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The Pipeline MLP sector ended July up 14.20% year-to-date [vs being up 7.75% at June's end and 13.43% last week] - a gain that could be higher if 05 IPOs' HLND and TGP were included. The sector is up 5.50% for July, led by a monthly gains of 15.30% in XTEX, 10.68% in APL, 10.11% in PPX, 9.97% in ETP and 9.27% in CPNO. Energy Partnerships Shine in Surging Sector Matt Daily, Reuters 7-05 Surging oil prices have attracted billions of dollars into the energy sector, and experts say few investments have proven as lucrative as the master limited partnerships that own cash-rich assets. They are so attractive to investors right now. There's been a huge increase in interest," said Janice Sharry, a lawyer with Haynes Boone in Dallas. The MLPs, such as Kinder Morgan, Valero and Plains All American Pipeline, typically own pipelines, gas processing and storage operations, and gas liquids distribution. Those assets may be far less exciting to investors than the oil and gas wells that MLPs were originally designed to finance, but they generate ample cash with little risk which the MLPs pay out to investors at high rates. "I got no questions on them five years ago, and I get daily questions now," Sharry said. "Now we're seeing lots of clients that are interested in segmenting assets into MLPs." Those energy partnerships are paying out annual distribution yields of about 6%, far better than many other investments. "Historically it's been about 300 basis points above treasuries," said Joshua Davidson, a partner at law firm Baker Botts LLP. Smith Barney's MLP Composite index showed the partnerships' total return rose by 5.4% through the first five months of the year, topping the S&P 500's 1 percent return. However, MLPs underperformed the broader market in May, according to a Smith Barney analyst report, partly because of declines in energy prices that month, and partly due to the dilutive effect of $750 million in equity issuances by MLPS. Those equity issues are expected to continue, with Williams set to launch an initial public offering in the third quarter for an MLP bundling part of its midstream gas assets. Duke Energy Field Services has said it was considering forming an MLP. MLPs have traditionally grown through acquisitions, although the hot market for energy assets has pushed purchase prices above 14 times annual cash flows in recent months, about double the historical levels. "And even at that level it can still be accretive," according to Robert Lane, analyst with Sanders Morris Harris in Houston. As asset values have jumped, MLPs have increased funding for their own internal growth projects to boost revenue. "There is a lot of organic investment going on," Lane said, pointing to Enterprise Products Partners $2 billion capital spending program over 3 years that includes $600 million to build the offshore Independence Hub platform and pipeline. Lane said Enterprise and Valero LP were among his favorites in the growing MLP field. Valero LP, which recently purchased Kaneb Services and Kaneb Pipe Line Partners for $2.7 billion, could gain some new pipeline assets after Valero's parent Valero Energy (VLO) completes its purchase of rival Premcor. "I see tremendous upside potential for Valero and its assets. There's a lot of low hanging fruit they can acquire," Lane said. Tapping Gushers Beneath the Gushers Otis Port, McGraw-Hill 7-08 Oil is locked in the pores of rock layers deep below ground. Sink a hole into such a layer, and the pressure of the earth above squeezes out the oil. But as it oozes out, pressure on the remaining oil diminishes. After three or four decades the flow of oil drops so low that big oil producers, such as Exxon Mobil Corp. or France's Total, no longer want to bother collecting it. So they sell the well to a smaller company. Now, many engineers are reassessing the riches that may lie hidden under such wells -- including the 400,000 U.S. wells that produce, on average, just 2.2 barrels a day. These still account for almost 15% of domestic U.S. oil production, or 7% of total U.S. consumption. Using new, enhanced recovery techniques, the output of some low-flow wells can be increased dramatically. It's even possible to revive old wells that aren't producing a drop. The oil barons of the early 20th century rarely pulled up more than 10% of a reservoir's bounty. Things got better after World War II, when the oil industry developed secondary "lifting" techniques. These restore underground pressure by pumping water back down into the earth or returning the natural gas that normally