Magellan Midstream Partners Reports Record Net Income

TULSA, Okla. – Magellan Midstream Partners, L.P. (NYSE: MMP) today reported record quarterly net income of $30.6 million for third-quarter 2004 compared to $22.3 million for third-quarter 2003, representing a 37 percent increase. Operating profit increased to $39.2 million during third-quarter 2004 from $31.8 million in the corresponding 2003 period, for a 23 percent increase.

“Demand for the services we provide continues to be strong, fueled in part by the improving U.S. economy,” said Don Wellendorf, chief executive officer. “The quarter also benefited from two acquisitions and lower interest costs resulting from a debt refinancing completed earlier in the year.”

An analysis of variances by segment comparing third-quarter 2004 to third-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 $44.1 million, an increase of $1.9 million. The current quarter benefited from higher diesel and jet fuel transportation volumes due to increased market demand, increased earnings from the partnership's March 2004 investment in the Osage pipeline and higher ancillary revenues. Operating expenses increased between periods primarily due to less favorable product loss allowances and increased power costs associated with higher transportation volumes.

Petroleum products terminals. Terminals operating margin was $14.9 million, an increase of $5.2 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 January 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 $2.9 million, an increase of $0.5 million. The increase was primarily due to lower operating expenses resulting from favorable property tax assessments during the current period. Transportation volumes were essentially flat between periods.

Reported diluted earnings per limited partner unit were 96 cents during third-quarter 2004 compared to 84 cents during 2003. Analyst expectations for the current quarter averaged 87 cents per unit.

Management currently expects earnings for fourth-quarter 2004 to be 95 cents per unit and is increasing its earnings guidance for the full-year 2004 excluding refinancing costs to $3.90 per limited partner unit. The refinancing costs resulted from the partnership's May 2004 refinancing plan and are expected to impact the full year by approximately 48 cents per unit. Therefore, management currently expects reported annual earnings per limited partner unit including these costs to be $3.42 per unit.

An analyst call with management regarding third-quarter 2004 earnings is scheduled today at 1:30 p.m. Eastern. To participate, dial (800) 967-7135 and provide code 835914. 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 Nov. 4. To access the replay, dial (888) 203-1112 and provide code 835914. 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