Welcome to the MPLX Fourth Quarter 2020 Earnings Call. My name is Amber, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later we will conduct a question and answer session. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Kristina Kazarian. Kristina, you may begin.

Good morning, and welcome to the MPLX fourth quarter 2020 earnings conference call. The slides that accompany this call can be found on our website at mplx.com, under the Investors tab. Joining me on the call today are Mike Hennigan, Chairman, President and CEO; Pam Beall, CFO; and other members of the executive team. We invite you to read the safe harbor statements and non-GAAP disclaimer on Slide 2. It's a reminder that we will be making forward-looking statements during the call and during the question-and-answer session that follows. Actual results may differ materially from what we expect today. Factors that could cause actual results to differ are included there as well as in our filings with the SEC. Now with that, I'll turn the call over to Mike.

Thanks, Kristina. Good morning, everyone. Thank you for joining our call. Earlier today, we’ve reported adjusted EBITDA for the fourth quarter of 2020 of $1.4 billion and full year 2020 adjusted EBITDA of $5.2 billion. Considering the unprecedented challenges our industry faced throughout 2020, we're proud of the way our performance highlighted the resiliency and stability of our underlying business. Despite the difficult macro environment, we were able to grow total BcF for 2020 compared to 2019. Additionally, our results demonstrate our commitment to executing on the priorities we laid out for the year. We made strides on optimizing our portfolio, announcing the sale of the Javelina facility in Corpus Christi, Texas. While not large in size, this is an example of the continued effort we're making to focus on the assets that have long-term strategic value to the company. We reduced our capital spend in 2020 by over $700 million from the target. We also took necessary steps to address our long-term cost structure achieving our target to reduce forecasted operating expenses by over $200 million. These expense reductions were key to offset earnings headwinds, particularly in the L&S segment, and we believe they will be enduring long term. Our cost reduction efforts are particularly meaningful when you consider we have not compromised our commitment to safely operating our assets, protect the health and safety of our employees and support the communities in which we operate. As a result of these concerted efforts, we were able to generate excess cash flow for the full year 2020 after self-funding our distribution and capital program. This inflection occurred earlier than our original target of 2021 and gave us the financial flexibility to begin repurchasing units in the fourth quarter of 2020. Today, we also announced a growth capital outlook for 2021…

Thanks, Mike, and good morning. As Mike mentioned earlier, MPLX delivered fourth quarter adjusted EBITDA of $1.4 billion and full year EBITDA of $5.2 billion. Distributable cash flow of $1.2 billion for the fourth quarter provided strong distribution coverage of 1.58 times, and we ended the year with leverage of 3.9 times. Our quick response to the challenging demand environment allowed us to increase our EBITDA by $100 million for the year. In the L&S segment, the strength of our underlying contracts and operating expense reductions more than offset the impact of lower volumes in the system. The gathering and processing segment also benefited from lower operating expenses, partially offsetting the impact of production curtailment in certain basins. I'm pleased to report that our 2020 results represent the first full year that MPLX has funded both our total capital investments and distributions to our unitholders with $266 million of excess cash flow after these activities. During the fourth quarter, we began to implement the Board-authorized unit repurchase program of up to $1 billion of our outstanding publicly traded common units. Looking forward, we expect our assets to continue to provide strong cash flow. Our capital allocation will continue to focus on fully funding our capital needs and distributions with cash generated from operations, while maintaining an investment-grade credit profile and returning excess cash to our unitholders. We expect to maintain the distribution and the pace of unit repurchases will depend on several factors, including: excess cash available, alternative investment opportunities and the business and market conditions. During 2021, we expect to invest approximately $800 million in growth capital and $165 million in maintenance capital. Slide 7 outlines the fourth quarter logistics and storage segment highlights. Volumes across our pipeline and terminal systems were lower compared with the fourth quarter of…

Thanks, Pam. [Operator Instructions]. You may reprompt for additional questions as time permits. With that, we will now open the line to questions. Operator?

[Operator Instructions] Our first question comes from Shneur Gershuni with UBS. Your line is open. Please go ahead.

