Magellan Midstream Partners, L.P.
) announced dull third-quarter 2012 earnings, with poor
contributions from the business units.
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The Tulsa, Oklahoma-based oil distributor reported earnings per
unit (EPU) of 35 cents (excluding mark-to-market
commodity-related pricing adjustments), unchanged from the profit
of the prior-year quarter. The result, however, fell shy of the
Zacks Consensus Estimate of 44 cents.
Total revenues, at $325.9 million, were down 25.2% year over year
and were also below the Zacks Consensus Estimate of $468.0
In mid-October, Magellan Midstream completed the split of its
limited partner units in the ratio 2:1. The quarterly results
reflect the effects of the stock split.
Recently, Magellan raised its third-quarter 2012 cash
distribution by 3% sequentially and 21% year over year to 48.5
cents per unit ($1.94 per unit annualized). Magellan's new
distribution is payable on November 14 to unitholders of record
as on November 6, 2012.
Petroleum Products Pipeline System:
In the Petroleum Products Pipeline System, quarterly operating
profits (before affiliate G&A and D&A expenses) were
$97.7 million, down 34.5% year over year. An increase in
operating expenses and low average tariff rate impacted the
performance of the segment, offsetting the effects of higher
transportation and terminals revenues as well as improved product
In the Petroleum Terminals segment, operating margin was $36.1
million, exhibiting a drop of 10.4% year over year. Steeper
expenses associated with personnel costs and environment spending
pulled down the quarterly performance of the segment.
Ammonia Pipeline System:
The partnership's Ammonia Pipeline System reported an operating
profit of $79.3 million, substantially less than the $137.7
million earned in the third quarter of 2011.
Management expects to generate distributable cash flows of
approximately $525 million for the full year 2012 (up from the
previous guidance of $520 million) and is targeting annual
distribution growth of 18%. The partnership plans to raise the
payout by a further 10% in 2013. Magellan guided toward fourth
quarter and full-year 2012 earnings per unit of 68 cents and
The partnership plans to spend approximately $450 million on
growth projects in 2012, with expenditures of additional $280
million in 2013 to complete the projects. Additionally, the
partnership is looking to put in more than $500 million in
potential growth projects.
Magellan Midstream - which is collaborating with Los Angeles,
California-based energy firm
Occidental Petroleum Corporation
) to set up a 400-mile long oil transport BridgeTex pipeline
joint venture - currently retain a Zacks #2 Rank, which
translates into a short-term Buy rating.
We maintain a long-term Outperform recommendation on the stock,
owing to its low risk, stable business model and proven track
record of distribution growth. The partnership's high-quality and
diversified midstream assets are also projected to generate
stable and recurring revenues by way of long-term fee-based