MMP - Earnings call transcript Q4 2017 | Magellan Midstream Partners, L.P.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day everyone and welcome to the Magellan Midstream Partners Fourth Quarter 2017 Earnings Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mike Mears, President and Chief Executive Officer. Please go ahead.

Michael Mears

Good afternoon and thank you for joining us today to discuss Magellan’s fourth quarter financial results and our outlook for 2018.

I’ll as that defined started, making will get statements forward-looking by we remind management you be Before the SEC. based impact of are factors statements on judgments current Such regarding that could the Magellan. performance future our the

You opinions in SEC filings discussed other our future Magellan's the performance. should your with own risk review forming and information factors in about the

solidifying volumes, We’re XXXX cash records to quarterly financial results pleased to delivering year distributable record report another and our products as XXXX crude transportation for with flow volumes and strong operating and transportation refined Magellan.

while our expansion fourth the by Milford, to In available a addition, for the more call before cash which $XXX to our times to we CFO, than resulted in hand cash results access be our invest Magellan’s X.XX guidance call increased in discuss your Then X% our financial million and distributions project for in review of more detail. Year Magellan’s to quarter the I’ll year, the business. questions. healthy opening to average now New back generating Aaron over I’ll

Aaron Milford

would fourth per XXXX. million, higher $X.XX these measure. Mike. for reported in financial margin million like to exhibits morning, metrics, was the quarter reported we $XXX.X that evaluating $X.XX distributable performance. or release operating remind net on basis, this of nearest We that Earlier we'll diluted these or metrics the to I $XXX.X GAAP of unit useful the be certain making their reconcile fourth including quarter a you, for than income per Thank which unit and flow. We’ve included diluted cash non-GAAP metrics audience are references believe to to our investors our earnings

of diluted in provided mark-to-market the $X.XX year. exceeded of earnings back guidance our commodity adjusted impact the unit November in last of Excluding of $X.XX per quarter, current activity

reported in of Distributable net the we flow of year, the the for million XXXX. of XXXX $XXX.X higher reported quarter of XXXX. $XX and the XXXX cash $XXX.X was to in $XXX.X million fourth $XXX.X million income in fourth million million quarter For compared the

billion than which with we For higher of back $XX.X cash Magellan. $X.XX the represent and quarterly flow XXXX million provided distributable for annual Both our the XXXX results. in results reported distributable in year, our was November cash annual line and of guidance record performance flow

and As ended able to note, provided. expected, Hurricane on the financial and have we strong overcome the effect we we a or meet year the Harvey exceed of guidance were

by million quarter, negatively diluted cash distributable For flow $XX Hurricane and about the Harvey approximately impacted million. $X fourth income net by

net by was and year, the income impacted approximately was For negatively approximately $XX by flow impacted million. million distributable $XX negatively cash

the our this after of quarter marine spending. event of bore the increase discussed third we through segment brunt last and loss As year,

from we lingering any now to we effects don’t forward, materially take As insurance quarter. we discussion expect account in segment look our once our margin the into performance I expectations move operating of for will for XXXX Harvey recoveries.

aggregate XXXX. Our about by driven West in of XXXX. to XXXX volumes higher and of by Transportation quarter the increases equates fourth in the fourth with gasoline volumes compared demand by distilled distil the Texas which volume were increased due internals activity to as primarily being was Texas segment X% up XXXX which $XXX.X particularly in our refined increased In operating of XX%, increase the in volume were generated were $XX.X total, our million an XX% million notable. margin of quarter fourth product up $XX in well. almost to These revenues drilling million an quarter quarter were

tariff impact to and a the home mostly result accruals of quarter in a compared of million the tariffs $XX increase business of decreased personnel by to favorable South the fourth XXXX. which quarter in were period partly the which outages higher decreased XXXX of XXXX due as Product our associated fourth of the lower XXXX expenses fourth our XXXX million approximately to in a X% maintenance with shorter offset environmental Texas hedging decreased quarter to cost. $XX margin quarter in result average other spending the fourth overall Operating received offset unrealized barrel compared losses per rate lower by average and July quarter of as Our compared to higher of program.

takes costs. gallon into approximately butane margins gains losses margins of and in the product which normalized per Our quarter due gallon blending per sell cash of $X.XX the in $X.XX to quarter physically was fourth primarily is and fourth for we XXXX. year’s These below per account same unrealized were compared margin also higher when last quarter to

