Back to top

Image: Bigstock

Magellan Midstream Prices Senior Notes Worth $500 Million

Read MoreHide Full Article

Pipeline operator Magellan Midstream Partners, L.P. has priced $500 million of its 4.25% senior notes, due 2046. The securities were priced at 98.762% and are estimated to yield 4.324% upon maturity.    

The oil distributing master limited partnership (MLP) plans to use the net proceeds from this offering to pay back its 5.65% senior notes that are due in Oct 2016, all the outstanding debt under its commercial paper program and for general partnership purposes such as capital expenditures. The offering, which is expected to close on Sep 13, 2016, is expected to generate approximately $488.7 million after underwriting discount and estimated offering expenses.

Tulsa, OK-based Magellan Midstream owns and operates a diversified portfolio of energy infrastructure assets. The partnership primarily transports, stores, and distributes refined petroleum products and, to a lesser extent, ammonia. Magellan Midstream conducts its operations via three segments – Refined Products, Crude Oil, and Marine Storage.

We appreciate Magellan Midstream’s investment grade credit rating as it will enable the partnership to draw capital from the market at a reasonable cost. Also, the partnership recently reported strong second-quarter 2016 results. The outperformance came on the back of increased shipments following strong gasoline demand.

MAGELLAN MDSTRM Price

 

However, Magellan Midstream, like many of its peers, is expected to be adversely affected by weak oil prices. The refined product demand of the partnership is inherently volatile and is subject to complex market forces.

The partnership currently carries a Zacks Rank #3 (Hold), which implies that the stock will perform  in line with the broader U.S. equity market over the next one to three months.

Some better-ranked players from the broader energy sector include NGL Energy Partners LP (NGL - Free Report) , Enviva Partners, LP (EVA - Free Report) and Matador Resources Company (MTDR - Free Report) . All these stocks sport a Zacks Rank #1 (Strong Buy).

Confidential from Zacks

Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


NGL Energy Partners LP (NGL) - free report >>

Matador Resources Company (MTDR) - free report >>

Enviva Inc. (EVA) - free report >>

Published in