MMP - Earnings call transcript Q4 2021 | Magellan Midstream Partners, L.P.

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Operator

Greetings and welcome to Magellan's Fourth Quarter 2021 Earnings Call.

During the presentation, all participants will be in a listen-only mode. After, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded Wednesday, February 2nd, 2022. I would now like to turn the conference over to Mike Mears, Chief Executive Officer. ahead. go Please

Mike Mears

and discuss afternoon, guidance for us joining the Well, fourth thank quarter to Magellan's year. our financial today new good you results for and

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

information other opinions and in factors our for performance. of risk operational the review exceeded expectations and strong own should with services. results filings your Magellan another our year SEC robust and and about discussed demand the generating with You our future financial solidified recovery quarter, that a finished XXXX form XXXX Magellan's as

CFO, now Holman, general, answering I'll our be financial guidance quarter to will your then fourth before results discuss our in back questions. Jeff Our review

Jeff Holman

Mike. Thanks

metrics, cash XX% XXXX, quarter-over-quarter out, $XXX certain a XXXX cash for our Adjusted flow cash approximately based $XX coverage these the in billion, unit in times. compared was additional was for free in resulting margin, was free ratio business million, exceeded $XXX was the after and nearest distributions primary our $X.XX, and quarter the for per ability than last experiences. note of $X.XXX I is This in for year the was $XXX metrics per mention excess detailed impact the products mark-to-market on X.XX the on earnings DCF, which, be and included million. our increase financial XXXX. the this higher our cash perspective to billion, Full quarter I'll me impact that $X.XXX distribution resulting DCF weighted cash cash release or XXXX million fourth distributable of XXXX guidance program I commodity-related adjustments, to year Mike exhibits DCF the free non-GAAP in our of unit usual, of let should release contributions to about DCF XX% segment. pointed number ACS units that in buyback the we've in per average of excludes quarter X% of was period. higher morning. reflects quarter for the unit is $X.XX, Full just refined Earlier underscores to we XXXX First, DCF of as of growth to flow, growth $XXX $XXX issued deliver and which significant free per of of references measures. topline than higher related dates that our quarter, was similarly from flow the flow variances in our of including Free the for earnings that morning, in XXXX description $X.XX. flow to calculation quarter, A reported earnings outstanding of than year. as mentioned of making about flow the record million available resulting after the distributions driver unit XXXX. per reconcile fourth unit net fourth to income GAAP quarter we million quarter that this their million operating for

Starting period. of the So, the highlights XX% quarter XXXX refined the million quarter as the our of $XXX touch products than segment, usual, just few was with higher operating results. of I'll fourth for approximately margin on a

products record. from fuel XXXX overall and less constitutes than that reductions that revenue Reflecting I'll period, XX% well commitment from continued the to average typically as were Our for transportation on refined in products overall up the to year business fuel the benefited Though volumes. aviation from new as in rebound absolute relative the volumes XX% also year an saw a as products compared set prior the travel, with prior again recovery sharp travel, note volumes an quarterly pandemic-driven period. refined experienced context Overall, in on economic, plus in of tariff XXXX. to all Refined our projects. of increase the XX% basis, usual, aviation once our and ramp on increase activity into significant XXXX Texas once expansion benefit increases effect final went drilling in X% Xst versus again revenues July the

index remaining consisted rate. our rate of decrease and a a than X.X% increase this X% increase average more As an to of X% reminder, our to

I most revisited recently are the index aware, probably you calculation. of imagine As the FERC

of be we about liquids margin result discuss was our the favorable a X% as to better and result, and XXXX, will which effective a compared to by blending Product few rates our blending primarily gas March will opportunities. the moments to environment of fourth With as quarter reducing the due in volumes XXXX, improved higher due further index guidance higher part commodity Mike the margins -- discussion. of

we hedging activities. period losses to addition, related had lower our In unrealized in current the

XXX,XXX due Turning year. Fourth oil of our volume per were X% to lower business. shipped storage reductions revenue. $XXX crude down quarter with our in reduced from the of quarter operating volumes day approximately fourth the to barrels of rates, line in Longhorn was margin million, and XXXX some prior

on was XXXX and the versus expirations XXXX. now XXXX, on lower of which Houston story pipeline periods. between expected, start most in prior due the were decreased late we had a XXXX past new been primarily in in XXXX contract Longhorn us the period quarter delivering line our to to the that fourth change, consistent the on While in resulting on full necking delay and begin for year the the has distribution year believe pipeline, early a than the will the system of Volumes we performance the pretty

the rates to across expirations. is move recent rates has due and revenues, Houston lower generally see to operating in lower average often Longhorn competitive in The proportionately environment lower are movements shipments, short-haul for much crude quarters, led Similar last haul impact should at reported volatility contract to average between rate we means also which our our increase me tariffs our we quarter, average on those their at barrel Houston oil greater storage tariff although those lower saw actually volumes system pipes. on reminder, than following which our impact actual though due a as rate. Even that utilization their volumes and to distribution reduced brings significantly distribution crude longer Just currently per to we volumes lower overall volume revenues rates. of and two rate periods

period may short-term steep of pandemic You market high recall was during in the was the contracts numerous and we early and the very storage demand. in contango that entered a general,

seen have and our backwardated, been has rates we've lower contracts evolved services. short-term market storage pretty the those As for

per day Moving the associated a with result to compared timing the expiration primarily in just fourth nearly on of of XXX,XXX commitments elected joint per about have ventures, per to XXX,XXX under the year. new to pipeline in when to XXXX XXXX barrels day barrels BridgeTex day XXXX, day barrels barrels our in shippers due the committed to of volumes commitments their move compared in commitments the to volume as the as our XXX,XXX the well Saddlehorn XXX,XXX due approximately of quarter per earlier were to smaller year expansion. volumes increased as few before, partially

on sheet metrics capital allocation, Moving to balance and liquidity.