For the to contributed segment total for the margin products year, the almost operating company. refined XX%

compared crude quarterly increased quarter this for record million by $XX transportation fourth Moving - $XXX.X a of another volumes. to from million quarter was XXXX and This fourth as margin fourth of in XXXX. compared now contributions generated the to Transportation to operated our increase and represents a segment. revenues $XX oil segment, the result the segment XXXX record the quarter million the primarily oil internals of the crude

up day were the distributions Houston XXX,XXX in in our During system quarter. volumes volumes and Longhorn per quarter, substantially averaged the barrels the

between spending as at the XXXX to related barrel quarter pipeline the ventures a crude result $X.X million compared Longhorn increased Fourth higher by as from oil cost. higher million which personnel quarter to This primarily per quarter compared to well about our volumes operating the day Houston related joint of of operating during XXXX, Higher and resulted reasonably increased result rate result BridgeTex to per average of our barrels quarter XXXX. and increase earnings the compared was of of of BridgeTex market substantially to higher was West Texas XXXX. quarter quarter. Equity from volumes the additional XXXX. Saddlehorn volumes during system the XXXX being barrels joint same expenses response the almost ventures. in declined to fourth which barrels, the XXX,XXX related in than fourth rate $XX.X with Eaglebine a earnings the higher lower shipments associated XXX,XXX Houston maintenance splitter, a period differentials move average expenses higher shipped activated As higher and day our volumes spot distribution fourth origin wider condensate in as quarterly for

newly to day of in a increased XXXX. a per For volumes. fourth as barrels average splitter as well volumes day in the condensate compared XXX,XXX day barrels committed year, a the BridgeTex’s step shipped barrels per XXX,XXX barrels almost approximately result XXXX volume Saddlehorn XX,XXX were as up during per of quarter about established under

XXXX. value For margin per was the barrels for segment XXXX negative expositions of compared in hedge margin $X.X crude oil This day just transportation well from charges. as the expositions of or to lower than nine quarter the over primarily year averaged the resulted Saddlehorn market XX,XXX used day million to increased $X.X product fourth XX,XXX changes in -- around per value negative XXXX. barrels our million Product in over as

$X XXXX discussion Finishing fourth company crude our third the segment margin. performance, For fourth of the to compared total operating our oil the contributed margin about $X.X quarter XXXX. our marine million versus to of impacts segment of quarter was my operating segment up a in quarter and as higher of were primarily lower revenues the a from XXXX in terminals Harvey. result quarter also accruals. $X.X Harvey related Hurricane Transportation fourth and Expenses primarily were Hurricane response environmental our lower million the million related year

margin. company contributed our marine X% segment the operating total about For to year,

quarter Now quarter lower as projects. by current into XXXX other fourth million assets expenses. a balance as headcount and debt the of the and compared of fourth higher increased we fund well amortization to $X.X moving of capitalized was the to growth net by quarter the in expense compared expenses in variances the continue due long-term to Depreciation interest expense XXXX, to to higher up and primarily of from being our $X.X XXXX fourth quarter as Net our income G&A as interest bonus various to resulting quarter XXXX $X.X for million higher average million incentive higher result service. placed

Our slightly Other the of weighted XXXX. current fourth quarter of X.X% average quarter fourth interest from were the the XXXX. fell than to in rate higher expenses X.X% in

balance our commercial under Moving onto sheet liquidity our debt and outstanding outstanding at position, program. balance billion $X.X year borrowings regarding was our a paper discussion no with XXXX, end

also $XXX of a balance had million our a fourth We the of result of cash at in XXst bond XXXX. as December quarter offering

approximately December Our to X.X times. ratio EBITDA net was XXXX XX, debt at

credit have borrowings any We under facility end We program. maintain this year at our billion do facility $X continue paper which commercial supports to outstanding XXXX. also

since any we putting units a $XXX after maintain place. equity to in issued not any program not units continue quarter also do the and issue during program We the and market

to limit. a As plan past, our times to use the manage to we ratio tool ATM stated leverage the four in approach is our we

guidance target continue to fund our time, the our our been we to but we to estimates leverage the and case to our our closer any we believe do I projects projects economic currently XXXX. has throughout Mike to equity, can to over expect forward our ratio rise underway. turn growth we without growth state will current As times needing as discuss back X call of fund growth some our for projects current issue given now

