MPLX LP - FORM 10-Q - November 2, 2015

Attached files

file	filename
EX-31.1 - EXHIBIT 31.1 - MPLX LP	mplx-2015930xex311.htm
EX-32.2 - EXHIBIT 32.2 - MPLX LP	mplx-2015930xex322.htm
EX-32.1 - EXHIBIT 32.1 - MPLX LP	mplx-2015930xex321.htm
EX-31.2 - EXHIBIT 31.2 - MPLX LP	mplx-2015930xex312.htm

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________________

FORM 10-Q

_____________________________________________

(Mark One)



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2015



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-35714

_____________________________________________

MPLX LP

(Exact name of registrant as specified in its charter)

_____________________________________________



Delaware		45-5010536
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

200 E. Hardin Street, Findlay, Ohio		45840
(Address of principal executive offices)		(Zip code)

(419) 672-6500

(Registrant’s telephone number, including area code)

_____________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer	x	Accelerated filer	¨

Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ¨ No x

MPLX LP had 80,336,711 common units and 1,639,525 general partner units outstanding at October 30, 2015.

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MPLX LP

Form 10-Q

Quarter Ended September 30, 2015

INDEX



	Page
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Statements of Income (Unaudited)	2
Consolidated Balance Sheets (Unaudited)	3
Consolidated Statements of Cash Flows (Unaudited)	4
Consolidated Statements of Equity (Unaudited)	5
Notes to Consolidated Financial Statements (Unaudited)	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3. Quantitative and Qualitative Disclosures about Market Risk	30
Item 4. Controls and Procedures	30

PART II – OTHER INFORMATION
Item 1. Legal Proceedings	31
Item 1A. Risk Factors	31
Item 2. Unregistered Sales of Equity Securities	31
Item 6. Exhibits	32
Signatures	34

Unless the context otherwise requires, references in this report to “MPLX LP,” the “Partnership,” “we,” “our,” “us,” or like terms refer to MPLX LP and its subsidiaries, including MPLX Operations LLC (“MPLX Operations”) and MPLX Terminal and Storage LLC (“MPLX Terminal and Storage”), both wholly-owned subsidiaries, and MPLX Pipe Line Holdings LP (“Pipe Line Holdings”), of which as of September 30, 2015 MPLX LP owned a 99.5 percent general partner interest. Pipe Line Holdings owns 100 percent of Marathon Pipe Line LLC (“MPL”) and Ohio River Pipe Line LLC (“ORPL”). References to “MPC” refer collectively to Marathon Petroleum Corporation and its subsidiaries, other than the Partnership.

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Part I—Financial Information

Item 1. Financial Statements

MPLX LP

Consolidated Statements of Income (Unaudited)



	Three Months Ended September 30,					Nine Months Ended September 30,
(In millions, except per unit data)	2015			2014		2015			2014
Revenues and other income:
Sales and other operating revenues	$	18.2		$	16.6	$	50.2		$	52.2
Sales to related parties	122.7			114.1		360.7			336.0
Loss on sale of assets	—			—		(0.2		)	—
Other income	1.4			1.5		4.2			4.1
Other income - related parties	6.3			5.8		18.8			16.9
Total revenues and other income	148.6			138.0		433.7			409.2
Costs and expenses:
Cost of revenues (excludes items below)	41.9			40.6		101.4			102.9
Purchases from related parties	26.5			23.7		75.1			71.4
Depreciation	12.7			12.5		38.1			37.5
General and administrative expenses	21.1			15.3		57.7			47.1
Other taxes	(0.7		)	1.7		5.5			5.5
Total costs and expenses	101.5			93.8		277.8			264.4
Income from operations	47.1			44.2		155.9			144.8
Net interest and other financial costs	5.2			1.1		16.7			3.0
Income before income taxes	41.9			43.1		139.2			141.8
Provision for income taxes	0.1			—		0.1			0.1
Net income	41.8			43.1		139.1			141.7
Less: Net income attributable to MPC-retained interest	0.3			14.0		0.8			49.6
Net income attributable to MPLX LP	41.5			29.1		138.3			92.1
Less: General partner’s interest in net income attributable to MPLX LP	8.6			1.5		19.4			3.7
Limited partners’ interest in net income attributable to MPLX LP	$	32.9		$	27.6	$	118.9		$	88.4

Per Unit Data (See Note 5)
Net income attributable to MPLX LP per limited partner unit:
Common - basic	$	0.41		$	0.37	$	1.42		$	1.16
Common - diluted	0.41			0.37		1.42			1.16
Subordinated - basic and diluted	—			0.37		1.36			1.16
Weighted average limited partner units outstanding:
Common - basic	80.4			37.1		55.9			37.0
Common - diluted	80.4			37.1		55.9			37.1
Subordinated - basic and diluted	—			37.0		24.5			37.0
Cash distributions declared per limited partner common unit	$	0.4700		$	0.3575	$	1.3200		$	1.0275

The accompanying notes are an integral part of these consolidated financial statements.

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MPLX LP

Consolidated Balance Sheets (Unaudited)



(In millions)	September 30, 2015			December 31, 2014
Assets
Current assets:
Cash and cash equivalents	$	90.4		$	27.3
Receivables	11.8			10.2
Receivables from related parties	54.9			41.0
Materials and supplies inventories	11.8			11.7
Other current assets	4.1			7.0
Total current assets	173.0			97.2
Property, plant and equipment, net	1,109.2			1,008.6
Goodwill	104.7			104.7
Other noncurrent assets	4.2			4.0
Total assets	$	1,391.1		$	1,214.5
Liabilities
Current liabilities:
Accounts payable	$	67.6		$	42.2
Payables to related parties	25.1			20.2
Deferred revenue - related parties	30.5			30.5
Accrued taxes	6.3			5.2
Long-term debt due within one year	0.8			0.8
Accrued interest payable	2.5			0.6
Other current liabilities	2.7			1.1
Total current liabilities	135.5			100.6
Long-term deferred revenue - related parties	8.4			4.0
Long-term debt	752.5			644.0
Deferred credits and other liabilities	1.6			2.2
Total liabilities	898.0			750.8
Commitments and contingencies (see Note 13)
Equity
Common unitholders - public (23.4 million units issued and outstanding)	647.1			639.0
Common unitholder - MPC (57.0 million and 20.0 million units issued and outstanding)	492.7			261.1
Subordinated unitholder - MPC (0 and 37.0 million units issued and outstanding)	—			217.5
General partner - MPC (1.6 million units issued and outstanding)	(652.5		)	(659.4		)
Total MPLX LP partners’ capital	487.3			458.2
Noncontrolling interest retained by MPC	5.8			5.5
Total equity	493.1			463.7
Total liabilities and equity	$	1,391.1		$	1,214.5

The accompanying notes are an integral part of these consolidated financial statements.

