Nov 2, 2017
Executives
Michael N. Mears - Magellan Midstream Partners LP Aaron L.
Milford - Magellan Midstream Partners LP
Analysts
Justin S. Jenkins - Raymond James & Associates, Inc.
Shneur Z. Gershuni - UBS Securities LLC Mirek Zak - Citigroup Global Markets, Inc.
Tom Abrams - Morgan Stanley & Co. LLC Christopher Paul Sighinolfi - Jefferies LLC Jerren Holder - Goldman Sachs & Co.
LLC
Operator
Good day, everyone, and welcome to the Magellan Midstream Partners Third Quarter 2017 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 Chief Executive Officer. Please go ahead, sir.
Michael N. Mears - Magellan Midstream Partners LP
Good afternoon and thank you for joining us today to discuss Magellan's third quarter financial results. 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 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 in forming your own opinions about Magellan's future performance.
Moving to our results, the third quarter was an eventful one for Magellan. Although Hurricane Harvey negatively impacted a number of our facilities, we made it through the storm well overall with operations affected for a limited period of time due to the hard work of our dedicated employees who, in many cases, were dealing with personal hardships of their own.
We're very thankful for their service and diligence to restore our operations as soon and as safely as possible. At this point, we estimate the financial impact of the hurricane to be about $20 million hit to DCF, with half of that impact in the third quarter and the remainder related to future clean-up and repair work.
As of now, the majority of our impacted facilities are back in operations with the exception being a few tanks at Galena Park still under repair. We are also pleased to have announced three new large-scale projects during the third quarter that are now under construction.
We've been discussing these projects with you in general terms for a while now. But, as we've mentioned, it can take considerable time to negotiate final terms and prepare contracts even after conceptual agreement has been reached.
I'll discuss each of these new projects with you in a few minutes after Aaron addresses the quarterly earnings. With that, I'll hand the call over to our CFO, Aaron Milford, to review Magellan's third quarter financial results.
Then, I'll be back to discuss our guidance for the year and more specifics on our new expansion projects before opening the call to your questions.
Aaron L. Milford - Magellan Midstream Partners LP
Thanks, Mike. I would like to remind the audience that we'll be making references to certain non-GAAP financial metrics, including operating margin and distributable cash flow.
We believe these metrics are useful for investors in evaluating our performance, and we've included exhibits to our earnings release that reconcile these metrics to their nearest GAAP measure. Earlier this morning, we reported third quarter net income of $198.5 million, or $0.87 per unit on a diluted basis, which was slightly higher than the $194.6 million or $0.85 per diluted unit reported for the third quarter of 2016.
Excluding the impact of mark-to-market commodity activity in the current quarter, adjusted diluted earnings per unit of $0.97 exceeded our guidance of $0.90 provided back in August of this year. But the third quarter benefited from an $18.5 million gain on the sale of an inactive terminal in the Chicago area, which equated to about $0.08 per unit.
If you exclude this $0.08 benefit from the current quarter's results, adjusted diluted net income of $0.89 was basically in line with our guidance, especially considering the fact that Hurricane Harvey is estimated to have negatively impacted quarterly net income by approximately $0.04 per unit. Distributable cash flow of $235.2 million in the third quarter of 2017 was about $9 million lower than the $243.9 million reported in the third quarter of 2016.
As Mike mentioned earlier, we estimate that Hurricane Harvey negatively impacted DCF in the quarter by about $10 million, but we were able to quickly get our facilities back into service and deliver results virtually in line with guidance, which was no small task on the part of our employees. As we look forward, we see an additional $10 million or so of spending related to Harvey as we complete repairs to our facilities, which would bring the total estimated impact of Harvey, net of estimated insurance proceeds, to about $20 million.
While we expect the vast majority of this impact to 2017, there could be some carry-over into 2018. To give you a sense of segment impact, we believe the refined products segment benefited by about $5 million from higher volumes moving south to Texas as well as additional blending opportunities, while our marine and crude oil segments were negatively impacted by $5 million and $10 million, respectively.
