MMP - Earnings call transcript Q2 2021 | Magellan Midstream Partners, L.P.

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Operator

Greetings, and good afternoon, everyone. Welcome to the Second Quarter 2021 Earnings Call.

During the presentation, all participants will be in listen-only mode. Afterwards, we will have a question and answer session. [Operator Instructions] As a reminder, this call is being recorded, Thursday July 29, 2021. pleasure Executive the Officer. my Mike over now Chief Mears, is to call turn to It Please ahead, go sir.

Mike Mears

call. All right. for earnings today for joining Well, hello, and our thank second you us quarter

that different. of Before factors impact management materially as we could that by and based could statements Securities Magellan, the outcomes Commission. the I'll be judgments on get remind our defined will making current but forward-looking started, actual be statements Such are performance Exchange future you regarding the

You risk the discussed inform like terminals agreement million. an Magellan's we the second reviewing should our your in our Last network sell the I for to $XXX in by performance. quarter. about that information had review our month, other entered and factors activities announced independent asset opinions filings into would SEC with start future portfolio to own we

an We of approvals assets. we sales will regulatory view have the but year. have be related the close hope by which the This not been present will sale, be exceeding quoted end to for the we this once these do future and expectations of net to EBITDA price transaction multiple received, attractive our value

additive reminder, during April. interest sale because As sale we from closed and marine that announced our $XXX terminal the terminal received a Pasadena of million already independent in the partial was the a joint venture

portion of position products while position refined the on price in able ownership earnings monetize call, our discussed facility. strategic last a the were export the As meaningful an terminal we in a retaining attractive at to

to the to participate future. opportunity any Pasadena we expansion the have potential addition, the In facility in in

second sheet, opportunities review portfolio been historically assets, we of are significant while balance With through we for do value has our during in regularly of So create interest if the strong rotation. capital announced our seller sales our with Magellan in a asset position to long-term not both case only of these best has quarter. of we which the the transacting it the deem investors, been fortunate

volumes the pipeline prices additional pleased earnings expect timing expanded Moving exceeding our benefited generated higher recently that value a our to activities lower Increased to product another our Texas quarter items, year. our current a we overages this commodity included our and shipments we are refined driven strong that on fractionation of has notable guidance amount. results in product was this of previous with period now segments. part key EPU incurred which few by morning, that occur Magellan we certain of in outperformance The by from the announced expenses and expenses both the later financial

Holman, highlights CFO, Jeff will review questions. quarter I'll year from financial back before to the our answering results. now your discuss a our few Then for outlook Our second be

Jeff Holman

Mike. Thanks

with net non-GAAP as for that, for DCF, be mention to quarter XX% or adjustments, out that per me the which as $X.XX, which compared let quarter $X.XX. cash was certain we related of of from measures. $XXX lower price second XXXX. in to products following reported million million $XXX pointed second second XXXX. flow to prior demand due million, higher our several First, $XXX Adjusted proceeds margins cash metrics, making resulting usual, late sale the The free Longhorn included mark-to-market revenue earnings distributions for and this quarter morning. of in about crude nearest GAAP marine commodity the of income partially includes unit contracts we've improved including interest the distributable release free to to in to the release exceeded Mike we higher of after Earlier references impact DCF detailed available $XXX terminal in pandemic was our of financial operating guidance refined quarter a which million exhibits the margin, XXXX, flow quarter our their earnings and excludes primarily the expiration quarter, $XXX the $XXX morning, partial this million. variance issued for joint metrics cash these of reconcile compared the and year, commodity earnings I'll the by flow, cash driven million Free lows flow second Pasadena description venture, in than XXXX, of quarter quarter-over-quarter offset on in is of oil of

a sale just those of terminals, quarterly the pending results previously assets, a on few I'll have of first discontinued results product were independent overall note the periods. and our as performance. touch our now refined been of reclassified result as highlights usual, as operations which segment of included for themes the our So, of from me that within But all let operations

with starting margin higher quarter XX% approximately is XXXX products than So $XXX million our segment, second refined operating of period. the

drilling and well refined XXXX, lows of commodity environment Our naturally as to from quarter business improved recovery an from during activity and compared the the pandemic products as XXXX. experience travel price second in economic the benefited

adjustments ongoing well of we from Total an period compared favorable significant including system increases to expansion liquids a in opportunities. our on base in quarterly primarily our business to volumes blending serve. both to the period In as delivery and transportation increased represented the a and projects and our basis and importance for second refined the $XX more million of essential the our than improved gasoline, XX% diesel with our relative recent the projects, higher about blending as of the gas fuel prior to Texas to up quarter XXXX, record as reliable completed underscoring the more markets jet result fuels volumes, mark-to-market assets, compared XXXX addition, pipeline volumes margins were of recently contributed growing absolute year year-over-year Product due growth safe increase.

