Magellan Midstream Partners Announces Record Quarterly Earnings

  Increases 2007 Guidance  

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

Second-quarter 2007 operating profit was $79.2 million compared to $71.5 million for second quarter 2006, representing an 11% increase. Net income grew to $61.5 million during second quarter 2007 from $57.4 million in the corresponding 2006 period, for a 7% increase.

“Strong demand for our terminals services during the quarter, combined with favorable product margins and higher transportation rates, produced record financial results for Magellan,” said Don Wellendorf, chief executive officer. “Cash flows for the quarter were also increased by contributions from recently-completed expansion projects.”

An analysis of variances by segment comparing second quarter 2007 to second quarter 2006 is provided below based on operating margin, a financial measure that reflects operating profit before affiliate general and administrative (G&A) expense and depreciation and amortization:

Petroleum products pipeline system. Pipeline operating margin was $92.9 million, an increase of $9.9 million and a quarterly record for this segment. Transportation revenues increased between periods primarily due to higher transportation rates per barrel shipped resulting from the partnership’s 2006 mid-year tariff increase, partially offset by slightly lower transportation shipments due to temporary reductions in production during 2007 at refineries connected to the partnership’s pipeline system. The current quarter also benefited from higher fees for leased storage and increased demand for the partnership’s terminal, additive and renewable fuels services. Product margin increased during second quarter 2007 due to the higher commodity pricing environment, and operating expenses increased slightly between periods principally due to higher environmental accruals and power costs during the 2007 period, partially offset by more favorable product overages, which reduce operating expenses.

Petroleum products terminals. Terminals operating margin was $20.5 million, an increase of $2.3 million. The current period benefited from increased revenues due to expansion projects at the partnership’s marine terminals, record throughput volumes for its inland terminals and higher additive fees. Operating expenses were higher due to timing of maintenance projects.

Ammonia pipeline system. Ammonia operating margin was a loss of $1.5 million, a decrease of $1.9 million. Although revenues increased between periods due to higher shipments, second quarter 2007 was negatively impacted by increased environmental accruals for a 2004 pipeline release and additional integrity spending.

G&A expense increased primarily due to higher personnel costs and expense timing during the current quarter.

During second quarter 2007, the partnership refinanced debt, originally due in Oct. 2007, with borrowings at a lower interest rate. The early retirement resulted in $3.5 million of refinancing costs in the 2007 period.

Basic and diluted net income per limited partner unit was 66 cents for second quarter 2007 compared to 62 cents for second quarter 2006.

Distributable cash flow, which represents the amount of cash generated during the period that is available to pay distributions, was $77.2 million during second quarter 2007 compared to $70.8 million during the corresponding 2006 quarter.

Reflecting financial results to date and expectations for the remainder of 2007, management is increasing its 2007 net income per unit guidance to approximately $2.53, with a third-quarter 2007 estimate of 58 cents.

Management remains focused on developing growth opportunities for the partnership and is raising its expansion capital spending estimate to approximately $160 million for 2007, with an additional $90 million of spending needed in 2008 to complete these projects. These estimates include spending expectations for the partnership’s Texas expansion plans that were announced yesterday. The estimates exclude potential spending on acquisitions currently under negotiations or spending on more than $500 million of potential additional expansion projects currently under review.

An analyst call with management regarding second-quarter earnings and 2007 outlook is scheduled today at 1:30 p.m. Eastern. To participate, dial (800) 289-0544 and provide code 4958985. 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 Aug. 6. To access the replay, dial (888) 203-1112 and provide code 4958985. The replay also will be available at http://www.magellanlp.com.

Management believes that investors benefit from having access to the same financial measures 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 expense and depreciation and amortization, and distributable cash flow is an indicator of the cash available to pay distributions. Reconciliations of operating margin to operating profit and distributable cash flow to net income accompany this news 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