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MPLX LP  (NYSE:MPLX)
Q4 2018 Earnings Conference Call
Feb. 07, 2019, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to the MPLX Fourth Quarter 2018 Earnings Call. My name is Elan, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions) Please note that this conference is now being recorded.

I would now like to turn the call over to Kristina Kazarian. Kristina, you may begin.

Kristina A. Kazarian -- Vice President of Investor Relation

Morning, everyone, and welcome to the MPLX Fourth Quarter 2018 Earnings Webcast and Conference Call. The synchronized slides that accompany this call can be found on mplx.com under the Investor tab. On the call today are Gary Heminger, Chairman and CEO; Mike Hennigan, President; Pam Beall, CFO; and other members of the management team.

We invite you to read the safe harbor statements and non-GAAP disclaimer on Slide 2. It's a reminder that we will be making forward-looking statements during the call and during 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 will turn the call over to Gary Heminger for opening remarks.

Gary R. Heminger -- Chairman and Chief Executive Officer

Thanks, Kristina. Good morning, and thank you for joining our call. 2018 was a transformational year for MPLX. At the beginning of -- at the beginning of the year, we outlined a number of strategic objectives and we finished the year executing these initial plans and much more. We expanded our business through multiple new projects, enhanced the stability of our cash flow and simplified our financial structure.

2018 marked the single largest increase in annual EBITDA since we became a public Company. We reported 2018 adjusted EBITDA of $3.5 billion, which increased $1.5 billion over the prior year and nearly $400 million of this increase was driven by organic investments. This magnitude of annual organic growth highlights the success of our commercial and operational teams. Their ability to develop and execute strategic projects not only provides industry solutions in the areas we operate, but also showcases our effective deployment of capital.

In our Logistics and Storage segment, we acquired an export terminal, expanded our Ozark and Wood River pipeline systems, added strategic tankage at Texas City and Patoka, and increased the size of our marine fleet. In the Gathering and Processing segment, we added 11 new plants, which expanded our processing capacity by nearly 1.5 billion cubic feet per day, and our fractionation capacity by 100,000 barrels per day.

Lastly, we delivered on our commitment of enhancing the financial strength of our business. The Company generated $2.8 billion in distributable cash flow during the year, was able to fund its organic growth program without issuing any public equity and returned nearly $2.1 billion to unit holders. We ended the year with coverage of 1.36 times, and a prudent leverage of less than 4 times.

Looking forward, we continue to focus on increasing our presence throughout the midstream value chain and developing assets that generate third-party revenue. Our upcoming program of organic growth projects are expected to deliver long-term attractive returns and position the Company for success in 2019 and beyond.

With that, let me turn the call over to Mike.

Michael J. Hennigan -- President

Thanks, Gary. Slide 4 provides an overview of our Logistics and Storage segment. L&S reported fourth quarter segment adjusted EBITDA of $547 million. Total pipeline throughput averaged a record 3.6 million barrels per day in the fourth quarter, an 11% increase over the same quarter last year. The increased throughput level was primarily driven by higher volumes on our recently expanded Ozark and Wood River to Patoka pipeline systems, as well as higher product movements.

During the quarter, we also added crude tanks in Patoka, Illinois. This increased storage capacity is expected to provide logistics opportunities to MPC and other market participants, including the support of a future Capline reversal. In addition, we completed multiple other projects during 2018, including the commissioning of the Robinson butane cavern, the expansion of our Texas City tank farm, and an expansion of our marine fleet.

Slide 5 highlights the planned Capline reversal, which ties into our announced Swordfish Pipeline. As operator of Capline, MPLX initiated a binding open season in late January on behalf of the owners of this pipeline, which includes a subsidiary of our sponsor, MPC. The expectation is for the reversal of the commenced operations in September of 2020. A reversed Capline would transport crude oil from Patoka, Illinois to St. James, Louisiana. The line is expected to have a connection to the Diamond Pipeline, which originates in Cushing and has a connection point to Capline in Collierville, Tennessee. Once the barrels make it to St. James, they can flow onto the Swordfish Pipeline. Swordfish has been designed to transport up to 600,000 barrels per day of crude oil from St. James to Clovelly storage hub, providing shippers with access to storage services, connectivity to other carriers at Clovelly, and vessel loading through the existing Louisiana Offshore Oil Port, which is commonly referred to as LOOP. Both Capline and Swordfish would largely utilize existing pipe in the ground, making these systems attractive options for the region. Importantly, these systems would also be a direct feeder into LOOP, the only existing offshore port in the Gulf Coast that can fill a 2 million barrel of VLCC without reverse lightering. In December, LOOP loaded three VLCCs with 6 million barrels in a seven-day period, which highlights this port's ability to meet growing export needs. The planned Capline reversal, Swordfish Pipeline development and LOOP export connectivity highlights the strategic value MPLX can create.