Looking forward, almost all of the remaining $10 million to be spent will be incurred in our marine segment as we continue to repair impacted assets. I'll now move to a discussion of our segment performance for the quarter.
Our refined products segment generated $173.8 million of operating margin in the third quarter of 2017, which was $10 million lower than the same period in 2016. Transportation and terminals revenues were over $21 million higher than the year ago quarter due to contributions from our Little Rock pipeline as well as 4% higher transportation volumes on refined products systems, excluding the Little Rock pipeline.
Both gasoline and distillate volumes were higher with distillate being particularly notable with continued strong demand in West Texas. Revenues also benefited from a one-time payment from a customer related to a dispute settlement as well as higher storage and ancillary revenues.
Operating expenses increased $23.1 million compared to the third quarter of 2016 as a result of less favorable product overages, higher asset integrity spending related to the timing of maintenance work, as well as higher environmental accruals related to historical remediation sites. Product margin decreased by $8.3 million compared to the third quarter of 2016, partly as a result of out of period unrealized losses associated with our hedging program.
Our cash margin, which takes into account when we physically sell product and normalizes for these unrealized losses, also declined between periods, due to lower butane blending margins and higher cost of goods sold related to our fractionation activities. Our crude oil segment generated operating margin of $115.8 million in the third quarter of 2017.
This represents a $17 million increase compared to the third quarter of 2016 and was a quarterly record for this segment. Transportation and terminals revenue increased $16.2 million, primarily as a result of contributions from the condensate splitter, which began operations in June of this year and higher Longhorn volumes of 255,000 barrels per day in the current quarter compared to the 235,000 barrels per day in the 2016 quarter.
You may recall that that the 2016 quarter volumes were negatively impacted as a result of shippers utilizing historical transportation credits they had earned by shipping more than their minimum requirements that were set to expire in that quarter. Current period volumes were negatively impacted by Hurricane Harvey as well as downtime for repairs after the pipeline was struck by one of our maintenance contractors in July.
But we continue to believe that 260,000 barrels per day is still a reasonable estimate on a full year basis. Segment operating expenses increased $6.6 million as a result of operating expenses associated with the condensate splitter as well as higher power costs.
Equity earnings from our crude oil related joint ventures increased by $13.1 million compared to the third quarter of last year. This increase resulted primarily from higher earnings related to our BridgeTex and Saddlehorn joint ventures.
Saddlehorn began operations in September of 2016 and averaged approximately 47,000 barrels per day in throughput during the third quarter of 2017, which is consistent with our volume commitment that stepped up from approximately 40,000 barrels per day to about 60,000 barrels per day in September. BridgeTex's volumes averaged approximately 280,000 barrels per day during the third quarter of 2017, which is 55,000 barrels per day higher than the same period in 2016.
This volume increase was the result of the Eaglebine origin becoming operational during the second quarter of 2017 as well as additional spot volumes. Currently market price differentials are supportive of spot shipments and we expect BridgeTex volumes to finish the year strong resulting in average daily throughput of about 275,000 barrels per day for the year.
Product margin for the crude oil segment was negative $4.3 million or $4.9 million lower than the third quarter of last year. This negative product margin results primarily from our shift from our shipping spot volumes on BridgeTex and paying BridgeTex the spot shipment tariff, which we classify as cost of product sales.
Taken as a whole, while our commodity margin is negative, when our share of equity earnings from BridgeTex related to these movements is taken into account, these movements resulted in positive cash flow from capacity that otherwise would have gone unused. Finishing up my discussion of our segment performance, our marine segment generated $25.9 million of operating margin in the current quarter compared to $33.3 million in the third quarter 2016.
Revenues were $3.7 million lower primarily as a result of impacts from Hurricane Harvey. Expenses were $1.4 million higher also primarily related to our Hurricane Harvey response and related environmental accruals, while we were somewhat offset by the value of product gains.
