Supplemental Analyst Day Material
Transcript of Supplemental Analyst Day Material
SupplementalAnalyst Day Material
March 26, 2020
NYSE: MMP
2www.magellanlp.com | NYSE: MMP
Forward-looking statementsExcept for statements of historical fact, this document constitutes forward-looking statements as defined by federal law. Although management believes such statements are based on reasonable assumptions, such statements necessarily involve known and unknown risks and uncertainties that may cause actual outcomes to 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) changes in price or demand for refined petroleum products, crude oil and natural gas liquids, or for transportation, storage, blending or processing of those commodities through its facilities; (2) impacts of the coronavirus and similar epidemics on its workforce, customers and vendors; (3) its ability to identify and secure growth projects with acceptable expected returns and to complete those projects on time and at expected costs; (4) changes in the partnership’s tariff rates or other terms as required by regulatory authorities; (5) shut-downs or cutbacks at refineries, of hydrocarbon production or at other businesses that use or supply the partnership’s services; (6) changes in the throughput or interruption in service on pipelines or other facilities owned and operated by third parties and connected to the partnership’s terminals, pipelines or other facilities; (7) the occurrence of operational hazards or unforeseen interruptions; (8) the treatment of the partnership as a corporation for federal or state income tax purposes or the partnership becoming subject to significant forms of other taxation; (9) disruption in the debt and equity markets that negatively impacts the partnership’s ability to finance its capital spending; (10) its capital needs, cash flows and availability of cash to fund unit repurchases or distributions; and (11) failure of customers to meet or continue contractual obligations to the partnership. This list is not exhaustive. Additional factors are described 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, 2019. You are urged to carefully review and consider the cautionary statements and other disclosures made in the partnership’s filings, especially under the headings “Risk Factors” and “Forward-Looking Statements.” Forward-looking statements made in this presentation are based only on information currently known, and the partnership undertakes no obligation to update or revise its forward-looking statements.
3www.magellanlp.com | NYSE: MMP
Magellan’s asset portfolio
4www.magellanlp.com | NYSE: MMP
• Investment grade MLP with no incentive distribution rights• Primarily focused on transportation, storage and distribution of refined
petroleum products, such as gasoline and diesel fuel
Refined Products63%*
100%LP
Crude Oil37%*
Magellan Midstream Partners, L.P. (NYSE: MMP)
Public
* Percentage of 2019 annual operating margin. Due to recent sale of 3 marine terminals, plan to re-segment in 2020,with ‘19 financial results of historical Marine Storage segment combined into our Refined Products segment
Straight-forward business model
Refined Products
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Refined products segment overview• Extensive network serving end-use demand for refined petroleum products, such as
gasoline, diesel and aviation fuel, primarily in the central region of the United States‒ Beginning in ‘20, we plan to also include results from our Galena Park and Pasadena
JV marine storage facilities within the Refined segment
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Sources of fee-based refined products revenue• Refined products pipeline tariff revenue was $830mm+ during 2019
– Accounted for 70% of transportation and terminals revenue for the segment
• Remaining 30% is derived from other fee-based ancillary services‒ Demand for contract storage along our pipeline system remains strong and
provides customers flexibility‒ Throughput fees earned at 22 of our 53 pipeline terminals, included as part of
tariff at other 31 terminals‒ Our 25 independent terminals are located in the Southeast and earn revenue
from throughput and ethanol / additive blending ‒ Also blend renewable fuels such as ethanol and inject additives at our terminals
Refined products tariff70%
Other fee-based30%
Ppl terminal throughput
14%Independent Terminals
16%
Storage25%
Additives13%
Renewables10%
Capacity 4%Tenders 6%
Other 12%
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Refined products pipeline system• Longest refined petroleum products
pipeline system in the U.S. at 9,800 miles with 53 terminals and 46mm barrels of storage
• Demand-driven system with multiple supply options
