Magellan Midstream Announces Third-Quarter Results

Operating Profit from Core Fee-based Transportation and Terminals Activities
Increased 25% Between Periods

TULSA, Okla., Nov. 3 /PRNewswire-FirstCall/ -- Magellan Midstream Partners,
L.P. (NYSE: MMP) today reported financial results for third quarter 2009.
Third-quarter 2009 operating profit was $74.8 million compared to $83.4
million for third quarter 2008. The 2008 period benefited from unusually high
product margin (defined as product sales revenues less product purchases).
Excluding product margin, operating profit from the partnership's core
fee-based transportation and terminals activities increased $11.2 million, or
25%, in the 2009 period.

Net income was $54.2 million for third quarter 2009 compared to $69.4 million
for third quarter 2008. Excluding product margin, net income increased in the
current quarter by $4.6 million, or 15%.

Net income per limited partner unit was 43 cents for third quarter 2009
compared to 46 cents for third quarter 2008. The number of units used for this
calculation is primarily based on the 62.6 million historical units of
Magellan Midstream Holdings, L.P. (MGG) multiplied by the 0.6325
simplification exchange ratio for periods prior to Sept. 28, 2009, when the
new MMP units were deemed issued, and on the post-simplification total MMP
unit count of 106.6 million units thereafter.

Previous net income per limited partner unit guidance did not include the
impact of the simplification. Excluding the accounting implications of the
simplification, net income per limited partner unit would have been 58 cents
for third quarter 2009 compared to previous guidance of 50 cents. A
reconciliation of reported net income and net income per limited partner unit
for third quarter 2009 to these financial results excluding the accounting
implications of the simplification accompanies this news release.

The simplification of the partnership's capital structure closed on Sept. 30,
2009, at which time MGG unitholders received 0.6325 MMP units for each MGG
unit held on that date and MGG was dissolved. However, for accounting
purposes, MGG is deemed to be the surviving entity. As a result, the current
period and all historical periods shown have been restated as if MMP were MGG
from an accounting perspective. The primary differences between the two
accounting entities are additional general and administrative (G&A) expense
and depreciation that were specifically associated with MGG, which MMP will
now report as part of its consolidated results, and the calculation of net
income per limited partner unit.

"Magellan continues to benefit from higher results from our core
transportation and terminals assets even during the current challenging
economic environment," said Don Wellendorf, chief executive officer. "Record
quarterly gasoline shipments and record results from our terminals segment,
driven in part from expansion projects, have helped to offset the negative
impact of lower commodity prices and lower diesel fuel shipments this year."

An analysis of variances by segment comparing third quarter 2009 to third
quarter 2008 is provided below based on operating margin, a non-generally
accepted accounting principles (non-GAAP) financial measure that reflects
operating profit before G&A expense and depreciation and amortization:

Petroleum products pipeline system. Pipeline operating margin was $94.1
million, a decrease of $0.4 million. Excluding product margin, all other
operating margin from this segment was $78.7 million, an increase of $15
million.

Transportation and terminals revenues increased between periods primarily due
to higher leased storage and more additive and ethanol blending fees. Lower
average transportation rates resulting from shippers building inventory in the
partnership's pipeline system during third quarter 2009 were offset by 2%
higher transportation volumes. Gasoline shipments established a new quarterly
record for the partnership in the current period and were up about 7% compared
to the same period last year, excluding the negative impact of Hurricane Ike
during third quarter 2008. The record gasoline volumes were partially offset
by a 13% decline in diesel fuel volumes compared to the same period last year,
excluding the estimated hurricane impact.

Operating expenses declined between periods due to timing of system integrity
projects, reduced power costs, lower property tax assessments and favorable
product overages, which reduce operating expenses, partially offset by
additional costs related to the 700-mile Texas pipeline system the partnership
acquired on July 29, 2009.

Product margin decreased $15.4 million between periods primarily due to
significantly lower gasoline prices in 2009 that impacted the financial
results from the partnership's petroleum products blending activities. Timing
of mark-to-market (MTM) adjustments for New York Mercantile Exchange (NYMEX)
positions used to economically hedge the partnership's petroleum products
blending activities also produced lower financial results during the 2009
quarter.

Petroleum products terminals. Terminals operating margin was $27.7 million, an
increase of $0.6 million and a quarterly record for this segment. Excluding
product margin, all other operating margin from this segment was $25.4
million, an increase of $5.3 million. The current period benefited from higher
revenues at the partnership's marine and inland terminals primarily due to
expansion projects, including additional marine storage and ethanol blending,
higher marine storage rates and increased inland volumes. Operating expenses
increased primarily due to higher property taxes and personnel costs in the
2009 period. Product margin declined due to the sale of fewer product overages
at lower prices in 2009.

