2014 Analyst Day Houston April 8, 2014 www.magellanlp.com NYSE: MMP
Welcome and Agenda Paula Farrell Director, investor relations and planning www.magellanlp.com NYSE: MMP
Todays Agenda A look at our past successes Mike Mears, CEO Current business Jeff Selvidge, Sr. VP 15-minute break Growth projects Mike Mears, CEO Finance review Mike Osborne, CFO Closing remarks Mike Mears, CEO Lunch…
A Look at Our Past Successes Mike Mears Chairman, President and Chief Executive Officer www.magellanlp.com NYSE: MMP
Distribution Growth Trend Proven history of distribution growth with 47 quarterly increases Targeting 20% annual distribution growth for 2014 and 15% for 2015 (per MMP unit, annualized) 2.18 0.56 2001 2002 2003 2004 2005…
Industry-Leading Return Magellan has generated a total unitholder return in excess of 500% since 12/31/08, nearly doubling performance of the Alerian MLP index during that time Total Unitholder Return 600% MMP AMZ 450% 300%…
Distributable Cash Flow Growth over Last 5 Years Magellan grew distributable cash flow by 98% from 2008 to 2013 Another record year of 730mm expected for 2014, primarily due to contributions from recent growth projects 670 ( in…
Primarily Fee-Based Business Expect Future Fee-Based, Low Risk Activities to Comprise 85% or More of Operating Margin 2013 Results* Leased storage Fee-based ancillary 18% services 9% Transportation 51% Terminal delivery…
Growth in Expansion Capital Spending Over the last 10 years, Magellan has invested 3.7 billion in acquisitions and organic growth projects Expect to spend 950 million from 2014 - 2016 to finish construction projects currently…
Competitive Cost of Capital Strong investment-grade balance sheet Low leverage and significant available liquidity Primarily fee-based, stable business with attractive growth projects No general partner incentive distribution…
Current Business Jeff Selvidge Senior Vice President, Commercial www.magellanlp.com NYSE: MMP
Key Petroleum Infrastructure NYSE: MMP 13
Refined Products www.magellanlp.com NYSE: MMP
Refined Products Segment Map NYSE: MMP 15
Refined Products - Profitability Approximately 71% of Magellans 2013 operating margin was generated from the refined products segment Profits driven by volume, rate, ancillary fees and commodity-related activities Commodity profits…
Refined Products Pipeline System Longest refined petroleum products pipeline system in the U.S. at 9,600 miles with 54 terminals Includes recent long-term lease of pipeline between MO and AR, already connected to our system…
Refined Products Pipeline: Deliveries by State Our refined products pipeline During 2013, we provided system is a critical piece of the 40% + of the gasoline / Central U.S. petroleum distillate consumed in 7 of the infrastructure 15…
Refined Products Pipeline Commitments Contract commitment levels on our refined products pipeline system add to Magellans financial stability More than 50% of 13 shipments were subject to supplemental agreements with an average…
Competitive vs. Less Competitive Markets 60% of our refined products pipeline markets are deemed workably competitive by the FERC or are subject to state regulations The remaining 40% are deemed less competitive and are therefore…
Annual FERC Index History FERC indexation methodology instituted in 1995; reviewed every 5 years Intent of the methodology is to reimburse pipelines for their costs and allow for a reasonable return without a burdensome cost of…
Refined Products Pipeline Rates Our average refined products rate / bbl has trended generally inline with the PPI index Our South Texas tariff is significantly lower than the average tariffs for the remainder of our refined products…
Refined Products Pipeline Volumes Historical volume increases have been driven by: Solid demand for refined products on our historical system, especially in 13 Newly-implemented incentive tariff for South Texas shipments in 12 Recent…
Recent Refined Products Pipeline Acquisition Recently acquired 800 miles of refined petroleum products pipeline for 190mm Acquired July 2013: New Mexico pipeline system 250 miles of pipeline Acquired Nov. 2013: Rocky Mountain…
