Magellan Posts Strong 1Q - Analyst Blog
May 06 2011 - 12:14PM
Zacks
Magellan Midstream Partners L.P. (MMP), a
master limited partnership (“MLP”), reported earnings per unit
(EPU) of $1.01 (excluding mark-to-market commodity-related pricing
adjustments), surpassing both the Zacks Consensus Estimate of 87
cents and the year-ago profit of 67 cents (adjusted).
Quarterly revenues came in at $442.9 million, breezing past the
Zacks Consensus Estimate of $381 million and showing a remarkable
improvement from $329.7 million generated in the prior-year
quarter.
Magellan increased its distributable cash flow to $117.7 million
in first quarter 2011 from $85.2 million in the prior-year
quarter.
The quarter’s performance was boosted by benefits from the
recently acquired assets and growth projects, escalating demand for
petroleum products and improved petroleum prices.
Segmental Performance
Petroleum Products Pipeline System: In
Petroleum Products Pipeline System, quarterly operating margin
(before affiliate general and administrative expense and
depreciation and amortization) was $126.4 million, against $102.9
million in first quarter 2010.
The year-over-year growth was attributed to higher
transportation and terminals revenues, greater demand for petroleum
products and low operating expenses.
Petroleum Products Terminals: In the
Petroleum Products Terminals segment, operating margin was $39.9
million, indicating a jump of 29.5% year over year on strong
contributions from the recently acquired tankage at the
partnership’s storage facilities, greater throughput volume along
with higher ethanol fees. These positive were partially offset by
increased operating costs.
Ammonia Pipeline System: The Ammonia
Pipeline System’s operating margin leaped 232.8% year over year to
$3.7 million, aided by higher shipments and lower remediation
costs.
Financials
As of March 31, 2011, Magellan had cash and cash equivalents of
$28.5 million and long-term debt of $1,967.6 million. The
debt-to-capitalization ratio stood at 57.9%. During the quarter,
the company incurred maintenance capital spending of $8.7 million
and organic growth capital expenditure of $41.5 million.
2011 Guidance
For 2011, management raised its distributable cash flows
guidance by $30 million to $440 million and continues to aim an
annual distribution growth of 7%. Magellan guided toward
second-quarter earnings per unit of 87 cents and the raised
full-year outlook to $3.40 from the previous level of $3.13.
The partnership plans to spend approximately $225 million on
growth projects in 2011, with expenditures of $30 million
thereafter required to complete the projects. Additionally, the
partnership continues to look out for more than $500 million of
potential growth projects in the earlier stages of development.
Our Recommendation
We continue to maintain our long-term Neutral rating on Magellan
Midstream on account of its high-quality and diverse portfolio of
midstream assets, strong track record for distribution growth and
highly stable/recurring cash flows, which could be partially
dampened by low demand for refined products, commodity price
fluctuations and cost overruns on expansion projects.
Magellan Midstream competes with firms like Pioneer
Southwest Energy Partners L.P. (PSE), Spectra
Energy Partners L.P. (SEP) and TC PipeLines
L.P. (TCLP), currently retains a Zacks #3 Rank (short-term
Hold rating).
MAGELLAN MDSTRM (MMP): Free Stock Analysis Report
PIONEER SW EGY (PSE): Free Stock Analysis Report
SPECTRA EGY PTR (SEP): Free Stock Analysis Report
TC PIPELINES (TCLP): Free Stock Analysis Report
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