Attached files
MPLX LP
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Set forth below are the MPLX LP unaudited pro forma consolidated statements of income for each of the years in the three-year period ended December 31, 2016 and the six months ended June 30, 2017 and the MPLX LP unaudited pro forma consolidated balance sheet as of June 30, 2017 (together with the notes to the unaudited pro forma consolidated financial statements, the “pro forma financial statements”). The pro forma financial statements give effect to the acquisition of: all of the membership interests of Lincoln Pipeline LLC, a Delaware limited liability company which holds a 35 percent ownership interest in Illinois Extension Pipeline Company, L.L.C. (the "SAX Interest"); all of the membership interests of MPL Louisiana Holdings LLC, a Delaware limited liability company which holds a 40.7 percent ownership interest in LOOP LLC (the "LOOP Interest"); a 58.52 percent ownership interest in a Delaware limited liability company, LOCAP LLC (the "LOCAP Interest"); and a 24.51 percent ownership interest in a Delaware corporation, Explorer Pipeline Company (the "Explorer Interest" and, together with the SAX Interest, the LOOP Interest, and the LOCAP Interest, the “Equity Method Investments” or "EMI"). Unless otherwise stated or the context otherwise indicates, all references to “MPLX”, “the Partnership”, “we”, “our”, “us”, or similar expressions refer to MPLX LP and its subsidiaries. References to "MPC", refer to Marathon Petroleum Corporation and its subsidiaries, other than the Partnership. The pro forma financial statements have been prepared based on certain pro forma adjustments to the consolidated financial statements included in our Current Report on Form 8-K filed with the SEC on May 1, 2017. These pro forma financial statements should be read in conjunction with such historical consolidated financial statements, including the related consolidated financial statement notes. The pro forma financial statements have been prepared in accordance with Article 11 of the SEC’s Regulation S-X.
On September 1, 2017, we entered into a Membership Interests and Shares Contributions Agreement (the “Contributions Agreement”) with MPLX Logistics Holdings LLC, MPLX Holdings Inc., MPLX GP LLC, (the "General Partner") and MPC Investment LLC, all of which are wholly-owned subsidiaries of MPC. Pursuant to the Contributions Agreement, we agreed to acquire the Equity Method Investments held by indirect wholly-owned subsidiaries of MPC for cash consideration of $420 million (the “Cash Consideration”) and equity consideration in the form of common units and general partner units with a fair value of $630 million (the “Equity Consideration”), for total consideration of $1.05 billion (the “Acquisition”).
The pro forma financial statements assume the issuance of 18,628,930 common units of the Partnership to MPC and the issuance of 380,182 general partner units of the Partnership to our General Partner. The actual allocation of Equity Consideration will be determined at the closing of the Acquisition, with the number of general partner units issued being that number required for the General Partner to maintain its two percent general partner interest in the Partnership. We plan to fund the Cash Consideration, along with associated offering and transaction costs, by drawing on our existing revolver.
The Equity Method Investments acquired by MPLX consist of the following:
• | SAX Interest - all of the membership interests of Lincoln Pipeline LLC, which holds a 35 percent interest in Illinois Extension Pipeline Company, L.L.C., which owns and operates a 168-mile, 24-inch diameter oil pipeline from Flanagan, Illinois to Patoka, Illinois. The pipeline system has a capacity of 300,000 barrels per day (“Bpd”), as well as additional tankage and two pump stations, collectively referred to as the Southern Access Extension or SAX. The pipeline system was operational in December 2015. |
• | LOOP Interest - all of the membership interests of MPL Louisiana Holdings LLC, which holds a 40.7 percent interest in LOOP LLC (“LOOP”), which owns and operates midstream crude oil infrastructure, including a deep water oil port offshore of Louisiana, pipelines and onshore storage facilities. The deep water oil port offloads crude oil from crude carrying marine vessels destined for onshore storage and pipeline transport to the LOCAP LLC (“LOCAP”), an affiliate pipeline system, and other connecting carriers for onward delivery to refineries on the U. S. Gulf Coast and the Midwest regions. Additionally, LOOP receives and stores oil for onward transport from various other pipeline connections. |
• | LOCAP Interest - a 58.52 percent ownership interest in LOCAP, which owns and operates a federally regulated crude oil pipeline and tank facility in St. James, Louisiana that distributes oil received from LOOP storage facilities and other connecting pipelines to nearby refineries and into the mid-continent of the United States. |
• | Explorer Interest - a 24.51 percent ownership interest in Explorer Pipeline Company, which owns and operates a 1,830-mile refined products pipeline that transports products from the U.S. Gulf Coast to the Midwest, with a current capacity of 660,000 Bpd. |
The Equity Method Investments will be recorded by the Partnership at MPC’s historical cost, as the Acquisition is between entities under common control. The pro forma adjustments are based on currently available information and certain estimates and assumptions; actual adjustments may differ from the pro forma adjustments. However, our management believes the assumptions
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MPLX LP
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
are reasonable for presenting the significant effects of the Acquisition, and that the pro forma adjustments give appropriate effect to those assumptions, are factually supportable, and are properly applied in the pro forma financial statements.
