Welcome to the MPLX Fourth Quarter 2015 Earnings Conference Call. My name is Vanessa and I'll be your operator for today's call. At this time, all participants are in a listen-only mode and later we will conduct a question-and-answer session. Please note that this conference is being recorded. And I will now turn the call over to Lisa Wilson, Director of Investor Relations. You may begin

Thank you, Vanessa. Good afternoon and welcome to the MPLX fourth quarter 2015 earnings webcast and conference call. The synchronized slides that accompany this call can be found on mplx.com under the Investors tab. On the call today are Gary Heminger, CEO and Chairman; Frank Semple, Vice Chairman; Don Templin, President; Nancy Buese, Chief Financial Officer and other members of the management team. We invite you to read the Safe Harbor statements and non-GAAP disclaimer on Slide 2 and 3. It's a reminder that we will be making forward-looking statements during the call and in the question-and-answer session that follows. Actual results may differ materially from what we expect today. Factors that could cause actual results to differ are included there, as well as in our filings with the SEC. Now, I'll turn the call over to Gary Heminger for opening remarks. Gary?

Thanks Lisa, and good afternoon to everyone. I appreciate you being on the call. Before I begin, I would want to take this opportunity to introduce Lisa Wilson, our new Investor Relations Director for MPLX. Lisa is replacing Geri Ewing, who is transferring to our finance department. Lisa has a wealth of knowledge with nearly 25 years of experience with the Marathon Petroleum family and was most recently our Director of Financial Services and Insurance. Now let’s turn to Slide 4 where we’ll provide our fourth quarter highlights. Early in December we completed our strategic combination with MarkWest. This transformative merger positions MPLX as a diversified large cap master limited partnership with compelling long term growth opportunities. Combining MarkWest long term producer relationships and successful history of executing midstream organic capital programs with MPLX's existing logistics and storage network, we now have the ability to pursue projects along the entire hydrocarbon value chain. These organic growth projects combined with the potential drop-down investment opportunities totaling 1.6 billion of MLP qualifying EBITDA from our sponsor are all expected to contribute to the partnerships long term growth profile. The continued development of midstream infrastructure is vital to a long term advancement of America's role in global energy production. Despite the near term challenges impacting many throughout our industry, MPLX is exceptionally well positioned to execute on a growth strategy. MarkWest has the right assets in the right place where producers are still increasing volumes even in 2016. Our strong balance sheet, fee based cash flows, investment grade credit profile and supportive sponsor put us in an excellent position to manage through difficult environments. We are pleased to report adjusted EBTIDA of $286 million and distributable cash flow of $227 million for the fourth quarter of 2015 which includes MarkWest's results for the…

Thanks Gary. Turning to Slide 5 you will see a great example of strong sponsor support. MPC has offered to contribute its marine transportation business to the partnership at a support of multiple with funding anticipated to consist entirely of MPLX equity issued to MPC. MPC's marine business is a fully integrated waterborne transportation service provider, capable of moving right products, heavy oils, crude oil, renewable fuels, chemicals and feedstock’s throughout the interior river system of the U.S. Its primary assets include 18 tow boats, 205 tank barges and a state-of-the-art repair facility. The marine business which we expect to acquire in the second quarter of 2016 represents nearly 60% of the volume of MPCs inland marine movements. In addition to providing transportation services, MPLX will provide marine logistics services that include managing the remaining 40% of the volume of MPCs inland marine movements provided by third parties, as well as Jones Act blue water movements that are primarily provided by third parties. This acquisition excludes MPCs joint venture investment with Crowley Marine which could be available in the future. The contract structure with MPC will be on a fee for capacity basis which will provide stable cash flow and diversification to the partnership's earnings profile. The proposed acquisition of the marine business is expected to generate approximately $120 million of annual EBITDA for the partnership. MPC's willingness to take back all equity from MPLX demonstrates strong sponsor support and provides us with a more attractive alternative than accessing the public capital markets. Acquiring MPC set up high quality marine assets, extends our logistics capabilities and provides a unique platform to expand the transportation of products throughout the Midwest and the Gulf Coast. Moving to Slide 6. We provide a high level overview of our logistics and storage segment, which…

