Lisa Wilson – Investor Relations Gary Heminger – Chairman and Chief Executive Officer Don Templin – President Pam Beall – Chief Financial Officer Randy Nickerson – Executive Vice President and CCO, MarkWest Assets Greg Floerke – Executive Vice President and Chief Operating Officer, MarkWest Operations.

Shneur Gershuni – UBS Kristina Kazarian – Deutsche Bank Jeremy Tonet – JP Morgan John Edward – Credit Suisse Corey Goldman – Jefferies Michael Blum – Wells Fargo Jerren Holder – Goldman Sachs Brian Zarahn – Mizuho Securities Richard Roberts – Howard Weil.

Welcome to the MPLX Earnings Call. My name is Cynthia, 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 to Lisa Wilson, Director of Investor Relations.

Lisa, you may begin..

Thanks Cynthia. Good morning and welcome to the MPLX's First Quarter 2017 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, Don Templin, President, Pam Beall, 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, on slide three.

Gary?.

Thanks, Lisa. Good morning and thank you for joining our call. Earlier today, MPLX reported solid operational and financial results for the quarter, with adjusted EBITDA of $423 million, and distributable cash flow of $354 million.

The partnership continues to pursue and execute on a number of strategic growth opportunities supporting a diverse set of producer customers in some of the nation's most prolific shale plays. We're also excited about the progress we are making related to the strategic actions we announced earlier this year.

We completed the first of several planned dropdowns from MPC on March 1. Work to prepare the remaining assets for dropdown to MPLX remains on schedule. In conjunction with the completion of the dropdowns, we expect to exchange newly issued MPLX common units through MPC's general partner economic interests, including incentive distribution rights.

All of these transactions are subject to requisite approvals, market and other conditions, including tax and other regulatory clearances. These strategic actions are expected to double the size of the partnership, lower our cost of capital, and enhance our long-term distribution growth capabilities, all while maintaining an investment-grade profile.

Looking forward, we expect to deliver compelling value to our investors by building our backlog of organic growth opportunities, pursuing third-party acquisitions, and continuing our sharp focus on customer service. Now, I'll turn the call over to Don to review our quarterly operational highlights.

Don?.

Thanks, Gary. Moving to slide four, I'm pleased to report the completion of several strategic transactions during the quarter that provide additional sources of fee-based revenues, and expand the footprint of our Logistics and Storage segment.

In addition to the dropdown assets Gary referred to earlier, we acquired an indirect equity interest in the Bakken pipeline system. This system will have the capacity to deliver in excess of 470,000 barrels per day of crude from the Bakken to the Midwest and Gulf Coast markets.

We also purchased the Ozark pipeline, a 22-inch crude line that runs from Cushing, Oklahoma to Wood River, Illinois. Ozark connects to our extensive Midwest pipeline network and provides crude oil supply flexibility to our sponsor, MPC, and other third-party refiners in the Midwest.

As a part of our growth strategy, we plan to expand the capacity of this pipeline from 230,000 barrels per day to 345,000 barrels per day by the second quarter of 2018. Work also continues on the construction of the Harpster-to-Lima pipeline, and expansions to the east part of Finley [ph] pipelines.

These projects remain on target for mid-2017 completion. In combination with the recently completed Cornerstone Pipeline, these assets are designed to provide an industry solution by moving condensate and natural gasoline out of the Marcellus and Utica region into Midwest refining centers, and into Canada.

Moving to our Gathering and Processing segment, slide five provides an overview of our operations in the Marcellus and Utica shale. In the first quarter, we finalized strategic long-term commercial relationships with two of our largest producer customers in the Northeast.

We amended and extended gathering, and fractionation agreements with Range Resources to support the development of its rich gas acreage in the Northeast. We also formed a joint venture with Antero Midstream to support the development of Antero Resources' extensive rich gas position in the Marcellus.

For the first quarter, processed gas volumes in the Marcellus and Utica averaged 4.6 billion cubic feet per day, representing a 4% [technical difficulty] quarter and an 8% increase over the same quarter last year. Our utilization rate for the quarter was 83%.

The seventh plant at the Sherwood complex was placed in service in early March, and volumes of this complex continue to ramp quickly, averaging nearly 1.3 billion cubic feet per day for the quarter.

