Pipeline operator Magellan Midstream Partners L.P. MMP announced strong second-quarter 2015 earnings. Improved profits from the Houston crude oil pipeline along with higher storage rates realized from the marine terminals led to the outperformance. The positives were negated partly by lower shipment rates of the refined products.
The Tulsa, OK-based oil distributor reported earnings per unit (EPU) – excluding mark-to-market commodity-related pricing adjustments – of 82 cents, beating the Zacks Consensus Estimate of 74 cents and improving from the year-ago adjusted figure of 70 cents.
However, total revenues of $487.5 million decreased 1.8% year over year and also underperformed the Zacks Consensus Estimate of $507 million.
Distributable Cash Flow
Magellan Midstream reported distributable cash flow of $222.8 million, up 14% from the year-ago quarter.
Cash Distribution
Last month, Magellan Midstream declared that it has got its board of director’s approval to increase the second-quarter cash distribution. The new payout of 74 cents per unit represents a sequential hike of 3% and a year-over-year improvement of 16%. The distribution is payable on Aug 14 to unitholders of record as of Aug 7.
Segmental Performance
Refined Products: In this segment, quarterly operating profits (before affiliate G&A and D&A expenses) were recorded at $148.2 million, down 9% from the year-ago quarter. Lower average rate realized from shipment of refined products owing to short haul transportation affected the results. Things were made worse by rising operating expenses.
Crude Oil: The unit’s operating margin was approximately $106.9 million, up 45.4% from the prior-year quarter. Significant profit from the Houston crude oil pipeline, which stretches over roughly 40 miles, aided the results.
Marine Storage: This segment’s operating margin increased about 10.1% year over year to $30.2 million. Higher rates realized from storage work at the marine terminals favored the results.
Guidance
Magellan Midstream now projects full-year 2015 distributable cash flows of $880 million, reflecting a $10 million increase from the previous guidance. Moreover, the partnership reaffirmed its target of annual distribution growth by 15% in 2015 and at least 10% in 2016. Magellan Midstream guided third-quarter earnings per unit of 68 cents and increased the 2015 earnings projection to $3.15 per unit.
Zacks Rank
Magellan Midstream currently carries a Zacks Rank #3 (Hold).
Some better-ranked players in the energy sector are Valero Energy Partners LP VLP, Seadrill Partners LLC SDLP and Alon USA Energy Inc. ALJ. Each of these stocks sports a Zacks Rank #1 (Strong Buy).
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