MPLX (MPLX 0.39%) has undergone an important transformation over its six years as a public company. It has gone from an entity that mainly owned logistics assets serving its oil-refining parent Marathon Petroleum (MPC 4.67%) to a company that operates across the midstream sector. As a result, it's starting to capture an increasing amount of the estimated $800 billion of investments needed to expand North America's energy infrastructure footprint in the coming years.
Those expansion projects position MPLX to continue growing its distribution to investors, which it has done in each of the 22 quarters since it came public. With dividend growth being a key driver of outperformance over the long run, this master limited partnership (MLP) stands a good chance of delivering big-time total returns in the coming years.
Capturing expansions across the entire opportunity set
The industry needs to invest more than $400 billion in building natural-gas-related infrastructure over the next 18 years. These investments will include constructing new gathering and transmission pipelines, processing plants, storage capacity, and liquefied natural gas (LNG) terminals. Many of those opportunities are right up MPLX's alley since it has a large natural gas gathering and processing business that it acquired when it bought MarkWest Energy in 2015. The company currently has several new processing plants under construction in the Marcellus shale as part of its joint venture with Antero Midstream (AM 2.14%), another one as part of a joint venture with Targa Resources (TRGP 2.42%) in Oklahoma, and yet another plant in the Permian Basin for one of its customers in that area. On top of that, the company is building natural gas gathering pipelines in all three regions to move gas from newly drilled wells to its processing plants.
The midstream industry also needs to build another $321 billion of oil-related infrastructure in the coming years, which includes new pipelines and storage terminals. MPLX just recently captured one of those opportunities after it partnered with some of its fellow MLPs to build the Permian Gulf Coast Pipeline, which, as the name suggests, will move crude from the Permian to the coast. The large-scale pipeline could enter service by the middle of 2020 if everything goes according to plan. In addition, MPLX recently spent $450 million to buy a terminal along the Gulf Coast. The site can currently store 4 million barrels of petroleum products and export 120,000 barrels per day. However, MPLX could expand this site's storage capacity to 10 million barrels while adding a second 120,000-barrel-a-day export dock.
Finally, the industry needs to build $53 billion of additional natural gas liquids (NGLs) infrastructure, including pipelines, storage, and fractionators, which split NGLs into ethane, propane, and butane. MPLX has already captured some of those investments since it's building NGL fractionators as part of its joint venture with Antero Midstream, as well as expanding some of its NGL pipelines.
There's more growth coming down the pipeline
In addition to the projects the company has already captured, MPLX has others in development. One of the largest is the Whistler Pipeline, which would transport natural gas from the Permian Basin to the Gulf Coast. Targa Resources is leading the development of this project and has already secured enough shippers for three-quarters of the pipeline's planned capacity, and operations could begin as soon as the fourth quarter of 2020. Meanwhile, MPLX's joint venture with Antero Midstream has identified a total of $1.6 billion of natural gas processing plants and fractionation facilities that they plan to build over the next five years to support the growth of Antero's gas-producing parent.
Beyond those already identified projects, MPLX should have plenty of running room to continue expanding its midstream footprint. That's because it not only operates in most of the country's fastest-growing regions, but it owns assets across all three energy commodities. That diversification should provide it with more opportunities to grow in the coming years.
Plenty of fuel for continued dividend growth
MPLX has worked hard to diversify its midstream footprint so that it can capture expansion opportunities across nearly the entire sector. That positions it to grab a larger slice of the $800 billion pie than if it didn't diversify. All things considered, the company is increasingly likely to continue raising its distribution to investors, which has the potential to fuel big-time total returns in the future.