We remain on schedule to place Sherwood VIII in service in the third quarter, and have two additional processing plants at this complex schedule to complete in 2018. These plant additions further strengthen our position as the largest processor and fractionator in the Northeast.

Overall, we expect a 10% to 15% increase in process volumes, and a 3% to 6% increase in gathered volumes in 2017. Slide six provides a summary of our fractionated volumes from Marcellus and Utica, where we produce 334,000 barrels per day of ethane and heavier NGLs during the first quarter.

Operations of the third fractionation train at our Hopedale complex commenced during the quarter, increasing the total capacity of this complex to 180,000 barrels per day.

We also continue infrastructure build-outs at our Keystone and Majorsville complexes, with a total of 60,000 barrels per day of incremental deethanization capacity, expected to come online during the second half of the year. These additions support a growth forecast of 15% to 20% in fractionated volumes versus the prior year.

On slide seven, we provide an overview of our Southwest operations. For the quarter, we processed nearly 1.2 billion cubic feet per day of natural gas while plant utilization was 80%. Processed volumes continue to increase at our Hidalgo complex in the Delaware Basin of West Texas, with utilization averaging 96% for the quarter.

To support additional demand, we began construction of a second 200 million cubic feet per day gas processing plant adjacent to our existing Hidalgo plant, with expected completion in early 2018. We refer to this plant as Argo I.

For 2017, we forecast processed volumes to increase by 3% to 8%, with growth driven by both the Hidalgo complex, as well as incremental infrastructure to support Newfield stack recourse play in the Cana-Woodford shale. I am very proud of the consistently strong operational and financial results that my team has delivered since in beginning of 2016.

Our focus on providing increased visibility to both from successfully executing on the dropdown transactions, eliminating IDRs, and continuing our investment in organic growth projects positions us well to improve our cost to capital, and to deliver long-term value for our investors.

Now, I'll turn it over to Pam to review our financial results and position..

Yes, thanks, Don. You turn to slide eight; it provides a summary of our capital expenditure program. We updated our 2017 organic growth capital expenditures forecast to a range of $1.8 billion to $2 billion, and that's up from $1.4 billion to $1.7 billion.

The Gathering and Processing segment now includes capital to support additional infrastructure in both the Delaware basin in the Southwest, and the Sherwood complex in the Marcellus basin.

The Logistics and Storage segment budget was also increased primarily to reflect the announced Ozark pipeline expansion project, and the dropdowns from the assets acquired from our sponsor in the first quarter.

Our maintenance capital forecast increased to approximately $150 million, an increase of $50 million related to the assets acquired during the quarter, including the Ozark pipeline and the terminal, pipeline, and storage assets purchased from MPC.

Turning to our financial highlights on slide nine, we reported adjusted EBITDA of $423 million, and distributable of $354 million for the first quarter of 2017. Approximately two-thirds of segment operating income for the quarter was generated by Gathering and Processing segment.

The bridge on slide 10 shows the change in adjusted EBITDA from the first quarter of 2016 compared to the first quarter of 2017. Since the prior year quarter, we increased adjusted EBITDA by $121 million.

The increase in the Logistics and Storage segment adjusted EBITDA was primarily driven by the addition of marine business acquired last year, and the terminal, pipeline, and storage assets acquired from MPC in the first quarter of 2017.

Higher volumes and increased NGL prices accounted for the majority of the change in the Gathering and Processing segment. Slide 11, provides a summary of key financial highlights and select balance sheet information. In February, we issued a total of $2.25 billion in 10-year and 30-year senior unsecured notes.

We used a significant portion of the net proceeds of this offering to fund the March 1st dropdown from MPC, and expect to use the remaining proceeds for general partnership purposes, including future dropdowns in capital expenditures.

While the first dropdown was funded with approximately 75% debt, we expect financing for the dropdowns in total to average approximately equal portions of debt and equity. We anticipate funding the equity portion though LP units issued to MPC, and do not expect to raise public equity for the dropdown.

At the end of the first quarter we had $265 million of cash on hand, approximately $2 billion available on our bank revolver, and the full $500 million available on our intercompany facility with MPC.

We also continue to utilize our ATM program during the quarter, opportunistically issuing 4.2 million new common [indiscernible] for net proceeds of approximately $148 million.