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MPLX LP

Consolidated Statements of Cash Flows (Unaudited)



	Nine Months Ended September 30,
(In millions)	2015			2014
Increase (decrease) in cash and cash equivalents
Operating activities:
Net income	$	139.1		$	141.7
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	38.1			37.5
Asset retirement expenditures	(0.7		)	(1.0		)
Net loss on disposal of assets	0.2			—
Changes in:
Current receivables	(1.6		)	3.3
Materials and supplies inventories	(0.1		)	0.7
Current accounts payable and accrued liabilities	12.7			0.9
Receivables from / liabilities to related parties	(4.6		)	7.2
All other, net	1.8			—
Net cash provided by operating activities	184.9			190.3
Investing activities:
Additions to property, plant and equipment	(121.1		)	(47.1		)
Disposal of assets	0.4			—
All other, net	1.6			4.0
Net cash used in investing activities	(119.1		)	(43.1		)
Financing activities:
Long-term debt - borrowings	528.2			270.0
- repayments	(415.7		)	(15.6		)
Debt issuance costs	(4.4		)	—
Net proceeds from equity offerings	1.3			—
Quarterly distributions to unitholders and general partner	(111.6		)	(75.2		)
Quarterly distributions to noncontrolling interest retained by MPC	(0.5		)	(38.3		)
Distributions related to purchase of additional interest in Pipe Line Holdings	—			(310.0		)
Net cash used in financing activities	(2.7		)	(169.1		)
Net increase (decrease) in cash and cash equivalents	63.1			(21.9		)
Cash and cash equivalents at beginning of period	27.3			54.1
Cash and cash equivalents at end of period	$	90.4		$	32.2

The accompanying notes are an integral part of these consolidated financial statements.

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MPLX LP

Consolidated Statements of Equity (Unaudited)



	Partnership
(In millions)	Common Unitholders Public			Common Unitholder MPC			Subordinated Unitholder MPC			General Partner MPC			Noncontrolling Interest Retained by MPC			Total
Balance at December 31, 2013	$	412.0		$	57.4		$	209.3		$	(32.5	)	$	467.9		$	1,114.1
Purchase of additional interest in Pipe Line Holdings	—			—			—			(172.5		)	(137.5		)	(310.0		)
Net income	23.8			20.4			44.2			3.7			49.6			141.7
Quarterly distributions to unitholders and general partner	(19.6		)	(16.8		)	(36.4		)	(2.4		)	—			(75.2		)
Quarterly distributions to noncontrolling interest retained by MPC	—			—			—			—			(38.3		)	(38.3		)
Non-cash contribution from MPC	—			—			—			—			0.1			0.1
Equity-based compensation	0.9			—			—			—			—			0.9
Balance at September 30, 2014	$	417.1		$	61.0		$	217.1		$	(203.7	)	$	341.8		$	833.3

Balance at December 31, 2014	$	639.0		$	261.1		$	217.5		$	(659.4	)	$	5.5		$	463.7
Issuance of units under ATM Program	1.3			—			—			—			—			1.3
Net income	34.6			36.2			48.1			19.4			0.8			139.1
Quarterly distributions to unitholders and general partner	(28.9		)	(24.7		)	(45.5		)	(12.5		)	—			(111.6		)
Quarterly distributions to noncontrolling interest retained by MPC	—			—			—			—			(0.5		)	(0.5		)
Subordinated unit conversion	—			220.1			(220.1		)	—			—			—
Equity-based compensation	1.1			—			—			—			—			1.1
Balance at September 30, 2015	$	647.1		$	492.7		$	—		$	(652.5	)	$	5.8		$	493.1

The accompanying notes are an integral part of these consolidated financial statements.

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Notes to Consolidated Financial Statements (Unaudited)

1. Description of the Business and Basis of Presentation

Description of the Business—MPLX LP is a fee-based, growth-oriented master limited partnership formed to own, operate, develop and acquire pipelines and other midstream assets related to the transportation and storage of crude oil, refined products and other hydrocarbon-based products. As of September 30, 2015, our assets consisted of a 99.5 percent indirect interest in a network of common carrier crude oil and product pipeline systems and associated storage assets in the Midwest and Gulf Coast regions of the United States. We also own a 100 percent interest in a butane cavern in Neal, West Virginia with approximately one million barrels of natural gas liquids storage capacity.

Our operations consist of one reportable segment.

Basis of Presentation—Our financial position, results of operations and cash flows consist of consolidated MPLX LP activities and balances. All significant intercompany transactions and accounts have been eliminated.

The accompanying interim consolidated financial statements are unaudited; however, in the opinion of our management, these statements reflect all adjustments necessary for a fair statement of the results for the periods reported. All such adjustments are of a normal, recurring nature unless otherwise disclosed. These interim consolidated financial statements, including the notes, have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission(“SEC”) applicable to interim period financial statements and do not include all of the information and disclosures required by accounting principles generally accepted in the United States (“U.S. GAAP”) for complete financial statements.

These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2014. The results of operations for the three months and nine months ended September 30, 2015 are not necessarily indicative of the results to be expected for the full year.

In preparing our consolidated statements of equity, net income attributable to MPLX LP is allocated to unitholders in accordance with their respective ownership percentages. However, when distributions related to the incentive distribution rights are made, earnings equal to the amount of those distributions are first allocated to the general partner before the remaining earnings are allocated to the unitholders based on their respective ownership percentages. The allocation of net income attributable to MPLX LP for purposes of calculating net income per limited partner unit is described in Note 5.

2. Accounting Standards

Recently Adopted

In April 2015, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update to simplify the presentation of debt issuance costs. The update requires that debt issue costs for term debt are to be presented on the balance sheet as a direct reduction of the term debt liability as opposed to a deferred charge within other noncurrent assets. The change is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2015. Retrospective application is required and early adoption is permitted. Our early adoption of this standard in the second quarter of 2015 did not have a material impact on our consolidated results of operations, financial position or cash flows. In August 2015, the FASB subsequently issued a clarification as to the handling of debt issuance costs related to line-of-credit arrangements that allows for the presentation of these costs as an asset which would be amortized over the term of the line-of-credit arrangements. This clarification did not have any impact on our consolidated results of operations, financial position or cash flows.

In April 2014, the FASB issued an accounting standards update that redefines the criteria for determining discontinued operations and introduces new disclosures related to these disposals. The updated definition of a discontinued operation is the disposal of a component (or components) of an entity or the classification of a component (or components) of an entity as held for sale that represents a strategic shift for an entity and has (or will have) a major impact on an entity’s operations and financial results. The standard requires disclosure of additional financial information for discontinued operations and individually material components not qualifying for discontinued operation presentation, as well as information regarding an entity’s continuing involvement with the discontinued operation. The accounting standards update was effective prospectively for annual periods beginning on or after December 15, 2014, and interim periods within those years. Adoption of this standards update in the first quarter of 2015 did not impact our consolidated results of operations, financial position or cash flows.

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Not Yet Adopted

In September 2015, the FASB issued an accounting standards update that eliminates the requirement to restate prior period financial statements for measurement period adjustments. This update requires that the cumulative impact of a measurement period adjustment be recognized in the reporting period in which the adjustment is identified. The standard is effective for interim and annual periods beginning after December 15, 2015 with early application permitted. Adoption of this standard is not expected to have a material impact on our consolidated results of operations, financial position or cash flows.

In April 2015, the FASB issued an accounting standards update requiring that the earnings of transferred net assets prior to the dropdown date of the net assets to a master limited partnership be allocated entirely to the general partner when calculating earnings per unit under the two class method. Under this guidance, previously reported earnings per unit of the limited partners will not change as a result of a dropdown transaction. The change is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2015. Retrospective application is required and early adoption is permitted.

In April 2015, the FASB issued an accounting standards update clarifying whether a customer should account for a cloud computing arrangement as an acquisition of a software license or as a service arrangement by providing characteristics that a cloud computing arrangement must have in order to be accounted for as a software license acquisition. The change is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2015. Retrospective or prospective application is allowed and early adoption is permitted. Adoption of this standard is not expected to have a material impact on our consolidated results of operations, financial position or cash flows.