Slide 6 provides an overview of our Gathering and Processing operations. Full year 2018 adjusted EBITDA increased 15% to over $1.4 billion. The increase was largely driven by record gathered, processed and fractionated volumes. Gathered volumes averaged 4.5 billion cubic feet per day in 2018, a 26% increase versus the prior year. Processed volumes averaged 7 billion cubic feet per day for the year, a 9% increase over 2017. The increase was primarily driven by significant volume growth in the Marcellus Basin. Fractionated volumes averaged 459,000 barrels per day for 2018, representing a 16% increase over 2017. We commissioned eight processing plants and three fractionation facilities over the course of 2018. In total, we increased our processing capacity by nearly 20% to over 9.3 billion cubic feet per day, while also adding 100,000 barrels per day of fractionation capacity.

Slide 7 provides some highlights -- some operating highlights for the quarter. Gathered volumes averaged 4.9 billion cubic feet per day in the fourth quarter, representing a 17% increase over the fourth quarter 2017. Quarterly processed volumes increased 9% versus the same quarter last year to 7.4 billion cubic feet per day. Volume increases would have been higher if not for the unplanned downtime at our Houston Complex, which has since resumed normal operations. We also completed plants 10 and 11 at Sherwood during the quarter, increasing the total capacity of this complex to 2.2 billion cubic feet per day. We are pleased to see Mariner East 2 begin operations in late December. On the fractionation side, we were forced to curtail production at our Hopedale Complex in the fourth quarter due to the delayed start-up of the ME 2 pipeline. This start-up combined with the capacity added at the end of the year, positions us very well as we head into 2019.

On Slide 8, we provide a summary of our 2019 capital outlook that we unveiled at our December Investor Day. Our capital program historically was heavily weighted to the Gathering and Processing segment. In 2019, there is more balance between our two segments as we shift a significant amount of capital toward the L&S segment. We remain focused on high-grading our opportunity set and being selective toward the best return projects. We have abundant growth opportunities in both segments of our business, affording significant capital deployment options to deliver on our forecasted capital expenditure of approximately $2.2 billion in 2019, in line with 2018. The majority of the capital in the L&S segment is planned for the continued development and construction of long-haul pipelines in the Permian Basin, and strategic export facilities along the Gulf Coast. We continue to advance discussions on participating in a Permian crude pipeline project. As we mentioned at our Investor Day, we are pursuing several options, which includes the PGC Pipeline JV and combining with the Exxon, Plains, Lotus, Wink-to-Webster pipeline in a UJI structure.

We continue to evaluate the merits and details of each project, and we expect to reach a resolution on a definitive path shortly. Whistler Pipeline, which supports additional natural gas takeaway capacity from the Delaware Basin is in the detailed engineering phase. In addition, the BANGL NGL Pipeline, fractionation and export project is also in detailed engineering, as we remain excited about those projects. We recently acquired the Mt. Airy Terminal, another export facility we continue to develop in the Louisiana Gulf Coast area. This facility is currently equipped with a 120,000 barrel per day dock, and 4 million barrels per day of fully leased storage. We plan to construct a second dock, and this facility has capacity for up to 10 million barrels of total storage.

In the Northeast, we continue to benefit from the increased condensate and natural gas volumes on our Cornerstone and other Utica Build-Out systems. The next phase of our strategy is to equip these pipelines to handle normal butane, providing another outlet for growing liquids production in the region.

In the Gathering and Processing segment, we expect to add approximately 800 million cubic feet per day of processing capacity and 100,000 barrels per day of fractionation capacity in 2019. This is incremental to the processing capacity that came online in the fourth quarter of 2018, which will help support the production growth that we anticipate in 2019. We reiterate our commitment to a self-funding model and to finance our organic growth capital plan without issuing any equity, while maintaining an investment grade credit profile and strong distribution coverage.

Before I turn the call over to Pam, I want to summarize where we are strategically. Our core regions continue to provide many attractive investment opportunities. At the same time, we are committed to remaining disciplined on capital deployment. In the Northeast, we are optimistic on the production growth profile in the Marcellus and Utica basin. We actively engage with our producer customers in these regions and our planning process is real-time and dynamic. We expect to add 400 million cubic feet per day of processing capacity in 2019, which is in addition to the 600 million cubic feet per day brought online in the fourth quarter. We have further capacity expansions planned in 2020 and beyond. Our goal is to complete these new facilities on a just-in-time basis to meet our producer customer needs.

