Earnings call transcript Q4 2023

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Jeremy Tonet

My name is Jeremy Tonet, and I cover the midstream and utilities universe for J.P. Morgan, Equity Research. And for our final presentation of the day, we are extremely excited to be joined by Magellan's CEO, Aaron Milford. Very exciting developments with the Magellan story.

So thank you very much for taking the time to join us today. lead a just mind. on I'll maybe off question with everyone's And long conversations if off, discuss the potential to conversion to Magellan's how just you Magellan elements sell of the back could there factors ONEOK, Starting walk process? could us C-Corp to hold the a if How companies the through. between two that you full went to in? decision had and lot been did this decision A

Aaron Milford

Well, Jeremy, thanks.

having for conference. thanks all, this talk afternoon. you great of First a been us It's with It's to great all.

value of anything So diversifying this we answer was, some the question more to our And energy with starting with parts and period into would often If important of us, about it the the first diversified selling other things we'd of company for particular something a be the or like And doing. creates a to natural product why way part about that Magellan time. creates would combining We sure, the actually instance? that company Magellan asked think your think other idea get goes for would in strategically interested with industry? exposure question, is NGLs find or this open in products and minded of value. having in more gas could that do, and we're part ONEOK the about, back is

commodities, to strong natural and gas business. us So NGL or enter find and to through products What other a the studying that. options are the we to refined frankly, available our to time years, crude have add spent business already to business way

years of by there's for doing searching doing do background a the that? for how lot So So to that that. way we've work do been a we just go

do, ONEOK or foreign yesterday was proxy our first you'll the statement that with the strategic see is, from conversation morning, evaluating that alternatives. essentially the sure And recall of conversation One filed that we're we things comes in making we in happened XXXX. preliminary as work

Jeremy, going built was were of The likely natural the was that historically conversation, an we space acquisition. opinion be most in we've of that, company, things. the or going other gas inorganic NGL reason that as we whatever part to that, and always to we And that do a were was mentioned

go assets business example is organically. back you grown business to we've for XXXX, that a oil The sort way all the and really, where built XXXX, us. an been that company crude the built we If of has

have NGL to to in we So just successful inclination that, natural value want chain knew we a we build space in we us probably would an that and value but lead to need you the acquisition. the in full -- because think in order the things, be it, there's

know, is, side you that happening come beyond, opportunities to the and What of do has don't of the lot market are though in even coin just what what's which you've with to that available. and that be conclusion a might

the just rather more stronger, a not everything ONEOK of of than this combine in mind. together idea. to of new came new so and being create just sort to acquiring. growth, is ONEOK the idea side of instance a It that the portfolio with It that that idea that a happens the acquired is have So happens higher idea. combining so in resilient company had on particular we with wanting diversified The we're not

up do. side you're get just also on. equation speaks that mentality, on about too And can't we're of our value which all which think is, That's hung creating to what we're I to for unitholders. But our supposed you an

value doing. maximizing well, we're That objective of that's that's strategic at the when one you're you is you other, that as If coin on for the the what -- your that's that and side unitholders. equation, and it's to your our long accomplishing what do, that's objective. you goal, or look end it's So if believe up supposed

why necessarily thinking weren't be we're what about create wanting that's thinking company, this does. more we about selling. diversified selling, much that's transaction So and We to but a

So really it's employing. strategy an just a been of extension we've already

Jeremy Tonet

multiple know very Got it. there. helpful. That's in I had we questions packed

conversations, share didn't if companies. Magellan with other able were process? point how this other those as C-Corp to So factored far I any past, know this in analysis at about thoughts And guess you into talked as I how juncture in the and there's broadly

