MPLX Might Become The Best Compounder Among MLPs

2025-03-16 01:06:53 ET

Summary

• MPLX, formed by Marathon Petroleum, has grown into a major midstream player with strong profitability metrics and a significant presence in natural gas, NGLs, and crude oil.
• The company’s "NGL wellhead to water strategy" aims to integrate its NGL system, requiring $2.5B in CapEx with mid-teens returns.
• Despite high valuation metrics, MPLX excels in profitability, boasting top-tier gross, EBITDA, and net margins, and a 6.8% distribution yield.
• Risks include dependency on Marathon Petroleum and potential impacts from the transition to greener energy, but strong capital discipline and expansion plans make MPLX a buy.

Overview

MPLX ( MPLX ) was formed by Marathon Petroleum ( MPC ) back in 2012, in order to split and manage its midstream assets as a Master Limited Partnership that could generate strong cash flows and tax advantages. The earliest iteration had primarily assets from Marathon such as transportation, storage, etc., laying the foundations for the partnership. The company has since grown into a major midstream player, especially with the $20 billion acquisition of MarkWest Energy back in 2015. Marathon still holds around 63.3% of MPLX’s units....

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