Magellan Midstream Partners LP (NYSE:MMP) Q4 2015 Earnings Conference Call - Final Transcript

Feb 04, 2016 • 01:30 pm ET


Magellan Midstream Partners LP (NYSE:MMP) Q4 2015 Earnings Conference Call - Final Transcript


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Good day and welcome to the Magellan Midstream Partners Fourth Quarter 2015 Earnings Results Conference. Today's call is being recorded.

At this time, I would like to turn the conference over to President and CEO, Mike Mears. Please go ahead.

Michael Mears

Thank you. Good afternoon and thank you for joining us today to discuss Magellan's fourth-quarter financial results and our outlook for 2016.

Before we get started, I'll remind you that Management will be making forward-looking statements as defined by the SEC. Such statements are based on our current judgments regarding some of the factors that could impact future performance of Magellan. You should review the risk factors and other information discussed in our filings with the SEC and form your own opinions about Magellan's future performance.

As announced this morning, we generated record quarterly distributable cash flow during the fourth quarter of 2015, closing out another strong year for Magellan despite the continued challenging environment for the energy industry. For the year, we generated record DCF of $943 million, and successfully reached our goal of increasing cash distributions to our investors by 15% for 2015, while achieving a coverage ratio of 1.4 times.

Clearly the current low-crude oil environment has resulted in significant challenges for our industry. We have intentionally managed our business in a conservative fashion to focus on fee-based activities that are complementary in nature and as resilient as possible to price volatility. While a relatively small component of our overall operating margin comes from direct commodity-related activities, we have allowed our distribution coverage to reach higher levels like 1.4 to 1.5 times coverage we've generated the last two years as we've prepared for a lower commodity-price environment.

While I'm not sure that any of us expected to see crude oil in the $30s or lower, we believe this conservative approach should serve us well during the current environment. We don't know exactly how long this price environment will remain, but I'll address our views on the impact to Magellan's 2016 guidance shortly.

I'll now turn the call over to our CFO, Aaron Milford, to review Magellan's fourth-quarter financial results versus the year-ago period. Then I'll be back to discuss our guidance for 2016 and review the status of our largest expansion projects before opening the call for your questions.

Aaron Milford

Thank you, Mike. Today I'll be making references to certain non-GAAP financial metrics including operating margin and distributable cash flow. We've included exhibits to our earnings release that reconcile these metrics to their nearest GAAP measure. We reported net income of $207 million earlier this morning which is lower than the record $252 million reported for the same period in 2014 primarily due to mark-to-market adjustments related to our commodity activities.

Excluding the impact of out-of-period NYMEX activity in the current quarter, earnings per unit of $0.86 exceeded guidance of $0.84 previously provided for the current quarter. Distributable cash flow was a record $257 million for the fourth quarter, representing a $9 million increase for the fourth-quarter 2014. For