Earnings per Limited Partner Unit Exceed Analysts Expectations  

TULSA, Okla. – Magellan Midstream Partners, L.P. (NYSE: MMP) today announced fourth-quarter 2003 earnings of 73 cents per limited partner unit, or 75 cents excluding the 2-cent impact associated with transition costs during the quarter. The transition costs relate to the June 2003 change in ownership of the partnership's general partner. Analyst expectations for the quarter average 72 cents per unit.

Net income for fourth-quarter 2003 was $18.0 million, or $23.0 million excluding the impact of $2.0 million of transition costs and $3.0 million of reimbursable general and administrative (G&A) charges, compared with $27.6 million in 2002.

Operating profit for fourth-quarter 2003 was $27.4 million, or $32.4 million excluding the impact of the transition costs and reimbursable G&A, compared with $37.3 million in 2002.

“We are pleased to have exceeded expectations for the fourth quarter,” said Don Wellendorf, chief executive officer. “Lower fourth-quarter results compared to last year were anticipated due to very favorable market conditions that existed in late 2002. The partnership's performance in 2003 as a whole was strong and allowed us to increase our distributions substantially over the year.”

A reconciliation of reported operating profit, net income and earnings per unit to operating profit, net income and earnings per unit excluding transition costs and reimbursable G&A charges accompanies this release.

An analysis of quarter-to-quarter variances by segment is provided below based on operating margin, which is a non-GAAP measure reflecting operating profit before G&A expenses and depreciation. A reconciliation of operating margin to operating profit also accompanies this release.

Petroleum products pipeline system. Pipeline operating margin decreased by $6.4 million. Transportation revenues declined primarily due to lower revenue per barrel delivered compared to the previous year as a result of product being shipped a shorter distance on average during the current period. Longer hauls were experienced during fourth-quarter 2002 due to refinery production disruptions in the upper Midwest region. Product margin from a recently acquired refined products management business offset much of the transportation revenue decline.

Expenses for the petroleum products pipeline system increased $4.9 million between periods primarily because of the following items:

•  Higher property taxes due in part to a positive adjustment during fourth-quarter 2002;

•  Costs associated with repair and remediation work resulting from a pipeline leak during October 2003; and

•  A non-cash property write-off during the current period for retired assets.

Petroleum products terminals. Terminals operating margin increased by $1.7 million primarily due to reduced expenses. Maintenance expenses declined as the result of several efficiency projects that reduced contract labor and repair costs. Lower revenues partially offset the expense savings. Marine storage revenues were lower due to the continued challenging market conditions associated with high crude oil prices and market uncertainty about future petroleum prices. Higher inland terminal throughput benefited the 2003 revenues, partially offsetting the reduction in marine storage revenues.

Ammonia pipeline system. Ammonia operating margin increased by $0.1 million as lower operating expenses more than offset reduced transportation volumes.

G&A expenses increased $5.7 million in the current quarter primarily because of the $2.0 million in transition costs and $3.0 million of reimbursable G&A charges. The partnership's cash G&A expenses, excluding equity-based incentive compensation and transition costs, are capped under an agreement with the owner of the partnership's general partner. Expenses above the cap are reimbursed by the owner of the general partner . Therefore , these costs do not impact the partnership's cash generation or its limited partner earnings per unit.

Reduced debt placement fees during the current period more than offset higher net interest expense. The partnership placed long-term debt during late 2002 to refinance the short-term loan used initially to fund the acquisition of its petroleum products pipeline system. The short-term loan refinancing resulted in higher debt placement fees during 2002.

For the year ended Dec. 31, 2003 , operating profit was $125.4 million, or $142.1 million excluding the impact of $10.8 million in transition costs and a $5.9 million non-cash charge related to the reimbursable G&A, compared with $137.1 million in 2002. Net income for the 2003 period was $88.2 million, or $104.9 million excluding these items, compared with $99.2 million in 2002.

Diluted earnings per limited partner unit for the 2003 period were $3.31, or $3.56 excluding the 25 cents of transition costs, compared with $3.67 in 2002, with an average number of limited partner units outstanding of 27.2 million and 22.0 million for 2003 and 2002, respectively. The number of units increased between periods primarily due to equity issuances during second-quarter 2002 associated with the financing of the petroleum products pipeline system.

Management previously provided earnings guidance for the year 2004 of $3.30 per limited partner unit but is now raising its guidance for the year to $3.33 per limited partner unit to reflect the terminals acquisition announced earlier today. Earnings for the first-quarter 2004 are currently expected by management to be approximately 70 cents per unit compared to 99 cents in the first quarter of 2003. The expected reduction in earnings for the 2004 first quarter is due primarily to the favorable impact in 2003 of a customer settlement to terminate a marine storage contract and the unfavorable impact in 2004 of lower product loss allowances and higher maintenance expenses.

An analyst call with management regarding fourth-quarter 2003 earnings is scheduled today at 1:30 p.m. Eastern. To participate, dial (800) 289-0485 and provide code 233671. International callers should dial

(913) 981-5518 and provide the same code. Investors also may listen to the call via the partnership's web site at www.magellanlp.com/webcasts.asp.

Audio replays of the conference call will be available from 4:30 p.m. Eastern today through midnight on Feb. 4. To access the replay, dial (888) 203-1112. International callers should dial (719) 457-0820. The access replay code is 233671. The replay also will be available at www.magellanlp.com.

About Magellan Midstream Partners, L.P.  

Magellan Midstream Partners, L.P. is a publicly traded partnership formed to own, operate and acquire a diversified portfolio of energy assets. The partnership primarily transports, stores and distributes refined petroleum products. More information is available at www.magellanlp.com.

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Portions of this document may constitute "forward-looking statements" as defined by federal law. Although the partnership believes any such statements are based on reasonable assumptions, there is no assurance that actual outcomes will not be materially different. Any such statements are made in reliance on the "safe harbor" protections provided under the Private Securities Reform Act of 1995. Additional information about issues that could lead to material changes in performance is contained in the partnership's filings with the Securities and Exchange Commission.