bubbles up with the oil. Secondary techniques enabled oil companies to withdraw 30% of the oil in deposits below. More recently, engineers have unleashed a third, or tertiary, wave of recovery methods, using gas, chemicals, and even colonies of specially engineered microbes, to rejuvenate old wells. These approaches can double extraction potential, to 60% or 70%. Under ideal conditions, some companies claim they'll hit 80%. In other places tertiary methods may not work at all. But if 60% proves to be a rough average, that would "virtually double the known reserves of oil. The latest idea is called MEOR, for microbial enhanced oil recovery. Various labs around the world are engineering special bugs that generate CO2 biologically, along with detergent-like chemicals that help flush oil out of rocks. The microbes can be cultivated underground or in well-side vats. Because they grow explosively, the Energy Dept., which is funding several research projects, says MEOR technology may be the most cost-effective of all tertiary processes. MEOR is already used in Venezuela, China, Indonesia, and the U.S. to treat deposits of heavy oil -- a molasses-thick form of oil. Marginal wells - defined as those that produce less than 10 barrels of oil or fewer than 60,000 cubic feet of natural gas per day - may seem insignificant, but together, they supply about 30% of the country's oil production and about 70% of the oil pumped out of Oklahoma soil. (Adam Wilmoth, The Daily Oklahoman 7-06) Pacific Energy Agrees to Buy Certain Valero LP Assets Bizjournals.com 7-05 Valero has agreed to sell five refined-product terminals and a 550-mile pipeline to Pacific Energy Partners [PPX] for $455 million. Valero was required to divest these assets as part of its recent purchase of Kaneb Pipe Line Partners LP. ETP Announces Long-Term Agreement with XTO Energy Business Wire 7-06 ETP today announced the signing of a ten-year agreement with XTO Energy as part of its new pipeline construction project. Under the terms of the agreement, XTO Energy has agreed to transport minimum annual volumes over the ten-year term, and is entitled to ship additional volumes under similar terms. This project includes the previously announced Texas pipeline from Bethel to Texoma as well as the construction of additional pipelines. In all, ETP has now approved capital expenditures totaling $454 million to construct approximately 264 miles of 30 inch, 36 inch and 42 inch pipelines while adding approximately 40,000 horsepower of compression. ETP's ability to construct these additional pipelines is a result of the acquisitions the Partnership was successful in completing during the past year and a half. Although ETP will continue to participate in attractive acquisition opportunities, these types of pipeline construction projects will provide it with opportunities to raise quarterly distributions to its unitholders in future quarters without the necessity of acquiring additional assets. Energy Transfer Partners Reports Record Third Quarter Business Wire 7-11 ETP reported record results for its Q3-05. ETP record net income forQ3-05 of $189.5 million as compared to net income of $21.3 million for Q3-04. Net income for Q3-05 included income from discontinued operations of $0.9 million and a $142.1 million gain on the sale of discontinued operations, net of income tax expense, resulting from the sale of the Partnership's Oklahoma gathering, treating and processing assets, referred to as the Elk City system, on April 14, 2005. The Partnership also reported record EBITDA, as adjusted, of $105.3 million for Q3-05, as compared to the $52.9 million reported for Q3-04. EBITDA, as adjusted, for Q3-05, does not include the net gain on the sale of discontinued operations of $142.1 million. Plains All American sees Q2 Net Income of 76-84 cents Reuters 7-12 Plains All American Pipeline said on Tuesday it had revised its expected income for the second quarter to 76 cents to 84 cents per limited partner unit. The company said it expected its third-quarter net income to be between 51 cents to 66 cents per limited partner unit and its fourth-quarter income at 36 cents to 51 cents. Northern Border Updates 2005 Guidance Business Wire 7-14 Northern Border Partners is is reiterating guidance for the year 2005. The Partnership anticipates that second quarter 2005 will result in net income of $26 million to $28 million or $0.50 to $0.55 per unit. Cash flows as measured by earnings before interest, taxes, depreciation and amortization (EBITDA) are expected to be $77 million to $81 million in the second quarter 2005. Second