Maybe to start off, you generated excess free cash flow after distributions in 2019 -- sorry, in 2020, and it looks that way in 2021 or assuming that's the plan in 2021. Leverage is currently at 3.9 times. I was wondering if you can share with us the order of priorities before this excess cash split between, say, leverage buybacks and distribution increases. Just wondering if you can sort of rank order the priorities as you think about that excess cash generation on a go-forward basis.

Shneur, it's Mike. I'll give you some color on that. First off, I would try to remind everybody that it's not a set it and just let it go on forever. We're going to continue to look at where we stand on each of the parameters and then make decisions more dynamically rather than not. So where we've been, Shneur, is we've been comfortable with our leverage and a lot of people have asked us, how do you feel about that. And we've been running around 4 times for some pretty consistent amount of time. So we're comfortable there and the way we look at it right at the moment is -- and we started this just towards the end of the fourth quarter. But we look at where we're trading, where the equity is trading. And right now, we have a DPU yield of around 12%. We got a DCF yield of around 17%. And if the equity is going to trade at that kind of level then our priority in the short-term would obviously be to buy back units. We'd love to be able to do all of the above. But as you mentioned, you're going to have to prioritize as things go on and conditions change, et cetera. Love to be able to have a program that hits the highest priority at the time. But we're going to kind of look at it quarter-to-quarter or more dynamically and decide what we think is the best use. And right now, trading at 17% DCF, that's probably the highest priority we have right now because leverage is in a good spot, the market is not rewarding distribution growth right at the moment. But I think some of these things can change over time. I think the key for us,…

No, that does, and really do appreciate the direct answer, actually. Just to -- as a follow-up question, I don't want to overuse the word unprecedented, but 2020 was. And certainly, in terms of your responses to it, when I think about maintenance capital, you've got $165 million. I think, it's the forecast for this year. When I sort of think about that number, is that kind of the new run rate that you're sort of thinking about as the assets stand today? Is there any catch-up in there that you didn't do in 2020, and that should be lower as we sort of think about '22, assuming an apples-to-apples asset profile? Just wondering if you can sort of talk about the makeup of that $165 million.

Yes, Shneur, it's Pam. I'll take that one. So in 2019, our maintenance capital was actually about $200 million, and it dropped significantly last year. So a number of factors, certainly, influencing that. One is what was happening just across the space and in terms of a lower utilization of our refining assets and refining logistics assets at MPC's refineries. So that was having a significant influence on the downward pressure. And certainly, with a lot of uncertainties driving some of those costs lower, that made sense. So there is a nice increase that you see in 2021 of $165 million. A couple of things to keep in mind, MPC and MPLX both expense out a lot of maintenance. So when you look at our maintenance activities, we, for example, expense API 653 tank work. A lot of companies would capitalize that work. And so we are maintaining our assets in a fashion that will allow us to continue to have reliability and integrity. So it's -- don't just look at the maintenance capital and draw conclusions about how well we're maintaining our assets from that metric alone. And then just something else to keep in mind, as part of the ANDX inherited contracts with ANDV, there was a provision where we would be reimbursed for some of the maintenance activity. And so that also is causing the maintenance capital number to be a little bit lower. And over time, as those contracts roll off and those -- that tank work is complete, the maintenance capital related to that activity would certainly increase. The other thing we've mentioned from time to time is the fact that in the gathering and processing segment of the business, those assets are really new. We've spent a tremendous amount of capital, particularly in the Marcellus and Utica. And so the expected maintenance for those assets have been quite low. So it will obviously change over time. It will also be influenced by the assets that are in our portfolio, as MPC continues to evaluate its portfolio as part of its optimization. And so I can't say that this is a fixed run rate, Shneur. I think we're just going to have to give you some guidance as we move forward.

Our next question comes from Jeremy Tonet with JPMorgan. Your line is open. Please go ahead.

Just want to start off with the G&P side of the business here. And it seems like Marcellus processing volumes are continuing to grow, but there's been kind of declines across other basins. And just wondering if you could update us with regards to producer-customer conversations, and I guess, what expectations you have for activity across your G&P footprint this year. Should we expect those declines to continue? Or do you see them kind of abating?

