Welcome to the MPLX Earnings Call. My name is Jason, and I will be your operator. I will now turn the call over to Lisa Wilson. Lisa, you may begin.
Thanks, Jason. Good morning, and welcome to the MPLX 4th quarter and full year 2016 earnings webcast and conference call. The synchronized slides that accompany this call can be found on nplx.com under the Investors tab. On the call today are Gary Heminger, Chairman and CEO Don Templin, President Pam Beale, Chief Financial Officer and other members of the management team. We invite you to read the Safe Harbor statements and non GAAP disclaimer on Slide 2.
It's a reminder that we will be making forward looking statements during the call and the question and answer session that follows. Actual results may differ materially from what we expect today. Factors that could cause actual results to differ are included there as well as in our filings with the SEC. Now I will turn the call over to Gary Heminger for opening remarks on Slide 3.
Thanks, Lisa, and good morning to everyone. Despite a challenging environment, particularly in the first half of the year, MPLX has strong operational and financial performance. While I am pleased with what we achieved in 2016, I'm even more excited about what lies ahead. On January 3, we provided an update on the strategic actions we intend to implement at MPLX to provide increased visibility to our distribution growth and to lower our cost of capital. The partnership expects to acquire assets from MPC with approximately $1,400,000,000 of EBITDA as soon as practicable and expected in 2017.
A proposed transaction representing approximately $250,000,000 in EBITDA has already been offered to MPLX and referred to the Conflicts Committee of the MPLX Board. This transaction is expected to close in the Q1 of 2017, pending requisite approvals. We expect the partnership to finance the dropdown transactions through approximately equal portions of debt and equity, with the equity financing to be funded through LP units issued to MPC. In conjunction with completion of the dropdowns, we also expect to exchange MPC's economic interest as a general partner, including incentive distribution rights for newly issued MPLX common units. These actions are expected to provide greater visibility to near term distribution growth and reduce the partnership's cost of capital, enhancing its ability to deliver an attractive distribution growth rate over the long term.
Importantly, all of these transactions are subject to requisite approvals, market and other conditions, including tax and regulatory clearances. Following the dropdowns, the partnership size and scale will be among the largest in the industry with nearly equal contributions from the logistics and storage and gathering and processing segments. With a simplified structure, full alignment with MPC and additional visibility to an attractive distribution growth rate, we are confident about MPLX's compelling value proposed proposition to investors. Now, I'll turn the call over to Don to cover the financial and operational highlights. Don?
Thanks, Gary. Over the course of 2016, we executed our plan and delivered strong results in all four quarters. We also achieved our financial and distribution growth guidance for the year. This was accomplished by managing our costs, optimizing capital investments, and continuing our sharp focus on customer service. We also substantially reduced our leverage, placing the partnership in a strong financial position as we look forward to significant growth in 2017 and beyond.
We reported 4th quarter adjusted EBITDA of $391,000,000 and distributable cash flow of $318,000,000 marking the 4th straight quarter of growth in both these metrics. Full year adjusted EBITDA was 1,400,000,000 and distributable cash flow was over $1,100,000,000 Last week, we announced an increase in our quarterly distribution to $0.52 per common unit, a 4% increase over Q4 last year. With this increase, we delivered 13% distribution growth in 2016 and achieved our targeted distribution growth rate for the year. We also reaffirm our distribution growth guidance of 12% to 15 percent for 2017 and forecast double digit distribution growth for 2018. We remain committed to maintaining a strong balance sheet and an investment grade credit profile.
The partnership ended the year with $2,700,000,000 of liquidity and leverage of 3.4 times, well below our target of around 4 times. We also delivered a strong full year coverage ratio of 1.23 times. On the commercial front, we have reached an agreement with 1 of our key producer customers to continue to support their growth in the Marcellus. I'm pleased to announce that we recently executed amended gathering, processing and fractionation agreements with Range Resources, one of our largest producer customers. To support the continued long term development of Range's substantial rich gas acreage, we expect to construct an additional 200,000,000 cubic feet per day processing facility at the Houston complex in Pennsylvania in early 2018.
