John Fox commented, "The engagement that I have had with investors, analysts and other stakeholders since my open letter to management on January 11, 2017, has confirmed that there are many that also share my concern around management's proposed path forward. The proposed plan is just another complex financial engineering plot that has too many unanswered questions that ultimately sends MPLX down a slow growth path of value destruction. As MPLX's largest unitholder, MPC must understand the implications that growth expectations at the MPLX level have on its own value.
"Companies with slow distribution growth are put in the penalty box, putting downward pressure on the unit price and upward pressure on the yield. Based on our analysis of the MLP space, under a high growth valuation scenario MPLX could expect to attract a 4.1% yield implying a $55.12 per unit price, a 50% uplift to market close on January 12, 2017. Alternatively, under a slow growth plan like the one MPC is currently proposing, MPLX could expect to attract a 7.8% yield implying a $28.97 per unit price, a 20% decline in value compared to the market close on January 12, 2017. This swing has material implications for MPC shareholders. By dropping down slow growth refining assets, MPLX's organic growth assets will be strangled, diminishing MPC's fully integrated value.
"Don't put MPLX in the penalty box. Our simple and less risky plan puts us on a growth path to value creation. If managed properly, MPLX has years of double digit organic growth ahead with high rate of return projects built on its substantial core infrastructure. This high growth path retains management's focus on high-return EBITDA projects in the Marcellus. We estimate the adoption of our plan results in an immediate uplift in value for MPC shareholders of between $20-$30 per share.
"The high growth path is the only real path to value creation for MPC and MPLX. Execute the IDR elimination plan immediately at a fair and transparent price and set MPLX free with its own focused and growth driven management team. It Just Makes Sense!"
About John M. Fox
John Fox is the co-founder of MarkWest Hydrocarbon, former CEO, Chairman and Director of MarkWest Energy GP, L.L.C. ("MarkWest GP"), the general partner of MarkWest Energy Partners, L.P. ("MarkWest"), and beneficial owner of 1,542,072 MPLX common units, and 20,900 shares of Marathon Petroleum Company, through its merger with MarkWest in 2015 and from follow-on investments. Mr. Fox worked to eliminate the Incentive Distribution Rights (IDRs) at MarkWest in 2007, creating tremendous value that ultimately led to the successful acquisition of MWE by MPLX in 2015. MarkWest generated a 143.3% total return and grew from a $1.2 billion market cap to an $8.6 billion market cap for the period of September 5, 2007, when the IDRs were eliminated, to December 4, 2015.
John Fox is providing this material for general informational purposes only. None of the information provided herein is intended to be relied upon as investment advice. The opinions expressed in this letter are those of Mr. Fox as of January 26, 2017 and are subject to change at any time due to changes in market, economic conditions, or new public information. These opinions are Mr. Fox's alone, and do not reflect the opinions of any other member of the Fox family. The information and opinions contained in this material are derived from proprietary and non-proprietary sources deemed by Mr. Fox to be reliable and are not necessarily all-inclusive. Mr. Fox does not guarantee the accuracy or completeness of this information. There is no guarantee that any forecasts made by any party will come to pass. Reliance upon information in this material is at the sole discretion of the reader.
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/john-fox-co-founder-of-markwest-hydrocarbon-reaffirms-stance-against-marathon-petroleum-corporations-proposed-january-3-2017-plan-and-offers-additional-support-for-a-growth-plan-that-provides-immediate-uplift-in-value-for-mpc--300398675.html
SOURCE John M. Fox