MMP - Earnings call transcript Q2 2022 | Magellan Midstream Partners, L.P.

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Operator

Greetings, and welcome to the Magellan Midstream Partners Second Quarter Earnings Conference Call.

During the presentation, all participants will be in a listen-only mode. Later, we will conduct a question-and-answer session [Operator Instructions] As a reminder, this conference is being recorded Thursday, July 28, 2022. It is now my pleasure to turn the conference over to Aaron Milford, President and CEO. Please go ahead.

Aaron Milford

for results. today you second discuss thank financial quarter and joining to us Magellan's Hello,

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

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

continued we the our solid June to independent long-term call assets review over a EPU and quarter CFO, And I'll versus few second As the guidance. before turn commitment our our $XXX period, results equity investors. Holman, previously of actively work. of into for announced, I'll million year-ago to have we $XXX our now to then and maximizing Jeff trend deployed areas the With beat financial with we've capital on questions. financial second to we back results slightly interest of putting on of the our sale today, received network working for that, that proceeds second total quarter quarter to be closed buyback Including million terminals briefly performance more our these discuss been answering your value during underscoring those our program, X adjustments, a our

Jeffrey Holman

Aaron. Thanks,

cash second we've DCF Earlier free we second First, making quarter these margin, financial of will that including their metrics references or be release compared nearest let to XXXX. and to reported GAAP earnings in usual, distributable this measures. net to million non-GAAP million mention And metrics, $XXX included our income I $XXX flow. me certain operating cash exhibits reconcile morning, quarter as that, flow to

from period current the in $XXX is include a in network, portion joint the gain of marine of in the our our independent $XX discontinued Pasadena sale interest and As terminals to the venture. million these million primarily in related a release, our in to related sale results operations press which income a terminal period the noted of prior reflected gain

flow DCF did $XXX million. free the we lower than we earnings guidance the Excluding after net the resulting flow the $XX unit And on $X.XX. cash favorable million of gave was excluding the for last detailed the is earnings excludes cash $X.XX, for of at the variances impact was quarter-over-quarter gain in for $X.XX the the guidance exceeding income both gains, was of I'll earnings sale for of quarter-over-quarter. $X.XX. A the gain was adjustments, discontinued release per sale. the the of these $XX for issued quarter of Adjusted on morning. about include Free EPU our quarter million, $XXX quarter, of you million million that not decreased the mark-to-market per about impact quarter year. description $XXX And which distributions available in further operations, remind unit this quarter

to the between especially moved expansions Texas transportation revenue and continued well from quarterly partially from pandemic just I'll lower in is in which in was recovery highlights higher but increase due summary, results. volumes, periods few and product shortly, products more of margin our revenue of was at operating refined of detail and touch usual, resulting expense, resulting as high So operating increase as increase levels, which primarily record recent demand lower rate Drivers an an South aviation with $XXX transportation Starting volumes on the of contributions our the included fuel. terminals in from transportation X% a by quarterly as segment, margin. additional Texas than the offset provide period. decrease a million I'll XXXX

products volumes versus quarter, X% total For were 'XX the up refined levels.

our while tender more storage utilization environment. than expiration. benefited addition, commodity a year-over-year favorable which impacted In recent average revenue, by following quarter revenue transportation increase more XXXX the to tariff rates These benefits from to rates due was last offset increased primarily lower and similar lower midyear contract

which directly some market in contracts more As was not year-over-year, the a In the now operating the product for a was instead quarter costs, circumstances. other and have period effect segment of the experienced benefited pronounced the increase period-to-period fluctuate during less we the demand operation which expenses Operating couple quarter prices, services. steep of note we contracts increase overages of can rolled in Product storage [vac-related] the quarter. prior our fluctuations to represented still increased favorable the expense. exception during off, with contango. of these particular, the saw periods related shortages inflation but for those in with has pipeline. reminder, for the slightly when of resulted quarter, market And most this from reduced refined lower a elevated have the overages I'll that did power second And which while discrete entered currently XXXX.