on lower due averaged XXXX, about lower second of day, compared Turning into $XXX,XXX day down per business, the was to XXX,XXX the XXXX. quarter barrels in tariffs operating Volumes $XXX mainly our quarter second to and million, crude oil second margin rates. barrels per storage from XX% of Longhorn average quarter approximately average

some XXXX. we Longhorn expire commitments have discussed, we As late in previously

the While been we to well reflective differential margin has third volumes previous earning our prevailing the the been on offset contracts. Basin the is and below largely in of affiliate resulting the related Permian those by which more tariff currently between party realized marketing activities had on the shipments we activities, is Houston, decrease

we by utilization, recovery volume per demand distribution primarily increase average higher by to guidance year realized just As a our barrel provided period, system as anticipated offset the initially rate this the result, we year. prior for in when Volumes our due with Houston on declined versus has increased driven lower year-over-year refinery average rates.

move actual reminder, our and volatility longer at shipments, As result their often primarily time. although rates much reported is quarters, we which carry our rate significantly revenues. revenues on that their means in the the lower of volumes average haul short-term volumes in between impact than our to benefiting greater rates utilization Storage a period at Longhorn the due those as see on volumes HDS impact the higher XXXX than market increased that strong a declined storage from at

of XXX,XXX per as the commitments quarter in ventures, period, XXXX result which barrels our second barrels XXXX per per in quarter. due joint our shippers. the current XXX,XXX compared to barrels BridgeTex quarter in XXXX approximately decrease were as second XXXX, just day day recent the day uncommitted launched Saddlehorn per XXX,XXX XXX,XXX volumes volumes from to in shipments a day primarily approximately of supported the pipeline a you'll additional increased barrels recall to in our compared have to nearly was expansion, in over primarily We by

can but to continue the their So our credit-worthy customers crude continuing from to meet you obligations. as long-term remarks, pipelines, my from tell we commitments benefits oil our in counterparties enjoy of

other of reflecting periods our as expense notes Just results. year-over-year quick strong few costs, year-to-date. increased G&A higher a results result incentive primarily a our on between compensation

we cost primarily medical the related second XXXX matters. to unfavorable recognized in in other to claims. related Non-operating certain Additionally, the higher amounts quarter was benefit to due higher current legal expense had quarter,

note $XX decreased to due why this primarily expense recorded time, of marine a Pasadena sale joint XXXX our below interest Net debt of the these relatively XXXX. matters absence I notes recurring, to on XXXX. we are following to terminal our will approximately not is those While in operating the not interest be discuss partial of details quarter due we've of when disposition in million venture unusual a in legal them matters early incurred was retired assets in in costs and second repayment we're Gain position that profits. expected business which at for are

but about on the of our As was that weighted debt $X long-term of was the value billion, outstanding June X.X%. average interest rate XXth, debt face

discontinued those in increased the are XXXX Finally, early this of close the results expect year the we operations to sale, later effective period. improve compared terminals assets earlier, periods reflected which pending to our to The next. now due independent income volumes pandemic due from to as partly sometimes as or between mentioned

In liquids XXXX and the sensitive addition, stronger of assets higher commodity these pipeline which activities during from most from unrealized that – blending this is temporary volatile by significant the the favorable can of liquids, results also are during margin the benefit second portion driven environment the located quarter. expenses from of in from mark-to-market favorable of form assets asset the process colonial net gas operating reduce period-to-period a be favorably more which adjustments. leverages, commodity operating corneal These the product and well shutdown non-cash as saw impact along

say capital either the cash indeed transaction for an just these result unit statement operations value income for periods. remain coming reflect limitations of in in the increased believe course, We we terms and of our with the sale maintenance multiple not assets, holders these how with and in certain the that about EBITDA Of value we've much our on agreement disclosure the that's the sale discontinued the while does assets, can line in it. or disclosed income flow from very it not pleased limit associated will