Thanks Don. On Slide 10 is the summary of our capital expenditure program for 2016 which is now forecasted to be in a range of $1 billion to $1.5 billion. In light of the challenging commodity price environment, our top priority is to continue to be aggressively managing capital expenditures and working with producers as they optimize their drilling programs. In mid-point of our revised CapEx range represents a decrease of approximately $450 million from our previous forecast of $1.7 billion. Throughout the course of 2016, we’ll continue to evaluate our capital spending program and seek to optimize our investments as we take into account changes to producer activity and the infrastructure needed to support our customer's ongoing growth. Our goal remains to complete new projects on a just-in-time basis which results in higher utilization of our existing facilities. The majority of our organic growth investments are focused on supporting producer's requirements for gathering, processing and fractionation services in the Marcellus and Utica Shales where we forecast overall processed volumes to increase by approximately 20% in 2016. In addition, we are expanding our crude and refined product logistics capabilities to support MPC and other third parties. We currently have 10 major processing and fractionation projects under construction and expect to complete five facilities in 2016 to meet forecasted growth in producer volumes. In the appendix, we’ve included an updated project schedule. In addition to processing and fractionation infrastructure, we continue investing in logistics and storage infrastructure such as the Cornerstone Pipeline project, infrastructure to build-out the Utica region and the butane storage cabin in Robinson, Illinois. Not included in our current capital budget is the acquisition of MPC's Marine business. As Don previously mentioned, we expect to fund the drop via the issuance of MPLX units to MPC. Turning to…

Thanks Nancy. As we open the call for your questions, we ask that you limit yourself to one question plus a follow-up. You may reprompt for additional questions as time permits. With that, we will now open the call for questions. Vanessa?

[Operator Instructions] And we have our first question from Kristina Kazarian with Deutsche Bank.

Good afternoon. So I hear the explanation, I heard the explanation on both here and on the MPC call about color around capital market pressure. But Gary, maybe could you just talk a little bit about if you knew the stock was going to be down 20% say as the market reacts to the new growth profile, would you still have made the same decision because to me when I look at especially the MarkWest slides and the processing and frac utilization levels roughly in line with third quarter, that generally looks fine. So I guess what I'm going to understand is was the decision a reaction to the capital markets or are you seeing the potential for a material decline in MarkWest's underlying business coming in 2016?

No Kristina. No, the underlying business of MarkWest and MPLX is fine and the fundamentals are fine. It really comes back to and sure, if I could – and I know you're not being a Monday morning quarterback but if could always know what exactly is going to happen, you may look at things different. But everything comes back to - I think a very prudent business decision that with these yields, and we are not driven decision like capital issue, and it’s not a fundamental earnings or volume or cash flow generation decision. At this growth rates, at this yield, it just accelerates and it continues to accelerate without any governor on the accelerator and can get you into - it can have a run away with the incremental amount of units that you have to issue to be able to satisfy that type of a growth. I'm very cognizant of - even I’ve discussed this in the past, we always have very, very good intellectual precision in this marketplace but when we looked at the amount of units that we’d have to issue in this type of yield environment, we felt it was a prudent thing to do. Going forward, the fundamentals, and of course I get questioned a lot, if you were doing it again, do you like this transaction? And the answer is absolutely yes. The base fundamentals, the suite of assets that we acquired MarkWest are phenomenal if this commodity market turnaround but we needed to make a – as I said we needed to hunker down and make the right decision for this time in the status of MPLX.

My follow on is, I know Don talked this morning about how there had been like a 200 basis point swing in yield from like November to where we stand today. I guess one of the unfortunate parts is that the movement today is driven almost another 200 basis point compression. So does that mean I need to revisit these numbers again at some point in time or how are you thinking about that?

Well, the entire space and it's just not MPLX, Kristina and I know you’ve fully aware of that. And if you look at the yield where we backed up after today, I think the markets will sort itself out, I think the market is going to understand. But it was apparent this week when we increased our distribution for the fourth quarter that the market continues to be under severe pressure. So we will - as we said, we are very clear on 12 to 15. We've put out a range because we certainly expect the commodity markets to improve. They've started to improve today and we’re expecting them to improve throughout the balance of the year. But we have stated that the MPC is going to be very supportive in the drop down, very supporting in taking back units and many other options that we have to be flexible. It just didn’t, at this time, due to the big change that we've had since our Analyst Day, it didn’t make sense to - as I said this morning, to try to chase an ever increasing yield.

