MPLX’s 4Q Results Looks Good; Continues to Prioritize Unit Buybacks

MPLX’s fourth-quarter results were slightly ahead of our expectations, as 2021 EBITDA of $5.6 billion exceeded our forecast of $5.535 billion, due mainly to slightly better volumes. However, as we only expect modest improvements in 2022 EBITDA to about $5.7 billion, the changes are not material enough to impact our fair value estimate or narrow moat rating. MPLX, like peer Magellan ($800 million since inception and $523 million in 2021), continues to be one of the more aggressive re-purchasers of units with $630 million in 2021 purchases and $663 million since inception in the fourth quarter of 2020. With an average 2021 purchase price of about $28.64 a unit by our estimates, the buybacks are adding some value versus our $30 fair value estimate. Even with higher 2022 growth capital spending at $900 million, including $700 million in growth capital, we still expect MPLX can repurchase a similar amount of units in 2022. This shift would require a newly expanded authorization from the board to do so as there is only $337 million remaining. However, Marathon Petroleum (owner of 64% of MPLX’s units) just announced an incremental $5 billion buyback for its own shares, so we think MPLX would have no issues here.