Magellan Midstream Partners LP (MMP) entered into a long-term, fee-based, take-or-pay agreement with Trafigura Trading LLC for the exclusive use of Magellan’s new condensate splitter in Corpus Christi, Texas, as part of resolution of a lawsuit it brought against Trafigura.
Magellan also reaffirmed its annual distributable cash flow guidance of $1 billion for 2017. The partnership originally assumed that the splitter would generate no revenue this year, but that was before recent contractions in commodity margins.
Magellan said in a statement that it remains committed to increasing annual cash distributions by 8% in both 2017 and 2018, which would result in an expected distribution coverage of 1.2x the amount needed to pay cash distributions each year.
The splitter, with capacity of 50,000 barrels per day (Mbbl/d) is on schedule to begin commercial operations during late second-quarter 2017.
The company will build storage to handle an additional 300 Mbbl for a total of 1.5 MMbbl and make other minor modifications that will push anticipated capital spending from $300 million to $330 million. Based on these new estimates, the company expects to generate 7x EBITDA on its investment.
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