I didn't mean to imply that I didn't think they were good assets or a good deal because I do think MarkWest has some great assets there, so just a clarification there. And my last question before I jump off is this one is for you, Nancy. Can you just help me understand specifically what came out of the CapEx budget? I was able to piece together that it looked like there are about five plants that got pushed a little bit just like from a delay timing but just help me a little color there would be great.

Yes fundamentally I'd refer you to the plan schedule it's in the appendix and what we have done is work with producers to really optimize and work with just-in-time plant completions. So what you’ve seen as a few plants get moved out a quarter or two and we’ll continue to focus on that as we align with the forecast. We can help you work through that more specifically but generally that’s what we’ve done is move back a few quarters.

Our next question comes from Brian Zarahn with Barclays.

On the capital budget for 2016, it is sort of a wide range and it is a fluid environment. How should we think about the $1 billion? Is that a floor or is there potential for the 2016 capital budget to be revised?

I’ll take that one Gary. That's a great question Brian and the way do think about that is we do have a wide range and as you would expect, the market in the commodity price environment for the producers overall tends to be on the lower side and it takes longer time towards recovery, you can anticipate it will be near the low end of that range. We work with the producers on a very regular basis and we will continue to do so pushing out in CapEx we possibly can. So, my thesis on that would be the longer we stand this distressed environment, the lower end of that range will be – where we’ll end up for 2016.

Given where we are today, is there a potential for that $1 billion to get lower for this year and be deferred to 2017 or how do you think about that low-end of the range?

There is certainly that potential again this is based on our best estimate given on producer forecast today so if there is further moving out of volume, there is the potential to reduce CapEx further.

Okay. And then on financing, obviously the parent is taking the equity for the drop-down in the second quarter. To reach your leverage metrics, how do you think about financing the organic budget for this year?

We’ll continue to think about a variety of tools including and up to a many auctions using the parent as sponsor, using MPC as the buyer for the units on the drop is very critical, as well there is an opportunity for us to do another private placement with MPC over the course of the year. So we’ll think about options like that but again using the sponsor is a very supportive tool and only accessing the public equity capital markets on the very opportunistic basis.

Thank you, Nancy.

Our next question comes from John Edwards with Credit Suisse.

Good afternoon everybody. If you could help us understand when we were looking at the S4 and backing into of what the implied EBITDA guidance would be for 2016, we were sort of in the 1.5 to 1.6 range and now you were coming in at 1.25 to 1.4. Maybe you could give us an idea of why it came down to that extent and just a little bit of details on that. I know it is volumes and your customers and so on but if you can give any color on that, that would be helpful.

Yes, that’s absolutely you’ve got it right. It's slower ramp up in volumes and slower growth from the producer customers. Again we are still forecasting 20% to 30% growth over the course of 2016 which we think is a great in this environment but it is certainly slowing down a bit and you typically see greater ramp up at the end of each of year and that’s just getting pushed out a little bit. So it’s absolutely in line with our expectations given the current forward price strip or commodities for the producers.

Okay. So is it safe to assume that this reduction is - is it entirely on the MarkWest side or are there any other assets that are being deferred that were previously perhaps on the MPLX side only?

That's predominately associated with the MarkWest volumes.

Okay. Thank you very much.

Our next question comes from Shneur Gershuni with UBS.

Good afternoon, guys. Just sort of wanted to revisit Kristina's original question. I was wondering if you can kind of square a few data points for me. Before today your stock had a premium valuation and I realize it is down but it is a premium valuation to the rest of the MLP space because of your - I guess - we will call it a super grower status with the respect to the distributions. You talk about a successful combination in today's press release about MarkWest and MPLX. You recently reiterated your 25% growth guidance as well as your longer-term expectations. Your EBITDA guidance not overly negative compared to where we were, your drop-down guidance appears to be in line and I believe during the third quarter you had signaled that you would be willing to use drop downs to make up any holes in terms of growth rates and so forth. What exactly has changed in the last - we will call it I guess 8 to 10 weeks since the Analyst Day that causes you to cut the growth rate in half? It just sort of seems a very big reaction and you have owned the assets for about 8 to 10 weeks. Is something happening and deteriorating faster than we are seeing in the numbers? I was wondering if you can get a little bit more specific about it or is this some of it coming from the MPC side? Is there an issue there that you need to keep the assets upstairs? I was wondering if you can walk through the whole process for us?

