Nov 3, 2015
Operator
Good day, everyone, and welcome to the Magellan Midstream Partners third quarter 2015 earnings results conference call. Today's conference is being recorded.
At this time, I would like to turn the conference over to Mike Mears, President and CEO. Please go ahead.
Michael N. Mears
Good afternoon and thank you for joining us today. 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.
We announced strong third quarter financial results this morning that significantly exceeded the EPU guidance we provided back in August. The positive variance was primarily the result of stronger than expected refined products pipeline shipments during the quarter.
Our system benefited from low gasoline prices during the high demand summer driving season and also additional volume moving on our system due to regional refinery outages. These factors led to us setting a new quarterly record for refined products volumes.
Our crude oil and marine terminals business segments also exceeded our quarterly guidance. I'll turn the call over to our CFO, Aaron Milford, to review Magellan's third quarter financial results versus the year-ago period.
And then I'll be back to discuss our outlook for the rest of the year and review the latest status of our largest expansion projects before opening the call for your questions.
Aaron L. Milford
Thanks, Mike. Today I'll be making references to certain non-GAAP financial metrics, including operating margin and distributable cash flow.
We have included exhibits to our earnings release that reconcile these metrics to their nearest GAAP measures. We reported net income of $251 million earlier this morning, which represents a significant increase over the $199 million reported for the same period in 2014.
Excluding the impact of out-of-period NYMEX activity in the current quarter, earnings per unit of $0.86 exceeded guidance of $0.68 previously provided for the current quarter. Distributable cash flow was $230 million for the third quarter, representing a $47 million increase from the third quarter of last year.
All of our business segments contributed to our higher earnings and cash flow performance in the quarter. I will now discuss the operating margin performance of each of our business segments.
Our refined products segment generated $242 million of operating margin in the third quarter of 2015, which was $41 million higher than the same period of 2014. Transportation and terminals revenue increased $22 million as a result of higher average tariffs due to the 4.6% increase in rates in July of this year as well as record-setting gasoline volumes.
Volumes were positively impacted by lower gasoline prices, which spurred demand. And our systems also benefited from regional refinery turnarounds and outages that encouraged additional shipments on our systems in order to meet demand in the markets we serve.
Gasoline volumes increased 12% from the third quarter of 2014 to set a new record for Magellan in the quarter. This increase was partially offset by diesel volumes which were 7% below 2014 levels.
Diesel demand continues to be negatively impacted by reduced drilling activities in certain markets that we serve. In total, our transportation volumes were 3% higher in the current quarter versus 2014.
Product margin increased $23 million from the third quarter of 2014 to $86 million. $14 million of this increase is attributed to a favorable variance from the third quarter of last year associated with mark-to-market impacts related to our NYMEX positions used to economically hedge our commodity margins and inventory.
Ignoring these mark-to-market impacts, our cash margins were higher quarter over quarter, primarily due to improved margins and higher volumes related to our fractionation activities. Overall, we continue to be able to effectively manage our commodity margin, and our commodity activities have continued to meet or exceed our expectations in 2015.
Finally, operating expenses for our refined products segment increased $3 million quarter over quarter as a result of higher personnel costs and timing of asset integrity expenses. The increase in these costs was partially offset by favorable product overages, which act to reduce operating expenses.
Moving now to our crude segment, our crude segment operating margin for the third quarter of $95 million was $24 million higher than the third quarter of 2014. Transportation and terminals revenue was $17 million higher, primarily resulting from the November 2014 acquisition of a crude oil pipeline in Houston, higher shipments on our Longhorn pipeline, and higher volumes on our Houston distribution system.
For the quarter, Longhorn volumes averaged over 260,000 barrels per day. The higher revenue achieved as a result of higher volumes was partially offset by a lower average rate per barrel compared to last year.
This reduction in rate per barrel is a result of lower spot shipments on Longhorn, which earn a higher tariff, and the increase in volumes on our Houston distribution system, which move at lower average rates. The equity earnings recognized related to our various crude oil joint ventures, including BridgeTex, were $14 million higher than the third quarter of last year due to BridgeTex beginning operations toward the end of 2014.
For the current quarter, BridgeTex volumes averaged 200,000 barrels per day. We continue to believe that 200,000 barrels per day is a reasonable expectation as an average for all of 2015.