Recent Pipeline Construction Recently constructed 38-mile pipeline from Magellans El Paso, TX terminal to Union Pacifics new locomotive fueling depot near Santa Teresa, NM Began operation early 2014 Supported by 15-year…
Refined Products Demand Expectations Longer term, we expect generally stable refined petroleum products volumes consistent with the EIAs projections gasoline: slight decline - fuel efficiency vs. vehicle miles driven diesel fuel:…
Sources of Fee-Based Refined Products Revenue Refined products tariff revenue accounts for almost 70% of transportation and terminalling revenue for the refined products segment Remaining 30% is derived from fee-based ancillary…
Independent Terminals 27 terminals primarily in the Southeast, now part of refined products segment Connected to third-party pipelines Throughput driven by demand for refined products record volume in 2013 due to increased demand…
Ammonia Pipeline System 1,100-mile pipeline system, now part of refined products segment Ammonia is a much-needed agricultural fertilizer produced from natural gas Pipeline supported by 3 committed shippers, with rolling 3-year…
Commodity-Related Activities Although Magellan is primarily a fee-based business, we expect 15% or less of MMPs total future operating margin to come from commodity-related activities 2013 Commodity Margin (net of NYMEX adjustts):…
Butane Blending Overview Butane is a common gasoline blending component Butane prices have historically been lower than gasoline prices Blending activities are focused on 2 areas: The fungible gasoline pool delivered into our…
Butane Blending Margins Butane blending margins significantly improved beginning mid-2011 due to continued strength of gasoline prices coupled with reduced cost of butane Butane costs declined due to growing supply of domestically…
Renewable Identification Numbers (RINs) Because of our butane blending activities, Magellan is deemed to be an obligated party under the Renewable Fuels Standards and must purchase RINs Although we blend ethanol at our terminals, we…
Butane Blending Risk Mitigation Magellan does not speculate on the price of commodities and mitigates risk as much as possible related to our butane blending activities Purchase much of our butane in the spring and summer when…
Other Commodity Margin Terminals Overages Fractionator Magellans independent terminals Magellan owns 2 fractionators - used to receive product from third-party help manage commingled product pipeline systems produced in pipeline…
Questions www.magellanlp.com NYSE: MMP
Marine Storage www.magellanlp.com NYSE: MMP
Marine Storage Segment Map 5 storage facilities with 27mm barrels of aggregate storage Highly utilized at 90%+, supported by long-term agreements Storage demand driven by market structure, pricing volatility and connectivity NYSE:…
Marine Storage - Profitability Approximately 11% of Magellans 2013 operating margin was generated from the marine storage segment Storage terminal profits are driven by amount of storage utilized Utilization impacted by amount of…
Marine Storage Capacity Utilization Total marine storage available for Demand for marine storage remains lease has remained fairly constant strong, with average utilization 90%+ over the last few years Additional integrity work during…
Marine Storage Fee-Based Revenues Generate 85%+ of revenue primarily Average storage rate / bbl has increased from committed storage regardless of as historical contracts renewed at rates usage inline with current market conditions…
Marine Storage Galena Park Largest and most complex of our facilities with 14mm bbls of storage Primarily handling gasoline, diesel and jet, blendstocks and heavy oils Room to construct about 500k bbls of additional storage…
Marine Storage Galena Park (contd) Enhancing dock capabilities to accelerate loading and unloading times for improved efficiency Currently adding crude oil capabilities to this location to receive crude via nearby rail…
Marine Storage Corpus Christi 2mm bbls of refined products storage currently, primarily handling heavy oils and refinery feedstocks (an additional 2mm bbls of storage included in the crude oil segment) Access to local Corpus…
Marine Storage Other Locations Marrero, LA 3mm bbls of storage currently, primarily handling heavy oil, distillate and asphalt Plan to enhance dock capabilities for more loading flexibility Additional room to construct 1mm bbls of…
