Continues to Increase Expansion Capital Expectations, Maintain
Strong Liquidity Position TULSA, Okla., Feb. 3
/PRNewswire-FirstCall/ -- Magellan Midstream Partners, L.P.
(NYSE:MMP) today reported higher quarterly, and record annual,
operating profit, net income and distributable cash flow compared
to the same period in 2007. Fourth-quarter 2008 operating profit of
$100.6 million represented a 19% increase compared to $84.8 million
for fourth quarter 2007. For the year ended Dec. 31, 2008,
operating profit grew 33% to $399.5 million from $300.3 million in
the comparable 2007 period. Net income grew to $85.6 million during
fourth quarter 2008, which is a 19% increase over the $72.2 million
reported for fourth quarter 2007. For the year ended Dec. 31, 2008,
net income grew 43% to $346.6 million from $242.8 million in the
corresponding 2007 timeframe. "Our strong performance for the
quarter benefited from increased revenues in all three of our
business units despite the impact of Hurricane Ike on Oct.
throughput volumes and the weak economy," said Don Wellendorf,
chief executive officer. "Record results for the full year 2008
resulted from expansion projects, rate increases, higher commodity
margins and the gain on assignment of a third-party supply
agreement, all of which helped overcome poor economic conditions,
unprecedented swings in commodity prices and natural disasters that
affected Magellan during the year." An analysis of variances by
segment comparing fourth quarter 2008 to fourth quarter 2007 is
provided below based on operating margin, a financial measure that
reflects operating profit before affiliate general and
administrative (G&A) expense and depreciation and amortization:
Petroleum products pipeline system. Pipeline operating margin was
$109.7 million, an increase of $13.0 million. Despite a 6.5%
decrease in volumes for the quarter (4.5% excluding the impact of
Hurricane Ike), transportation and terminals revenues increased
between periods primarily due to higher average rates per barrel
shipped resulting in part from mid-year 2008 tariff escalations.
Transportation volumes decreased between periods primarily due to
shipment disruptions attributable to Hurricane Ike and continued
lower demand for refined products, especially aviation fuel, during
fourth quarter 2008. Comparatively, the 2007 period had benefited
from increased shipments after significant refinery supply
disruptions during mid-2007 had subsided. The 2008 period also
benefited from increased ethanol blending services and higher fees
earned for incremental storage and pipeline capacity leases.
Operating expenses increased primarily due to $10.5 million less
favorable system overages during the current period because of the
rapidly declining commodity price environment during fourth quarter
2008 compared to rising prices in 2007. This increase was partially
offset by lower integrity and maintenance spending due to
acceleration of projects earlier in 2008. Product margin increased
during fourth quarter 2008 primarily due to higher margins on the
partnership's petroleum products blending activity attributable to
higher product prices that had been locked in earlier in 2008.
Petroleum products terminals. Terminals operating margin was $23.9
million, an increase of $1.2 million. The current period benefited
from increased revenues at the partnership's marine and inland
terminals primarily due to expansion projects and higher rates,
partially offset by $2.5 million of lost revenue due to Hurricane
Ike, including lower profits from the partnership's variable rate
storage agreement, and reduced inland volumes. While product margin
was slightly higher due to the sale of additional product overages,
operating expenses increased primarily due to hurricane clean-up
costs. Ammonia pipeline system. Ammonia operating margin was $1.9
million, an increase of $0.6 million. Revenues increased between
periods due to higher average tariff rates and additional
shipments. Operating expenses increased because of higher
environmental accruals related to historical releases primarily
offset by lower maintenance expenses due to project timing. Other
items. Depreciation and amortization increased due to recent
capital spending whereas G&A declined due to lower equity-based
incentive compensation expense resulting from the partnership's
lower unit price and fewer units expected to vest under the
program. Net interest expense increased in the current quarter as a
result of additional borrowings for expansion capital expenditures.
Diluted net income per limited partner was 83 cents for fourth
quarter 2008 and 74 cents for fourth quarter 2007. For the full
year, diluted net income per limited partner unit was $3.27 in 2008
compared to $2.60 in 2007. Distributable cash flow, which
represents the amount of cash generated during the period that is
available to pay distributions, grew to $91.8 million during fourth
quarter 2008 from $86.3 million for the corresponding 2007 quarter.
