MAGELLAN MIDSTREAM PARTNERS, L.P. TULSA, Okla., Feb. 4, 2016 /PRNewswire/ -- Magellan Midstream Partners, L.P. (NYSE: MMP) today reported net income of $207.1 million for fourth quarter 2015 compared to $252.1 million for fourth quarter 2014. The decrease in current year net income was driven by reduced profits from the partnership's commodity-related activities, due to lower realized commodity prices on these activities and mark-to-market (MTM) pricing adjustments for the related hedging positions, partially offset by higher contributions from Magellan's core fee-based transportation and terminal activities.
Distributable cash flow (DCF), a non-generally accepted accounting principles (non-GAAP) financial measure that represents the amount of cash generated during the period that is available to pay distributions, was a record $256.9 million for fourth quarter 2015 compared to $248.1 million for fourth quarter 2014.
Diluted net income per limited partner unit was 91 cents in fourth quarter 2015 and $1.10 in fourth quarter 2014. Diluted net income per unit excluding MTM commodity-related pricing adjustments, a non-GAAP financial measure, of 86 cents for fourth quarter 2015 was slightly higher than the 84-cent guidance provided by management in early Nov. 2015.
"Despite the downturn in energy markets, Magellan generated record distributable cash flow for both the fourth quarter and the full-year 2015, driven by the benefit of recently-completed expansion capital projects and continued strong demand for our fee-based refined products and crude oil pipeline and terminal services," said Michael Mears, chief executive officer. "Magellan's business fundamentals remain sound, with our stable business model, investment-grade balance sheet and attractive slate of growth projects positioning us well to remain strong in the current energy environment with a stated goal to increase annual cash distributions to our investors by 10% for 2016 and at least 8% for 2017."
Beginning with the fourth quarter of 2015, the partnership adjusted the presentation of tender deductions received from customers on its refined products and crude oil pipelines from operating expense to revenue. Historical financial results have been adjusted to conform to this new presentation. Net income and DCF were not impacted by this change.
An analysis by segment comparing fourth quarter 2015 to fourth quarter 2014 is provided below based on operating margin, a non-GAAP financial measure that reflects operating profit before general and administrative (G&A) expense and depreciation and amortization:
Refined products. Refined products operating margin was $203.8 million, a decrease of $48.1 million primarily related to the impact of lower commodity prices on the partnership's commodity-related activities, including MTM adjustments for New York Mercantile Exchange (NYMEX) positions. Transportation and terminals revenue increased $5.4 million between periods primarily due to higher average tariffs from the partnership's 4.6% tariff increase on July 1, 2015, higher terminalling revenue (in part due to the recently-acquired Atlanta terminal) and higher revenue from additional leased storage along the pipeline system, partially offset by lower transportation volumes. Overall refined pipeline volumes declined 4% due to continued lower distillate demand, in part due to reduced drilling activities in areas served by the partnership's assets, and regional refinery issues that resulted in less volume moving on Magellan's system during the quarter. On an annual basis, refined pipeline volumes were relatively flat between periods as higher gasoline volumes offset lower distillate demand.
Operating expenses increased $3.1 million due to higher asset integrity spending based on timing of maintenance work and less favorable product overages (which reduce operating expenses) resulting from lower commodity prices.
Product margin (a non-GAAP measure defined as product sales revenue less cost of product sales) decreased $50.4 million between periods primarily due to a $32.7 million unfavorable variance associated with MTM adjustments for NYMEX positions used to economically hedge the partnership's commodity-related activities and other inventory adjustments. Details of these items can be found on the Distributable Cash Flow Reconciliation to Net Income schedule that accompanies this news release. The partnership's cash product margin, which reflects only transactions that settled during the quarter, also decreased between periods primarily due to lower commodity prices.
Crude oil. Crude oil operating margin was $95.2 million, an increase of $6.4 million. Transportation and terminals revenue increased $10.0 million primarily due to contributions from the 40-mile Houston crude oil pipeline that Magellan acquired in Nov. 2014, more shipments on the partnership's Longhorn pipeline system and new leased storage contracts. Affiliate management fee revenue declined $3.3 million due to lower construction management fees now that the BridgeTex pipeline is operational. Earnings of non-controlled entities increased $1.5 million primarily due to higher shipments on the Double Eagle condensate pipeline system, which is owned 50% by Magellan. Operating expenses increased $2.1 million between periods due to higher asset integrity spending based on timing of maintenance work and accruals for remediation costs.
