Magellan Midstream Delivers Record Quarterly and Annual Financial Results

  Magellan Midstream Delivers Record Quarterly and Annual Financial Results

Targets Annual Distribution Growth of 20% for 2014 and 15% for 2015

PR Newswire

TULSA, Okla., Feb. 5, 2014

TULSA, Okla., Feb. 5, 2014 /PRNewswire/ -- Magellan Midstream Partners, L.P.
(NYSE: MMP) today reported record quarterly operating profit of $223.5 million
for fourth quarter 2013, an increase of $40.8 million, or 22%, compared to
$182.7 million for fourth quarter 2012.

Net income grew 24% to a quarterly record of $190.0 million for fourth quarter
2013 compared to $153.8 million for fourth quarter 2012, and diluted net
income per limited partner unit increased to a record 83 cents in fourth
quarter 2013 versus 68 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 88 cents for fourth quarter 2013 was higher than the
81-cent guidance provided by management in Oct. 2013 primarily due to
stronger-than-expected refined products transportation volumes.

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, increased to a quarterly record of $236.6 million for fourth
quarter 2013, or 32% higher than the fourth-quarter 2012 DCF of $179.4

"Magellan finished 2013 in strong form, generating record financial results
for the year, successfully achieving key milestones for the largest
construction projects in our partnership's history and increasing cash
distributions to our investors by 16% for the year," said Michael Mears, chief
executive officer. "Looking ahead, we expect even stronger performance for
Magellan as we recognize greater benefit from growth projects commissioned
during 2013 and those expected to begin operation during 2014. Magellan enters
the new year in strong financial standing with the goal of growing annual cash
distributions to our investors by 20% for 2014 and 15% for 2015."

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 fourth quarter
2013 to fourth 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 $209.2 million, an increase of
$14.7 million and a quarterly record for this segment. Transportation and
terminals revenues increased $42.5 million between periods due to
significantly higher shipment volumes and average tariffs. Shipments grew
primarily as a result of strong demand for lower-priced gasoline in the
Midwest, including seasonal reversal of a portion of the partnership's
Oklahoma system to deliver refined products south into Texas during 2013, and
timing of the farming season, which resulted in higher demand for distillates
during the fourth quarter of 2013. Higher tariff rates were mainly driven by
the partnership's 4.6% tariff increase in mid-2013 and longer-haul movements
to meet increased demand. Revenues also benefited from operating results from
the New Mexico pipeline system acquired on July 1, 2013 and the Rocky Mountain
pipeline system acquisition that was effective Nov. 1, 2013.

Operating expenses increased between periods in part due to expenses related
to the recently-acquired New Mexico and Rocky Mountain pipeline systems. In
addition, expenses increased on the partnership's legacy pipeline systems due
to more asset integrity work and higher property taxes during the current
period, partially offset by more favorable product overages (which reduce
operating expenses).

Product margin (a non-GAAP measure defined as product sales revenues less cost
of product sales) decreased $15.6 million between periods resulting in part
from a $20.3 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 butane blending profits as a result of more
sales volume during the fourth quarter of 2013.

Crude oil. Crude operating margin was $62.7 million, an increase of $40.4
million. Revenues increased $42.3 million primarily due to crude oil shipments
on the Longhorn pipeline, which began operation during 2013, as well as joint
venture management fees, additional condensate throughput at the partnership's
Corpus Christi, Texas terminal and operating results from a recently-converted
Oklahoma pipeline to crude oil service. Operating expenses increased between
periods as costs related to 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 operating

Marine storage. Marine operating margin was $23.6 million, a decrease of $7.5
million, as higher revenues were more than offset by additional expenses.
Revenues increased between periods primarily due to storage fees from
recently-constructed tanks and higher rates on existing tankage. Expenses
increased due to more integrity spending, additional asset retirements and a
favorable adjustment in the 2012 period to a historical environmental
liability, with no such benefit in the 2013 period. Product margin declined
due to timing of product sales.