Jeremy, it's Mike. Thanks for that question. One of the things that we've talked constantly about is the G&P space and what our expectation is because a lot of people have questioned overall. And I'll give you -- big picture is we still feel really good about the business. We think it's going to grow earnings over time. Our -- as you pointed out, our Marcellus and Permian areas are continuing to grow, although we have seen some declines in some of the other areas. We've been pretty open about -- we're in eight basins today, and we're going to look to optimize that at some point, but the market hasn't been willing to give us the right offer for that -- those other assets that we think maybe belong in someone else's portfolio. So we're happy to keep them to keep generating cash and proceed in the mode that we've been in. But I think the big takeaway overall is the expectation in natural gas, in our opinion, has started to move back towards a positive dynamic. There's been a lot of discussion going into the pandemic about where gas was and being overwhelmed by associated gas, et cetera, et cetera. We had not been believers in that, and a lot of people were calling us on our view there. But at the same time, I think it's kind of played out a little bit as we were expecting, which is natural gas is going to be an important dynamic going forward. The earnings growth, we think will be good, but not double digit. We've said that many times as well. We're not expecting the robust growth that was there before. So producers in that space, similar to the oil space, are looking at their portfolios and trying to manage their balance sheets and their cash flow, et cetera. So I think this slow growth model is starting to play itself out a little more or becoming a little more obvious, I think, to investors than was in the past. So our conversations continue along the same activity that we've been seeing. Some areas, not going to get a lot of capital deployment. Other areas is kind of core to some of the bigger players. We've mentioned many times that our core areas are the Marcellus and the Permian. We're seeing growth in those areas. To your point, we're seeing a little bit of decline in the other areas. But as long as we're still kicking off cash in those areas, we still believe it's a contribution to the enterprise.

Got it. And then just wanted to go back to, I guess, the opening remarks with regards to the barge contract renewals. Was that -- $100 million was -- in 2021, was that the impact there? And just are there any other kind of contract renewals over the next three years or so that we should be thinking about that could have changes in the rates when they're renewed?

Yes. It's Pam, and I'll take that, Jeremy. So yes, we said it's less than $100 million, which is less than 2% of the 2020 annual EBITDA. And we have a lot of contracts between MPC and MPLX. The largest contracts that have the most EBITDA related to MPLX came about in 2018. So they have a long life. And those were refining logistics and fuels distribution. And keep in mind, the pipeline contracts that we have are all FERC-based rates. So we -- yes, there will be contracts that come up for renewal. There are no other contracts that I'm aware of that actually have this kind of an automatic rate reset provision baked into the agreement. It's just the way it was structured. It was about a five- to six-year period of time that it was in place and then it just is an automatic update on market rates. And so at sometimes, that's going to be a benefit to MPC. Sometimes that will be a benefit to MPLX as market conditions do change over time. There are rate escalation or fee escalation provisions in those agreements as well. So just keep that kind of thing in mind. But -- and as I said in the prepared remarks, we fully expect that MPC is going to renew these contracts with MPLX. In many cases, it has no other ingress or egress to its facility. So we fully expect these contracts are going to be renewed, and MPC owns a majority interest of MPLX and gets a lot of cash back from MPLX. So we think it's in the mutual interest of MPC and MPLX to continue the positive relationship that we have enjoyed.

Our next question comes from John Mackay with Goldman Sachs. Your line is open. Please go ahead.

Just maybe I want to circle back on a little bit of what Jeremy was getting into. Can you talk a little bit about the Javelina asset sale? And maybe what the impact to EBITDA it would be? And then just if you take that impact, add in the kind of marine recontracting, just talk about some of the other puts and takes on how you get comfortable with 2021 EBITDA being flat to maybe up a little bit.