as to facility us available December to of of we have billion First, our through our continue in $XXX with credit $X liquidity, on paper terms program million XX. outstanding commercial mid-XXXX

Additionally, a rate face our about net maturity weighted end average $X.X interest bond value on our debt isn't as XXXX. of with until the next The of long-term billion, was XXXX X.X%. of of debt

Our incorporates times on was of of leverage Pasadena at ratio sale XXXX. X.X earlier of interest the realized part we than purposes, less the for the in little end gain which our in compliance the a quarter

Excluding we is really gain including, which to manage the excluding X.X times, we slide is And leverage little capital that on that today, program. we'll course, leverage, that repurchase are it touch the sale brings allocation. been last of looking our a and over would that unit gain, as to of metric, on leverage the on impact have us

we combination of a As you've remain to the discipline cash committed financial through while maintaining investments, we for, known delivering investors and say are before, heard capital equity us our for distributions value long-term repurchases.

the X.X DCF for for $XX program $XXX XXXX, During decreased of began units Since have the fourth at of contributing XX.X similar Magellan program. million, spend repurchase amount we made thereby, units units repurchased units addition, increasing about of two of our million cumulative unit an to repurchases in of repurchased forward. years million distribution by quarter, our and in XXXX our past buyback repurchased under billion has worth to price nearly going over by bringing million per a purchase units we a average $XXX course, total during our better The million. X%, $XX.XX the coverage unit outstanding $X.X amount

the spending, balance careful that of as call four equity. the sale on terminal independent any free factors, the available, will conditions as remain capital well to note and flow that sheet timing, volume course, depend With including always remains unit of to limit we government requirements longstanding from the our our times cash over of particular, the market and expansion are and Of In we the trading price back regulatory the know, review to to turn proceeds I'll repurchases all that, yield metrics, expected also a price the Mike. of process. timing as number subject committed leverage

Mike Mears

Jeff. you, Thank

$XX of for recognize Street to Year. the than our recently a of pending remainder Turning have DCF we the that billion reduced expecting, lower earnings similar is XXXX. actuals. forecast completed our considering million to New asset very results but announced of XXXX the bit morning, is guidance guidance about our essentially this generate and We assumed associated to for was with we sales, This outlook there $X.XXX business

year. million demand which be both impact few the growth these to items, this refined the as including the expect we XXXX storms further new theme mentioned we unfavorable and you year, products expect oil in we've and crude do offset a to by last expect to tariff is from in revenues products a storage, overall we continued recur in While few as midyear increases quarters for $XX favorable healthy the reduced that refined not winter well positives

to comprises to economy, segment, margin, usual, about we assumptions you our walking Year. better commitment drilling pipeline XX% a assume products few to refined used understand minutes travel we're about will continue projections, we combination volumes have that projects of key ramped you refined how improved through which thinking spend the due as year with demand to As the operating in next continue now the Starting general products and which well to to level. I'd as our help like that develop hope shipments full their our expansion during XXXX full XXXX the of at the recover up committed of New Texas overall we to benefit have our increase

result, demand. we about As X% by distillate increase a XXXX product result, shipments higher to higher X% compared higher gasoline, expect fuel and driven XX% refined X% to aviation

ballpark in every transportation we estimate an represents annual total DCF refined purposes, volumes sensitivity For of million products basis. about change X% on $XX that

In average pipeline component the in important products segment, addition an our model the to for environment. refined is the rate volume, inflationary to current especially tariff system

X. of will assumes approximately rates our the average are an plan multiple this There increase current components average. of that July Our refined we X% in on products calculation by

markets through So follow deemed generally our the adjustments adjusted are of the I'll and them. allow. shipments tariff to annual remaining Currently, about for with refined FERC's XX% product go as competitive XX% methodology market index conditions be briefly

FERC Jeff index methodology for recently mentioned, As the changed industry's the its rates.

price bit With For decline a X.XX%. on the the adjustment effect on to year. X.X% that our index have producer in index the July X, going XXXX, been calculation a in index background, based last in change resulting plus of markets

the below change based the price FERC be on X.XX%, March change approach. Just essentially will minus a ago, the adjusted to in now X. methodology few producer initial so the on index become effective This X% weeks

will the this $X typical million by July X Magellan. X% currently cycle our X% change to So case XXXX formula. estimate lower follow we using index next In a month, of negative after about in rates interest, annually that then through index results in new the year that we the

been X.X%, positive may in in you which new preliminary know, which for a X.X% As increase rate change on X PPI the of July is using an result will this XXXX either XX% is index methodology, FERC. the increase that markets markets. planned deemed by or our the are have refined markets these The to be tariff interstate competitive for remaining movements of workably

would each to not generally year they methodology competitive adjust As allow. forces rates and a as the these are index result, subject

increasing higher last X% change We to corresponding which the competitive have range years, than X% the our the few the index frame. rates same time been annual over in over has been