liquidity, sheet Moving and end on through we the of first to allocation, approximately to of and the quarter. terms cash at $XXX on hand liquidity had have million credit balance continue mid-XXXX in our facility billion available of capital to us metrics $X second

in Our X.X we cash purposes with value equity finally, respect X.X of we and our times or allocation, leverage compliance quarter distributions, capital approximately part to a times long-term on discipline second ratio as interest sale the was I'll combination excluding to end capital realized for the our on for that at the the reiterate investors gain focused purchases. And remain Pasadena. delivering investment with of

repurchased approximately we purchased units X.X quarter, since million, total $XXX for a units price at During bringing X.X for approximately average of XXXX amount million units early spend second just of million under $XX.XX $XX million. the purchase at cumulative we an the to

unit sheet volume and point, and and our within the Rules the depend price all focus equity. efforts. there of non-public enabled information until time our plan. metrics, price recent to unit which timing, capital the to the have negotiations our caveats, conditions of to further note most note results of asset important allocation available, see number regulatory during to repurchases those a careful the spending, is But factors, significant always been requirements, will Safe the of unit possession that I'll we've expected as amounts an legal capital been repurchases as including of it are quarters our we been and we well conduct repurchases of material balance XXb-XX as some expansion recent to Harbor flow as the surrounding And course, subject trading that governing in Of continue ongoing sales, on two aforementioned pre-cash of market

to that, over back turn call with I'll Mike. So the

Mike Mears

Jeff. Thank you,

reiterated independent guidance expectation of As sales part transaction. year, given morning our DCF also from XXXX. during This terminal uncertain of through remainder generate annual contributions of timing $X.XX of the this the release, the to billion we earnings the the assumes

to higher the We've when to in second to commodity we hedged lower our RIN, impacts now expected of for the by approximately did costs that the some year quarter, the increase primarily year, the by due compared margins in blending for outperformed season. offset later amount. during second the in the guidance we margins quarter shifted due and for part from well as margins while the quarter While half we Blending increase few are second compressed as the enjoyed the during prices months, favorable XX% the expenses be of we to expected higher of not somewhat guidance our costs both gasoline fall April. liquids past future butane over similar gas by

announced. gallon per to we $X.XX As average a year result, an previously now versus $X.XX are for margin expecting the close

also $X.XX we Additionally, gallon. hedged as for around have well XX% margins per blending next about year at of spring also

previous we line By expect than the XX% refined higher, and XX% current gasoline overall aviation XX% with still be products With more of total be above shipments total volumes. to about in year last forecasted product distillate to volume be higher shipments for we higher year shipments to XXXX XXXX. our with to refined fuel product still demand, Turning expected year. to expect higher product be XX% year our than demand X% normal refined estimates the

encountered contributions Our estimates growth required of as expansion recently and our activities, as recent travel a continue associated as had completing increased customer project Texas from to related COVID projects. demand that increased in modest with a economic delays. Partially well connection result a

demand. continued peak distillate fuel season seen improvement summer continue see in we to also gasoline We in the especially during jet have and and vacation improvement demand,

Our to lockdowns in school markets and of with our estimates level activity improved or returning to otherwise. virus work the additional no will remain expect in back variants people related

On pipeline, on products like July our mentioned Xst. briefly into of went mid-year changes the subject effect that I'd refined tariff the

we around increase preferred in to want resulting mid-year to increased shipments. of of segment, have the of average our by expanded products tariff which the X% Texas increased recently methodology, subject governed on X%. In FERC. pipeline our index than also by historically an I an more remainder not decreased by average to XX% we movements represented in refined is of the overall our mention the due expected approximately markets As terrorists those the markets X.X% rates which nearly

subject expect shipments the being to volume decline indexation We rate with more to market-based percentage of through adjustments. our overall time subject

for quarterly for to payout a X.XX DCF expect $X.XX on disciplined of earlier, capital times coverage As Based year, equity generate assuming investors we Jeff the value long-term cash on mentioned we estimate of through distributions, repurchases, year. distribution keep our current remain and combination our spend focused XXXX investments. with our delivering for XXXX, and million million distribution billion We forecasted $XXX count. the our by intend complete payments expansion we unit capital Concerning of DCF almost exceed in to construction current $XX year $XX projected to XXXX to to and splat projects. expect slate for this in distribution million the