This facility will replace the existing 35,000,000 cubic feet per day Houston 1 processing plant. We also expect to commission a new 200,000,000 cubic feet per day plant at the Harmon Creek Complex in Washington County, Pennsylvania by mid to late 2018. The combination of this strategic partnership prolific Marcellus and Utica shales. On Slide 4, we provide a summary of our capital expenditure program for 2017. Our organic growth forecast increased slightly from the guidance we provided last quarter to a range of $1,400,000,000 to 1,700,000,000 dollars Maintenance capital remains forecast at approximately $100,000,000 The increased guidance in growth capital reflects incremental investments to support additional gathering and processing infrastructure for Range Resources.
Approximately $1,000,000,000 to $1,300,000,000 of our 20 17 capital is directed to our growth capital is directed to the Gathering and Processing segment, primarily in the prolific Marcellus Shale region. We expect to complete an additional 400,000,000 cubic feet per day of natural gas processing capacity and 120,000 barrels per day of fractionation capacity to support our producers' ongoing development of rich gas acreage in Pennsylvania and West Virginia. The remainder of our investments will support the Logistics and Storage segment. Projects include the Utica infrastructure build out in connection with the recently completed Cornerstone Pipeline, a butane cavern in Robinson, Illinois and a tank farm expansion in Texas City, Texas. Shifting to our Gathering and Processing segment, Slide 5 provides an overview of our operations in the Marcellus and Utica Shale.
4th quarter processed gas volumes averaged 4,400,000,000 cubic feet per day, representing a 2% increase over the 3rd quarter. Our complexes were 81% utilized during the quarter. We achieved full utilization at the Sherwood complex in December with volumes averaging around 1,200,000,000 cubic feet per day. Full year 2016 Marcellus and Utica process volumes increased 14% compared to 2015, while gathered volumes were up 20% versus the prior year. The positive production growth outlook from our major producer customers such as Antero, Range Resources and EQT give us confidence in delivering continued volume growth.
Overall, we expect an additional 10% to 15% increase in processed volumes in 2017. On Slide 6, we provide a summary As the largest provider of fractionation services in the basin, our 2016 volumes increased by 29% versus the prior year. We expect this robust growth to continue with a 15% to 20% increase forecast for next year. To support this growth, we have recently commenced operations of a third fractionation train at our Hopedale complex. We are also constructing additional fractionation facilities at the Keystone and Majorsville complexes with a total of 60,000 barrels per day of incremental de ethanization capacity.
Those facilities are expected to be placed into service during the second half of the year. Slide 7 provides an overview of our Southwest operations, where we have diversified gathering and processing assets across established resource plays in Texas and Oklahoma. For the Q4, we processed 1 point 2,000,000,000 cubic feet per day of natural gas, while plant utilization was 81%. We continue to see increased volume recently completed Hidalgo complex in the Delaware Basin of West Texas. With a 90% utilization rate for the quarter, this plant supports growing production from Cimarex and Chevron's ongoing development program.
For the full year 2016 process volumes increased 14%, while gathered volumes were also up slightly. For 2017, we forecast process volumes to increase by another 3% to 8% with growth driven by both the Hidalgo complex as well as incremental infrastructure to support new field stack resource play in the Kano Woodford Shale. Turning to Slide 8, we provide an update on our Logistics and Storage segment. The Cornerstone Pipeline became fully operational in October and we also completed the supporting Hopedale connection during the quarter. The completion of this connection combined with the reversal of MPC's Rio pipeline in December now allows for the movement of natural gasoline from our Hopedale fractionation complex all the way to MPC's Robinson, Illinois refinery.