In February 2015, the FASB issued an accounting standards update making targeted changes to the current consolidation guidance. The new standard changes the considerations related to substantive rights, related parties, and decision making fees when applying the variable interest entity consolidation model and eliminates certain guidance for limited partnerships and similar entities under the voting interest consolidation model. The update is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2015. Early adoption is permitted. Adoption of this standard is not expected to have a material impact on our consolidated results of operations, financial position or cash flows.

In August 2014, the FASB issued an accounting standards update requiring management to assess an entity’s ability to continue as a going concern and to provide related footnote disclosures in certain circumstances. Management will be required to assess if there is substantial doubt about an entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. Disclosures will be required if conditions give rise to substantial doubt and the type of disclosure will be determined based on whether management’s plans will be able to alleviate the substantial doubt. The accounting standards update will be effective for the first annual period ending after December 15, 2016, and for annual periods and interim periods thereafter with early application permitted.

In May 2014, the FASB issued an accounting standards update for revenue recognition that is aligned with the International Accounting Standards Board’s revenue recognition standard. The guidance in the update states that revenue is recognized when a customer obtains control of a good or service. Recognition of the revenue will involve a multiple step approach including identifying the contract, identifying the separate performance obligations, determining the transaction price, allocating the price to the performance obligations and then recognizing the revenue as the obligations are satisfied. Additional disclosures will be required to provide adequate information to understand the nature, amount, timing and uncertainty of reported revenues and revenues expected to be recognized. The accounting standards update will be effective on a retrospective or modified retrospective basis for annual reporting periods beginning after December 15, 2017, and interim periods within those years, with early adoption permitted no earlier than January 1, 2017. We are in the process of determining the impact of the new standard on our consolidated financial statements.

3. Acquisitions

Pending Merger with Markwest Energy Partners, L.P.

On July 11, 2015, MPLX LP and MarkWest Energy Partners, L.P. (“MWE”) entered into a definitive merger agreement (the “Merger Agreement”) whereby MWE would become a wholly owned subsidiary of MPLX LP (the “Merger”). The Merger is structured as a unit-for-unit transaction plus a one-time cash payment to MWE unitholders. At the effective time of the Merger, each common unit of MWE (each, a “Common Unit”) issued and outstanding will be converted into the right to receive 1.09 common units of MPLX LP representing limited partner interests in MPLX LP and cash in an amount obtained by dividing $675.0 million by the number of Common Units (including certain converted equity awards) plus the number of Class B Units of MWE. The Class A Units of MWE, which are all owned by wholly owned subsidiaries of MWE, issued and outstanding immediately prior to the effective time of the Merger will be converted into newly created Class A Units of MPLX LP in accordance with the Class A exchange ratio provided in the Merger Agreement. Each Class B Unit of MWE issued and outstanding immediately prior to the effective time of the Merger will be converted into a newly created Class B Unit of MPLX LP.

As of September 30, 2015, the implied total enterprise value for MWE was approximately $13.7 billion, including the assumption of debt of approximately $4.6 billion. MPC would contribute $675.0 million of cash to us to fund the one-time cash payment to MWE unitholders. The transaction between MPLX LP and MWE, which is subject to approval by MWE unitholders and to customary closing conditions and regulatory approvals, is expected to close in the fourth quarter of 2015. MPLX LP has incurred $4.3 million of acquisition costs through September 30, 2015, which are recorded in general and administrative expenses.

Acquisitions of Interests in Pipe Line Holdings

Effective December 1, 2014, we purchased a 22.875 percent interest in Pipe Line Holdings from subsidiaries of MPC for consideration of $600.0 million, which was financed through borrowings under our bank revolving credit facility. In addition, we accepted a contribution of a 7.625 percent interest in Pipe Line Holdings from a subsidiary of MPC in exchange for the issuance of equity valued at $200.0 million. We recorded the combined 30.5 percent interest at its historical carrying value of $334.8 million and the excess cash paid and equity contributed over historical carrying value of $465.2 million as a decrease to general partner equity. Beginning December 1, 2014, our consolidated financial statements reflect the 99.5 percent general partner interest in Pipe Line Holdings owned by MPLX LP, while the 0.5 percent limited partner interest held by MPC is reflected as a noncontrolling interest.

On March 1, 2014, we acquired a 13 percent interest in Pipe Line Holdings from MPC for consideration of $310.0 million, which was funded with $40.0 million of cash on hand and $270.0 million of borrowings on our bank revolving credit facility. We recorded the 13 percent interest in Pipe Line Holdings at its historical carrying value of $137.5 million and the excess cash paid over historical carrying value of $172.5 million as a decrease to general partner equity.

These acquisitions were approved by the conflicts committee of the board of directors of our general partner, which is comprised entirely of independent directors. Changes in MPLX LP’s equity resulting from changes in its ownership interest in Pipe Line Holdings for the three months and nine months ended September 30, 2015 and 2014 were as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2015		2014		2015		2014
Net income attributable to MPLX LP	$	41.5	$	29.1	$	138.3	$	92.1
Transfer to noncontrolling interest retained by MPC:
Decrease in general partner-MPC equity for purchases of additional interest in Pipe Line Holdings	—		—		—		(172.5		)
Change from net income attributable to MPLX LP and transfer to noncontrolling interest retained by MPC	$	41.5	$	29.1	$	138.3	$	(80.4	)

4. Related Party Agreements and Transactions

Our related parties include:


•	MPC, which refines, markets and transports crude oil and petroleum products, primarily in the Midwest, Gulf Coast, East Coast and Southeast regions of the United States.


•	Centennial Pipeline LLC (“Centennial”), in which MPC has a 50 percent interest. Centennial owns a common carrier products pipeline and storage facility.


•	Muskegon Pipeline LLC (“Muskegon”), in which MPC has a 60 percent interest. Muskegon owns a common carrier products pipeline.

Related Party Agreements

We have various long-term, fee-based commercial agreements with MPC under which we provide pipeline transportation and storage services to MPC, and MPC has committed to provide us with minimum quarterly throughput and storage volumes of crude oil and refined products and minimum storage volumes of butane. For additional information regarding our commercial and other agreements with MPC, see Item 1. Business in our Annual Report on Form 10-K for the year ended December 31, 2014.

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We believe the terms and conditions under our agreements with MPC are generally comparable to those with unrelated parties.

New Agreements

On September 17, 2015, MPL entered into an amendment (the “First Amendment”) to its existing Patoka, Illinois tank farm Storage Services Agreement with MPC dated September 24, 2012 (the “Storage Services Agreement”). Under the Storage Services Agreement, MPC pays a monthly fee to store crude oil at MPL’s Patoka, Illinois tank farm. MPC’s fees under the Storage Services Agreement are for the use of the available shell capacity of MPL’s Patoka, Illinois tank farm, regardless of whether MPC fully utilizes all of its contractual capacity. The First Amendment provides for an increase in available shell capacity at the Patoka, Illinois tank farm from 1,386,000 barrels to 2,626,000 barrels due to the addition of four newly constructed tanks at the facility.