biodiesel Although other project spending offset the of projects blending nearing same estimates This the now costs within new quarter, the state numbers increase as lower capabilities and include these Kansas completion. that last been remain by to with Missouri. are additional projects our associated has

discipline sheet and We remain we returns additional to come fruition, And expansion have also longstanding continue likely we been value generate to assess investors. committed attractive additional capital projects Like the attractive although than smaller balance most incremental to our opportunities in they always optimistic that expand our past. to remain with strength. service offering Magellan and for scale will

sale $XXX with million and We pre-cash independent use pool, than free of added available further all allocation generate $XXX priorities. distributions of more expected the to another be will to million after expenditures for the flow which cash terminal closing consistent our the year capital flow plan expansion the of for capital

questions. for Our turn capital investments remarks. flow with concludes preferred capital free operator repurchases. attractive I'll distributions remain equity it for be returns with continue great after an planned option, they're to over and allocation prepared That priorities that our but distributions And not cash currently path. our Special growth

Operator

with [Operator Instructions] ahead. the Suisse. much. comes Spiro very go you question Thank line Credit Our from of Dounis first Please

Spiro Dounis

that you ventures or if this little active what state that realize it's portfolio Hi, play starts or versus as fairly maybe done on M&A hard today, part others year levels joint stand too sales been to and to market and the ways you as just And these finding question predict down year of a afternoon assets optimizations about of maybe doesn't at same. as interest asset M&A of to sort you in weaker everybody. this sort these you for doing first you My just it's in earlier year going and on have getting core again pace? a of maybe can little, curious prune are for right you with now another trend we think stronger like more you lean look well. just little But this you're opine of Or as the remaining continue looks that by is could into forward.

Mike Mears

engaged been we best. and more be let Well, question. is I active present that been their likely are your a we've more have routinely me address to value been in than much first And historically. whether mean, is that asset valuable that's have we somebody sales, we active else think been determining we've in more process assets

of As I ventures but anything crude in want we ownership for southeast that we on look reasons the the where you we comment in probably specifically retained They're or we've joint are interest not oil they've products system. on sold, a have either might our assets or to network terminals partial case refined if our as the system look been an part forward, the obvious. marine do, of connected and really terminals that – at

those And assets remaining mean, on sell of if lingering are look of much right. impact are company. any that easier suite number our portfolio, the of negative the not at that So you assets to we're we selling don't I the have won't consider fall into you're remainder either. sold that that the everything not evaluate and the own in we of category, before and mean are to consider these but that or assets. evaluate doesn't continue business smaller than But we assets, and

potential system. have cost rest strategic the those but make the not amount parts a a get remaining can absolute as the of standpoint what from we also for we would and they just decisions also So transaction, from

assets was been with as at that unless us very been we've from slow. leave Obviously, I mean but And at a relatively whether question it are been active. as anticipate think assets, our active at to your in I we to haven't would is that uptake going least And forward can in something we interested think it's think an to reasonable I that short just attractive regards that And there's the selling the price. it's we – that far we're I'll there's very remain M&A. second the answer way that. in, So market still view I going in get

Spiro Dounis

Mike. helpful. it. Thanks Got Very

I just to keep question is uncertainty eventually of trigger MLPs taxed in mind? perspective, and for to are curious convert other there Second around automatic that. from the extent C-Corp, could your the be to and on guess [indiscernible] some MLP tax as that just considerations you to C-Corp? a Or an

Mike Mears

– likely we MLP the really convert. if most yes, no the if is clearly, associated it. longer partnership remain reason Well, will no structure a without with to then advantages tax allowed, There's

