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Magellan Midstream Reports Higher Second-Quarter Financial Results, Significantly Increases Distributable Cash Flow Guidance for

     Magellan Midstream Reports Higher Second-Quarter Financial Results,
      Significantly Increases Distributable Cash Flow Guidance for 2013

PR Newswire

TULSA, Okla., Aug. 1, 2013

TULSA, Okla., Aug. 1, 2013 /PRNewswire/ -- Magellan Midstream Partners, L.P.
(NYSE: MMP) today reported operating profit of $184.5 million for second
quarter 2013, an increase of $17.2 million, or 10%, compared to $167.3 million
for second quarter 2012. Net income grew 11% to $153.6 million for second
quarter 2013 compared to $137.8 million for second quarter 2012.

Diluted net income per limited partner unit was 68 cents in second quarter
2013 versus 61 cents in the corresponding 2012 period. Diluted net income per
unit excluding mark-to-market (MTM) commodity-related pricing adjustments, a
non-generally accepted accounting principles (non-GAAP) financial measure, of
65 cents for second quarter 2013 was significantly higher than the 52-cent
guidance provided by management in early May due to stronger-than-expected
demand for refined products, additional product overages and reversal of a
$10.6 million accrual for potential air emission fees at the partnership's
terminals in the Houston, Texas area that will not be assessed for historical
periods based on final environmental regulations adopted during June 2013.

Distributable cash flow (DCF), a non-GAAP financial measure that represents
the amount of cash generated during the period that is available to pay
distributions, was $168.2 million for second quarter 2013, or 26% higher than
the second-quarter 2012 DCF of $134.0 million.

"Magellan continues to generate stronger-than-expected financial results for
2013 driven by our solid fee-based transportation and terminals business and a
favorable pricing environment for our commodity-related activities," said
Michael Mears, chief executive officer. "In addition to strong financial
performance, Magellan successfully commissioned two significant industry
projects during the second quarter of 2013 -- start-up of our Longhorn
pipeline with initial crude oil deliveries to the Houston Gulf Coast refining
region and beginning condensate deliveries to the Corpus Christi petrochemical
market via our Double Eagle pipeline joint venture.

"The start-up of these projects helps frame Magellan's future growth and
contributed to our recent increased cash distribution guidance, allowing us to
now target annual distribution growth of 16% for 2013 and 15% for 2014."

Beginning in 2013, the partnership reorganized its reporting segments to
reflect strategic changes in its business, particularly its increasing crude
oil activities. Historical financial results have been restated to conform to
the new segment presentation. An analysis by segment comparing second quarter
2013 to second quarter 2012 is provided below based on operating margin, a
non-GAAP financial measure that reflects operating profit before general and
administrative (G&A) expense and depreciation and amortization:

Refined products. Refined operating margin was $177.8 million, an increase of
$0.8 million. Increases in transportation and terminals revenues were largely
offset by decreases in product margin due to timing of MTM commodity-related
pricing adjustments that favorably impacted the 2012 period.

Transportation and terminals revenues increased $15.1 million between periods
primarily due to the partnership's 8.6% tariff increase in mid-2012 and 3%
higher transportation volumes in the current period. Operating expenses
increased slightly between periods. Higher property taxes and power costs in
the current period were mostly offset by reversal of the accrual for potential
air emission fees at the partnership's East Houston, Texas terminal and
favorable gains on asset sales and replacements in the second quarter of 2013.

Product margin (a non-GAAP measure defined as product sales revenues less
product purchases) decreased $14.0 million between periods resulting from a
$19.6 million unfavorable variance associated with the timing of MTM
adjustments for New York Mercantile Exchange (NYMEX) positions used to
economically hedge the partnership's commodity-related activities and other
inventory adjustments. Details of these items can be found on the
Distributable Cash Flow Reconciliation to Net Income schedule that accompanies
this news release. The partnership's actual cash product margin, which
reflects only transactions that settled during the quarter, increased between
periods primarily due to higher contributions from the partnership's butane
blending activities as a result of lower butane costs.

