Magellan Midstream Partners Reports Increased Quarterly Earnings

TULSA, Okla. – Magellan Midstream Partners, L.P. (NYSE: MMP) today reported increased operating profit, net income and net income per limited partner unit for second-quarter 2005 compared to second-quarter 2004. The partnership also reported record quarterly transportation barrels shipped and inland terminal throughput during the current period.

Second-quarter 2005 operating profit was $51.4 million compared to $43.5 million for second-quarter 2004, representing an 18% increase. Net income increased to $39.0 million during second-quarter 2005 from $18.5 million in the corresponding 2004 period, a 111% increase. Net income per limited partner unit was 48 cents during second-quarter 2005 compared to 31 cents during 2004, for a 55% increase.

“Our second-quarter financial results were significantly better than last year primarily due to positive contributions from the pipeline system we acquired in Oct. 2004 and from debt refinancing costs that negatively impacted the 2004 period,” said Don Wellendorf, chief executive officer. “Magellan's asset portfolio continues to generate strong earnings and cash flows, allowing us to increase our distribution again this quarter while maintaining sufficient headroom to provide future distribution growth potential.”

An analysis of variances by segment comparing second-quarter 2005 to second-quarter 2004 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 $60.0 million, an increase of $10.6 million. Operating results from the pipeline system acquired during Oct. 2004 and additional equity earnings from our investment in the Osage pipeline were the primary contributors to the increase. Environmental expenses related to a May 2005 pipeline leak negatively impacted the current quarter.

Petroleum products terminals. Terminals operating margin was $18.2 million, an increase of $3.1 million, and represented record quarterly financial results for this segment. The 2005 period benefited from higher utilization and rates at the partnership's marine terminals and the addition of the East Houston facility as part of the pipeline system acquisition in Oct. 2004. Further, record throughput at the partnership's inland terminals and higher ancillary revenues benefited second-quarter 2005.

Ammonia pipeline system. Ammonia operating margin was unchanged between periods at $1.5 million. Incremental revenue from increased transportation volume during the current period was offset by higher system integrity expenses.

Depreciation, amortization and interest expenses increased between periods, all principally due to acquisitions completed during 2004. G&A expense also increased, primarily due to the impact of the partnership's higher unit price which increases expenses related to its equity-based incentive program.

Second-quarter 2004 was burdened with $16.7 million of net refinancing costs that did not occur during the 2005 period.

Management continues to anticipate net income per limited partner unit of $2.05 for the full year, while remaining committed to its goal of raising distributions by at least 10% annually. Net income per unit for third-quarter 2005 is currently expected to be approximately 47 cents.

An analyst call with management regarding second-quarter 2005 financial results is scheduled today at 1:30 p.m. Eastern. To participate, dial (800) 289-0496 and provide code 7826471. 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 3:30 p.m. Eastern today through midnight on August 2. To access the replay, dial (888) 203-1112 and provide code 7826471. 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