Geri Ewing - Director, IR Gary Heminger - Chairman and CEO Pam Beall - President Tim Griffith - VP and CFO Don Templin - EVP.

Brian Zarahn - Barclays Capital Jeremy Tonet - JPMorgan Kristina Kazarian - Deutsche Bank.

Welcome to the MPLX LP Second Quarter 2015 Earnings Conference Call. My name is Christine 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. Please note that this conference is being recorded.

I will now turn the call over to Geri Ewing, Director of Investor Relations. You may begin..

Thanks, Christine. Good afternoon and welcome to the MPLX second-quarter 2015 earnings webcast and conference call. The synchronized slides that accompany this call can be found on MPLX.com under the investors tab.

On the call today are Gary Heminger, MPLX's Chairman and Chief Executive Officer; Pam Beall, President of MPLX; and Tim Griffith, it's Chief Financial Officer. We invite you to read the Safe Harbor statement on Slide 2 and 3. It's a reminder that we will be making forward-looking statements during the call and during the question-and-answer session.

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. Additional disclosures appear on Slide 3 as they relate to the announced business combination of MPLX and MarkWest.

Investors and security holders are encouraged carefully read the registration statement and joint proxy statement that MPLX and MarkWest will be filing in the coming weeks and other documents that will be filed with the SEC because they will contain important information about the proposed merger.

Now I will turn the call over to Gary Heminger for opening remarks.

Gary?.

Thanks, Geri, and good afternoon to everyone. I wanted to make a few opening comments before turning the discussion over to Pam. MPLX remains committed to growing distributable cash over an extended period of time and this commitment will be significantly enhanced by the combination with MarkWest that we announced on July 13.

I believe this combination creates a best-in-class partnership. Together we combine two attractive platforms with multiple avenues to grow our distributable cash flow. The notable geographic overlap of our combined businesses will provide natural advantages as logistics and processing capabilities continue to build out in this area of the country.

Examples include MPLX's planned Cornerstone Pipeline and the newly completed condensate splitters in MPC's Canton and Cattlesburg refineries. The planned Cornerstone pipeline will become a critical industry solution in the movement of condensate and NGLs in the Utica region.

The integration potential is notable as the two companies span across the condensate, NGL, crude and refined products value chain.

Combining MarkWest's industry-leading gathering and processing business with MPLX's financial strength and the enhanced opportunity set provided by Marathon Petroleum creates an LP with an exceptional growth profile, notable scale and the potential to grow distributable cash flow and create superior value for our unitholders over an extended period of time.

Now I will turn the call over to Pam..

Thanks, Gary. Turn to Slide 4. MPLX reported solid financial results for the second quarter with a performance that continues to support the growth of distributable cash flow to the partnership. Adjusted EBITDA was $70.7 million for the quarter, generating distributable cash flow of $61 million.

Based on the second quarter's performance our Board of Directors declared a distribution of $0.44 per LP unit which represents a 7.3% increase from the first quarter of 2015 and a 28.5% increase over the same quarter of 2014.

MPLX has provided distribution increases in each of the 10 quarters since its initial public offering, representing a compound growth rate of 23% over the minimum quarterly distribution established at the partnership's formation.

As Gary noted MPLX remains committed to growing our distributable cash flow over the long-term and the combination with MarkWest enhances that commitment. Even though the combined partnership will be a large-cap MLP its growth profile will be more similar to that of a sponsored drop-down MLP.

As part of the combination MPLX affirmed its anticipated distribution growth guidance of 29% for 2015 and expects a 25% compound annual distribution growth rate for the combined entity through 2017 with an annual distribution growth profile of approximately 20% in 2018 and 2019.

MarkWest's $1.5 billion average annual capital investment program for the next five years coupled with the inventory of MLP qualifying EBITDA of $1.6 billion at MPC provides a clear path to the growth in distributable cash flows of the combined partnership over this time period.

Additionally, the combined partnership has identified $6 billion to $9 billion of incremental capital investment opportunities to pursue either directly or through MPC as its sponsor. This incremental investment is not included in our distribution growth guidance.

MPC's financial strength provides the pro forma partnership the ability to incubate growth projects at MPC which can help to address some of the timing challenges of investment versus run rate cash flows that sometimes exist within the business. This would also further build MPC's portfolio of potential future drop-downs.

Many of the identified investment opportunities are in the Marcellus and it Utica shale plays where MarkWest has built an extensive footprint.