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

Net interest expense increased primarily due to borrowings from the
partnership's Oct. 2013 debt offering to fund capital spending. As of Dec. 31,
2013, the partnership had $2.7 billion of debt outstanding and $25.2 million
of cash on hand.

Annual results

The partnership also produced record annual financial results in 2013. For the
year ended Dec. 31, 2013, operating profit was $705.1 million compared to
$552.1 million in the corresponding 2012 timeframe. Annual net income was
$582.2 million in 2013 compared to $435.7 million in 2012, and full-year
diluted net income per limited partner unit was $2.56 in 2013 and $1.92 in
2012. Annual DCF was a record $669.7 million in 2013, or 1.35 times the amount
needed to pay distributions related to 2013, compared to $539.8 million in

Expansion capital projects

Management remains focused on expansion opportunities, making significant
progress on its current slate of projects with a record $561 million spent
during 2013 on organic growth construction projects. Further, the partnership
spent $215 million on acquisitions during the year, primarily related to the
New Mexico and Rocky Mountain refined products pipelines. Based on the
progress of expansion projects already underway, the partnership plans to
spend approximately $550 million during 2014 to complete its current
construction projects.

The Longhorn pipeline has been capable of operating at its full
225,000-barrels per day (bpd) capacity since mid-Oct. and averaged
approximately 185,000 bpd during the fourth quarter of 2013. The partnership
expects to average approximately 200,000 bpd during the first quarter of 2014.
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 in mid-2014.

During Jan. 2014, Magellan began operation of its newly-constructed 38-mile
pipeline from the partnership's El Paso, Texas terminal to a new locomotive
fueling facility for Union Pacific Railroad near Santa Teresa, New Mexico.

The Double Eagle pipeline is now fully operational to transport condensate
from the Eagle Ford shale to Magellan's Corpus Christi terminal. As recently
announced, Double Eagle is constructing a 10-mile pipeline to connect to
Kinder Morgan's condensate system in early 2015, providing flexibility for
shippers to move product to Corpus Christi or the Houston Ship Channel.

The partnership continues to make significant progress on tank and pipeline
construction for the BridgeTex pipeline joint venture. Initial linefill is
expected to occur during late second quarter, with the pipeline operational in
mid-2014 to deliver crude oil from the Permian Basin to the Houston Gulf Coast

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 the partnership's
spending estimates. Advanced discussions continue for the potential Little
Rock pipeline project and potential Corpus Christi condensate splitter, and
while management remains optimistic about both projects, neither has been
included in the partnership's capital spending estimates at this time.

Financial guidance for 2014

Management currently expects to generate record annual DCF of $730 million in
2014 and is raising its annual distribution growth target to 20% for 2014,
resulting in 1.2 times the amount needed to pay cash distributions for 2014.
For DCF purposes, BridgeTex is expected to have minimal impact to 2014 results
due to the mid-year start-up of the pipeline system and the timing of cash
distribution payments from the joint venture to Magellan, which will be paid
in arrears on a quarterly basis.

Net income per limited partner unit is estimated to be $2.90 for 2014, with
first-quarter guidance of 70 cents. Guidance excludes future NYMEX MTM
adjustments on the partnership's commodity-related activities.

Based on the progress of Magellan's active growth projects, management is also
targeting 15% annual distribution growth for 2015. Distribution guidance
specific to 2015 has not been provided previously.

Management continues to believe the large majority of the partnership's
operating margin will be generated by fee-based transportation and terminals
services, with commodity-related activities contributing 15% or less of the
partnership's operating margin.