For we've our which change now index than on year, average Comparatively, mentioned, last a by more X.X% recent increased we competitive X.X% as X% declined last market be instance, FERC already the given index decline. by year. at discussed, rates the will

long-haul per we to point average the analyze the of expect rates. our complexity of movements mixture I In continue a as New barrels volumes to well in expansion Year, we remain barrel we that XX% market-based which more approximately we'll movements a additional point-to-point Houston-to-Hearne system, tariffs Mid-Continent, of based competitive, make. the we and movements, is products pipeline both of based for short-haul will due While rates guidance from increased July our X. therefore, assumes short-haul as market-by-market Texas of the on resulted overall rate actual ensure X% our report our changes lower the our fewer by on East basis we because on into and the on to the that out average on rates moving

tariffs mid-XXXX. to relatively remain in XXXX intend impacts flat important rate these our profits. as currently In barrels. which in approximately an deficiency expect refined ship of results, is though per X% no commodity million revenue average average products environment deficiencies represent we it segment, overall our XXXX products do gas we price to impacts recognized to not recognized again, even expect revenue liquids recur to addition, per the by directly for raise as average barrel also we barrel Also with blending of our rate negatively Considering refined the related factors, $XX

volume, $X.XX have XX% and spring all margin of which $X.XX for total margin, $X.XX week's was funding have already essentially to we sales hedged similar margin the results blending to our forward hedged margin a We five equates lower the Between of at year. about this per which years. currently our volume blending over expected gallon for unhedged an is the the expect the last point about curve XXXX, at of margins for last XXXX average average we slightly than

fall begin in fall once blending we XXXX months typical markets the hedging liquid next for would our Following approach, more expect the few season. to the become activity for of the

pipeline margin, Moving to our crude expect our oil segment, which comprises the to remaining in barrels XX% is volumes of we Longhorn averaged our we XXX,XXX which per XXXX. average similar the XXX,XXX operating to day, on very

tariff pipe's point market added of current being We differentials, XX% a life which remaining in Longhorn and resulting day generally rate, per commitment barrel have third-party an six the a of average to reflects the XXX,XXX new this at years. approximately recently committed capacity with

as above in Houston expected to discussed the But any the profitability from the affiliates of marketing pipes movements incremental activities stepping allow. the our we've prefer in we until move which level conditions parties low. the currently possible, result committed product market prevailing Although, our on reflects third to whenever space differential, remains Permian closely as marketing past, these to very unused are

crude pointed distribution can system, the Our Jeff between out, fluctuate other Houston oil which wholly-owned pipeline periods. is as

crude moving Houston oil Houston long-haul We distribution area. to new have to pipelines our connected system recently the

the distribution refineries to during our expect we more HDS Texas volume area. to system to So Houston and connect the in more utilize than the system City the on as or all barrels XXXX XX% extensive by rebound

Longhorn average lower oil which crude short impacts our due the that Houston As barrel financials. rate System in distance the we reported to overall a are on reminder, the significantly per than move, Distribution rates charged

expected day oil we average remaining per versus in pipeline's during to expect the BridgeTex point, XXXX, average in average has Concerning to shorter-haul year is barrel XXXX, on XX% With years. volumes be activity XXXX, per crude should commitments to shipments XXXX. day with barrel for At proportion the per $X.XX the BridgeTex reflecting venture this per in pipelines, closer our of approximately per joint four capacity rate similar incremental movements. barrel this an XXX,XXX shipped XXX,XXX of our which life of $X.XX barrel around barrels

Permian with generally With spot we the Houston, low line between uneconomical, basically commitment the levels. expect shipments differential so and current in remain shipments

For under an years. with the contracts for Saddlehorn, the on we the expansion life per remaining XXX,XXX expect of XX% of step-up day which contracted commitments to line of recent move barrels the in XXX,XXX is with about barrels five final commitments per current during Based day for XXXX, of capacity average line, pipeline's the Saddlehorn has new levels.

On we've served a as Magellan considering discussed savings we while kicked integrity ago us years the the initiative past to are well has This our opportunities that the efficiency and operating throughout off the cost in organization. few assets. identify of expense especially efficiently inflationary the ensure current safeguarding side, initiative to environment, as possible,

of we of increase expect capital, in With expenses is most last day actuals. safely million expect transport inclusive while maintenance to are both to to very spend fuels live initiatives, about these every and $XX expenses, the that and the G&A currently operating to year's we social protecting believe costs obligation store around nationwide we we total during X% that is which XXXX, XXXX. on Magellan, the our similar reliably Concerning benefit At and communities and important work. by where

significant million expect integrity capital more integrity and each and of work XXXX. our $XXX time we spend year and effort workforce in than the assets. maintenance ensure dedicated to on Between spend to Our expense,

cash distributable determining and are and flows aware, flow. As you in cash are both capital maintenance expense considered free