‒ Access to nearly 50% of refinery capacity in the U.S., including Midcontinent, Northern tier and Gulf Coast refineries
• Competitive advantages include:
‒ Extensive breadth of footprint and supply capabilities
‒ Open stock system, allowing customers to inject product into pipeline and simultaneously pull from another location along our network
‒ Independent service provider model
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Critical U.S. infrastructure
• Our refined products pipeline system is an essential component of the U.S. petroleum infrastructure to meet demand for refined products in the markets we serve
Source: EIA and Magellan deliveries
IL 4% NE 4% AR 5%KS 6%
CO 6%
MO 7%
OK 8%
IA 9%MN 9%
All other states11%
TX 31%
2019 Magellan Refined Products Pipeline Deliveries by State
45%46%47%50%
56%58%
81%
0% 50% 100%
OklahomaKansas
NebraskaArkansas
South DakotaMinnesota
Iowa
% of Total State Demand Supplied byMagellan Refined Products Pipeline in 2019
• During 2019, we transported 45% or more of the gasoline / distillate consumed in 7 of the 15 states we serve
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Market share17% Take-or-pay
57%
Volume incentive26%
• Volume driven by stable demand in the markets served by our pipeline system, with published tariffs generally serving as contracts with volume nominated up to a month in advance
• 40% of ‘19 shipments were subject to supplemental agreements with an average remaining contract life of approx. 3 years
– Committed volume expected to increase as our new Texas pipeline expansions become fully operational due to contracted nature of those projects
Refined products pipeline commitments
Spot shipments60% Contracted
volume40%
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Competitive vs. less competitive markets
• 60% of our refined products pipeline tariff revenue is generated from markets deemed workably competitive by the FERC or subject to state regulations
• The remaining 40% is deemed less competitive and therefore subject to the indexation methodology approved by the FERC
• We have followed the mid-year FERC index since its inception for our indexed markets and annually determine the appropriate rate change for our competitive markets
• Market-based designation provides flexibility, especially when the FERC index is negative or considered to be too low
Refined Products Pipeline System
12www.magellanlp.com | NYSE: MMP
-0.4%
0.9%1.7%
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3.2%3.6%
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~ 2.0%
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1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019
Index Market-based
Refined products pipeline rates• Our average rate / bbl impacted by combination of the FERC index, market
environment and distribution pattern of shipments
• Based on preliminary PPI results for 2019, will increase rates in our indexed markets by ~2% on July 1, 2020
• Intend to increase our competitive and intrastate rates by 3-4% in mid-year ’20, depending on market conditions
• Average rate in ‘20 expected to be similar to $1.62 / bbl reported for ‘19 primarily as a result of full year of East Houston-to-Hearne volumes, which move at a lower rate
Since inception, the cumulative FERC index increase has been approx. 71% while market-based rates have increased closer to 91%
History of Annual Refined Products Tariff Changes Index Formula: • 1995 to 2000: PPI – 1.0%• 2001 to 2005: PPI• 2006 to 2010: PPI + 1.3%• 2011 to 2015: PPI + 2.65%• 2016 to 2020: PPI + 1.23%
13www.magellanlp.com | NYSE: MMP
Upcoming FERC index review process• Index intended to allow pipelines to raise rates to recover actual cost increases while
earning a reasonable return without a complicated cost-of-service filing– FERC has utilized index methodology since 1995, reviewing every 5 years – 2020 represents the final year of the current FERC index formula equal to the
change in PPI + 1.23%
• Expected next steps of FERC review for new index methodology:– April 2020: Pipelines file 2019 FERC Form 6s, allowing data compilation and
analysis to begin, comparing cost changes from ’15 base year to ‘19– Summer 2020: FERC reviews summarized cost data and comments submitted by
the industry through Association of Oil Pipelines (AOPL) as well as shippers– End of 2020: FERC finalizes new methodology to be effective July ’21
• FERC must determine the best approach to implement its mid-cycle ‘18 policy change that no longer allows income taxes in rate structures for interstate pipelines structured as partnerships (included in ‘15 cost data, excluded in ‘19 data)
– Hypothetical calculations of the most adverse treatment of the income tax change would lower the index adder by approx. 1% (i.e. from +3% to +2%)
14www.magellanlp.com | NYSE: MMP