Effective June 11, 2015, MPL entered into a transportation services agreement with MPC pursuant to which MPL will charge fees to MPC, at applicable Federal Energy Regulatory Commission tariff rates, for transporting products on the Cornerstone pipeline system and related Utica build-out projects. MPC will be obligated to transport certain minimum quarterly volumes of products on the associated pipeline systems. If MPC fails to transport its minimum volume during any quarter, then MPC will pay MPL a quarterly deficiency payment. The amount of any quarterly deficiency payment paid by MPC may be applied as a credit for any volumes transported on the applicable pipeline system in excess of MPC’s minimum volume commitment during any of the succeeding four quarters, after which time any unused credits will expire. Upon the expiration or termination of this agreement, MPC will have the opportunity to apply any remaining credit amounts until the completion of the succeeding four quarter period, without regard to the minimum volume commitment under the agreement. This agreement has an initial term of 15 years after the project’s in-service date and automatically renews for up to two renewal terms of five years each unless either party provides the other party with written notice of its intent to terminate at least six months prior to the end of the primary term or any renewal term, as applicable.

We operate various pipeline systems owned by MPC under operating services agreements. Under the agreements the Partnership receives a fee for operating the assets and is generally reimbursed for all direct and indirect costs associated with operating the assets. On January 1, 2015, MPC and MPL amended the Amended and Restated Operating Agreement to reflect the transfer of certain assets from MPC to Hardin Street Transportation LLC (“HST”), an indirect, wholly-owned subsidiary of MPC. This amended agreement, with an annual operating fee of $0.6 million, now covers only the assets not transferred to HST. Also on January 1, 2015, MPL entered into a new agreement with HST (the “HST Operating Agreement”) for operation of the transferred assets with an annual fee of $12.2 million. The HST Operating Agreement has an initial term of one year and automatically renews for additional one-year terms, unless either party provides the other party with written notice of its intent to terminate the agreement at least six months prior to the end of the initial term or any renewal term. In combination, the amended and new agreement did not change the fees received by MPL or the services provided under the agreements.

Related Party Transactions

Sales to related parties were as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2015		2014		2015		2014
MPC	$	122.7	$	114.1	$	360.7	$	336.0

Related party sales to MPC consist of crude oil and refined products pipeline transportation services based on regulated tariff rates and storage services based on contracted rates. Under our transportation services agreements, if MPC fails to transport its minimum throughput volumes during any quarter, then MPC will pay us a deficiency payment equal to the volume of the deficiency multiplied by the tariff rate then in effect. The deficiency amounts are recorded as deferred revenue-related parties. MPC may then apply the amount of any such deficiency payments as a credit for volumes transported on the applicable pipeline system in excess of its minimum volume commitment during the following four or eight quarters under the terms of the applicable transportation services agreement. We recognize revenues for the deficiency payments when credits are used for volumes transported in excess of minimum quarterly volume commitments, when it becomes impossible to physically transport volumes necessary to utilize the credits or upon the expiration of the credits. The use or expiration of the credits is a decrease in deferred revenue-related parties.

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The revenue received for operating pipelines for related parties is included in other income-related parties on the consolidated statements of income were as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2015		2014		2015		2014
MPC	$	6.1	$	5.5	$	17.9	$	16.0
Centennial	0.2		0.3		0.8		0.8
Muskegon	—		—		0.1		0.1
Total	$	6.3	$	5.8	$	18.8	$	16.9

MPC provides executive management services and certain general and administrative services to us under the terms of the omnibus agreement. Charges for services included in purchases from related parties primarily relate to services that support our operations and maintenance activities, as well as compensation expenses. These charges were as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2015		2014		2015		2014
MPC	$	6.6	$	6.0	$	18.4	$	18.1

Charges for services included in general and administrative expenses primarily relate to services that support our executive management, accounting and human resources activities. These charges were as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2015		2014		2015		2014
MPC	$	8.1	$	7.8	$	24.2	$	23.1

In addition, some service costs related to engineering services are associated with assets under construction. These costs added to property, plant and equipment were as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2015		2014		2015		2014
MPC	$	3.2	$	1.9	$	9.4	$	4.1

MPLX LP contracts employee services from MPC under employee services agreements. Expenses incurred under these agreements are shown in the table below by the income statement line where they were recorded. The costs of personnel directly involved in or supporting operations and maintenance activities are classified as purchases from related parties. The costs of personnel involved in executive management, accounting and human resources activities are classified as general and administrative expenses.

Employee services expenses from related parties were as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2015		2014		2015		2014
Purchases from related parties	$	19.9	$	17.7	$	56.7	$	53.3
General and administrative expenses	6.1		5.6		20.2		16.6
Total	$	26.0	$	23.3	$	76.9	$	69.9

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Receivables from related parties were as follows:



(In millions)	September 30, 2015		December 31, 2014
MPC	$	54.3	$	40.5
Centennial	0.5		0.3
Muskegon	0.1		0.2
Total	$	54.9	$	41.0

Payables to related parties were as follows:



(In millions)	September 30, 2015		December 31, 2014
MPC	$	24.6	$	20.1
Centennial	0.5		0.1
Total	$	25.1	$	20.2

During the nine months ended September 30, 2015 and 2014, MPC did not ship its minimum committed volumes on certain of our pipeline systems. In addition, capital projects we are undertaking at the request of MPC are reimbursed in cash and recognized in income over the remaining term of the applicable transportation services agreements. The deferred revenue-related parties balance associated with the minimum volume deficiencies and project reimbursements were as follows:



(In millions)	September 30, 2015		December 31, 2014
Minimum volume deficiencies - MPC	$	33.7	$	29.9
Project reimbursements - MPC	5.2		4.6
Total	$	38.9	$	34.5

5. Net Income Per Limited Partner Unit

Net income per unit applicable to common limited partner units and to subordinated limited partner units is computed by dividing the respective limited partners’ interest in net income attributable to MPLX LP by the weighted average number of common units and subordinated units outstanding. Because we have more than one class of participating securities, we use the two-class method when calculating the net income per unit applicable to limited partners. The classes of participating securities include common units, subordinated units, general partner units, certain equity-based compensation awards and incentive distribution rights.

As discussed further in Note 6, the subordinated units, all of which were owned by MPC, were converted into common units during the third quarter. For purposes of calculating net income per unit, the subordinated units were treated as if they converted to common units on July 1, 2015.



	Three Months Ended September 30,					Nine Months Ended September 30,
(In millions)	2015			2014		2015		2014
Net income attributable to MPLX LP	$	41.5		$	29.1	$	138.3	$	92.1
Less: General partner’s distributions declared (including IDRs) ⁽¹⁾	8.8			1.5		19.0		3.4
Limited partners’ distributions declared on common units ⁽¹⁾	37.7			13.2		74.6		38.0
Limited partner’s distributions declared on subordinated units ⁽¹⁾	—			13.2		31.4		38.0
Undistributed net income (loss) attributable to MPLX LP	$	(5.0	)	$	1.2	$	13.3	$	12.7


⁽¹⁾	See Note 6 for distribution information.