We're committed to maintaining a strong balance sheet and investment-grade credit profile, and ended the quarter with a leverage ratio of four times, which is consistent with our target of four times or less.

With $2.8 billion of liquidity and access to the capital markets, the partnership is well-positioned to finance its robust growth capital investment plan, and the remaining dropdown acquisitions in 2017.

On slide 12, we've revised our 2017 forecast based on acquisitions in the first quarter, and are expectations for producer volumes, forecasted commodity prices, and our strategy of deploying capital on a just-in-time basis.

Excluding the impact of future dropdowns, adjusted EBITDA if forecast in the range of $1.7 billion to $1.85 billion, and distributable cash flow is forecast in the range of $1.25 billion to $1.4 billion. We have a strong record of growing distributions to our unit holders.

Based on our quarterly financial performance, the Board of Directors of our general partner declared a distribution of $0.54 per common unit. The first quarter 2017 distribution represents a 7% increase over the same period last year, and marks the 17th consecutive quarterly increase since our initial public offering, in October of 2012.

We reaffirm our guidance of 12% to 15% distribution growth rate over the prior year, and double digit growth rate in 2018. With the strategic initiatives announced earlier this year, a robust backlog of organic projects, and a strong balance sheet, we remain confident in our long-term value proposition for our investors.

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

Thanks, Pam. As we open the call for 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 we'll now open the call to questions. Cynthia. .

Thank you. [Operator Instructions] And we have a question from Shneur Gershuni with UBS. You may begin..

Hi, good morning guys. I was wondering we can first start off with the dropdowns and financing strategies. Kind of on a go-forward basis here, do you see an opportunity for the dropdowns to accelerate? And then with respect to financing them, you talk about 50-50 debt equity [ph] and so forth.

Do the units get taken back to MPC or do we continue to issue equity at this stage right now?.

Yes, Shneur, it's Pam, and I'll take that question. So as we noted, the first drop was financed more heavily with debt, 75% with debt and 25% equity.

And so what we've said and we continue to reinforce is that through all the drops we would expect [technical difficulty] 50% debt and 50% equity, with all the equity being issued in new units issued to the sponsor.

And then with respect to organic growth, and we really would expect a similar profile in terms of funding, so 50% debt, 50% equity and we are confident with the liquidity that we have available to us and the ATM program that we've hand in place, we are confidence that we can issue the equity in the market the way we need to finance the plan..

And so, with respect to just that, when we sort of think that ATM issuance is on a go forward basis given that your leverage has held the improvement, do you layoff the ATM issuances outside of just that CapEx, I guess in other words to see something announce then we can expect that there were the issuances but outside of this big project or CapEx added in the backlog that we could see actually the level of ATM issuances a little bit?.

Well, we are at four times debt-to-EBITDA, which is the ratio that we said we like to maintain or be lower than that and again I think it was just a funding mix as we - the sponsor has certain motivations in terms of the equity it would like to take back in terms of managing the tax fleet that would have on drop.

So if the drops were more heavily financed with debt in the first part of the year dropped in the back half of the year maybe equity that we issued as in terms of new issuance to MPC and that's a substantial part of the plan for the year but in terms of the organic growth again we think that we can easily issue the equity that we need to through the ATM program..

We, will take it offline but as a follow-up question you sort of have been asked this question in the back, in the past and I was just wondering if you can sort of breakdown a little bit further but post drops there is kind of an expectation that you still be easy, still see opportunities to be able to grow.

I was wondering if you can sort of talk about the backlog but to break it up into the separate component you talked organic growth that's gathering the processing that has, do you see producer shifting like that and that's say potentially decelerated our backlog, what happened and then you know, secondly if you can specifically talk to kind of the crude logistic side relaxing at CapEx standards and so forth you seem to be backing away from this timeline on the acolyte facility, do you see other opportunities there, you can talk about the backlog on crude logistics also?.

Sure, this is Don. I think our strategy has not really changed in terms of what we are trying to accomplish which is to reduce our cost of capital or have a very attractive cost of capital.

We think the way you do that is you provide increasing visibility to our growth and we are very focused on building the backlog, right now there seem to be some really good opportunities in the Marcellus and also ones that are continuing to develop in the premium dollar basis, so we are focused on that right now.