Refined products pipeline volumes• Base volumes generally trend with overall demand for refined products in the
markets served by our assets
• 2019 reported volumes 1% higher than ’18‒ Excluding growth volumes, base business volumes were roughly 1% lower
overall
• 2020 guidance originally assumed base refined products shipments flat– Including growth volumes primarily related to our East Houston-to-Hearne
and west Texas expansion projects, we expected all-in refined products volume growth of 10% in ’20
• Based on developing challenges associated with the virus pandemic, assessing short-term implications to our markets due to reduced travel in the near term
• Primary products handled are gasoline and distillate, with aviation and LPGs combined only 10% of ‘19 shipments
Gasoline54%
Distillate36%
Aviation, LPG10%
2019 Transportation Volumes by Product
15www.magellanlp.com | NYSE: MMP
Expansion of Texas refined products pipeline system• Largest expansion of our refined products pipeline system in Magellan’s history
• Phase 1: New East Houston-to-Hearne pipe became operational Sept. ‘19, adding 85k bpd capacity
– $425mm capital spend with 8x EBITDA multiple expected on committed volume
• Phase 2: New Hearne-to-Alexander pipeline and increasing diameter of existing pipe on western leg of Texas system, adding 75k bpd capacity
– $500mm capital spend with 7x EBITDA multiple expected on committed volume
– Expected completion mid-’20– Meaningful upside, including
potential incremental volume fromnew market-share agreement(volume is not guaranteed)
• Adding new Midland refined productsterminal as well
• Projects supported by long-termcommitments from investment-gradecompanies with average contract lifeof 9 years
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Longer-term refined products volume expectations• Longer term, we generally look to the EIA’s refined products demand projections
for the markets we serve, which are expected to remain relatively stable– Gasoline: slight decline – fuel efficiency vs vehicle miles driven
Electric vehicles not expected to have material impact in the markets served by Magellan for foreseeable future
– Distillate: generally flat based on expected economic conditions• EIA projections do not include developing implications from the current virus
pandemic, which is primarily expected to impact ’20 demand
-5%
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2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
EIA projected refined products demand growth in MMP's markets
Gasoline Distillate Total Refined Products
NOTE: MMP Market is based on 44% west north central region, 43% west south central and 13% otherSOURCE: EIA's Annual Energy Outlook 2020, February 2020
17www.magellanlp.com | NYSE: MMP
Renewable fuels• Continued expansion of renewables brings challenges and opportunities• Ethanol: Ability to blend E10, E15 and E85 at our terminals, with demand to date
heavily favoring E10 option– Blending and storage fees earned essentially offset lost tariff revenue
• Biodiesel: Limited system-wide demand so far, primarily located in Minnesota but other states are considering mandates as well
– Magellan is evaluating the transportation of biodiesel blends via pipe along portions of our refined products pipeline system
• Working with federal and state legislative and regulatory agencies to decrease cost of required infrastructure through cost-sharing programs
18www.magellanlp.com | NYSE: MMP
Refined products storage • Magellan has significant refined products storage along our pipeline system that is
used for contract storage– Comprised of a combination of fungible system storage throughout our pipeline
network as well as site-specific storage at selected locations • Beginning in ‘20, our Galena Park, TX marine terminal will be included in the Refined
segment with 14mm bbls of aggregate storage and 750k bpd of dock capacity– Highly utilized facility with exceptional connectivity to local refineries and
pipelines, attractive dock positioning and depth– Added 5th dock in mid-2019, improving flexibility and export capabilities– Also recently reactivated connection to rail rack for diesel service to Mexico
19www.magellanlp.com | NYSE: MMP
Pasadena marine terminal joint venture• Beginning in ‘20, our recently-constructed marine terminal in Pasadena, TX will also be
included in the Refined segment• 50/50 joint venture with Valero Energy with 300k bpd of dock capacity currently
– Phase 1: 1mm bbls of storage and Panamax-capable dock; began operations early ’19– Phase 2: 4mm bbls of storage, 3-bay truck rack, Aframax-capable dock and
connectivity to Valero’s refineries in Houston and TX City; began operations early ’20• $410mm for MMP’s share of capital spend for initial 2 phases, fully committed by long-
