Earnings call transcript Q2 2023

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Operator

Greetings, and welcome to the Magellan Midstream Partners Second Quarter Earnings Conference Call. [Operator Instructions].

As a reminder, this conference is being recorded today, August 3, 2023. It is now my pleasure to turn the conference over to Aaron Milford, Chief Executive Officer. Please go ahead, sir.

Aaron Milford

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

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

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

As disclosed morning, delivered in another this Magellan solid quarter. press our release

higher average due refined higher our Our second commodity-related beat tariffs product quarter shipments system. contributions to results and associated of on proportion longer-haul as our higher activities expectations a from as well

over expectations the quarter our CFO, now ONEOK our discuss I'll call Holman, will your then our and before from earnings, to I highlights answering review second merger questions. pending to for year our with the to the back turn Jeff be

Jeffrey Holman

Thanks, Aaron.

that our be reconcile metrics me cash note DCF to And nearest free non-GAAP exhibits cash flow I'll including that let making or and certain references flow. included GAAP measures. we've financial earnings First, release metrics, to to distributable their these

from in morning, of reported sale million which million quarter second second network. million the $XXX we terminals this to XXXX, gain Earlier a quarter $XXX net of our compared income included independent $XXX

and our year-over-year well transportation terminal a profits our as from gain, fee-based as Excluding higher that from commodity-related contribution prior increase was services. the by driven period larger activities core

million, after our in impact mentioned, flow nearly the mark-to-market million. $XX from cash distributions resulting quarter, earnings which, was year, of million, the to DCF commodity-related last million Adjusted of cash for exceeded was $X.XX. as $XX $XXX free $XXX free increased adjustments, Aaron quarter the flow unit which while excludes for up $X.XX, quarter for the just of guidance per

A our is quarter-over-quarter available detailed of in description variances earnings release.

to a as I'll So few speak just highlights. usual,

products. million, average. which were higher second tariffs higher due refined by operating rates our XXXX rates with than were profit higher primarily on We transportation quarter X% to margin. average Starting product the reported as XXXX well The $XX as higher quarter second average increase driven of million of midyear largely about transportation $XXX in

addition, benefit to as period from part long-haul In at the continued ongoing disruptions. which of higher rates, result shipments, more moved refinery in current a

margins well due activities. Product margin periods as blending sales volumes higher to in current our liquids the between increased lower as primarily unrealized gas and related losses hedging to both period

Our versus realized closer than margins year per period. gallon more the gallon year-over-year per doubled $X.XX in prior $X.XX to to blending

to crude Turning our business. oil

due 'XX revenue primarily Second in to splitter profit current from down revenues million, due moves. splitter, was our lower additional storage quarter extension operating part the last in period. $XX increased executed period condensate in the as lower million revenues well provided due the for year slightly as contract to Otherwise, lower to transportation from volume $XX rates

barrels the increased overall. the XXX,XXX at commitments. volume from long-haul than in from XXX,XXX new on in day just shipments of per rate barrels over move Houston second Volumes was per little a day, our resulting pipeline additional in a part rate the to lower averaged in due for volumes resulted volumes, connection Longhorn distribution volumes third-party 'XX system activity the from average up to segment shipments XXXX. prior Since a higher up higher quarter over lower increased HDS this these period, year that versus due ramping

futures period contributions contracts activities as mark-to-market marketing due current the favorable well increased margin from our product prior on oil quarter. as oil versus year crude adjustments higher to in Crude the

prevailing volumes BridgeTex day ventures. lower joint in oil crude XXXX from approximately in our barrels second from volumes XX,XXX due of were barrels shippers. about XXX,XXX down the committed per 'XX, day per volume reflects to decrease to quarter of particular, in on Moving which This general importance emphasizing from Permian and crude of in nature highly the the noted again low of some the differential competitive business the having counterparties. the take-or-pay we Midland for while and Basin have high-quality time, commitments

both XXX,XXX record compared the a reached of approximately uncommitted before shippers. volumes shipments as committed barrels year barrels XXX,XXX a Saddlehorn new per higher of day to day about for result and per

and million the to second touching costs briefly periods million on costs $XX quarter. G&A for incentive approximately combined expenses, between refined by higher merger-related increased $XX of Just segments approximately due our to compensation crude in and incurred

at In on continue credit outstanding billion quarter liquidity, end commercial borrowings facility have we terms and available no had our $X paper to of program. a

June on of with debt of debt face our XX, billion weighted As interest rate net unchanged remained the about average $X long-term value a X.X%. at of

compliance for Lastly, our at end leverage the purposes. quarter of ratio was X.Xx the

