Magellan Midstream Partners: Standing Strong in Tough Times
MMP’s segments
Magellan Midstream Partners’ (MMP) Refined Products segment contributes more than 60% of its operating income. The segment operates refined product pipelines and terminals. MMP’s Crude Oil and Marine Storage segments contribute nearly 30% and 10%, respectively, to its operating income.
While the Refined Products segment continues to generate the largest portion of MMP’s operating income, MMP’s Crude Oil business has contributed the most to its growth over the last five years. Half of the growth in MMP’s distributable cash flows since 2010 has been contributed by its Crude Oil business. MMP’s Crude Oil business, which now contributes 30% to its operating margin, was virtually nonexistent five years ago.
As the above graph shows, half of MMP’s current expansion spending is expected to be in its Crude Oil business. However, its future expansion spending will also be tilted slightly in favor of its Crude Oil business.
MMP expects to spend nearly $900 million on organic growth projects in 2016 and 2017. The partnership forms 7.7% of the Alerian MLP ETF (AMLP) and 0.6% of the Multi-Asset Diversified Income ETF (MDIV). MDIV invests nearly 17% of its portfolio in MLPs.
South Texas Refined Products Pipeline
On April 4, 2016, Magellan Midstream announced that it was jointly assessing the development of a new refined products pipeline with TransMontaigne Partners (TLP). The potential pipeline would be capable of transporting 150,000 bpd (barrels per day) of gasoline, diesel fuel, propane, and condensate from Magellan’s Corpus Christi, Texas terminal to TransMontaigne’s Brownsville, Texas terminal. If approved, the potential pipeline could be operational by the end of 2018.
MMP’s Saddlehorn pipeline is expected to become operational in September 2016. It’s owned 40% by Magellan, 40% by Plains All American Pipeline (PAA), and 20% by Anadarko Petroleum (APC).
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