term customer contracts (avg contract life of 10 years) with a 9x EBITDA multiple expected• Facility has space for another 5mm bbls of storage and 3 additional docks, could handle
other products including NGLs or chemicals– Additional expansions contingent on receiving sufficient customer commitments
20www.magellanlp.com | NYSE: MMP
Commodity-related activities
*Product margin of $183mm for the Refined Products segment calculated as $700mm product sales - $583mm cost of product sales + $66mm commodity-related adjustments for DCF purposes; Other primarily includes final price adjustments on sale of product overages
• During 2019, the Refined Products segment generated $183mm* of product margin
– Primarily related to our gas liquids blending activities
Gas liquids blending
89%Fractionator
14%
Other-3%
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Gas liquids blending overview• Magellan transported 280mm barrels of gasoline during 2019
– Quality margin associated with our fungible pipeline system typically creates opportunities for gas liquids blending
• Vast majority of our gas liquids blending is related to butane– Butane is a common gasoline blending component, with butane prices
generally lower than gasoline– Regulated gasoline specifications require gasoline to transition from low
vapor pressure in the summer to high vapor pressure during the winter, then back down in the spring
– Butane blending involves capturing these seasonal vapor pressure changes that allow blending butane into gasoline
• Additional opportunities involve blending to capture other quality margins, including octane levels of gasoline within pipeline network
• Volumes limited by quality margin availableand total volume shipped
– Gas liquids blending volumes historicallyequal ~2% of the annual gasoline wetransport, with blending sales heavilyweighted toward 1Q and 4Q
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Gas liquids blending margins• Blending margins more dependent on the spread between the price of gasoline and
gas liquids than the overall price level of crude oil– Gas liquids prices have typically been low due to increased domestic supply– Blending is opportunistic, will not blend if margins not favorable
• Projected margins are primarily based on the NYMEX forward curves for RBOB gasoline and Belvieu butane‒ Mid-Con gasoline typically trades at a discount to NYMEX RBOB (basis
differential)
• In addition, we incur logistical costs associated with storing and transporting gas liquids and buying RINs
Example of Spot Margin Calculation (per gallon)
Gasoline price (avg NYMEX RBOB for Jan '20) 1.67$ Butane price (avg NYMEX Belvieu for Jan '20) 0.69Imputed gross spot margin 0.98$ Basis differential: RBOB to Mid-Con gasoline ('19 avg) (0.05) Estimated logistics costs (0.25) Imputed net spot margin 0.68$
Note: calculation for example purposes only and does not represent actual marginsexpected.
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Gas liquids blending risk mitigation• Our realized margin will not precisely track spot margins throughout the year as it
is affected by:‒ Timing of gas liquids purchasing activities and related futures contracts‒ Pool costing of gas liquids inventory‒ Basis differentials
• Magellan does not typically speculate on the price of commodities and mitigates risk as much as possible related to our gas liquids blending activities‒ Purchase much of our blendstocks in the spring and summer when pricing is
lower to cover up to 90% of expected blending volumes‒ When purchase blendstock, hedge gasoline sales with futures contracts;
entering ‘20, we had 50% of our blending margins hedged, and generally use the forward curve to estimate margins for the remainder of the year
‒ Purchase necessary RINs at the time blendstock is purchased or in advance if market conditions are favorable (~90% of ‘20 RINs purchased already)
‒ Lock-in basis differentials when reasonable to do so
24www.magellanlp.com | NYSE: MMP
Current key focus areas – Refined Products
• Provide access to new markets in response to growing Midcontinent supply length
• Maintain market share while seeking to maximize revenue
• Leverage technology to create new services and new revenue opportunities
• Adapt to the growing penetration of biofuels in our market area
• Capture growth opportunities to serve increasing demand in Texas and northern Mexico
• Enhance marine terminal offerings through new pipeline connections and ongoing development of Pasadena JV
• Continue buildout and optimization of gas liquids blending activities
Crude Oil
26www.magellanlp.com | NYSE: MMP
Crude oil segment overview• 2,200 miles of crude oil pipelines, substantially backed by long-term throughput
commitments• 35mm barrels of total crude oil storage, including 23mm barrels used for contract