Jeff Holman

there cetera. ultimate the be periods. we timing been sense, that the of about that rules facts the has and I how to people of looking it and for some is one continuing It years, that, what obviously There through makes and be being of to kind will the value the taxation permutations of Yes, caveat long circumstances, situation in avoid XX-year just period, versus a most could period. proposals, are a number et double do on see the will a but around transition original based decisions so back think a discussion still of be transition in in legislation, sort transition was XXXXs

probably nuance would have only we the that's work around. to that So

Mike Mears

Yes, the where on requirement legislation were We to that, as eliminate more likely a think we I than in going months have structure. not. was looked it about like it ago three to you new stand think

going it's factor it's mean, I month still sit a the And, it to a less the month seems uncertainty. around week It's I or until today, going little happen. bit. we industry As quite than going risk that's to there's change likely overhang a maybe that moves likelihood to from as here appears something it to is week to said,

is time going it quickly of I it's this least of we little in any But not at perhaps point difficult moment. it things a like it what looks legislation to that in looks that. down planning regards So bit, long-term think that's like died knows, looks the kind with require, that's make kind at as like to to everyone can change mean, Washington, but at but

Spiro Dounis

Got all again it. appreciate color. right, I Understood. the All Thanks guys.

Mike Mears

You're welcome.

Operator

is Theresa with question from Chen Please Our ahead. Barclays. go next

Theresa Chen

my for afternoon. questions. taking Good Thanks

the like First, year. in touch it cost just guidance this were of you've what in I out to that the and to Mike, artificially suppressed cost more part increases was delving does a little this the How that bit all for into much the butane on quarter color that year moving now the And was related to appreciate, to have related to versus iterated, light that? around it? it, half. other blending any moved hedged that And there quarter I'd full expectations beat or the you just keeping second lower that of fall, bulk for around this flat And guidance?

Mike Mears

of moving the a let for can't some speculation mean, or had yes, perhaps refined remainder we've a is year. of was ones. I about there lot of Well, that product I obviously because happened. simplify forecast you little to reduced I just tweaked it tell going bit. talk all, the hasn't it We're kind material That demand we the parts. of think, there significantly that first me

we've material in little a is a forecast, our of slight not internal the The but bit. forecast. change gasoline contributor reduction, Our We've net to increased lowered a those diesel. it's

anticipated. in The So half second margins, part, had offset we lower for when the earnings than call. forecast changes which is was you volume visited are reduced the half second to that we number second commodity one the are what with the the over our big it in most quarter close very our what to performance is in back last

as not hedged As had spring. last the to time, mentioned we the call we you know, in fully

volume, point a went down. remainder those time as compressed. Fortunately the margins in did forward, of margins the we the came locking of when reached And

the the is of in the half of significant one that changes second year. And so

capital as projects don't the mentioned, but cost. you is, tell front the through the you precise any the the not just maintenance the intentional I me. that cost, is can timing other of have items on timing, And just numbers here big capital through of in I way, in The one of the the the unfold. planned. We significantly of first by under we're timing going amount quite second our we're the end in quarter, to maintenance frankly. in how of of quarter, the capital year we same originally as spent the these for anticipating expectations still spend that maintenance And

has second And on negative a the year. so that effect the half of

So, those there's different primary the but elements. Again, line there. two big those noise items around items, the lot individual of are a are right

Theresa Chen

southeast, Thank gears to you. sale, your pending do how's this? switching And the terminals the related you request process going to expect independent there? second And guess FTC the along I

Mike Mears

we anything FTC a – hasn't any we end to Well, have really have whether the second day. of we well. predict think don't approval we not. on to going concern the a this. long point. going whether received this caused at not been how for request is The it's to We take, any us we're really yet don't process the have we successful that get there comment a mean, request and have at to on anything from desk and been hard second that's I going the is process that's or raised will us But

don't. one one going don't rather sometimes is if, which go processes when than I but think, yet. they them of of know be how these sometimes to more Theresa, on it's We question this – quick, a

Theresa Chen

and can XXXX, us what mid-year assets Thank your remind given the And details subject to those current caps increases you your can that appreciate give inflation a the a how and much that the data as we lastly is. tariffs of us fees look of lot as the And sense of that the assets rates we are collars for on to have. just Great. expectations And total you. not? versus natural have are all given of are and you exposure environment, your inflationary I you gave many next year,