Finally, commodity margin related to product sales was $2.7 million lower, mostly due to lower volumes and sales prices. Now, moving to other net income variances to last year's quarter, our G&A expenses were $1.6 million higher than the 2016 period.
Depreciation and amortization expense was up by $2.8 million compared to last year's quarter as a result of assets being placed into service. Net interest expense increased by $6.3 million due to lower capitalized interest in the current quarter compared to the second quarter of 2016 as well as a higher average debt balance overall as we continue to fund our various growth projects.
Our weighted average interest rate fell to 4.7% in the current quarter from 4.9% in the third quarter of 2016. Other expense was $3.3 million higher than last year's quarter, due to higher pension cost as well as the 2016 quarter benefiting from a break-up fee received in conjunction with a potential acquisition that did not close.
We also recognized in net income, as mentioned earlier in my comments, an $18.5 million gain on the sale of an inactive terminal. Of note, consistent with our past practice, this net income gain has been excluded from our calculation of distributable cash flow as detailed in the attached distributable cash flow reconciliation exhibit.
Moving onto a discussion regarding our balance sheet and liquidity position, our outstanding debt balance was $4.3 billion as of September 30 of this year, which included $269 million of commercial paper. Our leverage ratio was approximately 3.4 times at the end of the quarter.
In October, we issued $500 million of 4.2% notes due in 2047 at 99.3% of par to repay outstanding commercial paper as well as fund future growth expenditures. We also recently extended the term of our $1 billion credit facility to October of 2022.
Our $250 million 364-day credit facility matured in October and we elected not to renew this facility. Currently our credit facility totals $1 billion and also provides support for our commercial paper program.
We also have a $750 million at-the-market equity program in place and we did not issue any units under this program during the quarter and have not issued any units since putting the program in place earlier this year. As we've stated in the past, this is a tool we plan to use to manage our leverage ratio, should we approach our stated 4 times limit.
As Mike will discuss in a moment, we have increased our planned growth spending significantly and it now totals about $1.75 billion for the 2017 to 2019 period. We have already spent over $400 million so far in 2017, which leaves just over $1.3 billion to be funded.
Given our current economic estimates, we believe we could fund these investments with retained cash flow and debt financing and as a result not need to issue any equity to stay within our stated 4 times debt to EBITDA limit. I will now turn the call back over to Mike to discuss our updated guidance for the balance of the year, as well as our significant growth projects.
Michael N. Mears - Magellan Midstream Partners LP
Thank you, Aaron. Based on our financial results to-date and our outlook for the remainder of the year, we are reaffirming our annual DCF guidance of $1.02 billion for 2017, which represents a record year for Magellan.
Even though the hurricane negatively impacted our financial results this year, demand for our services remains strong and our operations continue to generate solid returns, providing us comfort to reaffirm our previous guidance expectations. We also remain committed to our stated goal of growing cash distributions by 8% for both 2017 and 2018, while maintaining distribution coverage of 1.2 times.
Some of you have been asking about our latest quarterly distribution increase, which was $0.015 compared to $0.0175 per quarter earlier this year. This is not an indication that our stated distribution growth rate has been lowered.
This is the mathematical result required to achieve our annual distribution growth rate of 8%, while keeping distribution amounts in quarter-cent increments. We plan to recommend, subject to board approval, another $0.015 increase for our fourth quarter distribution, which would land us right at 8% distribution growth for the year.
Moving to expansion projects, we're excited to have announced three new large-scale projects in the third quarter. We are asked from time to time where we see our new growth coming from and we consistently indicate that we see attractive opportunities for future growth in each of our segments.
Our three new projects emphasize that point with one project announced for each of our business segments. The first project to mention is the expansion of our refined products pipeline system in the Texas market by building 135 miles of pipe between East Houston and Hearne and making other enhancements to our existing pipeline and terminal infrastructure in that region to handle the incremental volume.