The MPLX LP unaudited pro forma consolidated balance sheet as of June 30, 2017 has been prepared to give effect to the Acquisition as if it had occurred on June 30, 2017. The MPLX LP unaudited pro forma consolidated statements of income for each of the three-year period ended December 31, 2016 and the six months ended June 30, 2017 have been prepared to give effect to the Acquisition as if it had occurred on January 1, 2014. For the purposes of these unaudited pro forma consolidated financial statements, the Equity Consideration described above is based on the simple average of the ten day trading volume weighted average New York Stock Exchange price of a common unit for the ten trading days ending on August 28, 2017. On December 4, 2015, MarkWest Energy Partners, L.P. ("MWE") merged with a wholly-owned subsidiary of MPLX (the "MarkWest Merger"). The operating results of MWE for the period of December 4, 2015 through December 31, 2015, are included in the MPLX LP historical consolidated statement of income for the year ended December 31, 2015. The MPLX LP unaudited pro forma consolidated statement of income for the year ended December 31, 2015 does not reflect the MarkWest Merger as of January 1, 2015. Pro forma financial information related to the MarkWest Merger is included in our Current Report on Form 8-K filed with the SEC on December 4, 2015.
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MPLX LP
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 2017
(In millions, except per unit data) | MPLX LP Historical | EMI Historical (a) | EMI Pro Forma Adjustments | MPLX LP Pro Forma | |||||||||||
Revenues and other income: | |||||||||||||||
Service revenue | $ | 546 | $ | — | $ | — | $ | 546 | |||||||
Service revenue - related parties | 525 | — | — | 525 | |||||||||||
Rental income | 139 | — | — | 139 | |||||||||||
Rental income - related parties | 137 | — | — | 137 | |||||||||||
Product sales | 394 | — | — | 394 | |||||||||||
Product sales - related parties | 4 | — | — | 4 | |||||||||||
Gain on sale of assets | 1 | — | — | 1 | |||||||||||
Income from equity method investments | 6 | 63 | — | 69 | |||||||||||
Other income | 3 | — | — | 3 | |||||||||||
Other income - related parties | 47 | — | — | 47 | |||||||||||
Total revenues and other income | 1,802 | 63 | — | 1,865 | |||||||||||
Costs and expenses: | |||||||||||||||
Cost of revenues (excludes items below) | 252 | — | — | 252 | |||||||||||
Purchased product costs | 271 | — | — | 271 | |||||||||||
Rental cost of sales | 25 | — | — | 25 | |||||||||||
Rental cost of sales - related parties | 1 | — | — | 1 | |||||||||||
Purchases - related parties | 216 | — | — | 216 | |||||||||||
Depreciation and amortization | 351 | — | — | 351 | |||||||||||
General and administrative expenses | 115 | — | — | 115 | |||||||||||
Other taxes | 26 | — | — | 26 | |||||||||||
Total costs and expenses | 1,257 | — | — | 1,257 | |||||||||||
Income from operations | 545 | 63 | — | 608 | |||||||||||
Interest expense | 140 | — | 6 | (b) | 146 | ||||||||||
Other financial costs | 25 | — | — | 25 | |||||||||||
Income (loss) before income taxes | 380 | 63 | (6 | ) | 437 | ||||||||||
Provision for income taxes | 2 | — | — | (g) | 2 | ||||||||||
Net income (loss) | 378 | 63 | (6 | ) | 435 | ||||||||||
Less: Net income attributable to noncontrolling interests | 2 | — | — | 2 | |||||||||||
Less: Net income attributable to Predecessor | 36 | — | — | 36 | |||||||||||
Net income (loss) attributable to MPLX LP | 340 | 63 | (6 | ) | 397 | ||||||||||
Less: Preferred unit distributions | 33 | — | 33 | ||||||||||||
Less: General partner’s interest in net income attributable to MPLX LP | 136 | 3 | (h) | 139 | |||||||||||
Limited partners’ interest in net income attributable to MPLX LP | $ | 171 | $ | 54 | $ | 225 | |||||||||
Per Unit Data (Note 3) | |||||||||||||||
Net income attributable to MPLX LP per limited partner unit: | |||||||||||||||
Common - basic | $ | 0.46 | $ | 0.57 | |||||||||||
Common - diluted | 0.46 | 0.57 | |||||||||||||
Weighted average limited partner units outstanding: | |||||||||||||||
Common - basic | 370 | 19 | 389 | ||||||||||||
Common - diluted | 374 | 19 | 393 | ||||||||||||
See Notes to the Unaudited Pro Forma Consolidated Financial Statements.
