MPLX LP management said two strategic transactions announced in the first quarter would open the door to growth opportunities in the Marcellus and Utica shales and the Permian Basin.
During a conference call to discuss quarterly performance, CEO Michael Hennigan told analysts that exploration and production (E&P) companies are targeting liquids-rich acreage in the Northeast. “We have already seen growth in the rich gas window of the Utica, and we see new producers moving in the region.”
As such, Findlay, OH-based MPLX enhanced its footprint in the Utica by acquiring pipeline operator Summit Midstream Partners LP’s Utica assets. The package included Summit’s natural gas gathering system in southeastern Ohio and its equity interests in Ohio Gathering and Ohio Condensate, which it operated in partnership with MPLX.
MPLX has existing infrastructure in the Utica that is integrated into its Marcellus system and connects to fractionation and takeaway capacity. The Summit acquisition allows MPLX to “further buy into the area we’re really bullish about,” said COO Gregory Floerke.
Floerke said the rich gas area, mostly ignored by E&Ps in favor of dry, lean parts of the basin near the Ohio River, is getting more attention now with “a lot of great tailwinds behind it.”
In the Permian, another key area for MPLX, Hennigan said associated gas production continues as E&Ps continue to complete crude oil wells.
That said, natural gas prices in the Permian have tanked as a result of the supply glut and lack of capacity to move natural gas out of the region. NGI Daily Cash Market data showed the price at Waha, the West Texas regional benchmark, at negative 16.5 cents/MMBtu Wednesday (May 1). Prices bottomed last month in the negative $3.000.
MPLX, along with Whitewater Midstream and I Squared Capital, which is an existing Whistler Pipeline joint venture (JV), secured a definitive agreement with Enbridge Inc. in March to combine the Whistler and Rio Bravo pipeline projects into a partnership.
“The Rio Bravo pipeline project provides Whistler with that value chain connectivity to the Rio Grande LNG export facility in Brownsville, TX, Senior Vice President David Heppner said of the tie-up. “It’s that last-mile connectivity to the liquefied natural gas pole.”
Capital Plan Unchanged
CFO Kristopher Hagedorn said MPLX’s 2024 capital spending budget of $1.1 billion remains unchanged. It includes $950 million for growth and $150 million for maintenance on projects anchored in the Marcellus and Permian around natural gas and natural gas liquids (NGL) assets.
In the logistics and storage unit, the Whistler extension is progressing, according to management. MPLX expects to complete the 43-mile, 42-inch diameter ADCC Pipeline lateral from the Agua Dulce hub in South Texas to Corpus Christi LNG in the third quarter. Cheniere Energy Inc., which has a 30% stake in the pipeline, sanctioned the third stage of the Corpus LNG export project in 2022.
MPLX also is progressing with the expansion of its JV for the Bangl NGL pipeline to about 200,000 b/d. The expansion increases NGL takeaway from the Permian’s Delaware and Midland sub-basins to the fractionation hub in Sweeney, TX. The project is expected to be in service in the first half of 2025.
In the gathering and processing (G&P) segment, “we are bringing new gas processing plants online to meet increasing customer demand,” Hagedorn said.
In the Delaware, MPLX is progressing the Preakness II natural gas processing plant with an online target in May. The midstreamer also is progressing the Secretariat processing plant, its seventh in the basin, which is expected to begin operations in the second half of 2025.
Once operational, MPLX’s total processing capacity in the Delaware would be about 1.4 Bcf/d, according to Hagedorn.
In the Marcellus, MPLX placed the 200 MMcf/d Harmon Creek II gas processing plant into service in February, bringing processing capacity to 6.5 Bcf/d.
MPLX plans to spend the remaining capital on smaller projects “targeted at expansion or de-bottlenecking of existing assets and projects related to planned increases and producer-customer activity,” Hagedorn said.
Total gathered volumes were down 2% year/year, primarily because of decreased dry gas production in the Utica and scheduled maintenance activities in the Southwest. Processing volumes were up 9% over the period, primarily from higher volumes in the Marcellus and Utica, driven by increased customer production.
In the Marcellus, where it has its largest G&P operations, MPLX saw volume increases of 10% for gathering and 7% for processing, driven by increased drilling and production growth. Marcellus processing utilization was 92% in 1Q2024, “reflecting the need for our Harmon Creek II processing plant,” Hagedorn said.
Fractionation volumes grew 4% resulting from higher ethane recoveries and higher processed volumes.
MPLX reported net income of $1.0 billion (98 cents/share) for the first quarter of 2024, up from $943 million (91 cents) in the same quarter the previous year.