We continue to progress on the expansion of existing pipelines and the construction of new pipelines as part of our larger Utica build out strategy. These projects remain targeted for completion in mid-twenty 17. With this mix of new and existing pipelines, we are seizing a unique opportunity to support producer customer growth by connecting NGLs to downstream markets in the Midwest and Canada through our extensive distribution network. Now, I'll turn it over to Pam to review our financial position and strategy.
Thank you, Don. Turning to our financial highlights on Slide 9, we reported adjusted EBITDA of $391,000,000 and distributable cash flow of $318,000,000 for the Q4 of 2016. Full year adjusted EBITDA was 1,400,000,000 dollars and distributable cash flow was over $1,100,000,000 Total segment operating income was $429,000,000 with approximately 70% generated by the gathering and processing segment. The bridge on Slide 10 shows the change in adjusted EBITDA from the Q4 of 2015 compared to the Q4 of 2016. Since the prior year quarter, we increased adjusted EBITDA by $93,000,000 The increase in the Gathering and Processing segment adjusted EBITDA was primarily driven by higher volumes and increased NGL prices, while the addition of the Marine business accounted for the majority of the change in the Logistics and Storage segment.
Slide 11 provides a summary of key financial highlights and select balance sheet information. At the end of the Q4, we had approximately $2,000,000,000 available on our bank revolver and the full $500,000,000 available on our intercompany facility with our sponsor, Petroleum. During the quarter, we opportunistically issued 8,600,000 new common units through an ATM program and received net proceeds of approximately $277,000,000 As Gary mentioned earlier, we expect to finance the dropdown transactions through approximately equal portions of debt and equity. With the equity financing funded through LP units issued to MPC, we do not expect to raise public equity for the dropdowns. We remain committed to maintaining an investment grade credit profile as demonstrated by our actions last year.
A significant focus of 2016 was strengthening the balance sheet of the partnership. We reduced the leverage from 4.7 times at the end of 2015 to 3.4 times at the end of 2016, which is well within our target of 4.0 times or less. In addition, we delivered a strong full year coverage ratio of 1.23 times. With $2,700,000,000 of liquidity and access to the capital markets, the partnership is well positioned to finance its robust growth capital investment plan and the dropdown acquisitions in 2017. On Slide 12, we provide our commodity price sensitivity forecast, highlighting the annual unhedged impact to distributable cash flow of our exposure to natural gas, natural gas liquids and crude oil.
For 2017, we forecast net operating margin to be 92% fee based. For the commodity exposed portion, we continue to employ an active and disciplined hedging strategy and have hedged approximately 35% of our 2017 exposure. On Slide 13, we provide our 2017 forecast, which is based on expectations for producer volumes, commodity prices and our strategy of deploying capital on a just in time basis. Excluding the impact of dropdowns and third party acquisitions, we forecast 2017 net income in a range of $500,000,000 to $650,000,000 adjusted EBITDA in the range of $1,500,000,000 to $1,650,000,000 and distributable cash flow of $1,150,000,000 to 1,300,000,000 dollars We continue to expect distribution growth of 12% to 15% in 2017 and double digit growth in 2018. MPLX has a consistent record of growing distributions to unitholders.
Based on our quarterly financial performance, the Board of Directors of our general partner declared a distribution of $0.52 per common unit. The Q4 2016 distribution represents a 4% increase over the same period last year and marks the 16th consecutive quarterly increase since our initial public offering in October 2012. Full year 2016 distributions were $2.05 per common unit, which represents a 13% increase over the full year of 2015. Accelerated drop down of logistics and storage assets will add significant fee based stable cash flow to the partnership that will enhance visibility of near term distribution growth. The dropdowns combined with the exchange of the GP IDR interest for LP units are expected to lower our cost of capital and strengthen our ability to provide unitholders an attractive distribution growth profile over the long term.