Operating expenses for the crude oil segment were $5 million higher compared to last year's quarter, as a result of higher personnel costs and lower realized value from product overages due to lower crude oil prices. To wrap up our discussion of business segment performance, our marine segment's operating margin increased $4.6 million quarter over quarter to $32 million.
This increase is attributable to higher ancillary revenues due to higher customer activity and lower operating expenses due to timing of asset integrity work. Now moving to other net income variances, our G&A expenses increased $2 million in the third quarter of 2014, primarily related to higher personnel expenses.
Our amortization and depreciation expense increased $4 million compared to last year due to expansion capital projects placed into service. And our net interest expense increased $10 million due to higher debt balances and lower capitalized interest compared to last year's quarter, due to BridgeTex beginning operations.
Finally, we recognized a $1.7 million non-cash loss as other expense, related to the change in the differential between the spot price and forward price on fair value hedges associated with our crude oil tank bottoms and line fill. I will now move to a brief discussion regarding our balance sheet and liquidity position.
We had $3.4 billion of long-term debt outstanding at September 30, which included $227 million of commercial paper borrowings. Our weighted average interest rate was 4.7%.
We had no borrowings outstanding on our $1 billion revolving credit facility, which is also used to back our commercial paper program. Subsequent to the quarter end, we reported that we had extended the maturity of our $1 billion credit facility to October 2020 and also entered into a new $250 million, 364-day credit facility.
We entered into this new facility primarily to support our potential liquidity needs related to additional outstanding NYMEX contracts used to economically hedge our commodity margins. As of the end of the third quarter, our pro forma debt-to-EBITDA ratio was approximately 2.8 times, which gives us plenty of capacity to continue to fund growth with debt and excess cash flow.
In closing, all of our businesses continue to perform well. And I will now turn the call back over to Mike to discuss guidance for the remainder of the year and our growth projects.
Michael N. Mears
Thanks, Aaron. Based on our strong financial performance during the third quarter, we are increasing our full-year DCF guidance to a record $920 million.
Our fee-based activities are holding up well in this volatile time for the energy industry. Lower commodity prices have resulted in robust gasoline demand that more than offset lower distillate volumes, which primarily, as Aaron mentioned, is a result of decreased demand for diesel fuel in the drilling basins served by our refined products pipeline system.
Year to date, total refined products demand is up 1.3% versus 2014, but we are still assuming for guidance purposes that our refined products volumes will be flat for the full year compared to last year. Further, as we discussed last quarter, we also continue to see strong demand for our crude oil assets based on our ability to efficiently deliver Permian Basin production to the refinery gates on the Houston Gulf Coast coupled with the backstop of take-or-pay contracts for our Longhorn, BridgeTex, and Double Eagle pipeline systems.
We continue to believe that our systems and overall business model are well-positioned to generate short-term growth and sustain long-term value. Concerning our commodity-related activities, we continue to have NYMEX hedges in place to secure approximately 85% of our butane blending margins for the remainder of this year and about 40% of our 2016 blending activity.
You may recall that we discussed similar hedging levels last quarter, as we have proactively locked in margins a few months ago. Those hedges were put into place earlier than usual for next year's activity, as we took advantage of the attractive spread between gasoline and butane prices at that time.
With the increase in our DCF guidance to $920 million, we now expect distribution coverage of 1.35 times for the full year, which results in excess cash of more than $230 million for the year. We remain committed to our goal of increasing cash distributions by 15% for 2015 and at least 10% for 2016.
I know that many of you have been inquiring about our distribution growth for 2017. We are currently in the process of working through our multiyear budget, and we expect to follow our usual approach of sharing our target for 2017 distributions when we announce our year-end earnings in early February.
As we've shared in the past, we make distribution decisions based on our long-term view of Magellan's business using our latest forecast for the years to come rather than just one year of operating data. Although we are not providing 2017 guidance, I will remind you that our three largest construction projects, which is the Little Rock pipeline, Corpus Christi condensate splitter, and Saddlehorn pipeline, are all expected to become operational at various points in 2016.
So 2017 will be our first full year of operations that include each of these expansion projects. And while we're on that subject, we are making steady and substantial progress on each of these growth projects.
The Little Rock pipeline is on schedule for a mid-2016 startup, with pipeline construction initiated during the third quarter. Further, pipeline installation began in early October on the Platteville-to-Cushing segment of the Saddlehorn crude oil pipeline, which is expected to be operational in mid-2016 as well.
