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Magellan Midstream Partners 1st Quarter May 9, 2013

Posted by shaferfinancial in Finance, Uncategorized.
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MMP continues to perform well in the 1st quarter of 2013. Generally, 1st quarters aren’t great quarters for the pipelines companies as demand is at its lowest for both gasoline and diesel. However, net income went to $113.5M from $93.5M for the 1st quarter of 2012 a 21% increase. Much of this increase is due to hedging activity. Bottom line is that operating margin was up $9.6M from the year before. There was higher shipping volumes and higher tariff income from the year before. The transportations and terminal revenues were up $7.7M from the year before. Refined product shipment went up 13%. Note, the LongHorn run has just come on line after the 1st quarter so it has no effect on these numbers. Butane blending revenues were down year on year. Expenses were up this quarter and reflects normal maintenance due, but is not a permanent increase, but a periodic expense.

They have increased Distributable Cash Flow guidance by $10M to $580M a record for the company. There are two growth components that should be realized. The Long Horn line reversal has come on board and should be at capacity by the 3rd quarter. And new 800 miles of pipeline has been acquired pending regulatory approval. MMP plans to spend $900M in projects for 2013. There is also consideration of increasing the Long Horn capacity from 225,000 barrels a day to 275,000 barrels.

They have increased their debt load in order to lock in favorable terms for the planned projects.

They state they are still projecting a 10% increase in dividends for both 2013 and 2014. Reading between the lines, they are being conservative with these numbers.

The value of the stock continues to increase. Year to date it is up 22%. It is up 50% in the last year. Dividends are up to $.5075 per share for the 1st quarter, up 25% over the last year.

The valuation is a little rich for me now, so I won’t be adding to my position. However, my yield to cost is now approaching 16%, so I am very satisfied with this investment.

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