Magellan Midstream Partners L.P. (MMP)

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Magellan Midstream Partners, L.P. (MMP)

Bank of America Merrill Lynch Refining Conference

March 07, 2013 12:15 pm ET

Executives

Al Swanson - Chief Financial Officer of Plains All American GP LLC and Executive Vice President of Plains All American GP LLC

Michael N. Mears - Chairman of Magellan GP LLC, Chief Executive Officer of Magellan GP LLC, President of Magellan GP LLC and Chief Operating Officer of Magellan Gp LLC

Eric Slifka - Chief Executive Officer of Global GP LLC, President of Global GP LLC and Director of Global GP LLC

Analysts

Gabriel P. Moreen - BofA Merrill Lynch, Research Division

Presentation

Gabriel P. Moreen - BofA Merrill Lynch, Research Division

Welcome to the Infrastructure portion here of today's Refining Conference. We're pleased to have with us 3 significant players on the midstream side of Infrastructure, put you on the crude oil and refined products side of things. With us today, we have representatives from Global Partners LP, ticker GLP; Magellan Midstream Partners, ticker MMP; and Plains All American, ticker PAA. So from Plains we have Al Swanson, CFO of PAA. At Magellan, we have Mike Mears, President and CEO. And finally, of Global, we have Eric Slifka, President and CEO as well.

So I think the format of this presentation before lunch will basically be each of our 3 representatives go up and talk for about 5 minutes about their MLPs and their involvement in the midstream space. And then I think we'll have a panel discussion here. We'll ask some questions, and we certainly are welcoming audience participation in terms of that Q&A session.

So with that, I think we're going to go in reverse order, and we're going to start out with Al. So, Al, just take it away.

Al Swanson

Thank you, Gabe. I'm going to spend just 5 minutes, just briefly giving you an overview of PAA and also some of the fundamentals of how we think we're very uniquely positioned for the industry and the development of the oil shales in North America.

First, if I just can provide a little bit of a financial and operational overview. We're kind of a top 5 sized MLP, enterprise value roughly $25 billion, 4.1% yield, rated mid-BBB by both agencies.

On the right-hand panel, you see kind of our asset overview. 18,000 miles of pipeline, principally all crude oil. Significant liquid storage. Again, principally crude oil. Some refined products as well as NGL storage. We have a natural gas processing and fractionation of NGLs, as well as a very significant, what I call logistics assets, which include a significant amount of railcars, which is a very topical thing today. As well as a significant amount of trucks, trailers and barges.

We handle a little over 3.5 million barrels a day of physical product. We also provide very public guidance. Each quarter we file an 8-K with detailed guidance. The guidance for 2013 midpoint, a little over $2 billion of adjusted EBITDA and a little over $1.2 billion of adjusted net income.

We really operate and handle 4 of what we call product slates. Crude oil is by far the biggest. Roughly probably 80% of our cash flow comes from the crude oil activities. What the picture kind of shows is what we do and what we don't do. We don't own production. We don't own the refining. Both the producers and the refiners are our customers. And we basically handle the product in between. So we'll move product for third parties on our pipelines for a tariff. We'll lease terminal storage to refiners that need storage. But we also -- part of our business is we'll buy and sell crude oil. We buy it from the producer and move it to market and resell it. We take title to it, but we don't take flat price risk. Basically the purchase and the sale are matching and offset. We have a similar midstream kind of focus with the other product slates that we handle: natural gas, liquids, refined products and a natural gas storage as well.

The next couple of slides I'm going to touch -- clearly, what we're seeing in North America is very significant production growth. If you look at the U.S. and Canada combined, we're number 3 and number 6 in the world for oil production. You combine them, they're number 3, basically, the equivalent of Saudi in Russia. 1.8 million barrels a day of growth over the last kind of 2.5 years. In essence, that equals the rest of the 7 -- or 8 largest oil producers in the world. We are leading the world in oil production growth. That growth is accelerating, which is depicted on the bottom chart. We're seeing it actually increase at a much more rapid rate today than we have over the last several years.

We expect that to actually continue. What this chart shows is the fact that 1.8 million barrels a day of increased production in North America. We view this as kind of Plains' forecast in incremental 3 million plus barrels over the next several years of increased production. In the areas that you see, Canada, Eagle Ford, Permian, Bakken, Mid-Continent and the Rockies, we think we have a very unique position in all of those areas. Strong asset position and business position as well.

The other thing that we see is coming is a lot of light sweet products. In essence, in what we expect to see is, to date we've seen a lot of locational differentials. We think we'll start seeing a lot more quality differentials as we look forward, again, creating logistical challenges for the industry.

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