storage, with largest locations in strategic Houston and Cushing storage hubs• Independent, customer-focused service provider
– Focus on quality and transparency as well as significant Houston connectivity provide competitive advantage
27www.magellanlp.com | NYSE: MMP
Sources of fee-based crude oil revenue• Crude oil transportation and terminals revenue exceeded $600mm during 2019, with
pipeline tariffs comprising nearly 50% of these fee-based revenues‒ Joint venture contributions appear as earnings of non-controlled entities in financial
results instead of revenue‒ Including MMP’s share of JV revenue in analysis, tariffs would have comprised nearly
60% of 2019 fee-based revenues‒ Due to lower rates and volumes for Permian pipes in 2020, tariff revenue expected
to be 50%+ of transportation and terminals revenue including JV contributions in ‘20
• Storage revenues contributed almost 20% of ’19 revenues, primarily from Cushing and East Houston contract storage
• Remaining revenues primarily related to fee-based activities such as pipeline capacity leases (mainly line space leased to BridgeTex) and splitter tolling fees
Longhorn tariffs36%
Houston distribution tariffs 12%
Contract storage 17%
Other fees 7%
Ppl capacity leases9%
Tenders 6%
Splitter 11%
Mgmt fees 2%
2019 Crude Oil Revenue by Type(incl. MMP-share of JV revenue)2019 Crude Oil Revenue by Type
Longhorn tariffs 26%
Houston distribution tariffs 8%
BridgeTex tariffs 14%
Saddlehorn tariffs 7%
Double Eagle tariffs 3%
Contract storage 12%
Other fees 8%
Ppl capacity leases 6%
Tenders 5%Splitter 8%
Mgmt fees 2%
28www.magellanlp.com | NYSE: MMP
Crude oil differential, marketing affiliate activity• Pricing differential between the Permian Basin and Houston drives demand for uncommitted
shipments on Longhorn and BridgeTex pipelines
• Favorable differential during ‘18 and ’19 resulted in significant spot shipments
• Due to newly-constructed Permian take-away capacity, no third-party spot shipments are expected during ’20, as evidenced by the forward curve
• To the extent our crude oil pipes are not full, we are utilizing marketing activities to facilitate intrastate shipments on our Texas assets
– Accomplished through basic back-to-back transactions wherein we purchase at the origin and sell at the destination
• Due to the affiliate nature of the transactions, marketing activities on Longhorn appear as commodity margin on our consolidated financials
– We include affiliate shipments in operatingstatistics to provide complete picture oftotal volume moved, but exclude theseaffiliate volumes in the average tariff rate
Source: Argus 3/16/20
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29www.magellanlp.com | NYSE: MMP
Longhorn pipeline• 275k bpd pipeline handling various grades of crude oil from the Permian Basin• Primarily receives product through strategic interconnects with Centurion,
Medallion, Noble, Oryx and Plains’ pipelines• Proven track record of operational stability to deliver crude oil to the Houston
Gulf Coast region
30www.magellanlp.com | NYSE: MMP
Longhorn volume• Entering 2020, ~130k bpd committed under long-term commitments with remaining
~130k bpd set to expire Sept. 30, 2020– In Jan. 2020, executed 10-year agreement to fill significant portion of expiring
space, with volume ramp over next few years– At same time, marketing affiliate secured multi-year, fixed differential agreements
with third parties to bridge the gap during ramp-up period Accomplished by marketing affiliate taking assignment of customer contract
set to expire 9/30; began March ‘20 and expected to average 40k bpd this year– Resulting total volume commitments (incl. our marketing affiliate commitments)
average ~240k bpd in ’20 and ~200k bpd from 2020 to 2024; our marketing affiliate intends to move additional volume as differential economics allow
– ~70% of capacity currently contracted long term, continue to negotiate with additional parties to fill remainder of space
• Average remaining contract life of ~7 years
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Longhorn rates • Committed tariff for third-party shipments expected to average $1.95 / bbl in ‘20
– Committed rate expected to decline due to full-year impact of late ‘20 contract expiration and ramp of new significant commitment
– Spot tariff is ~$4.25 / bbl, depending on origin-destination mix– Based on current pricing environment, no third-party spot shipments expected
to move in ‘20
• Contracted rates adjusted by FERC index, subject to certain modifications
Note: Average rate above from 3rd party commitments only, does not include margin on Mktg committedvolume; all-in average rate including spot shipments was approx. $2.40 in ‘18 and $2.25 in ‘19
