Magellan Midstream Partners has reported a net income of $253.7 million in the second quarter, up from $214.4 million in the same period last year. It is also nearing completion on a number of its significant construction projects.
Refined products operating margin was $224.1 million, an increase of $32.7 million. Transportation and terminals revenue increased $15.2 million due to higher average transportation rates.
Crude oil operating margin was $160.3 million, an increase of $8.3 million and a quarterly record for this segment. Transportation and terminals revenue increased $17.6 million due to fees earned from new storage and dock services in conjunction with capacity that Magellan leases from the Seabrook Logistics, LLC export facility and higher transportation volumes on the partnership’s Houston distribution system primarily due to the increased activity at Seabrook.
Marine storage operating margin was $30 million, an increase of $1.7 million. Transportation and terminals revenue increased due to higher storage utilisation resulting from the timing of maintenance work, with more tanks available for contract storage in the second quarter of 2019. Operating expenses increased slightly due to higher property taxes.
Magellan is nearing completion on a number of its significant construction projects to enhance its service offering and benefit its future growth.
The partnership’s expanded dock capabilities at its Galena Park, Texasmarine terminal are now operational, with 5 docks for a combined capacity of approximately 750,000 barrels per day (bpd) now available at this location. Construction activities are in the final stages of completion and testing for the partnership’s East Houston-to-Hearne refined products pipeline in Texas. Magellan remains on-target to begin operations at the end of August for this new pipeline segment.
The second phase of the partnership’s Pasadena, Texas joint venture marine terminal is nearing completion as well, with an additional 4 million barrels of storage and supporting dock and pipeline infrastructure still expected to be in-service by the end of 2019.
Additional storage and export capabilities at Seabrook are progressing and expected to be operational in early 2020, and construction is now underway for Magellan’s west Texas refined products pipeline expansion and new Midland terminal that are expected to begin service in mid-2020.
Based on the progress of expansion projects underway, the partnership expects to spend approximately $1.1 billion in 2019 and $150 million in 2020 to complete its current slate of construction projects. These spending estimates include Magellan’s estimated share to expand the Saddlehorn pipeline by an additional 60,000 bpd to be operational by late 2020. The Saddlehorn pipeline could be further expanded up to a total 100,000 bpd of new capacity if warranted by optional increased volume commitments by shippers that may be exercised in the near future.
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