Michael Mears

Starting products remain consistent products increase between plan the billion Thanks, guidance how light previous products with flat guidance Aaron. better a to XXXX. year to incremental for resulting especially our base coverage in of see refining about Earlier feel project XXXX $X.XX expect today, like we distribution we we of El made X% our segment, better in guidance, you volume years of announced XXXX. we the X.X by XXXX with DCF in our DCF for new a times our key shipments, record Paso, Adding Texas understand again you XXXX, the we by refined assets in about the to generally help demand to total walk expect out. in connection X% create Year use the refined and you give to on year. we playing New we increase through volumes for To relatively our assumption projections you City in around we for to is

key recharge. pipeline average The component products other for our just refined the tariffs

of increase in indexation the in July plus markets system is follows expect of of will we our an in know, Even on price the X.XX%. for though XXXX. product almost X, by based you the X.X% XXXX increase index is result for tariffs FERC change tariff all in FERC methodology the those increase producer which refined change on indexation, current to markets As is to The preliminary PPI index. roughly the that X.X% XX% products subject our index refined

we intend on our please that per of pipeline overall barrel you statistics. haven’t For to flat the movements movement in mid areas rate to that rate mind expected operating point-to-point move remain though, be the majority almost is which rate. Paso to tariff anticipated in in lower see rates keep modeling projected incremental be haul our our purposes, average impact XXXX, at Texas tariffs City Even on in X.X% El is the period since a between shorter throughput the

key to segment it the assumption price product as other refined blending results impact to especially is is The environment, butane significantly commodity activities.

XXXX December guidance. also late the per in one-half important in pricing, price close our volumes. hedged XXXX margin for which the we in un-hedged year of gallon blending per forward of to based virtually blending to due Any is in XXXX and curve margins to for estimate volumes blending is We our the to locked butane be expected half historically in price to around the blend. $X.XX for blending forecast average point locked primarily margin second our would $X.XX spring recent were our we to and butane at years of margin expected curve with commodity average add approximately un-hedged XXXX, on this used margins Magellan. activities have gallon generally The compressed margins since expected and of purchase low our one-half to compared margin the all blending strength the forward volume hedges using about is current during our expect of actual We upside for which margin butane unfavorable volumes. sales in XXXX a The butane

XXX,XXX Moving levels to with oil we spot crude no shipments similar get at shipments. on XXXX day to Longhorn per pipeline be expect segment, our XXXX into to barrels our

We aware, the As remain new are to are active with upon potential expire shippers set Longhorn in discussions of our rates XXXX. you contracts regarding fall re-contracting. in

XXXX commitments Although, is lower pricing the Longhorn rates projections confident we for of so assume remain term fourth will discussed demand while XXXX. we’ve strong, re-contracting very quarter to for and space a as our be for competitive, now environment a upon in the Longhorn

our see into volume East related year from Houston recently capacity in pipeline BridgeTex facility that now distribution Houston to volume operational. to increased East our For is new and avenue system, we the takeaway expect the increased Houston are to coming primarily our Houston more in constructed how

approximately As tariff makes Longhorn at increase half rate. again Combining a about system these significantly wholly Houston system that barrel. lower on distribution transportation up distribution reminder, distribution average oil even volumes about tariff though volumes is crude than owned our $X.XX the oil driven the of higher lower Houston we expect by move pieces, the the we to XXXX volumes XX% in Houston the report, transportation the one per in crude

conducted a capacity that to XXXX. summative is slightly have secure two created above assume expansion be expect XXX,XXX to recently XXXX XXX,XXX we operational XXXX Considering level. new commitments barrels to to BridgeTex’s pipeline progress average volume barrels to which further the XXX,XXX around on BridgeTex day recently a barrels and with Moving open in to XXX,XX know per as commitments, seasons barrels in day in projections day newly early space. BridgeTex, expanded from you volumes these utilize of per our

a we do favorable Midland to move the day results movement. market barrels crude from barrel the XX% support including comparison, shipments XX not latter differential a the current The about XXXX Houston differentials in XXX,XXX with spot For a the of spot and part system as closer during benefitted year. between

ramp to So due assumes from Longhorn again XXXX pipeline once $XX spot on turn utilized if Contributions for to see our Saddlehorn during our in is guidance the we volumes. space spot upside the of for BridgeTex differentials available expected million committed guidance volumes to and in or BridgeTex barrels XXXX, approximately no are these the Longhorn. both favorable increase and

again committed a XXXX XXXX, and barrels in recall may step projections. to to barrels XX,XXX you As our September into day in modeled increased is up volumes temporarily day a XX,XXX which ’XX

amount forecast during movements time. built to we moved lower not into rates, XXXX small incentive those at Saddlehorn of recently this continued Although, condensate filed under have our