Yes, Shneur, let me take the, the front part of this and then ask Don, Nancy and Frank to chime in. But as I said to Kristina's question, fundamentally the MarkWest assets are very sound. Nancy just explained that the - the MPLX are very sound. So nothing underlying those - the dropdowns are still there and all very good assets. It just comes to the entire industry, it's not just MPLX but the entire industries yields have backed up in when you do the maths on, the chase an yield change I should say in the yield, it becomes very, very hard and challenging to be able to chase this yield in this market. And we found obviously the prudent thing to do right now in the environment it was in and quite honestly Shneur as I said earlier, we came out with our distribution for the fourth quarter, the market continued to be under tremendous pressure again it's not just MPLX granted, we are still trading at a premium, we're still one of the - going into the – one of the best MLP growth and best yielding MLPs in the space. However they're significantly higher yield than what we anticipated. And I'll turn it over to Don and Nancy and Frank to give any more color.

Yes Shneur, this is Don, I mentioned on the MPC call as well but as late as November 30, so last day November just the couple days - a day before the vote a couple days before our investor meeting the yield was 4.4% and we’ve seen a more than 200 basis point move and it was very clear that the market settlement was very negative for the industry in general and the sector in general and so we could not ignore that as we were evaluating the business. The underlying fundamentals are still very strong, so we feel very confident about that at both the MPC level and at the MPLX level. What really changed and what really moved was the yield environment and that impact on our growth and the need to issue incremental units.

I hear the explanation. I guess where I am confused is that you are saying there is incremental units being - forced to being issued because you have a 200 basis point increase. Yet the decision to cut it in half versus let's say dropping it to a high teens growth rate has basically cost you almost another 200 basis points. So it sort of seems like you are actually compounding the problem that you had in the first place. And I guess that is where I am confused because it doesn't sound like the guidance is saying that things are going to be that bad that you have to cut it in half. Like why half and why not a 15% to 17% growth rate or 20% growth rate? I mean why go all of the way down to a 12 to 15 rate when it should have been obvious that this would be viewed very negatively by the market and would just compound the problem that you are stating is the issue that you had in the first place?

A very fair question. We studied many different parameters and you will learn with MPC and just like all the years that we've studied with MarkWest we're going to be very conservative when we put number out. We don't like to go and drop something and then come back, I have this question again this morning, I think Kristina basically asked this question, do we need to consider something else later in the year. We want to come out and explain a very, very comfort - definitely our comfort level and not have to readjust later down the calendar. And we’ll see where things turn outs as we go forward.

Okay. And just turning away from this topic for a second here, I know that you are not formalizing a 2017 growth rate at this stage right now. But I was wondering if you can at least give us some color directionally, do you think it is going to be consistent with where you are expecting 2016 to shakeout, less, more? And also when you say a supportive valuation for the drop, I was wondering if you could give us a range of how you are thinking on valuation?

Yes, let me ask Nancy or Don to take those questions.

So, great question and we’re certainly evaluating where we’re going to be for 2016 - into 2017 and subsequent years past that. It’s just too soon to tell. There is a lot of options available, we have many tools to use to support the partnership. It's also very difficult to tell at this point of time of how the market is going to react to our distribution growth guidance and everything else. And so we will continue to grow, we want long-term sustainable growth rate for the benefit of all the unitholders and it’s just too soon for us to give that guidance in the out years.

And with respect to the dropdown, MPC has offered the assets to MPLX. The assets have been referred to the conflicts committee or special committee and I think it’s premature at this point in time to presuppose what they will come up in terms of valuation. But we’re confident that it will be considered a support of evaluation.

And lastly Shneur, let me offer, I think the yield is probably mainly driven by the overall commodity markets and where we see not only the gathering and processing business going or is the refining business going, where is the overall market going. And I would say they're probably equally distributed there when you try to answer that question. So we are going to be very conservative as we look at commodity price and we’re going to be - the theme across the entire industry appears to be lower for longer and we’re just preparing ourselves to make sure that we can hunker down, weather this challenges in the marketplace and then get back on track when the commodity markets improve.