When we get to the end of the year we will be a company after the dropdown we will be a company that as largely around sort of $3 billion of EBITDA largely half of that will be logistics and storage and half of that will be from the G&P side of the business and we are going to need to grow both sides of those businesses and we are looking at a number of opportunities some of them will be organic on the L&S side, but some of them may also include being involved in the M&A market to the extent that there are attractive assets that make a lot of sense in terms of the asset profile that we have and the opportunities that we see in the future.

So I would expect that the L&S side of the business will continue to be an important part of growing our organic growth and with an attractive cost of capital, I also think will be very well positioned to participate in acquisition, opportunities to the extent when and if those arise..

Okay, great. Thank you very much. I appreciate the color guys..

And our next question comes from Kristina Kazarian with Deutsche Bank. You may begin..

Good morning, guys..

Good morning, Kristina..

Hi, Kristina.

How are you?.

Good. Thank you. So, growth CapEx was up again because you guys got some good projects to end this quarter.

So, maybe honing my questions on some others today; first in the northeast, you guys have those throughputs and produced or when do you talked about earlier? Could you provide maybe a little more color on the interior deal and talk around opportunities to have other similarly structured project to some of the other regional players out there?.

So Kristina, this is Don.

I guess, you did note that our CapEx budget or forecast is up to about $2 billion and the sort of the key contributors or the key changes from the last time that we spoke one would be that Argo plant for 200 million cubic feet per day plant that we are planning to construct in the Delaware Basin adjacent to our Hidalgo plant.

Two other items would be sure with nine and sure with 10, so those are clearly very focused on and a result of the Antero Midstream Joint Venture and I will talk about that in just a second.

And then, I would say the other bucket of increase really relates to capital that's being spent growth capital that's being spent to support the dropdowns of the terminals and the pipelines that we already just dropped in the first quarter as well as the Ozark expansion.

So I mentioned that we are looking to expand that pipeline by 115,000 barrels a day that targeted completion date is the middle of 2018. So those sort of three or four items of the - the major items that have contributed to the increase in our forecast with respect to the Antero sure with Joint Venture we continue to be very enthusiastic about that.

We think it has positioned us with for the long-term to be able to plan around a geography with a major producer customer that gives us a lot of line of sight to grow not only in '18 but in beyond '18 and we think that's really an important part of growing our earnings backlog or organic growth backlog, so we can continue to provide that visibility to growth that I think all the investors that you all desire..

All right, and then my follow-up you alluded to or you mentioned Argo 1 as well and you called it 1 on the note of the Delaware does that mean maybe there now there are two, three coming. If you could help me think about the growth platform their and maybe also know other growth projects in the Southwest and [indiscernible] customer.

Now there is this cute fact so how do I think about other opportunities there as well?.

Yes, we are very focused again. I think the Delaware obviously is getting, is attracting a lot of capital right now. We really like our position Hidalgo performed brilliantly from the time that we brought that and commenced operations there and I would suggest that I think there is continuing opportunities.

We are not at a position yet to announce incremental plans but our team is very, very focused on expanding the producer customer base that we have there and identifying we will call it solutions to allow those producer customers to be able to go deploy their drilling a capital appropriately and to be able to do that with the confidence it will be gathered processed and find an end market that will give them an appropriate net back.

So I think we consistently said given where are the Permian kind of generally we would expect the majority of our capital or big piece of our capital will be deployed in Marcellus, but we expect to deploy more of our capital to kind of second place will be the southwest versus Eureka [ph] because we see that as the near term opportunity and we want to be well positioned Kristina to be able to grow with producer customers in that area..

Perfect. That's it from me today..

And the next question comes from Jeremy Tonet with JP Morgan. You may begin..

Good morning..

Good morning, Jeremy..

Just want to follow-up on your Appellation JV there. I mean, it seems like there is a lot of a processing capacity that you guys are looking to bring online there. I'm just wondering if you could provide a little bit more color as far as what you think the timeline to those expansions could look like and how utilization could ramp there..

Well, we've indicated that seven just came on; eight will come on in the third quarter. We expect nine and 10 will both come on stream in '18 sort of it, I won't say exactly six month intervals but that's kind of the pace at which we are going right now and I'm very confident that we won't be stopping there.

