We are maintaining our Neutral recommendation on Magellan Midstream
Partners. The partnership expects fourth-quarter 2014 earnings of
$0.92 per unit, higher than the year-ago profit. Additionally,
Magellan Midstream projects 2014 distributable cash flow of $865
million, up $25 million from the previous projection. These reflect
the partnership's strong outlook on the back of excellent operating
performances. However, we remain concerned as Magellan Midstream is
susceptible to lower-than-expected demand for refined products,
commodity price fluctuations and cost overruns on expansion
Tulsa, Oklahoma-based Magellan Midstream Partners, L.P. (MMP) is
a master limited partnership (MLP) that owns and operates a
diversified portfolio of energy infrastructure assets. The
partnership primarily transports, stores, and distributes refined
petroleum products and, to a lesser extent, ammonia. In 2013, the
partnership's pipeline volumes comprised 58% gasoline, 35%
distillates (which include diesel fuels and heating oil), and 7%
Liquefied Petroleum Gas (LPG)/aviation fuel. Magellan conducts its
operations in three segments: Refined Products, Crude Oil, and
Refined Products: The Refined Products unit primarily comprises
Magellan's approximately 9,500-mile pipeline system with 54
integrated terminals and 27 independent terminals (not linked to
Magellan's pipeline infrastructure). Additionally, the segment
looks after the partnership's 1,100-mile ammonia pipeline system
with 6 Magellan-owned terminals that extends from Texas and
Oklahoma to Minnesota, and caters to the mid-continent region.
Crude Oil: The Crude Oil division includes roughly 1,100 miles
of pipelines as well as storage services with a total storage
capacity of approximately 18 million barrels.
Marine Storage: This contains marine terminals that are spread
along coastal waterways with a collective storage capacity of
approximately 27 million barrels.
In a major transaction, the partnership acquired its publicly
traded general partner, Magellan Midstream Holdings, through an
all-equity exchange. With the completion of the transaction, in the
third quarter of 2009 following unit-holder approvals from both
entities, Magellan dissolved Magellan Midstream Holdings and the
associated incentive distribution rights.
Magellan Midstream Partners, L.P. (MMP): Read the
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