Goodwill and Intangibles (Notes)

3 Months Ended

Mar. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets Disclosure [Text Block]

Goodwill and Intangibles

Goodwill

MPLX annually evaluates goodwill for impairment as of November 30, as well as whenever events or changes in circumstances indicate it is more likely than not that the fair value of a reporting unit with goodwill is less than its carrying amount.

During the first quarter of 2020, we determined that an interim impairment analysis of the goodwill recorded was necessary based on consideration of a number of first quarter events and circumstances as discussed in Note 1. Our producer customers in our Eastern G&P region reduced production forecasts and drilling activity in response to the global economic downturn. Additionally, a decline in NGL prices impacted our future revenue forecast. After performing our evaluations related to the interim impairment of goodwill during the first quarter of 2020, we recorded an impairment of $1,814 million within the Eastern G&P reporting unit, which was recorded to Impairment expense on the Consolidated Statements of Income. The impairment was primarily driven by additional guidance related to the slowing of drilling activity, which has reduced production growth forecasts from our producer customers. This resulted in goodwill totaling approximately $7.7 billion as of March 31, 2020 within four reporting units. The fair value of the remaining reporting units with goodwill were in excess of their carrying value by percentages ranging from 8.5 percent to 270.0 percent. The reporting unit whose fair value exceeded its carrying amount by 8.5 percent, our Crude Gathering reporting unit, had goodwill totaling $1.1 billion at March 31, 2020. The operations which make up this reporting unit were acquired through the merger with ANDX. MPC accounted for its October 1, 2018 acquisition of Andeavor (including acquiring control of ANDX), using the acquisition method of accounting, which required Andeavor assets and liabilities to be recorded by MPC at the acquisition date fair value. The Merger was closed on July 30, 2019 and has been treated as a common control transaction, which required the recognition of assets acquired and liabilities assumed using MPC’s historical carrying value. As such, given the short amount of time from when fair value was established to the date of the impairment test, the amount by which the fair value exceeded the carrying value within this reporting unit is not unexpected.

Our reporting units are one level below our operating segments and are determined based on the way in which segment management operates and reviews each operating segment. The fair value of our six reporting units was determined based on applying both a discounted cash flow or income approach as well as a market approach. The discounted cash flow fair value estimate is based on known or knowable information at the measurement date. The significant assumptions that were used to develop the estimates of the fair values under the discounted cash flow method included management’s best estimates of the expected future results and discount rate, which ranged from 9.5 percent to 11.5 percent. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. As a result, there can be no assurance that the estimates and assumptions made for purposes of the interim goodwill impairment test will prove to be an accurate prediction of the future. The fair value measurements for the individual reporting units represent Level 3 measurements.

After performing our evaluations related to the impairment of goodwill during the fiscal year ending December 31, 2019, we recorded an impairment of $1,197 million within the Western G&P reporting unit. The remainder of the reporting units’ fair values were in excess of their carrying values. The impairment was primarily driven by updated guidance related to the slowing of drilling activity, which has reduced production growth forecasts from our producer customers. This resulted in goodwill totaling approximately $9.5 billion as of December 31, 2019, with all but one of our six reporting units having goodwill.

The changes in carrying amount of goodwill were as follows:

(In millions)	L&S		G&P			Total
Gross goodwill as of December 31, 2018	$	7,234	$	2,912		$	10,146
Accumulated impairment losses	—		(130		)	(130		)
Balance as of December 31, 2018	7,234		2,782			10,016
Impairment losses	—		(1,197		)	(1,197		)
Acquisitions	488		229			717
Balance as of December 31, 2019	7,722		1,814			9,536
Impairment losses	—		(1,814		)	(1,814		)
Balance as of March 31, 2020	7,722		—			7,722
Gross goodwill as of March 31, 2020	7,722		3,141			10,863
Accumulated impairment losses	—		(3,141		)	(3,141		)
Balance as of March 31, 2020	$	7,722	$	—		$	7,722

Intangible Assets

During the first quarter of 2020, we also determined that an impairment analysis of intangibles within our Western G&P reporting unit was necessary. See Note 11 for additional information regarding our assessment around the Western G&P reporting unit, and more specifically our East Texas G&P asset group. The fair value of the intangibles in our East Texas G&P asset group were determined based on applying the multi-period excess earnings method, which is an income approach. Key assumptions included management’s best estimates of the expected future cash flows from existing customers, customer attrition rates and the discount rate. After performing our evaluations related to the impairment of intangible assets associated with our East Texas G&P asset group during the first quarter of 2020, we recorded an impairment of $177 million to Impairment expense on the Consolidated Statements of Income related to our customer relationships.

MPLX’s remaining intangible assets are comprised of customer contracts and relationships. Gross intangible assets with accumulated amortization as of March 31, 2020 and December 31, 2019 is shown below:

		March 31, 2020							December 31, 2019
(In millions)	Useful Life	Gross		Accumulated Amortization(1)(2)			Net		Gross		Accumulated Amortization			Net
L&S	6 - 8 years	$	283	$	(54	)	$	229	$	283	$	(45	)	$	238
G&P	6 - 25 years	1,288		(462		)	826		1,288		(256		)	1,032
		$	1,571	$	(516	)	$	1,055	$	1,571	$	(301	)	$	1,270

(1) Amortization expense attributable to the G&P and L&S segments for the three months ended March 31, 2020 was $29 million and $9 million, respectively.

(2) Impairment charge of $177 million is included within the G&P accumulated amortization.

Estimated future amortization expense related to the intangible assets at March 31, 2020 is as follows:

(In millions)
2020	$	96
2021	128
2022	128
2023	128
2024	124
Thereafter	451
Total	$	1,055