XXXX be in line year We for asset. be contracted split expect first operating condensate our from to with benefit full throughput will this which a levels

to or the initial a pay As long-term agreement seven a reminder, split multiple the is that is a expected times supported by during take term. generate contract

spent estimate again we’ve during XXXX reasonable capital, XXXX. maintenance a $XX Regarding which million in approximately is

to we of of spends you and expense, capital million we maintenance spend for and considering a during a item Although expect know line basis and entire capital company see On the time our each for the on considerable component Magellan integrity XXXX. the almost year our to work $XXX integrity assets. effort integrity ensure combined program,

annual the XXXX. to projections the key approximately summarizes goals, build resulting healthy our of of into million of $XXX release. for approximately that with you’ve in state view times of sure in a our still provided excess as year. X% billion So, and X.XX X.X that in assumptions DCF expect cash distribution also am well noticed morning’s generate XXXX this we our of we’ve level Reaffirming XXXX growth I coverage XXXX flow for

pipeline way we to our in few for as have the to a intent the detail result growth $XXX coverage, with of a X.X our strong growth Based in those quarter $XXX currently especially to projects We for for markets kicked and million were coverage now the imply to we of coverage large last to remains future. Hearne, additional tends the on periods, from year East Magellan during our pipeline capital, hear Most crude years, Wink that performance We from notably for annual spend reinvest during of projects progress. XXXX XXXX XXXX. each a annual over from the in construction and our manage the growth Houston Valero an XXXX. space projects in refined investors growth continued to that range MLP $XXX X% expect important distribution manage to latter $XXX business. pipeline joint we projects would in considering times a the cash X% construct scale regards product spoke million the to which distribution last the on expectation marine with complete X.X Texas. expect about X% consistent in distribution to in million newer in in than DCF for Crane, $XXX spent To to XXXX. XXXX projects growth the organic and foreseeable the Pasadena as our under ratio off Based to excess business the long-term Texas and energy our range internal half construction, them venture with terminal million well of we XXXX currently XXXX times million to forecast, with With to maintain both X% of more to DCF range on and maintains expansion

make which in the of X still up We with of underway be the and XXXX. of construction million are million the make remaining is XXXX future to the operational storage in continue to these progress the stages early early of spending. barrels expected Specific on early projected first to storage to construction barrels and online bulk projects come in X Pasadena,

and the pipes the mid and both Wink Hearne we expected procurement, route permitting, in process to For work of XXXX. pipelines operational are pipe in be

of $XX for a jet include additional new George our pipeline by crude blending significantly in East Houston. Intercontinental increased Airport number of recently service total of into a East a capacity of out We Houston country. distribution and also which Houston Bush system from to Houston, our replaced butane fuel increase our about We oil the enhancements which around XX terminals million reactivation Avenue life will estimates spending projects our inch of Holland to the number opportunities smaller new

for phase venture Seabrook are crude our oil Logistics system with completed joint the We also our X.X of in to be line storage the nearing finish barrels Houston in connectivity of XXXX. distribution second mid million to

XXXX. significant continuing by progress make expected capacity We fully Park to on are new terminal to also is marine of addition late Galena be operational which dock our at

As more at you new lots And multiple and growth. most strategic make progress projects to times returns completing can recently projects commissioned see, of expansion and we opportunities the in in range. future for these eight on attractive importantly, nature are continue

evaluate well in venture opportunities future to other of additional excess expansion million currently significant Ford consideration investments in open condensate other still continue pipeline to $XXX of an products infrastructure provide in -- our Christi oil joint month currently oil shippers from opportunities. in March progress crude to to opportunities in Pasadena and each finalize for of Corpus another Eagle we under have Among expressed potential significant these in business just Basins Corpus the totaling additional also build many time Permian the possibilities We delivered pipeline with West extended X, out include expansion shippers times, in season fees further and projects refined We in lines. open and and our the interest Houston. Potential to Christi potential proposed crude commitment. we Texas the

Corpus the and permits an additional Christi. services Corpus incremental dark capabilities to stock land including condensate a XX,XXX We conjunction pipeline have expansion and at Christi Seabrook proposed in stories Logistics barrel at Suezmax and day significant for incremental significant. offer a with

acquisitions, projects. of acquisition considerations not disciplined approach Magellan and our but potential always remain to the space evaluating key and when maintain the we construction its in active only opportunities intends also profile available price are opportunities. analyzing On topic risk as on

committed counterparty. remarks, our Our for asset continues from prepared activities based to and questions. with now can operator to portfolio opportunities credit long-term volumes we worthy pursue so it That our be open fee expand concludes preference up to

