Magellan Midstream: Competitive Advantage Analyzed


  • Magellan Midstream is in the business of the transportation, storage, and distribution of refined petroleum products and crude oil.
  • In this article, I review its business model for the refined products, crude oil, and marine storage segments.
  • I analyzed its competitive advantage using Michael Porter's five force framework, setting the stage for an in-depth look at the company.
  • Looking for more? I update all of my investing ideas and strategies to members of The Natural Resources Hub. Start your free trial today »

Megallen Midstream Partners, the leading refined products pipeline operator

The business

Magellan Midstream Partners, L.P. (NYSE:MMP), a spin-off of The Williams Companies (WMB) in 2001, is in the business of the transportation, storage, and distribution of refined petroleum products and crude oil.

Refined products. The refined products segment has the longest refined petroleum products pipeline system in the U.S., primarily transporting gasoline and diesel fuel with a 9,700-mile pipeline system, 53 terminals, and 45 MMbbl of storage; it owns 25 independent terminals with 6 MMbbl storage mainly in the southeastern U.S. and connected to third-party common carrier interstate pipelines, including the Colonial and Plantation pipelines; it also has a 1,100-mile ammonia pipeline system, which it plans to divest (Fig. 1).

  • The refined products segment generates revenue from (1) transportation tariffs on volumes shipped on the refined products pipeline system; (2) providing services such as terminalling, ethanol and biodiesel unloading and loading, additive injection, custom blending, laboratory testing and data services to shippers; and (3) charging fees based on the amount of product delivered through the facilities and from ancillary services such as additive injections and ethanol blending.

Fig. 1. The assets of Magellan Midstream Partners, modified from the MLP & Energy Infrastructure Conference May 2019 presentation.

Crude oil. Its crude oil segment is comprised of 2,200 miles of crude oil pipelines (1,000 miles 100%; 1,200 miles JVs) and 33 MMbo of storage, serving crude oil producers in the Permian Basin, Rocky Mountain, Midcontinent, and Gulf Coast markets. It is one of the largest storage providers in Cushing, OK, and has a growing Gulf Coast storage position.

  • The crude oil segment generates revenue through transportation tariffs on our crude oil pipelines, storage fees from the crude oil terminals, tolling fees from the condensate splitter, and ancillary services including terminal throughput fees.

Marine storage. Its marine storage segment consists of

Magellan Midstream commands a sustainable competitive advantage as I have shown above and may study further in future articles. To know how we at The Natural Resources Hub invest in Magellan, you are invited to sign up here for a risk-free fortnight of free-trial. Join us today, see how our private investment community work together to mature investment prospects and benefit from Laurentian Research's proprietary in-depth research right away!

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Disclosure: Besides myself, TNRH is fortunate enough to have multiple other contributing authors who post articles for and share their views with our thriving community. These authors include Silver Coast Research, ..., among others. I'd like to emphasize that the articles contributed by these authors are the product of their respective independent research and analysis.

Disclosure: I am/we are long MMP. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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