We expect growth in the Northeast to be further enhanced by pipelines that have recently been placed in service. Natural gas pipelines, such as NEXUS, Atlantic Sunrise, and Rover, which is now fully operational, provide optionality to producers in the region, while Mariner East 2 provides a similar solution for NGLs. These pipelines are expected to increase netbacks for our producers on both the natural gas and NGL side of the business. The positive production growth profile and the enhanced takeaway capacity clearly benefits our investments in the region. In the Delaware Basin, we are focused on developing a super system, very similar to what we have in the Northeast. We're currently operating two processing plants, have two additional plants, Tornado and Apollo, under construction, and plan to move forward on a fifth plant called Preakness. This now gives us 1 billion cubic feet per day of processing capacity and approximately 125,000 barrels per day of liquids production in the Delaware Basin once these are completed.

These plants are expected to provide gas and liquids for the long-haul pipelines we have in development, moving this supply to the demand markets along the Gulf Coast. We're also intently focused on building out our export capabilities. We've identified five locations along the Texas and Louisiana Gulf Coast that are expected to provide increased opportunities to connect growing domestic supply to global demand centers. We're excited about the growth opportunities in our core regions and remain confident in the growth guidance we provided at our Investor Day.

I will now turn the call over to Pam to cover our financial highlights.

Pamela K.M. Beall -- Chief Financial Officer, Executive Vice President

Yes. Thanks, Mike. The fourth quarter concluded a very strong year for MPLX. The $3.5 billion of EBITDA we reported for 2018 was in line with the guidance provided on our third quarter earnings call. The guidance implied approximately $936 million of EBITDA for the quarter. There were a few notable events in the fourth quarter that I wanted to highlight. Net income for the fourth quarter was reduced by $82 million. Approximately $22 million was due to unplanned downtime at the Houston Complex and production curtailments, due to the delayed start-up of ME 2 that Mike just mentioned, as well as contract-related accrual adjustments. Debt extinguishment costs were $60 million, which were reflected in interest cost for the quarter. $14 million of these costs had a cash impact for premium paid. Adjusted EBITDA was reduced by approximately $22 million, and distributable cash flow was reduced by approximately $36 million for the quarter. I wanted to highlight these events and the impact, because our reported numbers in the press release and the slides do not adjust for these impacts.

Turning to our financial highlight slide on Slide 9, we reported adjusted EBITDA of $911 million for the quarter, of which $547 million was in Logistics and Storage segment, and $364 million was in the Gathering and Processing segment. Full year adjusted EBITDA was approximately $3.5 billion, with nearly 60% generated by the Logistics and Storage segment. For the year, we generated $2.8 billion of distributable cash flow and returned approximately $2.1 billion to our unitholders. The remainder supported our $2.2 billion organic growth capital program.

Turning to Slide 10, the bridge shows the change in adjusted EBITDA for the fourth quarter of 2017 to the fourth quarter of 2018. Since the prior year quarter, we increased adjusted EBITDA by $342 million. The dropdowns from MPC were $262 million of the increase. The remaining increase in the Logistics and Storage segment was primarily driven by record crude oil and product throughputs, as well as contributions from other recently completed investments. The $26 million increase in Gathering and Processing segment adjusted EBITDA was primarily driven by higher gathered, processed and fractionated volumes, and these benefits were partially offset by lower product margins.

On Slide 11, the bridge shows the change in adjusted EBITDA for the full year 2018, which increased by nearly $1.5 billion over 2017. The dropdowns in 2017 and the first quarter of 2018 generated an increase in EBITDA of approximately $1.1 billion for the year. Excluding dropdowns, the Logistics and Storage segment increased more than 20% year-over-year. The significant increase was primarily driven, again, by record pipeline throughputs on our base business, higher volumes on our expanded Ozark and Wood River-to-Patoka systems, as well as contributions from other pipeline and storage investments. The $189 million increase in the Gathering and Processing segment was primarily driven by record gathered, processed and fractionated volumes. Segment results also benefited from higher commodity prices in 2018, compared with 2017.

I'd like to remind everyone that while almost 95% or approximately 95% of our net operating margin is driven by fee-based business, a portion of our revenue is subject to NGL price sensitivity. Every $0.05 change in the weighted average NGL price is equal to approximately $23 million of annual distributable cash flow, and that's based on our current volume outlook.

