Magellan Midstream Partners L.P. (MMP), a master limited partnership, announced robust first quarter 2010 results, buoyed by higher rates in its core transportation and storage services, in addition to contribution from recently completed expansion projects.
The partnership reported earnings per unit (EPU) of 67 cents (excluding unrealized losses associated with future physical product sales), surpassing the Zacks Consensus Estimate by 4 cents. In the year-ago period, Magellan earned 30 cents per unit.
Total revenues soared 54.8% year-over-year to $329.7 million, reflecting higher fees and rates.
Distribution Raised
Importantly, Magellan declared a quarterly distribution of 72 cents per unit ($2.88 per unit annualized), representing an approximately 1.4% increase, both sequentially and year-over-year. The distribution will be paid on May 14 to unit-holders of record on May 7, 2010.
Petroleum Products Pipeline System
In the Petroleum Products Pipeline System, quarterly operating profits (before affiliate G&A and D&A expenses) were $102.9 million, up 36.8% year over year. The increase reflects higher pipeline capacity leases, more additive and ethanol blending fees, higher average transportation rates, and slightly lower operating expenses. These factors were partly offset by lower transportation volumes on the back of less gasoline shipments.
Petroleum Products Terminals
In the Petroleum Products Terminals segment, operating margin was $30.8 million, up approximately 28.2% year over year. The positive comparison was on account of the effects of expansion projects at the partnership’s terminals and higher storage rates on existing marine capacities, which were partly offset by higher operating expenses and lower product margin.
Ammonia Pipeline System
The partnership’s Ammonia Pipeline System reported an operating profit of $1.1 million, as against $116,000 in the first quarter of 2009. The segment results were favorably affected on account of increased volumes, somewhat offset by higher expenses.
2010 Guidance
Management expects distributable cash flows of approximately $350 million (up $5 million from the previous guidance) for the full year and is targeting an annual distribution growth of 4%. Magellan guided towards second-quarter and full-year earnings per unit of 64 cents and $2.69 (up from the previous guidance of $2.66), respectively.
The partnership plans to spend approximately $250 million (as against previously slated $210 million) on growth projects in 2010, with expenditures of $30 million in 2011 required to complete these projects. Additionally, the partnership continues to look out for more than $500 million of potential growth projects in the earlier stages of development.
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