Ammonia pipeline system. Ammonia operating margin was a loss of $3.4 million,
a decrease of $3.7 million. Both revenues and expenses were negatively
impacted by additional maintenance work performed on the pipeline during the
third quarter of 2009.

Other items. Depreciation and amortization increased due to recent capital
spending, and G&A increased due to higher personnel expenses. Net interest
expense increased in the current quarter as a result of additional borrowings
for expansion capital expenditures, including the 700-mile Texas pipeline
system acquired on July 29, 2009.

Expansion capital expectations
Management continues to pursue expansion capital opportunities to grow the
partnership's future cash flow and expects to spend approximately $510 million
during 2009 on growth capital projects, with an additional $160 million
required in future years to complete these projects. These combined estimates
are $80 million higher than previous expansion capital guidance due to the
addition of incremental projects and cost savings on a number of projects
already underway.

New projects include the construction of 0.6 million barrels of storage at the
partnership's Galena Park, Texas marine terminal and the Oct. 2009 acquisition
of a terminal in Marrero, Louisiana, which will be consolidated with the
partnership's adjacent marine facility and will provide more space for future
growth. Through Sept. 30, $395.7 million of growth capital has been spent in
2009, including the third-quarter acquisitions of a 700-mile Texas pipeline
system and an Oklahoma terminal already connected to the partnership's
petroleum products pipeline system, which also had not been included in the
previous expansion capital guidance.

In addition, the partnership continues to analyze more than $500 million of
potential organic growth projects in earlier stages of development, which have
been excluded from these spending estimates.

Guidance for 2009
Management currently estimates 2009 net income per limited partner unit of
$2.25 inclusive of the accounting impact of the simplification, with
fourth-quarter guidance of 78 cents. Because of the significant increase in
the number of outstanding MMP units following the simplification, quarterly
net income per unit will not sum to the annual guidance. Guidance assumes no
NYMEX MTM adjustments for the remainder of the year.

Management currently expects distributable cash flow (DCF) of approximately
$310 million for full year 2009, or 1.1 times the amount needed to pay
distributions for 2009 at the current quarterly rate of 71 cents per unit. DCF
guidance is $5 million lower than provided previously primarily due to
postponing the sale of petroleum products related to the partnership's
blending activities from 2009 into 2010 to capture higher economic value.
Management continues to believe that 15% or less of the partnership's
operating margin will come from its commodity-related activities, with the
large majority of its operating margin generated by fee-based transportation
and terminals services.

Earnings call details
An analyst call with management regarding third-quarter earnings is scheduled
today at 1:30 p.m. Eastern. To participate, dial (800) 334-8065 and provide
code 7492235. Investors also may listen to the call via the partnership's web
site at http://www.magellanlp.com/webcasts.asp.

Audio replays of the conference call will be available from 4:30 p.m. Eastern
today through midnight on Nov. 9. To access the replay, dial (888) 203-1112
and provide code 7492235. The replay also will be available at
http://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 and DCF, which are important performance measures used by management to
evaluate the economic success of the partnership's operations.

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 in deciding how to allocate
capital resources between segments.

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 measure as a basis for recommending to the
board of directors the amounts of distributions to be paid each period.

Reconciliations of operating margin to operating profit and DCF to net income
accompany this news release.

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
formed to own, operate and acquire a diversified portfolio of energy assets.
The partnership primarily transports, stores and distributes refined petroleum
products. More information is available at http://www.magellanlp.com.

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 projected costs; (2) price fluctuations for natural gas liquids
and refined petroleum products; (3) overall demand for natural gas liquids,
refined petroleum products, natural gas, oil and ammonia in the United States;
(4) changes in the partnership's tariff rates implemented by the Federal
Energy Regulatory Commission, the United States Surface Transportation Board
and state regulatory agencies; (5) shut-downs or cutbacks at major refineries,
petrochemical plants, ammonia production facilities or other businesses that
use or supply the partnership's services; (6) changes in the throughput or
interruption in service on petroleum products pipelines owned and operated by
third parties and connected to the partnership's petroleum products terminals
or petroleum products pipeline system; (7) the occurrence of an operational
hazard or unforeseen interruption for which the partnership is not adequately
insured; (8) 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; (9) an increase in the competition the partnership's
operations encounter; (10) continued disruption in the debt and equity markets
that negatively impacts the partnership's ability to finance its capital
spending and (11) 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. The partnership
undertakes no obligation to revise its forward-looking statements to reflect
events or circumstances 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 Nine Months Ended
September 30, September 30,
2008 2009 2008 2009