Distributable cash flow for the full year grew 13%, increasing to
$338.2 million in 2008 from $298.1 million in 2007. In total, the
partnership estimates that distributable cash flow was negatively
impacted by more than $14 million in 2008 due to hurricane-related
lost business and clean-up costs. Expansion capital expectations
Management remains focused on expansion opportunities and spent
$266 million during 2008 on growth project, $65 million of which
was spent in the fourth quarter. Based on the progress of expansion
projects already underway, including the addition of new projects,
the partnership has increased its growth spending estimates to
approximately $215 million during 2009, with spending of $30
million in 2010 required to complete these projects. These
estimates include about $27 million the partnership expects to
spend to construct 0.7 million barrels of crude oil storage at its
East Houston, Texas marine terminal, supported by a long-term
customer commitment. In addition, the partnership continues to
analyze more than $500 million of potential growth projects in
earlier stages of development, which have been excluded from these
spending estimates. Liquidity update The partnership's primary
source of liquidity for funding debt service, maintenance capital
expenditures and quarterly distributions comes from cash generated
from its operations. However, the partnership also employs its
revolving credit facility to provide additional liquidity for
working capital needs and expansion capital financing. The
partnership has a $550 million revolving credit facility comprised
of 18 banks with only $70 million drawn as of Dec. 31, 2008. This
facility does not expire until Sept. 2012. In addition, the
partnership had more than $30 million of cash reserves available at
year-end. The partnership intends to finance its current slate of
expansion projects with borrowings under its revolving credit
facility and cash reserves. Guidance for 2009 The partnership
currently is assessing a number of variables potentially impacting
2009 results and believes that the uncertainty surrounding any
earnings or distribution guidance makes such guidance unwarranted
at this time. However, the partnership recognizes the value that
investors place not only on distribution growth but more
importantly on the stability of the existing distribution and
firmly believes the current distribution amount remains achievable
for 2009 even in the current environment. Earnings call details An
analyst call with management regarding fourth-quarter earnings is
scheduled today at 1:30 p.m. Eastern. To participate, dial (888)
596-2581 and provide code 2344675. Investors also may listen to the
call via the partnership's web site at
http://www.magellanlp.com/webcasts.asp. Audio replays of the
conference call will be available from 4:30 p.m. Eastern today
through midnight on Feb. 9. To access the replay, dial (888)
203-1112 and provide code 2344675. The replay also will be
available at http://www.magellanlp.com/. Non-GAAP measures
Management believes that investors benefit from having access to
the same financial measures utilized by the partnership. As a
result, this news release and supporting schedules include the
non-generally accepted accounting principles ("non-GAAP") measures
of operating margin and distributable cash flow, which are
important performance measures used by management to evaluate the
economic success of the partnership's operations. Operating margin
reflects operating profit before G&A expense and depreciation
and amortization. This measure forms the basis of the partnership's
internal financial reporting and is used by management in deciding
how to allocate capital resources between segments. Distributable
cash flow is important in determining the amount of cash generated
from the partnership's operations that is available for
distribution to its unitholders. Management uses this measure as a
basis for recommending to the general partner's board of directors
the amounts of distributions to be paid each period.
Reconciliations of operating margin to operating profit and
distributable cash flow to net income accompany this news release.
Because the non-GAAP measures presented in this news release
include adjustments specific to the partnership, they may not be
comparable to similarly-titled measures of other companies. About
Magellan Midstream Partners, L.P. Magellan Midstream Partners, L.P.
(NYSE:MMP) is a publicly traded partnership formed to own, operate
and acquire a diversified portfolio of energy assets. The
partnership primarily transports, stores and distributes refined
petroleum products. More information is available at
http://www.magellanlp.com/. MMP's general partner interest and
related incentive distribution rights are owned by Magellan
Midstream Holdings, L.P. (NYSE:MGG). Portions of this document
constitute forward-looking statements as defined by federal law.
