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
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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