Marine storage. Marine storage operating margin was $29.2 million, a decrease of $2.1 million. Revenue declined $1.8 million primarily due to a one-time customer contract buy-out that benefited fourth-quarter 2014, partially offset by higher average storage rates in the 2015 period.
Other items. Depreciation and amortization increased primarily due to recent expansion capital expenditures, and G&A expense was higher primarily due to an increase in Magellan's unit price during the fourth quarter of 2015, which impacts deferred board of director fees. Other expense decreased $5.0 million related to a lower non-cash MTM adjustment for hedged crude oil tank bottom inventory owned by the partnership.
Net interest expense increased due to additional borrowings to finance expansion capital spending, partially offset by more interest capitalized for construction projects in the current period. As of Dec. 31, 2015, the partnership had $3.4 billion of debt outstanding, including $280.0 million outstanding under its commercial paper program, and $28.7 million of cash on hand.
Annual results
For the year ended Dec. 31, 2015, net income was $819.1 million compared to $839.5 million in 2014 primarily related to MTM adjustments and overall lower prices for the partnership's commodity-related activities. Otherwise, Magellan's fee-based activities increased significantly between years primarily due to higher refined products pipeline tariffs, increased shipments on the Longhorn and BridgeTex crude oil pipeline systems and the full-year benefit from the 40-mile Houston crude oil pipeline that Magellan acquired in late 2014. Full-year diluted net income per limited partner unit was $3.59 in 2015 and $3.69 in 2014. Annual DCF was a record $942.9 million in 2015, or 1.4 times the amount needed to pay distributions related to 2015, compared to $880.5 million in 2014.
Expansion capital projects
Magellan remains focused on expansion opportunities, making significant progress on its current slate of projects with $666 million spent during 2015 on organic growth construction projects and $81 million spent to acquire an additional Atlanta terminal and a 100-acre tract of land in Corpus Christi, Texas for future development. Based on the progress of expansion projects already underway, the partnership expects to spend $800 million in 2016 and $100 million thereafter to complete its current slate of construction projects. The new estimates include spending for Magellan's share of the recently-announced HoustonLink pipeline connection and new origin for the BridgeTex pipeline as well as the addition of jet fuel service for the Little Rock pipeline.
Significant progress continues for Magellan's largest construction projects. Construction of the Little Rock pipeline is nearing completion, with start-up expected in mid-2016. Pipeline installation is 75% complete for the Platteville-to-Cushing segment of the Saddlehorn pipeline, with this segment expected to be fully operational during third quarter. Right-of-way acquisition continues for the Carr-to-Platteville segment of the Saddlehorn pipeline, which is still expected to be operational by the end of 2016. Further, construction continues for Magellan's condensate splitter and related infrastructure in Corpus Christi, which are expected to be operational during the second half of 2016.
Magellan continues to evaluate well in excess of $500 million of potential growth projects in earlier stages of development as well as additional acquisition opportunities, all of which have been excluded from the partnership's spending estimates. For instance, Magellan continues to evaluate multiple options to increase its Gulf Coast marine capabilities, including additional storage at its Galena Park, Texas marine terminal and further development of its Seabrook Logistics joint venture and its recently-acquired land in Corpus Christi.
Financial guidance for 2016
Management remains committed to its goal of increasing annual cash distributions by 10% for 2016 and currently expects to generate annual DCF of $900 million in 2016, resulting in 1.2 times the amount needed to pay cash distributions for 2016. Current DCF guidance assumes an average crude oil price of approximately $35 per barrel for 2016, with each $1 change in the price of crude oil estimated to impact Magellan's 2016 financial results by approximately $3 million, primarily related to the partnership's butane blending activities and the value of its pipeline tender deductions and product overages.
Management is targeting annual distribution growth of at least 8% for 2017 while maintaining distribution coverage of at least 1.2 times the amount needed to pay cash distributions for 2017. Distribution growth guidance specific to 2017 has not been provided previously.
"With the current challenges facing the energy industry, we have heard very clearly from our long-term investors that distribution coverage has become exceedingly important at this time," said Michael Mears, chief executive officer. "Magellan's goal of increasing annual distributions by 10% for 2016 and at least 8% for 2017 while maintaining distribution coverage of at least 1.2 provides a healthy mix of distribution growth and coverage for our investors."
