Magellan Midstream Reports Significantly Higher Third-Quarter Financial Results

   Magellan Midstream Reports Significantly Higher Third-Quarter Financial
                                   Results

PR Newswire

TULSA, Okla., Oct. 31, 2013

TULSA, Okla., Oct. 31, 2013 /PRNewswire/ -- Magellan Midstream Partners, L.P.
(NYSE: MMP) today reported operating profit of $154.6 million for third
quarter 2013 compared to $79.3 million for third quarter 2012. Net income grew
to $125.6 million for third quarter 2013 compared to $50.5 million for third
quarter 2012.

Diluted net income per limited partner unit was 55 cents in third quarter 2013
versus 22 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
54 cents for third quarter 2013 was higher than the 48-cent guidance provided
by management in early Aug. due to higher refined transportation revenue,
lower power costs and less integrity expenses than initially expected due to
timing of project work that is now scheduled for later in the year.

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 $141.1 million for third quarter 2013, or 40% higher than
the third-quarter 2012 DCF of $100.7 million.

"Magellan continued its solid performance in 2013, generating significantly
higher third-quarter financial results for each of our segments compared to
the year-ago period," said Michael Mears, chief executive officer.
"Contributions from our growing crude oil segment, driven by Longhorn
pipeline's activation into crude oil service, our newly-acquired New Mexico
refined products pipeline system and a more favorable pricing environment for
our commodity-related activities benefited Magellan's quarterly results."

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 third quarter
2013 to third 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 $146.8 million, an increase of
$50.9 million. Transportation and terminals revenues increased between periods
primarily due to operating results from the New Mexico pipeline system
acquired on July 1, 2013 and higher weighted average tariff rates resulting
from the partnership's 4.6% tariff increase in mid-2013 and deficiency
payments during third quarter 2013 for committed volumes that did not ship.
Operating expenses increased slightly between periods. Expenses related to the
recently-acquired New Mexico pipeline system and less favorable product gains
(which reduce operating expenses) in the current period were partially offset
by lower environmental accruals and less asset retirements.

Product margin (a non-GAAP measure defined as product sales revenues less
product purchases) increased $40.4 million between periods resulting in part
from a $31.8 million favorable 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 butane blending profits as a result of more
sales volume and higher blending margins.

Crude oil. Crude operating margin was $50.6 million, an increase of $28.2
million. Revenues increased significantly due to crude oil shipments on the
Longhorn pipeline, which began during 2013, as well as joint venture
management fees and additional condensate throughput at the partnership's
Corpus Christi, Texas terminal. Operating expenses increased slightly between
periods. Costs related to the operation of the Longhorn pipeline in crude oil
service, including higher personnel costs, power and integrity spending, were
partially offset by more favorable product overages (which reduce expenses).

Marine storage. Marine operating margin was $24.5 million, an increase of $4.9
million. Revenues increased between periods primarily due to storage fees from
recently-constructed tanks and incremental throughput fees at the
partnership's Galena Park, Texas terminal. Expenses declined due to lower
environmental accruals in the current period partially offset by more
integrity spending and higher property taxes in third quarter 2013.

Other items. Depreciation and amortization increased primarily due to recent
expansion capital expenditures, and G&A expenses increased due to more
personnel costs as a result of additional headcount, higher payout
expectations for the partnership's annual bonus and costs related to the
partnership's pending Rocky Mountain refined products pipeline system
acquisition, which it expects to close in the near future.

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
Sept. 30, 2013, the partnership had $2.4 billion of debt outstanding and $14.2
million of cash on hand. During early Oct., the partnership received net
proceeds of approximately $295.6 million from its issuance of $300 million of
30-year senior notes.

Expansion capital projects
Magellan continues to pursue opportunities to grow its business, and its
current slate of expansion projects remains on schedule.

The Longhorn pipeline continued to add pumping capacity and averaged
approximately 100,000 barrels per day (bpd) of crude oil deliveries to the
Houston market during third quarter 2013. The pipeline has been capable of
operating at its full 225,000-bpd capacity since mid-Oct. and is expected to
average approximately 190,000 bpd during the fourth quarter. As previously
announced, Magellan plans to expand the capacity of the Longhorn pipeline by
50,000 bpd to an increased capacity of 275,000 bpd, all fully committed by
long-term customer agreements. Subject to regulatory approval, the operating
capacity of the Longhorn pipeline is expected to reach 275,000 bpd by
mid-2014.

The Double Eagle pipeline joint venture commenced condensate shipments on the
eastern leg of the pipeline beginning late Oct. and on the western leg from
Cooke Ranch, Texas during late Aug., with the western extension to Gardendale,
Texas projected to be operational by year-end. The pipeline system is
currently capable of transporting up to 100,000 bpd.