we independent terminals last announced regulatory reminder, pending our for await of quick the approval June. a still As sale

this unclear. year, bit timing to exact is a continue to still close expect We although the transaction

have the these that we unit of year. XXXX, would year, billion which purposes, through distribution to guidance XXXX. key on we amount necessary pay the $X.XXX first for for build these to of half DCF up the current our declared similar the cash of result distributions all the investors currently times cash last that by summary, the for assumed increases of we guidance growth For target to assets steady recognizing distribution In to own annual provided increase assumptions distribution, coverage in count X.X XXXX,

and we refined do guidance higher the the expect rates of we which to the XXXX, a in years tariff commodity will used flow benefit demand growth, Management product continued after While are distributions continues be strength repurchase modest inflationary considerations for previously. growth period, Jeff prices. providing not free that equity, expect DCF subject generally cash next tailwinds mentioned to from beyond few will to

unit DCF is expected greater value at a As increased grow in than for a result, DCF, investors future. providing our per the rate to

continue Although on company. repurchase forward, expect date strategy equity focused equity we our also million on Based in executed create value our have spend future capital. developing attractive already to $XX on to projects and repurchase expansion committed, substantial remain on capital XXXX to growth approximately expect going to we for we investments

XXXX. Following should per operational a system by product successful now open Colorado expansion our late from be that barrel season, to these fine a X,XXX of Kansas include estimates day

completion are is up to commitments fully New these projects that step the expansion In and in operational arise. to our market of our supply April Mexico addition, of to from network be the fill underwritten this strong counterparties previously by and Both refined may of products year. demonstrate expect nearing gaps announced of flexibility pipeline

know, you few been over has scale investments environment challenging the last for years. As capital the large

scale projects pipeline these likely growth more add smaller the year, most to although throughout expect we recent like expansions. However,

$XXX EBITDA remain Xx continue attractive expect approved threshold. that our our are look be in we line, as multiple As as to for additional still disciplined for expansion progresses. invest to a or spending to meet to and projects million XXXX and opportunities Xx to investment we capital exceed patient projects year our the committed Bottom result, close is low-risk approach to

community. comment company I proud my have on Before career and organization My and safety on we from including appreciate be a last would dedication from has open for will CEO last of almost XX the last entire I I energy every XX. spent to I to investor and more Magellan years the my Magellan week from couldn't as April sincerely is the role that space phone briefly created we lines, the announcement best-in-class performance, be rewarding, support the analyst and been perspective, I the I with retiring over truly operational company like company financial XX received culture. the the believe years. in

responsibilities. the have be as to Milford, Aaron the financial company us The many ensure Board that, strong his it position We model beginning build open as worked also very a Aaron to management transition. for I of from disciplined a has ensure and principles my closely in to future. open President as well Aaron confidence is to community on on seamless the served approach should will with vision our a familiar resilient prior with business the us should our complete I Magellan prepares together call abilities future. he and spent experienced COO Magellan And the and entire Directors be leadership and strong capabilities, who for team CFO have CEO, now these taking been with strategic will intentional here is investment current questions. his -- for successor operator, and that we company, lead His and into in at long-term with years. career the today, have success. his

Operator

line And Chen question the [Operator Theresa our proceed. with first Please Instructions] Barclays. of comes from

Theresa Chen

and Hello. on your also on new retirement Aaron to the role. congratulations Mike, Congratulations,

Mike Mears

Thank you, Theresa.

Theresa Chen

I the segment. Sure. ask to on wanted refined products first

takes X%, commentary the tariffs up to for net-net, portion, variables the XXXX relative many related all this, and flat about XXXX up to So correct? the Mike, and all summing of just puts transportation your volumes

Mike Mears

That's correct.

Theresa Chen

the business. then And for Okay. butane blending

be and favorable seem why that forward similar given bit $X.XX. to was hedged it you've $X.XX indicate a curves as that from fall the like may And at more to little wondering is be the for all the spot you spring So, I margins here? looks also year expect average the

Mike Mears

time, are Well, the as the would expect. curves you all moving

the taken the curves we've now. cost point have roughly $X.XX is forward RINs, we of of which a So, net to in acquire time in right

Theresa Chen

Southeast buyer divest just proceeds midyear? down may the sale to the getting kicked What lastly, at to of could do And for the expectation for terminals, in this there Okay. close something? have is terms you the that an further? Or gating line are the of this that point you by the expect be factors

Mike Mears

can close. And say timeframe want comment but really Well, on going within the we think FTC buyer going the close the it's the I have don't that's our really probably I we're to believe highly what point. and that the process expectations this because between but are to at firmly to process about FTC, the we guidance, likely we're from that's all within we a really

Theresa Chen

Got it. you. Thank

Operator

And Research. our the Keith of line comes next question from Please Stanley with Wolfe proceed.