We will now take our next question from Jeremy Tonet with JPMorgan.

Good afternoon. Just wanted to follow up a little bit on some of the earlier questions and so just thinking through some of the things that you guys were talking about as far as the business for MarkWest, the thesis outlook seems like it is still somewhat similar to where it was in December, still expecting the plans to ramp up with the 12 to 18 month outlook. It still looks like there is a lot of pipes coming into the Northeast in 2017 that will alleviate basis differentials and help producers get back to the original plans. So I'm just trying to think through where the MarkWest thesis and outlook stands right now and what that means for 2017? I mean is there really much downside risk to 12% growth continuing to 2017? I'm just trying to reconcile those two right now?

Jeremy, I agree with you on your thesis there. Fundamentally everything is still very strong. The legacy assets of MPLX are very, very strong. The challenges, the funds flow I should say out and waiting on funds to come back into the MLP markets is the challenge and that has what has driven the yield substantially over the last 8 to 10 weeks as we talked about earlier. So we’ve answered the question three or four times and you hit it right on the head. Those were all of the different attributes. The fundamentals are very strong, but we’re going to be very prepared and we’re going to make sure the balance sheet, I think Nancy talked about investment grade balance sheet, we’re going to make sure that both MPC and MPLX are very strong around the balance sheet and we think that is most important part of the business right now. There are going to be many opportunities down the road and many more opportunities and we have to make sure that our balance sheet can weather if it is lower for longer.

And then just thinking about the guidance, the guidance that you put out there, just to confirm that does include the drop-down in it? And also there was a discussion of $6 billion to $9 billion of growth CapEx previously from MarkWest. Where does that stand right now? Is it deferred, is it lost or how do you guys think about that?

The guidance includes the drops Jeremy and with respect to the $6 billion to $9 million, we are continuing to - this is Don, we’re continuing to progress the projects, I mean couple of the big ones were the butane outlook project and in NGL route to potentially the East Coast. And our view is those projects need to continue to be progressed because as you had stated earlier, it is very, very important for us to be able to allow our producer customers to increase their netbacks. And these are the types of projects that are going to allow the producer customers to increase those netbacks. So we are moving them forward and progressing them as rapidly as we can.

Great. Thank you very much. Just one last one if I could. As far as the leverage target, how much did that play into the decision to change the guidance here and how do the IDR waiver that tool? How do you think about the give and takes there when thinking about this guidance?

Yes, we take into account all of the metrics in which the business is measured and we also take into account the support from the parent and we do want to get back to our four times leverage by the end of 2016. So it’s all accumulative impact, but we’re more highly levered at the end of 2015 and need to work our way back down during the course of the year. We intend to do that through the growth of the EBITDA.

Our next question comes from Faisel Khan with Citigroup.

Thank you. Good afternoon. So I think I got all of the metrics, the target for the debt to EBITDA, I get 4 times, for distribution growth and then the 1.1 times coverage and then all of the equity offerings for the marine assets. So when you add all that up, it seems like you will probably need about maybe $0.5 billion in incremental equity to get to your leverage ratios. Is that sort of the right range to look at for additional equity needs beyond what you are going to get for the marine assets?

Yes Faisel typically we don’t give any sort of forward guidance on our capital funding needs but you can certainly do the math and we’ve indicated there is a variety of ways for us to raise those dollars during the course of 2016 and we’ll also reiterate our goal is to access the public capital markets is little and as infrequently as possible and using the tools by the support of the parent to get there.

Okay. If I'm looking at the guidance for gathering and processing on the processing volume side, there's a 20% increase in Marcellus and Utica volumes. I think in the previous guidance you had 20% growth in the Marcellus and 45% growth in the Utica. So just trying to understand what the breakout is of the different - where we are seeing the biggest pull back here since you last issued guidance for the two different areas?

Yes, fair question, that’s really across the board with all of the producer customers. I think what you’re seeing is distressed because commodity pricing and all of those customers and they’re all doing the same thing, we are which is optimizing and maximizing the CapEx dollar and they’re reducing and drawing out their drilling programs over a longer period of time. So it’s really just across the board and fairly ratable over both of the basins.