Turning to Slide 9, we provide a summary of some key financial highlights and select balance sheet information. In December -- sorry, Slide 12. Thank you. Slide -- in December, MPLX redeemed all $750 million aggregate principal amount of its 5.5% senior notes due in 2023, which resulted in a $60 million of debt extinguishment costs, which were reflected in interest cost for the quarter. As I mentioned, approximately $14 million was cash premium paid on this redemption, which was made with proceeds from new notes issued at a lower coupon with an extended maturity date, with an attractive payback. We ended 2018 with approximately $3.3 billion of liquidity, including $2.2 billion available on our bank revolver, and $1 billion available on the inter-Company facility with our sponsor. We're committed to maintaining a strong balance sheet, and we ended the year with a leverage ratio of 3.9 times and a distribution coverage ratio for the year of 1.36 times. MPLX has a strong track record of returning capital to unitholders, and in late January, we declared a distribution of $0.6475 per common unit. Since our IPO in 2012, we've returned $4.4 billion to our unitholders.

Slide 13 provides our financial outlook for 2019 and 2020. As outlined at our Investor Day, we're focused on growing our EBITDA by at least 10% per year. In 2019, we've guided to approximately $3.9 billion of adjusted EBITDA and $3.1 billion of distributable cash flow. Based on the guidance provided, we expect to return approximately $2.2 billion to our unitholders, and the remainder will support our $2.2 billion organic growth capital program without the need to issue any public equity. We remain committed to maintaining a solid investment grade credit profile, and with our strong balance sheet and the robust organic growth opportunities, we're confident in the long-term value proposition for our investors.

And now, let me turn the call back to Kristina.

Kristina A. Kazarian -- Vice President of Investor Relation

Thanks, Pam. As we open the call for questions, we ask that you limit yourself to one question plus one follow-up, you may reprompt for additional questions as time permits.

And with that, we'll now open the line for questions. Elan?

Questions and Answers:

Operator

Thank you. (Operator Instructions) Our first question today is from Jeremy Tonet from JPMorgan.

Jeremy Tonet -- JPMorgan. -- Analyst

Good morning. Just wanted to start off with the Northeast Appalachian gathering and processing there. You called out $22 million of one-time items in the PR, but I was just wondering was there anything else happening there in that segment, it seemed a bit light when normalizing for that given how many new facilities were coming online during the quarter, so I was wondering how much they contributed. Moreover, it seems like Appalachian producers are reigning in their production forecast for 2019. So, could you provide more color on what you're seeing in Appalachia, and what kind of underpins your confidence in hitting your '19 and '20 guide here?

Michael J. Hennigan -- President

Yes. Thanks, Jeremy. This is Mike. So, a lot of question in there. But let me try and break it down. So, we did face some headwinds in the quarter with our Houston plant unplanned downtime, as you mentioned, but there was actually two headwinds there, one was the Houston plant down for some time, and the second was we actually curtailed, because of ME 2, and not being online. And if you recall for several conference calls, I was saying that we were in pretty good shape until we get toward the end of the year, which is when we needed ME 2 to come up. But we actually had to curtail a little bit in the quarter due to that. We had the Houston Complex unplanned downtime, which led us to have a little bit of reduction in volumes in the quarter. Roughly it was about 5% to 6% of our processing capacity was off as a result of that, we expect that to be one-time, and we're at normal operations as of this point, so we're feeling pretty good about going forward, and we still feel very good about our guidance. To your point, some producers have guided slightly differently, mentioning Antero, since that's one of our largest players in the region. We brought on two plants, also to your point, but there's two plants for Antero that came on, Sherwood 10 and 11 came on toward the latter part of the quarter. So, you are really seeing them in full steam in the first part of '19. We also have Sherwood 12 and 13 planned in 2019 for the Northeast. I would also add that we have a plant in the STACK planned in 2019, as well as a plant in the Permian in 2019. So, we're still feeling pretty good about our guidance despite the fact that we had some loss of volume in the quarter.

Jeremy Tonet -- JPMorgan. -- Analyst

That's helpful. Thanks. And just turning to Capline real quick here. A point you (ph) talked about kind of a 3Q '20 in-service date for light oil and early 2022 in-service for heavy oil movements. Are these the dates that you guys see for in-service, and what do you see for the timeline for more heavy oil reach in Patoka, and when these volumes leave Capline, how much of that do you think can touch your system downstream, to get kind of the operating leverage and the synergies?

