Magellan Midstream Partners, L.P.
) announced mixed fourth-quarter 2012 results, with good
contributions from the business segments.
The Tulsa, Oklahoma-based oil distributor reported earnings
per unit (EPU) of 69 cents (excluding mark-to-market
commodity-related pricing adjustments), breezing past the Zacks
Consensus Estimate of 65 cents and the prior-year quarter profit
of 51 cents.
Total revenues, at $503.2 million, were up 3.3% year over year
but fell short of the Zacks Consensus Estimate of $520.0
In mid-October 2012, 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 fourth-quarter 2012 cash
distribution by 3% sequentially and 23% year over year to 50
cents per unit ($2.00 per unit annualized). Magellan's new
distribution is payable on Feb 14 to unitholders of record as on
Feb 6, 2013.
Petroleum Products Pipeline System
In the Petroleum Products Pipeline System, quarterly operating
profits (before affiliate G&A and D&A expenses) were a
record $193.4 million, up 28.8% year over year. The increase in
transportation volumes by 10% and the hike in average tariff rate
mainly contributed to the revenue growth.
In the Petroleum Terminals segment, operating margin was at an
all time high of $50.1 million, up 11.3% year over year on strong
contributions from the recently acquired tankage at the
partnership's storage facilities and also from partnership's
higher rate at its marine terminals.
Ammonia Pipeline System
The Ammonia Pipeline System's operating margin surged 30.3% year
over year to $4.3 million, due to transportation of higher
volumes at higher rates.
Management expects to generate distributable cash flows of
approximately $570 million for the full year 2013 and is
targeting an annual distribution growth of 10%. The partnership
plans to achieve an annual payout growth of at least 10% in 2014.
Magellan guided toward first quarter and full-year 2013 earnings
per unit of 45 cents and $2.20, respectively.
The partnership plans to spend approximately $700 million on
growth projects in 2013, with expenditures of an additional $290
million in 2014 to complete the projects. Moreover, the
partnership is looking to put in more than $500 million in
potential growth projects.
The company currently carries a Zacks Rank #2 (Buy), implying
that it is expected to outperform the broader U.S. equity market
over the next one to three months.
We believe that the attractive portfolio of energy
infrastructure assets, which the company owns will be able to
generate stable and recurring fee- and tariff-based revenues. The
assets include the longest U.S. refined petroleum products
pipeline system, access to more than 40% of refining capacity in
the continental U.S. along with imports, and 85 petroleum
terminals with more than 80 million barrels of storage.
We also remain upbeat regarding Magellan's acquisition of
petroleum storage and pipelines from a subsidiary of
). Following the acquisition, Magellan owns one of the largest
crude oil storages in the Cushing crude oil region and will
continue to exploit opportunities necessary for improving the
utilization of these assets.
Meanwhile, two firms in the energy sector that are expected to
significantly outperform the equity markets in the next one to
three months are
Cabot Oil & Gas Corporation
CVR Energy Inc.
) . Both these stocks carry a Zacks Rank #1 (Strong
BP PLC (BP): Free Stock Analysis Report
CABOT OIL & GAS (COG): Free Stock Analysis
CVR ENERGY INC (CVI): Free Stock Analysis
MAGELLAN MDSTRM (MMP): Free Stock Analysis
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