Keith Stanley

afternoon. good capital start and Could on just I allocation. buybacks the Hi,

you'll to some in repurchases the assuming half of to you willing free the is closed the of sale big but cash have about in? leverage a year, the of half chunk cash midyear, midyear. coming you given that do in think excess first terminal the how you So below interested not pretty flow, first just borrowings Would something short-term you're equity, target? Or you'd decently be the be use repurchase year

Jeff Holman

We be in that to theory. We -- is down It this open always Jeff. to specifics. comes would

back, will the flow we regulator always free times been with has bought be leveraged. the not real you and if look it current So cash at

there's We'll the eye one there. how more we're we little a as see we might opportunities we'll Obviously, have repurchases the wanting be on to and have so what be would converse looking and kind true be pay trading price, too. and the as eye timing incentivized on the a be proceeds in attention leverage if on be bit factors an well. to dislocation There's investment we'll well. to other of aggressive and we'll And at

in So as In been be see practice, think measured we I in have theory, us past. pretty you'll the yes.

Keith Stanley

thanks for for very then clarify. And detailed just drivers all Mike, helpful. was that want it. Got the to I XXXX,

it blending in profits to So was year-over-year be expected in release, butane the that noted XXXX. higher are

similar margins I were though. pretty gave you think the

So small XXXX? a And small a as driver? is of the storage that case, side that overall pretty negative driver similar of then we it think Should fair a driver pretty say question for that's -- things. in a for to

Mike Mears

in the moment. on -- storage market contracts storage Well, two short one side, at many we before, we've And about are years. talked the of the are as soft a our relatively term or

And so of frequent contracts. had those rotation we

the And current the in market so a it's strong a environment story. to backwardation with in challenging recontract market,

put mentioned year the as the So comments, from we benefited that expect to short-term versus look contracts. soft you this last be also XXXX, And it we year. at our was we in in it place contracts if in -- high-rate which year early during pandemic, were pretty

persist we'll cycles be soft We to some recovery But market don't regard. be through and a expect long-term. expect point, The a be contango in to market year in that back there. to drive an goes in are volume expect relatively higher. it the do to to some we expecting projecting are same, we are there we year-over-year, XXXX, Even this expect margins we we that So and a blending at going growth I regards in butane With softness think increase. though there. the that's blending,

Keith Stanley

it. much. Got very you Thank

Operator

line Fargo. question And next Please comes of proceed. Wells our Praneeth Satish with from the

Praneeth Satish

your retirement, on Aaron, on two just questions. the congrats have role. Mike, and I congrats I guess. Thanks. new

that new First, signed a contract third-party Longhorn. you noted on you

kind the talk this contract you other talking any shoots was to of one-off green addition? and Permian for contracting just customers? a forming? about whether crude if could you any So see you environment Are think you curious Or do

Mike Mears

shippers will differentials significantly honestly, two. extremely And over I long-term rates grow quite mean, the The Permian to as or look commitments incentive tight. next are. to And when grow huge case, I this customers. multiple buyers picture the spot there's access -- environment even year contracting in they system, points what as get along those our the would low though think is like prospective have our don't those marginal I we've doesn't have a are make to shippers, regards with ultimately signed a as to into barrels distribution attracts characterize we the some there. to system contract profitability, on demand distribution Longhorn us In where at

was also a the make that willingness what we contract. so a our contract. gets one barrel And we a And of make look willingness, entire we're behind when we once the signing on drivers it's Longhorn, to to not It's their just Houston. at again, pie what sign

sign be for But in at that least necessarily opportunistically and our So contracts, marketing Houston that of would incremental isn't system. the That the consider getting as to next to contract. Permian that I taking continue. two factors all of not or doesn't distribution into something interest our continuing mean year from expect shipper which to would advantage to decision into will affiliate our you

Praneeth Satish

if up of adjuster it's you And and PPI to mean just I wondering a talk think FERC decision that commissioners X.XX gas of could the oil friendly pipelines. lower FERC's the has made majority from about broader to terms whether X.XX. implications taking Democratic to approach you And the in now. negative less maybe

any your for the whether political that motives you behind So views and on curious think adjustment? there's

Mike Mears

is there don't pipeline. I indicator bias developing it's that against an the a think

against a decision over descent little year initial Chairman recall, worded was made the you'll the a If decision. strongly issued very when ago, a the

the move was argument we than what the on see as that's big they in I rehearing commissioner’s on that the original happened. direction that commission knew was would The in the the commission. overturned a the shift view by risk So a Democratic existed place focus in the commission rate. and once to lower of order as that that that don't more what an industry rehearing

don't really believe, have -- a Our It's both on arguments arguments I biased strong sides. decision. that

So behind there's a there. don't it. I'll I political think stop motivation

Praneeth Satish

Thank you. it. Got

Operator

comes question next Dounis the with line Please Suisse. Spiro of our proceed. from And Credit

Spiro Dounis

Thank, again Mike guys. could operator. go quickly. and Good afternoon, wanted Congrats to to back if guidance, Aaron. you the I to

that. implies still impact half is, I full I'm of seemed a and performance of I'm XXXX about XXXX. you item. I think And million back guess a $XX it your then, too everything that the a in on renewals storage context I of course, and of and annualize kind right? delta to year sort between lot the specifically, a number XXXX struggling, still of gap. bridging no like guidance. the your But to big back have when I and there, course, sale. of helpful out between So at sort that Uri $XX is I where that was big contract of look what I million And out of me, bridging think between called of bridge still doubt

me So you bridge curious, XXXX number sort little a it from that of you Mike, half perspective, can performance better? a at back bit help if look of

