Magellan Midstream Partners Announces Record Quarterly Earning

Increases 2006 Earnings Guidance 

TULSA, Okla. – Magellan Midstream Partners, L.P. (NYSE: MMP) today reported record quarterly operating profit and net income.

First-quarter 2006 operating profit was $62.8 million compared to $54.0 million for first quarter 2005, representing a 16.3% increase. Net income increased to $48.3 million during first quarter 2006 from $42.1 million in the corresponding 2005 period, a 14.7% increase.

“All of our businesses performed well during the quarter, and we are reaffirming our goal of 8% to 10% growth in distributions in 2006,” said Don Wellendorf, chief executive officer.

An analysis of variances by segment comparing first quarter 2006 to first quarter 2005 is provided below based on operating margin, a financial measure that reflects operating profit before general and administrative (G&A) expense and depreciation and amortization:

Petroleum products pipeline system. Pipeline operating margin was $64.2 million, an increase of $1.5 million. Revenues increased between periods primarily due to increased diesel fuel shipments and higher ancillary services such as additive injections. Higher commodity margins also positively impacted the 2006 quarter as the partnership’s petroleum products blending and fractionation operations continued to benefit from the sale of product during a high price environment. Higher power, property tax and environmental expenses as well as less favorable product overages negatively impacted the current quarter.

Petroleum products terminals. Terminals operating margin was $25.4 million, an increase of $7.8 million and a quarterly record for this segment. The 2006 period principally benefited from revenues from a variable-rate storage agreement. A portion of the partnership’s revenue from this contract is based on a percentage of the customer’s related net trading profit, which was determinable at the end of the contract term that expired Jan. 31, 2006. Further, the addition of the Wilmington, Delaware marine facility, which was acquired in Sept. 2005, and increased throughput and additive fees at the partnership’s inland terminals also increased operating results during first quarter 2006.

Ammonia pipeline system. Ammonia operating margin was $2.5 million, an increase of $1.5 million. The impact of higher tariffs associated with the partnership’s new transportation agreements, which became effective July 1, 2005, and increased shipments benefited the current quarter. Expenses increased primarily due to higher system integrity expenses and power costs.

Depreciation and amortization increased between quarters primarily due to capital spending over the last year. First-quarter 2006 interest expense was higher primarily due to rising interest rates.

Net income per limited partner unit was 55 cents during first quarter 2006 compared to 54 cents during 2005. 

Based on financial results to date and expectations for the remainder of 2006, management is increasing its 2006 net income per unit guidance to approximately $2.18. Net income per unit for second quarter 2006 is estimated to be approximately 53 cents.

Management continues to expect significant expansion opportunities during 2006. Based on projects currently underway or in advanced stages of development, capital spending for expansion projects is currently expected to be approximately $175.0 million during 2006, excluding potential future acquisitions.

An analyst call with management regarding first-quarter 2006 financial results and 2006 outlook is scheduled today at 1:30 p.m. Eastern. To participate, dial (800) 810-0924 and provide code 4995889. 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 May 4. To access the replay, dial (888) 203-1112 and provide code 4995889. 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 and supporting schedules include the non-generally accepted accounting principles measures of operating margin and distributable cash flow, which are important performance measures used by management to evaluate the economic success of the partnership’s operations. Operating margin reflects operating profit before G&A expenses and depreciation and amortization, and distributable cash flow reflects the cash available to pay distributions. Reconciliations of operating margin to operating profit and distributable cash flow to net income accompany 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 management 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