Transportation and
terminals revenues $164,470 $173,504 $471,855 $495,227
Product sales revenues 127,540 66,076 439,622 165,119
Affiliate management fee
revenue 183 190 549 570

Total revenues 292,193 239,770 912,026 660,916
Costs and expenses:
Operating 81,626 73,863 193,845 195,178
Product purchases 89,523 47,902 342,383 141,522
Depreciation and
amortization 21,563 24,613 63,847 70,928
General and administrative 17,754 20,002 55,104 61,386

Total costs and expenses 210,466 166,380 655,179 469,014
Gain on assignment of
supply agreement - - 26,492 -
Equity earnings 1,722 1,368 3,504 2,826

Operating profit 83,449 74,758 286,843 194,728
Interest expense 15,033 20,837 40,726 52,198
Interest income (351) (225) (950) (652)
Interest capitalized (1,322) (874) (3,734) (2,752)
Debt placement fee
amortization expense 211 331 548 775
Other (income)/expense - 11 (254) (636)

Income before provision for
income taxes 69,878 54,678 250,507 145,795
Provision for income taxes 524 463 1,469 1,272

Net income $69,354 $54,215 $249,038 $144,523

Allocation of net income:
Non-controlling owners'
interest $51,707 $36,054 $182,868 $99,729
Limited partners' interest 18,052 18,161 67,384 44,794
General partner's interest (405) - (1,214) -

Net income $69,354 $54,215 $249,038 $144,523

Basic and diluted net
income per limited partner
unit $0.46 $0.43 $1.70 $1.11

Weighted average number of
limited partner units
outstanding used for basic
and diluted net income per
unit calculation 39,631 41,831 39,629 40,377

MAGELLAN MIDSTREAM PARTNERS, L.P.
OPERATING STATISTICS

Three Months Ended Nine Months Ended
September 30, September 30,
2008 2009 2008 2009
Petroleum products pipeline
system:
Transportation revenue per
barrel shipped $1.266 $1.248 $1.197 $1.199

Volume shipped (million
barrels) 74.4 75.8 220.6 221.4

Petroleum products
terminals:
Marine terminal average
storage utilized (million
barrels per month) 23.8 26.4 23.1 25.9

Inland terminal throughput
(million barrels) 26.2 28.3 81.6 82.2

Ammonia pipeline system:
Volume shipped (thousand tons) 177 125 624 420

MAGELLAN MIDSTREAM PARTNERS, L.P.
OPERATING MARGIN RECONCILIATION TO OPERATING PROFIT
(Unaudited, in thousands)

Three Months Ended Nine Months Ended
September 30, September 30,
2008 2009 2008 2009
Petroleum products pipeline
system:
Transportation and
terminals revenues $125,746 $128,979 $353,664 $365,886
Less: Operating expenses 63,977 51,814 145,944 139,864

Transportation and
terminals margin 61,769 77,165 207,720 226,022

Product sales revenues 118,979 62,447 414,461 154,571
Less: Product purchases 88,169 47,050 336,367 138,552

Product margin 30,810 15,397 78,094 16,019
Add: Affiliate management
fee revenue 183 190 549 570
Equity earnings 1,722 1,368 3,504 2,826
Gain on assignment
of supply agreement - - 26,492 -

Operating margin $94,484 $94,120 $316,359 $245,437

Petroleum products terminals:
Transportation and
terminals revenues $34,472 $41,755 $104,043 $120,623
Less: Operating expenses 14,320 16,341 42,473 46,703

Transportation and
terminals margin 20,152 25,414 61,570 73,920

Product sales revenues 8,561 3,629 25,161 10,548
Less: Product purchases 1,606 1,349 6,528 4,455

Product margin 6,955 2,280 18,633 6,093

Operating margin $27,107 $27,694 $80,203 $80,013

Ammonia pipeline system:
Transportation and
terminals revenues $5,128 $4,017 $16,534 $12,494
Less: Operating expenses 4,766 7,392 9,825 13,732

Operating margin (loss) $362 $(3,375) $6,709 $(1,238)

Segment operating margin $121,953 $118,439 $403,271 $324,212
Add: Allocated corporate
depreciation costs 813 934 2,523 2,830

Total operating margin 122,766 119,373 405,794 327,042

Less: Depreciation and
amortization 21,563 24,613 63,847 70,928
Affiliate general and
administrative 17,754 20,002 55,104 61,386

Total operating profit $83,449 $74,758 $286,843 $194,728

Note: Amounts may not sum to figures shown on the consolidated statement
of income due to intersegment eliminations and allocated corporate
depreciation costs.

