Magellan Midstream Partners LP on Feb. 2 reported a drop of about 36% in net income in the fourth quarter as the COVID-19 pandemic reduced demand for refined products.
The company also reported lower volumes and average rates on its crude oil pipelines, in part because several of its higher-priced contracts on the Longhorn pipeline, which flows from Crane, Texas, in the Permian Basin to Houston, expired.
Global fuel demand collapsed in 2020 as governments across the world imposed lockdowns and travel restrictions to contain the spread of the coronavirus. As vaccines are rolled out, demand has begun a tepid recovery but remains below levels seen before the pandemic.
Total refined product volumes across all Magellan systems in the fourth quarter were about 5% lower than a year earlier.
"While volumes continue to grind higher from the lows we saw during the second quarter 2020, gasoline and aviation remained impacted by the effects of the pandemic, particularly in some of the metropolitan areas we serve, while lower drilling activity continues to negatively impact distillate volumes on our system," CFO Jeffrey Holman said during an earnings call with analysts.
For 2021, the company expects total refined products shipments to increase 13%, comprised of 16% higher gasoline, 8% higher distillate and 20% higher aviation fuel.
Magellan also said it has made progress on its business optimization efforts that started more than a year ago, adding that its 2021 forecast includes a roughly $50 million benefit from efficiencies.
Volumes on the Longhorn pipeline are expected to decline to an average of 230,000 bbl/d in 2021 from 270,000 bbl/d in 2020, the company said.
Net income in the fourth quarter was $183.9 million compared with $286.4 million a year earlier.
Magellan shares dropped about 4% to $41.98 in afternoon trading.
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