primarily completed blending to taxes a Additionally, primarily experienced of products gas the due the was compared second margin favorable to refined volumes. margins liquids XXXX projects. quarter Product slightly result recently segment higher expansion as property and higher of higher

margins closer the per Our prior gallon versus increased about to gallon per realized $X.XX in to $X.XX period. year year-over-year

partially have we fact quarter's business. unrealized blending given the related hedges on activities, period the year by than have otherwise our we were some favorable call, in higher next and the normal liquids wider to current losses would As hedging basis recently. through been these gas just differentials our this offset that blending wider Further, last And outstanding in from these have of results differentials prices offset we volatility spring. expected noted benefit have the

business. to Turning our oil crude

commitments as volumes barrels to our pipeline expiration the more our elected compared Houston rate. their well a day committed shippers year, XXXX moved of System XXX,XXX the to our shipments over over quarter million, $XXX resulting approximately versus system. past a the a Longhorn move margin tariff operating a higher under Volumes the averaged little which period. XXXX slightly on increased our barrels the of was smaller than second have year lower with day timing Distribution per few commitments when volume XXX,XXX due marketing new of at of period the prior to quarter from a to primarily in connection as Second

this use customers In addition, fees to elected a our Houston structure pricing terminal area. increased more for as simplified services throughput within

interest such that arrangements the the to statistics. connections of incremental as barrels result customer are HDS our volume transportation in growing showing increased, see reflected revenues as we have of resulting that with physical the while get move to much in continue up has terminal We the transportation fees added revenues throughput rather and we than

briefly our a crude spending, expenses as costs for ongoing this Longhorn the particular, at a splitter, Looking which the has lower expenses. quarter, on had power both oil Operating integrity which slightly optimization and -- increased segment by maintenance and offset the result to primarily volumes efforts. lower of in higher due partially turnaround

when due in in second timing We volumes have from joint revenue joint oil although already during pipeline by day from results that prior barrels and recognition again were once revenue note ventures. received our again to the our periods. as I'll XXX,XXX of BridgeTex 'XX, committed a share down benefit move associated quarter, per those the elected in of were our on earnings, in primarily recognize quarter XXX,XXX crude BridgeTex recognized ventures customers distributed that to did additional us which the offset per of And nearly to were the this cash their the DCF under proportionate lower the by Moving shippers time. 'XX at of deficiency barrels approximately volumes volumes. our to equity day us And deficiency commitments. for payments to payments

Finally, year. on about rates There expiration a XXXX albeit the to about barrels to at contracts Saddlehorn, few period the other touch just day, volumes due as items initial on I'd on. the lower the line averaged are of XXX,XXX like the late last in same per

net the rate our of outstanding the debt from down interest with sale. average received I'll proceeds And expense slightly $X value increased higher due during we a that as That debt about when terminal somewhat independent came to billion, face First, the debt balance of balance interest quarter. the X.X%. note average of was primarily weighted on XX, June that a

X.Xx independent terminals. the compliance for of of sale Our incorporates realized gain on our which at purposes, the ratio quarter the leverage the was end we

I investors equity last maintaining gain, to have that investments, item while to committed Excluding would us long-term brings allocation. know want known remain you've I of a X.Xx. heard through which reiterate delivering about I'll And we capital is what that combination been repurchases. the for touch to on We value today, leverage financial before. say and distributions are us our the for discipline cash capital

buyback from million putting have the $X.XX total spend units of Year-to-date, price repurchases, actively to of we those during through in already to proceeds purchase the discussed, As million. million a bringing we $XXX began repurchased sale the our second quarter We second since independent X.X average allocated and terminals of the $XX.XX the nearly program. quarter for received at network an $XXX work billion. total proceeds our senior inception

currently unit $XXX we see and to million that investors XXXX, is cash to ongoing distributions, repurchases equity. efforts. recently million. a distribution, including nearly So flow used repurchases of cash to number announced out important our $XXX far Further, repurchase which we in be focus our have to of we our after combination stated, allocation closer capital returned month, next pays through free continue to as expect an distributions our And generally previously as unit

Of And as With leverage of regulatory spending, course, repurchases back I'll requirements the metrics, trading call capital equity. we sheet conditions market price Xx any number as cash expansion and and long-standing unit our price of in always including turn flow volume remain our I'll particular, depend note Aaron. available, to to to as of the careful limit. legal a and that that, on balance are note, over will free committed well factors, we expected timing,

Aaron Milford

Thank annual we're our still XXXX. expectations DCF Concerning you, with billion, projecting $X.XX guidance, for previous Jeff. of consistent

our results. to quarter recall the last guidance pricing Magellan's that higher to commodity environment financial of we may increased the annual capture You benefit

are to early margins weakness to of we impact annual a half trend. first the our the to fuel related yet due fall commodity of expect not guidance. demand, we expect Concerning our to liquids see did demand XX% do during for over gas didn't prices July. a of year, activities, average we've the there our to notable from the detect nearly months we're margins items refined few here, on during continued forward while we As prices eye All $X.XX that demand with the impact number blending of inflation to from with a our at as year few on our economic weeks, a lock around of blending early in, $X.XX environment, general commodity the we more volatile July impact of including still refined keeping upcoming as last products hedged on, look not weakness this to these it's higher conditions. the disruption any products a fuel clear well gallon. things blending gallon. But material expenses, past prices now current higher little than we developing But declining over per hedges us additional per in is Specific

