Welcome to the Second Quarter 2016 Earnings Call for MPLX. My name is Katie and I will be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. And I will now turn the call to Lisa Wilson, Director of Investor Relations. .

Thank you Katie. Good morning and welcome to MPLX second quarter 2016 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, Chairman and CEO; Frank Semple, Vice Chairman; Don Templin, President; Nancy Buese, Chief Financial Officer; and other members of the management team. .

We invite you to read the safe harbor statements and non-GAAP disclaimer on Slide 2. It is a reminder that we will be making forward-looking statements during the call and 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. .

Thank you, Lisa, and good morning. Beginning on Slide 3, we continue to execute on our 2016 plans and achieved solid financial results for the second quarter. Adjusted EBITDA was $351 million and distributable cash flow was $285 million.

Last week, we announced an increase in our quarterly distribution to $0.51 per common unit while maintaining a strong coverage ratio of 1.42x. We reaffirm our distribution growth guidance of 12% to 15% for full year 2016 without the need for additional drops from MPC to achieve this growth rate.

We also reaffirm an expected double-digit distribution growth rate in 2017. .

With the completion of $1.3 billion of financing earlier this year, we have provided for our forecasted funding needs through the remainder of 2016 and into 2017. We are confident in the strength of our balance sheet, and leverage is now below our long-term target of 4.0x. .

By fulfilling our funding requirements, we are executing an attractive organic growth program to support a diverse set of producer customers. Due to improving commodity prices, there is also a growing optimism from producers about the acceleration of drilling activity.

With the right assets in the right places and over 9 million acres dedicated to us across our areas of operation, we are well-positioned for 2017 and beyond. .

With the wave of cracker projects beginning to come online, recovering additional ethane is a focus for producers. We are excited about the opportunity to invest in additional ethane infrastructure as these are part of our synergistic projects that were an important component of the combination with MarkWest.

MPLX is one of the largest processors and fractionators in the United States and has an expansive crude and refined products logistic system.

With world-class midstream assets located in some of the best resource plays in the country, we are well-positioned to capitalize on an exceptional set of opportunities across the entire hydrocarbon value chain. .

Before I turn the call over to Don, I would like to announce Frank Semple, our Vice Chairman of MPLX's General Partner, will retire from his executive role at the end of October, culminating a 38-year career in the Energy and Telecommunications Industry, which follows his distinguished service in the U.S. Navy. .

Frank will remain on the MPLX Board of Directors and will also continue to serve on MPC's Board of Directors. All of us on the MPLX Board of Directors are grateful to Frank for his service as Vice Chairman and his efforts to facilitate the seamless combination of MarkWest and MPLX. .

Frank assembled an outstanding management team at MarkWest and provided a strong leadership that created tremendous unitholder value.

We are fortunate to continue to benefit from his deep knowledge of the midstream business as well as his keen focus on creating value for of our unitholders as we position MPLX to continue delivering sustainable returns over the long term. .

Now, let me turn the call over to Don to review our quarterly operational results. .

Thanks, Gary. Turning to Slide 4, we have provided an update on our Logistics and Storage segment. Results include a full quarter of income from the inland marine business acquired from MPC at the end of March.

The high-quality marine assets further diversify our earnings mix and provide us with another source of stable cash flows through its long-term fee-for-capacity contract with MPC. .

The second quarter also includes a full quarter of results for the expanded Patoka to Robinson pipeline, which added 20,000 barrels per day of crude oil supply capacity to MPC's refinery in Robinson, Illinois. Cornerstone Pipeline is also progressing as planned, with completion expected in the fourth quarter.

In addition, we have accelerated construction of a pipeline that connects our Hopedale fractionator to Cornerstone Pipeline and expect to commence operations in the fourth quarter. .

With the Hopedale connection, Cornerstone Pipeline will provide an industry solution to move condensate and natural gas liquids out of the Marcellus and Utica region into Midwest refining centers and into Canada. .

Shifting to our Gathering and Processing segment. Slide 5 provides an overview of our operations in the Southwest where we have infrastructure in the -- in areas of the Anadarko, Haynesville, Arkoma-Woodford, Cana-Woodford, Eagle Ford and Permian. .

We recently completed the Hidalgo Complex, a 200 million cubic feet per day processing plant in the Delaware Basin. Producer activity in this area of the Permian is growing and volumes have continued to ramp quickly. The new facility is now 80% utilized only 3 months into operation.