So we have a producer customer that has a very robust drilling program that they've publicly talked about and we expect to be there to support them as they continue to develop their resource..

Got it.

So the 1.6 capacity that you could develop there that you think it would continue to you know go at a similar pace every six months is that reasonable or is that a bit ambitious?.

I think that will really be dependent on our producer customer, I mean what I think what we really pride ourselves on is being able to deliver the facilities that our customers need, when they need them and we work very closely not only with Antero but we're working very closely with the other very key big and important players in that region.

So, to make sure that we're developing assets and put bringing them on line in a manner that allows them to maximize efficiently their production.

So we're working with obviously Range Resources at our Houston plant and Harmon Creek, we have we're actively engaged with other producer customers but there is a sense of urgency to get those plans completed and we are working as expeditiously as we tend to make sure that that happens..

Great, thanks and then just one quick follow on as far as the Harmon Creek wells for Range look good there, I was just wondering with this coming on what opportunities that could mean for you guys?.

Let me have Greg take that..

Thanks, this is Greg. We're really excited about the potential of the Range acreage and around the Harmon Creek area north of which is north of our traditional gathering area but you know the opportunities there is that with the pipeline system, we're building to continue to gather and grow with Range as they move to new areas to gather their gas.

We have the ability in the interim to utilize our Houston plant capacity and as Harmon Creek comes on line to actually you know move gas north or south of the ability to remove recover ethane, we will have the ability to produce C3 plus propane heavier products in pipeline that down to our Houston fractionators.

So it integrates nicely, it will give us more processing capacity to support Range and but also flexibility to move gas between both plants to make sure we maximize utilization..

That's it from me, thank you..

And our next question comes from John Edward with Credit Suisse. You may begin..

Yes good morning everybody thanks for taking my question and nice quarter.

I just want to just clarify and make sure you know confirm on the guidance, so the increase from the guidance that includes the drop-downs already done, the stakes, the acquisition of [indiscernible] Apple plus the joint venture with Antero Midstream is correct?.

That's correct, so if we think about the guidance on the EBITDA was up a couple $100 million, the way I would largely think about that would be that you know is $20 million a month was broadly what that - what that those drop down assets were contributing. So that's what gets you that increase for the remainder of the year.

You know DCF went up by about $100 million versus the $200 million that you saw in the EBITDA and that's really a function of the fact that the maintenance capital is increasing because of the incremental assets that we have and that we have incremental interest expense from the you know from the debt that we issued that in the first quarter..

Okay.

And then just also I know you commented a little bit on this on the MPC call but just sort of wanted to confirm on the timing of the drop downs in IDR exchanges that your expectation now that you think you will have everything done by the end of the year and then that I think there was a $350 million EBITDA drop that you were expecting sometime in the third quarter, is that still the expected trajectory?.

Yes. So as Gary and Tim has spoke about on the MPC call, we are working very diligently and MPC is working very diligently to ready those assets and us to receive them and they to drop them down.

And you know we are the I would say that there's nothing that's changed about our view of the sort of sense of urgency and that diligence around getting those assets prepared for drop.

There was some discussion I think you'll recall on that call about you know the sort of tax implications around fuels distribution and the qualifying income around the new regulations.

If something happened there that you know caused that to not have certainty around the qualifying income qualifications there you know I think Gary mentioned that there's a potential that there could be you know a very modest slip from end of 2017 the early 2018 to make sure that they didn't go fall of the qualifying income rules but I think the team is working on an assumption right now John that you know we would be completing all of these in 2017..

And John the only other point there is as I said earlier we've got you very cognizant of you know the tax reform language in fact the President and Mr.

Con [ph] and the Secretary of the Treasury yesterday just talked about you know possibly even going to 15% so, we have to be cognizant and I think any shareholder would recognize that the there's you know tax link is possibly of a couple $100 million by waiting, a month or two that would really make sense.

So, our expectations we will be ready by year end but we'll see you know what legislation and changes in federal policy do that real reflects the ultimate decision point..

Okay, so in other words Gary what you're saying is that from a tax perspective you know when tax policy is more clearly known you'll be able to finalize whether makes more sense to actually go ahead and take care of everything in 2017 for actually what makes logical sense to let some of that slip into 2018 is that kind of what you're saying.