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MPLX LP
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 2016
(In millions, except per unit data) | MPLX LP Historical | EMI Historical (a) | EMI Pro Forma Adjustments | MPLX LP Pro Forma | |||||||||||
Revenues and other income: | |||||||||||||||
Service revenue | $ | 958 | $ | — | $ | — | $ | 958 | |||||||
Service revenue - related parties | 936 | — | — | 936 | |||||||||||
Rental income | 298 | — | — | 298 | |||||||||||
Rental income - related parties | 235 | — | — | 235 | |||||||||||
Product sales | 572 | — | — | 572 | |||||||||||
Product sales - related parties | 11 | — | — | 11 | |||||||||||
Gain on sale of assets | 1 | — | — | 1 | |||||||||||
(Loss) income from equity method investments | (74 | ) | 114 | — | 40 | ||||||||||
Other income | 6 | — | — | 6 | |||||||||||
Other income - related parties | 86 | — | — | 86 | |||||||||||
Total revenues and other income | 3,029 | 114 | — | 3,143 | |||||||||||
Costs and expenses: | |||||||||||||||
Cost of revenues (excludes items below) | 454 | — | — | 454 | |||||||||||
Purchased product costs | 448 | — | — | 448 | |||||||||||
Rental cost of sales | 57 | — | — | 57 | |||||||||||
Rental cost of sales - related parties | 1 | — | — | 1 | |||||||||||
Purchases - related parties | 388 | — | — | 388 | |||||||||||
Depreciation and amortization | 591 | — | — | 591 | |||||||||||
Impairment expense | 130 | — | — | 130 | |||||||||||
General and administrative expenses | 227 | — | — | 227 | |||||||||||
Other taxes | 50 | — | — | 50 | |||||||||||
Total costs and expenses | 2,346 | — | — | 2,346 | |||||||||||
Income from operations | 683 | 114 | — | 797 | |||||||||||
Related party interest and other financial (income) costs | 1 | — | — | 1 | |||||||||||
Interest expense | 210 | — | 11 | (b) | 221 | ||||||||||
Other financial costs | 50 | — | — | 50 | |||||||||||
Income (loss) before income taxes | 422 | 114 | (11 | ) | 525 | ||||||||||
(Benefit) provision for income taxes | (12 | ) | — | 2 | (g) | (10 | ) | ||||||||
Net income (loss) | 434 | 114 | (13 | ) | 535 | ||||||||||
Less: Net income attributable to noncontrolling interests | 2 | — | — | 2 | |||||||||||
Less: Net income attributable to Predecessor | 199 | — | — | 199 | |||||||||||
Net income attributable to MPLX LP | 233 | 114 | (13 | ) | 334 | ||||||||||
Less: Preferred unit distributions | 41 | — | 41 | ||||||||||||
Less: General partner’s interest in net income attributable to MPLX LP | 191 | 9 | (h) | 200 | |||||||||||
Limited partners’ interest in net income attributable to MPLX LP | $ | 1 | $ | 92 | $ | 93 | |||||||||
Per Unit Data (Note 3) | |||||||||||||||
Net income attributable to MPLX LP per limited partner unit: | |||||||||||||||
Common - basic | $ | — | $ | 0.25 | |||||||||||
Common - diluted | — | 0.25 | |||||||||||||
Weighted average limited partner units outstanding: | |||||||||||||||
Common - basic | 331 | 19 | 350 | ||||||||||||
Common - diluted | 338 | 19 | 357 | ||||||||||||
See Notes to the Unaudited Pro Forma Consolidated Financial Statements.