Yes. Happy to take that one, John. The Javelina assets, it's a good asset. We expect to close on it here in the fourth -- in the first quarter of 2021. It just didn't really fit our long-term plan. It's really a fractionation facility that processes refinery off gas. It's on the smaller side in terms of EBITDA contribution. So it's not something that's going to make a significant impact on our outlook for 2021. And then in terms of our expectations for 2021, I think maybe one way to think about this is, if you go back and just analyze kind of our weakest quarter which was the second quarter and then analyze our strongest quarter, which was the third quarter, you're going to come up with something in the range of $4.9 billion to $5.3 billion of EBITDA, okay? And we're going to continue to pursue cost reductions. So think about some cost reductions in 2021 offsetting some of the headwinds associated with the marine contract rate resetting. So I hope that's helpful to keep in mind. And then where 2021 shakes out is really going to depend in large part with the recovery, the recovery of volumes for the MPC system as well as the recovery for producers and their production volumes.

That's really helpful. Maybe just one on CapEx and a follow-up. I mean if we look at the $800 million growth CapEx guidance, it looks like there's still some kind of room in there if we think about what you need to spend on the G&P side and then just what is left on Wink to Webster and Whistler. Just curious if you can kind of talk about where that could move to once those larger projects roll off?

Yes. I think it's premature to talk about where it might move to. Certainly, there could be opportunity for that CapEx to come in lower. And again, I think it's really something that's going to be tied to what we're seeing in the producer community, both on the crude gathering side as well as the gas side of the business. So I think it'd be prudent for us to wait and see how that unfolds throughout the year. So -- but yes, we'll continue to look at all those opportunities where maybe we don't have to spend as much capital as we move through the year. I would say about roughly half of the expected CapEx is going to be on the G&P side of the business and roughly half is going to be on the L&S side of the business. And we do have some completion of some pipeline expansions. Certainly, you mentioned the Whistler project's going to take a little bit more capital in 2021 as we wrap up there. But largely on the G&P side, it's going to be dependent on the macroeconomic outlook and what producers do with the drill bits.

That's great.

Mike, the other thing I just want to add kind of goes to the question Shneur asked in the beginning is, our whole deployment of capital and return of capital is going to try and be as dynamic as we can be, as we go throughout the year. So in a big picture, we say these are about the guidelines that we're giving you. But as we go out through the year before we pull the trigger on any capital spend, where we still have the choice, something that's not already in progress, we're going to continue to look at what's the best use. And like I said, for our equity trades where it is, we'll deploy more capital towards it because in our opinion, it's been undervalued. But we'll compare that versus the choices we have on capital deployment as well as the long-term strategy in supporting the customer base that we have. So hopefully, it will be a little bit more dynamic and a little bit more thoughtful as far as long term. And I really just want to emphasize, we're going to try and use that word strict capital discipline and make that part of our mantra and strict cost discipline and make that part of our mantra. That's some of the things that we're trying to put a little more emphasis on than we have in the past.

Our next question comes from Michael Blum with Wells Fargo. Your line is open. Please go ahead.

I guess the first question I wanted to ask was just on Wink to Webster and Whistler. Can you remind us what the duration of those contracts are? And the reason I'm asking that is it would seem at this point those pipelines are adding capacity that probably maybe isn't needed right now by the market. So I just want to understand how long those cash flows are protected?

Michael, it's Mike. So on those projects, if you recall, I'll give you a big picture, and then I'll answer your question. We had stated a couple of years ago that we had significant capital deployment opportunities in three big projects: Whistler and Wink to Webster, two you're referencing. And then the third was BANGL. And the issue that we had in front of us is that Whistler and Wink to Webster, we got MVC protection. And then to your direct question, those contracts vary but put them in the 10-plus year environment. So very long-term. We'll use the rounded number of 10 as a guidepost for you. But at the end of the day, we have long-term commitments. We have MVC protection on it. And that's why we went forward with those two projects. That's why Wink to Webster and Whistler became part of our mantra. On BANGL, although we like the project, and although it was something in our mind, it could have been a long-term winner for us. We did not get MVC protection the way we would like to from the customer base. It was not something that they were willing to commit to, and we understand the reasoning. But as a result of that, without that long-term commitment and without that long-term MVC, our commercial team looked at it and kind of rethought what's the best way to do it and not deploy capital or put that capital at risk in the original intent, and we changed that quite a bit down to a much lower capital solution using some existing pipe and partnering with some other players, et cetera, and became a win where we were able to satisfy the customers' needs but not put ourselves at risk on the deployment of capital that wasn't backed as strongly as we would like. So Wink to Webster and Whistler ended up where we wanted it to be, long-term contracts to your question, MVC protected, and we think they're going to be terrific projects. We think the modified or smaller BANGL project is also good. It's just not what the original intent was because of the very point. We did not get that long-term MVC-protected portion of the contract. Does that make sense to you?