That's what we're saying and you know it's a matter of a. Couple months swing, couple months swing saves you, you know couple $100 million or more then it, it's very logical sure that makes sense..

Okay. And then just last for me just on the kind of the just in terms of the integration of Ozark and you know volume expectations going forward just if you can you know kind of help give us some more color there..

Yes, so we acquired obviously in the first quarter. We are working on it it's a 230,000 barrel a day pipeline right now.

We are working on expanding capital to expand that but as I said the 115,000 barrels a day to take us up to 345 that's going to be done by the middle of 2018 and, we are confident that the large volume of throughput is already contracted or committed on that pipeline.

So, there was an open season related to the expansion, it was a successful open season and so as the owners of that pipe were very confident about the sort of revenue stream that will come from that.

We didn't give an EBITDA number when we bought those assets but we did I think indicate that we expected to have a mid-teen's return from that acquisition and that what include the incremental capital that we would spend to expand the capacity..

Okay, great. That's it for me. Thank you..

And our next question comes from Corey Goldman with Jefferies. You may begin..

Hey, good morning again guys. Just a quick follow-up to Kristina's question but first congrats on the new project on Delaware the Argo plant; I think MPC even some comments earlier on the call. Just wondering if there're any projects beyond, G&P that NPR is considering such as fractionation and or pipes may call it will be helpful..

Can you just repeat that question, Cory, I'm not sure I understood I'm not understood that..

So that beyond doddering and processing in the Delaware are there any downstream projects that you guys are considering like fractionation or just NGL take away..

Let me have Greg mention..

Yes, this is Greg. Obviously we need to as we continue to expand in the Delaware and it's a growth area for us we're excited about, we continually evaluate residue and NGL take away options currently those options are primarily to the Gulf Coast and connections to Waha Hub and into the NGL infrastructure. We'll always look at potential opportunities.

We obviously have build up fractionation in the Northeast, currently this capacity that we utilize on the Gulf. So I think it's something we will continually continue to evaluate to make sure that our producer customers have access for capacity and optionality to move products out of the basin..

Got it, okay that is helpful and then maybe just my follow up just on maybe references to John's question on EBITDA guidance, we have this conversation last quarter but if you just take the mid-point of your previous EBITDA range of that 1.575 billion, I mean you described 10 months of dropdown credit and also Ozark credit, and then call it six months of the Apple credit, with nine percent interest, that would speak to a midpoint at or even above the high end of your range right now.

So just wondering is there still a bit of conservatism in your EBITDA guidance number or other things in there that maybe we're just not seeing correctly?.

Yes I don't think there is, I don't think we have anything that we're concerned about that is downward pressure in the back, in the back half of the year or so I think that you know we wanted to provide a guidance figure that we had you know a lot of confidence in and I think that we have a lot of confidence in the numbers that we're providing to you..

Awesome okay, that is it from me guys. Thanks again..

And your next question comes from Michael Blum with Wells Fargo. You may begin..

Thanks. I wonder if you can provide any update you have on Centennial and then just generally some of the larger potential projects you identified when you bought the North West assets there..

Yes so on Centennial, the discussions continue between MPC and Enterprise, I think both companies believe that that is a viable option for and provides an alternative to producer customers, obviously their Mariner East 2 is nearing completion, so that provides access to the East Coast but we believe our producer customers also want access to the Gulf Coast through incremental access to the Gulf Coast and as we've commented before I think that we understand sort of the cost that it will be incurred to do a reversal, we understand the tariff that needs to be associated with that pipe to make it an attractive alternative to producer customers want to have an alternative destination for their products, that they should be you know that they should be making the appropriate level of commitments to make sure that that happens.

So you know my understanding is that Marathon is working with Enterprise to be able to secure those type of commitments, to make it a project that makes sense for all the parties involved..

Okay, great.

That's helpful and then just on I want to make sure if I understood the change in maintenance capital guidance, so I guess obviously trade methodology but historically if I look at your maintenance CapEx as a percentage of EBITDA it's running around 6%, 7% and so this was this latest dropdown by much higher rates, I'm just wondering are these assets requiring more maintenance than your typical asset or something you know like special situation going on, just trying to understand the maintenance capital change?.

Yes, this is Pam, and I will take that one.

