Oct 31, 2014
Executives
Michael N. Mears - Chairman of Magellan GP LLC, Chief Executive Officer of Magellan GP LLC and President of Magellan GP LLC Michael P.
Osborne - Chief Financial Officer of Magellan GP LLC and Senior Vice President of Finance & Accounting - Magellan GP LLC
Analysts
Brian J. Zarahn - Barclays Capital, Research Division Shneur Z.
Gershuni - UBS Investment Bank, Research Division Abhishek Sinha - Wunderlich Securities Inc., Research Division John D. Edwards - Crédit Suisse AG, Research Division Lin Shen Sharon Lui - Wells Fargo Securities, LLC, Research Division Elvira Scotto - RBC Capital Markets, LLC, Research Division Steven C.
Sherowski - Goldman Sachs Group Inc., Research Division
Operator
Good day, and welcome to the Magellan Midstream Partners Third Quarter 2014 Earnings Results. This conference is being recorded.
At this time, I would like to turn the conference over to Mr. Mike Mears, President and CEO.
Please go ahead, sir.
Michael N. Mears
Well, good morning. Thank you for joining us today to discuss Magellan's third quarter financial results and our outlook for the remainder of 2014.
Before we get started, I'll remind you that management will be making forward-looking statements as defined by the SEC. Such statements are based on our current judgments regarding some of the factors that could impact the future performance of Magellan.
You should review the risk factors and other information discussed in our filings with the SEC and form your own opinions about Magellan's future performance. Magellan's business segments continue to perform well, generating higher financial results for each of our segments during the third quarter of 2014.
EPU exceeded the guidance we provided back in August due to stronger-than-expected demand for refined products during the quarter. Our total refined products pipeline shipments increased 10% quarter-over-quarter or a healthy 7%, excluding the pipeline systems we acquired during the second half of 2013.
On a DCF basis, our third quarter results exceeded the same period last year by 30%, generating distribution coverage of 1.2x for the quarter and 1.4x year-to-date. We also hit a key milestone during the third quarter with the startup of the BridgeTex pipeline, which represents an important piece of Magellan's growth.
Further, we continue to make good progress on our other expansion projects, which I'll discuss a little later. I'll now hand the call over to our CFO, Mike Osborne, to review Magellan's third quarter financial results in more detail.
Then I'll be back to discuss our outlook for the rest of 2014 and the status of our expansion capital projects.
Michael P. Osborne
Thank you, Mike. Before I begin, I want to mention that I'll be commenting on the non-GAAP measure operating margin.
A reconciliation of operating margin to operating profit was included in our earnings release this morning. Management believes investors benefit from this information, as it's a tool that management uses in evaluating the economic success of the partnership's core operations.
As noted in our earnings release, we reported net income of $198.6 million, or $0.87 per unit, this quarter versus net income of $125.6 million, or $0.55 per unit, in the third quarter of 2013. Approximately $38.6 million of this increase is attributable to commodity-related adjustments, which are primarily the mark-to-market gains on our economic hedges.
Details reflecting this mark-to-market commodity activity can be found on our distributable cash flow reconciliation to net income, which was attached to our earnings release this morning. The remaining increase of $34.4 million is largely due to the ramp-up in volumes on the Longhorn pipeline as well as strong volumes and higher average tariffs on our refined product system.
I'll go through the operating margin performance of each of our segments, and then discuss variances in depreciation, G&A and interest to come to an overall explanation of the variance in net income. On the Refined Products segment, operating margin for the quarter was $200.5 million compared to $146.8 million in 2013.
A number of factors drove the period-to-period increase. As previously mentioned, the commodity-related adjustments for out-of-period mark-to-market activity accounted for $38.6 million of the swing between the periods.
Excluding the Rocky Mountain system acquired in November 2013, which added approximately $6 million in revenues for the quarter, revenues on Refined Products system increased approximately $26 million, and this increase was driven by a 7% increase in volumes and a 9% higher average tariff. Total Refined Products volumes for the quarter benefited from strong demand in the central states in West Texas, and also drove higher ancillary revenues such as additive blending and terminal fees.