have We gallon. hedged with spring at made year's XXXX significant of in margins XX% hedging activity excess well blending progress our per also of expected in next $X.XX as

to NYMEX including differential return by we our in margin historical As than settled expect our between we would for another the more impacts negatively the which levels, this volumes. differential basis margin last $X.XX activities. hedged blending continue to we we $X.XX realize prices wider realize products activity our per futures quarter, prices the hedged to basis blending from If future were gallon, increase from to more discussed to volatile actual be overall physically and Mid-Continent contract and region normal, recent

on expansion capital. to Moving

$XX blending actively at gas is increase than additional prudent in project committed, grow expansion quarter, a terminal. a pursue of Houston We part Based liquids due $XX now East expect on to in manner. million business the in spend million approximately estimate already to This new continue XXXX we to projects capital. to last our to capabilities our higher our addition projects on

spending. a we to expansion recall, around or that still reasonable may you Xx X is meet As the for capital assumption current expansion million multiple opportunities target our EBITDA And threshold. $XXX environment, year low-risk in believe exceed per we that

has included pipeline yet previously our to set time interest customers El potential spending been a any Paso expansion the scope for more currently not to the on received of make final with and and tomorrow. extended expire of estimates, Significant in based Texas bit from to the to for needing simply industry finalize season commitments receive. products us the Although is a was potential our the decision refined we open project

X% July this you an in inflation recall, while of tariffs effective speak by moment, of the that remainder for wrapping a products markets, interest. Before may up of the I'd XX% a markets, reflects by knowing remarks, like index by average and of increased earlier which, prepared all-in of to as index our for rates this increased guidance, we the X. previous month, our allowable X.X% to our our topic X% with Consistent briefly tariff we increase is our rates an about refined

have project continued due ensure in expenses we preserving that year, optimization outpace assets. in our of safety on operating possible to integrity our discussed, increases while to for and these the increases we efficiently our opportunities the as the we focus As as are part

metric probably everyone index the aware, early finished haven't seen June, through index for up XX.X% the established is the think is FERC in the since I for year-to-date PPI is simply used As which the we 'XXs. was level goods

year. typically As that generally by in our of we change I markets index that going our the approach just the product expectation we'll noted, allowable baseline follow tariff that FERC forward. is rates index continue our each the XX% adjust refined And

to the our unitholders. next own approach However, we costs. as July attention current factors of will the between numerous conditions questions. value always are open given to thoughtfully we'll now our increases trajectory operator, we competitive view inflation backdrop, now paying close With to creation with next call and customer be including and as the for a year, that, of And year's long-term well and rate ready deliberately for as dynamics

Operator

[Operator first Instructions] Chen of question from comes Theresa The Barclays.

Theresa Chen

expected I indexation, on the comments your process a into XX% Aaron, very to rate touch that wanted for to subject there. increase and is that FERC Understand going you deliberate first inflation have the about XXXX.

few that we're rates, inflation get refined of able increase given products the footprint, market there for the For risk rate digit the mid-single-digit your XX% to upside the that rest subject single to to that -- is been past today? years you've pressures seeing

Aaron Milford

much at go don't you rates decisions. to get that look the going a think competitive is sure at we the that as answer amount. rate looking us, market Theresa? going index and by Obviously, rates decision raised we on same And dramatically base if may. inflation rates. year, rates, realize. of to at making that And we that that we know the rates haven't mentioned, rates. your feel this through through and be we'll the be I our is to as to cost index I index have rates when is I necessarily like that would It we're We when that tied And are July, our the process our follow rates But that exceed our the market the So we will raise we're market the and by that make I you at the rates, continue. needing the market that thoughtful will raise we'll we to we question, Does process. those be to time. think benefit, long-term good the always looking question as about general market-based feel dynamics by those a market index to don't able look didn't pattern at the go market able rates, the When inflation. make market benefit what's followed comment how making for versus and

Theresa Chen

you what And should then step-up. significant inflation, us seeing refined cost subject on from I'm a remind normalized rate this that the be expenses of just quarter, Can Yes. here? run operating the products just

