Magellan Midstream Generates Record Financial Results in First Quarter

    Magellan Midstream Generates Record Financial Results in First Quarter

Increases Annual Distributable Cash Flow Guidance to $810 Million for 2014

PR Newswire

TULSA, Okla., May 6, 2014

TULSA, Okla., May 6, 2014 /PRNewswire/ --Magellan Midstream Partners, L.P.
(NYSE: MMP) today reported record quarterly operating profit of $275.1 million
for first quarter 2014, an increase of $132.6 million, or 93%, compared to
$142.5 million for first quarter 2013.

Net income more than doubled to a quarterly record of $242.6 million for first
quarter 2014 compared to $113.0 million for first quarter 2013, and diluted
net income per limited partner unit increased to a record $1.07 in first
quarter 2014 versus 50 cents in the corresponding 2013 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 $1.07 for first quarter 2014 was higher than the 70-cent
guidance provided by management in Feb. 2014 primarily due to
stronger-than-expected refined products and crude oil transportation volumes
and rates, more favorable product overages and the sale of additional volumes
from the partnership's butane blending activities.

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 $253.2 million for first
quarter 2014, more than double the first-quarter 2013 DCF of $123.9 million.

"Magellan kicked off 2014 with exceptional strength, generating record
quarterly financial results due to strong performance from all aspects of our
business, including fee-based transportation and terminal assets and
commodity-related activities," said Michael Mears, chief executive officer.
"Further, we continue to build the framework for Magellan's future growth,
achieving significant progress on crude oil projects currently under
construction and launching new projects for critical energy infrastructure
that will sustain our growth trajectory."

An analysis by segment comparing first quarter 2014 to first quarter 2013 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 $255.0 million, an increase of
$94.8 million and a quarterly record for this segment. Transportation and
terminals revenue increased $44.9 million between periods due to higher
shipment volumes and average tariffs. Shipments grew primarily as a result of
strong demand for gasoline and distillates in the markets served by the
partnership, in part due to the seasonal reversal of a portion of the
partnership's Oklahoma system to deliver refined products south into Texas,
start-up of Magellan's recently-constructed pipeline from the partnership's El
Paso, Texas terminal to a new locomotive fueling facility in New Mexico and
shipments through a new connection to a third-party pipeline for further
distribution to other markets. 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 a
New Mexico pipeline system acquired in July 2013 and a Rocky Mountain pipeline
system acquired in Nov. 2013.

Operating expenses increased between periods primarily due to expenses related
to the recently-acquired New Mexico and Rocky Mountain pipeline systems.
Increased property taxes, power expenses and personnel costs on the
partnership's legacy pipeline system were primarily offset by more favorable
product overages (which reduce operating expenses).

Product margin (a non-GAAP measure defined as product sales revenue less cost
of product sales) increased $54.8 million between periods primarily due to
improved profitability of the partnership's butane blending activities as a
result of significantly lower butane costs in the current period and higher
sales volumes. The increased volume was attributable to selling additional
blended product carried over from the partnership's fourth-quarter 2013
blending activities as well as more blending opportunities during first
quarter 2014 in part due to higher gasoline demand.

Crude oil. Crude operating margin was $63.3 million, an increase of $40.6
million. Transportation and terminals revenue increased $44.7 million
primarily due to crude oil shipments on the Longhorn pipeline, which began
operation during second quarter 2013, and higher pipeline volume on the
partnership's Houston crude oil distribution system. 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 expenses).

Marine storage. Marine operating margin was $28.4 million, an increase of $3.1
million. Revenue increased between periods primarily due to storage fees from
newly-constructed tanks placed into service at the partnership's Galena Park
terminal over the last year, and expenses declined slightly due to less
spending for maintenance projects during the current period. Product margin
increased 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 more
personnel costs as a result of additional headcount and higher accruals for
the partnership's annual bonus and equity-based incentive compensation
programs as a result of higher payout expectations and an increasing unit

Net interest expense increased primarily due to borrowings from the
partnership's recent debt offerings to fund capital spending. As of March 31,
2014, the partnership had $2.9 billion of debt outstanding and $196.6 million
of cash on hand.