Absolutely. I appreciate the answer very much. The second question I had is just wanted to go back to a comment made during the prepared remarks. I think you talked about potentially optimizing processing capacity in the Northeast. I just want to understand better exactly what you meant by that. Would you -- are you considering idling processing plants? Or is there something else in that comment to understand?

No. It's Pam. Let me take that one. So there clearly are opportunities for us to have higher utilization of some of the plants that we have in the Northeast. And some of the pipeline work that we've undertaken over the past couple of years is going to allow us to shift volumes. So perhaps there are some opportunities to where we might have really high utilization, and we need to shift some volumes to a different location. But that's what we mean about the opportunity to optimize the assets. It's not that we're looking to actually -- to the extent there was an opportunity, it made sense, we'd certainly consider it, but we're not looking necessarily at shuttering any plants, but being able to balance volumes across the system with the investments that we've made. And then just the best return that we can get on our capital is filling up the plants that we already have in place without allocating capital to new additions. So that's the thought there.

Next, we'll go to Christine Cho with Barclays. Your line is open. Please go ahead.

Pam, I wanted to maybe start off with I think it was a comment you said in prepared remarks about increased ethane recovery. And I was just curious, is the Shell cracker that I think is supposed to start up later this year going to change anything on the fractionation side for you? Is more ethane going to get fractionated rather than getting rejected through your facilities? And would that be incremental cash flow? Or is that already being collected through in MVC?

Christine, it's Mike. I'm going to let Greg make a comment on that. But before I turn it to him, I'll just say, one of the things in general in the Northeast is continuing, like I mentioned earlier, growth area. We still are very bullish in the Marcellus. As Pam was trying to answer Michael's question, there's a little bit lower utilization in the Utica side of the Northeast. So that we're trying to look to ways that we can optimize that capital that's already been deployed. Overall, we still are pretty bullish in the area. When you think longer term, where do we think the natural gas business is going. We still think the 2 core areas that we're in are the important areas to be in for natural gas overall. So from a long-term perspective, we still feel real good about it. The dynamics will change up there, and I'll let Greg give you some comments on the Shell situation. But whether it's shell or some of these other pipelines that are happening, over time, those things will work themselves out because in our view, it's still a very cost-effective area for production and natural gas. Obviously, I always say it doesn't beat associated because that's a different economic. But for on-purpose gas, we're still believers that the area that we're in is a good area. And as things continue to develop, we think we'll find opportunities to grow earnings there. Greg, do you want to add anything on the Shell question?

Yes. Thanks, Mike. Christine, Greg Floerke here. We currently recover the large majority of the ethane in the basin. We have mentioned, I think, previously that we have a purity ethane line that connects all of our processing plants. We actually recover ethane at the processing plants and not centralize at a fractionator. So we have a lot of flexibility to recover and then transport on our own line to all the takeaway points currently to the Gulf Coast, Canada and the East Coast on the various pipelines. As our producer customers continue to sell ethane into those markets and have commitments into those markets and on other pipelines, we believe that likely continues post start-up of the Shell Monaca cracker, which would require then incremental recovery of ethane that's currently being rejected into a residue gas stream at all of these processing plant locations. So therefore, we'd expect to see incremental requirement to recover -- and there's plenty of ethane still in being rejected, that's still recoverable. But we would expect to see incremental recovery at our plants. We do have capacity in place without adding to recover on behalf of our producer customers. And we do -- that is incremental. It's on a fee basis in terms of the processing and the pipeline to the delivery points.