Operator

Thank Instructions] our Barclays. We’ll from you. question first Chen [Operator Theresa from

Theresa Chen

to on related particularly up follow your Longhorn. comments XXXX guidance to DCF wanted I Mike, to related of some

for competition a end. we quarter participants average lower what of $X.XX give wide extensive could Are about new to are wondering, and or versus there, to on actually range tariff out some be. tariff Longhorn I we heard that expect so. delta as expecting as really $X.XX market be comments expecting or something sense leap lowest you from post if as as at the I also you believe should mentioned today what projects tariff We from like different You an was just us a today? where of you

Michael Mears

for is the the I been those Longhorn. provide we thanks would question. Well, last with point and a re-contracting this and it competitive multiple exposure the to Unfortunately, prepare parties discussing much because to very range of in at the few not we we’re we’re the negotiations with give market. regards actively mean primarily how it’s have midst in right days a

rates for unfortunately expected into -- thorough that range narrow not XXXX of you I lower point. so, to you to further in that believe our guidance this it And only and in re-contracting, any but at I specifics we need unfortunately an XXXX we’re build those we but point. on range this can’t down I the range be And, have more that on going XXXX. at we also giving

Theresa Chen

Okay. Understand.

Is talk delta terms coming is to of differentials to Or out and guidance projects X% us and would In lower multiples growth. online? butane drivers on you blending the it driven to of it higher up ends? between very related to the return start more be Can commodity cetera? further what et about X% the

Michael Mears

I marginal It’s XXXX, butane if XXXX, in there’s XXXX and for commodity expecting is there’s two look as related at low our at in -- blending margins, and very some One big improvement low historical but mentioned, range. you drive historically we're commodity that out there, still rate. that we’re components margins activities

said The kind as -- what low are that. I curve historically which suggest, tied end with to current associated of upside our the lower of is range margin. certainly there’s so And pretty

and our forecast, in component in pipeline on is XXXX. spot the our The oil and volumes XXXX other out we've assumed crude even that

any guidance pipes. the our upside crude don't there’s have movements there. So significant our we spot end lower of that at on assumes But

Theresa Chen

Seabrook mind are As additional color And And the seeing Pasadena you future providing Logistics? discussions? where now, lastly are some and on of how stand shapeup? you phases those you would just demand

Michael Mears

in Well, with active with a expansion Pasadena. of discussions Pasadena, further already to parties of number we’re for regards

as storage X The very are of Just another build refined expectations can increased additional there strong. a we barrels X exports docks. reminder, and for million product

interest capabilities of in Pasadena. So the there's

those are discussions has we'll but near next have our and Seabrook, at On on project storage, future. Seabrook, on underway. hope rapidly Progress at would include expansion that So of phase more additional moving that would definitive the dock. pretty been I Suezmax also actually that something to announce in

Operator

And question JP our Jeremy Tonet Morgan. next we’ll take from with

Jeremy Tonet

maybe behind wondering was growth DCF just of that? it how guidance, happens years kind what or it provided of thoughts the the over feels base little growth guide off is when want -- any that see later-dated rate? it it seems you’re I the less, point. about of becomes could of to to guidance influence few more that also next to or and drive how you'll thinking want much the later that the start if what determines might that? I guidance to more, further have guess, had or like touch in outputs Variable, is And think on a capital other the kind wondering the growth about just at you how dated CapEx just the the it I’m past the to out XXXX, than And and coverage going kind bit you ratio be to like your

Michael Mears

XXXX been. important end we it's XXXX. line DCF but longer guidance below We at growth of it’s growth at XXXX, out in growth we’ve for XXXX what coming to precedent as projects through the regards below a mean, historical to XXXX, in significant and with for in time was GAAP that's and here, slightly the past. view lower I not we've somewhat And necessarily if trying done year, least look our you're to got than it going do XXXX in our in felt that Well a this the our has between forecast at typically and you set we're of guidance, right

long-term that felt indicator that we company prospects the the important growth is of to the that an not strong. signal that 'XX still so was And of it growth are

at felt we X.X coverage, to going talked think it frankly, of times about is give model coverage, trend than and is time. With was regards healthy a a that coverage. at -- it the business distribution towards also Quite think the times ‘XX for ‘XX flow. we guidance we've addition to in full being feel but X.X comfortable available So we self-funding to we to X.X prudent more this down coverage appropriate cash our a times maintain historically higher

than now So, be we primarily at if were debt. to right with that if at the are for are point projects And going funded feel significant target regards those the we X.X times we in and more the can healthy something and the that’s confident in over Clearly future. we that to least next to foreseeable we we reevaluate or constructing at whether is to with rather projects be self not X.X years. times our modified would and would that, that change at three point look this needs think to you have our issue to backlog, this But this expectation recent regards time equity. coverage the what coverage with be fund