Expansion capital projects

Magellan continues to make significant progress on its expansion opportunities
and recently announced plans to construct a fee-based condensate splitter at
its Corpus Christi, Texas terminal and to deliver refined products to Little
Rock, Arkansas by extending the reach of the partnership's pipeline system
from Ft. Smith, Arkansas to the Little Rock market.

The Longhorn pipeline continues to increase crude oil volume and averaged
approximately 200,000 barrels per day (bpd) during the first quarter of 2014.
Magellan has received regulatory approval to increase the capacity of the
pipeline to 275,000 bpd and expects to average approximately 240,000 bpd
during the second quarter of 2014 and 250,000 bpd during the second half of

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 pipeline movements expected
to begin mid-third quarter to deliver crude oil from the Permian Basin to the
Houston Gulf Coast area.

Based on the progress of expansion projects already underway, the partnership
currently plans to spend approximately $700 million in 2014 with additional
spending of $325 million in 2015 and $75 million in 2016 to complete its
current slate of construction projects.

In addition, Magellan continues to evaluate well in excess of $500 million of
potential growth projects in earlier stages of development as well as possible
acquisitions, both of which have been excluded from the partnership's spending

Financial guidance for 2014

Management is raising its 2014 DCF guidance by $80 million to $810 million
primarily as a result of strong financial results to date and remains
committed to its goal of increasing annual cash distributions by 20% for 2014
and 15% for 2015. For DCF purposes, BridgeTex is expected to have minimal
impact to 2014 results due to the timing of the pipeline's start-up and the
timing of cash distribution payments from the joint venture to Magellan, which
will be paid in arrears on a quarterly basis.

Including actual results so far this year, net income per limited partner unit
is estimated to be $3.25 for 2014, with second-quarter guidance of 72 cents.
Guidance excludes future MTM adjustments on the partnership's
commodity-related activities.

Earnings call details

An analyst call with management regarding first-quarter results and outlook
for the remainder of 2014 is scheduled today at 1:30 p.m. Eastern. To join the
conference call, dial (888) 466-4462 and provide code 1956876. 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 May 12. To access the replay, dial (888) 203-1112
and provide code 1956876. 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 revenue 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 New York Mercantile Exchange (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 nearly 50% of the nation's
refining capacity, and can store more than 90 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, 2013 and subsequent reports on Form 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
                                                        March 31,
                                                        2013        2014
Transportation and terminals revenue                    $ 227,271   $ 317,637
Product sales revenue                                   201,711     296,063
Affiliate management fee revenue                        3,439       4,906
Total revenue                                           432,421     618,606
Costs and expenses:
Operating                                               65,181      73,497
Cost of product sales                                   160,398     198,040
Depreciation and amortization                           36,332      37,511
General and administrative                              30,056      34,935
Total costs and expenses                                291,967     343,983
Earnings of non-controlled entities                     2,051       466
Operating profit                                        142,505     275,089
Interest expense                                        31,723      36,416
Interest income                                         (22)        (391)
Interest capitalized                                    (3,451)     (5,310)
Debt placement fee amortization expense                 540         599
Income before provision for income taxes                113,715     243,775
Provision for income taxes                              748         1,221
Net income                                              $ 112,967   $ 242,554
Basic and diluted net income per limited partner unit   $ 0.50      $ 1.07
Weighted average number of limited partner units
outstanding used for basic and diluted net income per   226,705     227,141
unit calculation

                                                            Three Months Ended
                                                            March 31,
                                                            2013      2014
Refined products:
Transportation revenue per barrel shipped                   $ 1.136   $ 1.356
Volume shipped (million barrels):
Gasoline                                                    53.6      59.8
Distillates                                                 33.8      37.5
Aviation fuel                                               4.5       5.0
Liquefied petroleum gases                                   1.1       1.5
Total volume shipped                                        93.0      103.8
Crude oil:
Transportation revenue per barrel shipped                   $ 0.313   $ 1.113
Volume shipped (million barrels)                            15.9      41.8
Crude oil terminal average utilization (million barrels per 12.8      12.1
Marine storage:
Marine terminal average utilization (million barrels per    22.7      22.7