Mike Mears

winter asset is came try. and the for for million. when effects, about We volume things. don't over up exactly $XX which the we is know talked about $XX Saddlehorn, to We've me I'll time contracts. which rate comment let you -- with I recontracted your about reductions a tariffs talked We've about on sales, with the couple Saddlehorn really of storm But how but talk long-term exchange million. in $XX million, we lower just in didn't detail. incremental agreed roughly

expect in repeat. $XX I also bit materially, that's detail I think, significant a specific in rate from is reduction to is that's say, in that's of which in I Mid-Continent, Houston are move. up dropping not with I When XXXX higher down the revenue we Mid-Continent the that should And slightly and mentioned products some barrel reduction, going proportion aren't some volumes, a of rate affected go number due there into per to through million recur But in million. didn't expecting that average to of that those last but mentioned think movements a in deficiency to or from reasons. one mentioned we year-over-year. we benefited comments, last the equal a lower we volumes of it some And a from refinery year, the great we probably basically -- issues -- recur the One we so rate there there's refined back is is short-haul the we it XXXX, elements. about long-haul about year, We talk recognized That's which there's little there, and XXXX. $XX don't neighborhood to

per out embedded even didn't in going be is we average that specifically. assumption that, barrel It's that -- our the rate year. of All to spell last

-- that it your view versus the but in didn't should happening we're and that barrel. closer, get to add negative -- It's head, down, XXXX it's being my missing So that guess, of calculation. that $XX all what's XXXX offset in really those not rate I you're bringing things with or number. million for we your said, up are probably we not as positives. an in in those had positives per associated mean that all I XXXX anything of XXXX just that, I

Jeff Holman

This I done add, because consider talked I partly way value you the do is about, wouldn't seasonality to business. I it. in mean, it think There's we a Jeff. haven't totally the too. really we exercise might enough just

the year, the at last volumes of much stronger the were recur. of six to and some look they that going the you If first months in quarters last in four than is are six months

trying the half guess, just I year caution, last on I'd to So so. annualize back of

Spiro Dounis

Okay. No, helpful. that's

items I those that think all gap. bridge probably together

appreciate guys. the I So there, color

a on come a you're other of in what M&A even so Second free what could buybacks one that move flow that to all of sounds basis items or curious, million Just there expectation that of at there? of is or most And $XXX one, your just the that to cash guess the allocation? for are really smaller or here. throughout like utilize view I sort maybe factors year. just potential some bolt-on quick It up change scale change a curious for that looking potentially? Is

Mike Mears

that opportunity is we on for projects internal on probably Well, finding probably investment we're attractive have something actively certainly, development. though capital looking even that I'd less M&A, are but looking. is challenging, the rule It's focused more returns focused It's out. for that never

return, extent of Jeff the all were caveats that the opportunity that it the also. an has again, into the will mentioned, impact arise price things that then to to would an of other that. factor that And attractive So equity sorts those

mean, it's not so than And that. complicated more I really

Spiro Dounis

Keep All We’ll worries. Thanks, at That's Mike. see guys it No Analyst perfect. right. Day. the simple. you

Operator

question line with of from JPMorgan. proceed. comes Jeremy the next our Tonet And Please

Jeremy Tonet

afternoon. Good Hi.

Mike Mears

Good afternoon.

Jeremy Tonet

We'll a best Aaron, and you luck of miss reins on career. taking here. successful Mike, the Congratulations,

in I of kind to one guess. to here it, wanted really a few Just start off different facets question

well With impacts different the and was Permian this the walk I is again, demand Be upswing through in increased a to through the the Magellan. whether when of favorable impacts you oil sense maybe more more just logistics, from growth just roll drilling pipelines make environment it permutations think as wondering, different could if us trying you of to or contracts? diesel, as those how conversion look

Mike Mears

broad question. a that's Well, Okay.

from benefit pieces. it see break to those first into material the we try me and product foremost, us I is refined demand drilling diesel Permian system. in the do down Let mean, I to mean, most on increased our

to certainly, have direct Texas the that, so that system. And we a West extent throughput on benefit our grows,

any any production the Midland the side, overcapacity before it's commitments -- from significant a of have for On material oil to to kind because change rates. shippers such willingness there's is see in grow bit quite to and you're crude to firm today, Houston at make the differential to going going

haven't When term, out that commitment. start benefit then if like do. widen or XXXX, a some built from capacity But to XXXX be there that of is I out and when in think to years look shippers we would world get plan. of So into now that more there we looks forecast three XXXX does four happens, trying any interested to start again, And you expect margins to but perhaps of we to potentially are making or the to improve, long to the out prospects obviously, what level difficult that is tighten. some

or out. said, years I as speculative, somewhat is that four three of All

how So, see to goes. have we'll that

be repurposing is nothing can but together tell evaluating to everybody talk anything about pipes, far you that. focused the going may talk I to within you continue repurposing. try can to can here, everyone today. we're real company that anyone. not does a else. to that some are To say as that. to on is be Permian us. to And pipe I'm do has there's probability as some about of challenges done, get for have to of be opportunity actively the that I not doing. other that real folks lot to place put said doesn't And insight don't tell extent in have but what I taking who to there's that to There project as last we actionable zero, that. I time, any call, a would activity but there's actual a look that benefit the As sure It the It's someone I that at it there's some

tuned how I So, stay that mean on develops.