quarter 2005 net income is expected to be slightly above earlier expectations. It is expected to reflect stronger than anticipated results from each of our natural gas pipelines and better than expected results in the natural gas gathering and processing segment's joint venture assets. The Partnership earnings are expected to include an approximate $1.6 million reduction in the allowance for doubtful accounts related to potential recoveries in the Enron bankruptcy. More detailed information with actual results will be provided in our second quarter 2005 earnings press release which is expected to be issued during the first week in August 2005. The Partnership is reiterating its earnings and EBITDA guidance for 2005. Net income is expected to be in the range of $122 million to $126 million, or $2.40 per unit to $2.50 per unit. EBITDA is now anticipated to be approximately $337 million to $347 million. Distributable cash flows (DCF) are expected to be $164 million to $168 million, or $3.29 to $3.39 per unit. TEPPCO Increases Distribution to $0.675 from $0.6625 Business Wire 7-15 TEPPCO announced that it will increase its quarterly cash distribution to $0.675 from $0.6625 per unit. This distribution is payable Aug. 5, 2005, to unitholders of record on July 29, 2005, and covers the period from April 1, 2005, through June 30, 2005. "We are pleased to increase our quarterly distribution, continuing our 13-year track record of solid distribution growth," said Barry Pearl, president and CEO of the GP of TEPPCO. The company will host a call related to earnings performance at 8 a.m. CT on Tuesday, July 26, 2005. Interested parties may listen live over the Internet or via telephone by dialing 800-289-0518, confirmation code 3901174. Please call in five to 10 minutes prior to the scheduled start time. To participate live over the Internet, log on to the Company's Web site. An audio replay of the conference call will also be available for seven days by dialing 888-203-1112, confirmation code 3901174. A replay and transcript will also at www.teppco.com. TEPPCO Announces Gulf Coast Expansion Project Business Wire 7-15 TEPPCO announced that it is initiating an expansion of its refined products origin capabilities in the Houston, Texas, and Texas City, Texas areas. As part of the project, TEPPCO has acquired from Texas Genco LLC all of its interests in certain companies, which own a 90-mile pipeline system and 5.8 million barrels of storage capacity. The transaction is valued at approximately $62 million. The assets of the purchased companies will be integrated into TEPPCO's downstream segment origin infrastructure in Texas City and Baytown, Texas. The integration and other system enhancements should be in service by fourth quarter 2006, at a cost of $45 million. TEPPCO's existing Texas City origin facility and a 10-inch diameter, 70,000 barrel per day pipeline system from Texas City to Baytown will be replaced by an 18-inch diameter, 180,000 barrel per day pipeline. The 18-inch diameter pipeline will provide additional receipt and delivery capabilities through the TEPPCO system at major exchange terminals in the Houston area. Once the project is completed, the 10-inch diameter Texas City pipeline and an 8-inch diameter Houston Ship Channel pipeline will be available for alternative transportation service. Copano Increases Distribution to $0.45 from $0.42 AP 7-18 Copano Energy LLC on Monday said it raised its regular quarterly dividend by 7.1%, and plans to pay another distribution on its Class B units related to the pending ScissorTail Energy acquisition. Copano boosted the dividend on its outstanding common and subordinated units by 3 cents to 45 cents per unit, bringing its annual payout to $1.80 per unit. Copano Chairman and Chief Executive John Eckel added that he expects the company to recommend increasing its annual dividend rate to at least $2 per unit from a current level of $1.80 per unit. EPD Increases Quarterly Cash Distribution to $0.42 from $0.41 Business Wire 7-20 Enterprise Products Partners announced an increased its quarterly cash distribution rate to partners to $0.42 per common unit, or $1.68 per unit on an annual basis. The distribution will be paid on August 10, 2005 to unitholders of record at the close of business on July 29, 2005. The current distribution represents a 2.4% increase over the $0.41 per unit quarterly distribution that was declared for Q1-05, and a 12.8% increase over the $0.3725 per unit quarterly distribution that was declared for Q2-04. Kinder Morgan Increases Distribution to $0.78 from $0.76 PRNewswire 7-20 Kinder