Mike Mears

formula Well, going I that – PPI on it's can but don't the tell strong. very driven so be I is index you year-to-date, what have and is to

that's start losing the subject expect we're time of intrastate takes I spring. late particularly And now which on, increasing the going because determination we percentage until that around – rates And so, market, the the competitive our we volumes for a wait decrease. are to which index, index those And get I low as our markets into terminals rate a in we expect place to high to what what around we our base than rate as Obviously increase market, spring be market, don't subject won't in make by that and do What analysis are in We the that for numbers that planning in next tariff because as are we're of Texas, index, it's typically yet, haven't not far in a driven that would XX%, to sense that and are will rates. a would a index our driven have to mean, that to year percentage and show the inclined it's doing significant volumes do and and the we those be. it's yet. I locations? in but I have increase next have analysis we be not a goes to I in as increases numbers. would right more done volumes that rates the mentioned, revenue We by we will market PPI. more year subject probably typically have know until inflation inflation that as but won't increases, don't or

the revenue, index will than grow decline volumes time. those as so the And of the subject transportation to over percentage our

Theresa Chen

Thank you.

Mike Mears

you. All right, thank

Operator

And question with go our Shneur Gershuni ahead. UBS. is from Please next

Shneur Gershuni

to remarks. a prepared priority go can just I of lower Hi, a just make I something special distribution I sure capital from good to return correctly. wanted of everything your back was perspective. I like if the afternoon, everyone. a wondering conclusion sounded is Mike, It heard

return payout and incremental playing preferred ratio help high if of probably capital. your priority field coverage sounds opportunistic kind so, buybacks improve of to I otherwise like your avenue And CapEx returns one, improve understand number but of the ratios correctly, is opportunities it is

Just understand to that point, kind of wanted at this

Mike Mears

I do priority framed we'll when look it's now, at planning that clear one right on exactly and saying our we're low want we on distribution, we're special current not to the playing moment. make but field think at a you I not the never it list right.

priority right equity you're and So capital now. correct, investments repurchases our top are return high

Shneur Gershuni

structure your would tied your index to that sort Okay, When perfect. side regulated I this conclude of to mining revenue your into of base that revisit revenue your of imagine business so that of fair greater Theresa of year structure, think I cost And overall your in is regulated cost cost happen terms the the year think to question though then be sort is impacts business? PPI the the When secondly, next just not it and all PPI revenue even driven about anything I the on of just increase the would this forth. versus that by to wanted – would kind than PPI asked. business, I

Mike Mears

has on two on I to we consistent should you costs saying I date people by items that's haven't systems typically what cost been mean, power that increases that's true. been true. think at generally I pipeline those year-to-date. largest PPI line seen and with mean, qualify or I our look that if our are and

are but that where going again, we forward, currently. Now, change could that's

and projects seeing capital those particularly sorts increases in increases costs and purchases, maintenance cost on of things. are We steel

So do sorts as replace those pipe, valves, things. of we replace

increases, on but two We seen pieces. we have it seen our biggest cost significant haven't

going Does as plays question? your that's forward. one. have we'll – again to that how I I that's think out that that But that on answer today see think Now, of

Shneur Gershuni

I No, few Yes. have it definitely but questions. respect into back more, I'll the does. a go and two queue

Mike Mears

Okay.

Operator

And our from Please J.P. Morgan. ahead. Tonet next question is with Jeremy go

Unidentified Analyst

buybacks kind of uncertainty John in regulatory guess – in continue in kind also And to considering million certainty kind quarter. pace you've capital about and was you sales completed Hi, for but about or regulatory can this the [ph] how of or kind also? allocation the that is that are needed more kind on specifically, of of of there, general? like Wanted like so during more the digging start I thinking of XX buybacks Jeremy. that talked more assets without Kind

Mike Mears

pace we will Well, the to that the been we regulatory I an be element I continue buybacks, say way. but want has in deciding specifically when when on it and will comment to uncertainty don't, don't and of execute

it this that. think the is the is away Washington a now, gone I we This right not down the at of died porch completely. regards where equity going like affect can going little with I to if us doesn't legislation to bit. that changes proposed position this our on happen. a continues moment more look puts to in a be there's is to where C-Corp regulatory uncertainties it think mean, required If comfortable a that that then conversion pace,

Unidentified Analyst

what do mind should that And you elevated makes quickly continuing sense. for then expanding ask related any or one-time? that costs we legal was the more helpful. on quarter; of and also That's wanted to That legal Okay. was expect expense to, the kind on

Mike Mears

I to statements. but were about the deals. you involved, saw wasn't will cases are financial legal specific quarter. items. talk resolved resolution legal all that the those don't Well, want in the items what in number just other to were we there that It were to second disputes netted not I say, And one lawsuits expect or are These be issue. one-time one-time the These recurring of multiple