With about 95% of its net operating margin generated through long-term fee-based contracts, nearly 8 million acres dedicated and a minimum volume commitments we believe MarkWest's growth in these two resource plays is exceptional.

Furthermore, the combination defers the need for the recently proposed MPLX acquisition of MPC's marine transportation assets planned for 2015.

As a result, that transaction has been indefinitely postponed and the approximately $115 million of EBITDA associated with those assets returns to the $1.6 billion backlog of EBITDA available to the partnership in the future.

MPC as the general partner has interests that are aligned with those of the limited partners and it is committed to providing support for the goals of the partnership including for the distribution growth objective of the combined partnership.

We believe the combined partnership's substantial organic growth profile, financial flexibility and strong sponsor creates a tremendous platform to grow distributable cash flow over an extended period of time driving long-term value per unit holders. Now I will turn the call of to Tim Griffith to review the financial results for the second quarter..

Thanks, Pam. The bridge on Slide 5 shows the change in net income during the second-quarter 2015 on a 100% basis compared to the second quarter of 2014 as well as the adjustment for the small interest retained by MPC.

Net income increased period over period primarily due to higher transportation revenue resulting from both higher transported volumes and higher average refined product tariff rates as well as the lower cost of revenues.

Partially offsetting these positive impacts on income was a higher interest cost attributable to the new debt issued to fund the Pipe Line Holdings acquisition in December.

Although not shown in this slide net income attributable to MPLX increased $22.4 million from the second quarter of 2014 which was primarily due to an increase in MPLX's ownership in Pipe Line Holdings as well as the increase I just mentioned.

Turning to Slide 6, distributable cash flow for the second quarter was $61 million compared to $57.4 million of distributable cash flow for first-quarter 2015 and $36.2 million for the same quarter last year.

The $3.6 million increase in distributable cash flow compared to the first quarter of this year was primarily due to higher income generated by MPLX and the $24.8 million increase compared to the second quarter last year was primarily due to MPLX's greater ownership in Pipe Line Holdings along with the higher income discussed on the previous slide.

Total distributions for second-quarter 2015 were $41.6 million. This represents a coverage ratio of about 1.47 times compared to our target ratio of about 1.1 times. Our coverage ratio will fluctuate from period to period primarily due to the seasonality of maintenance spending and the timing of drop-downs and acquisitions.

Slide 7 provides an adjusted EBITDA and distributable cash flow by quarter for MPLX since the formation of the partnership and continues to demonstrate our focused growth in earnings and distributable cash flow over time. This strategic combination provides a tremendous platform for this growth to continue over an extended period into the future.

Slide 8 provides some selected financial information. At the end of the second quarter we had $130.4 million of cash and the full $1 billion available on our bank revolving credit facility.

This liquidity along with our ability to access the public debt and equity markets allows MPLX to pursue growth opportunities that expand its growing base of distributable cash flow, including organic growth opportunities identified as part of the combination with MarkWest.

We're also pleased that all three rating agencies indicated prospective affirmation of MPLX's investment-grade credit rating upon the consummation of the combination with MarkWest. Our consolidated total debt to consolidated EBITDA covenant is 3.1 times, well below the maximum allowed of 5 times.

Upon the closing of the combination with MarkWest we expect MPLX will assume and take responsibility for all of the approximately $4.2 billion of debt which is expected to increase the combined partnership's debt to EBITDA ratio to about 4 times.

Our target leverage ratio will continue to be about 4 times debt to EBITDA consistent with our intent to maintain an investment-grade credit profile at the combined partnership. Slide 9 demonstrates our commitment to grow and distribute cash flow to our unitholders.

The bars illustrate our distribution history since the IPO and highlight the strong and consistent growth and LP distributions. MPLX's second-quarter 2015 distribution represents a 28.5% increase over the second quarter last year and a 23% compound annual growth rate over the MQD established at the time of the partnership's formation.

As Pam mentioned earlier we continue to expect a 29% increase in LP distributions for calendar year 2015. Subsequent to the combination with MarkWest, we expected 25% compound LP distribution growth rate through 2017 with an annual distribution growth profile of approximately 20% in 2018 and 2019.

This substantial growth will provide attractive return for both current and prospective MPLX unitholders and is truly peer leading. With that let me turn the call back over to Geri..

Thanks, Tim. With that we are prepared to open the call to questions.

Christine?.

Thank you. [Operator Instructions] And our first question is from Brian Zarahn of Barclays. Please go ahead..