Although management believes any such statements are based on
reasonable assumptions, there is no assurance that actual outcomes
will not be materially different. Among the key risk factors that
may have a direct impact on the partnership's results of operations
and financial condition are: (1) its ability to identify growth
projects or to complete identified projects on time and at
projected costs; (2) price fluctuations for natural gas liquids and
refined petroleum products; (3) overall demand for natural gas
liquids, refined petroleum products, natural gas, oil and ammonia
in the United States; (4) changes in the partnership's tariff rates
implemented by the Federal Energy Regulatory Commission, the United
States Surface Transportation Board and state regulatory agencies;
(5) shut-downs or cutbacks at major refineries, petrochemical
plants, ammonia production facilities or other businesses that use
or supply the partnership's services; (6) changes in the throughput
or interruption in service on petroleum products pipelines owned
and operated by third parties and connected to the partnership's
petroleum products terminals or petroleum products pipeline system;
(7) the occurrence of an operational hazard or unforeseen
interruption for which the partnership is not adequately insured;
(8) the treatment of the partnership as a corporation for federal
or state income tax purposes or if the partnership becomes subject
to significant forms of other taxation; (9) an increase in the
competition the partnership's operations encounter; (10) continued
disruption in the debt and equity markets that negatively impacts
the partnership's ability to finance its capital spending and (11)
failure of customers to meet or continue contractual obligations to
the partnership. Additional information about issues that could
lead to material changes in performance is contained in the
partnership's filings with the Securities and Exchange Commission.
The partnership undertakes no obligation to revise its
forward-looking statements to reflect events or circumstances
occurring after today's date. Contact: Paula Farrell (918) 574-7650
MAGELLAN MIDSTREAM PARTNERS, L.P. CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per unit amounts) (Unaudited) Three Months
Ended Twelve Months Ended December 31, December 31, 2007 2008 2007
2008 Transportation and terminals revenues $160,132 $166,742
$607,845 $637,958 Product sales revenues 215,712 134,473 709,564
574,095 Affiliate management fee revenue 178 184 712 733 Total
revenues 376,022 301,399 1,318,121 1,212,786 Costs and expenses:
Operating 66,157 71,285 251,601 265,728 Product purchases 189,415
94,184 633,909 436,567 Depreciation and amortization 16,743 18,817
63,792 71,153 Affiliate general and administrative 19,942 17,050
72,587 70,435 Total costs and expenses 292,257 201,336 1,021,889
843,883 Gain on assignment of supply agreement - - - 26,492 Equity
earnings 1,067 563 4,027 4,067 Operating profit 84,832 100,626
300,259 399,462 Interest expense 13,627 16,034 57,264 56,751
Interest income (318) (531) (1,767) (1,478) Interest capitalized
(1,259) (1,069) (4,452) (4,803) Debt placement fee amortization 171
219 2,144 767 Debt prepayment premium - - 1,984 - Other (income)
expense - (126) 728 (375) Income before provision for income taxes
72,611 86,099 244,358 348,600 Provision for income taxes 419 518
1,568 1,987 Net income $72,192 $85,581 $242,790 $346,613 Allocation
of net income: Limited partners' interest $49,640 $55,592 $173,330
$219,136 General partner's interest 22,552 29,989 69,460 127,477
Net income $72,192 $85,581 $242,790 $346,613 Basic net income per
limited partner unit $0.75 $0.83 $2.60 $3.28 Weighted average
number of limited partner units outstanding used for basic net
income per unit calculation 66,550 66,942 66,547 66,855 Diluted net
income per limited partner unit $0.74 $0.83 $2.60 $3.27 Weighted
average number of limited partner units outstanding used for
diluted net income per unit calculation 67,150 67,226 66,700 66,927
MAGELLAN MIDSTREAM PARTNERS, L.P. OPERATING STATISTICS Three Months
Ended Twelve Months Ended December 31, December 31, 2007 2008 2007