You may recall that we discussed the Carr-to-Platteville extension last quarter. And right-of-way acquisition is currently in progress, with that segment of pipe expected to be operational by the end of 2016.
And we continue to make good progress on our 50,000 barrel a day Corpus Christi condensate splitter, which should be operational in the second half of 2016. We also just reactivated a previously idle 135-mile pipeline from Healdton, Oklahoma that is capable of transporting up to 35,000 barrels a day of condensate from the SCOOP production area in southern Oklahoma to Cushing.
With regards to expansion capital spending projections, we have increased our estimates by $200 million to $1.6 billion for projects under construction, with $850 million of that spending in 2015, $700 million in 2016, and another $50 million thereafter to complete our current slate of construction of projects. The increase primarily relates to expansion at our Galena Park terminal that we announced last week.
These enhancements include the addition of a fifth dock and connectivity of our Houston crude oil distribution system to our Galena Park facility. We expect the dock improvements, which make up the majority of the $115 million of spending, to be operational by the end of 2018, and the crude oil connectivity to be complete by the end of 2016.
We are making these strategic investments to better serve the increasing demand from our existing customers and to prepare the facility for future growth. We expect to generate an EBITDA multiple of about eight times on these enhancements related to incremental throughput at the facility and increased storage rates to move our pricing more in line with the market once we have additional dock capabilities available.
In addition, we have initiated a number of pipeline expansions around our refined products system, supported by refinery production expansions. Magellan continues to pursue a significant number of investment opportunities that are well in excess of $500 million.
These potential projects are of varying sizes and cross all of our business lines. We have recently shared with you our focus to further increase our marine capabilities, which we see as the next strategic step in our value chain.
While many of the marine opportunities that we are developing are not at a stage that we can discuss yet, examples of those that we can discuss include building additional storage at our Galena Park terminal for use once the new dock is operational and constructing additional tankage and docks at the new 100-acre tract of land that we've recently acquired in Corpus Christi. We also continue to assess opportunities to expand various other terminals and pipelines within our portfolio, both on the refined products and crude oil side.
We also remain quite active looking for various acquisition opportunities. As always, we can't predict if or when we will find acquisition opportunities that will make sense for us, but we can reinforce that we will remain committed to the disciplined growth that our investors expect from us.
That concludes our prepared comments, so I'll now open the call up for questions.
Operator
Thank you. Our first question is from John Edwards from Credit Suisse.
Michael N. Mears
John, are you there?
Operator
Mr. Edwards, your line is open.
John Edwards - Credit Suisse Securities (USA) LLC (Broker) Oh, sorry, sorry. Can you hear me now?
Michael N. Mears
Yes. John Edwards - Credit Suisse Securities (USA) LLC (Broker) Can you hear me?
Michael N. Mears
Yes. John Edwards - Credit Suisse Securities (USA) LLC (Broker) Sorry, I had it on mute by accident, but congrats on a good quarter.
And I guess the question – you talked about it a little bit here at the end of your remarks. I am curious how things are developing in the marine area.
And I know you've always used the more opaque disclosure of more than $500 million in opportunities. And last quarter you had indicated that you thought marine could be as big as the crude oil opportunity has proven to be, if memory serves.
And so I just thought maybe you could describe – maybe any additional developments or color along those lines would be helpful.
Michael N. Mears
I can't give you any specifics, John. I think what I can tell is that we have multiple projects under development, from grassroots to potential acquisitions to potential joint ventures.
I cannot say with certainty that we'll get any or all of those done, but we are actively negotiating. We're very optimistic.
I wish I could give you more specifics on timing, but as you can imagine, this is a challenging environment to get commitments. And so things are moving probably a little slower than we'd like.
But as I said, I think we're optimistic that we'll be able to execute on some of these opportunities in the future, and we're actively developing them. John Edwards - Credit Suisse Securities (USA) LLC (Broker) Okay, great.
That's helpful. That's all I had today, thank you.
Operator
Moving on, we'll hear from Jeff Birnbaum from Wunderlich.
Jeffrey Birnbaum
Good afternoon, everyone.
Michael N. Mears
Good afternoon.
Jeffrey Birnbaum
A couple questions from me. The increase in 2016 CapEx of $150 million or so, you said Galena Park is I think $115 million, but that's online in two stages by the end of next year and then the end of 2018.