So let's talk about that a little bit, so the assets in the gathering and processing business are very new, so they have very low maintenance, the assets that are being brought into the partnership from the sponsor you know our assets that has historically had about a run rate of maybe 14% of EBITDA run rate.

And so we're talking about Terminals, we're talking about pipelines and we're talking about in the Marine business bought for replacement capital now in terms of special items, we've highlighted that there's I would say a higher amount of maintenance capital that's being focused on horizontal directional drill for river crossings for maintenance and probably we're spending more on that in the near term than what we but we would on an ongoing basis.

So, and then the gathering and processing is really very small in terms of the maintenance so, it's really all related to the new assets that are coming into the partnership that have been you know historically. Spending what you would see in the gathering and processing segment. .

Okay, great. Thank you..

And the historical maintenance cap on directional drilling of river crossings this is a we believe the best in class operation and that's the way we operate pipelines and we feel it's very appropriate to go out and find on a preventive basis and replacement crossings. It's just money well spent for the long term..

Great. Thanks you guys. Very helpful. That all I have..

And our next question comes from Jerren Holder with Goldman Sachs. You may begin..

Hi, good morning.

Most of my questions have been answered but you know going to like 14 where you guys let's start year growth projects you have NGL pipeline expansions there for 2017 and 2018 in Marcellus, what does that refer to?.

That's providing us incremental capability, we're growing all of that or developing all of that incremental processing capacity it sure would and so, over time we're going to with all that incremental capacity that gets.

That gets built or constructed it sure would you're going to need to be able to move that up both ethane and the NGLs so that you know we can get appropriate ethane markets in the NGLs to fractionators either at Houston or Hopedale. So when we referred to that. That is one of the primary drivers of that capital..

So that's, that's like NGL pipes that takes NGLs to like Miner West, is that the right way to think about it?.

Well, right now if you think about how we process, we -- you know will process with say, Sherwood as an example so we get the residue gas, the residue gas gets on residue gas pipelines. We then move ethane you know that pipe up a pipeline that goes all the way to Majorsville and then continues on to Hopedale.

I'm sorry Houston we also have NGL pipes that go from Sherwood up that way they get to Majorsville and then that it really gets kind of a why if you will.

We fill up the Houston plant with those NGLs and fractionated and we also have the alternative to take it over to Hopedale and we just build another fractionation unit at Hopedale to be able to handle that so we did we move ethane and NGLS from Sherwood north to Majorsville and what we want to do is to make sure that we have ample capacity so that the ramp up in gas processing that we're doing at Sherwood and other plants.

We can handle those and get them to either an FA market or we can get them to our fractionation facilities so, that we can you know direct to most value for our customers..

Got it and as the follow up slide 10 which shows that EBITDA build up from first quarter 2016 to 2017 its shows $32 million for the first quarter drop down is they're seasonality baked into that I see that 32 represents one month but you guys guided to $250 million with their seasonality throughout the year for this particular group of assets..

I wouldn't think that there's a tremendous amount of seasonality. You keep in mind the first quarter of we had the Marine facility that was dropped last year at the end of the quarter and we have a benefit of that for the first year, the first, first quarter full quarter.

And then we just have the drop that occurred here at the beginning of March, but no, I wouldn't expect a significant amount of seasonality in businesses..

No, it really our average is pretty close to 20 to 20 million a month those assets..

Okay, so this 32 does reflect March 1, and March 31 there..

It does indeed..

Okay, okay that works for me thank you. Thank you very much..

And our next question comes from Brian Zarahn with Mizuho. You may begin..

On the Argo processing project, can you give a little more color on customer mix contract structure, maybe relative to Hidalgo?.

We haven't gone public with that information. I think that you know, one of the things that we feel really good about, Brian, in that region is that we partnered with Chevron and Cimarex on Hidalgo.

They are excellent partners, and they are continuing to grow in that [technical difficulty] other producer customers with whom we want to build relationships, and you can imagine that we're building relationships as it relates to Argo, but also to other plants that we might have an opportunity to construct in support of their drilling programs..

And then, I guess, turning to potential M&A activity and to supplement your organic growth in the Permian, how do you balance the desire to expand and diversify your footprint, but keep in mind some capital allocation needs and valuations for assets in the basin?.