2008 Petroleum products pipeline system: Transportation revenue per
barrel shipped $1.129 $1.183 $1.147 $1.193 Volume shipped (million
barrels) 80.4 75.3 307.2 295.9 Petroleum products terminals: Marine
terminal average storage utilized (million barrels per month) 22.3
23.7 21.8 23.3 Inland terminal throughput (million barrels) 28.9
26.5 117.3 108.1 Ammonia pipeline system: Volume shipped (thousand
tons) 183 198 716 822 MAGELLAN MIDSTREAM PARTNERS, L.P. OPERATING
MARGIN RECONCILIATION TO OPERATING PROFIT (Unaudited, in thousands)
Three Months Ended Twelve Months Ended December 31, December 31,
2007 2008 2007 2008 Petroleum products pipeline system:
Transportation and terminals revenues $119,214 $124,596 $459,772
$477,621 Less: Operating expenses 47,738 51,934 179,426 198,356
Transportation and terminals margin 71,476 72,662 280,346 279,265
Product sales revenues 211,626 129,233 692,355 543,694 Less:
Product purchases 187,646 92,927 626,194 429,294 Product margin
23,980 36,306 66,161 114,400 Add: Affiliate management fee revenue
178 184 712 733 Equity earnings 1,067 563 4,027 4,067 Gain on
assignment of supply agreement - - - 26,492 Operating margin
$96,701 $109,715 $351,246 $424,957 Petroleum products terminals:
Transportation and terminals revenues $36,144 $37,086 $132,693
$141,129 Less: Operating expenses 15,674 16,703 56,301 59,284
Transportation and terminals Margin 20,470 20,383 76,392 81,845
Product sales revenues 4,086 5,240 17,209 30,401 Less: Product
purchases 1,898 1,751 8,233 8,279 Product margin 2,188 3,489 8,976
22,122 Operating margin $22,658 $23,872 $85,368 $103,967 Ammonia
pipeline system: Transportation and terminals revenues $5,202
$6,170 $18,287 $22,704 Less: Operating expenses 3,825 4,224 21,295
14,061 Operating margin (loss) $1,377 $1,946 $(3,008) $8,643
Segment operating margin $120,736 $135,533 $433,606 $537,567 Add:
Allocated corporate depreciation costs 781 960 3,032 3,483 Total
operating margin 121,517 136,493 436,638 541,050 Less: Depreciation
and amortization 16,743 18,817 63,792 71,153 Affiliate general and
administrative 19,942 17,050 72,587 70,435 Total operating profit
$84,832 $100,626 $300,259 $399,462 Note: Amounts may not sum to
figures shown on the consolidated statement of income due to
intersegment eliminations and allocated corporate depreciation
costs. MAGELLAN MIDSTREAM PARTNERS, L.P. ALLOCATION OF NET INCOME
(In thousands, unless otherwise noted) (Unaudited) Three Months
Ended Twelve Months Ended December 31, December 31, 2007 2008 2007
2008 Net income $72,192 $85,581 $242,790 $346,613 Direct charges to
the general partner: Reimbursable general and administrative costs
(a) 2,442 848 6,191 2,072 Previously indemnified environmental
charges (credits) 669 690 4,426 (6,416) Total direct charges
(credits) to general partner 3,111 1,538 10,617 (4,344) Income
before direct charges (credits) to general partner 75,303 87,119
253,407 342,269 General partner's share of income(b) 34.08% 36.19%
31.60% 35.98% General partner's allocated share of net income
before direct charges (credits) 25,663 31,527 80,077 123,133 Direct
charges (credits) to general partner 3,111 1,538 10,617 (4,344) Net
income allocated to general partner $22,552 $29,989 $69,460
$127,477 Net income $72,192 $85,581 $242,790 $346,613 Less: net
income allocated to general partner 22,552 29,989 69,460 127,477
Net income allocated to limited partners $49,640 $55,592 $173,330
$219,136 (a) Reimbursable G&A costs included non-cash expenses
related to payments made to one of the partnership's executive
officers by MGG Midstream Holdings, L.P., an affiliate that, until
December 2, 2008, indirectly owned a portion of the partnership's
general partner. These payments, for the three and twelve months
ended December 31, 2007 were $0.8 million and $2.1 million,
respectively, and for both the three and twelve months ended
December 31, 2008, were $0.4 million. These payments did not impact
the partnership's cash available for distributions. (b) For periods
when the distributions the partnership pays exceed its net income
(before direct charges to the general partner), the general
partner's percentage share of income is its proportion of cash