Morgan Energy Partners announced an increase in its quarterly cash distribution per common unit to $0.78 ($3.12 annualized) from $0.76 per unit. The distribution represents a 10% increase over Q2-04 cash distribution per unit of $0.71 ($2.84 annualized). This is the 11th consecutive quarter in which KMP has increased the distribution and the 24th increase out of 34 quarters since current management took over in February of 1997. Kinder Morgan Reports Q2 Earnings PRNewswire 7-20 KMP reported record Q2 earnings with a 14% increase in net income to $221.8 million, or $0.50 per limited partner unit, compared to $195.2 million, or $0.51 per unit, in Q2-04. For the first six months of the year, KMP had net income of $445.4 million, a 15% increase over net income of almost $387 million during the same period last year. At midyear, KMP is on target to meet its annual budget of 16% cumulative growth across all four business segments. It is on track to exceed $1 billion in 2005 in acquisitions and capital expansion projects. Through the first two quarters, KMP announced approximately $400 million in acquisitions and it is budgeted for more than $600 million in capital expansion projects. Excluding legal and environmental settlements, KMP has generated distributable cash flow in excess of distributions of approximately $51 million through the first six months of 2005 (which would have surpassed the company's published annual budget of $39 million). Including legal and environmental settlements, KMP generated distributable cash flow in excess of distributions of approximately $18 million through the first two quarters. The Products Pipelines segment delivered a 3% increase in Q2 earnings before DD&A to $123.3 million, up from $119.3 million in Q2-04. "We experienced increased earnings compared to last year on our Pacific, Central Florida and Plantation pipeline systems and at our Southeast terminals, which benefited from an acquisition in late 2004. This growth was partially offset by decreased earnings in our transmix operations, at our West Coast terminals and on our NGL pipelines," Kinder said. Total refined products volumes were up 0.5% compared to Q2-04 with increases on Pacific, Central Florida and CALNEV, largely offset by a decrease on Plantation. Overall segment gasoline volumes were up 0.8%, led by Central Florida. Jet and diesel volumes were relatively flat. NGL volumes were down about 15% due to low demand for propane on the North System, Cypress and Cochin, but revenues were up over 4 percent due to higher tariffs. The Natural Gas Pipelines segment produced Q2 earnings before DD&A of approximately $115 million, up 21% from $95.4 million in Q2-04 and on track to exceed its budgeted of 7% growth. "Growth in this segment was driven by contributions from the acquired TransColorado pipeline and solid earnings from Red Cedar and the Kinder Morgan Interstate Gas Transmission pipeline," Kinder said. TransColorado, which KMP acquired in Q4-04, contributed approximately $9.4 million in earnings in Q2. The CO2 segment delivered Q2 earnings before DD&A of $114.8 million, up 51% from almost $76 million in Q2-04 and on track to meet its published annual budget of 34% growth. "The superb growth in this segment was led by increased oil production at both the SACROC and Yates fields, increased CO2 delivery volumes and contributions from the Wink Pipeline, which was acquired in the third quarter of 2004," Kinder said. The CO2 segment is one of the only areas where KMP is exposed to commodity price risk, but that risk is mitigated by a long-term hedging strategy intended to generate more stable realized prices. The Terminals segment reported an 18% increase in Q2 earnings before DD&A to $77.6 million, compared to $65.7 million in Q2-04 and on track to exceed its budget of about 10% growth. "Growth was driven primarily by contributions from acquisitions, including terminals purchased along the Mississippi and Delaware rivers in the fourth quarter of 2004, and two months of benefits from the recently purchased petroleum coke terminals in Texas," Kinder said. KMP's large liquids complex on the Houston Ship Channel had its highest throughput second quarter ever. Outlook: KMP remains comfortable the company will meet or exceed cash distributions of $3.13 per limited partner unit for 2005. MMLP Increases Distributions to $0.55 from $0.535 PRNewswire 7-21 Martin Midstream Partners announced today that it has declared a cash distribution of $0.55 per unit, payable on August 15, 2005 to common and subordinated unitholders of record as of the close of business on