We are very excited to grow our Southwest footprint in this highly economic area of West Texas. .

In Western Oklahoma, we continue to expand our presence in the exciting stack area of the Cana-Woodford. We are currently processing approximately 100 million cubic feet per day of gas and gathering 7,000 barrels per day of crude oil.

For the second quarter, we processed over 1 billion cubic feet per day in the Southwest, and processing plant utilization was 79%. .

For the full year 2016, our forecast remains unchanged as we expect processed volumes to increase approximately 15% and gathered volumes to increase approximately 5%. .

Moving to Slide 6. We provide an overview of our Gathering and Processing operations in the Marcellus and Utica shale. In response to a number of investor requests, we've included the complex level detail for this area. Processed gas volumes were resilient, averaging 4.1 billion cubic feet per day and utilization was 79%.

We continue to expect processed volumes to increase by approximately 15% year-over-year and gathered volumes are now expected to increase by approximately 20% year-over-year. In addition to our significant Gathering and Processing position, we are also the leading fractionator in the Marcellus and Utica. .

On Slide 7, we have provided a summary of our NGL volumes and utilization where we produced over 290,000 barrels per day of ethane and heavier NGLs during the second quarter. Our growth forecast is unchanged from last quarter as we continue to expect fractionated volumes to grow by approximately 25% year-over-year. .

We continue to progress NGL marketing strategies for the region that improve price realizations for producer customers and have begun to regularly load unit trains from the Hopedale Complex to the Midcontinent.

Being able to load unit trains brings efficiency to the marketing of NGLs by lowering rail transportation costs which improves differentials for producers.

We also remain focused on driving the development of longer-term NGL solutions that will increase the basin's connectivity to both domestic and international markets as well as enhance local demand. .

Potential solutions include an NGL rail solution to the East Coast, along with an export terminal, reversal and repurposing of the Centennial Pipeline to the Gulf Coast and a butane-to-alkylate project. Each of these would provide producer customers with optionality and flexibility for their future NGL production.

Northeast ethane volumes reached a new record of 116,000 barrels per day, an increase of 76% from the second quarter of last year. .

As shown on Slide 8, we are well-positioned to support producer customers as we operate the majority of the de-ethanization capacity in the region through our distributed and interconnected ethane system. The recent announcement to construct a world-scale steam cracker near our operations will support new investment opportunities. .

Based on current utilization of our existing capacity, we can support the production of an additional 70,000 barrels per day of ethane. We are the origination point for all existing ethane takeaway solutions, including Mariner West, Mariner East and ATEX. .

Our facilities will also supply ethane for the coming Mariner East 2 and Utopia projects. With incremental ethane takeaway projects and the projected completion of our regional cracker facility, we anticipate reaching full utilization of our existing facilities.

In addition, as we outlined in our synergistic capital at the time of the merger, we have the opportunity to invest $500 million to $1 billion over the next 5 years to facilitate the fractionation, transportation and storage of ethane in the Northeast. .

Now I'll turn it over to Nancy to review our financial position and strategy. .

Thanks, Don. Slide 9 provides a summary of our capital expenditure program for 2016. We have narrowed our organic growth forecast to a range of $900 million to $1.2 billion and maintenance capital remains unchanged at approximately $60 million.

We continue to focus on increasing utilization of existing facilities and are working closely with our producer customers to complete new projects on a just-in-time basis. .

Turning to our financial highlights on Slide 10. We reported adjusted EBITDA of $351 million and distributable cash flow of $285 million for the second quarter 2016. Total segment operating income was $394 million, with approximately 70% of the segment operating income provided by the Gathering and Processing segment. .

The bridge on Slide 11 shows the change in adjusted EBITDA from the second quarter of 2015 compared to the second quarter of this year. Since the prior year quarter, we increased adjusted EBITDA by $281 million.

The addition of MarkWest operation accounted for nearly all of this increase, while higher tariffs and the addition of the marine business accounted for the majority of the remaining change. .

Slide 12 provides a summary of key financial highlights and select balance sheet information. At the end of the second quarter, we had almost $2 billion available on our bank revolver and a full $500 million available on our intercompany facility with MPC.

With the completion of the convertible preferred financing and ATM issuances, we have fulfilled our forecasted funding needs for the remainder of 2016 and into 2017. .

We will continue to remain opportunistic with regard to future capital markets activity. We're also committed to maintaining a strong balance sheet and an investment-grade credit profile by targeting a leverage ratio of around 4x. Our leverage ratio decreased this quarter to 3.7x. .