Net income per limited partner unit is estimated to be $3.20 for 2016, with first-quarter guidance of 70 cents. Guidance excludes future NYMEX MTM adjustments on the partnership's commodity-related activities.
Management continues to believe the large majority of the partnership's operating margin will be generated by fee-based transportation and terminals services, with commodity-related activities contributing less than 15% of the partnership's operating margin.
Earnings call details
An analyst call with management to discuss fourth-quarter results and 2016 guidance is scheduled today at 1:30 p.m. Eastern. To join the conference call, dial (888) 378-0320 and provide code 5364236. Investors also may listen to the call via the partnership's website at www.magellanlp.com/webcasts.aspx.
Audio replays of the conference call will be available from 4:30 p.m. Eastern today through midnight on Feb. 10. To access the replay, dial (888) 203-1112 and provide code 5364236. The replay also will be available at www.magellanlp.com.
Non-GAAP financial measures
Management believes that investors benefit from having access to the same financial measures utilized by the partnership. As a result, this news release and supporting schedules include the non-GAAP financial measures of operating margin, product margin, adjusted EBITDA, DCF and net income per unit excluding MTM commodity-related pricing adjustments, which are important performance measures used by management.
Operating margin reflects operating profit before G&A expense and depreciation and amortization. This measure forms the basis of the partnership's internal financial reporting and is used by management to evaluate the economic performance of the partnership's operations.
Product margin, which is calculated as product sales revenue less cost of product sales, is used by management to evaluate the profitability of the partnership's commodity-related activities.
Adjusted EBITDA is an important measure utilized by management and the investment community to assess the financial results of an entity.
DCF is important in determining the amount of cash generated from the partnership's operations that is available for distribution to its unitholders. Management uses this performance measure as a basis for recommending to the board of directors the amount of cash distributions to be paid each period and for determining the payouts under the partnership's equity-based incentive plan.
Reconciliations of operating margin to operating profit and adjusted EBITDA and DCF to net income accompany this news release.
The partnership uses NYMEX futures contracts to hedge against price changes of petroleum products associated with its commodity-related activities and its crude oil tank bottom inventory. Most of these NYMEX contracts do not qualify for hedge accounting treatment. However, because these NYMEX contracts are generally effective at hedging price changes, management believes the partnership's profitability should be evaluated excluding the unrealized NYMEX gains and losses associated with petroleum products that will be sold in future periods. Further, because the financial guidance provided by management excludes future MTM commodity-related pricing adjustments, a reconciliation of actual results to those excluding these adjustments is provided for comparability to previous financial guidance.
Because the non-GAAP measures presented in this news release include adjustments specific to the partnership, they may not be comparable to similarly-titled measures of other companies.
About Magellan Midstream Partners, L.P.
Magellan Midstream Partners, L.P. (NYSE: MMP) is a publicly traded partnership that primarily transports, stores and distributes refined petroleum products and crude oil. The partnership owns the longest refined petroleum products pipeline system in the country, with access to nearly 50% of the nation's refining capacity, and can store more than 95 million barrels of petroleum products such as gasoline, diesel fuel and crude oil. More information is available at www.magellanlp.com.
Forward-Looking Statement Disclaimer
Portions of this document constitute forward-looking statements as defined by federal law. Forward-looking statements can be identified by words such as: plan, goal, believe, estimate, expect, future, may, will and similar references to future periods. Although management of Magellan Midstream Partners, L.P. believes any such statements are based on reasonable assumptions, actual outcomes may be materially different. Among the key risk factors that may have a direct impact on the partnership's results of operations and financial condition are: (1) its ability to identify growth projects and to complete identified projects on time and at expected costs; (2) price fluctuations and changes in demand for refined petroleum products, crude oil and natural gas liquids, or changes in demand for transportation or storage of those commodities through its existing or planned facilities; (3) changes in the partnership's tariff rates or other terms imposed by state or federal regulatory agencies; (4) shut-downs or cutbacks at refineries or other businesses that use or supply the partnership's services; (5) changes in the throughput or interruption in service on pipelines owned and operated by third parties and connected to the partnership's terminals or pipelines; (6) the occurrence of operational hazards or unforeseen interruptions; (7) the treatment of the partnership as a corporation for federal or state income tax purposes or if the partnership becomes subject to significant forms of other taxation; (8) an increase in the competition the partnership's operations encounter; (9) disruption in the debt and equity markets that negatively impacts the partnership's ability to finance its capital spending; and (10) failure of customers to meet or continue contractual obligations to the partnership. 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, including the partnership's Annual Report on Form 10-K for the fiscal year ended Dec. 31, 2014 and subsequent reports on Forms 8-K and 10-Q. Forward-looking statements made by the partnership in this release are based only on information currently known, and the partnership undertakes no obligation to revise its forward-looking statements to reflect events or circumstances learned of or occurring after today's date.