(Unaudited, in thousands)
                                            Three Months Ended
                                            March 31,
                                            2013        2014
Refined products:
Transportation and terminals revenue        $ 165,359   $ 210,236
Less: Operating expenses                    46,281      51,157
Transportation and terminals margin         119,078     159,079
Product sales revenue                       199,415     293,710
Less: Cost of product sales                 158,298     197,756
Product margin                              41,117      95,954
Operating margin                            $ 160,195   $ 255,033
Crude oil:
Transportation and terminals revenue        $ 23,228    $ 67,903
Affiliate management fee revenue            3,159       4,595
Earnings (loss) of non-controlled entities  1,375       (180)
Less: Operating expenses                    5,107       9,058
Transportation and terminals margin         22,655      63,260
Operating margin                            $ 22,655    $ 63,260
Marine storage:
Transportation and terminals revenue        $ 38,684    $ 39,498
Affiliate management fee revenue            280         311
Earnings of non-controlled entities         676         646
Less: Operating expenses                    14,553      14,086
Transportation and terminals margin         25,087      26,369
Product sales revenue                       2,296       2,353
Less: Cost of product sales                 2,100       284
Product margin                              196         2,069
Operating margin                            $ 25,283    $ 28,438
Segment operating margin                    $ 208,133   $ 346,731
Add: Allocated corporate depreciation costs 760         804
Total operating margin                      208,893     347,535
Depreciation and amortization expense       36,332      37,511
General and administrative expense          30,056      34,935
Total operating profit                      $ 142,505   $ 275,089

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
                                     March 31, 2014
                                     Net Income  Basic and Diluted Net Income
                                                 Per Limited Partner Unit
As reported                          $ 242,554   $        1.07
Deduct: Unrealized derivative gains
associated with future physical      (131)       —
product transactions
Excluding commodity-related          $ 242,423   $        1.07
Weighted average number of limited
partner units outstanding used for   227,141
basic and limited net income per
unit calculation

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

(Unaudited, in thousands)
                                            Three Months Ended
                                            March 31,               2014
                                            2013        2014        Guidance
Net income                                  $ 112,967   $ 242,554   $ 738,000
Interest expense, net                       28,250      30,715      124,000
Depreciation and amortization^(1)           36,872      38,110      151,000
Equity-based incentive compensation^(2)     (7,403)     (9,725)     5,000
Asset retirements and impairments           1,791       1,205       5,000
Commodity-related adjustments:
Derivative (gains) losses recognized in the
period associated with future product       2,261       (131)
Derivative gains (losses) recognized in
previous periods associated with product    (5,195)     (5,250)
sales completed in the period ^ (4)
Lower-of-cost-or-market adjustments         (2,000)     —
Total commodity-related adjustments         (4,934)     (5,381)     (8,000)
Other                                       (1,279)     396         (4,000)
Adjusted EBITDA                             166,264     297,874     1,011,000
Interest expense, net                       (28,250)    (30,715)    (124,000)
Maintenance capital^(5)                     (14,108)    (13,977)    (77,000)
Distributable cash flow                     $ 123,906   $ 253,182   $ 810,000
Distributable cash flow per limited partner
unit paid distributions related to this     $ 0.55      $ 1.12      $ 3.57
Weighted average number of limited partner
units paid distributions related to this    226,679     227,068     227,068

(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 three months ended
(2)   March 31, 2013 and 2014 was $4.9 million and $5.1 million,
      respectively. However, the figures above include an adjustment for
      minimum statutory tax withholdings paid by the partnership in 2013 and
      2014 of $12.3 million and $14.8 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.
      Maintenance capital expenditure projects are not undertaken primarily to
      generate incremental distributable cash flow (i.e. incremental returns
(5)^ to the partnership's unitholders), while expansion capital projects are
      undertaken primarily to generate incremental distributable cash flow.
      For this reason, the partnership deducts maintenance capital
      expenditures to determine distributable cash flow.

SOURCE Magellan Midstream Partners, L.P.

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