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National Association of Publicly Traded Partnerships MLP Investor Conference Stamford, Connecticut May 2013.

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Presentation on theme: "National Association of Publicly Traded Partnerships MLP Investor Conference Stamford, Connecticut May 2013."— Presentation transcript:

1 National Association of Publicly Traded Partnerships MLP Investor Conference Stamford, Connecticut May 2013

2 Forward-Looking Statements
Portions of this document constitute forward-looking statements as defined by federal law. Although management believes any such statements are based on reasonable assumptions, there is no assurance that actual outcomes will not 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 or 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 major refineries, petrochemical plants, ammonia production facilities 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 an operational hazard or unforeseen interruption for which the partnership is not adequately insured; (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, 2012 and subsequent reports on Forms 10-Q and 8-K. The partnership undertakes no obligation to revise its forward-looking statements to reflect events or circumstances occurring after today's date.

3 Overview of Magellan MLP focused on providing pipeline and storage services in the refined petroleum products and crude oil space One of the top 10 largest MLPs, with an enterprise value ~$14 billion Experienced management team with proven track record Investment grade rating, supported by strong credit metrics and solid underlying business Proven history of distribution growth with 44 quarterly distribution increases since IPO and a 12% CAGR Strong projected growth in 2013 and 2014, driven by investment in crude oil pipeline projects Projected annual distribution growth of at least 10% in 2013 and 2014

4 Outperformance, Disciplined Management
Most MLPs have benefited from low interest rate environment, with investors searching for yield Magellan’s conservative acquisition philosophy and robust development opportunities have led to significant market outperformance

5 Structure = Competitive Advantage
Investment grade MLP with no incentive distribution rights Provides MMP a competitive advantage with one of the lowest costs of capital in the MLP space Public 100% LP Magellan Midstream Partners, L.P. (NYSE: MMP) Refined Products – 75%* Marine Storage – 13%* Crude Oil – 12%* * Percentage of 2012 operating margin, updated for new segments

6 Refined Products Longest refined products pipeline system at 8,800 miles, primarily transporting gasoline and diesel fuel Profit driven by throughput volume and tariffs Tariff increases directly related to Producer Price Index; increased tariffs by 8.6% on July 1, 2012; expect mid-’13 increase of ~4.6% Competitive position = breadth of system (access > 40% of refining capacity) + independent service provider model

7 Marine Storage 5 storage facilities with 26mm barrels of aggregate storage Profit driven by storage leased Highly utilized (90%+ leased) supported by long-term agreements

8 Crude Oil 800 miles of crude oil pipelines substantially backed by long-term throughput commitments 15mm barrels of aggregate storage supported by customer commitments, including one of the largest storage providers in Cushing, OK Significant source of growth for Magellan with recent Permian basin pipeline projects

9 Primarily Fee-Based Business
Expect Future Fee-Based, Low Risk Activities to Comprise ~85% or More of Operating Margin Results* * Operating margin represents operating profit before depreciation & amortization and general & administrative costs; includes $13mm of commodity-related adjustments

10 Growth in Expansion Capital Spending
Over the last nine years, Magellan has invested $2.9 billion in acquisitions and organic growth projects $1 billion of expansion projects currently underway and $190 million of pending acquisitions Many opportunities exist for continued growth Future acquisitions are difficult to predict but quality assets remain “on the market” Continue to assess > $500mm of potential expansion projects as well Management committed to disciplined approach for future growth

11 Future Growth Opportunities
Magellan’s growing crude oil asset profile provides springboard for additional crude oil opportunities 12%

12 Permian Crude Oil Pipelines
Longhorn Pipeline reversal 225k bpd capacity, fully committed Began shipments at partial capacity mid-April; ramping to full capacity 3Q13 $375mm capital spending 3x EBITDA multiple Evaluating potential 50k bpd expansion BridgeTex JV with Occidental Petroleum 300k bpd capacity Expect to be operational mid-2014 $600mm capital spending (MMP share) 8x EBITDA multiple on committed volume with upside potential Colorado City Crane Houston New Mexico Texas Oklahoma Arkansas Louisiana Permian Basin Longhorn Pipeline BridgeTex Pipeline

13 Permian a Key Focus Area for Magellan
Incremental pipeline capacity (000 bpd) 50 Plains Basin to Cushing 110 Sunoco West Texas Gulf 150 Sunoco Permian Express I 200 Plains Cactus 225 Longhorn pipeline 300 BridgeTex pipeline = 1,035k bpd incremental pipeline capacity (Source: Industry reports and Magellan estimates) Permian 2011 – 2022 Growth: +1,162k bpd Aug. 2012 Incremental pipeline capacity also expected to handle displaced Cushing barrels Currently, ~750k bpd of Permian crude oil moves to Cushing and Midwest refineries via Centurion, Basin and West Texas Gulf pipelines As Canadian crude pushes into Cushing and Northern markets, some of this crude oil will be pushed south Magellan Playing a Material Role in Permian Solution

14 Houston Connectivity Magellan’s Houston distribution network is the most comprehensive system to deliver crude oil to the Houston Gulf Coast area Plan to have access to all domestic inbound crude production and all Houston and Texas City refineries

15 Eagle Ford Joint Venture
JV with Kinder Morgan (formerly Copano Energy) to transport chemical-grade condensate from the Eagle Ford shale 100k bpd capacity, 140-mile pipeline 500k bbls condensate storage at Corpus Christi terminal (MMP owned) Partially operational now, expect full capabilities 3Q13 $100mm capital spending (MMP share)

16 Regional Refined Products Opportunities
Strengthening Mid-Continent refineries are maintaining high crude runs and seeking new outlets for their production, providing regional refined products opportunities Recently completed bi-directional pipeline project between OK and TX Considering connectivity between Magellan’s Ft. Smith and Little Rock, AR terminals

17 Pending Pipeline Acquisition
Agreed to acquire 800 miles of refined petroleum products pipeline for $190mm Rocky Mountain pipeline system 550 miles of pipeline 4 terminals with 1.7mm bbls storage New Mexico pipeline system 250 miles of pipeline Awaiting regulatory approvals following second information request from FTC Finance with cash on hand or revolving credit facility 10x EBITDA multiple expected, with potential upside from long-haul shipments

18 Distribution Growth Trend
Proven history of distribution growth with 44 quarterly increases Targeting at least 10% annual distribution growth for 2013 and 2014

19 Conservative Financial Profile
Committed to maintaining solid investment grade rating Targeting ~$75 million of annual excess cash (at least 1.1x coverage) Long-term leverage ratio of < 4x History of maintaining sector-leading credit metrics Intention to fund current slate of expansion projects with debt financing $800mm revolving credit facility with zero borrowings outstanding

20 Magellan Investment Highlights
Straight-forward, low risk, stable business model No general partner incentive distribution rights Attractive growth projects under construction and accretive acquisition pending Proven history of distribution growth Forecasted record distributable cash flow generation with strong distribution coverage Strong investment-grade balance sheet and liquidity position = low cost of capital History of exceptional total returns

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