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MPLX LP
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 2015
(In millions, except per unit data) | MPLX LP Historical | EMI Historical (a) | EMI Pro Forma Adjustments | MPLX LP Pro Forma | |||||||||||
Revenues and other income: | |||||||||||||||
Service revenue | $ | 130 | $ | — | $ | — | $ | 130 | |||||||
Service revenue - related parties | 701 | — | — | 701 | |||||||||||
Rental income | 20 | — | — | 20 | |||||||||||
Rental income - related parties | 146 | — | — | 146 | |||||||||||
Product sales | 36 | — | — | 36 | |||||||||||
Product sales - related parties | 1 | — | — | 1 | |||||||||||
Income (loss) from equity method investments | 3 | 70 | — | 73 | |||||||||||
Other income | 6 | — | — | 6 | |||||||||||
Other income - related parties | 58 | — | — | 58 | |||||||||||
Total revenues and other income | 1,101 | 70 | — | 1,171 | |||||||||||
Costs and expenses: | |||||||||||||||
Cost of revenues (excludes items below) | 247 | — | — | 247 | |||||||||||
Purchased product costs | 20 | — | — | 20 | |||||||||||
Rental cost of sales | 11 | — | — | 11 | |||||||||||
Rental cost of sales - related parties | 1 | — | — | 1 | |||||||||||
Purchases - related parties | 172 | — | — | 172 | |||||||||||
Depreciation and amortization | 129 | — | — | 129 | |||||||||||
Impairment expense | — | — | — | — | |||||||||||
General and administrative expenses | 125 | — | — | 125 | |||||||||||
Other taxes | 15 | — | — | 15 | |||||||||||
Total costs and expenses | 720 | — | — | 720 | |||||||||||
Income from operations | 381 | 70 | — | 451 | |||||||||||
Debt retirement expense | — | — | — | — | |||||||||||
Interest expense | 35 | — | 11 | (b) | 46 | ||||||||||
Other financial costs | 12 | — | — | 12 | |||||||||||
Income (loss) before income taxes | 334 | 70 | (11 | ) | 393 | ||||||||||
Provision (Benefit) for income taxes | 1 | — | — | (g) | 1 | ||||||||||
Net income (loss) | 333 | 70 | (11 | ) | 392 | ||||||||||
Less: Net income attributable to noncontrolling interests | 1 | — | — | 1 | |||||||||||
Less: Net income attributable to Predecessor | 176 | — | — | 176 | |||||||||||
Net income (loss) attributable to MPLX LP | 156 | 70 | (11 | ) | 215 | ||||||||||
Less: General partner’s interest in net income attributable to MPLX LP | 57 | 6 | (h) | 63 | |||||||||||
Limited partners’ interest in net income attributable to MPLX LP | $ | 99 | $ | 53 | $ | 152 | |||||||||
Per Unit Data (Note 3) | |||||||||||||||
Net income attributable to MPLX LP per limited partner unit: | |||||||||||||||
Common - basic | $ | 1.23 | $ | 1.44 | |||||||||||
Common - diluted | 1.22 | 1.43 | |||||||||||||
Subordinated - basic and diluted | 0.11 | 0.51 | |||||||||||||
Weighted average limited partner units outstanding: | |||||||||||||||
Common - basic | 79 | 19 | 98 | ||||||||||||
Common - diluted | 80 | 19 | 99 | ||||||||||||
Subordinated - basic and diluted | 18 | — | 18 | ||||||||||||
See Notes to the Unaudited Pro Forma Consolidated Financial Statements.