Contact: Paula Farrell
(918) 574-7650
paula.farrell@magellanlp.com
MAGELLAN MIDSTREAM PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per unit amounts)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
------------ ------------
2014 2015 2014 2015
---- ---- ---- ----
Transportation and
terminals revenue $382,039 $395,646 $1,459,267 $1,544,746
Product sales revenue 289,389 174,009 878,974 629,836
Affiliate management fee
revenue 6,765 3,393 22,111 13,871
----- ----- ------ ------
Total revenue 678,193 573,048 2,360,352 2,188,453
Costs and expenses:
Operating 124,637 129,528 500,901 525,902
Cost of product sales 195,851 131,065 594,585 447,273
Depreciation and
amortization 39,279 42,632 161,741 166,812
General and
administrative 38,667 40,277 148,288 151,329
------ ------ ------- -------
Total costs and expenses 398,434 343,502 1,405,515 1,291,316
Earnings of non-
controlled entities 15,328 16,830 19,394 66,483
------ ------ ------ ------
Operating profit 295,087 246,376 974,231 963,620
Interest expense 35,421 40,886 145,862 158,895
Interest income (369) (283) (1,540) (1,276)
Interest capitalized (1,445) (5,405) (22,803) (14,442)
Other expense (income) 8,573 3,539 8,573 (1,015)
----- ----- ----- ------
Income before provision
for income taxes 252,907 207,639 844,139 821,458
Provision for income
taxes 822 516 4,620 2,336
--- ---
Net income $252,085 $207,123 $839,519 $819,122
======== ======== ======== ========
Basic net income per
limited partner unit $1.11 $0.91 $3.69 $3.60
===== ===== ===== =====
Diluted net income per
limited partner unit $1.10 $0.91 $3.69 $3.59
===== ===== ===== =====
Weighted average number
of limited partner
units outstanding used
for basic net income
per unit calculation 227,316 227,583 227,260 227,550
======= ======= ======= =======
Weighted average number
of limited partner
units outstanding used
for diluted net income
per unit calculation 228,232 228,439 227,626 227,888
======= ======= ======= =======
MAGELLAN MIDSTREAM PARTNERS, L.P.
OPERATING STATISTICS
Three Months Ended Year Ended
December 31, December 31,
------------ ------------
2014 2015 2014 2015
---- ---- ---- ----
Refined products:
Transportation revenue
per barrel shipped $1.420 $1.505 $1.399 $1.439
Volume shipped (million barrels):
Gasoline 66.4 64.8 256.1 268.1
Distillates 43.5 40.5 163.1 152.5
Aviation fuel 5.5 5.1 23.0 21.2
Liquefied petroleum gases 0.4 0.4 9.9 9.7
--- --- --- ---
Total volume shipped 115.8 110.8 452.1 451.5
Crude oil:
Magellan 100%-owned assets:
Transportation revenue
per barrel shipped $1.116 $1.161 $1.192 $1.118
Volume shipped (million
barrels) 52.8 52.5 185.5 209.9
Crude oil terminal
average utilization
(million barrels per
month) 12.0 13.6 12.2 13.1
Select joint venture pipelines:
BridgeTex -volume
shipped (million
barrels) (1) 18.1 18.0 18.3 75.2
Marine storage:
Marine terminal average
utilization (million
barrels per month) 23.3 24.0 22.9 24.0
(1) These volumes reflect
the total shipments for
the BridgeTex pipeline,
which is owned 50% by
Magellan.
MAGELLAN MIDSTREAM PARTNERS, L.P.