Aaron Milford

all Yeah. I with up keep didn't the questions. just

So you for that. thank

negotiated process terms like? in in statement, you'll was see preliminary look So process. of heavily it a what As the the proxy did

those For ONEOK, sort constant led understand of Things that different is are could strategic or important or a background we with, joint for selling ventures assets, are we at acquisitions pay of are things alternatives combinations what continual or was, which times. -- buying with us. we it's to whether attention to all a that the think that what's done lot I or create to value, available work, assets process actionable, us

get a background current in, you're us from might an starting opportunity zero. for creates where options good our at be so when we're what that about you not that it all So times do comes

here. field playing the You the was background that case sort of and understand and the

of So for XXXX. understand what's background of and end discussions at possible work. ONEOK start we the sort have We then our that with us, we

we work. like took evaluating through about, something financial who did might in think We actually actionable. else like what's before interested you then do as the else there out our might process, that look time to else that who this? might We We be and And agree be well, the at, and well, board. to this, amongst look you you're what doing talked the to advisers. And talked

full our work transaction. it's that But it we're asked we're there from values what a sort question, And if we the understood unlikely. think there, most of value a there our might might we've work there in then deal? What if make to or we self if is company. determine getting out also out really the potential this so, somebody to that wrong? what What process during fully is But done sure superior that did have ONEOK somebody the be. importantly, even though we better We the

has overcome So can't can merger or what we we focused had on was better the the low job then do to range end. that a is but still solicit. range. order in sure at agreement end fee can't the And that we of we the a getting at better If hurdles we we're someone in that that deal, It's pending a we of solicit, think breakup making bring the idea while while good have did the closing, terms it. someone they a go low to might go reasonable the in

approaching So could interest deal we a from that of we has someone keep that removed better impediments, us. believe,

So if it a this think prove point we they we're a a we the But full idea value think in with was, wrong, have us. some showing pretty we we of of choose know front idea good can in deal else have by We what's better to. at up deal, [indiscernible] actionable. someone if

the about process. how we that's thought So

that the including we So ended look in when terms. rather think deal, we more a of at of the than the terms auction, running you sort value being place got we in same of feel totality up a able clearing traditional the good to

Now years how last some at some in of terms few C-Corps. looked part of your analysis put did of a question. where work C-Corp, we the We we a ago out

And little a traded we're at has look always be already were standalone. always that and us -- you one But were little on And was where a and wanted moment multiple look back a we where healthy think at us, today. stayed we're back between already C-Corp good more bit traded look if to if let's of gap we even just aware MLP. valuable. of you a look Well, at or C-Corp. and point, there the C-Corps a multiple. a what really C-Corps as for may burner So sense different trade sort let's It as delta for we today we we a that the then, the an to we might so just decided that like. say just And of -- for in convert

are So as one inclusion, they those to logic if of know open converting get and What that and up a C-Corp, But what those you corporation. to unknown. words, taxes investments, things. will pay you open value Magellan a In for is, a the going also you to willing do convert uplift a the and broader are convert? behind when other all -- you would you're folks index convert to of hold you passive -- that C-Corp some are MLPs, C-Corps of would up be set to

what it. standalone basis it good difficult is it becomes and how put know a you an with you gets. uplift, because really decision and don't gives decision you won't Right? when good know measure So the not you Was or it unknown that decision, a on a to to together make a until do

stand-alone converting us. in at front the that's juxtapose now Well, C-Corp of combination approach that as to a to look and

your and know the and first is index. be known the are getting premium an here business, the known. you're think here knowns XXX, the a so about company in in full instance The that's Let's combined for value you think knowns unknowns S&P the will a about The here. you're

So delivering premium process. this unitholders there the value are all a and knowns in about in versus conversion, it's transaction in for our the -- of more lot terms the we're

unknowns. has we much see. the unilateral of it all converting this value on the So transaction a C-corp a fewer, This can has lot and basis, that has

Jeremy Tonet

That's it. Got helpful there. very

thinking like as value other into whole? Or partnership about going that that fair analysis. into your process? sounds a a fed elements to to valuation process cover Were the went there it so the any is the proper lot with And

Aaron Milford

for key Well, understand. us, a thing to it's

is last that over been have The one years few in we've we we market. vocal that undervalued the been the believe very first

that units. in been the do we've been haven't shy we about undervalued back believe been market, not but We And have only it. we buying

outstanding years, XX% billion our of we over units we that buying the Over we last felt undervalued. because We three little back. back $X.X doing a units, were were bought

that So time looked how dovetails long over traditional was how they're to that determine math. we this that's process, very thought at cash can't if earn, to we it our felt because It view some it, not we having And a have there's we've for looked value We with a does we of years through that right? the three of updated at going or back only going kept of folks in our think in did a came firm that discount value we determine up flow, into value the in period without was you firm, what one and what program technical were if the undervalued. where room, for did is. whether buyback undervalued, unlevered And you buy you're right?