With a strong balance sheet and an improving cost of capital, we are well positioned to participate in opportunities in the midstream space. Our strategically located assets, long term producer customer relationships and the compelling backlog of organic projects are a strong foundation to provide sustainable returns well into the future. So with that, I'd like to turn the call back to Lisa.
Thanks, Pam. As we open the call for your questions, we ask that you limit yourself to one question plus a follow-up. You may be prompted for additional questions as time permits. With that, we will now open the call to questions. Thank you, Jason.
Thank And our first question comes from Christina Khazarian from Deutsche Bank.
Afternoon, guys.
Hi, Kristina.
Hi, Kristina. How are you?
Good. So sticking more on the fundamentals side, could you guys talk a little bit about volume guidance in the Marcellus Utica? So you guys have gathered up 3 to 6, process 10 to 15 and frac up 15 to 20. Just could you touch on the trends between each and what's kind of driving the differences as we step along the value chain?
Sure, Christina. This is Don. As we are looking into 2017, I think you'll recall that at the end of the Q3 on the gathered volumes, we were generally guiding flat and we're seeing some incremental positive information and feedback from our producer customers that we would expect that to increase slightly from what we had communicated to you all at the end of the Q3. In terms of the process volumes of 10% to 15% over last year over 2016, some of that's going to be driven by the addition to our processing that we're building at Sherwood. So Sherwood 7 and 8, we'll be adding those in 2017.
That's 400,000,000 cubic feet per day of incremental processing capacity. Our Sherwood plant is right now operating essentially at full capacity. It's at 1.2 Bcf a day. And so we're expecting that that will clearly be an addition to our processed volumes. On the so a lot of I would say a lot of our growth will be driven by adding that capacity, but that capacity will come online sort of over the period.
So that's 400,000,000 cubic feet per day on sort of 4.4 of processing that we have. So that's sort of 10%, but it gets feathered in during the year. We are going to also probably spend less money and capital in the Utica, but we're going to be driving increased capacity utilization. So we have assets there that aren't fully utilized and our goal in 2017 is to make sure that we're driving a fuller utilization of those assets and we will deploy incremental capital when it appears that those are getting more full or more fully utilized and we have an opportunity to deploy capital there. A lot of our capital would be deployed on the Marcellus side and we're actually expecting to deploy more capital in the Southwest than we are in Utica just given the opportunity set that presents itself.
Okay. And then my follow-up is in context of that comment in the $1,400,000,000 to $1,700,000,000 CapEx number. And you guys said it was about 75% Marcellus NGL related. How much incremental infrastructure is really needed? And what I'm really trying to get at how do I think about the longer annual growth
rate for
a company like of your size and any specifics would be great?
Yes. I think at
the time that the combination was announced, we'd indicated that we thought over the longer term that we had probably $1,500,000,000 of growth capital that was available to us sort of on an annual basis. And I would say, Christina, that we feel given the opportunity set that we see, the optimism that our producer customers are communicating and drilling plans that we see for 2017 and beyond that I would think that that's probably on the conservative side, not on the aggressive side. So we do see a good strong opportunity set for that type of investment.
All right. I'll leave it there. Thanks, guys.
Sure, Christina.
Thank you. Our next question comes from Jeremy Tonet from JPMorgan.
Good morning.
Hi, Jeremy.
I was just hoping that you could build on a little bit more from what you said at the MPC call with regards to the wholesale fuels business and the POR status there. And just wondering if you don't have full clarity, is there any chunk of it that you feel comfortable has clarity, half of it at this point or any other color that you could provide around that would be helpful?
Jeremy, it's Pam Beal, and I'll take that question. So we're very encouraged that the final regulations were published and our team is evaluating all the information contained in those regulations. And we hope that very soon we'll be in a position to understand better the path forward. As we've indicated and as MPC has indicated, we expect that we're still likely to seek a PLR. We don't view it as being kind of a part of the LOAF.