I think that's a -- it's a good question you asked. I mean, I think that we have historically exercised very good discipline even in markets that we are hot; I think Legacy MPLX is a good example before the MarkWest combination. Bakken was the place to be -- everybody was deploying capital there.

There were all sorts of acquisition opportunities, and we ultimately did not make an acquisition there, because there wasn't something that we thought was either strategic enough to go pursue or that met the IRR hurdles that we thought were important that needed to be met as we were deploying our capital.

So, I would expect that we will have the same discipline in the Permian, Delaware area as people are deploying capital, we will look at opportunities, we want to make sure we have an opportunity to tighten those.

It's one of the reasons why we're really working hard on our cost of capital, making sure that we have a lower cost of capital as we possibly can, so that we are well-advantaged or well-positioned to participate, but acquisitions will need to pass the IRR hurdle tests as we deploy capital..

Thank you..

And our next question comes from Richard Roberts with Howard Weil. You may begin..

Hi, good morning guys. Just a quick follow-up, I guess, from an earlier question, but on the MPC call you mentioned that butane LT project wouldn't be moving forward right now, just given where the butane/octane spread is.

I was wondering if you could just give us an update maybe on what that bucket of potential projects looks like that you talked about at the Analyst Day back in 2015. So, I guess of the 6 billion to 9 billion that was highlighted, that LT project was the largest.

Has anything else moved in or moved out or any update you can give us maybe when some of those projects might be moving forward?.

Yes, I mean that when that information was presented, the world was -- it was very different even a year and a half ago. I think we were presenting some of those projects as an example of opportunity sets that we could pursue or that look like they might be potential. The world has changed a lot in those 18 months.

The LT project as I mentioned, I think it was a -- there was a question on the MPC call, you know right now we don't see the differential between butane and octane. That differential is not great enough to support the economics of that type of capital expenditure right now.

That doesn't mean it may not in the future, but the opportunity set has also -- or the -- where people or producer customers are deploying capital has changed dramatically; 18 months ago, the Permian and the Delaware were not areas where lots of capital was going, and so we want to make sure one of the things that we write it ourselves on and MarkWest has been fantastic at has been being close to customers, solving problems for them, understanding their needs and providing a solution, and our focus on being close to customers, developing more producer relationships and providing solutions will continue, and my position is the list or the opportunities that will continue to evolve as new opportunities and as the commodity world changes, and as the demand/supply profile changes in the United States and the rest of the world..

Thanks, and that's helpful. And then, maybe just to hit on [indiscernible] one more time.

So, on the -- I guess at the Analyst Day last month from enterprise [indiscernible] beginning some kind of announcement of a project there very soon, and if I read the tone on the MPC call correctly this morning, it didn't seem quite as optimistic that we are beginning something eminently.

So I'm curious as anything changed in sort of the conversations you'd been having over the past couple of weeks, or is there still an opportunity to have something happen soon or shall we thinking about this as more of an evolving and maybe a longer long-term process? Thank you..

Well, I think both parties have -- are still very enthusiastic and have high hopes, or are optimistic that something will happen here. I guess it -- a reversal of that pipeline is for the benefit of producer customer.

So, at the end of the day, they are the ones that have the volumes that are going to move on the pipe, and we are working, and I know enterprise is working with producer customers to understand what their needs are, what their requirements are, and what sort of -- their available volumes are to support a project like this.

And when all the parties get to a point where they are very comfortable with sort of those volumes, you know, on the MPC enterprise side they need enough volume to provide a reasonable return on a project that's going to require capital to do the reversal, and on the producer customer side, they need to be very comfortable in making a commitment over a period of time that they can realistically support.

And so, that's where we are. I don't think anything unusual has happened in the last month or two that causes either party MPC or enterprise to not believe that a project can coexist with Mariner East 2, but you do need volumes in order to support the economics of such a project..

That's great. Thanks very much guys..

And we have no further questions at this time. I will now turn the call over to Lisa Wilson for closing remarks..

Thank you, Sudiya [ph], and thank you for joining us today, and your interest in MPLX. Should you have additional questions or like clarification on any of the topics discussed this morning, Doug Wendt, Denise Myers and I will be available to take your calls. Thank you..

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for your participation. You may now disconnect..