February 8, 2013 [Tulsa World] - Record pipeline margins drove earnings at Magellan Midstream Partners LP to a record high in the fourth quarter, the Tulsa-based refined and crude petroleum transporter reported Tuesday.
The company’s terminals segment logged $50.1 million in operating margin, another quarterly record, while its ammonia pipeline system improved its margin by $1 million over same time a year earlier.
“In fact, each of our business segments experienced increases for the quarter,” Chief Financial Officer John Chandler said during the conference call.
Magellan says it may spend about $700 million on capital projects this year. The company has started work on its BridgeTex crude oil pipeline in south Texas, a joint venture with Occidental Petroleum due for completion by mid-2014, and also plans to finish the Crane-to-Houston pipeline, formerly known as the Longhorn, by this spring.
Rising crude oil production in the U.S. will result in Magellan changing its reporting structure beginning with first-quarter earnings three months from now and the 3 new segments will be:
- Marine storage
- Crude oil pipelines and terminals
- Refined products pipelines and terminals
“We are making this change because of the growing significance of crude oil storage and logistics assets to Magellan’s profitability,” Chandler said. Magellan owns and operates about 9,500 miles in refined petroleum and crude oil pipelines, as well as 80 million barrels in storage capacity.
Magellan Midstream entered the crude oil sector only three years ago with the purchase of some BP pipeline assets and terminal facilities at the Cushing interchange.
Magellan’s net income totaled $153.8 million, an increase of $40 million from the last three months of 2011. The pipeline operating margin topped $193 million for the quarter, up $43.2 million.
Crude volumes rose 54 percent on deliveries from new locations connected to Magellan’s pipeline system, the company said, and gasoline shipments increased 7 percent.
CEO Michael Mears applauded the Magellan’s records on a variety of financial metrics, and also pointed to capital growth projects such as the Longhorn and BridgeTex pipelines.
“Even more importantly, the year 2012 set Magellan on the path to become the premier provider of crude oil distribution services while maintaining our key position in the refined products space,” Mears said during a conference call with analysts and media.
For the year, Magellan reported a $435.7 million profit, compared with $413.6 million in 2011. The partnership’s distributable cash flow in 2012 hit a record $539.8 million, or 1.3 times the amount needed to meet unitholder distributions. As of Dec. 31, the partnership had $2.4 billion of debt outstanding and $328.3 million of cash on hand.