Unidentified Analyst

there. I'll you Okay. much. Thank very stop

Operator

ahead. Please with go Our next Truist. question is from Tristan Richardson

Tristan Richardson

Hi, good afternoon guys.

and on capacity either question be are I with expirations that think a any in about but a customers, front, quick on you to guys also, contract the rationalizing of noted a then progress Can going about peer. the think portfolios talked factor. a sense limiting in look could Just crude you've you give you always talk the that oil, past have timing that that like? at or outside I us opportunities the something of with what looking scope of doing peers optimization Can are the

Mike Mears

at I an point, give you continue a to on actively update any developments I'm to first an actively update are your don't not position to in give to there. we tell opportunities you, can't have Well look you but I and

around to costs point. to don't your really profile. that probably this going again With opportunities our I optimization assets, discussion optimization number things improve on other lower to talking with regards, some a update as they're and give executed we're regards cost specifically far of As if is we've material about to doing are worth an our but have things not you. at things are There's that

we It's So for very process rationalization; us. we value is, such active should the and And do evaluated can in isn't a the believe to be especially a all a thing. If would parties here have a find something asset I pursue and guess we'll the to it. and put way you incremental takeaway shelf. this create of action through evaluate an Permian good continue on relevant

Tristan Richardson

just think there the Appreciate fuel there activity – a to asked chain. pull be And initiatives been renewable that past in about about the I you've on the talked follow-up, blending and opportunities I value think it quick might side, out potential backward Mike. into you've

will that for there So be more an Magellan. opportunity of

there is you think are updates studies look curious, at should maybe that we continue to or that case something about? some Just there, other potential guys or

Mike Mears

we're that in regard. active very Well,

You notes Kansas but number know, other a we in of some biodiesel blending things. in mentioned facilities we're our at Missouri, doing I are that and adding

biodiesel that the test would you we're started a doing movements would in system-wide very something caution then of do you to and successful. to going have I targeting I pipe. that particularly can we probably gradual got a it's also tell ideal to of by hub low We number it's at they've that going situation; in process pipeline, locations for in more been start We've an rather all the blending be areas blends it's with at capital. transported a than process once. – biodiesel be

So talk do we're this. lot are ball on positive but the adding And it on be the moving to capital hopefully to to a about cost going it. very future, think of path evolving a we not in be we're and we able we're more on it. to it's But

Tristan Richardson

Mike. Thanks it. Appreciate

Mike Mears

Sure.

Operator

And our next question is from Keith Stanley with Wolfe Research. Please go ahead.

Keith Stanley

Hi, good afternoon.

to First, I volumes. ask products on wanted just refined

already with normal first XXXX the for When of year the up XXXX. at I X% be you're above to first you're versus the So sticking of levels. half year, guidance or look the half the X%

but probably X% the the in in volumes not you're imply, that assuming the really XXXX of guidance, of same second and wouldn't recovery saw assuming in first of is you simplified, any year? the in half recovery already to overly half this year in above incremental the be the the kind level that So second half of

Mike Mears

Yes.

fairly the year, of consistent the in what second half we look for saw at If our with actually second the volume you they're forecast quarter.

year quarter So and absolute on basis, from we're second basis, different growth. products, this tremendous not but a an by growth some that it's the expecting just saw tremendous of on absolute volume

that to periods, and do quarters, third the this for second year, the to percentage again, were about relatively over when future expecting we're out of flat. works the But growth mean, each period, that's a still past to quarter it's versus X% quarter fourth going But you're we in previous still depressed. a XXXX. of comparing you're quarters If those have growth comparing because just what I those math

Keith Stanley

Okay. sense. That makes

might as wanted If of little to not spring mistaken said hedged than it. clarify, I you be blending is typically Second well. I question. you I'm a I earlier think think – do that just XX% now

I point? of on, spring the blending guess, thoughts an decided earlier at any you lock more why just So in to

Mike Mears

have I margin, earlier time we knowing lock When when to it's forward and previously. you there's there's in gasoline and moving know very a art prices and – as RIN prices it you some these behind that as expect, it done than Well, don't materially when the and markets have behind And tandem in butane being volatile volatile. extraordinarily hedge we some precise might would can it. necessarily been imagine not science prices, with

in. another we was appropriate those the I program, to for hedging you're And at other and the you to lock taught than and spring, second have a that you fact in just have you make always you taking things into wrong consideration, any as that, answer decision. the everything forward with the And it lock wrong the made we hedge decision all going whether guess to or make really you after you into looked when don't decision, can subject you And the to don't made so decision we margins. hedge do it

So I don't more other that. have any than detail

Keith Stanley

Now, that certainly Thank very you It's much. makes volatile. been sense.