So can you give us some more color perhaps on the contribution you think you can get from the investments next year in 2017 versus the second stage going into 2019, and then perhaps what's making up the reminder of that increase in next year's CapEx increase?
Michael N. Mears
First of all, I'd say the majority of the capital that we're spending next year is to complete the projects, our large projects, which include Saddlehorn and the Corpus Christi splitter and the Little Rock pipeline. So the majority of that capital will be to complete those projects, and so all of those will have a full-year effect in 2017.
The increment that we've added quarter over quarter, again, the biggest portion of that is the new dock and crude oil connectivity at Galena Park. The crude oil connectivity project will be done next year, and so we'll start to see some benefit from that in 2017.
The new dock obviously is later, and so we won't have – we're not expecting any 2017 impact from the new dock. The other projects that we've added, and we haven't got down into the discrete details there, but they're primarily a number of pipeline expansions around our refined product system to accommodate increased production from the refineries in the Mid-Continent.
Those projects should be done later next year also, and so we'll start to see the benefit of those in 2017 also.
Jeffrey Birnbaum
Okay, great. That's helpful.
And then I think you've said in the past that BridgeTex has MVCs [Minimum Volume Commitments] higher than current throughput levels, I believe up to 80% or so of capacity utilization. And I know you've said that 200,000 barrels a day is a good number for this year.
Should we be thinking about that as having your full MVCs in place in 2016?
Michael N. Mears
We would expect to have the full MVCs in place in 2016, that's correct.
Jeffrey Birnbaum
Okay, great, and then sorry, one last one from me. I apologize if I missed it earlier.
But did you say about how much you thought Magellan benefited in the quarter from some of the refinery outages? You discussed it aided volumes to Magellan systems.
Michael N. Mears
We haven't broken it down specifically by refineries, but there were a number of refineries that had issues, both on our system and in the vicinity of our system that impacted throughput through our system. Our best guess is probably, and it's hard to qualify this precisely because you can't identify a barrel that moved on your system precisely because a refinery had a problem, but our best guess is probably $2 million to $3 million of op margin.
Jeffrey Birnbaum
Okay, perfect. Thanks, Mike, and congrats on the quarter.
Michael N. Mears
Thank you.
Operator
Moving on, we have a question from Elvira Scotto from RBC Capital Markets. Ms.
Scotto, your line is open. Please go ahead.
Elvira Scotto
Hi, I'm sorry. On the Galena Park project, I think you mentioned that was an eight times EBITDA project.
Is that a starting point? Is that base on contracts?
Do you expect to work that multiple down over time?
Michael N. Mears
We don't have contracts specifically tied to that expansion at this point, Elvira. Those estimates are based on two things.
One is right now the rates we're getting for storage at Galena Park are below the market, primarily because we're constrained on dock capacity. So one component of the value there is to be able to charge market rates for our storage once we debottleneck the facility.
And in talking to our customers, we have a high level of confidence that we'll be able to do that once we debottleneck the facility. And then the second portion is really just increased throughput across the dock once it's in place, but that's not contracted.
I don't want to give the impression it is. But given that that facility is primarily a refined products facility and the trends with regards to refined product exports, we feel pretty confident about the eight times multiple.
Elvira Scotto
Okay, great. That's helpful.
Just going back to the potential – the over $500 million of potential growth projects, and I know you've outlined some of these in the release. Are these projects contingent upon a certain commodity price environment?
Michael N. Mears
There's certainly some level of projects in the crude oil space in particular that are more likely with higher commodity prices than we have right now. On the other hand, the low crude oil price facilitates some of the projects and opportunities we have on the refined products side.
So we haven't tagged this to a specific commodity price environment, and that's one of the reasons why we don't get more specific. We continue to say, and I know it probably is some level of frustration to the investment community, that it's in excess of $500 million.
It's well in excess of $500 million, and we feel very confident with that level of capital opportunity in this commodity price environment.
Elvira Scotto
Okay, great. That's really helpful.
And then can you just talk a little bit about the M&A landscape and what you're seeing out there on bid/ask spreads, especially in an environment where commodity prices could be lower for longer?
Michael N. Mears
I'll tell you I probably sound like a broken record, but the recent acquisition opportunities we've looked at have continued to surprise us as to what the bid prices have been for some of those versus what we're willing to pay. And so as we've said before and will continue to do, if the value is outside of what we think is appropriate, we'll pass.