Michael J. Hennigan -- President

Yes. So a couple of things there. So, we expect light service to begin in September of 2020, so we're in the process right now of still evacuating the line, and it takes about 18 months of work -- for months -- in the next couple of months, we'll be ready to start the work. So that gets us to September of 2020. The expectation or the market need is mostly light crude evacuation. So, we're talking about that as the early start. Heavy crude, we'll talk about a little bit later, because there's limitations of heavy crude getting into Patoka right now out of Canada. We're expecting those to be relieved by about that time. There's some contractual limitations, as well as some pipeline changes that need to occur there. So, our expectation is light crude should be able to reach down into the system. To your point on operating leverage, Capline will feed into Swordfish, which will ultimately feed into LOOP, so we'll have export capability, as well as having the ability to get some of that light crude into the refining system into Marathon's Garyville refinery is also a beneficiary of the light crude getting over there.

Operator

Thank you. Our next question is from Shneur Gershuni from UBS.

Shneur Gershuni -- UBS -- Analyst

Hi. Good morning, guys. I was just wondering if you can expand a little bit on your response to Jeremy about the Northeast expectations. Are you able to sort of delineate a little bit more about how the cuts are reflected in your guidance, because you gave your guidance out in November. And can you talk about the incremental capital? I think you were talking about the Sherwood plants that are coming online. Are there new MPCs coming in places that what gives you the confidence given the drop in rigs around your assets, given the drop in dock and so forth, just wondering if you can sort of expand on it a little bit to give us a little bit more confidence in the numbers?

Michael J. Hennigan -- President

Yes. Shneur, I'll comment exactly what I just said for Jeremy, but I'll try and give you a little bit more details to what you're asking. So, our philosophy up there, as I said in my prepared remarks is to be real-time and dynamic and work with the producers on a real-time basis. So, we're not looking to deploy capital in the region unless we think we're going to process gas there, so we have that communication going on. Without getting into some detail, we do have some MPC protection as part of our contractual obligations up there, so that's also an important point of what we're looking at. But the bottom line is we're staying in contact. I mentioned the Antero, just since that's a large player that has a lot of the growth in the Sherwood Complex, and they have adjusted guidance, but they're still showing 17% to 20% growth in their guidance for 2019. That's very consistent, as I said through our meetings with them as we look at what's going on. And then our other big customers in that area, whether it's Range or EQT or Southwestern or Sand(ph)or anything, we're having real-time conversations with them and at this point we still feel very good about the growth in the region. I mean, if you look at the numbers year-on-year they're still pretty strong up in the Marcellus, Utica. As I look at the development in the area continues to be very strong, despite -- I understand some people are concerned about potential cutbacks, we're not seeing that in the areas that we are operating. And in addition to that I pointed out in the prepared remarks that the netbacks up in the Northeast are getting better as a result of all these gas residue pipeline takeaways, and then ME 2 liquid takeaways will also change the netback on the liquids side of it. So, we're still pretty confident and feel pretty good about our development program. It's two plants up in the Northeast, one plant in the STACK, one plant in the Permian for 2019.

Shneur Gershuni -- UBS -- Analyst

Okay. And as a follow-up question, just kind of wanted to talk about central CapEx. You've got Capline, as well as the PGC pipe as well too. Can you give us a sense of what the gross cost would be of executing a reversal of Capline and non-PGC, are there enough firm commitments to PGC already to proceed if we (ph) don't get a deal with Exxon?

Michael J. Hennigan -- President

Yes. So, I won't give you the individual capital cost. What I will tell you on Capline is, one of the things that is very important, obviously, is to see what happens in the open season. So that's going to play itself out into the end of April, and we'll get a good sense of how much support is on that pipeline. On your question on PGC, yes, we do have committed volumes that put us in a position where we could go on that project, but we continue to evaluate the scenario, which is to join forces with the Exxon, Plains, Lotus project. As you know, they've also have committed volumes to go forward. So, the carrot there is capital efficiency. If we combine in a UJI, so we have separate commercial arrangements on each of the pipelines, so it would be a UJI situation, if we combine. Absent that we continue to progress PGC as well.

Operator

Thank you. Our next question is from Spiro Dounis from Credit Suisse.

Spiro Dounis -- Credit Suisse -- Analyst

Hi. Good morning, everyone. Just wanted to follow up on some comments from the MPC call with respect to Gray Oak. I believe you mentioned that you don't plan on dropping it down now to ANDX, and so I guess the next logical question for me is, does that apply to MPLX, and then how should we think about funding that going forward?