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	Three Months Ended September 30, 2015
(In millions, except per unit data)	General Partner			Limited Partners’ Common Units			Limited Partner’s Subordinated Units		Total
Basic and diluted net income attributable to MPLX LP per unit:
Net income attributable to MPLX LP:
Distributions declared (including IDRs)	$	8.8		$	37.7		$	—	$	46.5
Undistributed net loss attributable to MPLX LP	(0.1		)	(4.9		)	—		(5.0		)
Net income attributable to MPLX LP ⁽¹⁾	$	8.7		$	32.8		$	—	$	41.5
Weighted average units outstanding:
Basic	1.6			80.4			—		82.0
Diluted	1.6			80.4			—		82.0
Net income attributable to MPLX LP per limited partner unit:
Basic				$	0.41		$	—
Diluted				$	0.41		$	—



	Three Months Ended September 30, 2014
(In millions, except per unit data)	General Partner		Limited Partners’ Common Units		Limited Partner’s Subordinated Units		Total
Basic and diluted net income attributable to MPLX LP per unit:
Net income attributable to MPLX LP:
Distributions declared (including IDRs)	$	1.5	$	13.2	$	13.2	$	27.9
Undistributed net income attributable to MPLX LP	0.3		0.5		0.4		1.2
Net income attributable to MPLX LP ⁽¹⁾	$	1.8	$	13.7	$	13.6	$	29.1
Weighted average units outstanding:
Basic	1.4		37.1		37.0		75.5
Diluted	1.4		37.1		37.0		75.5
Net income attributable to MPLX LP per limited partner unit:
Basic			$	0.37	$	0.37
Diluted			$	0.37	$	0.37



	Nine Months Ended September 30, 2015
(In millions, except per unit data)	General Partner		Limited Partners’ Common Units		Limited Partner’s Subordinated Units		Total
Basic and diluted net income attributable to MPLX LP per unit:
Net income attributable to MPLX LP:
Distributions declared (including IDRs)	$	19.0	$	74.6	$	31.4	$	125.0
Undistributed net income attributable to MPLX LP	6.6		4.6		2.1		13.3
Net income attributable to MPLX LP ⁽¹⁾	$	25.6	$	79.2	$	33.5	$	138.3
Weighted average units outstanding:
Basic	1.6		55.9		24.5		82.0
Diluted	1.6		55.9		24.5		82.0
Net income attributable to MPLX LP per limited partner unit:
Basic			$	1.42	$	1.36
Diluted			$	1.42	$	1.36

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	Nine Months Ended September 30, 2014
(In millions, except per unit data)	General Partner		Limited Partners’ Common Units		Limited Partner’s Subordinated Units		Total
Basic and diluted net income attributable to MPLX LP per unit:
Net income attributable to MPLX LP:
Distributions declared (including IDRs)	$	3.4	$	38.0	$	38.0	$	79.4
Undistributed net income attributable to MPLX LP	3.2		4.8		4.7		12.7
Net income attributable to MPLX LP ⁽¹⁾	$	6.6	$	42.8	$	42.7	$	92.1
Weighted average units outstanding:
Basic	1.4		37.0		37.0		75.4
Diluted	1.4		37.1		37.0		75.5
Net income attributable to MPLX LP per limited partner unit:
Basic			$	1.16	$	1.16
Diluted			$	1.16	$	1.16


⁽¹⁾	Allocation of net income attributable to MPLX LP assumes all earnings for the period had been distributed based on the current period distribution priorities.

6. Equity

Units Outstanding - We had 80,336,711 common units outstanding as of September 30, 2015. Of that number, 56,932,134 were owned by MPC, which also owned the two percent general partner interest, represented by 1,639,525 general partner units.

Following payment of the cash distribution for the second quarter of 2015, the requirements for the conversion of all subordinated units were satisfied under our partnership agreement. As a result, effective August 17, 2015, the 36,951,515 subordinated units owned by MPC were converted into common units on a one-for-one basis and thereafter participate on terms equal with all other common units in distributions of available cash. The conversion did not impact the amount of the cash distributions paid by the Partnership or the total units outstanding.

ATM Program - On May 18, 2015, we filed a prospectus supplement to our shelf registration statement filed with the SEC on March 27, 2015, authorizing the continuous issuance of up to an aggregate of $500.0 million of common units, in amounts, at prices and on terms to be determined by market conditions and other factors at the time of our offerings (such continuous offering program, or at-the-market program, referred to as our “ATM Program”). We expect the net proceeds from sales under the ATM Program will be used for general partnership purposes. During the nine months ended September 30, 2015, we issued an aggregate of 25,166 common units under our ATM Program, generating net proceeds of approximately $1.3 million.

The changes in the number of units outstanding from December 31, 2014 through September 30, 2015 are summarized below:



(In units)	Common	Subordinated		General Partner	Total
Balance at December 31, 2014	43,341,098	36,951,515		1,638,625	81,931,238
Unit-based compensation awards⁽¹⁾	18,932	—		386	19,318
Issuance of units under the ATM Program⁽²⁾	25,166	—		514	25,680
Subordinated unit conversion	36,951,515	(36,951,515	)	—	—
Balance at September 30, 2015	80,336,711	—		1,639,525	81,976,236


⁽¹⁾	As a result of the unit-based compensation awards issued during the period, MPLX GP contributed less than $0.1 million in exchange for 386 general partner units to maintain its two percent general partner interest.


⁽²⁾	As a result of common units issued under the ATM Program during the period, MPLX GP contributed less than $0.1 million in exchange for 514 general partner units to maintain its two percent general partner interest.

Issuance of Additional Securities - Our partnership agreement authorizes us to issue an unlimited number of additional partnership securities for the consideration and on the terms and conditions determined by our general partner without the approval of the unitholders.

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Net Income Allocation - In preparing our consolidated statements of equity, net income attributable to MPLX LP is allocated to the unitholders in accordance with their respective ownership percentages. However, when distributions related to the incentive distribution rights are made, earnings equal to the amount of those distributions are first allocated to the general partner before the remaining earnings are allocated to the unitholders based on their respective ownership percentages. The following table presents the allocation of the general partner’s interest in net income attributable to MPLX LP:



	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2015		2014		2015		2014
Net income attributable to MPLX LP	$	41.5	$	29.1	$	138.3	$	92.1
Less: General partner's incentive distribution rights and other	7.9		1.0		16.9		1.9
Net income attributable to MPLX LP available to general and limited partners	$	33.6	$	28.1	$	121.4	$	90.2

General partner's two percent interest in net income attributable to MPLX LP	$	0.7	$	0.5	$	2.5	$	1.8
General partner's incentive distribution rights and other	7.9		1.0		16.9		1.9
General partner's interest in net income attributable to MPLX LP	$	8.6	$	1.5	$	19.4	$	3.7

Cash distributions - Our partnership agreement sets forth the calculation to be used to determine the amount and priority of cash distributions that the common and subordinated unitholders and general partner will receive. In accordance with our partnership agreement, on October 20, 2015, we declared a quarterly cash distribution of $0.47 per unit, resulting in total distributions to our limited and general partners of $46.5 million. These distributions will be paid on November 13, 2015 to unitholders of record on November 3, 2015.

The allocation of total quarterly cash distributions to general and limited partners is as follows for the three and nine months ended September 30, 2015 and 2014. Our distributions are declared subsequent to quarter end; therefore, the following table represents total cash distributions applicable to the period in which the distributions were earned.