On Slide 13, we have provided our commodity price sensitivity forecast highlighting the annual unhedged impact to DCF by our exposure to NGLs. We forecast fee-based net operating margin to be 92%.

For the remaining commodity exposed portion, we continue to employ an active and disciplined hedging strategy and has hedged almost half of our 2016 exposure. In addition, we have started to layer on hedges for 2017. .

Including on Slide 14, we have increased the midpoints for our full year 2016 financial guidance for adjusted EBITDA and distributable cash flow, which reflect our expectations for producer volumes, commodity prices and our strategy of deploying capital on a just-in-time basis. .

We are closely managing our expenses and achieving cost synergies as we integrate MarkWest into MPLX and the larger Marathon Petroleum family. Adjusted EBITDA is now forecast in the range of $1.3 billion to $1.4 billion, and DCF is now forecast in the range of $1 billion to $1.1 billion. .

We have a consistent record of growing distributions to unitholders. Based on our quarterly financial performance, the Board of Directors of our General Partner declared a distribution of $0.51 per common unit.

The second quarter 2016 distribution represents a 16% increase over the same period of last year and marks the 14th consecutive quarter since our IPO in October 2012 that we've increased the distribution. .

We reaffirm our guidance of a 12% to 15% distribution growth rate over the prior year and expect a double-digit growth rate in 2017. Based on our current plans, no future drops from MPC will be needed to achieve our 2016 distribution forecast.

We also target a long-term distribution coverage ratio of 1.1x and reported a strong coverage ratio of 1.24x for this quarter. .

We remain focused on execution and achievement of our financial and operational targets. With the right assets in the right places, a strong sponsor and long-term producer customer relationships, we are well-positioned to deliver on our 2016 plans and to continue providing sustainable returns well into the future. .

I'll now turn the call back to Lisa. .

Thanks, Nancy. As we open your call -- excuse me, the call for your questions, we ask that you limit yourself to one question plus a follow-up. You may re-prompt for additional questions as time permits. With that, Katie, we will now open the call to questions. .

[Operator Instructions] And our first question comes from Kristina Kazarian from Deutsche Bank. .

Good morning or afternoon guys.

So I know you guys reiterated the 15% increase on processed volume guidance and now you gave the 20% number on gathers, but can you guys touch a bit more on some of the quarter-over-quarter regional trends you're seeing in the Marcellus and Utica? Maybe specifically, how I should be thinking about the remainder of the year because it looked like on a quarter-over-quarter basis for this one, Marcellus gathering and frac were both up.

Does that pace kind of hold? But the Utica would -- will kind of more decline, so any color here would be great. .

Sure, Kristina. I'd be happy to take that. This is Nancy. In the Marcellus, we did see fairly flattish volumes for the quarter and that was really based on a couple of things. We had a little bit of downtime, if you will, relative to some operational -- very modest operational issues and then some other scheduled maintenance.

So that was what you saw in the Marcellus. In the Utica, what's really going on there is sort of the macro environment slowing the rate of growth for the producer customers. They're really motivated by the ultimate netbacks up there, and we're still seeing very strong upstream economics for them.

But the pace of drilling is really for them focused on the downstream pipeline projects like NEXUS, like Rover and some of those things. So we're hearing good optimism from the producers, but some of those downstream projects need to come online to release some of the ducts that are going on in that area.

And given all of that, we are still anticipating better volumes towards the end of the year based on where prices are going. But what -- and we're still committed to do with that 15% increase in volumes year-over-year. .

Okay.

And then my follow-up will be, Gary, I know you framed this up on the MPC call and Don touched on a little bit as well, but how should I be thinking about the specific opportunities you guys have now that the Shell cracker is moving forward? And more specifically, what types of projects come into that $500 million to $1 billion number to support ethane recovery?.

Yes. So I guess with respect to that, the Shell cracker specifically, one of the things that we would observe when a company like that announces a very large project like that, they have done, our view, an incredible amount of research and evaluation of the availability of ethane to support their project.

And so from our perspective, Kristina, one of the things that is good about that project is it's validating our strategy around building a world-class ethane -- an ethane or de-ethanization facilities in that area because we think there is -- there will be a lot of production of ethane and we will have an opportunity to participate and deploy capital to be able to do that.

We have capacity right now, about 70,000 barrels per day of incremental capacity to support ethane extraction.