Earnings call details

An analyst call with management regarding fourth-quarter results and 2014
guidance is scheduled today at 1:30 p.m. Eastern. To participate, dial (888)
401-4668 and provide code 8110910. Investors also may listen to the call via
the partnership's website at

Audio replays of the conference call will be available from 4:30 p.m. Eastern
today through midnight on Feb. 11. To access the replay, dial (888) 203-1112
and provide code 8110910. The replay also will be available at

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 cost of
product sales, 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

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



(In thousands, except per unit amounts)

                                  Three Months Ended    Year Ended
                                  December 31,          December 31,
                                  2012       2013       2012       2013
Transportation and terminals      $ 248,937  $ 333,269  $ 970,744  $ 1,138,328
Product sales revenue             252,906    240,184    799,382    744,669
Affiliate management fee revenue  1,352      3,985      1,948      14,609
Total revenue                     503,195    577,438    1,772,074  1,897,606
Costs and expenses:
Operating                         74,404     100,212    328,454    346,070
Cost of product sales             178,179    182,004    657,108    578,029
Depreciation and amortization     33,324     36,442     128,012    142,230
General and administrative        32,694     36,423     109,403    132,496
Total costs and expenses          318,601    355,081    1,222,977  1,198,825
Earnings (loss) of non-controlled (1,914)    1,113      2,961      6,275
Operating profit                  182,680    223,470    552,058    705,056
Interest expense                  30,627     35,168     117,981    130,463
Interest income                   (27)       (92)       (107)      (342)
Interest capitalized              (2,864)    (3,865)    (6,195)    (14,339)
Debt placement fee amortization   531        804        2,087      2,424
Income before provision for       154,413    191,455    438,292    586,850
income taxes
Provision for income taxes        610        1,448      2,622      4,613
Net income                        $ 153,803  $ 190,007  $ 435,670  $ 582,237
Basic net income per limited      $ 0.68     $ 0.84     $ 1.92     $ 2.57
partner unit
Diluted net income per limited    $ 0.68     $ 0.83     $ 1.92     $ 2.56
partner unit
Weighted average number of
limited partner units outstanding 226,434    226,879    226,369    226,829
used for basic net income per
unit calculation
Weighted average number of
limited partner units outstanding 227,383    227,928    226,608    227,094
used for diluted net income per
unit calculation


                                          Three Months Ended  Year Ended
                                          December 31,        December 31,
                                          2012       2013     2012     2013
Refined products:
Transportation revenue per barrel shipped $  1.220   $ 1.418  $ 1.230  $ 1.313
Volume shipped (million barrels):
Gasoline                                  59.9       65.0     223.7    239.7
Distillates                               36.8       41.1     136.7    146.5
Aviation fuel                             4.8        5.7      21.5     21.1
Liquefied petroleum gases                 0.6        0.6      8.5      7.8
Total volume shipped                      102.1      112.4    390.4    415.1
Crude oil:
Transportation revenue per barrel shipped $  0.322   $ 1.088  $ 0.305  $ 0.880
Volume shipped (million barrels)          20.6       40.6     72.0     113.2
Crude oil terminal average utilization    12.8       12.0     12.6     12.3
(million barrels per month)
Marine storage:
Marine terminal average utilization       23.5       23.3     23.8     23.0
(million barrels per month)



