Magellan Midstream Partners Announces Increased Quarterly Earnings; Provides 2006 Guidance

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    TULSA, Okla., Jan. 23 - Magellan Midstream Partners, L.P. (NYSE: MMP) today reported increased operating profit and net income for fourth-quarter 2005 compared to fourth-quarter 2004.

    Fourth-quarter 2005 operating profit was $51.2 million compared to $48.1 million for fourth-quarter 2004, representing a 6.4% increase. Net income increased to $37.6 million during fourth-quarter 2005 from $35.3 million in the corresponding 2004 period, a 6.5% increase.

    "Our businesses performed well during the quarter in spite of supply disruptions and high refined products prices following the recent Gulf Coast hurricane activity," said Don Wellendorf, chief executive officer. "We expect continued growth in our cash generation and distributions to our unitholders in 2006."

    An analysis of variances by segment comparing fourth-quarter 2005 to fourth-quarter 2004 is provided below based on operating margin, a financial measure that reflects operating profit before general and administrative (G&A) expense and depreciation and amortization:

    Petroleum products pipeline system. Pipeline operating margin was $57.7 million, a decline of $1.4 million. Revenues increased slightly between periods due to higher transportation barrels shipped and increased ancillary revenues due to additional demand for services such as additives and tank leases, all partially offset by lower transportation revenues that resulted primarily from an inventory build in the fourth quarter of 2005. Pipeline revenues are recognized when the transported product exits the pipeline system. When inventories build, the product has not yet left the pipeline system so the transportation tariff cannot be recognized. Higher commodity margins also positively impacted the 2005 quarter as the partnership's petroleum products management operation and third-party supply agreement continued to benefit from the sale of product during a high price environment. Higher product losses, power costs and system integrity spending negatively impacted the current quarter.

    Petroleum products terminals. Terminals operating margin was $18.0 million, an increase of $2.9 million. The addition of the Wilmington, Delaware marine facility, which was acquired in Sept. 2005, increased operating results during fourth-quarter 2005. In addition, the partnership's marine terminals benefited in the current period from recently completed expansion projects at two facilities and increased fees due to higher import activity resulting from tight global petroleum products supply following the third-quarter hurricanes. Revenues also increased at the partnership's inland terminals primarily due to higher additive injection fees. Expenses increased between periods primarily due to the addition of the Wilmington terminal and increased operating taxes.

    Ammonia pipeline system. Ammonia operating margin was $4.6 million, an increase of $4.3 million. The impact of higher tariffs associated with the partnership's new transportation agreements, which became effective July 1, 2005, benefited the current quarter. Further, 2005 results improved due to lower system integrity expenses related to timing of maintenance work and reduced environmental expenses.

    Depreciation and amortization increased between quarters due to capital spending over the last year. Fourth-quarter 2005 interest expense was higher due to rising interest rates.

    Net income per limited partner unit was 46 cents during fourth-quarter 2005 compared to 48 cents during 2004, a 4.2% decline, resulting from a higher allocation of net income to the general partner as the cash distribution per limited partner unit increases.

    Management expects the partnership's cash generation to increase in 2006, enabling a continuation of its five-year history of growing cash distributions. Targeted distribution growth for 2006 is 8% to 10%. Further, management currently estimates 2006 net income per unit to be approximately $2.03. The significant increase in cash distribution growth during 2005 and the targeted distribution growth in 2006 result in an increase in the allocation of net income to the general partner during 2006. Without this increased allocation, 2006 net income per unit would be approximately 19 cents higher. Net income per unit for first-quarter 2006 is estimated to be 44 cents. Guidance specific to 2006 has not been provided previously.

    Management also estimates organic growth capital spending of between $145.0 million and $200.0 million for 2006, with projects currently underway or in advanced stages of development related to the low end of this range.

    An analyst call with management regarding fourth-quarter 2005 financial results and its future growth plans is scheduled for Tues, Jan. 24 at 1:30 p.m. Eastern. To participate, dial (800) 289-0544 and provide code 1012864. Investors also may listen to the call via the partnership's web site at http://www.magellanlp.com/investors/calendar.asp .

    Audio replays of the conference call will be available from 4:30 p.m. Eastern on Jan. 24 through midnight on Jan. 30. To access the replay, dial (888) 203-1112 and provide code 1012864. The replay also will be available at http://www.magellanlp.com .

