Magellan Midstream Partners, L.P. (MMP) Q4 2022 Earnings Call Transcript

For the period ending December 31, 2022

February 2, 2023 1:30 p.m. ET

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to the Magellan Midstream Partners Fourth Quarter Earnings Conference Call. During the presentation, all participants will be in a listen only mode. Later we will conduct a question-and-answer session [Operator Instructions]. As a reminder, this conference is being recorded, Thursday, February 2, 2023.

It is now my pleasure to turn the conference over to Aaron Milford, CEO. Please go ahead.

Aaron Milford

Hello, and thank you for joining us today to discuss Magellan's fourth quarter financial results and perhaps even more of interest, our outlook for the new year. Before getting started, we must remind you that management will be making forward-looking statements as defined by the Securities and Exchange Commission. Such statements are based on our current judgments regarding the factors that could impact the future performance of Magellan but actual outcomes could be materially different. 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. Magellan wrapped up the year with another solid quarter supported by record refined products transportation volumes and financial results that exceeded our expectations, excluding a noncash impairment taken in the quarter. During 2022, we delivered over $1.3 billion of value to our investors via opportunistic equity repurchases and Magellan's attractive cash distribution, marking 21 years of continuous annual distribution growth. I will now turn the call over to our CFO, Jeff Holman, to review our fourth quarter financial results versus the year ago period. Then I'll be back to discuss our annual guidance for 2023 before answering your questions.

Jeff Holman

Thanks, Aaron. First, I'll note, as usual, that I'll be making references to certain non-GAAP financial metrics, including operating margin, distributable cash flow or DCF and free cash flow, and we've included exhibits to our earnings release that reconcile these metrics to their nearest GAAP measures. Earlier this morning, we reported fourth quarter net income of $187 million compared to $244 million in fourth quarter of 2021. These results include the $58 million impairment of our investment in the Double Eagle Pipeline joint venture. Adjusted earnings per unit for the quarter, which excludes the impact of commodity related mark to market adjustments, was $1.06. Excluding the $0.28 negative impact of the Double Eagle impairment, adjusted earnings per unit was $1.34, exceeding our guidance of $1.22. DCF for the quarter increased to $345 million, up $48 million from last year while free cash flow for the quarter was $324 million, resulting in free cash flow after distributions of $109 million. For the full year 2022, DCF was $1.128 billion, an increase of $10 million from 2021. DCF per unit in 2022 was $5.46, about 6% higher than in 2021. This per unit perspective reflects the significant impact of our buyback program and highlights our ability to deliver per unit growth in excess of the underlying DCF growth that our business experiences. Full year free cash flow for 2022 was $1.486 billion, resulting in free cash flow after distributions of $660 million for the year. A detailed description of quarter-over-quarter variances is available in the earnings release. So as usual, I'll just touch on a few highlights.