Fee-based activities contribute to nearly 88% of Magellan Midstream Partners’ (MMP) operating income. As a result, the company has cash flow stability. Transportation accounts for ~60% of Magellan Midstream Partners’ operating income. Terminal delivery fees, fee-based ancillary services, and contract storage account for ~28% of the company’s operating income.
As the above graph shows, commodity-related activities only contribute 12% to Magellan Midstream Partners’ operating income. Magellan Midstream Partners expects future fee-based and low-risk activities to account for 85% or more of its operating income.
Magellan Midstream Partners’ pipeline and logistics business generates fee-based revenues. Also, its FERC-regulated operations provide cash flow stability. A stable cash flow differentiates Magellan Midstream Partners from most of the other MLPs. Stable cash flows contributed to the stock’s outperformance in the past few years.
For a comparative analysis of Magellan Midstream with its peers, read In-Depth Analysis of the Top 4 MLPs: EPD, ETP, WPZ, and MMP.
In the next part, we’ll analyze Magellan Midstream Partners’ distributable cash flows and capital expenditures over the years.