Crude oil. Crude operating margin was $40.5 million, an increase of $17.7
million. Revenues increased primarily due to crude oil shipments on the
Longhorn pipeline, which began during mid-April 2013, as well as joint venture
management fees and higher utilization and rates on the partnership's
Houston-area distribution system. Operating expenses increased primarily due
to costs related to the operation of the Longhorn pipeline in crude oil
service, including higher personnel costs, integrity spending and pipeline
rental costs to access product from third-party origination sources, partially
offset by more favorable product overages, which reduce expenses.

Marine storage. Marine operating margin was $32.9 million, an increase of $9.1
million. Revenues were essentially flat between periods as storage fees from
newly-constructed tanks at the partnership's Galena Park, Texas terminal
offset lower overall utilization due in part to timing of tank maintenance
work. Expenses declined due to reversal of the accrual for potential air
emission fees at the partnership's Galena Park terminal. Product margin
increased due to the sale of additional overages in the current period.

Other items. Depreciation and amortization increased primarily due to recent
expansion capital expenditures, and G&A expenses increased due to higher
personnel costs as a result of additional headcount, improved payout
expectations for the partnership's annual bonus and equity-based incentive
compensation programs and a higher unit price, which also impacts equity-based
incentive compensation.

Net interest expense was substantially unchanged as additional borrowings from
the partnership's Nov. 2012 debt offering to fund capital spending was offset
by higher capitalized interest for the related construction projects. As of
June 30, 2013, the partnership had $2.4 billion of debt outstanding and $119.5
million of cash on hand.

Expansion projects

Magellan continues to assess additional opportunities to grow its business,
and its current slate of expansion projects remains on schedule.

The Longhorn pipeline successfully began deliveries of crude oil to the
Houston market beginning mid-April, averaging approximately 90,000 barrels per
day (bpd) from start-up through the second quarter. Additional capacity is
expected over the coming months as third-party supply connections,
newly-constructed storage tanks and additional pump stations come online.
Management expects the delivery rate to average approximately 120,000 bpd
during the third quarter, with full operating capacity of 225,000 bpd attained
by the end of Sept.

The Double Eagle pipeline joint venture successfully began deliveries of
condensate from its newly-constructed truck unloading facility at Three
Rivers, Texas to Magellan's Corpus Christi, Texas terminal during May, with
the expectation that all pipeline segments will be operational in early Sept.
with the capability to transport up to 100,000 bpd.

Further, the BridgeTex pipeline joint venture continues to progress, with an
operational date of mid-2014 still targeted. Significant progress has been
made on right-of-way acquisition and permitting, and tank construction and
pipeline production are currently underway.

As previously announced, the partnership acquired approximately 250 miles of
refined products pipeline in Texas and New Mexico for $57 million on July 1.
Acquisition of the remaining pipeline system in the Rocky Mountain region is
pending, subject to regulatory approvals.

The partnership currently plans to spend approximately $900 million during
2013 with an additional $320 million of spending in 2014 to complete its
current growth projects and pending pipeline acquisition.

The partnership also continues to evaluate well over $500 million of potential
growth projects in earlier stages of development as well as additional
acquisition opportunities, both of which have been excluded from these
spending estimates.

Financial guidance for 2013

Management is raising its 2013 DCF guidance by $50 million to $630 million
primarily as a result of strong financial results to date and the expectation
of continued low butane costs, which favorably impact the partnership's butane
blending activities.

Further, management recently increased its annual distribution growth targets
to 16% for 2013 and 15% for 2014 based on its confidence in Magellan's future,
driven by strong performance from the partnership's base business and
anticipated contributions from expansion projects that are progressing as
expected.

Including actual results so far this year, net income per limited partner unit
is estimated to be $2.50 for 2013, with third-quarter guidance of 48 cents.
Guidance excludes future NYMEX MTM adjustments on the partnership's
commodity-related activities and expected financial results from the pending
Rocky Mountain pipeline acquisition.

Earnings call details

An analyst call with management regarding second-quarter results and outlook
for the remainder of 2013 is scheduled today at 1:30 p.m. Eastern. To
participate, dial (888) 211-0193 and provide code 3283315. Investors also may
listen to the call via the partnership's website at
www.magellanlp.com/webcasts.aspx.