Aaron. And back to the call with turn I'll over that,

Aaron Milford

Jeff. Thank you,

transaction to continue this will remain including created transaction anticipate superior the on after-tax an quarter our of during ONEOK by the is and unitholders the alternative, value standalone to We the basis. for this of close third year that confident with value

said, That future appropriate quarter costs basis. Magellan standalone merger-related performance, on based believe our to ignoring XXXX we potential update financial a second on it's for expectations

through complete. the quality businesses of drive is continue full the of ability our ONEOK combined to merger stronger assets pending our year outlook the revised with company Our a value to highlights and once

strong expected expect year. for $X.XX XXXX excluding billion commodity second on reflects of We performance increase again, DCF the costs. This standalone a margins the and the for of merger-related generate basis, during better-than-expected remainder now to quarter continued

forecasted an more blending XXXX $X.XX our front, activity of gallon, full and which of X-year the year our generated average $X.XX we XXXX $X.XX last $X.XX expectations per favorably X/X average currently this include margin compares fall average hedged liquids blending gallon. to of gallon. at year margin our per margin commodity point for have All an we of in, gas per than the On

than hedged at XXXX spring XX% with margin made a excellent We per have next $X.XX also progress of hedging gallon. spring more

We consistent -- that recent are rates index by the the with refined increased rates also XX%, midyear we The -- XX% increased of by average most have our increase effective me, our all-in XX% average increased we our XX% approximately equates July of remaining the products FERC markets an products product our also tariff to refined increase tariff which excuse markets our subject an XX.X% X. and of of to refined guidance. tariff

ONEOK. with to our merger back Turning pending

unitholders We and difficult combination continue believe to just capture with be ONEOK to strength it'll through receive And of durability the business. and value the further that our and this own. in confidently that Magellan's confident be will our value full fair on is we as

our in merger, response, value to ONEOK used consistently our basis shared Prior present our created likely repurchased formed the realize that for we undervalued merger our to since frequently conclude announcement we with equity equity also of MMP outstanding XXXX. unitholders that was delivers more of same XX% Magellan standalone. for have and analysis The the views we repurchasing the conclusion a that value than could and

been the to considering, unitholders. to Magellan focused our delivering important especially great we've Tax pending of are a something considerations connection recently very time unitholders. always has with It's in superior deal spent transaction. value on

Willens, value our visit already, interest read the done the conclusion. transaction merger haven't of why along unitholders. transaction that you I a delivers What a than best on tax ONEOK so highly if more encourage Magellan confident is unitholders similar we to reached is the clear Mr. the respected to would us basis. you, even an standalone, other with to is expert, to Robert pending information work and MaximizingValueforMMPunitholders.com Willens' are in about after-tax

investors, many And with customers. speak overall, been to positive. analysts, opportunity the employees feedback had has the We've and

We tried to to initial transaction of coming are confusion clarify investors we the around have tax pleased understand see of the impact. some lot of are rationale as in market that a the the to the

detail And and to our as investors some anticipated we of become ONEOK planning combination. starting the that about confident is clear excited the are more the more of the potential company. progress market will integration reflect even value synergies, on we combined and It's communicate

recently unitholders value to $XX.XX unit ONEOK the XX% ONEOK nearly market premium July $XX.XX share. the terms have a the of move to prices around, price, a will to as based would merger. at of While and announcing of of closed price our per trading per that transaction, At XX, the units our on prior Magellan continue received as shares shares units

now are ready to we answer Operator, questions.

Operator

Instructions]. [Operator

Our with is Theresa first Barclays. question Chen from

Theresa Chen

Aaron, you view speak both on you your materials the which opposition deal the retail process are out been And itself, also on education the you so from Can public faced just since the your then, owners? your related and announcement and came in to for holders. to institutional since inning released this? some have

Aaron Milford

as been has time clarifying, expect And we in from rationale. we forward to around lot investors, impact the talk lot here, Well, of prepared in the talking communicate of transaction. as the this a we go tax as a And transaction. We're continue remarks, communicating my people understand we from our overall, reception to said that, I detail beginning as more synergies the of spending about and frankly, to misunderstandings are be to positive. then

question, accurately in the is because think we're the game So think, the that inning that we communicated, we're the answer it be -- full the ahead through we're are the in, got of compelling. part to inning of first We've we when and second would And we're us, to in to your prepared to that of inning. deal see successful I the merits we're very ninth say a inning. going

Theresa Chen

what color next enough just another you steps? since ahead Got adjourn and some time not game to if helpful. you about you it's if Would full the And it. us XX, on the it until hold of are what have that you give be expect, from can date? now And would choose September you,

Aaron Milford

all, We where focused. plenty that's for and we shareholder the we're September of first have of XX. meeting think scheduled time, Well, that's

