Magellan Midstream Partners LP (MMP) reported a 28 percent drop in volumes on its anhydrous ammonia pipeline for the year ending Dec. 31, 2010, to 462,000 st from the prior year’s 643,000 st. Volumes, revenues, and expenses were all impacted by integrity testing performed on the pipeline during the most of the third quarter and part of the fourth quarter of 2010. Magellan says that the testing is 75 percent complete and will resume again in the summer of 2011, when it is not expected to significantly impact volumes.
Magellan CEO Mike Mears was upbeat to analysts about the fortunes of the ammonia pipeline going forward. “While it is by far our smallest business unit, it can be a decent cash flow generator once it is in normal operating mode.” He added, “As a result, we expect to generate an operating margin of close to $5 million in 2011 versus a loss in 2010, with even better results projected thereafter once the hydro test work is complete. But the good news is that we have been pleased overall with the results of this testing and the integrity of this pipeline.”
For the year, MMP’s ammonia pipeline recorded a margin loss of $4.15 million on revenues of $14.9 million, compared to the prior year’s operating margin of $3.67 million on revenues of $19.9 million.