Jeffrey Holman

expenses run normalized for generally? A rate

Theresa Chen

XXX. For that line, refined expense products the

Jeffrey Holman

per I through I a unusual say we items. number year, don't I But them mean, we've property in again, went The as a one short ones is the or this going to this mean, I quarter know onetime-type We of of expected over that probably is particular, slight rate But Yes. quarter. big had would this quarter-to-quarter. of from impact usually a average. normalized had se. given typically -- overages, taxes. this on be it varies Again, positive month-to-month,

you if it's go item. over our transcripts, Sometimes a years back the in variance occasionally,

we that high more not sometimes have so bit expect run positive, quarter we this pronounced. And be -- Sometimes a normalize. little prices, But a at it It's number can rate when negative. to all. would

for contributed to And have for items again, those number you normalize So that there a onetime-type that. of to sure. that, are

Theresa Chen

on Okay. from your equity you earlier about be paid to would at revenues equity ventures down deficiency volume distributed on looking from get earnings, your when as the just and And well joint point, paid how then the the the step you a back? to as volatility Jeff, last expect basis, quarter

Jeffrey Holman

back, called just to the revenues, to to payments had be received the well, We've deficiency clear, we we've crude related those the BridgeTex those distributions particularly the on Paid and the received quarter. where out. is one side

that. -- it on contracts So particular depends like there's if the a there's deficiency

Sometimes can and paid, related But distributions credits in there receive are that. used to that the we be been future. we've

Operator

question The Tonet of Jeremy comes next from JPMorgan.

Jeremy Tonet

of impact might here us to as overages little through if headwinds? a versus you the parse you able bit think a Just headwind quantify other quarter could product the to be of help kind in wanted through, cost

Jeffrey Holman

million. is Yes, area $XX Jeremy. That about

Jeremy Tonet

ephemeral, just costs those that guess, takes are gives as I power headwinds, property if costs, and for higher sticky? other cost other -- Or wondering the And over kind it. overages time. of such taxes, these Got costs it. the Got is

Jeffrey Holman

tax. it's impacts, little that's means they're in Yes. that higher that property it tax, at digits a question. assets values. our And year, Directionally, because is Power not property some there's little hope all-in true-ups a a fair of million expansion reflective online costs. power the from the -- And That I and -- sticky bit there's But we assessed mean, relates of year. probably some those most a was we it's -- tax single being last favorable had of the property sticky. Directionally, to that quarter, in inflation projects well. prior little performing on coming negative effect actually bit

favorable time during And of at other this some of it some so probably winter in have I'd sticking. of reflects we some power just power the our And say we about is it's About this at expansion booking point. that second did We the up still it half where in had really increases showed expenses favorability small half again, year that hedges Power asset the quarter. costs, base. were place storm, of last of of and isn't.

negative So period-over-period, that contributed to in variance comparison. a

-- sticky. that, not So that's and course, of

on is taxes, on small digits the one just digits of time. power, and rest small So it

Operator

Keith comes Wolfe question from next Stanley, The Research.

Keith Stanley

the of CP repaid on quarter of balance because to low approach QX. from kind start in you some buybacks the of end to Wanted the of a is here. the cash at Obviously, borrowings. The now progress lot

Moody's into we leverage good paper stock And then that month feeling they we're obviously under Or about thinking going to your So is commercial you that? to the was on about the to there but a there assume sorry, we're that's it Xx, more headroom rebuild good in about tied a potentially very under your in ongoing free rating, all? buy cash wanting back ago, factoring BaaX line Is forward, it's draw ceiling. at affirmed but relatedly, flow? should long-winded, future? Or about thinking would buybacks

Jeffrey Holman

Let's take them in order.

yes, CP, question I fungible. mean, the around I cash On is guess,

when from that really If if repurchases, really CP, in come that. finance now a CP, paid financing CP So pay the it's magic. -- we we having down wash. of cash form no of proceeds decisions kind down just to and we the use that's borrow in It's

our to lot history, of repurchases you we've we of yes, would never balance. our So look a any for back in stretch repurchase CP. finance I And could had cash not cash if time. finance activity with look to

So doing. by We've has really going into that's decisions. than On is Moody's, Xx like be driven leverage our considerations with understand I short-term factors Moody's. They the ones No that. into all -- other come just the it financial coming mentioned we're more limit our had than thinking. to good like always rather dialogue It's thinking? financing what

think leverage. I to I tighter might not clear. trailing a proceeds, currently period it in understand little that. working But Xx, think on I quite look with than the think looks it them look understanding then committed if our and they on a and you We're is

thinking, just that really on it's commitment So not changing side. I of their the they're and our think underscoring importance