We think we need to do it on the entire LOAF. The it's a very sizable amount of EBITDA that will be coming into the partnership. And we think that the parameters of the fuels distribution service agreement that we've structured here is unique enough that we just don't want to we think it's just most prudent to get the have absolute clarity that it will be Q2 qualifying income. It's just not a risk that would make sense given the size that would be dropped into the partnership. And dropping in part of it and then having a different view about qualifying income just would not be prudent.
We wouldn't be acting in the best interest of the unitholders to take on
that. That.
That makes sense. And just want to turn about turn to growth outside of the Northeast and just wondering with the Delaware Basin, with the STACK, we continue to see volumes ramping there. Just wondering what you think about the prospects for incremental processing plants that could be developed there to service producer needs?
Sure, Jeremy. I mean, we are very optimistic about what's happening in the Southwest. Our Hidalgo plant, the first plant that we put into service in that region is nearly at 90% utilization or maybe on a daily basis slightly higher than that. So typically we would have a ramp up that would be 12 to 18 months that was put into service in the May time period. We are already at 90% utilization.
And so I would expect that we are that we will continue to invest in that region. We are actively in dialogue with producer customers around being able to grow our assets, particularly processing assets around there. In the STACK, we support Newfield and we are very constructive on sort of what they are doing there as well and we continue to grow with them and we'll look to continue to grow with them.
Great. That's helpful. Thank you.
Thank you. Our next question comes from TJ Schultz from RBC Capital Markets.
Great. Thanks. I think just first, the amendments and extensions to the Range agreements, I guess just what was the impetus to work through amendments, if you can give any more detail on changes to contract structure, pricing and tenure on that arrangement?
Yes. So we're not going to provide details around sort of those amendments and extensions. But I guess what I can say is that, one of the reasons that Marcellus exists in the Marcellus is that Range Resources was our key customer there and we grew with them over the last number of years and we are really excited about growing with Range in the years ahead. So we believe that this positions us to be able to grow with Range as they continue to grow. As we have indicated, we've committed to building incremental complexes.
So an incremental processing at our Houston facility and incremental processing at Harmon Creek. And so we feel like we are well positioned with Range for the long term to continue to grow as they grow.
Okay. Thanks. I guess just second on guidance, assumptions included for your investment in the Bakken pipeline system and guidance for 2017?
So in terms of the Bakken pipeline system, we have indicated that if and when the conditions and we do expect the conditions to close will be met, when the conditions to close are met, we expect to make a $500,000,000 investment and to take an ownership interest that is slightly more than 9% of that pipeline. So that would be we would expect that that especially given some of the positive communication that's coming out of Washington DC and with the administration, we are optimistic that something on that will happen nearer term rather than longer term. And maybe I'll have Pam comment as well.
Yes. I was just going to add that the guidance that we've provided does not include the impact of acquisitions or drop downs.
Okay, perfect. Thank you.
Thank you. Our next question comes from Eric Genkow from Citi.
Good morning. Was just curious baked into your guidance right now, what do you have sort of in terms of expectations for Rover? If they were to not get their certificate and miss the tree clearing deadline, is there a downside to this guidance? And then in the converse, they actually are able to the deadline, then is there upside? And how would that work in your perspective?
So Eric,
we have obviously expectations around all of the infrastructure that's being contemplated to be constructed in the basin. I mean, Rover is obviously an important piece of it. We expect that it will get it will be constructed and be completed. But we've not provided sort of any guidance around the impact sort of month to month or quarter to quarter on our results. I guess I would just say this, I feel very comfortable with the guidance that we're given that we are currently giving knowing what we know about completion dates of infrastructure And we believe and we believe we've been very we've had the ability to be very flexible in meeting and accommodating our producer customers' needs.
So last summer around NGL, so summer of 2016, we were loading unit trains of propane and sending them to Kansas in order to allow our producer customers to continue to grow the way that they wanted to grow. And I would expect that going into 2017 2018, we will be flexible and so will our producer customers in being able to grow their business.