Due to strong customer demand, our Texas refined products capacity has been constrained historically and this expansion will add 85,000 barrels per day of capacity to meet the needs of our shippers. This project has the industry support and is backed by long-term commitments from strong creditworthy customers, and lays the foundation for additional growth opportunities that are now being developed.
We expect to generate an 8 times EBITDA multiple on this project, which is expected to become operational in mid-2019. We also announced an expansion in joint venture of our Pasadena marine terminal.
You may recall that we had initially launched phase 1 of this project to construct 1 million barrels of storage in a dock at this recently acquired site. The land footprint allows for up to 10 million barrels of storage in five docks, in total, so we have been actively marketing this incremental capacity.
We are pleased to have now formed a joint venture with Valero for this Pasadena marine terminal. In addition to the initial 1 million barrels of storage, we are now building an incremental 4 million barrels of storage in the Aframax-capable dock in connectivity to Valero's refineries in Houston and Texas City, with all constructed assets to be owned 50%/50% by the new joint venture.
Our share of the capital for these first two phases will be $410 million, which is about $75 million higher than we initially projected for phase 1 alone when the facility was expected to be wholly-owned. All asset construction to-date is supported by long-term customer contracts, generating a 9 times EBITDA multiple.
Phase 1 is still expected to be operational in early 2019 with phase 2 operational in early 2020. In addition, we continue to market the remaining space that is available and continue to believe that, if we are successful building this facility out further, Magellan's total investment could be about $700 million earning an 8 times EBITDA multiple.
And, finally, we have launched a project to construct a 24-inch, 60 mile crude oil pipeline from the Delaware Basin to Crane, Texas, which essentially extends the reach of our Longhorn pipeline system. This project is driven by strong customer interest in sourcing volumes directly into Longhorn from the Delaware Basin, rather than routing the volumes through Midland.
We're moving forward at this time and plan to seek commitments in the future through an open season process. This new Delaware Basin pipeline and associated terminal in Wink, Texas is expected to cost $150 million and to be operational in mid-2019 with an initial capacity of 250,000 barrels a day, which is expandable up to 600,000 barrels a day.
In addition to strengthening the supply options to our Longhorn pipeline, this new Delaware Basin pipeline is the first step in a broader strategy to expand our service offerings in the Permian Basin. Including these new projects, our latest growth spending estimates are now $600 million in 2017, $800 million in 2018 and another $350 million in 2019 to complete the construction projects currently underway, which is a $750 million increase from the expansion capital forecast we discussed with you last quarter.
In addition to the new projects we just reviewed, the spending estimates also include a number of other new projects, including 1.5 million barrels of crude oil and condensate storage being constructed at Cushing and Corpus Christi, all supported by customer commitments. Our other large-scale projects are still on schedule.
A new 24-inch crude oil line from East Houston to Holland Avenue will be operational in early 2018, which will significantly increase the capacity of our Houston distribution system out of East Houston. The second phase of the Seabrook Logistics marine crude oil terminal is expected to be operational in mid-2018 and our new dock at Galena Park is projected to be operational in late 2018.
Updating some smaller projects that Magellan just completed, the Cheyenne extension of the Saddlehorn pipeline commenced operations in early October and the new connection of our Little Rock pipeline to a third pipeline is now operational providing our customers the option to ultimately transport refined products to the greater Memphis area, which is a new market for our Mid-Continent shippers to supply. As you can see, we continue to make progress on completing expansion projects and launching new opportunities for future growth.
We also continue to have other potential expansion opportunities under evaluation totaling well in excess of $500 million. These opportunities include further build out of our Pasadena terminal, a number of attractive refined products pipeline expansion opportunities and significant additional crude oil infrastructure opportunities to complement our existing assets in the Permian Basin.