Factors influencing the average tariff increase included the 3.9% tariff escalation that went into effect in July 2014 and strong demand in West Texas, Arkansas and the northern markets, as these are areas that generate the longer haul shipments. Operating expenses on the total Refined Products system increased $19 million.
The primary drivers for the increase were the expenses associated with the incremental systems acquired in 2013, higher asset integrity spending, higher personnel costs and higher property taxes. Our Crude segment operating margin increased $19.7 million to $70.3 million.
The Crude Oil revenue increase of $29.3 million was primarily attributable to the ramp-up in volumes on the Longhorn pipeline. Longhorn averaged approximately 240,000 barrels per day in the 2014 period compared to 100,000 barrels per day in the 2013 period.
And partially offsetting the revenue increase was a $10.3 million increase in crude oil operating expenses. This increase was largely due to the higher power costs associated with the incremental Longhorn volume, higher asset integrity spending and higher personnel costs.
Also, I'll mention that although BridgeTex began operation in September, there was only a nominal impact on the third quarter results. Operating margin on our Marine Terminal segment increased approximately $3 million due to higher storage rates at Galena Park and the current period revenue benefit from a one-time contract adjustment.
Operating expenses were essentially flat between periods. Stepping down from operating margin to net income, depreciation and related expenses increased $2.7 million due to higher property balances associated with our capital expenditures.
G&A expenses increased $2.6 million due to higher personnel and equity-based compensation expenses. And net interest expense decreased as higher interest costs were offset by higher capitalized interest primarily related to our investment in BridgeTex.
We ended the quarter with $2.97 billion in debt, that's the face value, and it includes $2.65 billion of notes and $316 million of commercial paper at September 30. Our debt-to-EBITDA, which is computed on a rolling 4 quarter basis, was 2.8:1.
That ratio is based off the actual results. The pro forma ratio, which is the metric used in our credit agreement and considers contractual revenues for in-progress projects, is approximately 2.6:1.
Now I'll turn it back over to Mike to discuss the outlook for the remainder of the year and capital projects.
Michael N. Mears
Thanks, Mike. As mentioned earlier, our business has continued to perform quite well in 2014, which has allowed us to increase our DCF guidance once again.
Our new estimate is $865 million for 2014, which is $25 million higher than the last guidance we provided. A significant factor driving the increase in our guidance has been the higher refined product demand that was experienced in the third quarter.
By increasing our DCF guidance to $865 million, we now expect 2014 distribution coverage of 1.45x, which results in excess cash close to $270 million for the year. Our guidance takes into consideration the commodity margins from our blending activities are essentially 100% locked in through hedges for the remainder of 2014.
In addition, approximately 2/3 of our spring 2015 commodity margins are hedged at margins consistent with what we realized for most of 2014. Gasoline and butane margins have softened in the last few months, but still remain at a relatively high level compared to historical margins.
Going forward, it may not be reasonable to expect that margins will return in the near future to the elevated levels experienced this year. But we also do not expect that margins will decrease significantly from the levels we are seeing in the current market.
We still project that 85% or more of our future operating margin will come from our fee-based activities, and therefore, we believe a long-term distribution coverage of closer to 1.1x remains appropriate for our business. And we would expect to increase our distribution over time to move closer to that level.
For now, we remain committed to our goal of increasing cash distributions by 20% for 2014 and 15% for 2015. And as usual, we expect to use any excess cash that we generate to continue to fund our expansion growth projects.
Moving on to our growth projects. We are pleased to have successfully placed BridgeTex into service during late September.
BridgeTex is the largest construction project in Magellan's history, and I'm very proud of our team's diligent efforts to get this system operational in a safe and efficient manner. Startup has gone smoothly and we have averaged approximately 160,000 barrels per day during our first full month of operation.
