enjoyeda better-than-expected first quarter of 2016 and is on stable financial footing,company officials said during their quarterly earnings call May 4.
Magellanreported a net income of $207 for the quarter, up from $184 million in the firstquarter of 2015. That tally, CFO Aaron Milford said, was a pleasant surprise forthe partnership.
"Overall,this is a solid quarter that exceeded our expectations," he said. "Ourrealized margins from our commodity-related activities faced some pressure, as expected,but our fee-based businesses continue to be resilient and growing."
In spiteof low commodity prices, the partnership's crude segment reported an operating marginof $101, a $16 million improvement over the first quarter of last year.
"Lookingat the crude segment overall, total shipments declined due to fewer barrels shippedunder our separate use and distribution tariff structure," Milford said. "Shipperson Longhorn and the BridgeTex system have choices they can make as to which tariffthey use to move barrels to their ultimate destination. Both BridgeTex and Longhornoffer long-haul rates to many of the ultimate delivery points on our system."
Duringhis comments, CEO Michael Mears said the company had increased its distributablecash flow guidance for the year to $910 million, a $10 million increase. He alsosaid the company is well hedged for much of the rest of 2016.
"Atthis point, we have almost 50% of our total expected sales volumes hedged for ourfall butane blending season, which equates to roughly 75% of our full-year blendingsales volume, either closed or hedged, with NYMEX contracts," he said.
Mearssaid Magellan had increased its spending projections by $50 million, largely dueto the addition of new storage projects along its refined products pipeline systemand new crude oil storage facilities at the partnership's East Houston terminal.
"Constructionof our Little Rock pipeline is substantially complete, and we expect commercialoperations to begin in early July," he said. "We're very excited aboutplacing this pipeline into service, and market feedback has been extremely positiveabout this important asset to bring new Mid-Continent and enhanced Gulf Coast refinedproducts supply to the Little Rock market."
The Saddlehornpipeline, the Platteville, Colo., to Cushing, Okla., segment, is expected to startcarrying crude volumes in the third quarter and be fully operational in September.The final stretch of the pipeline, from Platteville to Carr, Colo., remains in thepermitting stage with pipe installation expected to begin in June.
"Westill expect the Carr-to-Platteville segment of Saddlehorn to be operational bythe end of the year," Mears said, adding that Magellan's Corpus Christi condensatesplitter is expected to be operational in the fourth quarter of 2016.
Magellanofficials said the company intends to complete the growth projects without takingon additional debt, as it has sufficient cash or credit facilities available.
"Wecontinue to enjoy a strong balance sheet and strong distribution coverage. As aresult, we do not expect to access the equity markets to finance our currently identifiedgrowth projects," Milford said.