But we think there will be a number of de-ethanization facility investment opportunities and we've been working very closely with the producer customers to be able to manage that as they pick up their production and we ramp into what is likely to be large ethane production in 2020. .

And our next question comes from Jeremy Tonet from JPMorgan. .

Just wanted to follow-up a bit more as far as back half of the year Appalachian volume trend.

And just wondering what you guys are seeing as far as producers impacting -- pivoting towards dry gas from wet gas and how that kind of impacts your processing -- thought process there? And what type of opportunities that could also provide on the dry gas infrastructure side as well?.

Well, let me start and then maybe Nancy can add some incremental color. I guess we're not seeing a wholesale shift to dry gas production but rather a balance that depends really on the specific acreage that's held by individual producers.

We do have some very good assets in that region right now to -- infrastructure there to be able to manage the gathering of that dry gas. You note that we have the Ohio gathering gas system. So we're gathering gas right now for Gulfport in Belmont, Monroe counties in Ohio, and for Rice in Belmont County.

And at the end of 2015, we commenced our operations in Jefferson to support ascent in that. So I think we're really, really well positioned around dry gas. But we haven't seen sort of a wholesale move that way. In fact, some of our larger producer customers have been very focused on some of the richer gas areas right now. .

Yes, I would agree with that. And I think the other comment I would mention is we have really seen an improvement in NGL prices since the beginning of this year.

The price of the NGL barrel has increased almost 30%, and so we are starting to see scenarios where producers are going to continue to ramp up their rich gas volumes during the back half of the year. .

Okay, great. Thanks for the color. And then just want to follow-up with as far as -- thinking about future drop-downs in the multiples, I know you couldn't say exactly where they're going to be, but the last drop-down multiple was lower than historically.

I'm just wondering if you could just kind of walk us through your thought process there a little bit as far as, for our modeling, how we should think about where those economics or multiples could settle out in future drop-downs?.

Well, Jeremy, clearly the last big drop we had of the Marine business was at the very supportive multiple. That was really to bridge MPLX shortly after the merger here to bridge its balance sheet through this market cycle.

The -- I wouldn't expect that we would need to do anything near that type of a supportive multiple going forward as -- and Nancy can chime in here, but we have the balance sheet in a very good shape now. As we said, we don't need to do any more drops in the remainder of 2016 and into 2017.

And I believe the market will certainly strengthen in the -- where yields are and where the market is at the time the next drop is needed. But we expect whatever drop it is to be a win-win for both MPLX and MPC. .

I would agree with that Gary. And I think I would comment that we're always looking for the best opportunity to provide the sustainable value to our unitholders and that will be through a combination of organic growth at the partnership level.

It will be through appropriately priced drops that make sense for both MPC and MPLX and also M&A activity as appropriate for the partnership. So we'll look at all of those suites of options as tools to continue to enhance value. .

Got you.

But you wouldn't expect multiples to go back to kind of the 9x to 10x range that they were when MPLX was first IPO-ed?.

Well, I think they have to be market multiples, first off, but they also have to generate accretion at the MPLX level. So I would expect that they will be transactions that will be market-based but will need to be accretive to both MPLX and good for MPC. .

And our next question comes from Justin Jenkins from Raymond James. .

So I guess I'll start maybe with a quick one on the Marine business. It looks like $34 million of EBITDA this quarter, tracking maybe a bit ahead of the $120 million, annualize the outline.

Is that just some noise in terms of seasonality? Or is the business actually tracking maybe a bit better than what the initial expectations were?.

There wouldn't really be seasonality in the Marine business. I mean, that is a fee-for-capacity essentially contract. So as the equipment is available, the revenue would accrue to MPLX.

There can be from time to time some timing around maintenance and other activities like that, but we feel very comfortable about that $120 million sort of annual run rate of EBITDA. .

Okay, appreciate that color. And then I guess my follow-up, maybe a more strategic question and I guess, thoughts on the GP maybe. And then, Gary, you mentioned on the MPC call about simplification maybe being better in the medium term. And certainly, we've seen some well-received transactions lately.

But could you outline maybe how you think about the medium term for the GP and improving the MLP's cost of capital while still ensuring it's fair from both MPC and MPLX's perspective, and I'll leave it there. .

Sure. And what I meant by that this morning is that the models that seem to be evolving right now within the midstream space is to keep a simple message and a simple structure. Our GP, while -- we always have that opportunity, that flexibility, to IPO it when we think the market is right. Clearly, this is not the correct market timing to consider that.

