it's call it between 50 and 70 a day of liquids. Those are incremental to the liquids that we already have access to. So we'll be looking to explore other opportunities to drive economic value out of those. It does provide optionality, right, as we think about our existing NGL value chain as to how we do most economically utilize that value chain. So that's something I know the team has been looking at. And Sean, I don't know if there was anything you might want to add.

Yes, this is Sean. In addition to what Kris just mentioned, earlier this year, Maryann indicated that we are currently producing 250,000 barrels per day on BANGL, with plans to expand to 300,000 in the second half of 2016. As Kris noted, this optionality will provide us with significant flexibility to continue executing our strategy. We feel very optimistic about our current position and will keep exploring ways to maximize the opportunities that Northwind provides us.

Got it. That's all I had today.

With no further questions, I'll turn the call back over to Kristina.

Thank you for your interest in MPLX. Should you have more questions or if you'd like clarification on topics discussed this morning, please contact us, and our team will be available to take your calls. Thank you for joining us today.

This concludes today's call. Thank you for your participation. You may disconnect at this time.