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32www.magellanlp.com | NYSE: MMP
BridgeTex pipeline• 440k bpd pipeline handling various grades of crude oil from the Permian
Basin and Eaglebine• Primarily receives product through interconnects with Centurion, Medallion,
NuStar and Plains’ pipelines• Ownership structure: OMERS 50%, Magellan 30%, Plains 20%; MMP serves
as operator
33www.magellanlp.com | NYSE: MMP
BridgeTex volume and rates• Expect ‘20 shipments to average 360k bpd at average rate of ~$2.40 / bbl
‒ BridgeTex 1: 80% of 300k bpd pipeline capacity committed with take-or-pay contracts at average rate of ~$2.90 / bbl (incl. commitment from pipeline affiliate in connection with our basis derivative agreement), guidance assumes lower ‘20 volume due to customer use of credits earned from excess historical shipments
‒ BridgeTex 2: 80% of 140k bpd capacity also committed with take-or-pay contracts at average rate of ~$1.80 / bbl (incl. lower Eaglebine rate)
‒ Contracted rates adjusted by FERC index, subject to certain modifications
• No shipments assumed for ’20 at spot tariff of ~$4.10 / bbl; volumes above committed levels assumed to move in ’20 as shippers take advantage of current incentive rates and joint tariffs
• Average remaining contract life of more than 4 years
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34www.magellanlp.com | NYSE: MMP
• Currently 9mm bbls of crude oil storage at East Houston, with 5mm bbls available for contract storage
– Space to build another 2mm bbls of storage– Considering additional grade segregation to meet customer needs
• Magellan’s East Houston terminal is a critical trading hub on the U.S. Gulf Coast‒ Price assessment for WTI via Argus (MEH)‒ ICE HOU futures contract‒ Platts’ price assessment
• MEH has developed as the premiere trade point due to consistent quality, liquidity and transparency
• With recent commodity price volatility and resulting contango curve, significant increase in demand for contractstorage at this time, with 2mm bblsrecently leased for ’20-21
East Houston crude oil storage
35www.magellanlp.com | NYSE: MMP
Houston crude oil connectivity• Magellan’s Houston distribution system is a network of crude oil pipelines with the
capacity, connectivity and quality segregations to provide our shippers extensive access to the refineries and export terminals on the Gulf Coast
36www.magellanlp.com | NYSE: MMP
Houston distribution system• During 2019, we transported >200mm bbls under the Houston distribution tariff
that averaged ~ 25 cents
• Volume primarily driven by shipments on Longhorn and BridgeTex, which travel to final destination using our Houston distribution system
• BridgeTex also leases space on our Houston distribution system
– BridgeTex customers can elect to move under this capacity lease for seamless delivery to ultimate destination without paying a separate tariff to us
• Delivery capabilities to all Houston and Texas City refineries, third-party storage facilities and our Seabrook JV export terminal
• New agreements that include terminal transfer fees allow customers to access Seabrook; revenue neutral but expected to result in lower reported transportation volumes
45%
20%
35%
2019 Product Origins
BridgeTex Longhorn Other
70%
30%
2019 Product Destinations
Refineries Seabrook
37www.magellanlp.com | NYSE: MMP
• 50/50 joint venture with LBC Tank Terminals– Currently operational: 3.2mm bbls of crude oil storage, Aframax dock with 300k
bpd capacity + connectivity to MMP’s Houston crude oil distribution system– Under construction: Suezmax dock with 400k bpd capacity to be operational mid
2020, and 750k bbls of crude oil storage expected to be operational early 2021– Magellan has a long-term lease agreement with Seabrook to provide our
customers with storage capacity and dock access for crude oil imports and exports– Opportunity for up to 1.5mm bbls of additional storage and second pipeline
connection to MMP’s Houston crude oil pipeline system
Seabrook Logistics offers crude export solution
38www.magellanlp.com | NYSE: MMP
• Magellan has a significant presence in Corpus Christi– 6mm bbls of aggregate storage (all shown in crude oil segment going forward)
– Landing spot for Eagle Ford condensate from our 50%-owned Double Eagle JV pipeline
– 50k bpd condensate splitter fully committed under take-or-pay customer contract
– 100k bpd dock capacity via shared docks owned by the Port of Corpus Christi– 100 acres of undeveloped land with waterfront access
• Assessing connectivity options to new long-haul pipes delivering crude oil and condensate to the Corpus Christi market,including potential opportunities to utilizeour undeveloped land
Corpus Christi
39www.magellanlp.com | NYSE: MMP
• Joint venture pipeline primarily delivering crude oil from the DJ and Powder River Basins to Cushing‒ 600-mile pipeline with initial
