Magellan Midstream Partners Announces Increased Quarterly Earnings

Provides 2006 Guidance  

TULSA, Okla. – Magellan Midstream Partners, L.P. (NYSE: MMP) today reported increased operating profit and net income for fourth-quarter 2005 compared to fourth-quarter 2004.

Fourth-quarter 2005 operating profit was $51.2 million compared to $48.1 million for fourth-quarter 2004, representing a 6.4% increase. Net income increased to $37.6 million during fourth-quarter 2005 from $35.3 million in the corresponding 2004 period, a 6.5% increase.

“Our businesses performed well during the quarter in spite of supply disruptions and high refined products prices following the recent Gulf Coast hurricane activity,” said Don Wellendorf, chief executive officer. “We expect continued growth in our cash generation and distributions to our unitholders in 2006.”

An analysis of variances by segment comparing fourth-quarter 2005 to fourth-quarter 2004 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 $57.7 million, a decline of $1.4 million. Revenues increased slightly between periods due to higher transportation barrels shipped and increased ancillary revenues due to additional demand for services such as additives and tank leases, all partially offset by lower transportation revenues that resulted primarily from an inventory build in the fourth quarter of 2005. Pipeline revenues are recognized when the transported product exits the pipeline system. When inventories build, the product has not yet left the pipeline system so the transportation tariff cannot be recognized. Higher commodity margins also positively impacted the 2005 quarter as the partnership's petroleum products management operation and third-party supply agreement continued to benefit from the sale of product during a high price environment. Higher product losses, power costs and system integrity spending negatively impacted the current quarter.

Petroleum products terminals. Terminals operating margin was $18.0 million, an increase of $2.9 million. The addition of the Wilmington, Delaware marine facility, which was acquired in Sept. 2005, increased operating results during fourth-quarter 2005. In addition, the partnership's marine terminals benefited in the current period from recently completed expansion projects at two facilities and increased fees due to higher import activity resulting from tight global petroleum products supply following the third-quarter hurricanes. Revenues also increased at the partnership's inland terminals primarily due to higher additive injection fees. Expenses increased between periods primarily due to the addition of the Wilmington terminal and increased operating taxes.

Ammonia pipeline system. Ammonia operating margin was $4.6 million, an increase of $4.3 million. The impact of higher tariffs associated with the partnership's new transportation agreements, which became effective July 1, 2005, benefited the current quarter. Further, 2005 results improved due to lower system integrity expenses related to timing of maintenance work and reduced environmental expenses.

Depreciation and amortization increased between quarters due to capital spending over the last year. Fourth-quarter 2005 interest expense was higher due to rising interest rates.

Net income per limited partner unit was 46 cents during fourth-quarter 2005 compared to 48 cents during 2004, a 4.2% decline, resulting from a higher allocation of net income to the general partner as the cash distribution per limited partner unit increases.

Management expects the partnership's cash generation to increase in 2006, enabling a continuation of its five-year history of growing cash distributions. Targeted distribution growth for 2006 is 8% to 10%. Further, management currently estimates 2006 net income per unit to be approximately $2.03. The significant increase in cash distribution growth during 2005 and the targeted distribution growth in 2006 result in an increase in the allocation of net income to the general partner during 2006. Without this increased allocation, 2006 net income per unit would be approximately 19 cents higher. Net income per unit for first-quarter 2006 is estimated to be 44 cents. Guidance specific to 2006 has not been provided previously.

Management also estimates organic growth capital spending of between $145.0 million and $200.0 million for 2006, with projects currently underway or in advanced stages of development related to the low end of this range.

An analyst call with management regarding fourth-quarter 2005 financial results and its future growth plans is scheduled for Tues, Jan. 24 at 1:30 p.m. Eastern. To participate, dial (800) 289-0544 and provide code 1012864. 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 on Jan. 24 through midnight on Jan. 30. To access the replay, dial (888) 203-1112 and provide code 1012864. 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 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.


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