OPERATING MARGIN RECONCILIATION TO OPERATING PROFIT
(Unaudited, in thousands)
Three Months Ended Year Ended
December 31, December 31,
------------ ------------
2014 2015 2014 2015
---- ---- ---- ----
Refined products:
Transportation and
terminals revenue $245,976 $251,349 $946,612 $974,505
Less: Operating expenses 86,453 89,507 356,057 377,772
Losses of non-controlled
entities - (47) - (193)
--- --- --- ----
Transportation and
terminals margin 159,523 161,795 590,555 596,540
Product sales revenue 287,359 169,365 872,537 623,102
Less: Cost of product
sales 194,907 127,320 592,887 442,621
Product margin 92,452 42,045 279,650 180,481
------ ------ ------- -------
Operating margin $251,975 $203,840 $870,205 $777,021
======== ======== ======== ========
Crude oil:
Transportation and
terminals revenue $90,050 $100,075 $341,915 $394,098
Affiliate management fee
revenue 6,391 3,046 20,790 12,495
Earnings of non-
controlled entities 14,642 16,183 16,309 63,918
Less: Operating expenses 22,317 24,423 83,184 89,455
------ ------ ------
Transportation and
terminals margin 88,766 94,881 295,830 381,056
Product sales revenue - 3,587 - 3,587
Less: Cost of product
sales - 3,278 - 3,278
Product margin - 309 - 309
--- --- --- ---
Operating margin $88,766 $95,190 $295,830 $381,365
======= ======= ======== ========
Marine storage:
Transportation and
terminals revenue $46,013 $44,222 $170,740 $176,143
Affiliate management fee
revenue 374 347 1,321 1,376
Earnings of non-
controlled entities 686 694 3,085 2,758
Less: Operating expenses 16,852 16,610 65,173 62,526
------ ------ ------ ------
Transportation and
terminals margin 30,221 28,653 109,973 117,751
Product sales revenue 2,030 1,057 6,437 3,147
Less: Cost of product
sales 944 467 1,698 1,374
--- --- ----- -----
Product margin 1,086 590 4,739 1,773
Operating margin $31,307 $29,243 $114,712 $119,524
======= ======= ======== ========
Segment operating margin $372,048 $328,273 $1,280,747 $1,277,910
Add: Allocated corporate
depreciation costs 985 1,012 3,513 3,851
--- ----- ----- -----
Total operating margin 373,033 329,285 1,284,260 1,281,761
Less:
Depreciation and
amortization expense 39,279 42,632 161,741 166,812
General and
administrative expense 38,667 40,277 148,288 151,329
------ ------ ------- -------
Total operating profit $295,087 $246,376 $974,231 $963,620
======== ======== ======== ========
Note: Amounts may not sum to
figures shown on the
consolidated statement of
income due to inter-segment
eliminations and allocated
corporate depreciation costs.
MAGELLAN MIDSTREAM PARTNERS, L.P.
RECONCILIATION OF NET INCOME AND NET INCOME PER LIMITED PARTNER UNIT
EXCLUDING MARK-TO-MARKET COMMODITY-RELATED PRICING AND LOWER-OF-COST-OR-MARKET
INVENTORY ADJUSTMENTS TO GAAP MEASURES
(Unaudited, in thousands except per unit amounts)
Three Months Ended
December 31, 2015
-----------------
Net Income Basic Net
Income Diluted Net
Per Limited Income Per
Partner Limited
Unit Partner
Unit
----
As reported $207,123 $0.91 $0.91
Unrealized derivative gains associated with future physical product sales (14,674) (0.07) (0.07)
Lower-of-cost-or-market adjustments associated with future physical product transactions 4,360 0.02 0.02
----- ----
Excluding commodity-related adjustments* $196,809 $0.86 $0.86
======== ===== =====
Weighted average number of limited partner units outstanding used for basic net income per unit
calculation 227,583
=======
Weighted average number of limited partner units outstanding used for diluted net income per unit
calculation 228,439
=======
* Please see Distributable Cash
Flow Reconciliation to Net Income
for further descriptions of the
commodity-related adjustments.
MAGELLAN MIDSTREAM PARTNERS, L.P.
