Magellan Midstream Partners L.P. Reports Operating Results (10-Q)

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Nov 01, 2012
Magellan Midstream Partners L.P. (MMP, Financial) filed Quarterly Report for the period ended 2012-09-30.

Magellan Midstream Partners, L.p. has a market cap of $9.71 billion; its shares were traded at around $43.01 with a P/E ratio of 22.8 and P/S ratio of 5.6. The dividend yield of Magellan Midstream Partners, L.p. stocks is 4.4%. Magellan Midstream Partners, L.p. had an annual average earning growth of 3.6% over the past 10 years.

Highlight of Business Operations:

Product sales revenues primarily resulted from our petroleum products blending activities, product marketing and linefill management associated with our Houston-to-El Paso pipeline section, terminal product gains and transmix fractionation. We utilize New York Mercantile Exchange (“NYMEX”) contracts to hedge against changes in the price of petroleum products we expect to sell in the future. The period change in the mark-to-market value of these contracts that are not designated as hedges for accounting purposes, the effective portion of the change in value of matured NYMEX contracts that qualified for hedge accounting treatment and any ineffectiveness of NYMEX contracts that qualify for hedge accounting treatment are also included in product sales revenues. We use butane swap agreements to hedge against changes in the price of butane we expect to purchase in future periods. The period change in the mark-to-market value of these swap agreements, which were not designated as hedges, are included as adjustments to product purchases. Product margin decreased $59.3 million primarily due to unrealized losses on NYMEX contracts in the current quarter (compared to unrealized gains in third quarter 2011) due to increasing product prices in the current period. Excluding mark-to-market adjustments on these open NYMEX contracts, we earned slightly more product margin in third quarter 2012 as higher blending profits offset lower results from our fractionation and linefill management activities. See Other Items—Commodity Derivative Agreements—Product Sales below for more information about our NYMEX contracts.

The following tables provide a summary of the mark-to-market gains and losses associated with NYMEX contracts and the accounting periods in which the gains and losses impacted product sales revenues in our consolidated statements of income for the three and nine months ended September 30, 2011 and 2012 (in millions):

Related Party Transactions. We own a 50% interest in Osage and receive a management fee for the operation of its crude oil pipeline. We received management fees from this company of $0.2 million for each of the three months ended September 30, 2011 and 2012, and $0.6 million for each of the nine months ended September 30, 2011 and 2012. We reported these fees as affiliate management fee revenue on our consolidated statements of income.

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