Jeremy Tonet

year seems growing little more the new have like production with center And year-end is the in progresses into want still and to market, but bit pipe like 'XX. expand seems especially some and basin in as situation the also with considerably the just Longhorn go on rapidly that you competitive to could the and And a it tightness re-contracting. back capacity

thoughts your different goes So it into I on. these was it get versus doing you year later, re-contracting if weigh factors just the as wondering tighter how timing, on the will sooner

Michael Mears

company known we conservative for you’ve rather than of the and would if length contracting be us rather we exposed market. to are prefer committed Well, any time,

was would we exposed err that be in is to rather in this the rates any for so, re-contract time whatever And at secured spot differential commitments are tariffs. as at term doing than we’re case, to point

tend that And you of to fixed in short-term we I have in so grow to Longhorn be the production are on space couple the on spot even will have right, could has try Longhorn that we re-contracting and however, market preference, we it that’s next prefer profits. contracts and its the though longer I continues absolutely maximize mean projected as term tightness to be with space rates to our BridgeTex. significant years; been at to if that there say spot then

tighten that our does with and if from market even re-contracting So, benefit the Longhorn differentials we the will strategy. widen, then

Jeremy Tonet

And guess. just last one I

far forward. there takeaway a now, of is being as -- proposed right of Permian As lot moving them some projects

wondering you provide bubble. about guys in-house many from kind Just years a pipes room a now of anything takeaway with moving or few needs new macro much Permian? think How forward as views how pipes -- needed, for far capacity how three as can right the how you the over next much is are far it as

Michael Mears

support this Well, all, long-term of a commitment say in not economics. the I of we without out build mean to Permian it’s the first that environment would I that would think pipe safe

pipelines for certainly five -- long-term, So, look are more years plus you get forward. reality support Permian and bullish now from forecast the the two there that’s that if in at production would if than out is the short-term, you going

So, of can as with that’s an attractive if you kind long-term committed something return is now. that the view get

assets. far our growth long-term support future long-term built. being again But I assets that into would the the if going pipes risk of you to everyone strong should production the very Permian are time. view, like not but it's in out to some the for is -- Basin that that exposed be forecast looks is and long-term proposed go the And say the the new Permian, existing still You’re

Operator

Mirek And with next Zak to we’ll go Citigroup.

Mirek Zak

plus $XXX your you’ve further makeup to opportunities, out at your that’s return how how and guys seen the in for or year XXXX? you XXXX those so, maybe going kind over project million of to Looking looking past change can the perspective speak opportunities of

Michael Mears

of more times general they’re typically have significantly, quite end in They're Well, outside the I returns we've upper that say not to times would range. But I six characteristics the return that we’re of range. of projects the that pursuing eight of not the -- historically frankly range. quoted change mean

at gold if project very at than the Basin are Longhorn this looking we’re in But least outlier and need outlier standard get proposed to I line. in Permian five one significantly that need and projects build pipelines lower to you now project thresholds. for the that projects mean That the the at are across the there, outlier. we than Obviously, look competitive difficult look we’ve They’re going volume, the which those the very as but to the ballpark are commitment say just we’re uniquely would multiple, are projects we’re ago. you very, still in ago. because there, volume, be regard for past. Permian still five you us that with approved volume a was not more rates those an get as higher a I advantageous means hitting investments, we’re instance, build commitments nature and the considering you at If had same deep the more years years to to have being unless more low our are But to able the get on you returns more securing that going think needed

Mirek Zak

or generating also of of on need officially And yet see that return And sort often hurdles. you top that rate so when of speak your projects you how opportunities those that that you do itself? that replenish haven’t announced sanction all