We expect volume to continue to ramp up over time, as we move through normal startup issues and additional third-party supply infrastructure at Colorado City is put into service. As we've discussed from a DCF perspective, the first real impact from BridgeTex will appear in our 2015 results due to the timing of cash distribution payments from the joint venture to Magellan, which will be paid quarterly in arrears.
We also announced this morning that we have received sufficient commitments to proceed with the Saddlehorn pipeline project to transport crude oil from the Niobrara production area in Colorado to our facilities in Cushing, Oklahoma. The project includes the construction of approximately 600 miles of 20-inch pipeline that will be capable of transporting up to 400,000 barrels per day of crude oil, and we expect it to be operational during the second quarter of 2016.
We have also announced that we've executed letters of intent with both Anadarko and Saddle Butte Pipeline for potential equity ownership in the project. We are excited about this project, as it will expand our crude oil storage and transportation services into a new basin as well as extending our fee-based growth visibility for years to come.
The open season is still active for this project through November 20, and we expect to release more details on this projects once the open season is complete, as we will have a better feel for the final project scope and cost as well as ownership structure. Although we are still in the early stages of construction activity for our Corpus Christi splitter and Little Rock pipeline construction projects, we continue to make steady progress on both.
For the Corpus Christi splitter, we are in the process of site preparation and contractor selection at this point. All air permits were submitted earlier this year, and we are hopeful to receive the necessary approvals in early 2015, so that we may begin construction at that time.
The splitter remains on schedule for startup date during the second half of 2016. For our Little Rock pipeline project, right-of-way and permitting work continue to extend the reach of our refined products pipeline from Fort Smith, Arkansas, to the Little Rock market.
Based on progress-to-date, we still expect this pipeline to be operational during early 2016. Based on the expansion projects we currently have under construction, excluding the just announced Saddlehorn pipeline, we expect to spend $775 million during 2014 with additional spending of $450 million in 2015 and $75 million in 2016 to complete the projects now in process.
Total spending has increased $100 million from the last guidance we provided, primarily due to the addition of a number of new projects, including expansions of our Wichita, Kansas, and our Odessa, Texas, truck racks, connectivity to Phillips 66's Cross Channel project in the Houston area, addition of butane blending at a few locations along our network and new truck unloading capabilities for crude oil at our Longhorn origin point at Crane. And with our strong balance sheet, we do not anticipate the need for any equity issuances in the foreseeable future to fund our growth.
We continue to analyze additional opportunities with an extensive list of projects with varying sizes and probabilities. Excluding the potential Saddlehorn pipeline, the combined list of opportunities under consideration is still well in excess of $500 million.
And while we see potential growth opportunities in all areas of our business, the majority of opportunities still relate to crude oil infrastructure projects. As usual, our business development group is always busy assessing acquisition opportunities as well.
There are always a number of attractive prospects out there that we would like to own, but the final prizes that recent assets have sold for continue to be too rich for us. As a result, we intend to be patient and maintain our disciplined approach to find the right assets at the right place -- at the right price.
That's the end of our prepared comments. So operator, we'll now open it up for questions.
Operator
[Operator Instructions] And we will take our first question from Brian Zarahn with Barclays.
Brian J. Zarahn - Barclays Capital, Research Division
On the Saddlehorn pipeline, I know you're still in open season. But maybe, can you provide a general sense, given this is a new-build project, is it reasonable to assume that this will likely be your largest organic project?
Michael N. Mears
It is likely to be our largest organic project, that is correct.
Brian J. Zarahn - Barclays Capital, Research Division
And then any general sense of the range of ownership? Would it be at a minimum similar to BridgeTex?
Or how should we think about the project?
Michael N. Mears
At this point, I think I can say that this is still somewhat of a fluid situation with regards to the final equity ownership. But we will be a majority owner.
But the precise equity ownership, we're going to wait to disclose that at a later date.
Brian J. Zarahn - Barclays Capital, Research Division
Okay. And then, given the destination in Cushing, any implications for your Cushing storage?
Do you have adequate capacity to handle the pipe?