And then I guess just as a follow-up or separate question, as I think about the guidance you've given and kind of where you're at now and kind of post all of the dropdowns. I think you mentioned in the last call that you expect to be above your 1.1x sort of coverage long term target once the dropdowns complete. And you cited here a 4.0 sort of longer term target on sort of debt to EBITDA, but sort of back of the envelope math suggests that you're at 3.4 now and you do fifty-fifty debt to equity like you're going to be, I mean, likely at 3.5x or less maybe once all this is done and with much, much higher coverage. So I'm just curious how are you thinking about that? And in terms of yield compression, is that part of it or maintaining the distribution growth guidance?
I'm just curious to hear your thoughts on that overall.
I think the answer is probably yes to both of the comments you made at the end. I mean, we are committed to our distribution growth guidance, both the 12% to 15% for 2017 and the double digit for 2018. We believe that the actions that we're taking will actually provide increased visibility to investors around our ability to meet that distribution growth guidance. In terms of one of the things I do think that's important over time as we make the acquisitions from MPC and we have and we've essentially acquired the drop down portfolio from MPC, we do think it's important and our investors want incremental visibility into our growth profile. So I would say if our coverage rises a little bit above the sort of 1.1 times that we historically had when we were predominantly a drop down story, I don't think that's a bad result.
I think that will actually give our investors a lot of confidence in our growth profile and allow us to continue to drive a lower cost of capital.
Okay. Thank you.
Our next question comes from Robert Balsamo from FBR.
How are you doing guys? Congrats on a nice quarter.
Thanks.
I was wondering just some more clarity on the arrangement with Range. Any potential there for expansion into North Louisiana or other basins? I assume that that's on the table.
Yes. Our primary focus on and the announcement that we made was really a Marcellus based focus, but maybe I'll have Randy Nickerson comment around sort of the continuing relationship with Range.
As Don said, Range is a big part of why we're there. Excuse me, when we wrote that the first entered into the arrangement of the range, you have to realize that was the very first time we moved into Marcellus. And honestly, at the time, if I think back to that, we thought sort of our base case was 50,000,000 a day growing to 90,000,000 a day, not really knowing the extent of the rock of the production. So honestly, part of it is a natural evolution and maturing of the relationship between us and Range. We just needed to rework through the arrangements.
At the same time, we needed to expand both at the new complex at Harmon Creek, replacing Houston. So both of those are the key drivers and why we did we wanted to rework the arrangement. It's good for both Range and for Mark West, solidifies the arrangement for us. We're delighted by it. We get to expand.
I think everything is all positives on both sides.
Okay. Thank you very much.
Our next
With dropdowns and organic projects and the DAPL investments going to be an active 2017 given the parent will be taking equity for the dropdowns. Can you provide organic investments in DAPL?
Yes. Brian, it's Pam, and I'll take that question. I think it's important for us to always look at where we ended the year and how well positioned the partnership is. So we ended 2016 with $2,700,000,000 of liquidity and $234,000,000 of cash on the balance sheet. So as we're entering this phase of significant growth, the partnership is in a really good position to take on these commitments.
We know that the market for the debt markets are very strong. They're certainly strong for energy names and we think that they're going to be very strong for the sector in which we operate today. And we think that based on the fact that the sponsor is going to take back the equity portion of the consideration, it really limits the amount of equity that we need to raise in the capital markets. So we're very confident in our ability to raise the capital that we'll need to fund both the organic portion of our growth strategy, the drop downs and the acquisition of Dapple.
As of now, the organic investment in DAPL are expected to be funded with public equity?
Well, keep in mind, we did raise equity opportunistically in the Q4 of 2016. So we've already issued a fair bit of equity, and we'll the ATM market was a very was a good way to raise equity capital through 20 16, and we see no reason why it won't be a good source of equity capital as we move through 2017 as well.