this is So work over all we've firm work. we done It's our about years what current. three have

is value, So it's have a on comparison of our is the you're put fair also we're in say that the we this the firm when we change that value And comparison you regardless And value we value the combination transaction full along. the value we there's sure, market it. a do our value. to or because market, trading think do make the mind, in real what is had intrinsic of intrinsic bar we to that's focused there's better. that value What where where felt firm? That's this comes say that you to on or to we of

the that's It's think value just the the and business, the what combination can be think if you the know on on value is for own. it's we It's years, But forma we worth firm because you this it. at the present look beyond work value. basis, combined the we value been company be just XX% going going is plus deal. company if the also is today, three doing what how determined be, pro chin of achieve what we combined bar. look that deal we combined So than not a we've what the that in that, can of $XX higher to to at it's of And worth entity. cash here really That's fair our

the fair, sure So company also only excited but about, and you value to get very have it's in it's make see that you value that's the not forma we're the pro you frankly.

Jeremy Tonet

how there to your helpful you we've lot long-term that is it. That's Tax guess, very area tax into Got factored basis, analysis. us questions. three where of a year walk received especially I think In unitholders. analysis? an through, for Could

Aaron Milford

lot for a whenever talk were It's there transaction no structure while that -- knows Anyone understand of a was discussions looking you're an that's it just about you're going the so a about this to and MLP to space understand the evaluate. Well, We're during at need that process. whole followed taxes this, MLP you to part like taxes. of we it. from have MLP, Jeremy, different

literally So you're to too will that I be we for took groups look long position important going your time own bought you to things to our it. really And get trade understand. Those the the two and in on tax want but don't at the how the units. are depend when unit held you to up technical,

that part will the sort then we happens unitholders most our take realized wanted had unitholders firm. part if we our understand conclusion fair tax of taxes you that's the effect that that, that firm to you already value And reached all and we only was fair compare What getting. is the of after-tax combination stack what was that's that of the that the that to conclusion we And we on the And incremental the this to this combination, be this premium owe. was best part those we're of that, The related of of value are the taxes even closing And interest basis. capital the to reason the up? for part of do an gains on in then you the it how essentially that's reached is believe, table? on the and

So you owe. back, will the already taxes step taxes our that they owe unitholders just if are

So an example, a moment. let's I for use if could,

May last combination. at so $XX.XX. looked this you that's unaffected year, We trading for If XX this announced of the around before price were we

at And which one you're -- sold that pay on realize as much pay. of you're going to so is these you going will you're depending you our trade if your to unitholders tax and that how in if and taxes wanted to determine group $XX.XX,

Let's for just example, $XX. it's say,

Let's number, high pick a $XX.

You've held us long time. a

that premium, which of $XX, number or So Do out we're and to otherwise Compare this $XX realize at realize only math, you'd $XX.XX -- by around out getting same take example. a you the higher you instead that's $XX.XX. could $XX, $X. a because this in announcement take than was what transaction, $X get

previous than selling you under at transaction after off the the better You're transaction price. are the market

owe is it. reality, that the that's So our unitholders already

The second most important, the I taxes essentially taxes, I I but sell to difficult I to this that's you the $XX it and pay want piece if don't thing just is is, to you for the probably I equation it. that -- in future. unit really of about want unitholders our these the grasp, to and don't and owe. want defer the so But to to sell I know it, want want already pay owe don't that

my hold just unit future. going and to taxes I'm those So in the pay

really clear that each to and point going are What increasing. The sure to we taxes we're the to make forward that on needs face is owe distributions year. unitholders trying from this will what that, taxes pay be higher understood we're be going to our

of they of for avoiding tenured idea or owe a tax The this longer-dated an they isn't we that longer. as be the in for unitholders option. XX% and tax be burden that some of the pay really So as an that XX longer owned And of would example much or our XXXX. them years say holding could distribution

avoid units doesn't that's event, selling the going avoiding holding my way, it and these So the in along simply any I'm that to the owed. to frankly, is taxes by up. -- at going paying the idea understand just to work. are taxes and of And you both be But the have things. will not how not of end this taxes those day, The taxes going

which that you might and time, they're event to everyone going taxes, taxes from longer that less There's value more pass wish have you. one pay along the life less going at, the hope is away and longer -- where is, a all we sort data the and that way, the will to fruitful very limited to in long them is exception how your that our you're death to But upon to that these to heirs. out benefit the we're has pass the of not not benefit on unitholders, pay