Jeremy Tonet

one, it. could. if one Got And Very helpful there. last I

you regards color The storage could that's, with Cushing bit business? your there. current I the Just to if how I provide market, guess, wonder impacting more a environment,

Mike Mears

of Cushing's contracted. now a have we've the storage on the as finger got percentage contracts. my us extent significant of is impacting of large I that's not it's because it but to top don't right most Well, contracted,

life any a so those and number significant at now issue of Cushing, not the seeing has And of right left. years we're contracts

depend like they really on looks expire, imminent. which isn't what will when it So, market the

Jeremy Tonet

one one quick. I touch actually Got last just have on it. to

impacted things some other companies kind was with reported there with there union think inflation. to I issues impasses regards and of there maybe that out energy and

before, You wondering, talked note if inflation on just there's lot labor to anything a specifically side, about there. but the

Mike Mears

we as increases you yet. is to negotiations we're we We going will happy to end an start all before haven't we've -- nothing of everybody wind may way expect waiting with. where outcome that have happens there's the a we're that going our salary that of to happy union have a everyone Well, started that really place but mean expect there's up Those for And that and do note. and be works I I contract that this at renewal. is, end mean first. know for the is implemented year. union a happening negotiations, pattern That's this negotiation we're our to that. all now, up we

Jeremy Tonet

there. Thank Got you it. much. very I'll leave it

Operator

comes of Please Goldman Sachs. with the Lapides proceed. next the Michael And question line from

Michael Lapides

questions. my taking for thanks guys Hey

million true XXXX of cash chunk kind large sale. flow, the in a comes free expecting, about from and you're so that curious, asset Just of in $XXX

other available What happens how is for you're think of either Or at debt? million pay Just of buybacks XXXX? any curious on in growth end or million the year that the or of end XXXX? you about year allocation? do side. CapEx as forms $XXX use debt-to-EBITDA the of $XXX debt you enter Do the or to thinking kind that how capital And down you we

Jeff Holman

it generally we flow Yes. Well, really factors repurchase that to those projecting units, as purpose those to then expectation use not on proceeds talked on depend cash our will we're specified be any but about. for all free use to would

us, for like It's front undertake activity, down of we don't repurchase if debt, mean units. repurchase could could projects So, pay those out us. obviously, the up plan. mentioned, none depending excuse on the any Mike whether up, the fungible. growth we of kind not don't we the it of as show I and -- show and of we play and those purposes those our any for of up, other first it's last the can showed me, octane, that's how on we options in If options M&A use just

project now. the And if on it used what debt is see all pretty today repurchases, during increasing we for So sure. we for the year where proceeds debt we would don't up based end much

number of you be so don't the but minute, would the calculate way of that, me that's in I ratio from thinking right Michael. this that sort projections. And right can have leverage we front about

Michael Lapides

Got it.

at and comment it that Okay. last a rather point number like in when at at of a maybe in today you you be to M&A three types M&A. of market couple years, where small years two, what, of versus the these of at I And of four the you've And ago. three time, anything but when to look the they that were of actually this much done you look bit four look kind or or attractive markets would a you Is three, portfolio sales. there types made buyer a assets, little a assets, years, ones, host say, things hey, specific like know look I'd the about you of last asset where over could not might

Jeff Holman

four is specific probably not were is get we why than market, right but your already say, was three some to four assets We're refined reasonable were really high, rather if make the answer years those not are to but there We market there question And to our a things buyer. more to now. to than do of now products believe diversify space, assets. a we're into is ago, than targeting we specifically, astronomically have in back to out years what we we don't of prices Well, attractive three more outside And which be the looking there's continue right too that's certainly, -- really we We we We'll feel it since we like of was especially it not time what set on seller our outside buy an of big or attractive kind go equity. have of to us saying still that the for much or opportunity were ago, bets to buy. high. the have the watch it. those and we of come a We ago, to felt the might that. couple like years market that a assets assets back the they this

it. mean, anything our evaluate a point-in-time opportunity next and fall transformational there. we're decision. that's lap might All you not of right never we'll But out in now, know week I actively what pursuing

Michael Lapides

guys. Thanks you, Thank it. Much it. Mike. appreciate Got

Operator

the with U.S. of proceed. James Capital next from Please Carreker question comes line our Advisors. And

James Carreker

and Hi. had the I in had of and Mike one the for Aaron. there press congrats in talked $XXX again clarifying a the schedule and it in Thanks official to million release CapEx about Mike, XX. growth about guidance you then number question. financial

the So difference there? just if wondering maybe what you is know

Mike Mears

number, be expect generic actually be also got we that's what we done. XX will it'd what we think get of actually we about committed, Yes, kind If lower just billing we've what under put that only assumption to that happen.

number as that could committed up about come are there's we're we that year, million stages area probabilities, $XXX or that being into the of come development we kind soon handicap projects so, of XX with at during so up we of an a relatively another evaluating So various number. toggle the and

the that's difference. So

James Carreker

the might Okay. be I case. thought that

refined Does does clarify. you put question, account look of, then number? know XXXX normal still projects. the at relative that Just we've x you I you wanted when Do guess, growth to back we up? growth parts into that projects you versus think kind caught a growth how feel I like some big and talking there's guess like normal the into at But that taking economy XXXX when from XXXX about product picture outlook, levels? of I fully look And to, away gotten say, holding feel that place, and