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MPLX LP
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 2014
(In millions, except per unit data) | MPLX LP Historical | EMI Historical (a) | EMI Pro Forma Adjustments | MPLX LP Pro Forma | |||||||||||
Revenues and other income: | |||||||||||||||
Service revenue | $ | 70 | $ | — | $ | — | $ | 70 | |||||||
Service revenue - related parties | 662 | — | — | 662 | |||||||||||
Rental income | — | — | — | — | |||||||||||
Rental income - related parties | 15 | — | — | 15 | |||||||||||
Product sales | — | — | — | — | |||||||||||
Product sales - related parties | — | — | — | — | |||||||||||
Income from equity method investments | — | 61 | — | 61 | |||||||||||
Other income | 6 | — | — | 6 | |||||||||||
Other income - related parties | 40 | — | — | 40 | |||||||||||
Total revenues and other income | 793 | 61 | — | 854 | |||||||||||
Costs and expenses: | |||||||||||||||
Cost of revenues (excludes items below) | 228 | — | — | 228 | |||||||||||
Purchased product costs | — | — | — | — | |||||||||||
Rental cost of sales | 1 | — | — | 1 | |||||||||||
Rental cost of sales - related parties | — | — | — | — | |||||||||||
Purchases - related parties | 153 | — | — | 153 | |||||||||||
Depreciation and amortization | 75 | — | — | 75 | |||||||||||
Impairment expense | — | — | — | ||||||||||||
General and administrative expenses | 81 | — | — | 81 | |||||||||||
Other taxes | 10 | — | — | 10 | |||||||||||
Total costs and expenses | 548 | — | — | 548 | |||||||||||
Income from operations | 245 | 61 | — | 306 | |||||||||||
Debt retirement expense | — | — | — | — | |||||||||||
Related party interest and other financial costs | — | — | — | — | |||||||||||
Interest expense | 4 | — | 11 | (b) | 15 | ||||||||||
Other financial costs | 1 | — | — | 1 | |||||||||||
Income (loss) before income taxes | 240 | 61 | (11 | ) | 290 | ||||||||||
Provision for income taxes | 1 | — | — | (g) | 1 | ||||||||||
Net income (loss) | 239 | 61 | (11 | ) | 289 | ||||||||||
Less: Net income attributable to noncontrolling interests | 57 | — | — | 57 | |||||||||||
Less: Net income attributable to Predecessor | 61 | — | — | 61 | |||||||||||
Net income (loss) attributable to MPLX LP | 121 | 61 | (11 | ) | 171 | ||||||||||
Less: General partner’s interest in net income attributable to MPLX LP | 6 | 2 | (h) | 8 | |||||||||||
Limited partners’ interest in net income attributable to MPLX LP | $ | 115 | $ | 48 | $ | 163 | |||||||||
Per Unit Data (Note 3) | |||||||||||||||
Net income attributable to MPLX LP per limited partner unit: | |||||||||||||||
Common - basic | $ | 1.55 | $ | 1.65 | |||||||||||
Common - diluted | 1.55 | 1.64 | |||||||||||||
Subordinated - basic and diluted | 1.50 | 1.65 | |||||||||||||
Weighted average limited partner units outstanding: | |||||||||||||||
Common - basic | 37 | 19 | 56 | ||||||||||||
Common - diluted | 37 | 19 | 56 | ||||||||||||
Subordinated - basic and diluted | 37 | — | 37 | ||||||||||||
See Notes to the Unaudited Pro Forma Consolidated Financial Statements.
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MPLX LP
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2017
(In millions) | MPLX LP Historical | EMI Historical (a) | EMI Pro Forma Adjustments | MPLX LP Pro Forma | |||||||||||
Assets | |||||||||||||||
Current assets: | |||||||||||||||
Cash and cash equivalents | $ | 293 | $ | — | $ | 420 | (b) | $ | 293 | ||||||
(420 | ) | (c) | |||||||||||||
Receivables, net | 284 | — | — | 284 | |||||||||||
Receivables - related parties | 173 | — | — | 173 | |||||||||||
Inventories | 62 | — | — | 62 | |||||||||||
Other current assets | 31 | — | — | 31 | |||||||||||
Total current assets | 843 | — | — | 843 | |||||||||||
Equity method investments | 3,368 | 644 | — | 4,012 | |||||||||||
Property, plant and equipment, net | 11,638 | — | — | 11,638 | |||||||||||
Intangibles, net | 473 | — | — | 473 | |||||||||||
Goodwill | 2,245 | — | — | 2,245 | |||||||||||
Long-term receivables - related parties | 16 | — | — | 16 | |||||||||||
Other noncurrent assets | 18 | — | — | 18 | |||||||||||
Total assets | $ | 18,601 | $ | 644 | $ | — | $ | 19,245 | |||||||
Liabilities | |||||||||||||||
Current liabilities: | |||||||||||||||
Accounts payable | $ | 144 | $ | — | $ | — | $ | 144 | |||||||
Accrued liabilities | 178 | — | — | 178 | |||||||||||
Payables - related parties | 93 | — | — | 93 | |||||||||||
Deferred revenue | 3 | — | — | 3 | |||||||||||
Deferred revenue - related parties | 39 | — | — | 39 | |||||||||||