Operator

Spiro question next with Our Citi. is from Dounis

Spiro Dounis

activities, just First on kind hit question, strong to the but quarter this commodity pretty seasonal. of maybe

if you curious little guys bit just that maybe a walk So can further. through

there look ratability you're guess feel those of pretty Just margins. And you to extra that. doing forward, sounds you it I squeeze about differently like maybe seems like of out the sort good something as

once So more just working. how again, that's on detail

Aaron Milford

Yes.

it an very for look X break had just little gasoline gas at a we've NGL sense we've us. its pieces than think. you had favorable And when and market into had wider margin prices, strong the first apart been margin. setup our might blending let's liquids drives a a the weaker relatively talk has what that in So and We've margin that you that available about

So have in may past, being differential, better. been a just about us. recall of for basis a bit the we the you headwind The margins basis talked

than it's in. coming less this anticipated had year, And so far been we a of headwind

the on basis at we're looking that picture. expected. also margins we're margin wider feeling gross we the just otherwise So differential And the margins, place. first not headwinds That's the quite in

remaining We see for at see fairly the what we rest the the consistent that on of year based moment.

We're part better to performance job again, other it. all that better is just a The in are overall part and being the of process a volume. of, just company, as the that doing, just available opportunities of of terms capturing us at

So wider as both. the it's as a story of are Volumes higher, result and margins well. a volume outperformance

Operator

question JPMorgan. from line Our next is the of Tonet with Jeremy

Jeremy Tonet

about if a talk the I could. to want Just bit little business

that Just things far? you In on trends as expectations look, normalizing your how as do go-forward see a so trends has your guess materializing. I curious And kind there? markets, to materialized regards of with across have demand fundamental product far how footprint, been versus

Aaron Milford

business. have to the for Distillate going year, healthy It's look was unusual down. When gasoline So a us was quarter very this second not you stable and of up. we're at areas, to as we growing, relatively are some demand expect actually our commodities be and and system. But were moving. some see stable in able especially extend to stay we the swings, to

in We fully beginning West pipeline XXXX. have coming in system our expansion of Texas the online

our some the we have means market, we slowly are immediate fundamentals, opportunities growth to the we'll But think, provide fairly as think about us. So extend growing stable, period. over which a to we will think, those trend, that volume

very of business up forward. highlights just the we sets well that going consistency So think and our

and longer-haul Jeff movements as also due on mentioned, in our outperformed We quarter, pipeline. to I the

connected those served. bright longer the still markets be So may XX% primarily to The spot move capacity the demand short-term to refinery us. refineries when almost U.S., and just there refinery refining a fill are for disruptions. are And has barrels holes some in we're there, real the driven are that's headwinds, be been tend of since as disruptions into to hauls refinery because the it is And when we those to suffering down. happen

So to that longer-haul allows us volumes. see

may do. show those little a volumes longer-haul of up, it's Now but unpredictable they when

a at going really stable system, look we're have business, of to extension high-performing stable, very when optionality so with just the slight combined business. a And you growth our through the

you to going look to and business of you those our the combined when compelling business pro the it's put inside company. of combined pro fast strength company, the the at strength think company and company you be you And and together, really think forma a ONEOK's forma forward about we that

Jeremy Tonet

Got it. exports crude that? exports if very comment as and you could, able helpful guess, to Permian you're over out playing And oil there. want dynamic I extent how I That's to the touch just guess, that well between see LPG on I on exports any on Houston, And particularly, Corpus thoughts, time? to

Aaron Milford

crude whether States, generally, or It needs refined any expect demand resources market. Yes. LPG We exports comments we to world see to or I have don't products pulling them. the those from petroleum on components oil. But into United products continue grow just on that's the that side.

On States its well of to talked through lower we logistics Permian still the to the the predominant there. fill up the from terminal out that as that's generally into capacity the to in port cost market. the infrastructure into and expect about due is that past Corpus, time, Corpus export crude market specifically, as pipeline We to proximity get United

demand We again, expand. as But we as some, start towards will to evolve, order barrels export the yet It Houston growing more start expand in don't that and seeing that, meet heading to worldwide. will fills expect. Houston's Corpus time to capacity continue through capabilities we'll know extent

Jeremy Tonet

That's And helpful. last if just ask. it. one the deal I on one could Got

to think, in maybe response here, it, questions, I early the first inning. in you think earlier said I innings the

show outside? how know is When see, successful things stretch? at Just I wondering the we a from towards deal? to out progressing we as seventh are see boat far process can concerned, this people things do how getting guess, the outside we and as the getting there, the inning far as as What can up progressing are from we're

Aaron Milford

Well, I think that's a question. good

we're plan we're game so And execute plan. our a the that to have first merits the we're transaction. this in of we sure And make going game reach if communicating to inning, investors,

that first plan is the can going to plan. game expectation the not set the take We've answers. game inning. And to my investors on who that get ninth is to up us all got up, And website inning we're go the from going questions way let where have