	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2015		2014		2015		2014
General partner's distributions:
General partner's distributions	$	1.0	$	0.5	$	2.5	$	1.5
General partner's incentive distribution rights distributions	7.8		1.0		16.5		1.9
Total general partner's distributions	$	8.8	$	1.5	$	19.0	$	3.4
Limited partners' distributions:
Common unitholders	$	37.7	$	13.2	$	74.6	$	38.0
Subordinated unitholders	—		13.2		31.4		38.0
Total limited partners' distributions	37.7		26.4		106.0		76.0
Total cash distributions declared	$	46.5	$	27.9	$	125.0	$	79.4

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7. Other Items

Net interest and other financial costs were:



	Three Months Ended September 30,						Nine Months Ended September 30,
(In millions)	2015			2014			2015			2014
Interest income	$	(0.1	)	$	—		$	(0.2	)	$	—
Interest expense	5.9			1.2			18.0			3.1
Interest capitalized	(1.2		)	(0.2		)	(2.6		)	(0.7		)
Other financial costs	0.6			0.1			1.5			0.6
Net interest and other financial costs	$	5.2		$	1.1		$	16.7		$	3.0

8. Property, Plant and Equipment

Our investment in property, plant and equipment with associated accumulated depreciation was:



(In millions)	September 30, 2015		December 31, 2014
Land	$	5.5	$	5.5
Pipelines and related assets	1,085.0		1,081.4
Storage and delivery facilities	197.7		165.8
Assets under construction	184.3		85.3
Other	24.2		23.7
Total	1,496.7		1,361.7
Less accumulated depreciation	387.5		353.1
Property, plant and equipment, net	$	1,109.2	$	1,008.6

9. Fair Value Measurements

Fair Values—Recurring

There were no assets accounted for at fair value on a recurring basis at September 30, 2015 and December 31, 2014.

Fair Values—Reported

Our primary financial instruments are trade receivables and payables. We believe the carrying values of our current assets and liabilities approximate fair value. Our fair value assessment incorporates a variety of considerations, including (1) the short-term duration of the instruments, (2) our investment-grade credit rating and (3) our historical incurrence of and expected future insignificance of bad debt expense, which includes an evaluation of counterparty credit risk. Fair value of fixed-rate long-term debt is measured using a market approach, based upon the average of quotes from major financial institutions and a third-party service for our debt. Because these quotes cannot be independently verified to the market, they are considered Level 3 inputs. Fair value of our variable-rate long-term debt approximates the carrying value. The following table summarizes the fair value and carrying value of our long-term debt, excluding capital leases and debt issuance costs, at September 30, 2015 and December 31, 2014.



	September 30, 2015				December 31, 2014
(In millions)	Fair Value		Carrying Value		Fair Value		Carrying Value
Long-term debt	$	711.1	$	748.3	$	635.6	$	635.0

10. Debt

Our outstanding borrowings at September 30, 2015 and December 31, 2014 consisted of the following:



(In millions)	September 30, 2015			December 31, 2014
MPLX LP:
Bank revolving credit facility due 2019	—			385.0
Term loan facility due 2019	250.0			250.0
4.000% senior notes due 2025	500.0			—
Consolidated subsidiaries:
Pipe Line Holdings - revolving credit agreement due 2019	—			—
MPL - capital lease obligations due 2020	9.1			9.8
Total	759.1			644.8
Unamortized debt issuance costs⁽¹⁾	(4.1		)	—
Unamortized discount	(1.7		)	—
Amounts due within one year	(0.8		)	(0.8		)
Total long-term debt due after one year	$	752.5		$	644.0


⁽¹⁾	We adopted the updated FASB debt issuance cost standard as of June 30, 2015. This has been applied retrospectively and there was no effect to the prior period presented.

Senior Notes

On February 12, 2015, we completed a public offering of $500 million aggregate principal amount of four percent unsecured senior notes due February 15, 2025 (the “Senior Notes”). The net proceeds from the offering of the Senior Notes were approximately $495.0 million, after deducting underwriting discounts. The net proceeds were used to repay the amounts outstanding under the bank revolving credit facility, as well as for general partnership purposes. Interest is payable semi-annually in arrears on February 15 and August 15 of each year, commencing on August 15, 2015.

Credit Agreements

During the nine months ended September 30, 2015, we borrowed $30.0 million under the bank revolving credit facility, at an average interest rate of 1.457 percent, per annum, and repaid $415.0 million of these borrowings. At September 30, 2015, we had no borrowings or letters of credit outstanding under this facility, resulting in total unused loan availability of $1.0 billion, or 100 percent of the borrowing capacity.

The $250 million term loan facility was drawn in full on November 20, 2014. The borrowings under this facility during the nine months ended September 30, 2015 were at an average interest rate of 1.651 percent.

11. Supplemental Cash Flow Information



	Nine Months Ended September 30,
(In millions)	2015		2014
Net cash provided by operating activities included:
Interest paid (net of amounts capitalized)	$	12.4	$	1.8
Income taxes paid	$	0.1	$	—
Non-cash investing and financing activities:
Net transfers of property, plant and equipment to materials and supplies inventories	$	—	$	0.7
Property, plant and equipment contributed by MPC	—		0.1

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The consolidated statements of cash flows exclude changes to the consolidated balance sheets that did not affect cash. The following is a reconciliation of additions to property, plant and equipment to total capital expenditures:



	Nine Months Ended September 30,
(In millions)	2015		2014
Additions to property, plant and equipment	$	121.1	$	47.1
Plus: Increase in capital accruals	17.5		5.9
Asset retirement expenditures	0.7		1.0
Total capital expenditures	$	139.3	$	54.0

12. Equity-Based Compensation

Phantom Units—The following is a summary of phantom unit award activity of MPLX LP common limited partner units for the nine months ended September 30, 2015:



	Number of Units		Weighted Average Fair Value
Outstanding at December 31, 2014	100,769		$	41.66
Granted	35,630		80.16
Settled	(32,313	)	40.18
Outstanding at September 30, 2015	104,086		55.30

Performance Units—We grant performance units under the MPLX LP 2012 Incentive Compensation Plan to certain officers of our general partner and certain eligible MPC officers who make significant contributions to our business. These performance units pay out 75 percent in cash and 25 percent in MPLX LP common units. The performance units paying out in units are accounted for as equity awards and had a weighted-average grant date fair value per unit of $1.03 for 2015, as calculated using a Monte Carlo valuation model.

The following is a summary of the equity-classified performance unit award activity for the nine months ended September 30, 2015:



	Number of Units
Outstanding at December 31, 2014	924,143
Granted	597,249
Outstanding at September 30, 2015	1,521,392

13. Commitments and Contingencies

We are the subject of, or a party to, a number of pending or threatened legal actions, contingencies and commitments involving a variety of matters, including laws and regulations relating to the environment. Some of these matters are discussed below. For matters for which we have not recorded an accrued liability, we are unable to estimate a range of possible losses for the reasons discussed in more detail below. However, the ultimate resolution of some of these contingencies could, individually or in the aggregate, be material.

Environmental matters—We are subject to federal, state and local laws and regulations relating to the environment. These laws generally provide for control of pollutants released into the environment and require responsible parties to undertake remediation of hazardous waste disposal sites. Penalties may be imposed for noncompliance.

At September 30, 2015 and December 31, 2014, accrued liabilities for remediation totaled $1.1 million and $0.6 million, respectively. It is not presently possible to estimate the ultimate amount of all remediation costs that might be incurred or penalties, if any, which may be imposed. Receivables from MPC for indemnification of environmental costs related to incidents occurring prior to our initial public offering completed on October 31, 2012 were less than $0.1 million at September 30, 2015. There were no receivables from MPC for indemnification at December 31, 2014.