Accrued property, plant and equipment | 171 | — | — | 171 | |||||||||||
Accrued taxes | 39 | — | — | 39 | |||||||||||
Accrued interest payable | 94 | — | — | 94 | |||||||||||
Other current liabilities | 29 | — | — | 29 | |||||||||||
Total current liabilities | 790 | — | — | 790 | |||||||||||
Long-term deferred revenue | 26 | — | — | 26 | |||||||||||
Long-term deferred revenue - related parties | 33 | — | — | 33 | |||||||||||
Long-term debt | 6,666 | — | 420 | (b) | 7,086 | ||||||||||
Deferred income taxes | 7 | — | — | (g) | 7 | ||||||||||
Deferred credits and other liabilities | 170 | — | — | 170 | |||||||||||
Total liabilities | 7,692 | — | 420 | 8,112 | |||||||||||
Commitments and contingencies | |||||||||||||||
Redeemable preferred units | 1,000 | — | — | 1,000 | |||||||||||
Equity | |||||||||||||||
Common unitholders - public | 8,360 | — | — | 8,360 | |||||||||||
Class B unitholders | 133 | — | — | 133 | |||||||||||
Common unitholder - MPC | 1,161 | — | 617 | (d) | 1,778 | ||||||||||
Common unitholder - GP | 351 | — | 13 | (d) | 364 | ||||||||||
General partner - MPC | (242 | ) | — | (406 | ) | (e) | (648 | ) | |||||||
Net investment | — | 644 | (644 | ) | (f) | — | |||||||||
Total MPLX LP partners’ capital | 9,763 | 644 | (420 | ) | 9,987 | ||||||||||
Noncontrolling interest | 146 | — | — | 146 | |||||||||||
Total equity | 9,909 | 644 | (420 | ) | 10,133 | ||||||||||
Total liabilities, preferred units and equity | $ | 18,601 | $ | 644 | $ | — | $ | 19,245 | |||||||
See Notes to Unaudited Pro Forma Consolidated Financial Statements.
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MPLX LP
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Except as noted within the context of each footnote, the dollar amounts presented in the tabular data within these footnotes are stated in millions of dollars.
1. Basis of Pro Forma Presentation
The accompanying unaudited pro forma consolidated financial information is intended to reflect the impact of the Acquisition on MPLX's consolidated financial statements and presents the pro forma consolidated financial position and results of operations of MPLX based on its historical financial statements and the financial statements related to the SAX Interest, LOOP Interest, LOCAP Interest and Explorer Interest, incorporated by reference in this Current Report on Form 8-K, after giving effect to the Acquisition and pro forma adjustment as described in these notes. Pro forma adjustments are included only to the extent they are (i) directly attributable to the Acquisition, (ii) factually supportable and (iii) with respect to the unaudited pro forma consolidated statements of income, expected to have a continuing impact on the consolidated results. Certain items included in the historical consolidated financial statements of MPLX LP were not adjusted for in these unaudited pro forma consolidated financial statements, as they were not directly related to the Acquisition.
The unaudited pro forma consolidated balance sheet as of June 30, 2017 has been prepared to give effect to the Acquisition as if it had occurred on June 30, 2017. The unaudited pro forma consolidated statements of income for the three-year period ended December 31, 2016 and the six months ended June 30, 2017 have been prepared to give effect to the Acquisition as if it had occurred on January 1, 2014.
2. Pro Forma Adjustments to the Unaudited Consolidated Financial Statements
Equity Method Investments
(a) | Adjustments reflect the acquisition of the SAX Interest of $298 million, the LOOP Interest of $229 million, the LOCAP Interest of $23 million, and the Explorer Interest of $94 million, totaling $644 million at MPC's historical cost as of June 30, 2017. Adjustments also reflect the associated equity income for the periods presented. The Partnership’s accounting policy is to record its share of the results of the Equity Method Investments, and any related amortization expense and related tax impact, one month in arrears within Income from Equity Method Investments in the consolidated statements of income. The equity earnings are as follows: |
(in millions) | Six Months Ended June 30, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | ||||||||
SAX Interest (1) | 12 | 25 | — | — | ||||||||
LOOP Interest | 30 | 45 | 34 | 36 | ||||||||
LOCAP Interest | 7 | 12 | 11 | 8 | ||||||||
Explorer Interest | 14 | 32 | 25 | 17 | ||||||||
Income from equity method investments | $ | 63 | $ | 114 | $ | 70 | $ | 61 | ||||
(1) The pipeline was placed into service in December 2015.