MAGELLAN MIDSTREAM PARTNERS, L.P.
DISTRIBUTABLE CASH FLOW RECONCILIATION TO NET INCOME
(Unaudited, in millions)

Three Months Ended Nine Months Ended
September 30, September 30, 2009
2008 2009 2008 2009 Estimate

Net income $69.4 $54.2 $249.0 $144.5 $228
Add: Depreciation and
amortization (1) 21.8 24.9 64.4 71.7 98
Equity-based
incentive
compensation (2) 1.5 2.2 0.5 3.9 5
Expenses indemnified
by former
affiliate 3.7 4.1 (3.9) 6.0 6
Asset retirements
and impairments 2.1 0.8 3.8 3.0 4
NYMEX contract
adjustment (3) (12.2) (6.1) (12.2) 25.0 14
Less: Maintenance
capital (net
of expected
reimbursements
and indemnified
spending) (4) 10.6 10.2 25.4 30.5 45
Gain on
assignment
of supply
agreement - - 26.5 - -
Other 1.6 0.3 3.3 0.1 -

Distributable cash
flow (5) $74.1 $69.6 $246.4 $223.5 $310

(1) Depreciation and amortization includes debt placement fee
amortization.
(2) 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 purposes.
Total equity-based incentive compensation expense for the nine months
ended September 30, 2008 and 2009 was $4.4 million and $7.4 million,
respectively. However, the figures above include an adjustment for
minimum statutory tax withholdings paid by the partnership during
first quarter 2008 and 2009 of $3.9 million and $3.5 million,
respectively, for equity-based incentive compensation units that
vested on the previous year end.

(3) Represents margins realized in the current quarter on the physical
sales of products that were hedged using New York Mercantile Exchange
("NYMEX") contracts. Because certain of these NYMEX contracts do not
qualify for hedge accounting treatment, $3.9 million of losses and
$20.2 million of gains for the three and nine months ended September
30, 2009, respectively, were recognized in previous accounting
periods when the NYMEX contracts were marked to market. The
partnership adjusted these accounting profits out of its
distributable cash flows in those earlier periods. Additionally,
the three and nine month periods ended September 30, 2009 include
$2.2 million of mark-to-market gains and $4.8 million of mark-to-
market losses, respectively, on NYMEX contracts associated with
products that will be physically sold in future periods.

(4) During the three months ended September 30, 2008 and 2009, the
partnership paid $0.7 million and $1.3 million, respectively, and for
the nine months ended September 30, 2008 and 2009, the partnership
paid $4.2 million and $3.4 million, respectively, for indemnified
maintenance capital projects related to its indemnification settlement
or for costs which it expects to be reimbursed by insurance proceeds.

(5) Distributable cash flow does not include fluctuations related to
working capital or spending for which the partnership has received,
or expects to receive, reimbursement through third party
indemnifications. Through September 30, 2009, the partnership has
either paid or accrued liabilities totaling $90.9 million of the
$117.5 million indemnification settlement amount it has received,
including $24.8 million for capital projects.

MAGELLAN MIDSTREAM PARTNERS, L.P.
NET INCOME EXCLUDING ACCOUNTING IMPLICATIONS OF SIMPLIFICATION
RECONCILIATION TO NET INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2009
(Unaudited, in thousands except per unit amounts)

Net income, as reported $54,215
Adjustments:
MGG depreciation expense (1) 3,263
MGG stand-alone general and administrative
expense 1,029
Other (52)

Net income excluding accounting implications
of simplification $58,455

Allocation of net income excluding accounting
implications of simplification:
Limited partners $39,223
General partner 19,232

Net income excluding accounting implications
of simplification $58,455

Basic and diluted net income per unit
excluding accounting implications of
simplification $0.58

Basic and diluted weighted-average units
outstanding excluding accounting
implications of simplification 67,129

(1) At the time Magellan Midstream Holdings, L.P. (MGG) acquired the
general and limited partner interests in the partnership in June 2003,
MGG recorded a stepped-up basis in the partnership's property, plant
and equipment to reflect its 55% ownership interest at the time, which
results in higher depreciation expense.

SOURCE Magellan Midstream Partners, L.P.

Paula Farrell of Magellan Midstream Partners, L.P., +1-918-574-7650,
paula.farrell@magellanlp.com