Magellan Midstream Reports Higher 3Q Earnings

Magellan Midstream Partners LP reports higher quarterly operating profit, net income and distributable cash flow compared to the same period last year.
Third-quarter operating profit of $87.4 million is 22 percent above the $71.5 million reported in the third quarter 2007. Net income grew to $73.3 million during third quarter 2008, a 23 percent increase over the $59.4 million reported at the same time in 2007.
The partnership estimates that its third-quarter 2008 operating profit was negatively impacted by approximately $5 million as a result of operational disruptions caused by Hurricane Ike during Sept. 2008.
“We faced several challenges during the quarter, but our positive results show that our commodity-related activities continued to serve as a natural hedge against the negative impact of high refined products prices on demand for transportation services,” said Don Wellendorf, chief executive. “The large majority of our operating margin continues to come from historically stable fee-based services, and we have an extremely strong balance sheet to fund growth opportunities.”
An analysis of variances by segment comparing third quarter 2008 to third quarter 2007 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 $94.1 million, an increase of $10.6 million. Despite an overall 5 percent decrease in volumes, transportation revenues increased between periods primarily due to higher average rates per barrel shipped resulting in part from mid-year 2008 tariff escalations. Transportation volumes decreased between periods primarily due to shipment disruptions attributable to Hurricane Ike during third quarter 2008. Excluding the estimated impact of Hurricane Ike, total petroleum products pipeline volumes would have been similar to third quarter 2007 levels as higher shipments of liquefied petroleum gases (“LPGs”) overcame 1 percent lower refined products shipments. The 2008 period also benefited from higher fees earned for leased storage and ethanol and additive blending services.

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