distributions paid for the period. For periods when net income
exceeds the cash distributions the partnership pays, the general
partner's percentage share of income is its proportion of pro forma
cash distributions that equal net income (before direct charges to
the general partner). For the fourth quarters of 2007 and 2008 a
per unit pro forma cash distribution of $0.7437 and $0.8303,
respectively, would have resulted in total distributions equal to
net income before direct charges to the general partner. The
general partner's share of distributions at these levels was 34.08%
and 36.19% for the fourth quarter 2007 and 2008, respectively. The
general partner's share of net income for the twelve months ended
December 31, 2007 is based on its share of actual distributions
paid for the first quarter and pro forma distributions for the
second, third and fourth quarters. The general partner's share of
net income for the twelve months ended December 31, 2008 was based
on its share of pro forma distributions for each quarter during the
year. MAGELLAN MIDSTREAM PARTNERS, L.P. DISTRIBUTABLE CASH FLOW
RECONCILIATION TO NET INCOME (Unaudited, in millions) Three Months
Twelve Months Ended Ended December 31, December 31, 2007 2008 2007
2008 Net income $72.2 $85.6 $242.8 $346.6 Add: Depreciation and
amortization (1) 16.9 19.0 65.9 71.9 Equity-based incentive
compensation (2) 3.4 0.4 6.2 0.9 Direct charges (credits) to
general partner 3.1 1.5 10.6 (4.4) Asset retirements and
impairments 2.5 3.4 8.3 7.2 Less: Maintenance capital (net of
expected reimbursements and indemnified spending) (3) 10.3 17.8
31.2 43.2 Gain on assignment of supply agreement - - - 26.5
Unrealized gain on NYMEX contracts (4) - 1.6 - 13.8 Other 1.5 (1.3)
4.5 0.5 Distributable cash flow (5) $86.3 $91.8 $298.1 $338.2 (1)
Depreciation and amortization includes debt placement fee
amortization. (2) Because the partnership intends to satisfy
vesting of units under its equity-based incentive compensation
program with the issuance of limited partner units, expenses
related to this program generally are deemed non-cash and added
back for distributable cash flow purposes. Total equity-based
incentive compensation expense for the twelve months ended December
31, 2007 and 2008 was $10.5 million and $5.4 million, respectively.
However, the figures above include an adjustment for minimum
statutory tax withholdings paid by the partnership during first
quarter 2007 and 2008 of $4.3 million and $4.5 million,
respectively, for equity-based incentive compensation units that
vested on the previous year end. (3) The partnership paid the
following additional amounts for indemnified maintenance capital
projects related to its indemnification settlement or for which it
expects third-party reimbursement: for the three months ended
December 31, 2007 and 2008, $3.8 million and ($0.6) million,
respectively; and for the twelve months ended December 31, 2007 and
2008, $8.8 million and $3.6 million, respectively. (4) Adjustment
is shown net of a $6.4 million expense recorded in the fourth
quarter of 2008 related to a lower-of-cost-or-market adjustment for
inventory that was economically hedged using NYMEX sales contracts.
The NYMEX sales contracts do not qualify for hedge accounting
treatment. (5) Distributable cash flow does not include
fluctuations related to working capital or spending for which the
partnership has received, or expects to receive, reimbursement
through third party indemnifications. Through December 31, 2007 and
2008, the partnership has either paid or accrued liabilities
totaling $88.4 million and $84.5 million, respectively, which were
covered by an indemnification settlement for which the partnership
has received the full amount of $117.5 million.
http://www.newscom.com/cgi-bin/prnh/20031107/DAMAGELOGO
http://photoarchive.ap.org/ DATASOURCE: Magellan Midstream
Partners, L.P. CONTACT: Paula Farrell of Magellan Midstream
Partners, L.P., +1-918-574-7650, Web Site:
http://www.magellanlp.com/
Copyright
Magellan Midstream (NYSE:MGG)
Historical Stock Chart
From Jun 2024 to Jul 2024
Magellan Midstream (NYSE:MGG)
Historical Stock Chart
From Jul 2023 to Jul 2024