But we also have a lot of flexibility on how we look at things down the road. So I really can't give you a short term to a medium term other than we are we very aware of all the structures that are available and very aware of what makes -- what can make sense.

But bottom line, I still believe that there's tremendous upside in MPLX as we continue to strengthen, as the commodity price strengthens. And we use up -- we start to fill up more of the capacity that is available within the system that our yields should improve.

As Nancy just stated, as our yield improves, it certainly affords more accretive drop-downs that are wins-wins for both MPC and MPLX. So we have many knobs to turn as we go forward. But bottom line is that it has to be a win-win for both MPC and MPLX. .

And our next question comes from John Edwards from Crédit Suisse. .

Just I wanted to ask about the Shell project a little different way.

I mean, the announcement of that, I mean, did that change your thinking at all? And if so, how? And any change to strategy after they announced that? And if so, in what way?.

John, I don't think it changed our strategy. I mean, even at the time of the combination, we are talking about ethane and investing to produce ethane as being a very important part of our growth strategy.

So I would say what it really did for us and for the market is to validate what an important basin the Utica and Marcellus is and how important it is going forward and the opportunity set that exists there for us to continue to grow our peer leading infrastructure there. .

Okay. And then just one other question.

Just Gary, could you just update us on the synergies with the MarkWest merger, how that's tracking relative to your original expectations?.

Yes, let me -- this is Don. Let me answer that John. I mean, I think we've been very focused on synergies. So there's a couple of areas where we've been focused. One is on just the relative size of the company and the buying power.

So as we think about how we're approaching expenses and costs that we have, we have a larger entity and we're leveraging that between MPLX, legacy MPLX, MarkWest and MPC.

The other area where we spent a lot of time is on, I'll call them commercial synergies, where we're identifying opportunities where having a very, very strong midstream and a very, very strong downstream operation can afford both -- be a win for both MPLX and MPC.

So a good example would be we accelerated some capital around -- we're building the Cornerstone Pipeline. We accelerated some capital that was probably going to be spent in 2017 or maybe a little bit later to connect Hopedale to Cornerstone.

And we're doing that because we have an opportunity to move natural gasoline in the short term and other NGLs longer term to MPC refineries and other Midwest refineries. That's good for MPLX because we generate incremental revenue on Cornerstone, and it's good for MPC because they have access to natural gasoline.

And it's good for our producer customers because they find an outlet for their production that is allowing them to get a stronger netback than they would have in an alternative situation. .

And our next question comes from Barrett Blaschke from MUFG Securities. .

Just as you continue to sort of build out in the Marcellus, Utica and the ethane continues to ramp and particularly with Shell now going forward with the cracker there, is this a point where you guys are starting to see a true hub for NGLs developing the Northeastern market, sort of a Northeastern version of Belvieu?.

Yes, absolutely. I think that's always been our vision. And I think that this just validates that, that vision or strategy has real momentum, and investing our capital there and being the leader in infrastructure development is a very, very good strategy. .

Okay.

And then, just a follow-up, is there a balance to strike in your opinion at this point with bringing on more volume of ethane versus -- I mean, given that we're still in rejection today and given where pricing is, obviously, I think you wanted to -- I would assume you want to have it come on at a more measured pace just to be more supportive of price in that market.

Can you give us a little color on that?.

Sure. We have about 70,000 barrels per day of capacity right now that exists, and we are very focused on matching up our future capital projects with what our producer customers are saying are likely to be their needs. So we will continue to monitor that. We will continue to be in daily, weekly discussion with our producer customers around that.

And our expectation is that we will be building out de-ethanization capability, and our expectation is that we'll be doing it just in time to meet our producer customer needs. .

And our next question comes from TJ Schultz from RBC Capital Markets. .

I missed part of call, so sorry if you've touched on this. But the larger projects you're evaluating, butane-to-alkylate, I think you called out the regional exports to the Northeast and the Centennial reversal.

Just any update on kind of how those are progressing or when you'd expect to provide more definitive scope or scale or time line around those?.

Yes. The evaluation and consideration of sort of all 3 of those projects is continuing. We have teams focused on each of them. I would say from a timing perspective, getting NGLs to the East Coast, particularly propane to the East Coast, is the one that is the sort of the nearest term. But that's not a change.