Gary R. Heminger -- Chairman and Chief Executive Officer

Well. Spiro, this is Gary. We've had several questions on this as we met with investors and we just wanted to get the fact out there that, that's how we see it, since it is being funded by MPC, and prior by Andeavor. We will make the determination a timing, when the timing might be, and if we were to drop that down in the near future. Right now, we're going to focus on, as we mentioned in the MPC call, we have advisors, Jefferies for MPLX, Goldman Sachs for ANDX, and we will let them do their work, let the conflicts committees do their work, and then we'll determine down the road the path forward for Gray Oak.

Spiro Dounis -- Credit Suisse -- Analyst

Got it. Appreciate the color there. Second one, just on ME 2, and I know you mentioned you call that out as a potential factor in 4Q. Just curious if you're seeing any similar impact now with ME 1 down temporarily on the subsurface issues?

Michael J. Hennigan -- President

No. Not at this point. So ME 1 is mainly in ethane service, and we're moving the ethane that we process through the other outlets that are in the area.

Operator

Thank you. Our next question is from Michael Blum from Wells Fargo.

Michael Blum -- Wells Fargo. -- Analyst

Hi. Good morning, everyone, and thanks for taking my question. I just wanted to go back to the comments you made earlier, Mike, on PGC versus the Wink-to-Webster pipe. I guess the first is, just to clarify, the PGC pipe is FID, is moving forward on its own, that's kind of the first question, and it's my impression, but want to confirm that. And then the second is, your comment made it sound like, I wasn't sure if you meant the pipeline as a whole is looking at combining or you as a Company were looking at combining onto the Exxon, Plains, and maybe leaving PGC or just wanted to get some clarification on those two. Thanks.

Gary R. Heminger -- Chairman and Chief Executive Officer

Yes. So, Michael, on the first question, so PGC has not reached FID, because we are still evaluating. What I was saying though is we've received enough commitments that that's one of the options that's on the table for us. As far as the second comment, it's the whole PGC group is in conversation with Exxon, Plains and Lotus to combine into one pipeline and the main carrot, the industrial logic there is capital efficiency. So, as you saw Exxon announced that they're going forward and we are in conversations with them and we continue to work through the details of that. As you can imagine, there's a lot of participants and the structure would be such that it would be a UJI, so commercially there would be two types to the project, but the real carrot is getting a better return, utilizing one pipe, one set of construction, et cetera, et cetera. But right at the moment, we're still doing parallel path as to see which do we think is the best option for ourselves.

Michael Blum -- Wells Fargo. -- Analyst

Okay. If so, then in the UJI structure, if you did combine, would the total capacity yet rationalize or it would just the one plus one equals two?

Gary R. Heminger -- Chairman and Chief Executive Officer

It's more toward the latter. Again, we're not into that level of detail publicly yet, but that's some of the discussion that we're talking about. The capacity that we need for our side commercially and the capacity the other side needs commercially, those are some of the details, as well as construction details, operating details, governance details, all of those types of things are what we are discussing with the participants as we speak.

Operator

Thank you. Our next question is from TJ Schultz from RBC Capital Markets.

TJ Schultz -- RBC Capital Markets -- Analyst

Great. Thanks. I guess just a question on BANGL, maybe for the frac and export project, does that still consider additional partners on the two proposed fractionator, would that bring more volumes into the project?

Michael J. Hennigan -- President

Yes, TJ. We are still in development on that, and as I mentioned in the prepared remarks, we're doing detailed engineering. There's actually three pieces to that project, there is the BANGL Pipeline portion, the fractionation as you mentioned down in the Sweeny area, as well as the export terminal. So there is different partnering relationships as you go through the different phases, and we're doing detailed engineering on all portions of it, as well as having discussions about how much volume commitments each section has, as well as the partnering. So that's still all in play. We continue to be excited about the development, but as you can imagine there's a lot of details that need to get worked out and we're working through those.

TJ Schultz -- RBC Capital Markets -- Analyst

Okay. Just a follow-up on the export, would you consider, or are you considering ethane exports as well?

Michael J. Hennigan -- President

That will be something that comes in time, the early part will be concentrated on propanes and heavier, but yes, ethane will be part of the long-term plan as far as getting NGLs to the market.

TJ Schultz -- RBC Capital Markets -- Analyst

Okay. Thanks.

Michael J. Hennigan -- President

You're welcome.