So come value. we're central the job back our is There's really looking in make two. firm all our to of from they'll forward There's think the premise. sure situation. understand it, unitholders what's here for combination. their understand they It's the we that full a getting once full value to And

more, we company, these on you're be thirdly, avoid absent we believe, and one. combined to worth the that taxes Magellan going passing don't And will away, the not any Second, stand-alone. wish

Jeremy Tonet

it. Mortality difficult Got a of active management. is part

So understood.

I don't like kind of maybe is. or for able that's investor of so, you're if able to there's move the know it. something guess, to could lot we receptivity on synergies combined you sounds -- talk I about you're And that what comment, It as to education entity if a see

Aaron Milford

Well, sentiment this. receiving are let's the about and people how talk

think I important. it's

we most out. to understand That's I just of help understanding out to We meant want the our shareholders think just that's that. have or the the what And supplemental proxy the how good. them at put we assessment we information largest still very happen. phase. unitholders see think they're least are much We've put preliminary absorbing world, in and that's

the lens see be fog of we our which absorb some there proposition value we out unitholders, think with around deal people the the we going it. through So have we're see information, least the of will and to through is sort able have this that cut through time, conversations as them through at to

and study more. We're been, has a anxious to it putting talk out. good we think thing. And for So really going thanks it, the that's we're reaction to

We is minds, have thing. a open good which

you in it synergies, So that of as for well. moment up. a terms the appreciate about I talk let's bringing

is same in of million you'll range. synergy the the of focused perspective. expect end the of company even deal million Just all we low be the going that range, deal see from And our look works from at That of us our million, to to combined S-X, page, we The at more be you if $XXX low and this on should the essentially most the synergy range. what end put plus. $XXX the the end $XXX between which forward, forecasts, sort low $XXX synergies worth the million synergy the of on

to the If million you down, $XXX office don't you do of can redundancies, combined break look that or want things things cost better. the that expect to too $XXX come synergies, activities, back primarily of million about you we need back when that you office or company, at from

million $XXX of $XXX that's million. So the

commercial The the synergies other $XXX to going And get commercial upper think, million, then that will be that end we range. us be of synergies. there's to

numbers, that that, The do making deal extent make I are think with makes sense. which So heroic. the going the those really even And we anyone don't point that, better would would we to than then to, is conservative argue sense. start I it's synergy to expect

going just efficient is then we going forward, two blending to today, that optimizing where move, us that chain into we businesses. area. it buy NGLs, believe an be you going that going we store, independently. things into like couldn't entire and really company it efficiencies we area focusing available making An to make We're procure the And butane our in gasoline. be it's really to as really get starts to blend end to find how that more system. in what's So butane going able particular, we're sense? find among and we're We on a that value assets through the That's that be to

another So to that's that's find area going synergies.

of get able end the upper upper We even So through that blending range. get But deal going and we between the time, end to, range, $XXX the if low structures, the the to range. don't the to cost optimization wrong, of end we're to that the and is think the the be we're million works. of

Jeremy Tonet

That's very helpful.

I'm sure the been not how Magellan public you're much to at able comment again, there's And point, exactly but so opposition to some deal. this

provide And so, that extent I the you're and in anything in you direction able extent on to were comment. I'm the just able guess, (ph) to to wondering, [vote] general thoughts to else,