Audio replays of the conference call will be available from 4:30 p.m. Eastern
today through midnight on Aug. 7. To access the replay, dial (888) 203-1112
and provide code 3283315. The replay also will be available at
www.magellanlp.com.

Non-GAAP financial 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-GAAP financial measures of operating
margin, product margin, adjusted EBITDA, DCF and net income per unit excluding
MTM commodity-related pricing adjustments, which are important performance
measures used by management.

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 to evaluate the economic
performance of the partnership's operations.

Product margin, which is calculated as product sales revenues less product
purchases, is used by management to evaluate the profitability of the
partnership's commodity-related activities.

Adjusted EBITDA is an important measure utilized by management and the
investment community to assess the financial results of an entity.

DCF 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
board of directors the amount of cash distributions to be paid each period.

Reconciliations of operating margin to operating profit and adjusted EBITDA
and DCF to net income accompany this news release.

The partnership uses NYMEX futures contracts to hedge against price changes of
petroleum products associated with its commodity-related activities. Most of
these NYMEX contracts do not qualify for hedge accounting treatment. However,
because these NYMEX contracts are generally effective at hedging price
changes, management believes the partnership's profitability should be
evaluated excluding the unrealized NYMEX gains and losses associated with
petroleum products that will be sold in future periods. Further, because the
financial guidance provided by management generally excludes future MTM
commodity-related pricing adjustments, a reconciliation of actual results to
those excluding these adjustments is provided for comparability to previous
financial guidance.

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
that primarily transports, stores and distributes refined petroleum products
and crude oil. The partnership owns the longest refined petroleum products
pipeline system in the country, with access to more than 40% of the nation's
refining capacity, and can store over 80 million barrels of petroleum products
such as gasoline, diesel fuel and crude oil. More information is available at
www.magellanlp.com.

Forward-Looking Statement Disclaimer
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 expected costs; (2) price fluctuations and changes in demand for
refined petroleum products, crude oil and natural gas liquids, or changes in
demand for transportation or storage of those commodities through its existing
or planned facilities; (3) changes in the partnership's tariff rates or other
terms imposed by state or federal regulatory agencies; (4) shut-downs or
cutbacks at major refineries or other businesses that use or supply the
partnership's services; (5) changes in the throughput or interruption in
service on pipelines owned and operated by third parties and connected to the
partnership's terminals or pipelines; (6) the occurrence of an operational
hazard or unforeseen interruption for which the partnership is not adequately
insured; (7) 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; (8) an increase in the competition the partnership's
operations encounter; (9) disruption in the debt and equity markets that
negatively impacts the partnership's ability to finance its capital spending;
and (10) 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, including the partnership's Annual
Report on Form 10-K for the fiscal year ended Dec. 31, 2012 and subsequent
reports on Forms 10-Q and 8-K. 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
         paula.farrell@magellanlp.com



MAGELLAN MIDSTREAM PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per unit amounts)
(Unaudited)
                                Three Months Ended      Six Months Ended
                                June 30,                June 30,
                                2012        2013        2012        2013
Transportation and terminals    $ 248,761   $ 282,462   $ 466,315   $ 509,733
revenue
Product sales revenues          200,568     157,922     476,298     359,633
Affiliate management fee        198         3,528       397         6,967
revenue
Total revenue                   449,527     443,912     943,010     876,333
Costs and expenses:
Operating                       82,326      77,415      150,778     142,596
Product purchases               144,498     115,328     393,110     275,726
Depreciation and amortization   31,486      34,186      62,996      70,518
General and administrative      25,414      33,262      49,158      63,318
Total costs and expenses        283,724     260,191     656,042     552,158
Earnings of non-controlled      1,478       736         3,126       2,787
entities
Operating profit                167,281     184,457     290,094     326,962
Interest expense                29,118      31,720      58,241      63,443
Interest income                 (29)        (13)        (64)        (35)
Interest capitalized            (1,028)     (3,243)     (1,892)     (6,694)
Debt placement fee amortization 518         540         1,037       1,080
expense
Income before provision for     138,702     155,453     232,772     269,168
income taxes
Provision for income taxes      881         1,813       1,427       2,561
Net income                      $ 137,821   $ 153,640   $ 231,345   $ 266,607
Basic and diluted net income    $ 0.61      $ 0.68      $ 1.02      $ 1.18
per limited partner unit
Weighted average number of
limited partner units
outstanding used for basic and  226,429     226,864     226,305     226,785
diluted net income per unit
calculation