capacity of 190k bpd‒ Currently in process of expanding to
290k bpd by late 2020‒ Effective Feb. 2020, ownership
structure: Magellan 30%, Plains 30%, WES 20%, Black Diamond 20% (an affiliate of Noble)
• Continue to improve connectivity and optionality of system
– Various joint tariffs in place to attract incremental volume, including recently-constructed DJ South Matador pipeline to begin April ’20
– Recent connection to Pony Express, with others under review
Saddlehorn pipeline
40www.magellanlp.com | NYSE: MMP
Saddlehorn volume and rates• Expect ‘20 shipments to average more than 180k bpd (155k bpd in ‘19) at average rate
of ~$2.75 / bbl
• New agreements result in ~75% of capacity committed with take-or-pay commitments when fully-expanded capacity available late ‘20
• New commitments ramp over time, essentially replacing original commitments set to expire in ’21, but resulting in a lower average rate consistent with more current market pricing
• Uncommitted volumes expected as well due to various joint tariff movements, with more than 30k bpd of uncommitted volume assumed in ‘20 guidance
• Contracted rates increase annually by nominal fixed amount
• Average remaining contract life of ~7 years
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41www.magellanlp.com | NYSE: MMP
Cushing crude oil storage• Cushing continues to be an important crude oil hub, providing traders
flexibility to deliver crude oil to the highest margin market at any given time
• With 13mm bbls of total storage, Magellan is one of the largest owners of crude oil storage in Cushing
• Continue to enhance connectivity of our facility, with new Glass Mountain and Ozark pipeline connections added in early ‘20
• Magellan’s independent storage model also increases the attractiveness of our tankage compared to many of our competitors
– Maintaining consistency and predictability of quality within our system remains a top priority
• With recent commodity price volatilityand resulting contango curve,demand for storage at Cushing remains strong
42www.magellanlp.com | NYSE: MMP
Current key focus areas – Crude Oil
• Maximize re-contracting of long-haul pipelines
• Optimize use of uncommitted space on long-haul pipelines, including utilization of marketing activities
• Enhance connectivity of Permian pipelines and Houston distribution system
• Further explore crude oil export capabilities, utilizing Magellan’s consistent disciplined approach
• Continued focus on consistent and predictable quality of crude oil available through our pipelines and terminals
Additional Information
44www.magellanlp.com | NYSE: MMP
MMP does not rely on equity markets• Magellan has avoided relying on equity issuances to finance growth
– Despite $6.3 billion of expansion capital spending over last 10 years, have issued only $260mm of equity in one deal in 2010
• Reinvested ~$2.2 billion of retained cash flow over the last 10 years • Also reinvested BridgeTex sale proceeds into additional fee-based assets
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$800
$1,000
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
$ m
illio
ns
MMP financing mix since 2010
Debt New equity Retained cash
45www.magellanlp.com | NYSE: MMP
Financial policy • Target maximum leverage ratio remains unchanged at 4x debt-to-EBITDA
– Potential share repurchases and special distributions designed to supplement regular distribution will be subject to this long-standing financial policy
• Remain committed to solid investment grade rating• Issued equity when needed to defend credit (e.g. ‘10)• Significant liquidity with $1 billion credit facility• Strong distribution coverage (targeting at least 1.2x once beyond current virus
challenges)
46www.magellanlp.com | NYSE: MMP
Minimal near-term debt maturities, limited interest rate exposure
• Average maturity of debt is nearly 20 years
• No debt maturity in ’20, with $550mm due Feb ‘21
• Low all-in realized coupon, averaging 4.5% (4.6% withhedges and premiums)
• Currently 100% fixed with no floating rate exposure
$in millions
Amount CouponCP -$ 0.0% 0.0%
2021 550 4.3% 4.0%2025 250 3.2% 3.2%2026 650 5.0% 5.0%2037 250 6.4% 6.4%2042 250 4.2% 4.2%2043 550 5.2% 5.2%2045 250 4.2% 5.4%2046 500 4.3% 4.3%2047 500 4.2% 4.2%2049 500 4.9% 4.7%2050 500 3.9% 4.3%
4,750$ 4.5% 4.6%* Includes impact of hedges/premiums/discounts
Effective Rate*
47www.magellanlp.com | NYSE: MMP
Best-in-class returns
ROIC defined as trailing 12 month net operating profit after tax / average invested capitalSource: Bloomberg
• Magellan has proven track record of delivering superior returns• Reflects disciplined management style, high quality asset base and strong
business position
48www.magellanlp.com | NYSE: MMP
$0
$200
$400
$600
$800
$1,000
$1,200
