I have followed MPLX (MPLX 0.28%) for several years and have never been more intrigued by the master limited partnership (MLP) than I am now. While its high-yield distribution, which currently sits at over 7.5%, has always been attractive, the midstream company's improving growth profile has added to my excitement.
Here's a look at all the new sources of growth the MLP has added this year.
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Significantly expanding its backlog
MPLX ended last year with a few expansion projects in its backlog. The MLP had started construction on two new natural gas processing plants, Secretariat and Harmon Creek III, which it anticipates completing in the fourth quarter of 2025 and the second half of 2026, respectively. In addition, it's a partner in a joint venture (JV) that's building the Blackcomb and Rio Bravo gas pipelines, with an in-service date of the second half of 2026. These projects provide the energy company with visible growth through next year.
The MLP has significantly enhanced and extended its visible growth outlook since the start of the year, approving the following projects:
- BANGL NGL pipeline expansion: MPLX and its partners approved a project to expand this natural gas liquids (NGL) pipeline, which should enter service in the second half of next year.
- Oneok JV: The MLP formed a JV with Oneok to build a new LPG export terminal and associated pipeline, both of which should enter commercial service in early 2028. MPLX will own 50% of the $1.4 billion export facility and a 20% interest in the $350 million pipeline.
- Gulf Coast Fractionation Complex: MPLX also agreed to build two NGL fractionation facilities next to Marathon Petroleum's Galveston Bay refinery. Marathon will buy all the output of those facilities when they come online in 2028 and 2029.
- Traverse Pipeline: The company and its partners in the Blackcomb and Rio Bravo pipeline projects have also approved the construction of the Traverse Pipeline, which they expect to finish in 2027.
- Eiger Express Pipeline: MPLX is investing in this new gas pipeline through its existing Matterhorn JV and taking a direct 15% interest in the project. This pipeline should enter commercial service by mid-2028.
As a result, MPLX now has projects in its backlog that should come online through the end of the decade. This extended growth pipeline enhances the company's ability to grow earnings at a mid-single-digit annual rate, which in turn should support continued distribution growth.
Adding an acquisition-fueled earnings boost
MPLX's strong financial profile has enabled it to approve new growth projects as they emerge. The pipeline company has also used its financial flexibility to capitalize on several acquisition opportunities. The MLP has made three smaller bolt-on acquisitions this year:
- Whiptail Midstream: MPLX paid $237 million for Whiptail, which owns extensive oil, gas, and water gathering systems in the San Juan Basin.
- BANGL Pipeline: MPLX agreed to acquire the remaining 55% stake in this pipeline that it didn't already own for $715 million.
- Matterhorn Express Pipeline: MPLX agreed to buy an additional 5% interest in this JV for $151 million, boosting its stake to 10%.
These acquisitions will provide the MLP with incremental sources of growing income, further enhancing its ability to increase its distribution.
In addition, MPLX recently agreed to buy Northwind Midstream for $2.4 billion. Northwind provides natural gas gathering, treating, and processing services in New Mexico. The company currently operates over 200 miles of gathering pipelines, two acid gas injection (AGI) wells with a combined capacity of 20 million cubic feet per day (MMcf/d), and 150 MMcf/d of gas processing capacity. Northwind is currently expanding its gas processing capacity to 440 MMcf/d by the second half of next year. It also has a third permitted AGI well that would boost its total capacity to 37 MMcf/d. Acquiring Northwind will provide an immediate boost to MPLX's cash flow, which should continue growing over the next year as the company completes its in-process expansion projects. This additional cash flow further fortifies MPLX's ability to maintain and increase its distribution. MPLX also believes the deal will accelerate other growth opportunities in the region.
Adding lots of fuel to its distribution growth engine
MPLX has significantly enhanced its growth profile this year. It approved several new expansion projects and made a series of acquisitions. These investments will help grow its cash flow at a healthy rate in the coming years, providing MPLX with greater capacity to increase its high-yielding distribution. This visible distribution growth has made me even more enthusiastic about this MLP. I think it's a great investment for those seeking a growing stream of passive income and are comfortable receiving the Schedule K-1 Federal Tax Form the MLP sends investors each year.
