Magellan Midstream Posts Mixed 4Q - Analyst Blog
February 07 2013 - 5:00AM
Zacks
Pipeline operator Magellan
Midstream Partners, L.P. (MMP) announced mixed
fourth-quarter 2012 results, with good contributions from the
business segments.
The Tulsa, Oklahoma-based oil
distributor reported earnings per unit (EPU) of 69 cents (excluding
mark-to-market commodity-related pricing adjustments), breezing
past the Zacks Consensus Estimate of 65 cents and the prior-year
quarter profit of 51 cents.
Total revenues, at $503.2 million,
were up 3.3% year over year but fell short of the Zacks Consensus
Estimate of $520.0 million.
Stock Split
In mid-October 2012, Magellan
Midstream completed the split of its limited partner units in the
ratio 2:1. The quarterly results reflect the effects of the stock
split.
Quarterly
Distribution
Recently, Magellan raised its
fourth-quarter 2012 cash distribution by 3% sequentially and 23%
year over year to 50 cents per unit ($2.00 per unit annualized).
Magellan’s new distribution is payable on Feb 14 to unitholders of
record as on Feb 6, 2013.
Segmental
Performance
Petroleum Products
Pipeline System: In the Petroleum Products Pipeline
System, quarterly operating profits (before affiliate G&A and
D&A expenses) were a record $193.4 million, up 28.8% year over
year. The increase in transportation volumes by 10% and the hike in
average tariff rate mainly contributed to the revenue growth.
Petroleum
Terminals: In the Petroleum Terminals segment,
operating margin was at an all time high of $50.1 million, up 11.3%
year over year on strong contributions from the recently acquired
tankage at the partnership’s storage facilities and also from
partnership’s higher rate at its marine terminals.
Ammonia Pipeline
System: The Ammonia Pipeline System’s operating
margin surged 30.3% year over year to $4.3 million, due to
transportation of higher volumes at higher rates.
Guidance
Raised
Management expects to generate
distributable cash flows of approximately $570 million for the full
year 2013 and is targeting an annual distribution growth of 10%.
The partnership plans to achieve an annual payout growth of at
least 10% in 2014. Magellan guided toward first quarter and
full-year 2013 earnings per unit of 45 cents and $2.20,
respectively.
The partnership plans to spend
approximately $700 million on growth projects in 2013, with
expenditures of an additional $290 million in 2014 to complete the
projects. Moreover, the partnership is looking to put in more than
$500 million in potential growth projects.
Rating
The company currently carries a
Zacks Rank #2 (Buy), implying that it is expected to outperform the
broader U.S. equity market over the next one to three months.
We believe that the attractive
portfolio of energy infrastructure assets, which the company owns
will be able to generate stable and recurring fee- and tariff-based
revenues. The assets include the longest U.S. refined petroleum
products pipeline system, access to more than 40% of refining
capacity in the continental U.S. along with imports, and 85
petroleum terminals with more than 80 million barrels of
storage.
We also remain upbeat regarding
Magellan’s acquisition of petroleum storage and pipelines from a
subsidiary of BP plc (BP). Following the
acquisition, Magellan owns one of the largest crude oil storages in
the Cushing crude oil region and will continue to exploit
opportunities necessary for improving the utilization of these
assets.
Meanwhile, two firms in the energy sector that are expected to
significantly outperform the equity markets in the next one to
three months are Cabot Oil & Gas Corporation
(COG) and CVR Energy Inc. (CVI) . Both these
stocks carry a Zacks Rank #1 (Strong Buy).
BP PLC (BP): Free Stock Analysis Report
CABOT OIL & GAS (COG): Free Stock Analysis Report
CVR ENERGY INC (CVI): Free Stock Analysis Report
MAGELLAN MDSTRM (MMP): Free Stock Analysis Report
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