(b) | Adjustment to reflect proceeds from MPLX's borrowings of $420 million under the bank revolving credit facility, which bears interest at 2.70 percent and is due 2022, intended to fund the Cash Consideration of the Acquisition. Adjustment to reflect the associated interest expense of $6 million for the six months ended June 30, 2017 and $11 million for each of the years ended December 31, 2016, 2015 and 2014. |
(c) | Adjustment to reflect the $420 million cash payment made to MPC in connection with the Acquisition. |
(d) | Adjustment to reflect the issuance of 18,628,930 common units and 380,182 general partner units to MPC in connection with the Acquisition. Pro forma equity adjustments include increases to common unitholder - MPC and General partner - MPC of $617 million and $13 million, respectively. |
(e) | The Partnership recorded its acquired interest in the Equity Method Investments at their historical carrying values and the excess consideration paid over the historical carrying values as a decrease to general partner equity. The unaudited |
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pro forma consolidated balance sheet reflects a decrease in General partner - MPC equity of $406 million; which includes $1.05 billion total fair value consideration less the Equity Method Investments' combined historical carrying value of $644 million.
(f) | Adjustment to reflect the elimination of MPC's combined net investment in the SAX Interest, LOOP Interest, LOCAP Interest, and Explorer Interest at June 30, 2017, of $644 million. |
(g) | Adjustment to reflect the estimated additional provision of $2 million for the year ended December 31, 2016 for income taxes associated with the Acquisition. There are no tax consequences related to the Equity Method Investments' for the six months ended June 30, 2017 or the years ended December 31, 2015 or 2014. |
(h) | Adjustment to reflect the net income attributable to the general partner, including distributions related to the General Partner's IDRs, to give effect to the Acquisition. The adjustment reflects the combined MPLX and the Equity Method Investments' historical cash distributions allocated per the terms of MPLX's partnership agreement. |
3. Pro Forma Net Income per Limited Partner Unit
The pro forma basic and diluted net income per limited partner unit is determined by dividing the limited partners' interests in pro forma net income attributable to MPLX by the weighted-average number of common units outstanding for the period. As there is more than one class of participating securities, the two-class method is used when calculating the net income per unit applicable to limited partners. The classes of securities in the calculation include common units, class B units, subordinated units, general partner units, certain equity-based compensation awards and IDRs. Presented in the tables below, all newly issued units in connection with the Acquisition were assumed to have been outstanding since January 1, 2014. Additionally, net income attributable to the General Partner, IDRs and limited partners was adjusted per the pro forma adjustments; and the pro forma basic and diluted weighted average number of common units equals the actual weighted average number of common units outstanding for each of the periods presented, plus the amount of assumed newly issued units.
(in millions; except exchange ratio) | Six Months Ended June 30, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||
Common Units per the Contributions Agreement - basic | 19 | 19 | 19 | 19 | |||||||
MPLX weighted average common units outstanding - basic | 370 | 331 | 79 | 37 | |||||||
Pro forma MPLX weighted average common units outstanding - basic | 389 | 350 | 98 | 56 | |||||||
Common Units per the Contributions Agreement - diluted | 19 | 19 | 19 | 19 | |||||||
MPLX weighted average common units outstanding - diluted | 374 | 338 | 80 | 37 | |||||||
Pro forma MPLX weighted average common units outstanding - diluted | 393 | 357 | 99 | 56 | |||||||
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June 30, 2017 | |||||||||||
(in millions; except per unit data) | General Partner | Limited Partners' Common Units | Total | ||||||||
Basic and diluted earnings per unit: | |||||||||||
Allocation of earnings: | |||||||||||
Income attributable to MPLX LP | $ | 397 | |||||||||
Distribution declared on Preferred units | 33 | ||||||||||
Income allocated to participating securities | — | ||||||||||