    Management believes that investors benefit from having access to the same financial measures being utilized by the partnership. As a result, this news release includes a discussion of operating margin, which is an important performance measure used by management to evaluate the economic success of the partnership's operations. Operating margin is a non-GAAP measure that reflects operating profit before G&A expenses and depreciation and amortization. A reconciliation of operating margin to operating profit accompanies this release.

    About Magellan Midstream Partners, L.P.

    Magellan Midstream Partners, L.P. is a publicly traded partnership formed to own, operate and acquire a diversified portfolio of energy assets. The partnership primarily transports, stores and distributes refined petroleum products. More information is available at http://www.magellanlp.com .

    Portions of this document may constitute forward-looking statements as defined by federal law. Although the partnership believes any such statements are based on reasonable assumptions, there is no assurance that actual outcomes will not be materially different. Additional information about issues that could lead to material changes in performance is contained in the partnership's filings with the Securities and Exchange Commission.

     MAGELLAN MIDSTREAM PARTNERS, L.P.

     CONSOLIDATED STATEMENTS OF INCOME

     (In thousands, except per unit amounts)

     (Unaudited)

     Three Months Ended Twelve Months Ended

     December 31, December 31,

     2004 2005 2004 2005

    Transportation and

     terminals revenues $122,812 $129,924 $419,117 $500,196

    Product sales revenues 138,535 179,120 275,769 636,209

    Affiliate management fee

     revenue 163 166 488 667

     Total revenues 261,510 309,210 695,374 1,137,072

    Costs and expenses:

     Operating 50,363 58,354 177,066 217,788

     Environmental 1,485 2,093 43,989 12,007

     Environmental

     reimbursements (74) --- (41,398) ---

     Product purchases 135,101 168,472 255,599 582,631

     Depreciation and

     amortization 12,937 14,908 41,845 56,307

     Affiliate general and

     administrative 14,235 15,087 54,466 61,131

     Total costs and

     expenses 214,047 258,914 531,567 929,864

     Equity earnings 621 873 1,602 3,104

    Operating profit 48,084 51,169 165,409 210,312

    Interest expense 12,645 13,725 37,893 52,554

    Interest income (721) (867) (2,458) (4,296)

    Debt prepayment premium --- --- 12,666 ---

    Write-off of unamortized

     debt placement costs --- --- 5,002 ---

    Debt placement fee

     amortization 832 677 3,056 2,871

    Other income --- --- (953) (300)

    Net income $35,328 $37,634 $110,203 $159,483

    Allocation of net income:

     Limited partners'

     interest $31,515 $30,422 $101,140 $135,579

     General partner's

     interest 3,813 7,212 9,063 23,904

     Net income $35,328 $37,634 $110,203 $159,483

    Basic net income per

     limited partner unit $0.48 $0.46 $1.72 $2.04

    Weighted average number

     of limited partner units

     outstanding used for

     basic net income per

     unit calculation 65,872 66,361 58,716 66,361

    Diluted net income per

     limited partner unit $0.48 $0.46 $1.72 $2.03

    Weighted average number of

     limited partner units

     outstanding used for

     diluted net income per

     unit calculation 66,032 66,833 58,844 66,625

     MAGELLAN MIDSTREAM PARTNERS, L.P.

     OPERATING STATISTICS

     Three Months Ended Twelve Months Ended

     December 31, December 31,

     2004 2005 2004 2005

    Petroleum products pipeline

     system:

     Transportation revenue per

     barrel shipped (dollars

     per barrel) $1.055 $1.001 $0.997 $1.026

     Transportation barrels

     shipped (million barrels) 72.9 75.7 255.0 297.7

    Petroleum products terminals:

     Marine terminal average

     storage capacity utilized

     per month (million barrels) * 16.7 18.9 16.4 18.6

     Marine terminal throughput

     (million barrels) 11.9 11.0 28.9 48.4

     Inland terminal throughput

     (million barrels) 27.1 27.5 101.2 111.1

    Ammonia pipeline system:

     Volume shipped

     (thousand tons) 213 226 765 713

     * For the twelve months ended December 31, 2004, represents the average

     storage capacity utilized for the three months we owned the East

     Houston, Texas facility (0.6 million barrels) and the average storage

     capacity utilized for the full year at our other marine terminals

     (15.8 million barrels).