On the topic of acquisitions, we remain active in analyzing the opportunities available in our space but, as always, price will be a key consideration. Magellan intends to maintain its disciplined approach when evaluating potential acquisition opportunities.
That now includes our prepared comments. We'll now open the call up for questions.
Operator
Thank you. We'll go to Justin Jenkins, Raymond James.
Justin S. Jenkins - Raymond James & Associates, Inc.
Great. Thanks.
Good afternoon, everybody. I guess I'm going to start with the guidance figure.
Seems like we're keeping the 2017 outlook basically unchanged. That implies a pretty big jump quarter-over-quarter here in 4Q.
I know we've got positive refined products seasonality and looks like a really big ramp in BridgeTex volumes this quarter but also offset maybe with hurricane impact in 4Q, so just looking for maybe a better sense of the bridge between 3Q and 4Q here.
Michael N. Mears - Magellan Midstream Partners LP
Well, first of all, I'd say that in the fourth quarter, that's typically our strongest commodity blending month and so – or quarter I should say. So, there's – if you think of the third quarter, there's very little blending that takes place at all and then there are significant blending that takes place in the fourth quarter.
So, there's a significant – the difference in fourth quarter and third quarter, that's a significant contributor. We do have the expectation of higher volumes on BridgeTex that's built in there.
I don't know if there's anything significantly more material in there. I will say that our splitter was down due to the hurricane for a little over a month in the third quarter and we're expecting it to be operating through the entire fourth quarter.
So, those are probably some of the biggest components between the third quarter and fourth quarter bridge.
Justin S. Jenkins - Raymond James & Associates, Inc.
Okay. No, that's helpful.
And then thinking maybe, shifting gears here on the crude market. I guess, Aaron, you mentioned the wider differentials in your comments on BridgeTex and certainly a lots of questions and maybe a bit of confusion these days around the Brent/WTI spread.
Just curious if you have a fundamental view on those spreads and how we play out with that over time.
Michael N. Mears - Magellan Midstream Partners LP
Well, clearly, those spreads have strengthened considerably over the last three months. And it started right after the hurricane hit but it's maintained its strength even after I would – I would expect we've had full recovery in asset utilization since the hurricane happened.
So, I think that's just an indicator of the growth of production in the Permian. And our expectation is it's going to stay strong for a while.
Obviously, Enterprise has a pipeline that's going to start up here shortly that could affect the differential in the short-term, but our expectations are that as production continues to grow in the basin those differentials are going to remain pretty strong.
Justin S. Jenkins - Raymond James & Associates, Inc.
Mike, do you think that this differential here has maybe started to accelerate some conversations on additional takeaway capacity?
Michael N. Mears - Magellan Midstream Partners LP
Well, I don't know if there's any need to accelerate those conversations. Those conversations have been happening for quite some time.
It certainly puts a spotlight on the need for additional infrastructure. And I can tell you that we are continue to be actively engaged with discussions to provide that solution, but we don't have anything to report on that yet.
Justin S. Jenkins - Raymond James & Associates, Inc.
Perfect. I'll leave it there.
Thanks, guys.
Michael N. Mears - Magellan Midstream Partners LP
Thanks.
Operator
We'll go next to Jeremy Tonet, JPMorgan.
Unknown Speaker
Hi. This is Bill (25:37) on for Jeremy.
Can you provide more color on the product overages, integrity spending and remediation accrual drivers for the $23 million increase in the refined products OpEX?
Michael N. Mears - Magellan Midstream Partners LP
Sure. Just to touch on those individually.
From an accrual standpoint, we go through a process every year to re-estimate our environmental liabilities for active remediation sites. And when we do that, we're typically doing a 10-year forecast of what the cost is and then adjust our accruals accordingly.
And we went through that process in the third quarter and that accrual was slightly larger than what we've seen in the past. And so that's one component of it.
