Magellan Midstream: Analyzing How Its Segments Performed
Refined Products segment
Magellan Midstream Partners’ (MMP) Refined Products segment, which primarily transports gasoline and diesel, earned 61% of its EBITDA (earnings before interest, tax, depreciation, and amortization) for 2Q17. The segment’s 2Q17 EBITDA rose 20% compared to 2Q16 due to contributions from the Rock pipeline, which became operational in July 2016, higher distillate demand, and higher tariffs.
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Magellan Midstream Partners’ Refined Products segment is comprised of the longest refined products pipeline system with 9,700 miles, 53 terminals, and 42 MMbbls (million barrels) of storage. It also has 26 independent terminals that aren’t connected to the pipeline system and a 1,100-mile ammonia pipeline system. The transportation revenue per barrel of refined products shipped for 2Q17 was $1.48.
Crude Oil segment
Magellan Midstream’s Crude Oil segment contributed 31% towards the company’s total EBITDA for 2Q17. The segment’s 2Q17 EBITDA rose 8% compared to 2Q16, partly due to its condensate splitter in Corpus Christi, Texas, that started operations in June 2017.
The segment owns ~2,200 miles of crude oil pipelines and storage facilities with an aggregate storage capacity of ~27 MMbbls. The transportation revenue per barrel of crude oil shipped for 2Q17 was $1.38.
Marine Storage segment
Magellan Midstream’s Marine Storage segment contributed 8% towards the company’s total 2Q17 EBITDA. The segment’s 2Q17 EBITDA rose 11% compared to 2Q16, due to higher storage rates, increased storage utilization, and increased customer activity. The above chart shows Magellan Midstream Partners’ segment-wise EBITDA in the past three years.
Notably, Magellan Midstream derives profits from blending activities largely in the first and fourth quarters each year. The summer months drive the gasoline demand, which increases the transportation volumes and revenues on its pipeline systems.
Magellan Midstream’s largely fee-based operations contribute towards its cash flow stability. We’ll discuss this in the next part.