Mike Mears

Sure.

Operator

is ahead. And Mizuho. our next from Gabe Please go with Moreen question

Gabe Moreen

RINs terms relative XXXX, you had also for whether context if that point? this of of for year could good in follow you just just expense historical I Hey, put Maybe – levels and up can afternoon. this question, guess on I the at just of exposure, to some Keith's into sort

Mike Mears

absolute what is, on $X.XX average I the being told of don't number margin. We a in works independent what our the is our that don't know an the in don't is that typically I front I'm expense hedge walking RIN is cost the have about on gallon If what actual out basis me. to. of

gasoline we lock typically we butane what margin. do in when to So

associated by RIN that. the also We with

beyond exposed not RIN hedge don't we that typically production hedged but our least we're to at RIN So on the basis. on price, a speculative

Gabe Moreen

ask, various markets if a lack about media refined can reports Got been then lot of products I and it. of running to smaller out maybe there's obviously Thanks due truckers Mike. of be guess any I may any And wondering whatnot. your what just there's not of projects out some for to impacting to may opportunity extent I'm smaller markets. come or that that? of whether And

Mike Mears

some where and that's market. the – the [indiscernible] part stress that demand. range, of conversion out Denver in Part have we've rapid supply is due the Cheyenne due taken is we Front Well of that's on to in Range, the refinery just their to supply seen of recovery in the of front

up that of projects the few maybe get to We're more high These kind aren't adding they're but there. – going initiated are projects of They're to able range get to additional already they're have There a to market, some going we're low them. return a projects to capital, We more X,XXX supply relatively going we're have they're up execute supply – think to We for there. transformational if that projects. to in and us. but on. be day barrels highly evaluating

to at of the looking capability facilities. at some rail we're more into market, also our some So that. barrels We're looking into rail

fix some quick Range. more not we time do projects kind opportunities. and more investment. the to capital anticipate They're return They high supply and But there. to opportunities we're are there barrels Front going have require of So do to throughput

Gabe Moreen

it. Got Thanks Mike.

Mike Mears

Sure.

Operator

Sachs. Lapides, is Goldman the ahead. And go question Michael Please next from

Michael Lapides

taking question. Hey guys, thanks my for

customers, from Just a that quick number. this the year, pretty year, and of us are they have kind a of lot talked what that's hey, one through of whole halfway from placeholder to isn't view it an is meaning or growth already here we've getting little it to is. a And through it Or what on out? CapEx too kind we've at really could for you there next be a than our time a small that indications that, XXXX Is gone for on now and the XX XXXX? even it kind months outlook need for is infrastructure of more early standpoint, XX,

Mike Mears

and on projects question. I that what construction. is. are that million $XX mean, – the be on all, have That been first of number, is that approved Good under just to clear is already

end just of rolling to and early projects those before approved next this incremental million going into $XX what's that anticipate have projects. we're year so in year over And is next finish to year. do We the the

So will up. come number that that,

get be to in XXXX above but a would I what think for on for be too up that hard close full of working see million, it's realistic, number lot to based we we year, the actually front have to forecast on could of get early a could us, for we that it's projects that us to number we're XXXX. anything for up, $XXX year and these if happened, for

Michael Lapides

Thank Got Mike. you, appreciated. Much it.

Mike Mears

Sure.

Operator

I’ll turn back you. Mears, over And Mr. call to the

Mike Mears

your time soon, Well, we and your you and talk will you to Magellan, for today everyone in Alright. thank interest

Operator

thank that great you We conference a our call your day. of your conclude today. Have Ladies for participation. rest and all does gentlemen, for

your disconnect lines. may You

Magellan Midstream Partners (MMP) 29 Jul 212021 Q2 Earnings call transcript