Operator

Thank you. Our next question is from Dennis Coleman from Bank of America Merrill Lynch.

Dennis Coleman -- Bank of America Merrill Lynch. -- Analyst

Yes. Good morning, everyone. Thanks for taking my questions. Mike, I wonder, there's a lot of different moving parts here, you talked about five export locations that you have identified and maybe I missed this, but is that five that you -- total that you would consider using or you're looking at these options and what products are we talking about? I think some of this has been covered, but I missed a little bit while you are giving your comments.

Michael J. Hennigan -- President

Yes, Dennis. What we're talking about, strategically, we have a large emphasis across the Marathon family on the exports in the Gulf Coast. The five that I talk about are LOOP, which I mentioned -- which is involved with Capline and Swordfish, but the only VLCC capable port. We also have the Mt. Airy Terminal that we purchased, which is also on the Eastern Gulf in Louisiana. Texas City, we have the MPLX, Texas City tank farm, which is in development, we've added crude tankage to it today. The other Texas City terminal is related to the BANGL project, so that'll be NGLs, as was just asked. And then the fifth is part of the Marathon family that sits in ANDX at this point, which is South Gateway down in Corpus Christi. So two export facilities on the Eastern Gulf, two in the Texas City area, one in Corpus Christi, that are all part of the midstream asset base, not to mention what MPC has as world-class export facilities at both Garyville and Galveston Bay. We're just putting a lot of emphasis on that part of the molecule, because if you attended our Investor Day we are big believers in exports, exports, exports, as all the hydrocarbon chains continued to evolve to demand centers outside of the US.

Dennis Coleman -- Bank of America Merrill Lynch. -- Analyst

Okay. Thanks for that. Sorry, I missed some of that. And then I guess if I can just ask a little bit about, Pam, you talked about the NGL sensitivity -- price sensitivity and that seemed a little more than I had been thinking. I mean, can you talk a little bit about your -- the contract structures, I guess the POP contracts, where they stand and sort of any specifics you can give -- exposure by regions perhaps. And maybe also sort of as you're recontracting or contracting these new structures, do those -- any of those contain, I mean, new processing plants, do any of those have exposure to commodity prices?

Pamela K.M. Beall -- Chief Financial Officer, Executive Vice President

Yes. So, really the change is simply the volumes that we expect that are increasing under existing contracts that have been in place for some time. It's not that we're signing new contracts that have a significant POP exposure. As I mentioned, when you look at the total enterprise, only 5% of our business is really exposed to that price commodity sensitivity. I know it's not a huge change, I mean, we said it was -- used to say it was $20 million a year annual impact for every $0.05, and we've moved that up to $23 million, so not a huge change, but just reflecting higher volumes.

Operator

Thank you. Our next question is from Ross Payne from Wells Fargo.

Ross Payne -- Wells Fargo. -- Analyst

How are you doing, guys? I guess my biggest question is equity cost of capital for both MPLX and ANDX. You're obviously self-funding, so it's probably not first on your mind right now, but how important is your equity cost of capital? Lot of people are obviously looking at C-Corps and Valero, obviously pull their MLP inside, so would it make sense to walk down similar avenues or what are your thoughts there?

Pamela K.M. Beall -- Chief Financial Officer, Executive Vice President

Well, we continue to discuss the merits of the MLP structure versus a potential C-Corp conversion. We did talk about this a little bit at the Investor Day back in December. And I'll just start with the fact that we haven't seen any evidence that the valuation is much different for midstream companies that have converted to a C-Corp instead of staying in an MLP wrapper. We believe there are sustained benefits with the MLP structure with respect to the pass-through nature of the entity, and no federal income tax. So with the change in the Congress and over time, you just don't know if these tax cuts that have been afforded corporations will remain in place. So that's certainly a big consideration. Valuation and access to deeper, wider pools of capital, I think is one of the reasons that some have considered moving to a C-Corp. It's important to us, I mean, clearly -- we want to create value for our unitholders and that comes in a couple of different ways and returning a lot of cash through distributions is certainly one, which we are distributing about 70% of our cash from operations and distributable cash flow. So that's a pretty high payout, over time, and I would say, not in the next year, maybe not in the next year or two, but as we build more financial flexibility in their financial profile, certainly one thing that Mike and I have had a lot of conversations about is, can we position the partnership in a way that we could potentially buy back some of our units. So, we have some really good organic growth opportunities. We think that's where we should place the emphasis where we're deploying our capital today, but it's something that we'll continue to evaluate.

