Magellan Midstream Partners, L.P. (MMP): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report


We are upgrading our investment thesis on Magellan Midstream Partners to Outperform from Neutral as the partnership has a strong portfolio of energy infrastructure assets that generate stable and recurring fee and tariff-based revenues. The partnership has hiked its quarterly distribution and also forecasts high distributable cash flow along with strong distribution coverage over the next few quarters. Additionally, Magellan Midstream has an impressive project backlog that will likely provide strong returns to its unitholders. As such, we believe Magellan Midstream is favorably positioned for the future and view it as an attractive investment.


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 Marine Storage.

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.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Stocks

Referenced Stocks: MMP , MLP , LPG

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