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

Vice President of Finance & Investor Relations - MPLX GP LLC 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 1/3 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 within 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…

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 expense 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 and 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 intensive 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 remain 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 4 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.

Vice President of Finance & Investor Relations - MPLX GP LLC 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.

[Operator Instructions] 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. So First of all, I just want to say we think the economics in this transaction are extremely compelling, as you can see. And 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 sort of, which is the opportunities on 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 durable 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% 2026 and beyond, certainly for the next few years is very durable. So most definitely 12.5% 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 completion frac 1, 2028, frac 2, 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 sort of 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 Northwinds. One, 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 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. When we think about our strategy, we've said we'll put capital to work organically -- this year, it's in a range of about 1.7%. As you know, we've got Secretariat. We've got the first phase of our frac. We've got Harmon Creek well on its way. So we clearly see opportunities for organic growth. And then when we look at M&A, we also believe there are opportunities there. So it isn't as if we start out the year with an allocation of how much is M&A and how much of capital, we look at all of those opportunities. They must meet our strategic rationale. Obviously, our commitment to mid-single-digit growth is a critical component -- and then lastly, we want to be sure that they can generate mid-teens returns. All of those, I mean, the way we put capital to work should continue to support our ability to grow EBITDA and then, therefore, support our distribution. I hope that answers 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. So first, I think your first question was kind of what is the contract duration on processing. And we're probably somewhere those contracts today, somewhere in the range of 2 to 3 years on those processing contracts. Keep in mind, overall, and I think I mentioned this in the prepared remarks as well, these contracts that we have for these MVCs are average contract life of 13 years. So 80% of this revenue is MVC just to be sure that I was clear on that. And then some of the top producer customers that we -- I mentioned there are actually customers that are operating today on our system. But let me look at, Dave, and I'm going to ask him to give you a little more color 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, why 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 increase 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.

You're most welcome. Thank you.

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 2 of them currently operating, 1/3 is permitted. So within the next 12 months, just under $500 million, and most of that's already been started.

And then turning to the residue gas side of things. In addition to your NGL infrastructure build-out, you've made significant progress in growing this asset base via your JVs -- looking at the long-term visible demand drivers for gas, Maryann, what do you think are the logical strategic mix to augment your exposure here. Is it a matter of more gas transmission? Is it something more direct on the gas to power side of things? Is it liquefaction? What are your thoughts here?

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

Theresa, I'll kick it off and maybe I can ask some of my peers if they want to add on to it. When you think about data centers and some of the other growth, but yes, you touched on it. And -- as we think about the Permian and specifically and as you know, our strategy, a lot of long-haul pipelines out of there. We do not think that there is an overbuild situation in long-haul pipe. Let me start with that. So whether it be Whistler, Blackcomb, Matterhorn and or increased equity ownership in that, you could see that we have a lot of confidence in the growth -- not only the growth profile of the Permian on the gas side, but also the demand side of it. So as you know, down in the Gulf Coast with the -- with a lot of the LNG activity, but also with the increased growing activity around data centers, we believe, not only from a supply, but also from a demand perspective, there's a lot of opportunity. And I think we've proven that with the project we've announced most recently. So -- the one we haven't touched on is Traverse, so not only just the long-haul pipes out of the basin, but getting our shipping customers the utmost flexibility to get those premium markets in addition to getting out of the basin, we think, is a key part of our strategy. So as we go forward, it's an increase growth, optionality, flexibility and access to those premium markets for the gas coming out of the Permian. So hopefully, that gives you a little bit of color how we're thinking about that 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 starting on the Texas side of the line, but it's gradually expanded into [indiscernible] County, New Mexico. And that -- even though our plants are right on the Texas side of that line, a lot of our growth has continued to be on the [indiscernible] 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 1,200 -- or 12,000, excuse me. So it is more economic produced, 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 recognize when they built that system. Some of our existing base customers are -- 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 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 think we looked at -- if we were to build a system organically, the Northwind system would be one that we would have built. So in terms of looking for bolt-ons, I don't necessarily would say that there's opportunities there. We'll always look for those if they are a strategic fit and makes sense. But this one would have made sense as an organic build-out just as much as a bolt-on. And it happens to be that it's right next to our system, and it's right in the area where we see a lot of growth. So this accelerates our plans that probably organically we would have looked at anyway.

Jeremy, it's Maryann. I would say Greg has already said it, but at the risk of repeating, I'll say, we've said it's adjacent and it's complementary. I'd like to say it's about as perfectly as one could expect -- and then you have the economics that I think we've tried to share with you, we think they're pretty compelling, supported by the average contract life of 13 years over 200,000 dedicated acres in the Delaware. And none of the economics when we talk about that roughly 7x multiple reflect any upside from that. So -- we're pretty pleased with this, and we think it will continue to give us opportunities to grow beyond what we've been sharing with you here.

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, et cetera? 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 to 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, those -- that value chain is full. So when we think about the 70 of liquids that comes 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.

Senior Vice President of Logistics & Storage - MPLX GP LLC Yes. Michael, this is Sean. On top of what Kris just mentioned, as you know earlier this year, Maryann mentioned earlier that we're at 250,000 barrels per day on BANGL already this year with expansion in the second half of 2016 to go to $300,000. And as Chris mentioned, that optionality that will give us tremendous flexibility to continue to execute on our strategy. So we've got -- we feel really good at the spot we're in, and we'll continue looking to maximize the organic that now North wind bring options to us.

Got it. That's all I had today. .

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

Vice President of Finance & Investor Relations - MPLX GP LLC 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.