Fourth quarter income dropped for Magellan Midstream

Net income slipped in Magellan Midstream Partners, L.P.’s fourth quarter according to a recent report by the Tulsa-based company.

Magellan reported fourth quarter 2019 net income was $286.4 million compared to $314.1 million a year earlier.

“The decrease in fourth quarter 2019 net income was driven by mark-to-market adjustments for hedge positions related to the partnership’s commodity-related activities,” stated the company in its report.

The company reported its distributable cash flow was a record $357.8 million for the fourth quarter of 2019, 18% more than the $302.4 million reported in the fourth quarter of 2018.

“Magellan closed out the year with another strong quarter, generating solid financial results from each of our segments and solidifying 2019 as a record year for our company,” said Michael Mears, chief executive officer. “Our conservative business model has consistently proven successful as we focus on providing essential services to move the fuel that keeps America moving while ensuring attractive returns on capital deployed.”

Refined products operating margin was $264.9 million, a decrease of $84.4 million primarily related to the impact of MTM adjustments for exchange-traded futures contracts used to hedge the partnership’s commodity-related activities. Excluding these adjustments, financial results from this segment’s fee-based activities increased between periods and represented a quarterly record.

Transportation and terminals revenue increased due to incremental refined products transportation volume and a higher average transportation rate. Shipments grew 3% mainly as a result of the newly-constructed East Houston-to-Hearne pipeline segment that became operational in late 2019, and the average rate in the current period increased slightly as the 2019 mid-year tariff adjustment of 4.3% was partially offset by more short-haul movements that ship at a lower rate.

Operating expenses decreased $10.7 million primarily due to lower spending for asset integrity as a result of maintenance work timing and less asset retirements in the current period, partially offset by less favorable product overages (which reduce operating expenses).

Source: Magellan press release