'10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20E
$ in
Mill
ions
Organic Growth Acquisitions
Disciplined growth• Over the last 10 years, Magellan has invested $6.3 billion in expansion projects
– Historically made a few strategic acquisitions that served as platforms for future organic growth and continuously evaluate opportunities
– Organic growth projects remain our primary focus
• Expect to spend $400mm in ‘20 on construction projects currently underway, primarily related to the transportation & storage of refined petroleum products
• Targeting 6-8x EBITDA multiple on projects
BP (Houston distribution,
Cushing)
~75% of organic spending on crude oil
Plains (Rocky Mtn, NM)
~75% of organic spending on refined products
49www.magellanlp.com | NYSE: MMP
* Operating margin represents operating profit before depreciation, amortization & impairment expense and general & administrative costs;excludes unrealized mark-to-market and other commodity-related adjustments
• Magellan’s business model primarily focused on fee-based transportation, storage and distribution of petroleum products
• 2019 transportation results benefited from spot revenue and marketing activities on our crude oil pipelines due to the favorable pricing differential between the Permian Basin and Houston that is not expected to continue in ‘20
Limited direct commodity exposure
Expect Future Fee-Based, Low Risk Activitiesto Comprise 85%+ of Operating Margin
2019 Annual Results*
50www.magellanlp.com | NYSE: MMP
Customer credit update
* Based on forecasted 2020 revenues (ratings updated as of 3/20/20). Includes MMP’s share of JV revenues.
• Crude oil revenues (1/3 of total) largely contract dependent− Mostly long-haul
transportation take-or-pay contracts, 61% from investment grade (IG) customers, 35% split-rated, 2% non-IG, 2% unrated*
− Storage, terminalling and lease revenues 44% from IG customers, 31% split rated, 5% non-IG, 20% unrated*
− Splitter revenue entirely from Trafigura (unrated)
• Refined products revenues (2/3 of total) primarily demand-driven, customer credit not usually relevant − If one customer lowers
utilization, others step in to meet demand
− Mostly transportation, also storage and terminalling
− Customers primarily refiners, also marketers and end users
− We do require contracts on new projects, e.g. Houston-to-Hearne and west Texas expansions (~90% of committed volumes on those projects are backed by IG refiners / majors)
2020 Forecasted Revenue Breakdown*
51www.magellanlp.com | NYSE: MMP
• Joint ventures have contributed increasingly more value to our company, especially related to our crude oil business
• Risk-mitigation tool for new construction projects, aligning Magellan with other industry players who intend to utilize the new assets over the long term
• During 2019, MMP received cash distributions of $204mm from joint ventures, expected to grow to $210mm in 2020
– Increased Pasadena contributions primarily offset by lack of spot shipments and lower commodity environment in ‘20
Significant contribution from joint ventures
BridgeTex35%
Saddlehorn24%
Seabrook11%
Pasadena15%
Double Eagle8%
Powder Springs6% Other
1%
2020E Cash Distributions from Joint Ventures
BridgeTex43%
Saddlehorn24%
Seabrook13%
Pasadena3%
Double Eagle7%
Powder Springs8%
Other 2%
2019 Cash Distributions from Joint Ventures
52www.magellanlp.com | NYSE: MMP
Commitment to corporate responsibility• Magellan has always been committed to running our business sustainably
– Our operations prioritize safety, pursuant to an extensive system integrity program designed to minimize the impact to air and water quality and ensure compliance with all local, state and federal regulations Spending of $200mm+ each year to maintain integrity of assets over
the past 5 years Our incident response is based on a “60-minute assault” whereby we
mobilize aggressively to reduce potential impacts of any releases– Our annual incentive program for all employees has always incorporated our
performance on key safety and operational metrics– Industry leader in corporate governance– One of first MLPs to eliminate incentive distribution rights in 2009– All members of our board of directors elected by the public, and
8 of 9 members are independent– Disciplined management team as evidenced by acquisition restraint,
opportunistic asset sales, low leverage and industry-leading ROIC• Hired new employee in January 2020 to drive our ESG initiative, targeting
issuance of inaugural corporate responsibility report by the end of the year
53www.magellanlp.com | NYSE: MMP
Investor relations contact information
• Paula Farrell – Associate vice president, investor relations‒ [email protected]‒ (918) 574-7650
• Heather Livingston – Investor relations specialist‒ [email protected]‒ (918) 574-7160