Michael N. Mears
We have adequate capacity to handle the pipe, that's correct. Now we may build more there depending on what the market looks like with regards to existing storage, but we've got adequate storage there today, if we choose not to build any additional infrastructure.
Brian J. Zarahn - Barclays Capital, Research Division
Okay. And then, shifting to BridgeTex.
Any change here expected returns or still in the 7x range?
Michael N. Mears
That's still an accurate estimate.
Brian J. Zarahn - Barclays Capital, Research Division
And then on the third quarter, can you provide a little more color on the strong gasoline pipeline demand and volumes?
Michael N. Mears
Well, we had a number of factors. There's really not one thing that we can point to that drove it, but we've had continued very strong demand in West Texas.
And clearly, all of the drilling in West Texas elevates diesel demand that we've benefited from that. Our Arkansas, Fort Smith, demand has been very high, with barrels moving over to Little Rock.
And then we've just had significant long haul barrels in our system just due to some refinery issues that we saw in the third quarter. So that was really just a conglomeration of a number of positive effects.
Brian J. Zarahn - Barclays Capital, Research Division
Last one for me. Can you provide the expansion CapEx and the cash balance in the third quarter?
Michael P. Osborne
Hold on, we're looking that up. Yes, for the third quarter, the expansion spending was 153, $153 million.
Brian J. Zarahn - Barclays Capital, Research Division
Cash balance?
Michael P. Osborne
Cash balance at the end of the quarter was about $15 million.
Operator
And we will take our next question from Shneur Gershuni with UBS.
Shneur Z. Gershuni - UBS Investment Bank, Research Division
I just kind of wanted to focus a little bit on kind of the CapEx and M&A comments that you made. We are getting closer to the end of the year, you just listed a bunch of projects that you were kind of evaluating and so forth.
I was wondering if there were some sort of, like, zip code of how you're thinking about CapEx for '15 and ‘16. Are there a lot of large buckets of opportunities that you're looking at that we are not currently aware of and so forth?
And just trying to get a sense of how you think CapEx changes '15, '16, versus, let's say, 2013 and 2014?
Michael N. Mears
Well, clearly, we're going to have a large addition to our capital forecast once we disclose the details on Saddlehorn. So that's new information as of today for the market.
And those capital numbers, as we refine those -- and one of the reasons why we haven't done that in this call is because we are still in an open season. The total commitment levels that are received at the completion of the open season will affect the size and scope of the project initially.
And so, that's why we're holding back on that. But we will have a significant increase in capital in '14 -- I mean, excuse me, in '15 and '16 with the addition of Saddlehorn.
Beyond that, we have a project development list that's in excess of $500 million. We typically have not given more detail on that list.
I can tell you that the list is extensive. There are a number -- many, many smaller scale projects on there, and there's a handful of large projects on there.
We haven't talked about those, and I don't intend to talk about those today. But the list is extensive with both large and small projects.
Shneur Z. Gershuni - UBS Investment Bank, Research Division
Right. I appreciate the color.
Your last comment before going to questions was about M&A activity. I appreciate the fact that the valuations are high and so forth, and you're keeping an eye on that and what not.
But at the same time, Magellan does enjoy one of the lowest costs of capital out there. When you think about swap for equity and so forth, have you sort of been looking at growth opportunities where you're looking at someone who is a large development or need for capital and so forth where you can provide huge cost of equity and capital opportunities for some of these entities?
I was kind of wondering if you can sort of walk us through how you're thinking about acquisitions. Or is it just really small bolt-ons that you're thinking about?
Michael N. Mears
No. I think it's fair to say.
I mean, even though we have not participated in the M&A market, that doesn't mean we don't evaluate opportunities. We very actively evaluate opportunities.
And so -- I mean the short answer to your question is we haven't excluded M&A, large M&A. But again, the price is the right fit, we just haven't found something that we want to act on.
One of the -- it obviously is a benefit that we have equity that has a strong valuation to it that we can use as currency in an acquisition, but what comes with that is we have a very high cash flow growth profile. And so finding a fit of an M&A candidate that will be accretive to the growth profile we already have is challenging.