Marine Storage Maturity Schedule Fairly uniform contract renewals over next few years; average remaining contract life of 4 years Expect overall utilization to remain high at slightly increased rates due to contract escalations;…
Crude Oil www.magellanlp.com NYSE: MMP
Crude Oil Segment Map 1,100 miles of active crude oil pipelines, substantially backed by long-term throughput commitments 18mm barrels of total crude oil storage supported by lease agreements, including one of the largest storage…
Crude Oil - Profitability Approximately 18% of Magellans 2013 operating margin was generated from the crude oil segment Profits significantly driven by growing volume on crude oil pipelines 2014 & volumes in millions 2011 2012…
Sources of Fee-Based Crude Oil Revenue Tariff revenue accounted for 50% of transportation and terminalling revenue for the crude oil segment during 2013 13 revenues only partially benefitted from start-up of the Longhorn pipeline in…
Longhorn Pipeline Pipeline fully subscribed for capacity under long-term agreements with average remaining life of 5 years 225k bpd capacity now operational, currently increasing to 275k bpd 430mm combined capital spending 3x…
Longhorn Volume and Rates Magellan began initial start-up of the Longhorn pipeline in crude oil service during 2Q13, continuing to ramp up volume since that time We have now received regulatory approval to increase the capacity to…
Houston Crude Oil Connectivity Magellans Houston distribution network is a comprehensive system to deliver crude oil to the Houston Gulf Coast area Access to all domestic inbound crude production Delivery capabilities to…
Crude Oil Pipeline Volumes and Rates Crude oil shipments expected to increase significantly in 2014 primarily due to full- year benefit of Longhorn pipeline and the addition of crude oil capabilities at Galena Park, which will…
Cushing Crude Oil Storage With 12mm barrels of total storage at Cushing, OK, Magellan is one of the largest owners of crude oil storage in Cushing Profit driven by storage utilized 100% contracted with average remaining life of 3…
Cushing Will Remain an Important Crude Oil Hub We believe Cushing storage will be needed long term: Provides traders flexibility to deliver crude oil to the highest margin market at a given time Continued need for…
Crude Oil Storage Magellan also owns 2mm barrels of crude oil and condensate storage at our Corpus Christi and East Houston terminals used for leased storage Demand for crude oil storage at all locations remains strong, with average…
Questions www.magellanlp.com NYSE: MMP
15-Minute Break www.magellanlp.com NYSE: MMP
Growth Projects Mike Mears Chairman, President and Chief Executive Officer www.magellanlp.com NYSE: MMP
Future Growth Opportunities While refined products generates the largest portion of our financial results, Magellans growing crude oil asset profile provides a springboard for additional crude oil opportunities Current Expansion…
Permian a Key Focus Area for Magellan Incremental pipeline capacity (000 bpd) Permian 110 Sunoco West Texas Gulf 2012 2030 150 Sunoco Permian Express I Growth: 200 Sunoco Permian Express II +1,130k bpd 250 Plains Cactus 275…
BridgeTex Pipeline Largest organic growth project in Magellans history: 600mm for MMPs share of capital spending 50/50 joint venture with Occidental Petroleum 300k bpd pipeline capacity to transport Permian Basin crude oil to the…
Project Scope of BridgeTex Pipeline Project cost by category Storage Pipeline: Houston to 10% TX City 20% Pipeline to E. Houston 70% 90% of total project cost committed to date NYSE: MMP 64
Key Milestones for BridgeTex Decision to move forward with BridgeTex pipeline Nov. 2012 Tank construction began at Colorado City and E. Houston May 2013 Pipeline construction began Oct. 2013 Expected completion date Initial…
BridgeTex Expected Financial Results Based on Magellans 600mm capital spend for BridgeTex, we expect to generate an 8x EBITDA multiple on committed volume beginning in 2015, the first full year of operation Room for additional…
Condensate Splitter With restrictions on crude oil exports, investments in condensate splitters on the Gulf Coast are LPG NGL Market needed to handle the influx of Light Eagle Ford production Naphtha Replacement for Natural…
