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Magellan Midstream Partners, L.P. posted a record quarterly operating profit of $182.7 million during the fourth quarter of 2012, representing an increase of $42.9 million, or 31%, compared to $139.8 million during the corresponding period in 2011.

Net income grew 39% to a quarterly record of $153.8 million during the fourth quarter of 2012 compared to $110.3 million in the last quarter of 2011, and diluted net income per limited partner unit increased to a record 68 cents versus 49 cents in 2011.

Commenting on the results, Michael Mears, chief executive officer, said: "Magellan produced exceptional returns during 2012, generating record operating and financial results from our current assets, launching new crude oil opportunities that solidify our position as a key storage and logistics provider in the crude oil space and increasing cash distributions to our investors by 18% for the year.

“We enter 2013 poised for an exciting year, with our solid business model, strong balance sheet and attractive fee-based growth projects expected to provide significant benefit for our investors and customers for years to come."

Petroleum terminals

The operating margin for petroleum terminals was $50.1 million, which represented an increase of $5.3 million and a quarterly record for the segment. The period primarily benefited from new refined products tanks and higher rates at the partnership’s marine terminals.

Operating expenses decreased due to accruals in fourth quarter 2011 for potential historical air emission fees and increased integrity spending, partially offset by favourable adjustments in 2011 for property taxes and an insurance settlement to replace historical hurricane-damaged assets, with no such items benefitting fourth-quarter 2012 results. Product margin increased due to the sale of additional product overages.

Petroleum pipeline system

The pipeline operating margin was $193.4 million, representing an increase of $43.2 million and a quarterly record for the segment. Transportation and terminals revenues increased between periods primarily due to a 10% increase in transportation volumes, driven by significantly increased crude oil and gasoline shipments, and the company's mid-2012 tariff increase.

Crude volumes increased 54%, resulting from deliveries to additional locations that are now connected to the partnership’s pipeline system and increased deliveries to existing customers.

Gasoline shipments increased 7% primarily due to higher volumes in the partnership’s South Texas pipeline segments. The average tariff rate increased only slightly between periods as the benefit from the 8.6% rate increase implemented on July 1, 2012 was mostly offset by more crude oil and South Texas gasoline movements, which ship at a lower rate than the partnership’s other pipeline shipments.

Annual results

Magellan produced record annual financial results in 2012. For the year ended December 31, 2012, operating profit was $552.1 million compared to $522.9 million in the corresponding 2011 period.

Annual net income was $435.7 million in 2012 compared to $413.6 million in 2011, and full-year diluted net income per limited partner unit was $1.92 in 2012 versus $1.83 in 2011.

Expansion capital spending

Magellan said it remains focused on expansion opportunities, making progress on its current slate of projects with a record $365 million spent during 2012 on organic growth construction projects. Based on the progress of expansion projects already underway, the company said it plans to spend approximately $700 million during 2013 with an additional $290 million of spending in 2014 to complete these projects.

Magellan’s Crane-to-Houston pipeline project (also known as the Longhorn pipeline) is said to be on schedule, with the company expecting to begin filling the reversed pipeline with crude oil in mid-March 2013 and beginning partial operations at an estimated 75,000 barrels per day (bpd) in mid-April, increasing to its full 225,000-bpd capacity in the third quarter of 2013.