Good afternoon. Looking at the quarter pretty solid pipeline volume growth around 8% and the highest since 2012.

Can you give a little color on what's driving the volume growth?.

Volume growth as you know is really very much related to the operations of the sponsor. So I can't give you specific details around that, only to say that MPC, the sponsor's business has continued to grow.

This year we don't have, MPC doesn't have as much in the way of turnarounds as it has in the past, so the growth in volumes would be directly related primarily to MPC's operations..

Okay and then for the remainder of the year expectations would be still fairly high utilizations at the refineries?.

Well, again the sponsor gives quarter-by-quarter guidance on its outlook for turnaround activity. But and of course turnaround activity can have some impact on volumes that the sponsor sees through its operations. But we don't go far out on the calendar with that, Brian..

Brian, this is Gary. If you look at, and we had the MPC call this morning, and volumes across the industry and specifically MPC, namely gasoline but diesel was a very good performer for us as well. But the overall volumes are up in the second quarter over second quarter last year which helps as well..

So this higher demand domestically is helping…?.

Yes sir..

Okay.

And then I guess, thanks Gary, and then turning to maintenance CapEx it was a little bit below than I expected, any changes for your maintenance CapEx for the remainder of the year?.

Yes, I wouldn't say there's any real change in guidance on maintenance CapEx Brian. I would say that it's a little slower maybe at the beginning of the year, especially in the second quarter we had a lot of wet weather around our geography. So we had lower cost associated with some of those activities than what we had originally planned..

So I believe the last number was around $38 million.

Is that still reasonable for the year?.

Yes, I wouldn't provide any change in that guidance..

And then I appreciate Gary's comments earlier in the call on MarkWest. Obviously that's everyone's main focus right now. I guess a couple of quick questions. One would be the maintenance CapEx is a lot lower for MarkWest if you just look as a percentage of EBITDA relative to MPLX.

Do you expect any changes in maintenance CapEx with the combined Company?.

You know the beauty of MarkWest assets, they have a number of new fractionators, process units, they're new and they last a long time. So we would expect to see the same type of run rate in what they historically have had going forward..

And Brian, obviously not appropriate for us to comment on their business, I would invite you to talk to Nancy and Frank on their call in the coming weeks about it. I think there are some differences in how things get classified.

I think there are items of maintenance CapEx on how we would look at it and some of their things get picked up directly on OpEx. But I think probably a better question for Nancy or Frank to answer on their call..

Okay.

And then there's also just turning to the risk profile it is different for MarkWest than the current MPLX business, and how do you view about potentially shifting some of the commodity price exposure to MPC and away from MPLX?.

Let me take the risk profile first. The way we look at this for MPLX, I look at our risk profile today and we are considered to be a very strong drop-down high-growth Company but embedded within that today we have the risk of a lot of organic projects that have to be completed. They have to be done on-time, on-budget.

As we go forward we're still going to have the drop-downs but we're still going to have organic projects going forward. We've illustrated within MPLX and MPC that we've been very good at executing on those projects. We've learned that MarkWest is very good at executing on those as well.

So the point on risk that I'm trying to get across from investors is that when you look at MPLX going forward I think we're going to have the same risk profile, albeit more projects than we had within the legacy MPLX but they're not that complex of projects. And I think they're going to be very ratable going forward.

Let me turn it over to Pam or Tim then to talk about the commodity risk..

Yes, I would just say that, Brian, as we look at all the different basins across the country, certainly the gathering and processing space does have a volume risk associated with it tied to the producers development plans.

But when you look at the contracts that MarkWest has in place and particularly in the Utica and Marcellus a lot of those are fee-based.

And when we look at the potential for the producers to develop these resources we really believe that the producers that are tied into the MarkWest plants and operations are in the sweet spot of some of the best basins in the country. And we think that those basins are going to continue to attract capital and be developed.

So we think that -- that's how we got comfortable with -- there is some volume risk, but we think given where they're located they've got really strong prospects for continued investment..

I appreciate the color. Last one for me is you certainly have your plate full with MarkWest but we are seeing a pickup in M&A activity in the refining sector.

Do you view that as a potential source of growth for the midstream business?.

I guess I haven't really seen M&A activity in the refining sector. I know there was some discussions earlier this morning about a couple of companies that were having some discussions but I've not seen that much. The good point about the refining and I think we'll keep things robust is how strong the global demand is for refined products.

That's keeping the refineries running full out. And I would expect to see that going into the third and fourth quarter because of the strength in the global demand..