Keith Stanley

disruption The just all products so much And you sounds far a it one. seen date. haven't like as quick very at to demand refined volume, as

the is for XXXX? volumes forecast X% versus So be about the refined up year still products for to

Aaron Milford

we'd whole to There's about lot to As we year, year. pretty beginning at what be we we we're of around. be sort moving thought a the think the of think going the close

any any You're that demand from haven't we higher would disruption of material call right direct prices. what I evidence in seen

comments, prices have that have I as But pump the some fallen. July, saw in As abated seems essentially mentioned we to my early weakness.

continuing. see don't trend we that So

all what close thought. had to I think we So be in, we're originally pretty to going

think be any there's So I speaking. real to there, surprises don't generally going

Operator

Satish next from Fargo. comes Wells of The question Praneeth

Praneeth Satish

price oil and of continue? it going a make had to to be Sorry and I environment? maybe this item Was a this of this expense of due line I point. to won't to onetime this quarter, belabor is guess, wanted the had guess, product Or But clear. I shortfall a product volatile a therefore, just remain the overages, more kind payment, to on higher because you

Jeffrey Holman

mention has has mention. little new. many to to it before fluctuated. variances. and fluctuate, as it it's certainly enough I been a not but Well, And try probably to does said, a merit volatile usually, it explain always We've like a not is we it times merit had strong, That's but mention,

expect total products it. high. very, our hear physical much our to are fairly It wouldn't It's take typical settle when prices I surprised doesn't to unusual. when nothing the the it, about of but month amount inventory. pipeline. wouldn't I operation There's inventory to small of hear we It's amount just very be the the So complicated. have book an of particularly handle in out we to very compare to impact, A

again, month-to-month, a from expected over in time, that a stretch small it the But it's vary. our on So typical can favor. value any year positive of usually

And wouldn't positive you at expected the negatives. so calculation, value as a if followed And could be it continued surprised a when we a kind such have you would it would and Don't is not out. doing evens the a have But it often, kind versa -- way but hear is be that negative of slight yes, all would surprising That that's to by positive. vice this But negatives. of about be works. again, string that of all. expected it be expected you're frankly,

Praneeth Satish

this, it. And XX% terms sequentially. but down missed driving down Got clear. that. a in in I QX, quite bit just then just Okay. of were I'm That's if think, sorry I'm I they what's wondering volumes, BridgeTex

Jeffrey Holman

again, cases, well, and as they commitments. have Well, their line own in and to operations, trying they're some on optimize. the have commitments also And have they shippers just

pattern behavior, beauty of get to would The commitments. And with we been arrangements the still us but the changed volumes some that their of have delivered and other shipper quarter had commitments. made that's normally we -- and/or our paid. So during

prefer to tenders and we on get We something not prefer. it's everything So that else.

we a on circumstances that a that's impacts small us of some if expect has cause it events and would don't it particular set or ship. to they that. recur. don't unusual, pattern that's So Obviously, it's But

often, -- and expect projecting to not We the continue seen we're don't year. it through it very haven't we

Operator

Neel question from next America. of The comes Mitra Bank of

Neel Mitra

some where of terms wanted offset recent a release guidance I your decline commodity the this part the to XXXX to of the for in you've of you in prices that year. said for budget overages hit the refer could

there. the through to walk trying items line Just different

well be be of to With assume kind coming So demand are there? takes could that's other walk you the seeing what commodity then Midland RBOB to that you the you year? And down, just down the eliminate butane coming if prices kind the contracting would gasoline second there of widening that, would would half look of I And when spreads? sensitivity referring MEH part that and you're oil through and some that as puts for prices disruption, spread, with or would the whether good. at and

Aaron Milford

Yes.

some So I would overall, on our that there hedges is margins otherwise usually think upside takes. and in a commodities the compared to expected when butane a history, basis volatility going our potential strong hit are our between that's have point would lot and the and with that the and blending physically margins. That's recent the coming volatility we on fairly are Generally the say you've butane because been butane there, puts of of the speaking, we on has differential actually market key margins settle still in them. muted I what

it's the basis year, to a back area monitoring very we're one that's half that at So as Unfortunately, hedge. you volatility. risk going that efficiently to difficult be of look the

more our look higher butane margins, of prices commodity you on blending prices If higher generally at outside tender mean business revenues.