We've had considerable integrity spending in the quarter obviously in relation to some hurricane work that took place, but also, we were spending quite a bit of money on our ammonia pipeline system and that work is now complete for the year. So, we shouldn't see that recurring in the fourth quarter.
And then with regards to product overages, those are difficult to predict. I mean those are really associated with measurement, accuracies and it tends to fluctuate quite a bit and it can be seasonal.
And in the third quarter, we saw a lower number than we've typically seen. We don't think that that's a recurring instance but it's just part of the cyclical nature of how we measure product overages and shortages.
Unknown Speaker
Okay. Thanks.
And then on the recent Permian asset transactions, have you had any interest there or is organic projects there more attractive?
Michael N. Mears - Magellan Midstream Partners LP
Typically, organic projects are more attractive and so we haven't diminished our interest in developing project organically. That being said, we have had an interest in the gathering systems that have been marketed in the Permian.
We've said for a number of quarters now that we are interested in gathering systems specifically in the Permian as an enhancement to our takeaway pipes. But as with regards to the assets that have transacted, we simply weren't able to get to the value that they transacted at and so we didn't execute.
Unknown Speaker
Okay. Thanks.
And then, just one more. Now that the Corpus Christi splitters entered service, how is it performing versus your expected multiple excluding the hurricane impacts?
Thanks.
Michael N. Mears - Magellan Midstream Partners LP
It's performing just as we expected. It's a fee-based service.
And so, as long as we can keep it running above a minimum throughput threshold, then it's going to meet our expectations. And short of the hurricane, we've been able to do that and we don't see any reason why we aren't going to continue to do that going forward.
Unknown Speaker
Great. Thanks very much.
Michael N. Mears - Magellan Midstream Partners LP
Thank you.
Operator
And we'll take our next question from Shneur Gershuni, UBS.
Shneur Z. Gershuni - UBS Securities LLC
Good afternoon, everyone. Just a couple of quick questions here.
First off, given that you've announced all of these JVs, but at the same time you've increased the amount of capital that's expected to be spent on a net basis, previously you had said that you would use the ATM really as a tool, almost like a last resort. Has any of this new approvals changed your thought process on the ATM?
Is it they are just as a just-in-case (29:44) or is it something that we should assume might actually be tapped in coming years as you go through this big build-out?
Aaron L. Milford - Magellan Midstream Partners LP
No, we're – this is Aaron. We're not changing our approach to using the ATM.
As we've consistently said, it truly is a tool for us to manage within the 4 times self-imposed debt-to-EBITDA limit. And we can fund what we have on the table right now without using it.
So, nothing is changing within terms of our intentions of how to use the program.
Shneur Z. Gershuni - UBS Securities LLC
Okay. That makes perfect sense.
And then, given – I know that you didn't give an exact guidance number, but when you say you're looking to grow 8% next year and sort of maintain a 1.2 times coverage ratio, with an expectation of 1.25 there's a little bit of potential coverage harvesting, but nonetheless you're expecting some growth 2018 versus 2017. I was wondering if you could bucket the growth into kind of, I guess, three categories by percentage.
What's coming from new project ramps versus operating leverage on existing assets, and then maybe if you can sort of put in what you're expecting for butane blending as part of that as well, too? What are the bigger and smaller drivers of that ramp?
Michael N. Mears - Magellan Midstream Partners LP
Well, we typically provide that update at the fourth quarter call and we're not prepared to do that today. So, we're going to defer till the next call and we're going to provide great detail on all of those questions.
Shneur Z. Gershuni - UBS Securities LLC
Fair enough. And one final question, with respect to the JVs that you've announced, obviously, you'd spent a lot of time and capital sort of developing these projects.
Did you receive any type of promote type of economics with respect to them or is it just they're refunding the money that you've spent so far?
Michael N. Mears - Magellan Midstream Partners LP
Well, with regards to the large JV we just did at Pasadena, we did not receive a promote. But you have to also remember that we've received significant incremental commitments to the facility, also.