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Litigation Relating to the Pending Merger—In July 2015, a purported class action lawsuit asserting claims challenging the Merger was filed in the Court of Chancery of the State of Delaware by a purported unitholder of MWE. In August 2015, two similar putative class action lawsuits were filed in the Court of Chancery of the State of Delaware by plaintiffs who purport to be unitholders of MWE. On September 9, 2015, these lawsuits were consolidated into one action pending in the Court of Chancery of the State of Delaware, now captioned In re MarkWest Energy Partners, L.P. Unitholder Litigation. On October 1, 2015, the plaintiffs filed a consolidated complaint against the individual members of the board of directors of MarkWest Energy GP, L.L.C. (the “MWE GP Board”), MPLX, MPLX GP LLC, the general partner of MPLX, MPC and Sapphire Holdco LLC, a subsidiary of MPLX, asserting in connection with the Merger and related disclosures that, among other things, (i) the MWE GP Board breached its duties in approving the Merger with MPLX and (ii) MPC, MPLX, MPLX GP, and Sapphire Holdco LLC aided and abetted such breaches. The complaint seeks, among other relief, to enjoin the Merger, or in the event the Merger is consummated, rescission of the Merger or monetary damages. An adverse judgment for rescission of the Merger or for monetary damages following the completion of the Merger could have an adverse effect on MPLX. The parties believe these claims are without merit and intend to vigorously defend the consolidated lawsuit and therefore, at this time, we do not believe the ultimate resolution of this lawsuit will have a material adverse effect.

Other Lawsuits—In 2003, the State of Illinois brought an action against the Premcor Refining Group, Inc. (“Premcor”) and Apex Refining Company (“Apex”) asserting claims for environmental cleanup related to the refinery owned by these entities in the Hartford/Wood River, Illinois area. In 2006, Premcor and Apex filed third-party complaints against numerous owners and operators of petroleum products facilities in the Hartford/Wood River, Illinois area, including MPL. These complaints, which have been amended since filing, assert claims of common law nuisance and contribution under the Illinois Contribution Act and other laws for environmental cleanup costs that may be imposed on Premcor and Apex by the State of Illinois. There are several third-party defendants in the litigation and MPL has asserted cross-claims in contribution against the various third-party defendants. This litigation is currently pending in the Third Judicial Circuit Court, Madison County, Illinois. While the ultimate outcome of these litigated matters remains uncertain, neither the likelihood of an unfavorable outcome nor the ultimate liability, if any, with respect to this matter can be determined at this time and we are unable to estimate a reasonably possible loss (or range of loss) for this litigation. Under our omnibus agreement, MPC will indemnify us for the full cost of any losses should MPL be deemed responsible for any damages in this lawsuit.

Guarantees—We have entered into guarantees with maximum potential undiscounted payments totaling $1.9 million as of September 30, 2015, which consist of leases of vehicles that contain general lease indemnities and guaranteed residual values.

Over the years, we have sold various assets in the normal course of our business. Certain of the related agreements contain performance and general guarantees, including guarantees regarding inaccuracies in representations, warranties, covenants and agreements, and environmental and general indemnifications that require us to perform upon the occurrence of a triggering event or condition. These guarantees and indemnifications are part of the normal course of selling assets. We are typically not able to calculate the maximum potential amount of future payments that could be made under such contractual provisions because of the variability inherent in the guarantees and indemnities. Most often, the nature of the guarantees and indemnities is such that there is no appropriate method for quantifying the exposure because we have little or no past experience with the underlying triggering event upon which a reasonable prediction of the outcome can be based.

Contractual commitments—At September 30, 2015, our contractual commitments to acquire property, plant and equipment totaled $49.6 million. Our contractual commitments at September 30, 2015 were primarily related to various projects including a butane cavern in Robinson, Illinois, a tank expansion in Patoka, Illinois connecting to MPC’s Southern Access Extension pipeline project and the Cornerstone Pipeline project.

14. Subsequent Events

On October 27, 2015, in connection with the pending Merger, we amended our $1.0 billion bank revolving credit facility to, among other things, (i) extend the term of the bank revolving credit facility to a five-year term commencing on the date of the closing of the Merger and (ii) increase the borrowing capacity of the bank revolving credit facility to up to $2.0 billion. The amendment will only become effective upon the consummation of the Merger.

Subject to consummation of the Merger, our board of directors approved the purchase of the remaining 0.5 percent interest in Pipe Line Holdings from MPC for $12.0 million. This transaction would close at the same time as the Merger.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the unaudited financial statements and accompanying footnotes included under Item 1. Financial Statements and in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2014.

Management’s Discussion and Analysis of Financial Condition and Results of Operations includes various forward-looking statements concerning trends or events potentially affecting our business. You can identify our forward-looking statements by words such as “anticipate,” “believe,” “estimate,” “objective,” “expect,” “forecast,” “goal,” “intend,” “plan,” “predict,” “project,” “potential,” “seek,” “target,” “could,” “may,” “should,” “would,” “will” or other similar expressions that convey the uncertainty of future events or outcomes. In accordance with “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, these statements are accompanied by cautionary language identifying important factors, though not necessarily all such factors, which could cause future outcomes to differ materially from those set forth in forward-looking statements. For additional risk factors affecting our business, see Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2014.

PARTNERSHIP OVERVIEW

We are a fee-based, growth-oriented master limited partnership formed by MPC to own, operate, develop and acquire pipelines and other midstream assets related to the transportation and storage of crude oil, refined products and other hydrocarbon-based products. We believe our network of petroleum pipelines is one of the largest in the United States, based on total annual volumes delivered. Our assets are integral to the success of MPC’s operations. As of September 30, 2015, our primary assets consisted of:


•	a 99.5 percent general partner interest in Pipe Line Holdings, an entity that owns 100 percent interest in MPL and ORPL, which in turn collectively own:


•	a network of pipeline systems that includes approximately 1,004 miles of common carrier crude oil pipelines and approximately 1,902 miles of common carrier product pipelines extending across nine states. This network includes approximately 230 miles of common carrier crude oil and product pipelines that we operate under long-term leases with third parties;


•	a barge dock located on the Mississippi River near Wood River, Illinois with approximately 78 thousand barrels per day (mbpd) of crude oil and product throughput capacity; and


•	crude oil and product tank farms located in Patoka, Wood River and Martinsville, Illinois and Lebanon, Indiana.


•	a 100 percent interest in a butane cavern located in Neal, West Virginia with approximately one million barrels of storage capacity that serves MPC’s Catlettsburg, Kentucky refinery.

RECENT DEVELOPMENTS

As of September 30, 2015, the implied total enterprise value for MWE was approximately $13.7 billion, including the assumption of debt of approximately $4.6 billion. MPC would contribute $675.0 million of cash to us to fund the one-time cash payment to MWE unitholders. The transaction between MPLX LP and MWE, which is subject to approval by MWE unitholders and to customary closing conditions and regulatory approvals, is expected to close in the fourth quarter of 2015. All three rating agencies affirmed the prospective investment-grade credit rating of the combined partnership, subject to the closing of the Merger in a manner consistent with the expectations at the time of the announcement.

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If the Merger is consummated, we will assume all of MWE's outstanding debt, including approximately $4.1 billion aggregate principal amount of senior notes and any amounts outstanding under MWE’s revolving credit facility. We intend to assume MWE's outstanding senior notes and repay any amounts outstanding under MWE's revolving credit facility with borrowings under our bank revolving credit facility, as amended.

Subject to consummation of the Merger, our board of directors approved the purchase of the remaining 0.5 percent interest in Pipe Line Holdings from MPC for $12 million. This transaction would close at the same time as the Merger.

On October 20, 2015, we announced the board of directors of our general partner had declared a distribution of $0.47 per unit that will be paid on November 13, 2015 to unitholders of record on November 3, 2015.