We're still optimistic that those prices will come down and we'll have an opportunity on some acquisition opportunities. But right now, at least for us, the sales price on a lot of the assets have been higher than we're willing to pay.
Elvira Scotto
Okay, great, and then just a last one from me. Can you just remind us how you look at distribution coverage and excess cash and the level of excess cash you'd like to generate and whether that's contingent upon the commodity price environment?
Michael N. Mears
Well, we've said before that we would feel comfortable with coverage of around 1.1 times. We think our business is stable, and a 1.1 times coverage is more than sufficient for us.
We're much higher than that right now, and our intent would be to over time bring that down closer to 1.1 times, but we're going to do that in a structured way. We're not going to do it all at once.
And again, as long as we can continue to grow the business at the pace we're going, that's going to give us quite a bit of fairway and time before we come down to that 1.1 times coverage. I hope that answers the question.
Elvira Scotto
That's very helpful. That's all I had; thank you very much.
Operator
And Robert Carl from CSCM Incorporated has our next question.
Robert D. Carl
Yes, actually I have two questions. First of all, great quarter, something we've come to expect from this extremely well-managed company.
First question is, the tariff increase on July 1 was 4.6% on the refined products line. Can you give us any thoughts what that increase might be next year, 2016 or even 2017?
It just appeared to me that that was a pretty high increase for this year. Can you comment further?
That's my first question.
Michael N. Mears
As you probably are aware, the FERC is in the process of redetermining what the new index will be starting next year. That process is in place.
You can go to the FERC website and read the filings to that regard.
Robert D. Carl
All right.
Michael N. Mears
And probably be as up to date as I am as to what the range of probabilities are with regards to the index. And so we expect – just to paraphrase it for you if you go read those filings, the index adder likely – and again, the FERC is free to do what they want, but the adder is likely to be somewhere between 1.8% to 2.5%, in that range.
Obviously, the industry is arguing for a higher adder, but we won't know what it actually is until the proceeding is complete. If you look at PPI year to date, it's negative 3% roughly.
So that would suggest that next year we'll have an index that is flat to perhaps slightly negative if things don't change with the PPI between now and the end of the year. Now in saying that, I'll highlight with regards to Magellan, that two-thirds of our markets are not subject to the index.
We have market-based rates in two-thirds of our markets. So the majority of our rates are not subject to the index.
Robert D. Carl
Okay, thank you. That's very helpful.
And then my second question is – I know it might be a little early, but do you have any rough idea as to what percent of the distributable cash flow this year will be taxable?
Michael N. Mears
I don't have an estimate for that handy. I think we'll have to get back to you on that.
Robert D. Carl
Okay.
Paula Farrell
This is Paula Farrell. Actually, as you're probably aware, that is unique to every single investor based on the time they actually purchase their units.
Robert D. Carl
I understand that.
Paula Farrell
So for instance, if you look at last year, someone who bought at the very end of 2013, they actually were allocated a loss for 2014. So it's unique to every single investor.
Robert D. Carl
All right, okay. Well, that is true if you look at it that way.
Okay, but it also relates to the difference between book and tax depreciation. And that's a big one, and that's not unique to individuals.
That was what I was getting at.
Operator
And we'll go next to Selman Akyol from Stifel.
Selman Akyol
Thank you, congrats on some very nice results; two quick questions. First, on the product overages you use to offset your expenses, can you quantify how much that was in the quarter?
Michael N. Mears
I don't have that handy. Let's see if we can find it here real quick on the schedule.
Do you have another question while we're looking?
Selman Akyol
The other one is just a little bit – really following up on Elvira's question regarding acquisitions, and I appreciate the answer on the bid/ask spreads. But can just talk about what you're seeing out there on deal flow in this environment?
Are you seeing increased opportunities at all, or is it flat, any color there?
Michael N. Mears
I think the opportunity set is about the same as it has been for the last year or two. I think what we're seeing – there is a differentiation.
I ought to be maybe a little more clear on that. Some of the assets that are probably a little more attractive than other assets have been going for premiums consistent with my comments earlier, premiums that are higher than what we typically would feel comfortable paying.
And so we've participated in those processes, but we haven't won the bids. There are other assets out there that are probably a little more distressed.
And what we're seeing, especially with regards to those that are owned by private equities, they're just pulling those assets off the market, and so you are seeing some differentiation there. But again, the ones that are probably most attractive are still going at premiums.