Mike Mears

gasoline people quite But still you my there to in a not I to it's numbers, work, give I've above have said, just Diesel there. is I I numbers the I businesses directionally, here it and I'm into before, me, about geography. it's on us, markets, but I gasoline, back front numbers. talking hasn't talked which fuel to talking again, where don't think don't gotten to still fingertips gets have back Well, and XXXX we percentages of say really I'm quite true. jet is miss, in there. to the not but we back It and it's XXXX And were you back I not I in of rural not and numbers. about big as in about fuel, on surprising XXXX. obviously, aren't above that strong I have think don't -- this cities. on is probably the mean, And when have mean kind XXXX any the that.

so a bit a of I think little there. And lag there's still

Jeff Holman

And are few system there said, things minor specific. some our are on Mike like that

affect the small cetera. serve, those we back can system things project and just there on it to we contract I XXXX much gasoline, with levels. volumes, markets outs here think overall, in and our roll-offs to ins et for that places There's be pretty based some going

really, of next to aviation lag this it's only year. the -- that overall, So continues end by

James Carreker

in would what If upside color. one that That's forward helpful but not the all some noted for One West could when Okay. probably with that guys expansion you service, more that's in. with into it Texas upside. Xx of potentially I your a achieve went guidance question that, additional that is, take assume guess significant you maybe laid I multiple out say to you XXXX, I when project? significant you put

Mike Mears

guidance. It's Well, I our we mean, volumes in do And have some that assets. but markets in in breadth the just guidance, bring details to the attractive initiatives West serves. new I we I'm Arizona, our those, our West potentially the across in Mexico tell West not it's New we can growth West haven't going And beyond of the Texas, system. say Mexico, that into in Texas time underway material go initiatives you to number Texas, we that have -- volumes our connected markets put of a can say and pipeline all it of we to we but that our not it's Texas this are serve. but all

spectrum our into we built so that we're those there's And across opportunities that really haven't opportunities again, And guidance. pursuing.

our a West we're Some material of built those XXXX But it's assets safe think into that horizon, that to say more regards haven't probably they're opportunities at I Texas there's we that. than looking to are type with XXXX. upside beyond

Jeff Holman

drilling to further Mike's an that expectations around I drilling can if as from Mike's well our talking answer without initiative might point project. see as as exceeds because earlier also upside just back we an about, expansion

Jeremy Tonet

These having clarify, would to just any -- existing these be assets? repurpose do to you pipes. to initiatives them on with existing without space just And able are

Mike Mears

I require call there that, scenarios I'd growth. are absent those also, what of there's some for actively opportunities but it said, on home Well, is, working assets. run would that repurposing but And we're like even

Jeremy Tonet

lot. a Congrats. Thanks

Mike Mears

Thank you.

Operator

And our line Timm Citi. question with Schneider comes from next the Please of proceed.

Timm Schneider

Hey good afternoon.

question. quick a Just

that DX, butane you blending, the in side? remind most of Is are to combination DX a On or you exposed RIN can what those? us the

Jeff Holman

look that totality meet new the in at that really composite. hedge, to specific have as it, we percentages as to look that we we we the types we're make rents It's we of that need. the of When at RBOs. And each getting sure are

So time. them different we're in all at of exposed to essentially points

So basket a there's composite for us.

Timm Schneider

your Or using now, look is right in bid your are Got own assumptions then pricing you forward on for the that just of that? going through you kind views to guys it. XXXX? do have And curves like what

Jeff Holman

what's looking happening we're curves forward and the paying Yes, attention to market. in at the

part, about have, rent our would where point most already opinions And is, point for that significant out directionally it's curves. other XXXX We maybe I we've amount is got say, hedged. but the of to forward that a obligations the own

I to XX% of think it's view XXXX around obligation our be. we what for

do we some of go got taken already. So have we've hedge, more care but of lot a that to

Timm Schneider

all margin. said, was inclusive Got Is that right? it. a $X.XX of -- you And that think then that's I it

Jeff Holman

That's a margin. net

$X.XX. cost less less So operating that's net basis gallon the on per expenses, our of rents margin gross a the

Timm Schneider

that Okay. But includes hedged? XX% the

Jeff Holman

Yes.

Timm Schneider

it. Got Okay.

trying Yes, reconcile go Sorry, was that. to ahead. just I

Mike Mears

That's it.

Timm Schneider

right. All

It’s all Thank That’s Sorry. you. answer. had. great I

Mike Mears

for time probably more there’s Operator, one question.

Operator

the Please no Mr. over There's ahead. go turn to questions. Mears. I'll call back

Mike Mears

and continued And we month. a thank Magellan, next have our see Well, then, right. of you you. we hope to your All many day. at Well, Day in interest good appreciate until Analyst

Operator

a Thank day. for ask you. that your We call That please you lines. you your Have does and disconnect the great for today. participation thank conclude

Magellan Midstream Partners (MMP) 2 Feb 222021 Q4 Earnings call transcript