And then as you're moving ahead with the simplification process, what are your thoughts about potentially changing the timing of the GP buy in perhaps a bit sooner than initially expected?
Yes, Brian, this is Don. I guess we as the acquirer of the assets that were being offered by MPC, we'll acquire them when they're offered to us. And I guess I would say the same thing would be true around an IDR transaction. We can't affect an IDR type transaction until the GP makes that available to us. So I expect that what MPC announced is their strategic plan and we are operating under the presumption that that strategic plan will be carried out on that timetable and in that sequence.
Thank you, Don.
Thank you. Our next question comes from Theresa Chen from Barclays.
Good morning. I wanted to ask you about your positioning in the ethane market. I believe based on your current capacity, you have the ability to generate another 70,000 barrels per day of production in ethane. And is an addition to that an opportunity to invest anywhere between $500,000,000 to $1,000,000,000 in the Northeast. Can you just talk about the factors that caused that delta?
And how do you get to the low end versus the high end? Where do you stand now? And is this at all contingent on export demand out of the Northeast?
Sure. This is Randy Nickerson. I'll take that and then maybe Greg can even follow-up with that. One of the things that we did in the Marcellus and in the Utica that's really different is we have very distributed deethanolization. So we have ethane recovery at each and every plant.
That gives us incredible flexibility because each and every producer is positioned differently relative to their takeaway, relative to their perspective on ethane and so forth. And we can install additional deethanizers really customize to match each and every one of our producers. You see us doing that. We're installing at Bluestone. We have deethanolization at some plants and not total deethanolization at others.
The other thing we can do because of the way we've designed the system that's really unique is that we can include smaller deethanolization integrated with the plants at the complexes or we can install larger standalone deethanizers. So we have almost unlimited flexibility sort of meet the market, particularly as we talk about the crackers coming on at the end of 2018 and into 2019. It's still to be seen what the price of ethane is going to happen. Is it really going to occur like this, like people are projecting that we're going to be perhaps even short of ethane and those crackers are going to have to reach up into the Northeast to pull out a lot more ethane than what we have. Today, we're primarily just recovering the minimum amount, what we all talk about as must recover, but realize that number can double and even in some cases triple if ethane becomes highly profitable to recover.
And that's what drives it for us. The neat thing about that as well is we can install those additional facilities sort of a just in time basis, so they're fully utilized. So we're really in a unique and a very good position to match the market as the ethane cracking capacity, both in the Northeast, particularly in the Gulf Coast, expands is going to be great. The other thing we're fortunate to be is we can send ethane is leaving our facilities and being exported out the East Coast. If we have crackers in the Northeast when they come online, Shell and others, and then we ship our producers transport ethane down to the Gulf Coast, we really access almost all the major markets.
So we're really in an ideal position or our producers are and we're in an ideal position to support those producers when they decide to meet those markets. So that's why there's such a big variability in the cost that goes with the good part of having enormous flexibility.
Thanks, Randy. This is Greg Flerke. I just would add to what Randy said. We in addition to all of the distributed deethanization facilities, which are our cryogenic plants, we have a connecting purity ethane pipeline to all of those. And that purity pipeline allows us to deliver ethane into our Houston, Pennsylvania hub and our Catas, Ohio hub, which are interconnects with ATEX, Mariner West, Mariner East and eventually Utopia, which will originate from our Catas facility.
We also will be have 2 origin points or the 2 interconnecting origin points or pipeline that eventually connect the Shell cracker that's been announced. So that's another takeaway point. So we hope to grow on our current position where we recover about 80% of all the ethane in the region. And as we can continue to dial up our ability with existing utilization and expanding as we are to our Majorsville and Keystone plants, we'll move with our customers' demand to grow that capacity.
That's very helpful. And how much of that investment opportunity is baked into your near term CapEx guidance for 2017?
Those big projects are not or that incremental project is not baked into our existing CapEx.