Project Scope of Condensate Splitter Magellan recently announced construction of a 50k bpd condensate splitter at our Corpus Christi terminal Fee-based project, fully committed with long-term take-or-pay agreement with Trafigura…
Condensate Splitter Key Milestones and Expected Financial Results Key milestones: Preliminary design complete and air permits submitted Late 2014: complete final design Early 2015: receive air permit and begin construction Second…
Double Eagle Joint Venture JV with Kinder Morgan to transport condensate from the Eagle Ford shale 195-mile, 100k bpd Double Eagle pipeline Delivers to Magellans Corpus Christi terminal Fully operational at this point Recently…
Double Eagle Expected Financial Results Magellans total cost for Double Eagle is 130mm Includes wholly-owned condensate storage built at our Corpus Christi terminal and the recently-announced JV expansion Supported by long-term…
Galena Park Crude Oil Currently adding crude oil capabilities at our Galena Park terminal Constructing pipeline infrastructure and converting 500k bbls of storage for crude oil service Magellan will facilitate crude oil movements…
Potential Little Rock Pipeline Magellan is considering a new refined products pipeline connection between our Ft. Smith and Little Rock, AR terminals Midcontinent refiners do not currently have access to Little Rock via pipeline…
Expansion Capital Spending Profile Based on existing projects, we expect to spend 950mm on organic growth projects from 2014 to 2016: BridgeTex 340mm Corpus Christi condensate splitter 250 Longhorn pipeline, including expansion 110…
Questions www.magellanlp.com NYSE: MMP
Finance Review Mike Osborne Chief Financial Officer www.magellanlp.com NYSE: MMP
Continued Strong Financial Performance Magellan generated very strong operating margin and DCF growth in 2013 driven by (a) higher refined products transportation revenues, (b) stronger product margins and (c) placing Longhorn in…
Strong Distribution Coverage Magellan has a history of strong distribution growth Growth has averaged 14% over prior 3 years, spurred by attractive investments, recovering transportation volumes and movement into crude oil services…
Balanced Debt Maturities, Low Rates Average maturity of debt is 13 years, intentional spreading of maturities Low all-in realized coupon, averaging 5.5% (5.2% with hedges and premiums) Currently 100% fixed; floating rate (including…
Extended Revolver Strong Support Revolving credit facility - covenant light & attractively priced Facility Size 1 billion Maturity Date Nov. 2018 Accordion Up to 1.2 billion Financial Covenant Base Acquisition Max Leverage (Net…
Conservative Credit Profile Target maximum long-term debt-to-EBITDA of 4.0x Debt-to-EBITDA has remained low, despite investing 1.8 billion over the last four years and another projected 700mm in 2014 Note: minimal EBITDA impact from…
Competitive Cost of Capital Low yield + low leverage = powerful acquisition currency Of lower yielding MLPs, only MMP and EPD do not have incentive distribution rights Significant additional capacity for debt financing *Source:…
Strong Financial Position to Fund Growth 1 billion available on the revolver in millions Hypothetical 2014 Deal Flow Proforma 25 million in cash at Guidance 9x multiple 2014 12/31/13 12/31/14 Adj EBITDA* 935 111 1,046 135…
How We Think About Cost of Capital Yield + Growth = equity cost of capital Estimating Equity Cost of Capital Distribution Growth* Equity Cost Yield* 3 5 10 of Capital*** Many of MMPs peers also Large Cap MLP Pipelines** 6.2% 5.7%…
Questions www.magellanlp.com NYSE: MMP
Closing Remarks Mike Mears Chairman, President and Chief Executive Officer www.magellanlp.com NYSE: MMP
Potential Expansion Projects Continue to assess well over 500mm of potential organic growth expansion projects Targeting 6-8x EBITDA multiple or better Pipeline expansion 20% Refined storage 10% Crude 60% Terminal…
Magellan Summary Proven history of exceptional returns and distribution growth Straight-forward, low risk, stable business model Forecasted record distributable cash flow generation with strong distribution coverage…
Loading...
