Magellan Midstream Boosts Capital Spending as Projects Heat Up Along Texas Gulf Coast

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Researched by Industrial Info Resources (Sugar Land, Texas)--Favorable market conditions for refined products and crude-oil pipelines are giving Magellan Midstream Partners LP (NYSE:MMP) (Tulsa, Oklahoma) a rosy outlook for the remainder of the year. The company is significantly boosting its capital spending as several expansion projects, notably along the Texas Gulf Coast, are in their advanced stages and are expected to reap benefits in coming years. Industrial Info is tracking more than $1 billion in active projects involving Magellan, more than 95% of which are to be found in Texas.

Click on the image at right for a graph detailing Magellan's active projects, by industry sector.

In addition to improving commodity prices, Magellan benefited from strong demand for its fee-based transportation and terminals services. Magellan said in a quarterly earnings-related press release that it expects to spend about $950 million in 2018 and $425 million in 2019 to complete its current slate of construction projects; this amounts to a $100 million increase from previous estimates. Of the active Magellan projects tracked in Industrial Info's project database, more than half of the total investment value is attributed to refined products storage terminals.

The company said tank construction is underway for the $335 million marine terminal on the Houston Ship Channel in Pasadena, Texas, which is a joint venture with Valero Energy Corporation (NYSE:VLO). The full project would feature at least 10 tanks to store petroleum products and gasoline and diesel fuel, as well as a marine dock for Panamax-sized ships or barges. Magellan says the initial 1 million barrels of storage is targeted for service in January 2019, and is proposing an estimated $75 million addition that would provide 4 million more barrels of space by 2020. For more information, see Industrial Info's project reports on Phase I and Phase II.

Magellan also announced that it had ordered pipeline steel and is seeking permits and right-of-way approval for the $150 million Houston-to-Hearne pipeline and $60 million Wink-to-Crane pipeline, both in Texas. The Houston-to-Hearne line will carry more than 85,000 barrels per day (BBL/d) of refined products 135 miles in two spreads, with access to other points in the Texas, Mid-Continent and Arkansas markets; the Wink-to-Crane line will carry 250,000 BBL/d (expandable up to 600,000 BBL/d) of Delaware Basin crude oil 60 miles from Wink to an interconnection with Magellan's Longhorn Pipeline. The company expects both to be operational in mid-2019. For more information, see Industrial Info's reports on the Houston-to-Hearne and Wink-to-Crane lines.

The company also is at work on a $30 million pump station for the Houston-to-Hearne line in Houston, as well as a $60 million crude oil and condensate terminal and a $30 million pump station for the Wink-to-Crane line in Wink. Magellan said in the press release that it is "evaluating optimization of the Delaware Basin [Wink-to-Crane] project through a joint venture or undivided joint interest arrangement with a third party." For more information, see Industrial Info's project reports on the Houston pump station, Wink terminal and Wink pump station.

Magellan also has several tank additions planned at terminals across the U.S. South. This includes a $20 million in additions at the East Houston Refined Products Terminal in Houston, Texas, which is expected to add 620,000 barrels of capacity; $15 million in additions at the Doraville 2 Gasoline & Diesel Terminal in Atlanta, Georgia, which is expected to add 160,000 barrels of capacity; and $5 million in additions at the Macon Gasoline, Diesel & Ethanol Terminal in Macon, Georgia, which is expected to add 100,000 barrels of capacity. For more information, see Industrial Info's reports on the East Houston, Doraville 2 and Macon projects.

Magellan's net income stood at $210.9 million for first-quarter 2018, compared with $222.7 million for first-quarter 2017. The company was negatively affected by a $16 million expense related to a one-time adjustment to correct an error for pension valuation estimates.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.