Michael Mears

before return goal to our internal project. sanction the we threshold is Well, hit our

and pipeline – to our that that's the we believe of So regards basin. be do development going to able to with out we're

itself. forever maintain be at we've development future. that our answer. out -- continue at business. the pipeline backlog we do to a pipeline feel going that need growth So of feel projects replenishing I to over the as it’s long we're sufficient to we when we've point, the far need see for Permian able it backlog our for and That's to to opportunity to do and we that haul bring unlikely that said going goal As to able question we're been look confident -- our tough historically million the we our line in able execute in are this diversified It's we've that have a point $XXX to growth, still to to still not elsewhere that across the track record, would look been and just I with set which

Operator

to next Energy. go Heikkinen We’ll David Amoss with

David Amoss

I million the annualized what assuming staying us? How how XXXX have the questions guess in exit an then I that long? be for would of couple basin, for worth helpful in you that on are, upside guys DCF and are have follow-up really And but those And a spot on with would apologize volumes pipelines. for the Just questions if on be spot the Permian, much forecast XX? of rate the and you some in a $XX basis for you

Michael Mears

Well, space upper filling shipments shipments. up with only essentially that then end of I that BridgeTex, basically again available year. of up represent range for that own that BridgeTex fill -- would spot has of Longhorn, $XX And that think, we half its is the for recognizing which spot the we assuming only are million XX% that

alone those upside. the $XX $XX from have million that's -- that Those for probably There's two areas, it areas those other improve, product growth get strong that margins a just us two million available of can we items. in be But continued two to upside demand. commodity number other refined get we in most that number. opportunity capacity can Now spot see and items. would two notable the just can utilizing are to There’s opportunities significantly those

David Amoss

you And then your the any forecast to corresponds put comments own guidance production out today? on that internal

Michael Mears

use the and we own make judgment don't are ones you forecast. tell our reasonable. which internal as most We kind a generate can everyone’s I to Well, of

an give number have unfortunately. you don’t right I So to exit now,

you. So, I number don't that have for

David Amoss

if thanks. you how then that the you costs over see last out could one one just couple and what's higher of playing next butane Okay, the years? And comment on recently driving

Michael Mears

of the export the is at quantities of significant availability think to look history, butane. strength pricing in butane you if Well, biggest I driver

the that think we So markets adjusted to that.

long-term, If some you expect widening we pricing see year butane over period. versus widening, three look but at to not gasoline pricing, some it the significant, forward curves,

a we low So we think are at point.

that going going now. some it’s when believe to continue we would international at -- domestic strengthening those than there’s which so any the only what’s to U.S. the where be at probability you you butane, part That’s be right better expectations we curve. that of demand for one to see think look for driver to are growth they butane prices not what’s be, in the and butane really there is strong And the production versus

is part gasoline now, gasoline forward right crude the curve the other And The significant see pricing. with of oil we prices. in don’t forecast strengthening

period. So three built over our the that’s why flat we’ve year guidance a margin time relatively around

Operator

We’ll go BMO next Danilo Juvane Capital with Markets. to

Danilo Juvane

Thanks and afternoon good everyone.

follow-up, I the where in to you you X%. forecast within least that know outlined reveal Longhorn you that what that your a at the of growth high Can it at is, you at tariff you have guidance. is it re-contracted end? is say quick the is or midpoint, that re-contracted end spread Just embedded low in expectations, have at But X% the the can’t distribution

Michael Mears

going it’s year as re-contract, in know we done. rates to a low have be what Once over that our understand say at it’s those fixed we that’s they they set next probably you fixed, would months I want we X% would -- here the timeframe. will are which of But we Well I consider to end are on few done, the expectations the re-contracting. not variable, three to assumes X% the the

much I lower current market are the to or So now disclose say and on But DCF we’d right low I am give the with on rates are consistent a that appreciate to competitive highly again are being renegotiating fairly we they be regards about. now When we more growth what re-contracted. that be rates and little to a three the we six are midst a talking position in be of on from need what any But ‘XX. months now better They kind competitive looks than trying low, market. of we’re can distribution assuming here. what rates firm with in like sensitive fairly in will this you in months I hope ‘XX not percentage we what

Operator

to next go Hite. with Shen And we’ll Lin

Lin Shen

three kind mentioned the also a just think that to some crude going life. contract Permian years going be contracted. you So three expectation new year for for guess be re-contracted for renegotiations will I for I’m of pipelines is and to fixed Longhorn carry a normal that you do ask contract for maybe

Michael Mears

and I that you impression gave I Well contracts to was but say talking did be three period about we negotiation, contracts our the mean Longhorn. was signing not I The apologize, term contracted guidance they’re we DCF on are at with this clear to to three three I Longhorn of were what years year be and this period. expect necessarily for I if intend year under point. not that set would during