Got it. Very helpful. And then I guess on a follow-up, maybe moving over to L&S. Given MPC's plans to expand eastward in terms of placing product into PADD I via the Laurel or Manor pipes following multiple shutdowns at local East Coast refineries. Is there an opportunity for MPLX to somehow participate in MPC's west to east movement if PADD I becomes increasingly short product once demand recovers further?

Christine, it's Mike. I don't know that there's going to be a capital opportunity for MPLX. There's some existing assets, as I know you're aware of, a couple of other competitive assets that are out there that would fill MPC's need because they are existing. There's opportunities for us in regard to tankage and things like that. But I don't think you're going to see any large capital expenditure from us to support that need. We'll see if things change or if the dynamic around the market supply and demand changes. But for right now, I would tell you that I don't see us putting a lot of capital into that opportunity.

Yes. If it were, it would probably be around debottlenecking some of the pipelines we already have to make sure that we get the volume into those systems that MPC wants to move eastward.

Our next question comes from Keith Stanley with Wolfe Research. Your line is open. Please go ahead.

I wanted to revisit the recontracting question from earlier. So specifically with the oil pipelines from the IPO where the contract expires next year. Can you say -- are those in the negotiation there? Are the new rates negotiated with MPC for the oil pipelines? Or is there a mechanism already set by which the rates would automatically adjust when you recontract?

Yes. It's Pam. The overwhelming majority of our pipelines, whether we're talking crude or products, are FERC-based rates. So that's really what dictates the fees that we'll receive on those pipelines. And that fluctuates over time with the FERC index changes and PPI.

Okay. So, you don't have

No. I don't -- yes. So it's really going to be driven by the market rates and FERC rates that are in place today.

Okay. So the rates have been changing with the index over this time period already?

Yes, they do. They fluctuate each year.

Got it. Okay. Second question. Just thinking about recovery in volumes, how can we think about the company's leverage to an eventual recovery in MPC's throughput volumes? I'm just thinking L&S EBITDA never really declined much in 2020 because you offset it with cost cuts. But how can we think about leverage to volumes on the way back up? Is it material as a driver for MPLX? Or is it pretty modest because of your contract structures?

Well, I think as you look -- as you highlighted, we were able to mitigate some of the impact on the way down. We will see some improvements on the way back up. I think it's just really difficult to predict how much that might be and when. I think it's going to depend on which areas of the geography MPC sees the most robust recovery. So again, we're just -- we have a cautious optimism for 2021, and we'll just have to wait to see how it plays out.

Our next question comes from Tristan Richardson with Truist Securities.

Appreciate all the comments on 2021. I mean, just -- maybe just going back to the prior question. I would appreciate the outlook for cautious optimism and the parent's comments on 1Q. But one of your peers is out there and -- made the comment that they could see 2021 returning to 2019 levels. Curious do you guys see overall refined product demand recovering to 2019 this year?

Tristan, it's Mike. One of the things that I've tried to tell people is, I don't spend a lot of time trying to call exactly where the market is. And I spend more time trying to think of the banks of the river. So what if it turns out to be a poor year as far as recovery relative to the pandemic? What if it does turn out to be more robust, like you're referencing? So to me, the banks of the river are still pretty wide. Do we anticipate there could be a positive upside as a result of getting past the pandemic and vaccines working their way through and an earlier recovery? So I'd say that the bull case is we get a recovery that's robust and quick. And then the bear case is, things take a little longer than people expect because the pandemic lingers and the post pandemic activity doesn't recover quite as much. So I'm hopeful that it is the first part. As Pam said, we're cautiously optimistic. We can see some of the parameters that would have people feeling that way. And obviously, we hope that's the case. But our model, though, is to spend more time saying what if it's not the case and how do we see this playing out in case it turns out to be longer, et cetera? So I'm the first to admit that I don't know exactly when it's going to recover. I hope it is more robust than earlier than later. That's obviously our hope. That's why Pam uses the word cautious optimism. At the same time, probably, our thinking is, let's prepare for the worst and just be prepared in case this thing takes longer. I mean, some of the actual facts, as people know, is as we got into the back end of December, the pandemic was hitting harder and the cases were spiking up, and we kind of saw a second wave of restrictions. And hopefully, those are going to start to come off. And I know the new administration has a priority to get vaccination into the people's arms as quickly as possible. So there's momentum in the positive side, but -- and there's momentum that cases seem to be coming down and hopefully restrictions will be coming off, but I think it's hard to tell as to when it will actually occur. And so we're just going to prepare for both scenarios, the bull scenario, the bear scenario and look at our cases and see what we think would play out in both. That's the way we kind of approach it. I hope that helps you?