such as earlier, regard, positive mentioned side higher on we that or Jeff As losses at of better period drive look and gains are prices typically that from a performance of a we time, year long the go or And deductions, it. those us. prices goes that tender as for for obviously up net all that and gains those down higher up with we have, are down, potential tailwinds product so prices the

is we've on mentioned In demand demand, gasoline many as times terms and fairly gives generally and of transportation the commodity the in high and puts prices inelastic. past,

testing it's think haven't, a July think, upon I with early we But think still we broken inelastic. inelasticity. very that that in I I the we little them. were don't prices maybe saw bit

which as So they as prices -- with commodity extreme, or that range, long volume unless commodity lot down one risk those we you an of off really a stay within of or an to up we've tested again, extreme, prices, extremes. in way are up expected but higher too whether sort July, even other the driving not of don't see may have we come get

commodity put a we lot really or together, high-priced provide strong you it it that was when of environment we So a benefits. all had going thought, to obviously,

of muted have thought to had As than some be. be more we come might those it benefit prices originally that is going what down,

But So you our what to together, it's I of put that $X.XX all still is want reiterate even I mean, intact. guidance simple. billion that really is when

the puts here economic those taking sit looking think the of the we've and environment we guidance we're still on of be back able are our and half all we're general the and So achieve. outs, all our things. that, all expectations the for takes, at that still eye set on as to and year, the right going the ins keeping now, what But to the we table

I of volatility, be reality it lot to a bit to the and And little And expect -- expectations. the think even upside that stayed part we at well. hitting what of just takes reason we prices see than you. sort may talked I of of where but all the for puts be are might right a they that in we're had that word, basis a the performance, higher more with seems terms not go about we downer now. perform think essentially had with It's that it. the it's of differential. just we're commodity like right But seeing expectations disconnect, honest which continue were to And and we is it's

Neel Mitra

that that's on -- margins Right. that between year? a uncorrelated, York Or basis? higher Is the a And positively that, do Harbor and to see if could are higher basis is when that? Mid-Con, up you blending basis could your lower see and and next the margins you something higher correlates thoughts on what's I follow New there

Aaron Milford

Yes. in I don't is to dealing been outright think going relative the or really the by It's dynamic driven with some been what's outright the things. price. We've the world. basis margin on

being basis. you that we at being correlated up months with and the bid it think, up you correlated the look And a higher. it's Harbor don't I to Harbor level events absolute Mid-Con the many margin and Mid-Continent, Europe, bid and price. York New going when York New higher trade for to on bid higher maybe as between at much, look up or being think wider is and creates relative the in not

two relative really being more particular it by instance. events the impacted think between other I world than markets, phenomena a so the one is in this

So no, I would correlated. not that say they're

wide, my is upside comments, and basis we that table some continues the forward. volatile. if that it behavior look there's we as on to continues tried to back out to more for point to So what think normal, But be stay it us goes we

Operator

The next of Partners. comes Cusimano from Pickering Michael question Energy

Michael Cusimano

products talk to depending recontracting refined with frame about wanted then look splitter, how or thinking how the I maybe on could maybe that about is sensitivity And environment. if the goes, like the downside what the revenues could out and like? like you you're what upside

Aaron Milford

Well, as lot at we splitter, a we today look sit splitter. fundamental there's in the and the here of value

we much, but You may it. not to too operate recall, rehash

And outputs. up the for takes and next be inputs the renewal year. contract provides that will customer that initial a have We

So one the what's is happen, a of is that interested. still question, which customer going logical and to

is potentially in our point an we say the that that with preferred, we're I'd interested customer. of frankly, us and provides may our contributor folks mean It lot that else. for That someone that that splitter would we in it with comfort option We have recontract ourselves. economic thinking mean current in but recontract What is for for mean that there's we think operate value continuing may It to something it to I about. be moving a least we third splitter. may it's us it fundamental terms that forward. of other a that

mind. on that us. quite already views of our got the or for that the material or should think the go -- it's in frankly, a good here sensitivities, way we the other. think setup could splitter I a become be to one be way some built of contracting of think terms not how other, we've We that, in we've driver own sort And one In material going don't

high because at probably you to you, going a terms frank fundamentally. continue different value been immaterial the seen what now the we're to I it of confident pretty it you I've have look with see to And a again, or splitter sensitivity number specific for to it's value recontracted be has is ever we're way the I of mean, find as other for get In you, don't when fairly aggregate. been than in

Michael Cusimano

then for If volumes into could that color talk bring from a customers was what through Like are that with makes sense. customers Brent could temporary? that more. driving the commercial there Yes. maybe side, looking as what volumes to more is being BridgeTex, down. That maybe dynamic Any one the is past Or looking And strong quarter? Sure. on I could revisit was there do. maybe you to I hoping pull Cushing to like Houston pricing this it Corpus be away

Aaron Milford

Well, customer to what's a is a have think -- commitment happening they I us.

