- Unit cites the continued decline in commodity prices
- Customers have been 'severely impacted' by drop in prices
MPLX LP, the pipeline unit formed by Marathon Petroleum Corp. in 2012, slumped the most on record after lowering its payout guidance to investors in the wake of the collapse in commodity prices.
It slid 25 percent to close at $21.86 in New York. The units have lost 72 percent of their value in the past year. Marathon Petroleum tumbled 7.6 percent.
MPLX forecast distribution growth of 12 percent to 15 percent this year, according to a fourth-quarter earnings statement from the Findlay, Ohio-based company Wednesday. That follows an increase to distributions of 29 percent in 2015. The company said the unit’s distribution growth rate continues to be among the highest for large-cap, diversified master-limited partnerships.
“MPLX’s slowing growth plan, just two months after the 25 percent annual distribution growth was affirmed at the analyst day, will affect their valuation,” said Gurpal Dosanjh, an analyst with Bloomberg Intelligence in New York.
Falling U.S. oil and gas prices have driven down the value of pipeline stocks, spurring some to cut or freeze payouts to conserve cash. In December, Kinder Morgan Inc. slashed its dividend by 74 percent to avoid a credit downgrade to junk status.
The decline in commodity prices and the market’s perception that low prices will persist have “severely impacted” MPLX’s customers, which will affect income growth that is distributed, Chief Executive Officer Gary Heminger said in a call with analysts.
Marathon has a 19 percent stake in MPLX, according to Bloomberg data.