The partnership continues to make significant progress on the BridgeTex
pipeline joint venture, with tank and pipeline construction currently underway
and an operational date of mid-2014 still targeted.

As previously announced, the partnership acquired approximately 250 miles of
refined products pipeline in Texas and New Mexico for $57 million on July 1,
2013. Acquisition of the remaining pipeline system in the Rocky Mountain
region is expected to close in the near future.

The partnership plans to spend approximately $925 million during 2013 for its
current slate of growth projects and its pending Rocky Mountain pipeline
acquisition, with an additional $400 million of spending in 2014 to complete
the expansion projects now underway.

Magellan 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 $10 million to $640 million and
remains committed to its goal of increasing annual cash distributions by 16%
for 2013 and 15% for 2014. Including actual results so far this year, net
income per limited partner unit is estimated to be $2.54 for 2013, resulting
in fourth-quarter guidance of 81 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 third-quarter results and outlook
for the remainder of 2013 is scheduled today at 1:30 p.m. Eastern. To
participate, dial (800) 533-7619 and provide code 3858290. 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 Nov. 6. To access the replay, dial (888) 203-1112
and provide code 3858290. 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 performance measure as a basis for
recommending to the board of directors the amount of cash distributions to be
paid each period and for determining the payouts under the partnership's
equity-based incentive plan.

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 of Magellan Midstream Partners, L.P. believes
any such statements are based on reasonable assumptions, actual outcomes may
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 operational
hazards or unforeseen interruptions; (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    Nine Months Ended
                                  September 30,         September 30,
                                  2012       2013       2012       2013
Transportation and terminals      $ 255,492  $ 295,326  $ 721,807  $ 805,059
revenue
Product sales revenues            70,178     144,852    546,476    504,485
Affiliate management fee revenue  199        3,657      596        10,624
Total revenue                     325,869    443,835    1,268,879  1,320,168
Costs and expenses:
Operating                         103,272    103,262    254,050    245,858
Product purchases                 85,819     120,299    478,929    396,025
Depreciation and amortization     31,692     35,270     94,688     105,788
General and administrative        27,551     32,755     76,709     96,073
Total costs and expenses          248,334    291,586    904,376    843,744
Earnings of non-controlled        1,749      2,375      4,875      5,162
entities
Operating profit                  79,284     154,624    369,378    481,586
Interest expense                  29,113     31,852     87,354     95,295
Interest income                   (16)       (215)      (80)       (250)
Interest capitalized              (1,439)    (3,780)    (3,331)    (10,474)
Debt placement fee amortization   519        540        1,556      1,620
expense
Income before provision for       51,107     126,227    283,879    395,395
income taxes
Provision for income taxes        585        604        2,012      3,165
Net income                        $ 50,522   $ 125,623  $ 281,867  $ 392,230
Basic and diluted net income per  $ 0.22     $ 0.55     $ 1.25     $ 1.73
limited partner unit
Weighted average number of
limited partner units outstanding 226,431    226,866    226,348    226,812
used for basic and diluted net
income per unit calculation



MAGELLAN MIDSTREAM PARTNERS, L.P.

OPERATING STATISTICS
                                        Three Months Ended  Nine Months Ended
                                        September 30,       September 30,
                                        2012       2013     2012      2013
Refined products:
Transportation revenue per barrel       $  1.228   $ 1.306  $  1.233  $ 1.274
shipped
Volume shipped (million barrels):
Gasoline                                61.8       61.9     163.8     174.6
Distillates                             36.5       36.1     99.9      105.4
Aviation fuel                           5.9        5.9      16.7      15.4
Liquefied petroleum gases               3.2        4.0      7.9       7.3
Total volume shipped                    107.4      107.9    288.3     302.7
Crude oil:
Transportation revenue per barrel       $  0.311   $ 1.010  $  0.298  $ 0.765
shipped
Volume shipped (million barrels)        19.3       28.6     51.4      72.6
Crude oil terminal average utilization  12.6       12.3     12.6      12.4
(million barrels per month)
Marine storage:
Marine terminal average utilization     23.6       23.2     23.8      22.9
(million barrels per month)





MAGELLAN MIDSTREAM PARTNERS, L.P.