Thank you. Our next question is from Jeremy Tonet of JPMorgan. Please go ahead..

Good afternoon. For the $6 billion to $9 billion of incremental projects that you had outlined there, I was wondering if you might be able to give a little bit more color or group those into buckets for us to help us see what type of opportunities those could be..

Sure, Jeremy. On our roadshow last weekend and with our analyst meetings we went into this and a little more detail. And I appreciate you bringing it back up. I would kind of put them into three buckets.

First of all, you look at the operating synergies in between MPC, MPLX and MarkWest and they're along a number of natural gas liquids different feedstocks for refining that are required within our refining system. So there's some just natural synergies there.

But if you look at one of the areas that is of interest and again this is conceptual, we have not FIDed a project yet, but you just look at the long-term octane requirements of the refining industry and specifically with the CAFE standards that comes into place at the end of this decade, early 2021, 2022.

And the requirements for more octane, butane is a great source, a great feedstock to be able to make additional octane by taking it through an alkylation unit.

What's so important, though, for the producers is that producers find a home for this feedstock and not be constrained, market constrained and infrastructure constrained in these NGLs being hampered only in the Marcellus and the Utica or in other parts of the country and how you can move these to market. So that's one of the key elements.

Another key element is how do you move other NGLs, possibly even Y-grade, how do you move that either to the East Coast or the Gulf Coast? I think there's a very strong potential there.

The thing that I want to be perfectly clear on is that these big projects like this that we're talking about are not included in the base, the numbers that Tim and Pam went over today of the 29, 25, 20, 20 type growth over the first five years. They are not included in those numbers. These are incremental above and beyond.

So I outlined two very big projects there that we're looking at. We have some others also not just specific to the Northeast but other parts of the country. And remember, MPC has 1 million barrels a day of refining capacity in the Gulf Coast. And we have a number of projects that I think makes sense long term in the Gulf Coast as well.

So we have if you probability weight this and we have done that in the due diligence, so we've done that in a lot of the work that we've done so far that's why we're talking about the $6 billion to $9 billion publicly. We're very comfortable that this arena in the $6 billion to $9 billion range will come to fruition..

That's helpful. Thank you.

Then building off that, getting the liquids east to the New York Harbor is that -- could you expand on that a little bit more? Is that existing assets, would that be new assets, would you like to partner with someone there and also could that involve export and PDH?.

It could involve all the above but I want to be careful in getting out ahead of developing some of these projects. A lot of this is competitive. So I want to be careful of getting out ahead of what we may or may not do there..

Fair enough. That makes sense.

And once a deal has closed could you speak to appetite for M&A at that point in time?.

Well, I had this question earlier this morning. We have a lot to say grace over right now. However, I think in our strategy and we've said this for quite some time that our strategy was to build into our midstream and to build it with high-quality assets.

And I believe in all the work in due diligence that we've done over this space for over the last year and a half that MarkWest is clearly the best asset. They have a tremendous position that they built and an outstanding management team. So first and foremost is to get this into, to close this transaction, bring it together with MPLX.

The management team of MarkWest is going to be in place to continue to manage that business but then I just outlined some projects that I think make great sense with the operational synergies of MPC MPLX. So we'll see where we go from there. I do believe that the midstream space is going to have some consolidation going down the road..

And I think Gary's point is key that this is not like an integration where we're going to do a lot of transition between the organizations.

As we said, MarkWest really will operate as a stand-alone Company and it's a new platform for growth and they've done a terrific job and we want to provide them capital and other things to support their ongoing growth in the future. So it's not like something that's going to take a considerable amount of our time as an integration..

We're going to be focused just like Frank, John and Randy have been focused, Greg Floerke how they've been focused in the past. And the producer, the customer will be number one in this business model going forward..

That's good to hear. Just one last quick one if I could. Clearly the MarkWest deal here is going to create a pure leading large MLP.

But we've been fielding questions from investors that if it appears that MarkWest holders wanted additional consideration to replenish some of the premium that faded away, if the deal were going to be voted down, what options or considerations are available to MPC at that point?.

Well, Jeremy, we feel this transaction is very compelling as it stands and it stands on its own. Yes there have been a lot of headwinds in the marketplace. It's hard to pick your timing. We announced this on Monday morning just after the Iranian nuclear accord was announced over the weekend.