And so -- but that doesn't mean we don't evaluate and look.
Shneur Z. Gershuni - UBS Investment Bank, Research Division
Great. And one final question, if I may.
You've got your splitter underway and so forth. At one point, splitters looked like a great opportunity.
And then, we've had the recent announcements about condensate exports and so forth. Is it fair to assume that splitters are completely off the table right now, like incremental splitters to be built?
Or are people still evaluating and there's potentially still an opportunity for you to potentially build some more splitters as people sort of gain the lay of the land and so forth?
Michael N. Mears
Well, I think it's fair to say that the development work on additional splitters has cooled off to some extent. I wouldn't say it's gone to 0.
I think the market, at least the participants we're talking to, are kind of in a wait-and-see mode with what's going to happen with regards to restrictions on exports of condensate or the lack of restrictions on exports of condensate, just kind of see how that materializes before they make any commitments. So I think it's fair to say, it's unlikely to see anything new develop in the short term.
I don't think that, that necessarily eliminates the potential interest in the long term. And it, certainly, with regards to the splitter we're building, I can tell you that our customer is still very bullish on the opportunities around that splitter.
So we still feel very good about that. But as far as additional splitters, I think that there's a wait-and-see mode in the market.
Operator
And we will next move to Abhi Sinha with Wunderlich Securities.
Abhishek Sinha - Wunderlich Securities Inc., Research Division
A quick one on BridgeTex. I was wondering if you can provide any color on how we should think about the ramping up from here.
I think it's 50% or so utilized. So when do you see it like coming up closer to the full transition?
I mean, some kind of color on what kind of time period we are looking at?
Michael N. Mears
Well, I would expect -- we're in a period here, and we talked about this before that the supply in Colorado City is under additional supply into Colorado City, which is the origin for BridgeTex. It still -- quite a bit of that is still under development.
And so when you look at all the takeaway capacity from BridgeTex -- I mean from Colorado City versus the inbound capacity, there's more outbound capacity than inbound capacity today. So that makes it very difficult for us to predict precisely how much we're going to move during that period.
We expect that problem to be resolved shortly after the first of the year. So for the next few months, it's very difficult for us to give a very accurate prediction on physical throughput on BridgeTex.
We would expect, once that infrastructure is in place after the first of the year, that we would start to ramp up closer to the capacity of the pipe.
Abhishek Sinha - Wunderlich Securities Inc., Research Division
Sure. And the $450 million CapEx in 2015, I mean, how should we think about the spread?
Are they -- maybe we should think about, like, evenly spread across the quarters? Or is this going to be like front-end loaded?
How should we think about the capital utilization there?
Michael N. Mears
I think it's best just to assume for 2015 that that's evenly spread throughout. I mean that's a number of projects, all with different spend profiles.
I think the best assumption would be to assume that it's spread throughout the year.
Abhishek Sinha - Wunderlich Securities Inc., Research Division
Sure. And then in the 2014 CapEx, $775 million, how much of that has already been spent and how much is left?
Michael N. Mears
Hold on a second. We have spent...
Michael P. Osborne
Yes, we spent $555 million through the 9 months.
Operator
And we'll take our next question from John Edwards with Credit Suisse.
John D. Edwards - Crédit Suisse AG, Research Division
Just -- and I realize on Saddlehorn, you're in open season and everything. I mean, as far as costs go, I mean in the region or along the routes you're thinking, do you have sort of preliminary, say, cost per inch mile for that region that we could be thinking about?
I mean is it, say, $1 million, $1.5 million per inch mile? What's kind of a good rule of thumb we should be thinking about?
Michael N. Mears
Well, I mean, just to short change, you're doing a calculation -- I mean, what I'll tell you, I mean, I don't think anyone who knows anything about pipeline cost, it's any big secret when you're building a 600-mile pipe, but the overall cost of the project is going to be north of $1 billion. So you can kind of view that as approximate floor for the cost.