August 1, 2005. This distribution reflects an 3% increase of $0.015 per unit over the quarterly distributions previously paid by MMLP and is based on the current operating performance of, and the current general economic, industry and market conditions impacting MMLP. MMP Increases Distributions to $0.4975 from $0.48 PRNewswire 7-21 Magellan Midstream Partners has increased the partnership's quarterly cash distribution to 49.75 cents per unit for the period April 1 through June 30, 2005. The second-quarter distribution represents a 14% increase over the second- quarter 2004 distribution of 43.5 cents per unit and a 90% increase since the partnership's initial public offering during early 2001. The new distribution, which equates to $1.99 per unit on an annualized basis. Plains All American Increases Distribution to $0.65 from $0.6375 AP 7-21 Plains All American Pipeline LP, which owns an oil pipeline network in the United States and Canada, on Thursday said it increased its quarterly cash distribution by nearly 13% from last year. The partnership raised the distribution to 65 cents per unit from 57.75 cents a year ago. The distribution is payable Aug. 12 to unitholders of record as of Aug. 2. The payment is also higher than the company's cash distribution of 63.75 cents per unit from May. "Based on our outlook for future performance, we believe Plains All American is well positioned to generate sustainable cash flows that will support future distribution growth," said Greg L. Armstrong, chairman and chief executive, in a statement. Crosstex Increases Distributions to $0.47 from $0.46 PRNewswire 7-22 The Crosstex Energy companies today announced an increase in second quarter distributions [XTEX will increase from $0.46 per unit to $0.47 per unit] and dividends [XTXI will increase from $0.41 per share to $0.43 per share]. The companies have increased distributions and dividends every quarter since the initial public offering of each company. Teppco Net Income Up to $0.45 from $0.43 in Q2-04 PRNewswire 7-25 TEPPCO Partners reported net income for Q2-05 of $42.2 million, or $0.45 per unit, compared with net income of $37.8 million, or $0.43 per unit, for Q2-04. Net income for the six months ended June 30, 2005, was $90.8 million, or $0.99 per unit, compared with $78.2 million, or $0.88 per unit, for the six months ended June 30, 2004. Earnings before interest, taxes, depreciation and amortization was $96.1 million for Q2-05, compared with $86.1 million forQ2-04. EBITDA was $195.5 million for the six months ended June 30, 2005, compared with $179 million in the prior year period. "Our 2005 earnings per unit range is $1.75 to $1.95 per unit, which reflects the impact of 7 million units issued during second quarter 2005 and our recently announced cash distribution increase" said Barry R. Pearl, president and chief executive officer of the general partner of TEPPCO. The Upstream Segment includes crude oil transportation, storage, gathering and marketing activities; and distribution of lubrication oils and specialty chemicals. Operating income for the upstream segment was $11.7 million for Q2-05, compared with $8.5 million for Q2-04. The increase was primarily attributable to a $3.8 million increase in operating margin as a result of increased transportation revenues on the South Texas and Basin systems, increased marketing margins on storage contracts, and unrealized gains related to mark-to-market treatment on contracts entered into in late 2004. These increases were partially offset by a $0.6 million increase in depreciation and amortization expense. Equity earnings from the investment in Seaway Crude Pipeline were $8.2 million for Q2-05, compared with $12.1 million for Q2-04. The decrease in equity earnings was due to decreased volumes attributable to reduced operating pressures following a pipeline release in May 2005, and higher gains on inventory sales and an inventory settlement in the 2004 period. Long-haul volumes on Seaway averaged 214,000 barrels per day for Q2-05, compared with 275,000 barrels per day for Q2-04. The Midstream Segment includes natural gas gathering services, and storage, transportation and fractionation of natural gas liquids (NGLs). Operating income for the midstream segment was $28.1 million for Q2-05, compared with $19.3 million for Q2-04. The increase resulted from a $4.7 million increase in operating revenues primarily due to higher natural gas gathering volumes on the Jonah system, higher NGL transportation volumes on the Panola system, and gains on the sale of excess NGLs and natural gas; a $2.9 million decrease