MAGELLAN MIDSTREAM PARTNERS, L.P.
OPERATING STATISTICS
                                        Three Months Ended  Six Months Ended
                                        June 30,            June 30,
                                        2012      2013      2012      2013
Refined products:
Transportation revenue per barrel       $ 1.270   $ 1.366   $ 1.236   $ 1.256
shipped
Volume shipped (million barrels):
Gasoline                                56.1      59.1      102.0     112.7
Distillates                             33.6      35.5      63.4      69.3
Aviation fuel                           5.2       5.0       10.8      9.5
Liquefied petroleum gases               3.7       2.2       4.7       3.3
Total volume shipped                    98.6      101.8     180.9     194.8
Crude oil:
Transportation revenue per barrel       $ 0.301   $ 0.771   $ 0.289   $ 0.605
shipped
Volume shipped (million barrels)        17.2      28.1      32.1      44.0
Crude oil terminal average utilization  12.5      12.6      12.6      12.5
(million barrels per month)
Marine storage:
Marine terminal average utilization     24.2      22.8      24.2      22.7
(million barrels per month)





MAGELLAN MIDSTREAM PARTNERS, L.P.
OPERATING MARGIN RECONCILIATION TO OPERATING PROFIT
(Unaudited, in thousands)
                                Three Months Ended      Six Months Ended
                                June 30,                June 30,
                                2012        2013        2012        2013
Refined products:
Transportation and terminals    $ 187,262   $ 202,397   $ 344,932   $ 367,756
revenue
Less: Operating expenses        66,153      66,456      123,359     112,737
Transportation and terminals    121,109     135,941     221,573     255,019
margin
Product sales revenue           199,840     156,321     472,658     355,736
Less: Product purchases         143,962     114,460     391,798     272,758
Product margin                  55,878      41,861      80,860      82,978
Operating margin                $ 176,987   $ 177,802   $ 302,433   $ 337,997
Crude oil:
Transportation and terminals    $ 22,545    $ 41,158    $ 43,758    $ 64,386
revenue
Less: Operating expenses        1,502       4,027       605         9,134
Transportation and terminals    21,043      37,131      43,153      55,252
margin
Affiliate management fee        198         3,239       397         6,398
revenue
Earnings of non-controlled      1,493       110         3,161       1,485
entities
Operating margin                $ 22,734    $ 40,480    $ 46,711    $ 63,135
Marine storage:
Transportation and terminals    $ 38,954    $ 38,907    $ 77,625    $ 77,591
revenue
Less: Operating expenses        15,341      7,694       28,218      22,247
Transportation and terminals    23,613      31,213      49,407      55,344
margin
Product sales revenue           728         1,601       3,640       3,897
Less: Product purchases        536         868         1,312       2,968
Product margin                  192         733         2,328       929
Affiliate management fee        —           289         —           569
revenue
Earnings (loss) of              (15)        626         (35)        1,302
non-controlled entities
Operating margin                $ 23,790    $ 32,861    $ 51,700    $ 58,144
Segment operating margin        $ 223,511   $ 251,143   $ 400,844   $ 459,276
Add: Allocated corporate        670         762         1,404       1,522
depreciation costs
Total operating margin          224,181     251,905     402,248     460,798
Less:
Depreciation and amortization   31,486      34,186      62,996      70,518
expense
General and administrative      25,414      33,262      49,158      63,318
expense
Total operating profit          $ 167,281   $ 184,457   $ 290,094   $ 326,962