And then depending on the level of commitments we receive and what level of capacity we need to plan for initially, it will drive that number from there.
John D. Edwards - Crédit Suisse AG, Research Division
Okay, that's helpful. And then, can you talk about what the sort of threshold commitments were?
I mean, you've obviously indicated you're going to go forward, it's just a question of how many more? I mean is -- I mean, if you could give us any color around that issue, how many commitments have been received?
Or what the minimum you wanted to see on that before proceeding?
Michael N. Mears
We're not prepared to discuss that today. I mean, we will, as I said, disclose more about the project after the conclusion of the open season.
I'm not going to promise to you, we'll tell you how many commitments we have, but we'll give you significantly more financial details and projections on the pipe at that point.
John D. Edwards - Crédit Suisse AG, Research Division
That's fine. And then as far as your backlog goes, I mean, have you seen the backlog?
The greater than $500 million, have you seen it rising, staying about the same or falling a bit, given the recent price volatility in the market?
Michael N. Mears
I don't -- we're actually not doing an active analysis on that. But my sense is that it stays roughly the same, which means that as projects are developed and are actually executed on, there are projects that backfill it on the list.
And with that occurring, I think the list is generally staying about the same level of capital opportunities.
Operator
And we next move to Lin Shen with HITE Hedge Asset Management.
Lin Shen
For Saddlehorn, you said that you're going to extend the open season to November 20. And is that the latest time you might have to make a decision to start the construction?
Or you have more room to extend more time, if possible?
Michael N. Mears
Yes. The open season, we don't have a hard stop on the open season.
At this point, we don't intend to extend it beyond November 20, but we aren't prevented from doing that if we are -- and typically, since we've been open now for well over a month, that the only reason we would do that this if we had a likely shipper who needs a little bit more time to get their approvals. We don't foresee that at this time, but that'd be only likely reason we would extend.
But we're not prevented from doing that.
Lin Shen
Okay. Got you.
And also in the meantime, I think you will start to do the preparation work as you are already in a position to proceed?
Michael N. Mears
That's correct.
Operator
And we next move to Sharon Lui with Wells Fargo.
Sharon Lui - Wells Fargo Securities, LLC, Research Division
Just following up on some questions on Saddlehorn. So based on initial indications, is the plan to move with just the 20-inch?
Or is there a potential to expand the project to a 24-inch line?
Michael N. Mears
Well, the plan right now is to build a 20-inch. I mean, certainly, if there's a threshold where we would consider upsizing that to a 24-inch, that we would know in this open season process, but that's not the current expectation.
The current expectation is to proceed with the 20-inch.
Sharon Lui - Wells Fargo Securities, LLC, Research Division
Okay. And then just thinking about potential returns.
Do you think that this project would fall into your historical targets in that 6% to 8% -- I mean, 6 to 8x range?
Michael N. Mears
Yes, we do. We do expect it to be at 6 to 8 multiple.
Sharon Lui - Wells Fargo Securities, LLC, Research Division
Okay, that's helpful. And then just any growth opportunities tied to this project?
Any ancillary projects that could come from building this pipe?
Michael N. Mears
Well, that's a good question. I think there's a number of things that we're looking at out there.
Certainly not anything that we're prepared to talk about. So we do have some things that we're actively looking at.
And it's typical with this sort of thing as our experience in the past, it does lead to opportunities that we didn't necessarily even foresee at the time that we proceeded with the project. So we haven't built any of that into our expectations, but there are some things we're working on and we would hope that this would lead to additional development opportunities.
Operator
We next move to Elvira Scotto with RBC Capital Markets.
Elvira Scotto - RBC Capital Markets, LLC, Research Division
I just had a couple of follow-up questions. When you talked about the 6 to 8x EBITDA on the project, is that with the current commitments?
Or do you need additional commitments to ramp to that multiple?
Michael N. Mears
Well, I don't want to address the commitment levels. I mean, I think it's just best to characterize that our expectations are that we are going to be at a -- within the 6 to 8 multiple.