I think the one wildcard that Mike's hinting at as well is just this new variant on the virus. We really don't know what kind of impact that's going to have. And so just while we think that the whole country is starting to turn the corner on this situation, this is a new kind of a wildcard that's been presented. So we'll have to see how that plays out.

No. I appreciate it. And then just one follow-up on the optimization efforts in the Northeast. Is there a cost savings number associated with pushing volumes to the most productive plants? Can that be meaningful in the G&P segment this year?

No, I wouldn't suggest that there is some meaningful upside related to that.

It's more about capital deployment and can we optimize the capital that has already been spent. So if you look at our data, we have some areas where the utilization is very high in some areas where there's opportunity. So what Pam was referring to is our commercial and operating teams are looking at, is there a way to take advantage of that unused capacity as growth occurs in an area where there is not excess capacity? That's the idea.

Our last question comes from Ujjwal Pradhan. Your line is open. Please go ahead.

First one, just around the commentary that you have provided around capital allocation framework. Very helpful. You discussed the attractive cash flow yield on the units. So compared to that, when you think about new capital projects or expansions, how would you frame the return threshold that you're using internally?

Yes, Ujjwal, it's a good question, but it's a tough one to answer. Depending on the project, aside from just the return which you're mentioning, there's a lot of factors that come into place. Like Michael asked earlier, do you have MVC protection? How long is the project? What length of term deals that you have? So there's a lot of things that come into play. Overall, what we've been trying to tell people is, we've moved the capital down for two reasons. One is we want to set the bar higher than we have in the past as far as that capital discipline. That's one thing that's driving this. And the second is where the equity is trading. And when we're trading at a 17-ish yield on DCF, that is something that you can get very quickly with no time lag, no capital lag to execute a project, no permitting risk, no execution risk, et cetera, et cetera. So you take that for what it is at that yield and then you compare it to some of the projects that may even be better than that longer term and maybe more strategic for us. But that's kind of the process that we kind of go about looking at it. If we were trading at a much more valued equity in our mind, that dynamic would be a little bit different. But at least in the short term, while we continue to trade at these higher yields, makes us really look and I use the word disciplined on whether we want to invest the capital or not. And you know this as well as anybody. When you invest capital, you're putting money out for a couple of years before you get cash flows, et cetera, et cetera. So you weigh…

Got it. That's helpful, Mike. And my next question is to Pam. Could you clarify the NGL price sensitivity you mentioned earlier after the Javelina plant sale versus the $23 million for every $0.05 change impact that you have pointed out in the past?

When you say clarify. In the past -- yes, we had given a rule of thumb or metric sensitivity of $23 million in the past. So it's a small tweak. It's not a material tweak. And there are a number of factors that influence that, but a lot of it has to do with volumes that are related to product sales that we have as part of our percent of proceeds contracts of which Javelina is one. So it's not just specifically related to Javelina, but it is a small tweak. But just wanted to provide you that updated guidance as we've provided it in the past.

I'd like to turn the call back over to Kristina Kazarian for closing remarks.

Sounds great. Thank you for joining us today, and thank you for your interest in MPLX. Should you have additional questions or would you like clarification on any of the topics discussed this morning, members of our team will be available to take your calls. Thank you.

Thank you. That concludes today's conference. Thank you for participating. You may now disconnect.