That has been always our design is to able to offer an alternative to our producer customers in 2017 to be able to get their NGLs, particularly propane, to the East Coast and then onto the water if they need to export it. With respect to the butane-to-alkylate project, that's a very large project.

We are in engineering right now, spending considerable time on that. And that was a project that was going to run for several years anyway. So I don't think there's been any change in our view around that project. It's continuing to progress in terms of the engineering evaluation.

And if it was ultimately -- if we ultimately go forward with it, it's likely to be in sort of the 2020 time period or late 2019. That's kind of the time period we're looking at. .

Okay, and Centennial?.

Right. We continue to be discussions -- active discussions with Enterprise around maximizing the value of that pipeline and finding -- having NGLs find their way to the Gulf Coast through that pipeline is an active discussion. .

And our next question comes from Timm Schneider from Evercore ISI. .

First of all, thank you for adding back in that project plant-level detail. That's extremely helpful for modeling purposes. My question is, I'd like to get your view on longer-term takeaway solutions out of the Northeast, whether that be waterborne through Marcus Hook or Centennial or rail.

I'm sure you saw one of your peers, they just got 5 cargoes canceled for them in August. The one thing that came up in my mind then is what if this happens at some point at Marcus Hook, right? You don't really have the storage or anywhere to divert that product.

Does that really increase the need for an export solution to the Gulf Coast? Or how do you guys think about that longer term? Hello?.

Are you there?.

Yes, I'm here. .

We lost you midway through your question.

Can you repeat it?.

Yes, sure. So I was just saying, I'm sure you guys saw one of your peers just got 5 cargoes canceled out of one of their LPG export terminals out of the Gulf Coast. Just wondering, what if something like that were to occur at Marcus Hook, right? You don't really have the storage, and I'm realizing that's not your asset.

But you don't really have the storage to divert that propane. So does that really increase the need for an export solution like Centennial to the Gulf Coast? Or is rail going to be just kind of the placeholder for that? Just interested in your thoughts. .

Well, I think that's one of the reasons why we're trying to provide multiple options to our producer customers is so that you can deal with those situations when they occur. The more options we have, the better off our producer customers are. And so that's why we're exploring multiple options. .

Good. And how are those discussions going? I mean, I realized there's a certain element of circularity here, right, where the E&P doesn't want to sign up for long-term contracts, but they're also not getting better netbacks until they do.

Has there been more, I guess, more progress on that front? Or are they still a little bit more reluctant as far as committing to a longer time period?.

It may not be a matter of reluctance. I think it's just a matter or economics right now. It is very hard for a producer customer to sign up for a long-term commitment in the situation they currently find themselves. So we are working hard to kind of progress these types of projects without having to delay.

And we understand the economic situation our producers customers were in currently, and we're trying to continue to progress these projects so that they have viable solutions when the pricing picks up. .

And our next question comes from Helen Ryoo from Barclays. .

Good morning and I wanted to congratulate Frank for the retirement. The -- so just a couple of questions. So Gary, just going back to your comment on drop-down strategy.

Is it fair to understand that you've already guided double-digit growth next year and I think you -- and please correct me, I think you may said you may not need -- or you don't need drop-down to reach your growth target.

If you could clarify that? And also, as you think about the growth multiple, I guess, you'll probably adjust it based on your ability to sort of hit the double-digit target.

Is that a fair understanding that it's going to be priced in a way that you make sure that you reach the growth guidance for next year?.

Right. What we had said, Helen, was that we did not need any additional drops in 2016 to hit the growth range that we had put out. And early into '17, we don't believe so, but we will need possibly a drop in 2017. But the market will decide what the valuation is of a drop.

Certainly, it's going to need to be accretive to MPC and it's going to have to be a fair value back to -- I should say, accretive to MPLX and a fair value back to MPC. But the market will dictate that. But as -- and I'll ask Nancy to comment on the coverage that we have and what she sees as the outlook for our growth next year. .

Yes, I would agree with what Gary said. And certainly, we will look at drops at options, but we've also got a lot of opportunity for organic growth at the partnership level. So it will all be a combination of how to best generate the EBITDA to deliver those types of double-digit distribution growth and then also maintain a very strong coverage ratio.

We believe all of those components are important as we move forward. .

Got it. Thanks for the clarification. And just on Centennial, and I apologize if I've missed this. But I think last time Don mentioned that you'll need to figure out what happens in the in-basin cracker situation to decide on how that -- what kind of type Centennial reversal turns out to be.