And that's based on our current throughput projections. I'll address commitments at a later date.
I'll also mention that, that number could be lower than that, that there is significant upside to this project. And the number could be better than 6x, significantly better than 6x.
And so, that's probably all the color I can provide on that right now.
Elvira Scotto - RBC Capital Markets, LLC, Research Division
No, that's great. That's helpful.
The other question I had is -- a couple more questions. I guess, maybe just talk about how this relationship with Saddle Butte happened?
I mean, I guess, they were developing their own project. Just how the discussions evolved?
Michael N. Mears
Well, I don't want to get into details of the negotiations. But obviously, Saddle Butte, I mean, we wouldn't have entered into an agreement with Saddle Butte unless there were some strengths that they had that were complementary to our project.
And we've within the last few weeks agreed that the strengths of their project and the strength of our project were very complementary, which led to the arrangement we have. Probably no more details I can share with you on that other than that.
Elvira Scotto - RBC Capital Markets, LLC, Research Division
Okay. Great.
So just to expand on an earlier question. I mean, given what oil prices have done, I mean, have you heard any rumblings or consternation amongst any of your producer customers, concerns around production growth that could affect kind of your backlog of growth projects?
Michael N. Mears
Obviously, that's a topic of conversation. I can tell you at this point, we have not reached a point where that's materially affected our backlog of projects.
Operator
And our next question comes from Steve Sherowski with Goldman Sachs.
Steven C. Sherowski - Goldman Sachs Group Inc., Research Division
Just a quick question. What -- is BridgeTex's volume limited to a certain amount prior to Sunrise coming online?
Michael N. Mears
The physical capacity of BridgeTex is unlimited. I mean, what's limiting -- what could limit what ships on BridgeTex is the available barrels in Colorado City, it's not the physical capacity of the pipe.
Now to be clear, BridgeTex is operational to the Houston area right now. We haven't completed the line down to Texas City yet, but that doesn't restrict.
I mean we can still move 300,000 -- up to 300,000 barrels a day into the Houston market from Colorado City, if there's enough supply there.
Steven C. Sherowski - Goldman Sachs Group Inc., Research Division
So I guess, what is the -- prior to Sunrise coming online, I understand that there's no physical constraints, but what are the supply constraints? Is there a ceiling just in terms of the crude receipts into Colorado City?
Michael N. Mears
There is a current -- there is a ceiling on the crude receipts in the Colorado City. The outbound capacity exceeds the inbound capacity.
So it's really a question for the shippers. There's enough physical supply in Colorado City to fill BridgeTex up.
We're not necessarily projecting that to happen until Sunrise is up and running. But shippers at Colorado City would have to make a decision as to whether they're going to take their barrels to Cushing, whether they're going to take their barrels on third-party pipes, or whether they're going to put their barrels on BridgeTex.
There's not enough physical supply there to fill up all of those outbound pipes, but there's certainly enough there to fill up BridgeTex, if that's what the shippers in the Colorado City prefer to do. What we've said is we're not going to try to make any predictions on that until Sunrise is operational.
And so with regards to between now and the end of the year, or between now and when Sunrise is operational, it's difficult for us to predict exactly how much it's going to move. 160,000 barrels a day in September, I think, is a good potential floor for the number.
But what we'll actually move, we don't know. Now once Sunrise is operational and that supply constraint is gone, we would expect that to ramp up to 300,000.
We feel more confident in projecting we'd ramp up to the 300,000.
Operator
[Operator Instructions] And it appears there are no further questions in queue. I would like to turn the conference back over to Mr.
Mike Mears for any closing remarks.
Michael N. Mears
Yes. Well, thank you.
Magellan's assets continue to perform well, and we're making significant progress to solidify our future growth. Thank you for your time today, and we appreciate your continued support for Magellan.
Have a good weekend.
Operator
And ladies and gentlemen, that does conclude today's conference. We do thank you for your participation.
Have a great rest of your day.