So, the return profile on the capital improved dramatically, but we didn't receive any cash promote.
Shneur Z. Gershuni - UBS Securities LLC
And so, that's kind of why you've gone from a 10 times multiple to a 9 times multiple, because the incremental additions were sub-10 times – or sub-9 times, I guess? Is that the way to think about it?
Michael N. Mears - Magellan Midstream Partners LP
That is, but I'd tell you that the first phase was a 12 times multiple. And now, the entire project is a 9 times multiple, so there's significant improvement.
Shneur Z. Gershuni - UBS Securities LLC
Great. Perfect.
Thank you very much. Appreciate the color today.
Michael N. Mears - Magellan Midstream Partners LP
Sure.
Operator
We'll go next to Mirek Zak, Citigroup.
Mirek Zak - Citigroup Global Markets, Inc.
Hi. Good afternoon, everyone.
Just a quick one from me. You had a decent volume ramp on BridgeTex this quarter.
I was wondering if you could just split that out a little bit amongst what you saw from the Eaglebine origin versus organic volume growth and maybe your marketing business.
Michael N. Mears - Magellan Midstream Partners LP
Well, the vast majority of that is Colorado City origins. Eaglebine has been fairly stable, so we didn't see a huge increase in volumes coming from the Eaglebine.
So, the majority of that is spot barrels out of the Permian. There is a portion of that that was our marketing barrels.
I don't think we're prepared to disclose what percentage of it was our marketing barrels. I can tell you it wasn't 100% our marketing barrels, but probably won't comment more on what the actual percentage was.
Mirek Zak - Citigroup Global Markets, Inc.
Would you say that was, at least, like relatively similar to last quarter or that remained relatively flat versus last quarter, if you can say that?
Michael N. Mears - Magellan Midstream Partners LP
It was slightly more in the third quarter.
Mirek Zak - Citigroup Global Markets, Inc.
Okay. Okay.
Thanks. I'll leave it there.
Operator
We'll go next to Tom Abrams, Morgan Stanley.
Tom Abrams - Morgan Stanley & Co. LLC
Hey. Good afternoon.
It's been about an hour since the House put out some tax code suggestions. Just wondered if you had a chance to go through them yet to see if there are any impact on MLPs?
Michael N. Mears - Magellan Midstream Partners LP
Well, I can honestly say I've not come through them yet. We've been preparing for this call.
I did have a note from our staff that they have reviewed it at a high level and haven't seen anything terribly disturbing in there with regard to MLPs. But I don't have any more information than that.
Tom Abrams - Morgan Stanley & Co. LLC
That's good. I was a little tongue-in-cheek the question.
We're all asking ourselves that, however. The question really was about terminalling and pricing for it which I think there's a belief out there in some quarters that pricing on storage and terminalling will go down, will be much more competitive.
And I think it's particularly true around the coast maybe kind of hurricane-driven and Venezuela-oriented. But I'm also imagining where the export markets will open and close on and off during the year such that you could get a backup, if you will, in a system where storage is really needed on the coast.
And then as the exports get pulled away not needed as much, but there will be times when if system does backup, storage could really be in demand. So I'm just wondering if that dynamic – it is going to be actually more volatility introduced into the system that could help storage not only the amount but also the pricing of it.
Michael N. Mears - Magellan Midstream Partners LP
Well, there is a lot of components to that question. I mean clearly there's things that can change in the market to affect storage pricing and we see that on occasion.
I would tell you with regards to our business, both crude oil and refined products, that we prefer tendering to (36:24) long-term fixed price contracts. And so, the vast majority of our storage is under longer-term fixed price contracts and we have not seen the pricing on those contracts going down in the recent past.
Now, we do have a portion of our crude oil storage that we do auction off and lease on a short-term basis and you do see fluctuations in that pricing based on market conditions and the export markets, but that's a small portion of our storage business.
Tom Abrams - Morgan Stanley & Co. LLC
Great. Well, thanks for that.