Okay, great. Thank you very much.
I mean, we do have in the 2017 budget, I mean, we have set this then we announced this previously, I guess Theresa, is that we have 60,000 barrels a day of deethanization that will come online in 2017. So that's in our budget. But I guess, I thought you were asking about sort of the incremental stuff and the bigger takeaway above what we already have.
Just the $500,000,000 to $1,000,000,000
Yes, yes. That's not in this.
Got it. Thank you very much.
Thank you. And our next comes from Cory Goldman from Jefferies.
Hey, guys. Just wanted to run through the 2017 EBITDA guidance quickly if I can. Just annualizing 4Q that kind of gets us within the range already for 2017 and you guys are forecasting some nice growth at least on the gathering processing and frac side. Can you give us some color as to what can get us to maybe just the low end of the guidance that you had given us just for the legacy side?
Well, let me start, Corey, I guess. As we see that, we want obviously, we've announced incremental processing capacity. So we will have that, that will help to drive on the G and P side. On the L and S side, we acquired the marine business at the end of the Q1. So there's $30,000,000 of L and S has L and S has historically grown at a pace and at percentages that would be typical of pipeline type growth.
And then the kind of the bigger pieces will really be around the G and P growth that we are experiencing. Yes.
And then the Cornerstone pipeline just came online in December. So you're going to have a full year of operation of Cornerstone.
Yes. I guess that's kind of my question is that if we use just 4Q on the $391,000,000 and annualize that, that gets us north of the low end of your 2017 guidance range. And so you have a full year cornerstone, you have additional gathering processing fractionation volumes. Just is it being a conservative on the NGL side, given that there is still some sensitivity on that front? Just wondering why the low end would be lower than what the 4Q would be kind of indicating to us on the 4Q 2016 sorry, yes, the 4Q 2016?
I would say it would just reflect caution and conservatism around the commodity price environment. We're optimistic. I think there's a lot of optimism by producer customers, but we just try to provide a range of guidance that could reflect the full spectrum of what could occur in 2017. Okay.
Can you guys
go ahead.
Sorry. I was going to say if you guys can provide just the NGL forecast just so we can get some gauge on that maybe.
So you want the weighted average NGL price that's in our forecast?
If you guys can provide it, yes.
It's $0.65
Perfect. Okay. That's helpful. And then just as a follow-up then, the new CapEx implies somewhere about $300,000,000 to $500,000,000 of additional projects. The additional range processing plant that explains a good portion of it assuming Harmon was already included in the guidance.
Can you guys just give some color as to what would drive us beyond I mean to get to that $500,000,000 is there additional projects in the Southwest that you guys are considering?
I'm sorry, which $500,000,000 Corey?
Just the delta between the $1,000,000,000 $2,000,000,000 on the high end on the previous guidance on the $17,000,000
I'm sorry.
I would say as we think about that capital, I think we're probably much closer to the high end of that range than we are to the bottom end of that range. And I think when we originally provided the range, the sort of the gathering capital is typically the one where we have maybe the least visibility and probably the most flexibility in managing that to be timed up to when our producer customers are putting wells online. I would say the rest of the fractionation and the processing, the capital around that the capital around the L and S part of the business, I think is relatively fixed and probably has more upside probability than downside probability.
That's really helpful. If I could just squeeze one very quick one in there. The 35% hedges that you have on the prices, is that a target you're comfortable with or you're going to look to add hedges on top of that already?
We're likely to continue to add as we go through the year.
Perfect. Thanks, guys.
We have no further questions at this time. I will now turn the call back to Lisa Wilson.
Thank you, Jason, and thank you for your interest in MPLX. Should you have additional questions or would like clarification on any of the topics discussed this morning, Doug Wentz, Denise Myers and I will be available to take your calls. Thank you for joining us today.
Thank you, ladies and gentlemen. This concludes today's conference. Thank you for your participation. You may now disconnect.