that are be making the in or to international short got they they move a move the deficiency. It So that I'm pay don't could would they've they're line, period for pay of are take they they're be I'm that other be to may I'm time. the of get deficiency, it those know one at a to and looking Cushing better if decisions Corpus mean, dynamics, where our markets want a and value, Corpus, a there but for the on better off. still it's better where not could sure into be market making. those. Corpus me that to I decision market,

to making, a there earn. that's terms be example But we value are I think don't potential that making be that us in the expected sure. an expect trend. of that's that economics still our the So earn shippers that's those commitment. to necessarily moments may decisions to they also We forever. for continue decisions could but where the We don't of

Michael Cusimano

And your in cost -- as better be it. flowing worse variable that...? what it you your or does the they is the Got offset Okay. I -- guess paid margin for elect if payments? deficiency you but -- would I on it, know get is

Aaron Milford

Yes. revenue I come mean, different mean, yes, downstream, generally on speaking, we're it. going streams to with make more money deductions, if they that I actually potential movements tender move it.

We not like if But a they it. it. the it, to strong they better of move But if sort move preference yes, it's have folks it's move for -- don't that's of such that just deal. tender otherwise earn, that we are we're not earning It's and not economics in the deduct. downstream great we're harmed some might earning revenue a that we're

So economic move such it's not move I guess losing you for don't a still money if question it -- it's probably less if the it, or don't is your but us. that we're to proposition margin good specifically, answer they they not

Jeffrey Holman

crude Yes. partly power a do point. quarter. not save on this also your favorable the of to the that Longhorn context lot. due We're in losing We have LongHorn. dynamic had I little fact slightly a to expenses power did that mentioned that We

Operator

comes of question U.S. The next from Carreker Advisors. Capital James

James Carreker

I Just a little about $XXX implicitly the reaffirmation talk guidance of implies half year first million bit about wondering the this versus could if of second more DCF year. half the of this in

terminals. Just of could own the independent July you that wondering tariff X, no hit increases the longer you've if the walk some you Obviously, through drivers. got but

be maybe why walk the So just looking much through trying so is stronger. to up half second

Aaron Milford

Sure.

of note first part the increase tariff year. the the I would is is, in So middle the one, thing

there note is piece I that would to business. second seasonality our a The is

the the more activity you blending the significant of look, butane is have we because spring. in in than If is fall a the it activity, of timing the usually often fall

our business. with some So blending there's particularly And our has underlying seasonality then also some seasonality that pipeline to comes it.

of tends just just that's activity ways, do half In better. have and the the seasonality many of some there's to in. year sort fundamentally more built So second

So primary are activity tariff of drivers. in probably half it's rates, back it's higher due the the more the Those really X year. seasonality to

Jeffrey Holman

bit locked The are margins in well. Yes. blending a as little higher

second that in than we year to subject was basis, the half to of it first. expect the again, the So be stronger in

James Carreker

the then about And thinking bigger just Permian. Okay. picture

wondering there -- 'XX out that happening 'XX, the about in, necessarily, when time out indications there's Just any even on with there looking spreads, guess, looking continued extent been you to growth frames? I has but on guys transactions spot forward those the look there are at if volumes improvement production to to any not

Aaron Milford

be for the Houston curve at and over that shows Houston, time. If improving or between there East you should differential the differentials look forward the forward curve Midland

If to directionally wider expect dramatic seeing you right differentials, those look curves improvements say that could today what's yesterday, from speaking, versus and here. earn happening, now we're pricing what today forward so improve that what we differential, we wouldn't can the earn we in I but would

production continues right, You're to grow.

excess amount the drive. of it out to grows, continue production basin, of the which that As capacity should through minimize time should

XXXX results. And for to the you them see seeing sense are all there that fundamental not it show that the we're into certainly going in is, some start and XXXX realize and and when still differentials. higher should can where start improvement makes yet, So certainly I as them out seeing as think we they up we but question the beyond. we potential just look over actually

James Carreker

that's a like it hedge a And And symptom were see. normally adjustments more obviously, quarter then this the fit if one quite I in, of we than just volatility. bit just bigger could seemed the

are this had The And question, respect was thought a know it but Just during quarter. other negative. accounting else from but to positive those adjusted I commodity-related any was wondering I'm wondering I adjustments, of net Or on with net of interesting. income with kind adjusted just color EBITDA the the there. to what is nitpicky income opposite if why kind in adjustment the there's directions? adjustment EBITDA anything derivatives just happened