Income available to unitholders | $ | 364 | |||||||||
Pro forma distributions declared (including IDRs) | $ | 145 | $ | 427 | $ | 572 | |||||
Pro forma distributions greater than net income | |||||||||||
attributable to MPLX LP | (4 | ) | (204 | ) | (208 | ) | |||||
Net income attributable to MPLX LP | |||||||||||
unitholders - basic | $ | 141 | $ | 223 | $ | 364 | |||||
Pro forma weighted average units outstanding - basic | 389 | ||||||||||
Pro forma weighted average units outstanding - diluted | 393 | ||||||||||
Pro forma net income attributable to MPLX LP per | |||||||||||
Limited partner unit - basic | $ | 0.57 | |||||||||
Pro forma net income attributable to MPLX LP per | |||||||||||
Limited partner unit - diluted | $ | 0.57 | |||||||||
December 31, 2016 | |||||||||||
(in millions; except per unit data) | General Partner | Limited Partners' Common Units | Total | ||||||||
Basic and diluted earnings per unit: | |||||||||||
Allocation of earnings: | |||||||||||
Income attributable to MPLX LP | $ | 334 | |||||||||
Distribution declared on Preferred units | 41 | ||||||||||
Income allocated to participating securities | 1 | ||||||||||
Income available to unitholders | $ | 292 | |||||||||
Pro forma distributions declared (including IDRs) | $ | 217 | $ | 731 | $ | 948 | |||||
Pro forma distributions greater than net income | |||||||||||
attributable to MPLX LP | (13 | ) | (643 | ) | (656 | ) | |||||
Net income attributable to MPLX LP | |||||||||||
unitholders - basic | $ | 204 | $ | 88 | $ | 292 | |||||
Pro forma weighted average units outstanding - basic | 350 | ||||||||||
Pro forma weighted average units outstanding - diluted | 357 | ||||||||||
Pro forma net income attributable to MPLX LP per | |||||||||||
Limited partner unit - basic | $ | 0.25 | |||||||||
Pro forma net income attributable to MPLX LP per | |||||||||||
Limited partner unit - diluted | $ | 0.25 | |||||||||
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December 31, 2015 | |||||||||||||||
(in millions; except per unit data) | General Partner | Limited Partners' Common Units | Limited Partner Subordinated Units | Total | |||||||||||
Basic and diluted earnings per unit: | |||||||||||||||
Allocation of earnings: | |||||||||||||||
Income attributable to MPLX LP | $ | 215 | |||||||||||||
Income allocated to participating securities | 1 | ||||||||||||||
Income available to unitholders | $ | 214 | |||||||||||||
Pro forma distributions declared (including IDRs) | $ | 68 | $ | 257 | $ | 31 | $ | 356 | |||||||
Pro forma distributions greater than net income | |||||||||||||||
attributable to MPLX LP | (3 | ) | (117 | ) | (22 | ) | (142 | ) | |||||||
Net income attributable to MPLX LP | |||||||||||||||
unitholders - basic | $ | 65 | $ | 140 | $ | 9 | $ | 214 | |||||||
Pro forma weighted average units outstanding - basic | 98 | 18 | |||||||||||||
Pro forma weighted average units outstanding - diluted | 99 | 18 | |||||||||||||
Pro forma net income attributable to MPLX LP per | |||||||||||||||
Limited partner unit - basic | $ | 1.44 | $ | 0.51 | |||||||||||
Pro forma net income attributable to MPLX LP per | |||||||||||||||
Limited partner unit - diluted | $ | 1.43 | $ | 0.51 | |||||||||||
December 31, 2014 | |||||||||||||||
(in millions; except per unit data) | General Partner | Limited Partners' Common Units | Limited Partner Subordinated Units | Total | |||||||||||
Basic and diluted earnings per unit: | |||||||||||||||
Allocation of earnings: | |||||||||||||||
Income attributable to MPLX LP | $ | 171 | |||||||||||||
Income allocated to participating securities | — | ||||||||||||||
Income available to unitholders | $ | 171 | |||||||||||||
Pro forma distributions declared (including IDRs) | $ | 7 | $ | 81 | $ | 52 | $ | 140 | |||||||
Pro forma undistributed net income | |||||||||||||||
attributable to MPLX LP | 11 | 11 | 9 | 31 | |||||||||||
Net income attributable to MPLX LP | |||||||||||||||
unitholders - basic | $ | 18 | $ | 92 | $ | 61 | $ | 171 | |||||||
Pro forma weighted average units outstanding - basic | 56 | 37 | |||||||||||||
Pro forma weighted average units outstanding - diluted | 56 | 37 | |||||||||||||
Pro forma net income attributable to MPLX LP per | |||||||||||||||
Limited partner unit - basic | $ | 1.65 | $ | 1.65 | |||||||||||
Pro forma net income attributable to MPLX LP per | |||||||||||||||
Limited partner unit - diluted | $ | 1.64 | $ | 1.65 | |||||||||||
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