We have outreach plan.

that us. call talking investors We're to

we're time to everyone the and to special So between now talking get our all we meeting day.

this say in. we're in first the the the So We're we're when in the I inning, that's started. in that -- inning. getting We're game metaphor, first

execute if well way the plan. We're we And transaction the in of that, be execute game all will of merits getting successful this do the We're we'll confident going game. going end our to the understood, be vote. till and our then we're to

I'm the worried end of get we stretch. inning metaphorical about will here. worried seventh to sure getting we the about game know stretch? the when inning I'm But I'm the not seventh to

Operator

is of the Stanley Keith line question Research. with next from Wolfe our And

Keith Stanley

one question on wanted the follow-up the me. movements and of refinery for to disruption some Just longer-haul impacts. I

balance average very can refined So that of movements. high of expectations for increase quarter meaningful, just you and tariff the the pipeline comment the for year? impact the It other products even was longer-haul make normal putting of seemed any But aside. those on some the the

Aaron Milford

Yes.

isolate significant. think your movements it, that It positively if we quarter about million, -- estimate or the of point. So by the $XX quarter quarter and impacted long-haul you second second was you that to

quarter. the Now second refinery environment consider in have you disruption also to the

at to down. you the You were the they wouldn't expect of those that normally refineries time particular, same were long manner sort had they in in that for in have as refineries down several as down Texas,

be So in extrapolate I think quarter here second of from the not event every it's quarter a bit on to that unique a have to to we virtually careful out.

difficult $XX And million. the second But know we the of as What them. to from significant, benefit like mean, we is I occur, them. generally I they quarter, said, that's extent predict. the they're to for it nature was

Operator

Instructions]. [Operator

from follow-up Dounis. next is Our a Spiro question

Spiro Dounis

again. Back Sorry.

more sense deal, last your the few in receptivity X-part now things. months. curious customer are heads investors' going. the to guess, one related We've it side customer of on what I But has or where had at follow-up question curious a though. One, on the Just a the been got

consensus been And then to what number think there. maybe of able any two, sort tougher this as is about on of curious if broker answer. garner the you policy you've voting sort But held I'm the swap, on units to is

Aaron Milford

Yes.

is is have customers. But in important that first it's I keep take let's customer what question a been positive your from to we changed. our reaction mind the hearing that -- value and hasn't first, which reaction. also And So the service,

all them sure any to make pending how expect So throughout difference this been and customers, we've from really they hard they working don't our in feel us. merger, treat we what

So still get to service from our perspective, gotten, them continue expect getting they're they've we that and always it. the to customers, same

there deal that that's they make to reaction customers So continuing happy. been the happy, make and need a we're are there's because -- do the stay to sure do we our hasn't to fact sure what positive to we that overall

a lot So frankly. on that there, there's of not quite news front, really

being some so essentially don't. via There your on the units swap, are are voted can those based of that question the on there that brokers those wishes To hold the swap, others holder. that units facilitate

interest break know Where or known what don't for and will our of that we counterparties know units that accordingly. swap -- in can are, make on percentage do there down are have swap allow hold terms I don't that their I those how to people to exactly you vote But can't.

to answer XX%, Does total or is in a of But take. that bag. bit probably question? your perspective, we give a put swap it it's just think mixed ownership, So under

Spiro Dounis

no, it a Yes. a you at I does. I know it. it Aaron. one, was No, taking stab tough appreciate

appreciate So guys. the I color, always leave it there. I'll

Aaron Milford

Spiro, we follow to been have sure moving know just that, they can been on And positive. on folks their vote. think Yes. there that And that's we have to positions up swap make

that I'd as well. So remiss not be mentioning

Operator

are there remarks. continue further closing this no Milford, Mr. presentation questions Please or at time. your with

Aaron Milford

Thank larger, look Magellan's approval And strength becoming confident with look the we We to business investor merger with to following in to your the discussions continuing and pending remain contributor today. company investors of a weeks. our you time coming a in more of forward diversified valuable forward ONEOK. for our

continued appreciate on encourage pending to investors Magellan's vote with special good support all for meeting of ahead and have XX, We your a merger day. our ONEOK and September

Operator

And that conclude ask for the that participation lines. We does for conference all you your thank your call today. please disconnect kindly and you

Aaron Milford	President, CEO & Director
Jeffrey Holman	Principal Accounting Officer, EVP, CFO & Treasurer
Theresa Chen	Barclays Bank
Spiro Dounis	Citigroup
Jeremy Tonet	JPMorgan Chase & Co.
Keith Stanley	Wolfe Research

Magellan Midstream Partners (MMP) 3 Aug 232023 Q2 Earnings call transcript