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.
RECONCILIATION OF NET INCOME AND NET INCOME PER LIMITED PARTNER UNIT
EXCLUDING MARK-TO-MARKET COMMODITY-RELATED PRICING ADJUSTMENTS
TO GAAP MEASURES
(Unaudited, in thousands except per unit amounts)
                                             Three Months Ended
                                             June 30, 2013
                                                         Basic and Diluted Net
                                             Net Income  Income Per Limited
                                                         Partner Unit
As reported                                  $ 153,640   $      0.68
Deduct: Unrealized derivative gains
associated with future physical product      (8,096)     (0.04)
transactions
Add: Lower-of-cost-or-market inventory       2,057       0.01
adjustment
Excluding commodity-related adjustments      $ 147,601   $      0.65
Weighted average number of limited partner
units outstanding used for basic and         226,864
diluted net income per unit calculation

*Please see Distributable Cash Flow Reconciliation to Net Income for further
descriptions of the commodity-related adjustments.





MAGELLAN MIDSTREAM PARTNERS, L.P.
DISTRIBUTABLE CASH FLOW RECONCILIATION TO NET INCOME
(Unaudited, in thousands)
                        Three Months Ended      Six Months Ended
                        June 30,                June 30,                2013
                        2012        2013        2012        2013        Guidance
Net income              $ 137,821   $ 153,640   $ 231,345   $ 266,607   $ 567,000
Interest expense, net   28,061      28,464      56,285      56,714      120,000
Depreciation and        32,004      34,726      64,033      71,598      145,000
amortization^(1)
Equity-based incentive  4,165       5,425       (5,991)     (1,978)     7,000
compensation^(2)
Asset retirements and   1,952       507         7,359       2,298       5,000
impairments
Commodity-related
adjustments:
Derivative gains
recognized in the
period associated with  (27,511)    (8,096)     (17,908)    (6,860)
future product
transactions^(3)
Derivative losses
recognized in previous
periods associated with (10,886)    (1,556)     (4,164)     (5,726)
product sales completed
in theperiod ^ (4)
Lower-of-cost-or-market 4,106       2,057       3,089       57
adjustments
Houston-to-El Paso cost
of sales                7,082       —           8,121       —
adjustments^(5)
Total commodity-related (27,209)    (7,595)     (10,862)    (12,529)    (14,000)
adjustments
Other                   9           362         529         (917)       (5,000)
Adjusted EBITDA         176,803     215,529     342,698     381,793     825,000
Interest expense, net   (28,061)    (28,464)    (56,285)    (56,714)    (120,000)
Maintenance capital     (14,752)    (18,878)    (26,710)    (32,986)    (75,000)
Distributable cash flow $ 133,990   $ 168,187   $ 259,703   $ 292,093   $ 630,000
Distributable cash flow
per limited partner     $ 0.59      $ 0.74      $ 1.15      $ 1.29      $ 2.78
unit
Weighted average number
of limited partner      226,201     226,679     226,201     226,679     226,679
units paid
distributions

^(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 six months ended June 30, 2012 and 2013
was $7.0 million and $10.3 million, respectively. However, the figures above
include an adjustment for minimum statutory tax withholdings paid by the
partnership in 2012 and 2013 of $13.0 million and $12.3 million, respectively,
for equity-based incentive compensation units that vested on the previous year
end, which reduce distributable cash flow.



^(3) Certain derivatives the partnership uses as economic hedges have not been
designated as hedges for accounting purposes and the mark-to-market changes of
these derivatives are recognized currently in earnings. These amounts
represent the gains or losses from economic hedges in the partnership's
earnings for the period associated with products that had not yet been
physically sold as of the period end date.



^(4) When the partnership physically sells products that it has economically
hedged (but were not designated as hedges for accounting purposes), it
includes in its distributable cash flow calculations the full amount of the
change in fair value of the associated derivative agreement.



^(5) Cost of goods sold adjustment related to commodity activities for the
partnership's Houston-to-El Paso pipeline to more closely resemble current
market prices for the applicable period for distributable cash flow purposes
rather than average inventory costing as used to determine the partnership's
results of operations. We discontinued these commodity activities during 2012
in conjunction with the Longhorn crude pipeline project.



SOURCE Magellan Midstream Partners, L.P.

Website: http://www.magellanlp.com
 
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