Leases

12 Months Ended

Dec. 31, 2023

Lessee

We lease a wide variety of facilities and equipment including land and building space, office and field equipment, storage facilities and transportation equipment. Our remaining lease terms range from less than one year to 95 years. Most long-term leases include renewal options ranging from less than one year to 49 years and, in certain leases, also include purchase options. The lease term included in the measurement of right of use assets and lease liabilities includes options to extend or terminate our leases that we are reasonably certain to exercise.

Under ASC 842, the components of lease cost are shown below. Lease costs for operating leases are recognized on a straight line basis and are reflected in the income statement based on the leased asset’s use. Lease costs for finance leases are reflected in depreciation and amortization and in net interest and other financial costs.


(Millions of dollars)	2023		2022		2021
Finance lease cost:
Amortization of right of use assets	$	73	$	81	$	78
Interest on lease liabilities	25		29		31
Operating lease cost	489		490		565
Variable lease cost	54		59		62
Short-term lease cost	881		772		446
Total lease cost	$	1,522	$	1,431	$	1,182

Supplemental consolidated balance sheet data related to leases were as follows:


	December 31,
(Millions of dollars)	2023			2022
Operating leases
Assets
Right of use assets	$	1,233		$	1,214
Liabilities
Operating lease liabilities	$	454		$	368
Long-term operating lease liabilities	764			841
Total operating lease liabilities	$	1,218		$	1,209

Weighted average remaining lease term (in years)	4			5
Weighted average discount rate	4.1		%	3.5		%

Finance leases
Assets
Property, plant and equipment, gross	$	765		$	818
Less accumulated depreciation	413			412
Property, plant and equipment, net	$	352		$	406
Liabilities
Debt due within one year	$	69		$	79
Long-term debt	401			451
Total finance lease liabilities	$	470		$	530

Weighted average remaining lease term (in years)	9			9
Weighted average discount rate	5.1		%	5.1		%

As of December 31, 2023, maturities of lease liabilities for operating lease obligations and finance lease obligations having initial or remaining non-cancellable lease terms in excess of one year are as follows:


(Millions of dollars)	Operating		Finance
2024	$	494	$	91
2025	356		82
2026	181		79
2027	100		63
2028	66		47
2029 and thereafter	128		228
Gross lease payments	1,325		590
Less: imputed interest	107		120
Total lease liabilities	$	1,218	$	470

Lessor, Operating Leases

Lessor

MPLX is considered to be the lessor under several operating lease agreements in accordance with GAAP related to certain fee-based natural gas transportation and processing agreements in the Marcellus and Southern Appalachia region. The primary term of these agreements expire between 2026 and 2036, however, these contracts either have renewal options or will continue thereafter on a year-to-year basis until terminated by either party.

MPLX did not elect to use the practical expedient to combine lease and non-lease components for lessor arrangements. The tables below represent the portion of the contract allocated to the lease component based on relative standalone selling price. MPLX elected the practical expedient to carry forward historical classification conclusions until a modification of an existing agreement occurs. Once a modification occurs, the amended agreement is required to be assessed under ASC 842 to determine whether a reclassification of the lease is required.

During the third quarter of 2022, the approved expansion of a gathering and compression system triggered the first assessment of a third party agreement under ASC 842. As a result of the assessment during the period, the lease was reclassified from an operating lease to a sales-type lease. Accordingly, the underlying property, plant and equipment of $745 million and associated deferred revenue of $277 million were derecognized. The present value of the future lease payments of $914 million and the unguaranteed residual value of $63 million were recorded as the net investment in the lease within receivables and other noncurrent assets. This resulted in a gain of approximately $509 million, which was recorded as a net gain on disposal of assets in the consolidated statements of income. This transaction was a non-cash transaction.

Lease revenues are included in sales and other operating revenues on the consolidated statements of income. Lease revenues were as follows:


(Millions of dollars)	2023		2022		2021
Operating leases:
Rental income	$	243	$	327	$	376
Sales-type leases:
Interest income (Sales-type rental revenue-fixed minimum)	114		46		—
Interest income (Revenue from variable lease payments)	22		16		—
Sales-type lease revenue	$	136	$	62	$	—

The following is a schedule of minimum future rentals on the non-cancelable operating leases as of December 31, 2023:


(Millions of dollars)
2024	$	117
2025	95
2026	75
2027	53
2028	46
2029 and thereafter	250
Total minimum future rentals	$	636

Annual minimum undiscounted lease payment receipts under our sales-type leases were as follows as of December 31, 2023:


(Millions of dollars)
2024	$	175
2025	161
2026	150
2027	141
2028	132
2029 and thereafter	959
Total minimum future rentals	1,718
Less: imputed interest	778
Lease receivables(a)	$	940

Current lease receivables(b)	$	102
Long-term lease receivables(c)	838
Unguaranteed residual assets	78
Total sales-type lease assets	$	1,018

(a) This amount does not include the unguaranteed residual assets.

(b) Presented in receivables, net on the consolidated balance sheets.

Capital expenditures related to assets subject to sales-type lease arrangements were $50 million for the year ended December 31, 2023. These amounts are reflected as additions to property, plant and equipment in the consolidated statements of cash flows.

The following schedule summarizes our investment in assets held under operating lease by major classes as of December 31, 2023 and 2022:


	December 31,
(Millions of dollars)	2023		2022
Gathering and transportation	$	86	$	94
Processing and fractionation	1,000		973
Pipelines	12		—
Terminals	129		128
Land, building and other	10		10
Property, plant and equipment	1,237		1,205
Less accumulated depreciation	396		330
Total property, plant and equipment, net	$	841	$	875