Megallan Midstream reports weaker net income for fourth quarter, year over year

TULSA — Market-to-market commodity-related adjustments pushed Magellan Midstream Partners’ net income lower in the final quarter of 2019, the company reported on Thursday.

Before markets opened, the company reported it earned a fourth-quarter net income of $286.4 million, or $1.25 per unit, on total revenues of about $740.7 million.

In the fourth quarter of 2018, it had earned a net income of $314.1 million, or $1.38 per unit, on total revenues of about $865.7 million.

Company officials said Magellan’s distributable cash flow for the fourth quarter of 2019 was a record $357.8 million, compared to $302.4 million the same period the previous year.

As for the full year, Magellan reported a net income of about $1.02 billion, or $4.46 per unit, on total revenues of about $2.73 billion. In 2018, Magellan reported a net income of about $1.34 billion, or $5.84 per unit, on total revenues of about $2.83 billion.

However, after accounting for Magellan’s sale of part of its BridgeTex assets, the company’s 2018 net income was $980.1 million.

While commodity pricing adjustments hurt the company’s bottom line somewhat in the fourth quarter of 2019, officials said that partially was offset by lower operating expenses, higher butane blending margins as well as higher demand for the partnership's crude oil services.

"Magellan closed out the year with another strong quarter, generating solid financial results from each of our segments and solidifying 2019 as a record year for our company," Michael Mears, Magellan’s CEO, stated as part of the earnings release. "Our conservative business model has consistently proven successful as we focus on providing essential services to move the fuel that keeps America moving while ensuring attractive returns on capital deployed.

“Magellan's financial strength and discipline will remain key to producing long-term value, not only in today's competitive environment but also for years to come."

Construction continues

Magellan stated Thursday work on several expansion projects underway in 2019 are continuing into this year, with expectations the company will spend another $400 million (in addition to $990 million spent in 2019) to close them out.

Projects include an addition of 750,000 barrels of storage at a marine terminal Magellan jointly owns with another company at Seabrook, Texas, with an anticipated in-service date of early 2021.

The company’s work to expand its west Texas refined products pipeline expansion and to build a new Midland terminal also continues, as does an expansion project for its Saddlehorn pipeline.

Management expects Magellan’s board will increase annual cash distributions to unit holders by 3% for 2020, based upon predictions the company will generate $1.2 billion in distributable cash flow this year.

Officials were more hesitant to make predictions beyond that, however.

"Managing our business in a prudent manner for the long-term benefit of our investors remains our top priority," Mears stated. "While our business has continued to perform very well and demand for our services remains strong, recent outperformance has been driven in part by favorable conditions for our crude oil business that we do not think are likely to persist.

“As a result, we are taking a conservative approach to projected future increases in our quarterly cash distributions."