And the entire space, large-caps gathering and processing, and in fact big drop-down MLPs have all had a tremendous amount of headwinds over the last almost three weeks. So it's too early in the process and but we think we have a compelling transaction. We looked at many structures and this is the one that made the most sense for both parties.

So we're pleased where we stand..

Thank you. Our next question is from Kristina Kazarian of Deutsche Bank. Please go ahead..

Hey guys, you've framed up a lot of great growth opportunities and thinking about like octane blending or batch refined product lines.

But Gary, and I know we've talked about this a little bit, can you talk a little bit more about how you guys are thinking about which projects are likely to be incubated up at the MPC level, if MPC commits as like an anchor tenant or takes capacity on some of these projects and start there maybe?.

Sure. And the thing Kristina and always good talking with you is that we have tremendous flexibility. We can incubate some of these big projects at MPC.

Tim has been very clear in all the investor meetings and public meetings we've had it would better to do these projects and we will do all the projects we can at the MPLX level just because it gives more flexibility to MPLX. But beyond that we also have two very strategic points I want to make.

Number one, we don't want to miss out on many great opportunities. And as Frank was very clear in all the investor meetings last week and our call that we had was that they missed some opportunities just because they didn't have the balance sheet to be able to complete those.

I think the position that MarkWest is in and we want to continue to build on that position that we will have be in the same mindset we want to make sure we don't miss any of those projects. Secondly, as I've mentioned earlier there are a lot of strategic projects.

It just depends on how they come down the funnel and when you have your engineering prepared, when the market is ready and as I just said earlier number one in our mind is how we can be able to perform for the producers. That is what is key. So it will just be how all those are coming down the track and when they are ready to go.

We may -- we don't have to incubate the whole project. We have lots of flexibility on how we can do that..

And then how do I think about how big midstream can be for MPC has a percent of the business on a longer-term basis and like what this would imply for MPC long-term midstream CapEx as well?.

I missed the first part of the question..

How big can it be overall..

How big does midstream get for MPC?.

You know it's hard to give you a number Kristina how big it could be. But as we outlined in November 2014 when we accelerated, said that we wanted to accelerate our midstream business it was clear that we said we wanted to accelerate retail, we accomplished that. We want to accelerate midstream, we're in the process of a accomplishing that.

And we have a tremendous platform here, working with MarkWest going forward a tremendous platform as I've said now a couple of times, a lot to say grace over. But if we see opportunities that make sense I think we will have the appetite to look at those opportunities..

Yes, just by comparison if you think about the Hess retail acquisition that we just made where Tony Kenny and his team were converting over 1,200 stores or the acquisition that we made of the Galveston Bay refinery at couple of years ago and just how much work there was and how much resource we're needing to dedicate to that, those are far different kinds of acquisitions requiring a lot of MPC's resources, human and capital resources.

This is a different kind of platform for growth that we've established. And the leadership team at MarkWest has a demonstrated track record which is what was attractive to us and they're not going to be draining, this opportunity is very different in terms of integration and the need to integrate into our existing business.

So I don't think it's going to be a big distraction to MPC. Yes it's a big transaction, it's very important to us and we're going to find ways to operationally vertically integrate where that makes sense. But, yes, I think there still will be other opportunities that we'll evaluate..

Great. And last one on my side is how's the market reaction been from someone like the MWE producer customers? Obviously you guys have chatted a lot about the importance of getting NGL market, NGL to export markets but maybe on the further downstream domestic demand side..

Let's ask Don Templin has been out in the field visiting with a lot of our employees and in the field where the producers are. Let me ask Don to take that..

Sure, Kristina, our impression is that the customer producers are very excited about the opportunity. Their primary focus is on making sure that they get the best netback that they possibly can get.

And MarkWest has done a fantastic job over a period of time historically of being able to be able to serve their customers in a way where they come up with solutions that allow their customer producers to get a higher netback.

And I think as they start to see some of the opportunities, and you even talked about a couple of them, but as they see some opportunities to take a product, so let's say butane, and upgrade it so that they can get a higher netback, that to them is very exciting. I mean that's really good for MPLX and MarkWest.

It's really good for MPC but it's also really good for the producer of the customer producers. So our primary goal will be to continue that focus on making sure that we come up with projects on a combined basis in that entity that allows the customer producers to continue to be able to build their business as well..

Thank you. [Operator Instructions] We have no one in the queue at this time..

Thank you, Christine. Thank you 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 afternoon, Teresa Homan and I will be available to take your calls. Thank you..

Thank you. Thank you ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect..