Magellan Midstream Partners
) announced earnings per unit (EPU) of 94 cents (excluding
mark-to-market commodity-related pricing adjustments), a penny
behind the Zacks Consensus Estimate of 95 cents and also below the
year-ago adjusted profit of $1.01, owing to weaker demands for
gasoline in the quarter.
However, total revenue of $493.5 million was up 11.4% year over
year and was also above the Zacks Consensus Estimate of $490.0
million, aided by good performance from its crude oil pipelines and
Recently, Magellan raised its quarterly cash distribution by
3.0% sequentially and 9.0% year over year to 84 cents per unit
($3.36 per unit annualized). The partnership's new distribution is
payable on May 15 to unitholders of record as of May 8, 2012.
Petroleum Products Pipeline System
In the Petroleum Products Pipeline System, quarterly operating
margins (before affiliate G&A and D&A expenses) were $125.4
million, down 0.8% year over year as improved revenues were more
than offset by elevated expenses. Moreover, its higher volumes of
crude oil were more than mitigated by weak gasoline demand.
In the Petroleum Terminals segment, operating margin was a record
$48.0 million, up 20.4% year over year. The improvement were
attributable to the recently-constructed crude oil storage
facilities, new refined product tanks, inflated rates from its
marine terminals and decreasing operating expenses, partly offset
by a decline in product margin owing to less overseas sales.
Ammonia Pipeline System
The partnership's Ammonia Pipeline System reported an operating
margin of $3.9 million, higher than the $3.7 million earned in the
first quarter of 2011. The result was positively impacted by a
decrease in operating expenses, partly offset by declining
Management has raised their distributable cash flow guidance by
$10 million to $490 million for the full year and is targeting
annual distribution growth of 9%.
The partnership plans to spend approximately $500 million on
expansion projects in 2012, with expenditures of $180 million
thereafter to complete these projects. Additionally, the
partnership is on the look out for more than $500 million worth
potential growth projects in the earlier stages of development.
Magellan Midstream units currently retain a Zacks #3 Rank, which
translates into a short-term Hold rating. We are also maintaining
our long-term Neutral recommendation on the stock.
Magellan Midstream Partnersowns a high-quality and diverse
portfolio of midstream assets that generate stable and recurring
revenues by way of long-term fee-based contracts. The partnership -
with more than $500 million of potential projects under development
- has attractive growth potential, and maintains a sound liquidity
The partnership is also susceptible to lower-than-expected
demand for refined products, commodity price fluctuations and cost
overruns on expansion projects.
Magellan Midstream competes in the 'Oil/Gas Production Pipeline
MLP' industry with firms like
Plains All American Pipeline, L.P.
Inergy Midstream LLC
PAA Natural Gas Storage, L.P.
MAGELLAN MDSTRM (MMP): Free Stock Analysis
INERGY MIDSTRM (NRGM): Free Stock Analysis
PLAINS ALL AMER (PAA): Free Stock Analysis
PAA NATURAL GAS (PNG): Free Stock Analysis
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