DISTRIBUTABLE CASH FLOW RECONCILIATION TO NET INCOME
(Unaudited, in thousands)
Three Months Ended Year Ended
December 31, December 31, 2016
------------ ------------
2014 2015 2014 2015 Guidance
---- ---- ---- ---- --------
Net income $252,085 $207,123 $839,519 $819,122 $730,000
Interest expense, net 33,607 35,198 121,519 143,177 167,000
Depreciation and
amortization 39,279 42,632 161,741 166,812 177,000
Equity-based incentive
compensation (1) 9,553 9,019 12,471 6,461 5,000
Loss on sale and retirement
of assets 2,393 3,493 7,223 7,871 8,000
Commodity-related adjustments:
Derivative gains recognized
in the period associated
with future product
transactions (2) (75,939) (14,674) (87,511) (47,780)
Derivative gains (losses)
recognized in previous
periods associated with
product sales completed in
the period (3) 17,120 21,076 (8,086) 96,084
Lower-of-cost-or-market
adjustments (4) 36,856 4,360 39,309 (34,316)
------ ----- ------ -------
Total commodity-related
adjustments (21,963) 10,762 (56,288) 13,988 47,000
Cash distributions received
from non-controlled
entities in excess of/
(less than) earnings for
the period (12,217) 7,032 (8,724) 14,572 20,000
------- ----- ------ ------ ------
Adjusted EBITDA 302,737 315,259 1,077,461 1,172,003 1,154,000
Interest expense, net,
excluding debt issuance
cost amortization(5) (33,041) (34,352) (119,186) (140,464) (164,000)
Maintenance capital (6) (21,641) (24,010) (77,806) (88,685) (90,000)
Distributable cash flow $248,055 $256,897 $880,469 $942,854 $900,000
======== ======== ======== ======== ========
Distributable cash flow per
limited partner unit
receiving distributions
related to this period $1.09 $1.13 $3.88 $4.14 $3.95
===== ===== ===== ===== =====
Weighted average number of
limited partner units
receiving distributions
related to this period 227,426 227,781 227,158 227,516 227,781
======= ======= ======= ======= =======
(1) Because the partnership intends to
satisfy vesting of units under
its equity-based incentive
compensation program with the
issuance of limited partner
units, expenses related to this
program generally are deemed non-
cash and added back for
distributable cash flow ("DCF")
purposes. Total equity-based
incentive compensation expense
for the year ended December 31,
2014 and 2015 was $27.3 million
and $24.3 million, respectively.
However, the figures above
include an adjustment for minimum
statutory tax withholdings paid
by the partnership in 2014 and
2015 of $14.8 million and $17.8
million, respectively, for
equity-based incentive
compensation units that vested on
the previous year end, which
reduce DCF.
(2) Certain derivatives the
partnership uses as economic
hedges have not been designated
as hedges for accounting purposes
and the mark-to-market changes
of these derivatives are
recognized currently in earnings.
In addition, the partnership has
designated certain derivatives it
uses to hedge its crude oil tank
bottoms and linefill assets as
fair value hedges and the change
in the differential between the
current spot price and forward
price on these hedges is
recognized currently in earnings.
The partnership excludes the net
impact of both of these
adjustments from its
determination of DCF until the
hedged products are physically
sold. In the period in which
these hedged products are
physically sold, the net impact
of the associated hedges is
included in the partnership's
determination of DCF.
(3) When the partnership physically
sells products that it has
economically hedged (but were not
designated as hedges for
accounting purposes), the
partnership includes in its DCF
calculations the full amount of
the gain or loss realized on the
economic hedges in the period
that the underlying product sales
occur.
(4) The partnership adds the amount of
lower-of-cost-or-market
("LCM") adjustments on inventory
and firm purchase commitments it
recognizes in each applicable
period to determine DCF as these
are non-cash charges against
income. In subsequent periods
when the partnership physically
sells or purchases the related
products, it deducts the LCM
adjustments previously recognized
to determine DCF.
(5) In 2015, the partnership adopted
Accounting Standards Update No.
2015-03, Interest: Simplifying
the Presentation of Debt Issuance
Costs. Under this new accounting
standard, the partnership has
reclassified debt issuance cost
amortization expense as interest
expense. The partnership has
added back debt issuance cost
amortization expense included in
interest expense for purposes of
calculating DCF as follows: For
the three months ended December
31, 2014 and 2015, $0.6 million
and $0.8 million, respectively,
and for the twelve months ended
December 31, 2014 and 2015, $2.3
million and $2.7 million,
respectively.
(6) Maintenance capital expenditure
projects maintain the
partnership's existing assets and
do not generate incremental DCF
(i.e. incremental returns to the
partnership's unitholders). For
this reason, the partnership
deducts maintenance capital
expenditures to determine DCF.
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SOURCE Magellan Midstream Partners, L.P.