in operating expenses due primarily to decreased gas settlement expenses, pipeline maintenance expense primarily on Val Verde, and property taxes, partially offset by higher compensation expense; and a $1.3 million decrease in depreciation and amortization expense due to lower amortization expense primarily as a result of increased production estimates on Jonah, which extended the useful lives of the intangible assets. The Downstream Segment includes the transportation and storage of refined products, liquefied petroleum gases (LPGs) and petrochemicals. Downstream operating income was $14.9 million for Q2-05, compared with $14.6 million for Q2-04. The increase in operating income resulted from increased long-haul propane deliveries, terminaling service revenue and product exchange revenue, partially offset by lower distillate deliveries and increased depreciation expense. Equity earnings from unconsolidated investments totaled $0.9 million for Q2-05, compared with a loss of $0.5 million for Q2-04. Equity earnings from Mont Belvieu Storage Partners, L.P. totaled $1.4 million and $1.8 million during Q2-05 and 2004, respectively. The decrease in equity earnings during the 2005 period was primarily due to higher depreciation and amortization expenses resulting from the acquisition of storage assets in April 2004, and higher pipeline maintenance and administrative services expense. Equity losses from Centennial Pipeline totaled $0.5 million and $2.3 million during Q2-05 and Q2-04, respectively, and $4 million and $6.2 million during the six months ended June 30, 2005, and 2004, respectively. The decrease in equity loss during the 2005 periods was primarily due to higher transportation revenues and volumes, partially offset by higher transmix differentials. Q2-05 interest expense - net was $21.6 million, including capitalized interest of $1.2 million. Interest expense - net was $16.4 million for Q2-04, including capitalized interest of $1.6 million. The increase in interest expense during Q2-05 was primarily due to $2 million of expense recognized on the cancellation of an interest rate lock agreement and higher short term floating interest rates on the revolving credit agreement. Valero Increases Distributions to $0.855 from $0.80 Business Wire 7-25 With respect to the quarterly distribution to unitholders payable for the second quarter of 2005, Valero L.P. also announced that it has declared a distribution of $0.855 per unit payable August 12, 2005, to holders of record as of August 5, 2005. This distribution represents an increase of $0.055 per unit, or 6.9%, over the distribution for Q1-05. This is the fifth increase in the quarterly distribution since we went public in April 2001, and a 43% increase in the distribution rate in just over four years. Valero Net Income Falls to $0.74 from $0.79 Business Wire 7-25 Valero announced net income applicable to limited partners of $17.0 million, or $0.74 per unit, for Q2-05, compared to $18.2 million, or $0.79 per unit, for Q2-04. For the first six months of 2005, net income applicable to limited partners was $34.8 million, or $1.51 per unit, compared to $36.7 million, or $1.59 per unit. Distributable cash flow available to limited partners for Q2r was $22.1 million, compared to $22.0 million for Q2-04. Reported results for Valero L.P. for these periods do not include the results of Kaneb Pipe Line Partners or Kaneb Services, which were merged into Valero L.P. on July 1, 2005. Effective July 1, 2005, the financial results of Kaneb Partners and Kaneb Services will be included in the reported results of Valero L.P. Crude oil pipelines produced net income of $7.033 million in Q2-05 vs. $7.939 in Q2-04. Crude oil storage tanks produced net income of $7.716 million in Q2-05 vs. $7.594 million in Q2-04. Refined product pipelines produced net income of $9.222 million in Q2-05 vs. $8.075 in Q2-04 Refined product terminals produced net income of $3.899 million in Q2-05 vs. $3.638 million in Q2-04. Distributable cash flow for Q2-05 was $24.867 million vs. $24.744 milion in Q2-04. General partner's interest in distributable cash flow for Q2-05 was ($2.741 milion) vs ($2.711 million) in Q2-04. Buckeye Partners Net Income Falls to $0.66 from $0.69 PRNewswire 7-29 Buckeye GP LLC, the general partner of Buckeye Partners, reported that the Partnership's net income for Q2-05 was $24.4 million, an increase of 22.6% from net income of $19.9 million in Q2-04. On a per unit basis, net income was $0.66 during the Q2-05 as compared with $0.69 last year. Net income per unit results in Q2 reflect an increase in the average