Ross Payne -- Wells Fargo. -- Analyst

Okay. Thank you very much, Pam. And is MPC happy with the MLP structure currently, or is it something that just generally speaking does it make to -- make sense to consider rolling it into the MPC box?

Michael J. Hennigan -- President

I have Tim Griffith, our CFO, I'd rather have Tim cover that.

Timothy T. Griffith -- Chief Financial Officer

Well, Ross, I think it's akin to a lot of what Pam said. I mean the structure still has some tax benefits to it. There's nothing that compels us, it's something we'll continue to evaluate as we go longer-term, but I think we've certainly been frustrated with equity valuations over the last several quarters, but there's -- I don't think there's anything that would compel or change at this point. I mean the fantastic news is that we're not dependent on the equity markets to fund the business as we go forward and looking to continue to evaluate our options and that's exactly what we'll do.

Operator

Thank you. We do have a follow-up from Jeremy Tonet from JPMorgan.

Jeremy Tonet -- JPMorgan. -- Analyst

Hi. Thanks for taking my follow-up here. Just wanted to see, you're talking about crude oil projects and possibly combining some of those, and just want to turn toward the natural gas side with the Whistler here. It seems like there's some other Permian gas takeaway projects out there. Would it makes sense, could you envision combining projects there or kind of Whistler as it is, do you think is really clear in a way the best option?

Michael J. Hennigan -- President

Jeremy, this is Mike. So, we continue to develop Whistler on its own, we still feel very good about that project, but as you stated and as you've seen similar in crude, we're always looking to optimize and get a better return if we can do that. So, we also have conversations going along with some of the partners in that project, as well as others, and one of the things that I was trying to emphasize is we're doing detailed engineering to make sure we understand the cost of the projects, we continue to feel really good about it on a stand-alone basis, but we're always looking to see if we can optimize the projects as we move forward.

Jeremy Tonet -- JPMorgan. -- Analyst

Great. That's helpful. That's it for me. Thanks.

Michael J. Hennigan -- President

You're welcome.

Operator

Thank you. And our final question today is from Shneur Gershuni from UBS.

Shneur Gershuni -- UBS -- Analyst

Hi. Good morning, again, I guess. just wondering if we can talk about the simplification elephant in the room a little bit here. You talk about ANDX needing to look attractive to MPLX from -- on a stand-alone basis without support and so forth. You also mentioned in your press release earlier today about a need for higher coverage and so forth. If MPLX were to do with simplification with ANDX, in theory that would be a backdoor cut and the coverage ratio would be significantly higher and possibly enhancing to MPLX. Is that part of the thought process that you're thinking about and so forth as you go through the simplification review?

Timothy T. Griffith -- Chief Financial Officer

Yes, sure. It's Tim. Again, I think we're looking at all aspects. So what we want to make clear is that the way that the partnership should be managed should be more consistent than they have been historically. We've highlighted that coverage is a priority for both partnerships in terms of the self-funding model. So, I think we are looking at all of the elements that would make for, again, a very good outcome for a potential combined MLP. But again, we're, as I think we said this morning, this is a process that's under way, it's inappropriate for us to get out in front of it, we will certainly report back at the appropriate time when we're able to in terms of what that potential combination could look like, but we're not going to get out in front of a process that's under way currently.

Shneur Gershuni -- UBS -- Analyst

All right. That makes sense. And looking forward to talking to you again in an hour or two.

Kristina A. Kazarian -- Vice President of Investor Relation

Sounds great. With that thank you, everyone, for joining us today, and thank you for your interest in MPLX. Should you have additional questions or would like clarification on any of the topics discussed this morning, we'll be available to take your calls. And Elan I'll turn it back to you.

Operator

Thank you. And this does conclude today's conference. You may disconnect at this time.

Duration: 46 minutes

Call participants:

Kristina A. Kazarian -- Vice President of Investor Relation

Gary R. Heminger -- Chairman and Chief Executive Officer

Michael J. Hennigan -- President

Pamela K.M. Beall -- Chief Financial Officer, Executive Vice President

Jeremy Tonet -- JPMorgan. -- Analyst

Shneur Gershuni -- UBS -- Analyst

Spiro Dounis -- Credit Suisse -- Analyst

Michael Blum -- Wells Fargo. -- Analyst

TJ Schultz -- RBC Capital Markets -- Analyst

Dennis Coleman -- Bank of America Merrill Lynch. -- Analyst

Ross Payne -- Wells Fargo. -- Analyst

Timothy T. Griffith -- Chief Financial Officer

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