(Unaudited, in thousands)
                                   Three Months Ended    Year Ended
                                   December 31,          December 31,
                                   2012       2013       2012       2013
Refined products:
Transportation and terminals       $ 185,023  $ 227,513  $ 723,835  $ 801,128
Less: Operating expenses           63,630     75,800     267,694    270,711
Transportation and terminals       121,393    151,713    456,141    530,417
Product sales revenue              250,682    238,986    790,116    738,271
Less: Cost of product sales        177,590    181,516    653,429    574,703
Product margin                     73,092     57,470     136,687    163,568
Operating margin                   $ 194,485  $ 209,183  $ 592,828  $ 693,985
Crude oil:
Transportation and terminals       $ 24,662   $ 64,504   $ 92,288   $ 178,409
Less: Operating expenses           1,183      5,963      5,229      19,131
Transportation and terminals       23,479     58,541     87,059     159,278
Affiliate management fee revenue   1,138      3,594      1,734      13,361
Earnings (loss) of non-controlled  (2,339)    526        2,574      3,781
Operating margin                   $ 22,278   $ 62,661   $ 91,367   $ 176,420
Marine storage:
Transportation and terminals       $ 39,252   $ 41,252   $ 154,621  $ 158,791
Less: Operating expenses           10,444     19,347     58,486     59,407
Transportation and terminals       28,808     21,905     96,135     99,384
Product sales revenue              2,224      1,198      9,266      6,398
Less: Cost of product sales        589        488        3,679      3,326
Product margin                     1,635      710        5,587      3,072
Affiliate management fee revenue   214        391        214        1,248
Earnings of non-controlled         425        587        387        2,494
Operating margin                   $ 31,082   $ 23,593   $ 102,323  $ 106,198
Segment operating margin           $ 247,845  $ 295,437  $ 786,518  $ 976,603
Add: Allocated corporate           853        898        2,955      3,179
depreciation costs
Total operating margin             248,698    296,335    789,473    979,782
Depreciation and amortization      33,324     36,442     128,012    142,230
General and administrative expense 32,694     36,423     109,403    132,496
Total operating profit             $ 182,680  $ 223,470  $ 552,058  $ 705,056

Note: Amounts may not sum to figures shown on the consolidated statement of
income due to intersegment eliminations and allocated corporate depreciation





(Unaudited, in thousands except per unit amounts)
                                     Three Months Ended
                                     December 31, 2013
                                                 Basic Net     Diluted Net
                                     Net Income  Income Per    Income Per
                                                 Limited       Limited Partner
                                                 Partner Unit  Unit
As reported                          $  190,007  $    0.84     $      0.83
Add: Unrealized derivative losses
associated with future physical      12,820      0.06          0.06
product transactions
Deduct: Lower-of-cost-or-market      (1,506)     (0.01)        (0.01)
inventory adjustment
Excluding commodity-related          $  201,321  $    0.89     $      0.88
Weighted average number of limited
partner units outstanding used for   226,879
basic net income per unit
Weighted average number of limited
partner units outstanding used for   227,928
diluted net income per unit

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



(Unaudited, in thousands)
                        Three Months Ended    Year Ended
                        December 31,          December 31,          2014
                        2012       2013       2012       2013       Guidance
Net income              $ 153,803  $ 190,007  $ 435,670  $ 582,237  $ 658,000
Interest expense, net   27,736     31,211     111,679    115,782    128,000
Depreciation and        33,855     37,246     130,099    144,654    150,000
Equity-based incentive  8,481      9,584      8,038      11,823     4,000
Asset retirements and   2,047      3,566      12,622     7,835      6,000
Derivative (gains)
losses recognized in
the period associated   (26)       12,820     6,424      8,086
with future product
Derivative gains
(losses) recognized in
previous periods        (1,629)    2,896      3,649      (6,425)
associated with product
sales completed in the
period ^ (4)
Lower-of-cost-or-market 2,000      (1,506)    983        (2,000)
Houston-to-El Paso cost
of sales                (6,389)    —          1,838      —
Total commodity-related (6,044)    14,210     12,894     (339)      (8,000)
Other                   4,413      2,519      4,850      (409)      (3,000)
Adjusted EBITDA         224,291    288,343    715,852    861,583    935,000
Interest expense, net   (27,736)   (31,211)   (111,679)  (115,782)  (128,000)
Maintenance capital     (17,202)   (20,562)   (64,396)   (76,081)   (77,000)
Distributable cash flow $ 179,353  $ 236,570  $ 539,777  $ 669,720  $ 730,000
Distributable cash flow
per limited partner     $ 0.79     $ 1.04     $ 2.39     $ 2.95     $ 3.21
unit paid distributions
related to this period
Weighted average number
of limited partner
units paid              226,679    227,068    226,321    226,777    227,068
distributions related
to this period

^(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 year ended December
^(2) 31, 2012 and 2013 was $21.0 million and $24.1 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

SOURCE Magellan Midstream Partners, L.P.

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