Jeffrey Holman

related that you've hedges we cases, settle. affect transactions they income hedges on the you've where you got periods, which up hedges we're some other at large and DCF the income current see is going where just taken that, if to match it In the timing all you've no in first, on hedges DCF hedged than of can prices. had you swings. they depending you don't do when to on but you're or we say going took when there Well, off, other just or it's put more way of large hedges, just call sort that. volatility prior to have We moves last calculate the And of affect less put off I when you the when have story them your in some path and with had fall, impacts

periods, even this the statement when was DCF. hit reconcile prior period impacted adjusted the in though EBITDA So will be income the we in

but sense. saying They're them, then a So and than -- expect than -- I move definitely expect you to or to that them more not there's there's the pattern you together related, -- you're between think makes you the they're little apples would two if reason can't is no oranges. complicated

James Carreker

that. Appreciate Okay.

Jeffrey Holman

trades first good when period said, quarter quarter, those. reconciliation a for in income, if bring we the we because but on that bringing is we this net hit, say, for had let's we're of now DCF settled income and a okay, This quarter, period into and prior that into first where EBITDA example this that the in this they losses we that had we Does -- make hedges, affected some sense? quarter's reducing

James Carreker

I Maybe follow think we can up off-line. so.

Jeffrey Holman

a it's Yes, course whole Paul put can through. you

James Carreker

Appreciate it.

Jeffrey Holman

it all trace to you It time. too out have those No, but in the It's it's through. flows, just complicated, mindset get just over not to timing. and definitely evens

Operator

The Instructions] Goldman [Operator of Sachs. from next comes Michael question Lapides

Michael Lapides

don't for curious, that should think I and across, next Just your don't planning metrics across well have How kind we almost, starting outstanding. capital allocation and you're you utilization CapEx your Obviously, I year. or know, growth of about probably unit July. into takes know, in we're the a little doing there it late $X.X remaining buyback and billion puts bit leverage and of of and program almost maybe across the

step the in thoughts. that there's would material Just point just pops CapEx it you and next would at this I back, just of But growth start year, your kind something seems year. a I'll love unless up, project that unlikely hitting

Aaron Milford

buy grow we We going it's we allocation, Michael, if projects value for capital it not And that And if in want create back. to as is value more going on and and we think to simple don't them. we be Well, to units, say. find than as find really them, that. look complicated it we're there's

forward, in to be year comments, CapEx think that. per remaining As we reasonable of still assumption. million expansion a $XXX look I We my mentioned the

see now assumption. So capital as $XXX average we of sort what million on that keeping expansion on is we reasonable based forward, right around look a probably

still to have back leverage if value flow, to our you then if the have we'll cash what we're And at and look there. free look that's to at expect units. And we're our do, capacity capacity still going assuming Xx our So buy back buy going commitment, again, you units. to there's to

working in know can if right don't going We're there's really that Z buy on units year's cash CapEx only I not really is or that back we're I to to -- therefore, flow. of put amount So there's saying Y, not now, have next more quite precision going equation a at free be moment. certain this

here, buyback through program our program. to those any I to We As different specificity and room on value. to going we've But don't we've buyback already continue all we to we'll have give maximize it avenues. execute while deploy see growth provided. of capital, extent find left beyond We're that what you value got sit also the we

Michael Lapides

level term happy the valuation figure not of we're the level maybe this of buying long out, times. How this you hey, is use a back is our of where the be do capital? as kind most and units, value you where and hey, that's appropriate the to see number used valuation as a Board You

Aaron Milford

evaluate how of scenarios, what we it's a that point I say bunch assumptions. that is. wouldn't look the it a all run this a cash the discounted that Well, not range. of would going things to look, in scenarios from think we going into do similar probably But perspective. today way a we And that estimates, we range. but an evaluate future look is do do potential What it's company flow all we going I I'm and analysis in we what it under I'm us a it those to it's of that that discounted it cash gives way. in market very you say and a It's area, at and may argue flow with get at that we model. different our are

really have too what it's considerations. so more of that have think we point broad I is with just it's shouldn't a confident no than But a So set we complex complex to a a little think estimate. not that. It's complicated range

Operator

back question. going Mr. to Milford, final our any closing you was to the turn remarks. over That call I'm for

Aaron Milford

today, great to you Magellan. in continue Well, your your all have a Hope you thank all time we and interest day. for continued appreciate

Operator

the ask Thank Thank good participation you. conclude call a your you, thank please your This today. have for lines. We that does conference you for and you and disconnect day.

Magellan Midstream Partners (MMP) 28 Jul 222022 Q2 Earnings call transcript