OPERATING MARGIN RECONCILIATION TO OPERATING PROFIT

(Unaudited, in thousands)
                                    Three Months Ended    Nine Months Ended
                                    September 30,         September 30,
                                    2012       2013       2012       2013
Refined products:
Transportation and terminals        $ 193,880  $ 205,859  $ 538,812  $ 573,615
revenue
Less: Operating expenses            80,705     82,174     204,064    194,911
Transportation and terminals margin 113,175    123,685    334,748    378,704
Product sales revenue               66,776     143,549    539,434    499,285
Less: Product purchases             84,041     120,429    475,839    393,187
Product margin                      (17,265)   23,120     63,595     106,098
Operating margin                    $ 95,910   $ 146,805  $ 398,343  $ 484,802
Crude oil:
Transportation and terminals        $ 23,868   $ 49,519   $ 67,626   $ 113,905
revenue
Less: Operating expenses            3,441      4,034      4,046      13,168
Transportation and terminals margin 20,427     45,485     63,580     100,737
Affiliate management fee revenue    199        3,369      596        9,767
Earnings of non-controlled entities 1,752      1,770      4,913      3,255
Operating margin                    $ 22,378   $ 50,624   $ 69,089   $ 113,759
Marine storage:
Transportation and terminals        $ 37,744   $ 39,948   $ 115,369  $ 117,539
revenue
Less: Operating expenses            19,824     17,813     48,042     40,060
Transportation and terminals margin 17,920     22,135     67,327     77,479
Product sales revenue               3,402      1,303      7,042      5,200
Less: Product purchases            1,778      (130)      3,090      2,838
Product margin                      1,624      1,433      3,952      2,362
Affiliate management fee revenue    —          288        —          857
Earnings (loss) of non-controlled   (3)        605        (38)       1,907
entities
Operating margin                    $ 19,541   $ 24,461   $ 71,241   $ 82,605
Segment operating margin            $ 137,829  $ 221,890  $ 538,673  $ 681,166
Add: Allocated corporate            698        759        2,102      2,281
depreciation costs
Total operating margin              138,527    222,649    540,775    683,447
Less:
Depreciation and amortization       31,692     35,270     94,688     105,788
expense
General and administrative expense  27,551     32,755     76,709     96,073
Total operating profit              $ 79,284   $ 154,624  $ 369,378  $ 481,586

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
                                                 September 30, 2013
                                                             Basic and Diluted
                                                 Net Income  Net Income Per
                                                             Limited Partner
                                                             Unit
As reported                                      $  125,623  $       0.55
Deduct: Unrealized derivative gains associated  (2,770)     (0.01)
with future physical product transactions
Lower-of-cost-or-market inventory adjustment     (551)       —
Excluding commodity-related adjustments          $  122,302  $       0.54
Weighted average number of limited partner
units outstanding used for basic and diluted     226,866
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    Nine Months Ended
                        September 30,         September 30,         2013
                        2012       2013       2012       2013       Guidance
Net income              $ 50,522   $ 125,623  $ 281,867  $ 392,230  $ 576,000
Interest expense, net   27,658     27,857     83,943     84,571     116,000
Depreciation and        32,211     35,810     96,244     107,408    145,000
amortization^(1)
Equity-based incentive  5,548      4,217      (443)      2,239      8,000
compensation^(2)
Asset retirements and   3,216      1,971      10,575     4,269      6,000
impairments
Commodity-related
adjustments:
Derivative (gains)
losses recognized in
the period associated   33,562     (2,770)    18,409     (8,317)
with future product
transactions^(3)
Derivative gains
(losses) recognized in
previous periods        238        1,301      (6,681)    (5,738)
associated with product
sales completed in the
period ^ (4)
Lower-of-cost-or-market (4,106)    (551)      (1,017)    (494)
adjustments
Houston-to-El Paso cost
of sales                106        —          8,227      —
adjustments^(5)
Total commodity-related 29,800     (2,020)    18,938     (14,549)   (18,000)
adjustments
Other                   (92)       (2,011)    437        (2,928)    (2,000)
Adjusted EBITDA         148,863    191,447    491,561    573,240    831,000
Interest expense, net   (27,658)   (27,857)   (83,943)   (84,571)   (116,000)
Maintenance capital     (20,484)   (22,533)   (47,194)   (55,519)   (75,000)
Distributable cash flow $ 100,721  $ 141,057  $ 360,424  $ 433,150  $ 640,000
Distributable cash flow
per limited partner     $ 0.45     $ 0.62     $ 1.59     $ 1.91     $ 2.82
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.
     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 nine months ended
^(2) September 30, 2012 and 2013 was $12.6 million and $14.5 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.
     Certain derivatives the partnership uses as economic hedges have not been
     designated as hedges for accounting purposes and the mark-to-market
^(3) 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.
     When the partnership physically sells products that it has economically
^(4) 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.
     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
^(5) 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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