Magellan Midstream Partners Reports Record Quarterly Earnings [February]

TULSA, Okla. – Magellan Midstream Partners, L.P. (NYSE: MMP) today reported record quarterly net income of $35.3 million for fourth-quarter 2004 compared to $18.0 million for fourth-quarter 2003, representing a 96 percent increase. Operating profit increased to $48.1 million during fourth-quarter 2004 from $27.4 million in the corresponding 2003 period, for a 76 percent increase. Fourth-quarter 2004 is the first financial reporting period to include results from the partnership's newly-acquired refined petroleum products pipeline system, which was purchased on Oct. 1, 2004.

“Magellan's performance in 2004 has been exceptional,” said Don Wellendorf, chief executive officer. “The strong performance of our business units allowed us to accomplish our goal of increasing cash distributions by 10 percent. During the year, we also refinanced our debt under much more favorable terms and acquired several strategic assets to strengthen our asset portfolio. These recent acquisitions are performing well, and Magellan enters 2005 in a strong financial and operational position.”

An analysis of variances by segment comparing fourth-quarter 2004 to fourth-quarter 2003 is provided below based on operating margin, a financial measure that reflects operating profit before general and administrative (G&A) expenses and depreciation and amortization:

Petroleum products pipeline system. Pipeline operating margin was $59.1 million, an increase of $20.3 million. The current quarter benefited from operating results from the partnership's newly-acquired pipeline system as well as improved financial performance from its existing pipeline system. Transportation revenue per barrel shipped increased primarily due to longer-haul shipments and a mid-year tariff increase. Earnings also increased due to the partnership's March 2004 investment in the Osage pipeline and higher ancillary revenues. Operating expenses increased between periods primarily due to expenses associated with the new pipeline system, partially offset by lower environmental costs.

Petroleum products terminals. Terminals operating margin was $15.1 million, an increase of $4.7 million. The 2004 period benefited from higher utilization and rates at the partnership's marine terminals and additional earnings from the ownership interests in 14 inland terminals that were acquired in Jan. 2004. Increased throughput at the partnership's other inland terminals and higher ancillary revenues further contributed to the positive variance.

Ammonia pipeline system. Ammonia operating margin was $0.3 million, a decrease of $2.5 million. Higher system integrity costs and environmental accruals related to two pipeline releases during fourth-quarter 2004 were the primary contributors to the unfavorable variance.

Depreciation, amortization and interest expenses increased between the fourth quarters of 2004 and 2003, principally due to acquisitions completed during 2004. G&A expenses declined between periods because higher G&A costs during 2004 resulting from recent acquisitions were more than offset by lower transition costs. The transition costs were related to the partnership's separation from the former owner of its general partner.

Reported basic earnings per limited partner unit were 96 cents during fourth-quarter 2004 compared to 73 cents during 2003. Diluted earnings per limited partner unit were 95 cents during fourth-quarter 2004 and 73 cents during 2003.

Management currently expects earnings of $3.80 per limited partner unit for 2005 and remains committed to its goal of raising distributions by 10 percent annually. Reported full-year 2004 earnings were $3.44 per limited partner unit, or $3.92 per unit excluding refinancing costs as shown on the accompanying schedule.

Management expects that performance of the partnership's assets will continue to produce strong results including incremental earnings from recent acquisitions. This resulting improvement in earnings per unit is more than offset by the change in income allocation between limited partner and general partner interests associated with attaining the partnership's goal of increasing cash distributions by 10 percent. The combination of these items results in the 12-cent decline between years.

Earnings for first-quarter 2005 are currently expected to be approximately 80 cents per unit.

An analyst call with management regarding fourth-quarter 2004 earnings is scheduled today at 1:30 p.m. Eastern. To participate, dial (800) 289-0496 and provide code 574715. Investors also may listen to the call via the partnership's web site at http://www.magellanlp.com/webcasts.aspx.

Audio replays of the conference call will be available from 4:30 p.m. Eastern today through midnight on Feb. 8. To access the replay, dial (888) 203-1112 and provide code 574715. The replay also will be available at http://www.magellanlp.com.

Management believes that investors benefit from having access to the same financial measures being utilized by the partnership. As a result, this news release includes a discussion of operating margin, which is an important performance measure used by management to evaluate the economic success of the partnership's core operations. Operating margin is a non-GAAP measure that reflects operating profit before G&A expenses and depreciation and amortization. A reconciliation of operating margin to operating profit accompanies this release.

In addition, the partnership's historical results include items that can make it difficult to compare financial results between periods, such as reimbursable G&A expenses, transition costs related to Williams' sale of its interests in the partnership and debt refinancing costs. A reconciliation of reported results to results excluding these items also accompanies this release.



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 http://www.magellanlp.com.




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. 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.  

Contact Information:

Paula Farrell Investor Relations 918-574-7650 paula.farrell@magellanlp.com