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Magellan Midstream Partners February 5, 2010

Posted by shaferfinancial in Finance.
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As regular readers know, I regularly post about the stocks I own.  One of them, MMP, reported  a couple of days ago.

This company is an oil pipeline and storage company.  The last quarter of 2009 was their best quarter ever in terms of profitability.  This despite, the country still being mired in a recession.  They had added a new pipeline earlier in the year by acquisition and it is only ramped up to 15% or potential in the last quarter.  So there is an expectation of getting that up to 100% by the end of 2010.  There are also some other development projects on board, that will go forward.  Since this companies profits depend upon total volume of product moved, not price of product, the most likely prediction is that volumes will increase during the year.  However, the company has taken a more conservative position looking forward and assumed volumes will remain the same.  40% of the transported oil products is under the tariffs payment system.  On July 1st, there was an increase of over 7% on government dictated price of tariffs.    Even with this assumption of no improvement in volumes transported,  MMPs management stated they will improve distributable cash 5-10% and likely increase distributions 4-7% in 2010.

The price has dropped over the last few days to the $40 range giving it a current yield of 7%.  I think this represents another buying opportunity for this stock and I will be adding on a few shares myself.

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Comments»

1. Joel Janco - February 5, 2010

With respect to the conference call on the Longhorn pipeline that you refer to as the “new acquisition” they said they hoped to get it up to 25% capacity this year not the 100% you mention.

shaferfinancial - February 5, 2010

I will take your word for it. Sorry about the mistake.


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