Operator
We'll go next to Chris Sighinolfi, Jefferies.
Christopher Paul Sighinolfi - Jefferies LLC
Hey. Good afternoon, Mike.
Just -
Michael N. Mears - Magellan Midstream Partners LP
Good afternoon.
Christopher Paul Sighinolfi - Jefferies LLC
I was hoping to clarify a few things. I guess, first, if I heard you correctly, the ramp in 4Q performance implied by the guidance is at least in part driven by a ramp in BridgeTex volumes.
I was just curious, was that always part of – was that always included in the 2017 guidance whereas recent activity spread differentials driving that inclusion now?
Michael N. Mears - Magellan Midstream Partners LP
It's recent. We didn't have that in our guidance when we started the year but the basis differential strengthened.
And so that's our expectation for this quarter, yes.
Christopher Paul Sighinolfi - Jefferies LLC
Okay. Great.
That's how I thought it was. I just wanted – we weren't covering MMP at the beginning, so I just want to clarify.
And then two other questions if I could – and I apologize if you addressed this one already. But the one-time customer payment, did you quantify that at all and if it's possible just for our own edification any additional color on what that was, what it stemmed from, and if there's anything else similar to it out there?
Michael N. Mears - Magellan Midstream Partners LP
We haven't quantified it. And we're under a confidentiality agreement to not disclose the amount, which is why we haven't done it.
Christopher Paul Sighinolfi - Jefferies LLC
Okay. Are there other settlement disputes, I guess, live at the moment that may come to bear before the end of the year or in 2018?
Michael N. Mears - Magellan Midstream Partners LP
No, no. This was an unusual circumstance.
We don't typically have this. This would be best considered as a one-off.
Christopher Paul Sighinolfi - Jefferies LLC
Understood. And I guess, finally, and I don't know if you can really bifurcate it, but I was just – it was sort of a curiosity question.
The additional several weeks of butane blending capability following in association with Harvey, just wondering if you had any sense of the impact that that might have had on third quarter this year, thinking about calibration for future. I get spreads.
We're going to change in future periods. I'm just wondering -
Michael N. Mears - Magellan Midstream Partners LP
Well, I mean we did benefit. Yeah.
We did benefit in the third quarter from incremental blending, but that's factored into the net impact we gave you. So, the $10 million net impact to DCF in the third quarter already nets the benefit of the blending income there.
So, the actual revenue lost from other items and damage was higher than $10 million, but it was offset by additional blending income in the third quarter to bring the net $10 million.
Christopher Paul Sighinolfi - Jefferies LLC
Okay. Understood.
I appreciate the time. Thanks.
Operator
We'll go next to Jerren Holder, Goldman Sachs.
Jerren Holder - Goldman Sachs & Co. LLC
Thanks. Good afternoon.
Given that U.S. crude exports have been picking up, at least recently, are you seeing some of that benefit through your asset base?
And also beyond the Seabrook's JV that you have, any other opportunities you're looking at to sort of expand into the crude exports type of realm?
Michael N. Mears - Magellan Midstream Partners LP
Yes, to all of those questions. We have benefited.
Obviously, we don't have our marine facility operational yet, so we haven't put crude oil on the water ourselves, but the throughput through Longhorn and BridgeTex is making its way to terminals that can put it on the water. And we're anxious to get our facility operational at Seabrook.
And we are actively evaluating the next expansion of Seabrook and other opportunities.
Jerren Holder - Goldman Sachs & Co. LLC
Okay. That's it from me.
Thank you.
Operator
That will conclude the question-and-answer session. I'd like to turn the call back over to Mike Mears for any additional or closing remarks.
Michael N. Mears - Magellan Midstream Partners LP
Well, thank you for your time today. On behalf of Magellan, we appreciate your continued support of our company.
And thank you and have a nice day.
Operator
That will conclude today's call. Thank you for your participation.