     For the twelve months ended December 31, 2005, represents the average

     storage capacity utilized for the four months that we owned our

     Delaware terminal (1.8 million barrels) and the average monthly

     storage capacity utilized for the full year at our other marine

     terminals (16.8 million barrels).

     MAGELLAN MIDSTREAM PARTNERS, L.P.

     OPERATING MARGIN RECONCILIATION TO OPERATING PROFIT

     (Unaudited, in thousands)

     Three Months Ended Twelve Months Ended

     December 31, December 31,

     2004 2005 2004 2005

    Petroleum products pipeline

     system:

     Transportation and

     terminals revenues $95,085 $95,520 $315,044 $381,926

     Less: Operating expenses (38,973) (47,071) (139,082) (176,781)

     Environmental

     expenses (263) (1,640) (38,744) (8,590)

     Add: Environmental

     expense reimbursement 74 --- 37,647 ---

     Transportation and

     terminals margin 55,923 46,809 174,865 196,555

     Product sales revenues 134,974 176,601 264,950 625,725

     Less: Product purchases (132,604) (166,797) (249,064) (578,806)

     Product margin 2,370 9,804 15,886 46,919

     Add: Affiliate

     management fee revenue 163 166 488 667

     Equity earnings 621 873 1,602 3,104

     Operating margin $59,077 $57,652 $192,841 $247,245

    Petroleum products

     terminals:

     Transportation and

     terminals revenues $24,403 $29,189 $91,302 $105,563

     Less: Operating expenses (10,186) (11,538) (36,864) (40,197)

     Environmental

     expenses (200) (392) (3,039) (2,102)

     Add: Environmental

     expense

     reimbursement --- --- 2,839 ---

     Transportation and

     terminals margin 14,017 17,259 54,238 63,264

     Product sales revenues 3,561 2,519 10,819 11,444

     Less: Product purchases (2,497) (1,803) (6,535) (5,294)

     Product margin 1,064 716 4,284 6,150

     Operating margin $15,081 $17,975 $58,522 $69,414

    Ammonia pipeline system:

     Total revenues $4,039 $5,897 $13,922 $15,849

     Less: Operating expenses (2,720) (1,238) (5,300) (6,849)

     Environmental

     expenses (1,022) (61) (2,206) (1,315)

     Add: Environmental

     expense reimbursement --- --- 912 ---

     Operating margin $297 $4,598 $7,328 $7,685

    Segment operating margin $74,455 $80,225 $258,691 $324,344

    Add: Allocated corporate

     depreciation costs 801 939 3,029 3,406

    Total operating margin 75,256 81,164 261,720 327,750

    Less: Depreciation and

     amortization (12,937) (14,908) (41,845) (56,307)

    Affiliate general and

     administrative (14,235) (15,087) (54,466) (61,131)

    Total operating profit $48,084 $51,169 $165,409 $210,312

     Note: Amounts may not sum to figures shown on the consolidated statement

     of income due to intersegment eliminations and allocated corporate

     depreciation costs.

     MAGELLAN MIDSTREAM PARTNERS, L.P.

     ALLOCATION OF NET INCOME

     (In thousands, unless otherwise noted)

     (Unaudited)

     Three Months Ended Twelve Months Ended

     December 31, December 31,

     2004 2005 2004 2005

    Net income $35,328 $37,634 $110,203 $159,483

    Direct charges to the

     general partner:

     Transition charges --- --- 823 ---

     Reimbursable general and

     administrative costs 590 601 6,397 3,294

     Previously indemnified

     environmental charges 1,010 1,810 1,351 8,502

     Total direct charges

     to general partner 1,600 2,411 8,571 11,796

    Income before direct charges

     to general partner 36,928 40,045 118,774 171,279

    General partner's share of

     income 14.66% 24.02% 14.85% 20.84%

    General partner's allocated

     share of net income

     before direct charges 5,413 9,623 17,634 35,700

    Direct charges to general

     partner 1,600 2,411 8,571 11,796

    Net income allocated to

     general partner $3,813 $7,212 $9,063 $23,904

    Net income $35,328 $37,634 $110,203 $159,483

    Less: net income allocated

     to general partner 3,813 7,212 9,063 23,904

    Net income allocated to

     limited partners $31,515 $30,422 $101,140 $135,579

     Contact: Paula Farrell

     (918) 574-7650

     paula.farrell@magellanlp.com
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