Aaron Milford

information -- not Sure. view think should to we I I I'm I into is It's best the going trying that's tit-for-tat to but They're interest. we know those this think may it. We're and of -- who is, the not this opinions their in view think question, think Even we into of best unitholders, that show We're do. And with unitholders. going talk appreciate our to get with to interest. into intended reasons about to yesterday still to how out we on What all is that's this to to some why why a interest meant to it's the unitholders' their in get in and get disagree. want unitholders. to in what our an with ever we it. our is the deal put explain argument We we're is respects, job do, can this our to what not entitled they agree supplemental disagree

going owe the time company and the anyway. on things combined of growth, full value; I'm going it. taxes a rehash you're lot We resilient And it's more higher is to are business that. attractive, than spend more something are: a stand-alone; those our to not

to going we continue closing. vote think successful receiving. equation to And both talk all We the anyway. that, consideration to value to and we owe company in the believe we going think understand forma if you about people get see, and that the pro in this You're we're them value. be with back the we to this, there, comes as And we're and help it is

Jeremy Tonet

it. Got

be that directions. the So any salient different this deal thinking that I haven't touched on we touched there should points in point? about many think we've Are we on at

Aaron Milford

emotion a think a interesting, salient and other issue, this perspective, bit is, I interesting the transaction. No, around really from of it's lot a soft I frankly. only It's there's point, and of that think our but it's

a lot us we're have been really of run possibly as unitholders We run We've to we appreciative time, tried them. with best that have this could and company it. of a long

discipline, we a reputation of being I good those focused investors value, really love. on have all that think things unitholder-friendly,

there, done the the here of that's think to a a symbol think good been emotional We've a there's our that a we've reasonably a think of it's out through lot around years. job thing And look since where I going And of there's the I end respective this. and made to investors. point in emotional Jeff, a investors day, sadness lot at money. time of that the Frankly, I We've ticker and the just a sense the and of But see Paula like can from in I see come Bruce. some get-go, an that of our going an room beginning you're not thing from management. Magellan much

what emotional day, for does. But job we're job, that's as do. value, day, little to that's well. end end believe and we're to the create a the maximize this That's there's going doing. is the So that's our at of our combination us of to And what we at the what value,

Jeremy Tonet

you fundamental in Got to want to in haven't final our and think minutes we're minutes, few past talk here? Magellan Well, -- the down that there -- our last anything conversation it. the anything touched touch fundamental That I business makes of the that we on Is we sense. three can yet. to

Aaron Milford

because Yes. This a combination a the us will bridge both to talk actually be way I think and for the great fundamentals. about it's conversation

a certain business doing currently time. stable, good going be a very really is It's business to good everything Our It's for really find is a slightly demand in well. long growing going and product We business areas. well.

job. If nothing some contracts. good look team it's the at just flow doing with had our but That's new, challenges got We've overcapacity. is stable. Cash good crude a really our you is really business, oil really

well. it's really business put So when you doing our together,

environment it's look this you the year, for been commodity favorable If really at us.

a So long going our going good we're we in it take going business lot It's to for flow business. we're have to together believe, really with to really It's highly another confident for be generate, time. we're long business. going and cash And a still and to that, put relevant a a of stronger time. really

far So going so This is a well. things for us. are great year

going continue business. really take to an expect that, together stronger business and strong another it put it We with we're and even to that have way,

Jeremy Tonet

And the time around on notable? far side like last in product information seems are set guidance the pipeline the with anything line of refined is as concerned, available as expectations business in as tracking it publicly out things else or

Aaron Milford

It's certainly tracking our guidance.

this expected We year volumes refined product to X%. grow

XXXX was record. XXXX in to X%, also grow So keep but have XXXX you over mind that a

company, as a So to grow. continuing we're

X% that keep to certainly declining. have you not perspective, So

So that. we're thankful for

Jeremy Tonet

Well, I think we're down to our last minute here.

or with want don't on I so, you to And that the fundamentals know audience if otherwise? there's thoughts the final any share

Aaron Milford

full. it's the But to appreciate and unitholders' we're stronger What them owe comes I it. all highlight once The be going we here No. sensitive. or on basis. going We the we that way The to I is, back understand taxes. where one combination being you're you began and we the [indiscernible] the merger that's value understand including think provides a basis would it day, to value, on an our think combined the the this end is value, after-tax other, of company and is At again. maximizes receiving

Jeremy Tonet

to sense the Makes greatly We it. appreciate time. Got taking us.

Aaron Milford

you do Thank Glad Yes. to all. it.

Magellan Midstream Partners (MMP) 21 Jun 232023 Q4 Earnings call transcript