Okay so I should take - if I look at both basins, it is a similar sort of cut to get to that 20% from what you guys gave out in the third quarter?

Yes.

Okay. Last question, on the splitters, they are still at the parent level. In the current commodity price environment, are those splitters generating positive cash flow in the current commodity price environment?

Absolutely.

Any color around that? Is it better or worse than that -

We can’t give you any color but as I said on the – Mike Palmer discussed this morning, both splitters, Canton is at 25, and Cattlesburg at 35 and we’re finding the condensate availability and we running them at their design capacity.

Okay. Thanks for the time.

Our next question comes from Michael Blum with Wells Fargo.

Thank you. Just two quick questions for me. The first just - I guess the prior guidance assumed that you would sort of bring forward the drop downs over the next few years, the $1.6 billion of EBITDA that could be dropped. What is the latest thinking - I understand what the 2016 drop-down thought is but just over the next few years, what is the thinking in terms of the pace of drop downs?

Michael, that’s going to be very market dependent. We’ve already committed to working with MPC for the marine drop in 2016 in the second quarter as what we are targeting. We will continue to evaluate the combination of distribution growth, leverage, growth and EBITDA through the drop downs and all of the other measures that are important to us as we think about increasing the value to unitholders longer term. So, it's really – it’s a debate between how soon do you want to drop those down in these market conditions versus also maintaining an awful lot of dry powder for times down the road and in addition to that we have indicated we'll be continuing to incubate and develop additional assets at the MPC level to drop down overtime.

Okay. And the second question is if I remember correctly I think the kind of target or pro forma leverage you thought you'd have coming out of the merger was 4.3 and it looks like it is 4.7 if I'm understanding that correctly. So I just wanted to make sure that there has been no change in terms of your projection relative to the debt that you actually have at this point, that is pretty much in line and the delta is really just on the EBITDA?

Yes, that’s correct I mean that is exactly where we thought it was going to be. As we indicated, we did notes exchange for the MBWE notes at the time of the transaction. Those are now MPLX paper so there has not been any new net additional debt that was contemplated.

Got it. Thank you.

Our next question comes from Richard Roberts with Howard Weil.

Good afternoon, folks. Maybe one quick one on sort of your thoughts about what the appropriate level of distribution growth is over the next few years. Obviously we are not going to get any guidance here but we have to put something in our models as we are thinking about -

I'm so sorry Mr. Robert, this is the Operator. There seems to be a bit of disturbance on your line. Are you perhaps on a speaker phone? Do you have the ability to lift up your handsets or anything like that or switch to a handset.

I am on a handset.

Okay. Unfortunately you are coming to a bit garbled. Speakers, is it all right for Mr. Roberts to proceed.

I think the question was about distribution growth guidance for 2016?

I guess what I wanted to get at was just where you think or how you think about restructuring that. So if I don't have guidance number to get to, obviously we are going to have something in our model as far as what your EBITDA and DCF numbers are going to look like. So are you going to be targeting a coverage ratio and pay out whatever you can to get to - I'll say 1.1 times coverage over the next few years or are you going to be targeting something in relation to your peers so maybe a time for calendar - at MLP or I guess structurally, how do you think about the right level of distribution growth?

I think I’ll try to refund what I think I heard but the question was about how do we think about distribution growth rates over the longer term and how we would characterize that as we have indicated a one point - our objective would be around 1.1 times coverage ratio and you got a pretty good understanding about the return rates on this projects. So how I would think about it is sort of top tier growth. If you look at large cap diversified MLP's, I would put our growth plans and our growth trajectory somewhere in that realm of sort of top quartile performance. And that’s how we’ll be thinking about measuring ourselves going forward.

Got it. I apologize for the connection -

I’ll just confirm Mr. Robert did that conclude your question?

Yes, if my phone is garbled, I don't want to keep going. So I will just hop off there. Thank you.

Thank you, sir. I'm standing by for further questions.

Vanessa, no further questions, we’ll go ahead and conclude the call today. Thank you for joining us and thank you for your interest in MPLX. Should you have additional questions or would like clarification on any of the topics discussed this afternoon, Kevin Hawkins and I will be available to take your calls. Thank you.

Thank you. Ladies and gentlemen, this concludes today's conference. We thank you for participating and you may now disconnect.