And maybe is that still -- now that you have -- I'm sorry, could you hear me well? Hello? Yes. Sorry. I've been hearing myself echo, but... .

Yes. We just -- there was a technology issue. Sorry, about that, yes. .

Yes, sure.

So anyway, just a little bit more update on Centennial given that you have the in-basin cracker situation clarified with Shell's FID, what's the -- what it's -- is it more looking to be firmed up this year? If so, is it expected to be like a 1.5 years type of construction period? And then I think the current pipeline is a 200,000 barrels per day line.

And could it be as big as that type of project?.

So I think we've not made any sort of public comments nor our partner in Centennial around sort of the size and volumes. I mean, that's part of the evaluation that we are currently undertaking.

Our view is that just because of the Shell announcement of a cracker in-basin, doesn't alleviate the need to also move ethane to either the Gulf Coast or the East Coast. I mean, I think there's going to be large volumes of ethane that need to find a home.

And so the announcement of an ethane cracker I don't think would suggest that these solutions are being put on hold or being deferred. .

Got it.

And then, I guess, is it -- given MarkWest and MPLX now control so much NGL up there, is it fair to assume that you don't really need a third-party underwriting of the capacity to move this forward that you could probably forward it, sort of firm it up on your own barrel?.

Yes. I guess we're exploring all of the options. I mean, we need to make sure that the economics work for the owners of the transportation, but we also need to make sure that whatever gets built and the financial arrangements also work for the producer customers. So I think that is part of what we're evaluating right now.

But I feel very confident that if we decide to move forward with these projects, we would have the volumes available to us through dedicated acreage and other that would allow the projects to be successful. .

Do you also have commitment on ME2? And if so, have you said how much?.

We have not disclosed that to my knowledge. .

And our next question comes from Jerren Holder from Goldman Sachs. .

So I appreciate the color about processing volumes in the Marcellus and Utica still expected to increase about 15% over the prior year.

Can you guys comment a bit about the second quarter volumes being sequentially lower than the first quarter and what were some of the drivers of that?.

Yes. We talked about that a little bit earlier on the call. And so from the Marcellus perspective, we had a few small unplanned outages and we had a little bit of maintenance work that contributed to those volumes for the Marcellus. Over the course of the rest of the year, we do anticipate those volumes to firm up a bit and meet our volume projections.

From a Utica perspective, again, it's driven primarily by downstream pipeline constraints on the producer customers and so once some additional volumes come online there, we anticipate the Utica will also pick up a bit and that will contribute to, again, meeting our outlined goals for processed and for gathered volumes for that matter.

I think another comment that's just helpful to think about the firming up for the rest of the year is we still have some unused capacity within our systems especially in the Northeast.

And as those volumes fill up the utilization of those plants specifically, that's really going to contribute to additional margin without the need for more CapEx to bring that margin online. So it's all positive based on the system and the current utilization that we have today. .

Okay. And then, switching over to Delaware Basin.

Just given the high utilization you guys are already seeing on the new processing plant, is there a discussion for maybe expansion down in that region, whether it's with the existing producer or any other third parties?.

Absolutely. I mean, we've been delighted at the sort of the first couple of months of operation of our facility there. And we were -- we believe that that's an area where there's considerable upside, there will be considerable drilling and there is a real opportunity.

So we are in active discussions with the producer customers for which we're already processing gas.

And we're also having discussions with others in order to assess when the right time is to make the incremental capital expenditure to make sure that we are capitalizing and providing the appropriate service to our producer customers to allow them to grow. .

And as a follow-up to that, to the degree that your producer or producers do come to an agreement that they need incremental capacity, what would sort of be the time period where from go you'd be able to get a plant or additional plant into service?.

It's typically about a 12- to 18-month process. .

One of the things that we did do at Hidalgo, though, I mean, at that complex, is we anticipated that there would likely be incremental opportunities. So when you look at the plant right now, there is pipe rack and all sorts of other infrastructure that was built to allow for the facilitation of train -- incremental trains.

So that, in our mind, is something that allows us to proceed reasonably quickly or briskly to conclusion. .

[Operator Instructions] And we have no further questions at this time. With that, I'll turn the call back to Lisa. .

Thank you, Katie, and thank you for joining us today and your interest in MPLX. Should you have additional questions or would like clarification on any of the topics discussed today, Kevin Hawkins, Teresa Homan and I will be available to take your calls. Thank you. .

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