Lin Shen

Okay. about your XXXX be your also DCF think long-term your Got mostly X.X and How CapEx I should coverage for And think when of XXXX? is I also XXXX, it. finance your being. that think self about leverage we and also funding debt plan for to EBITDA

Michael Mears

targeted a four ratio for is long said we’ve around as times. maximum our time, Well, leverage

at target. what we’re fund see what we play and next constructing few have the what years, internally we and look fund book to that on can think we and stay we right as retain with our XXXX, over cash So, the we debt now consistent with maximum currently

would So, what I mention. that’s

Going live four forward, fund can with that limit, do debt. going to and that think times we we’re everything within we

future. coverage be We’re the us we to really be a maintain caveat leverage ratio to going goal to we will We’ll the revisit sheet, have to or for land at day at of right the healthy how ratio that. for level may our big be a balance pretty balance foreseeable that, And one-two a level. maintain end much the maintaining from but we’re project fund the the

Lin Shen

year lower next you do XXXX? expect leverage going be currently And to to your

Michael Mears

continue creep this No, year up leverage throughout to will XXXX. in

end debt-to-EBITDA currently we’re times at of X.X the around So, XXXX.

four increase that times gradually our expect XXXX throughout our be leverage closer once we ratio to And growth get fund our we We as to target, to level. the we’ll target. then

Operator

with We’ll JP go next to Jeremy Tonet Morgan.

Jeremy Tonet

Hi.

if and the follow FERC, do you has that progressed? a any there you us regard far with as could have incur there how update is of with that as you sort provide question Just that to, up

Michael Mears

what other filed. publicly had what’s read updates All I don’t the information any you I publicly. have than can is been

don’t I that’s So, an have update.

Operator

with Sachs. Holder to Goldman next go will We Jerren

Jerren Holder

one of you just it or talking docs, were to your about like I not. Corpus have for So, you recent doc Christi presentations and assuming area contracts the what build in looks opportunity opportunities guess the get to some

service? soon that potentially could how Just bring that potential into project you

Michael Mears

has But in fairly the it at land is our for development. other this there right Corpus shift situated Well, this channel nothing ideally point. actually on than

kind a operations at as point year commissioning two to looking you’re from timeframe. probably it’s of a So,

Jerren Holder

for in I in you four Okay. your I storage CapEx then? maybe itself. some docs, included opportunities imagine the factoring and need would as other well pipelines $XXX not the guess of in terms your million of And that

Michael Mears

Well, remember of excess we're in million. $XXX

Jerren Holder

Okay

Michael Mears

actual it capital of And four would cost, And I scope potential the quote barrels be XX storage. up the in won't that million of have to you and just include of would capabilities be the that but sense, the category backlog. in a docks projects to would give an yes with we for you land that the

is the of capital opportunity kind So of what there. sense that should give you kind

Michael Mears

equivalent is we of you’re it of the sort working economics that now, here cost of project? use like can that mean, on I use that could type of sort what that gauge of terms better as Seabrook for we fair it if a in

Michael Mears

Sure.

Michael Mears

Okay.

Michael Mears

benchmark. That would be a reasonable

Operator

James And Advisors. next we’ll with Carreker US go to

James Carreker

the if your even earn new the I had or just product wonder on any you about oil pipelines. potential crude over federal and concerns refined Hi, tax rate pipelines your to

Michael Mears

reasons. of products most One, don't are of crude market systems we an two XX% based. the it’s crude products are oil a primarily contracted have little to refined tax to oil the is focus that for markets so, as on should more regards system on Well, to the where refined the and the regard concerns issue systems, any there, with it's which change, but rates again our with really be system complicated the opposed

subject of regulation. cost they're So not to service

three XX% is -- be index for set the is place other index, index the current is to next the subject in years. to the The

if those estimates, allowance case, if are Magellan under take with look filings earning. to at you our you So to that just filings look But our stable. you same should tax when took case, the be at and cost allowance earning. regards but to you down which bring an tax the service to system under not we pretty of still zero, you regulatory And extreme overall, down is zero, show just we're the regulatory if

we got the rates. think don't we've So much in to regulated exposure change our law tax

Operator

queue. are no currently questions the there And in more

Michael Mears

you later. for thank your continued well, right, today All time we Talk you to Magellan. and interest appreciate everyone's in

Operator

Thank does And today’s your you call. participation. this for conclude

You may now disconnect.

Magellan Midstream Partners (MMP) 1 Feb 182017 Q4 Earnings call transcript