During the third quarter of 2015, the requirements for the conversion of all subordinated units were satisfied under the partnership agreement. Effective August 17, 2015, 36,951,515 subordinated units owned by MPC were converted into common units on a one-for-one basis and now and going forward participate on terms equal with all other common units in distributions of available cash. The conversion did not impact the amount of the cash distributions paid by the Partnership or the total units outstanding.

On February 12, 2015, we completed an initial underwritten public offering of $500.0 million aggregate principal amount of four percent unsecured senior notes due February 15, 2025 (the “Senior Notes”). The Senior Notes were offered at a price to the public of 99.64 percent of par. The net proceeds of this offering were used to repay the amounts outstanding under our bank revolving credit facility, as well as for general partnership purposes.

The above discussion contains forward-looking statements with respect to the proposed transaction between MPLX LP and MWE. Factors that could affect the proposed transaction between MPLX LP and MWE include, but are not limited to, the ability of MPLX LP and MWE to complete the proposed transaction on the anticipated terms and timetable, the ability to obtain approval of the proposed transaction by the unitholders of MWE and satisfy other conditions to the closing of the transaction contemplated by the Merger Agreement and any conditions imposed on the combined company in connection with consummation of the proposed transaction. These factors, among others, could cause actual results to differ materially from those set forth in the forward-looking statements.

NON-GAAP FINANCIAL INFORMATION

Our management uses a variety of financial and operating metrics to analyze our performance. These metrics are significant factors in assessing our operating results and profitability and include the non-U.S. GAAP financial measures of Adjusted EBITDA and Distributable Cash Flow.

We define Adjusted EBITDA as net income before depreciation, provision (benefit) for income taxes, non-cash equity-based compensation, net interest and other financial costs and acquisition costs. In the third quarter of 2015, we revised Adjusted EBITDA to exclude acquisition costs on a prospective basis. We also use Distributable Cash Flow, which we define as Adjusted EBITDA plus the current period deferred revenue for committed volume deficiencies less net interest and other financial costs, income taxes paid, maintenance capital expenditures paid and volume deficiency credits.

We believe that the presentation of Adjusted EBITDA and Distributable Cash Flow provides useful information to investors in assessing our financial condition and results of operations. The U.S. GAAP measures most directly comparable to Adjusted EBITDA and Distributable Cash Flow are net income and net cash provided by operating activities. Adjusted EBITDA and Distributable Cash Flow should not be considered as alternatives to U.S. GAAP net income or net cash provided by operating activities. Adjusted EBITDA and Distributable Cash Flow have important limitations as analytical tools because they exclude some but not all items that affect net income and net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with U.S. GAAP. Adjusted EBITDA and Distributable Cash Flow should not be considered in isolation or as substitutes for analysis of our results as reported under U.S. GAAP. Additionally, because Adjusted EBITDA and Distributable Cash Flow may be defined differently by other companies in our industry, our definitions of Adjusted EBITDA and Distributable Cash Flow may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

For a reconciliation of Adjusted EBITDA and Distributable Cash Flow to their most comparable measures calculated and presented in accordance with U.S. GAAP, see – Results of Operations.

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RESULTS OF OPERATIONS

The following table and discussion is a summary of our results of operations for the three months and nine months ended September 30, 2015 and 2014, including a reconciliation of Adjusted EBITDA and Distributable Cash Flow from net income and net cash provided by operating activities, the most directly comparable U.S. GAAP financial measures.



	Three Months Ended September 30,								Nine Months Ended September 30,
(In millions, unless otherwise noted)	2015			2014		Variance			2015			2014		Variance
Revenues and other income:
Sales and other operating revenues	$	18.2		$	16.6	$	1.6		$	50.2		$	52.2	$	(2.0	)
Sales to related parties	122.7			114.1		8.6			360.7			336.0		24.7
Loss on sale of assets	—			—		—			(0.2		)	—		(0.2		)
Other income	1.4			1.5		(0.1		)	4.2			4.1		0.1
Other income - related parties	6.3			5.8		0.5			18.8			16.9		1.9
Total revenues and other income	148.6			138.0		10.6			433.7			409.2		24.5
Costs and expenses:
Cost of revenues (excludes items below)	41.9			40.6		1.3			101.4			102.9		(1.5		)
Purchases from related parties	26.5			23.7		2.8			75.1			71.4		3.7
Depreciation	12.7			12.5		0.2			38.1			37.5		0.6
General and administrative expenses	21.1			15.3		5.8			57.7			47.1		10.6
Other taxes	(0.7		)	1.7		(2.4		)	5.5			5.5		—
Total costs and expenses	101.5			93.8		7.7			277.8			264.4		13.4
Income from operations	47.1			44.2		2.9			155.9			144.8		11.1
Net interest and other financial costs	5.2			1.1		4.1			16.7			3.0		13.7
Income before income taxes	41.9			43.1		(1.2		)	139.2			141.8		(2.6		)
Provision for income taxes	0.1			—		0.1			0.1			0.1		—
Net income	41.8			43.1		(1.3		)	139.1			141.7		(2.6		)
Less: Net income attributable to MPC-retained interest	0.3			14.0		(13.7		)	0.8			49.6		(48.8		)
Net income attributable to MPLX LP	41.5			29.1		12.4			138.3			92.1		46.2
Less: General partner’s interest in net income attributable to MPLX LP	8.6			1.5		7.1			19.4			3.7		15.7
Limited partners’ interest in net income attributable to MPLX LP	$	32.9		$	27.6	$	5.3		$	118.9		$	88.4	$	30.5

Adjusted EBITDA attributable to MPLX LP ⁽¹⁾	$	64.6		$	40.2	$	24.4		$	199.5		$	123.9	$	75.6
Distributable Cash Flow attributable to MPLX LP ⁽¹⁾	52.5			32.9		19.6			170.9			106.4		64.5

Pipeline throughput (mbpd):
Crude oil pipelines	1,135			1,048		87			1,091			1,034		57
Product pipelines	896			839		57			907			843		64
Total	2,031			1,887		144			1,998			1,877		121
Average tariff rates ($ per barrel): ⁽²⁾
Crude oil pipelines	$	0.66		$	0.64	$	0.02		$	0.66		$	0.65	$	0.01
Product pipelines	0.65			0.63		0.02			0.64			0.61		0.03
Total pipelines	0.66			0.64		0.02			0.65			0.64		0.01


⁽¹⁾	Non-U.S. GAAP financial measure. See the following tables for reconciliations to the most directly comparable U.S. GAAP measures.


⁽²⁾	Average tariff rates calculated using pipeline transportation revenues divided by pipeline throughput barrels.

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	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2015		2014		2015		2014
Reconciliation of Adjusted EBITDA attributable to MPLX LP and Distributable Cash Flow attributable to MPLX LP from Net Income:
Net income	$	41.8	$	43.1	$	139.1	$	141.7
Less: Net income attributable to MPC-retained interest	0.3		14.0		0.8		49.6
Net income attributable to MPLX LP	41.5		29.1		138.3		92.1
Plus: Net income attributable to MPC-retained interest	0.3		14.0		0.8		49.6
Depreciation	12.7		12.5		38.1		37.5
Provision for income taxes	0.1		—		0.1		0.1
Non-cash equity-based compensation	0.8		0.5		2.2		1.4
Net interest and other financial costs	5.2		1.1		16.7		3.0
Acquisition costs	4.3		—		4.3		—
Adjusted EBITDA	64.9		57.2		200.5		183.7
Less: Adjusted EBITDA attributable to MPC-retained interest	0.3		17.0		1.0		59.8
Adjusted EBITDA attributable to MPLX LP	64.6