But as far as back to your specific question, there are quite a few things in the market. And so I'd say the opportunities haven't gone away.
It's just the valuation hasn't come down.
Selman Akyol
Fair enough, I appreciate that.
Aaron L. Milford
And then as far as back to your original question about the amount of over-and-short offsetting operating expenses, in total for the refined product segment in the third quarter of this year it was $4 million. And in the crude oil segment, also for the third quarter it was $6 million, for a total of $10 million.
Selman Akyol
Thank you so much.
Michael N. Mears
That's not the variance.
Aaron L. Milford
And to be clear, that's not the variance. That's the actual total impact.
Selman Akyol
So in other words, you would have been $4 million higher in your operating expenses on the refined products side?
Aaron L. Milford
That's correct.
Selman Akyol
Thank you so much.
Operator
Our next question is from Sharon Lui from Wells Fargo.
Sharon Lui
Hi, good afternoon. So it seems like Magellan has made really good progress on its pursuit of its marine strategy.
You guys have announced new investments for the last two quarters. I'm just wondering if I guess this pace has met your own internal expectations.
And maybe if you can discuss what are some of the other marine related opportunities that Magellan can undertake?
Michael N. Mears
With regards to our expectations, it's probably consistent with our expectations of that. All things being equal, I think we'd like to get things done sooner rather than later.
But in this environment, I think that we're happy with the pace that we're proceeding at. The other opportunities that we're pursuing, they're primarily associated with our long-haul pipes, as we mentioned probably on the last call.
So it's opportunities in and around the Houston Ship Channel all the way down to Texas City. Along that entire corridor is where we're developing, we're actively developing opportunities.
And again, the strategy is twofold. The marine facilities, especially for crude oil, are perhaps valuable in their own right.
But from a long-term strategic perspective, they're most valuable to us if they're connected to our long-haul pipelines. And so that's why we're focusing in that area with regards to marine storage.
And as I said earlier, we're making progress on those and we've got multiple opportunities we're developing. And hopefully, we'll get something done here in the near future.
Sharon Lui
Okay, great. Thank you.
Operator
And we'll go next to Mirek Zak from Citi.
Mirek Zak
Hi, everyone. Good afternoon.
Now I know you benefited from refinery issues during the quarter. But did your volume see a benefit specifically from BP's Whiting facility outage as well?
Michael N. Mears
I think it's safe to say that we saw some benefit there. Again, it's hard to quantify.
An impact to a Chicago refinery has a less of a benefit to us than it would say to a Mid-Continent refiner or a North Texas refinery, but there is some impact. But it's very difficult to quantify specifically.
Mirek Zak
Okay. And on your Galena Park terminal expansion and other marine prospects, are you seeing demand for these facilities driven by growth in product volumes, or do you expect to somewhat drive volumes based on acquiring existing volumes?
And if it's the latter, how do you expect to attract these volumes?
Michael N. Mears
With regards to Galena Park, it's primarily a refined products facility, and there's increased desire to move more barrels through the facility onto the water. Galena Park, we've grown that facility substantially over the last few years and grown it through adding storage.
And we've reached the point now where the customers are requiring more water access in order to fully value the storage we have there. So that's one of the primary drivers behind adding the dock.
And then we would expect to see increased refined products throughput through the existing storage once we've completed that. In addition to that, and I think I mentioned it in my comments, we have the ability to add more storage at Galena Park.
And we're not going to do that until we complete the dock because we can't serve it at this point. But once we complete the dock, then we have the capability to add more storage at that facility.
Mirek Zak
Okay, great. And just lastly, have you contracted any incremental capacity on Saddlehorn this quarter, or are you seeing any desire from additional producers to sign firm transportation at this point?
Michael N. Mears
We are having productive discussions with additional potential shippers. We haven't completed any of those yet, but we're optimistic that we will.
It's probably all I can say on that.
Mirek Zak
Okay, great. Thanks, that's all I had.
Operator
And that does conclude our question-and-answer session today. Mr.
Mears, I'll turn the conference back to you for additional or closing remarks.
Michael N. Mears
Great, I want to thank everyone for their time today. We believe our third quarter results demonstrate the strength of our earnings in a difficult market.
And we appreciate your continued interest and investment in Magellan. Have a good afternoon.
Operator
And that does conclude our conference today. Thank you all for your participation.