number of units outstanding to 36.9 million from an average of 29.0 million units outstanding in Q2-04. Revenue in Q2-05 was $101.9 million compared with revenue of $70.5 million in Q2-04. Operating income in the 2005 period was $39.6 million, an increase of 43.5% from operating income of $27.6 million in Q2-04. Pipeline volume for Q2-05 was 1,386,900 barrels per day, a 24.1% increase over Q2-04. Costs and expenses for Q2-05 were $62.3 million compared to $42.9 million in Q2-04. All of the foregoing financial results reflect the Partnership's acquisition of certain pipelines and terminals from affiliates of Shell Oil in October 2004, and the acquisition of certain pipelines and terminals from affiliates of Exxon Mobil in May 2005. The Board of Directors of Buckeye GP LLC also declared a regular quarterly partnership cash distribution of $0.7125 per limited partnership unit payable August 31, 2005, to unitholders of record on August 9, 2005. This cash distribution represents a quarterly increase in the distribution of $0.0125 per limited partnership unit to an indicated annual cash distribution level of $2.85. This is the 74th consecutive quarterly cash distribution paid by the Partnership since its formation in 1986, and the fifth consecutive increase in the quarterly cash distribution. Holly Energy Increases Distribution 4.5% to $0.575 Per Unit PRNewswire 7-29 Holly Energy Partners announced declaration of its cash distribution, for the second quarter of 2005, of $0.575 per unit. This represents an increase in the quarterly distribution of 4.5% over the amount of $0.55 distributed per unit for the first quarter of 2005. The distribution will be paid August 15, 2005 to unit holders of record August 8, 2005. Enbridge Net Income Falls to 0.32 from $0.56 Primezone 7-29 Enbridge Energy Partners reported net income for Q2-05 of $25.7 million, or $0.32 per unit, compared with $35.9 million, or $0.56 per unit, for Q2-04. EBITDA decreased modestly to $85.4 million in Q2-05 from $86.8 million in Q2-04. Earlier today, the Partnership announced a successful conclusion to an open season for the Southern Access Mainline Expansion Program. The expansion will provide an additional 400,000 bpd of crude oil capacity on the Enbridge-Lakehead mainline system from Hardisty, Alberta to Chicago, Illinois. EEP will undertake the U.S. portion of the expansion program, on its Lakehead system from the international border to Chicago, at a cost of approximately $760 million and will collect revenues for the new facilities on a cost-of-service basis. The extension will be fully in service potentially as early as 2009. Other key developments with respect to the Partnership's growth strategy during second quarter 2005 included: -- The $150 million East Texas natural gas transmission line commenced full service in late June. With capacity of 500 MMcf/d, the line provides additional market access for producers in the region. -- A 100,000 MMBtu/d transportation agreement was finalized with a third-party pipeline to enhance market optionality for customers of the North Texas System. This firm capacity, combined with approximately $20 million of connecting facilities to be constructed by EEP, will provide a link to the new East Texas transmission line for North Texas gas production. The service is expected to be available in early 2006. -- The $38 million first stage of the Zybach gas processing plant was commissioned and started production early in Q2. The new plant provides an additional 105 MMcf/d of processing capacity on the Anadarko System and is being heavily utilized. A $14 million second stage is underway to increase capacity to 160 MMcf/d by late this year. -- In June, EEP acquired an idle 90-mile, 20-inch diameter natural gas line for approximately $20 million that will be integrated with the Anadarko System by early 2006 at a cost of $2 million. Once integrated, the pipeline will offer lower compression service for approximately 30,000 MMBtu/d of current natural gas receipts and is expected to attract additional production from the area. -- Construction on the $28 million first stage of the Mid-Continent System project to add 2.3 million barrels of commercial crude oil storage at Cushing, Oklahoma is on schedule for completion late this year. Operating income from the Liquids segment was $30.1 million for the second quarter, a decrease of $5.3 million over the same period in 2004. Deliveries on the Lakehead system were 129,000 bpd lower than in second quarter of 2004, impacting operating income by approximately $4.1 million. The reduced volumes are largely attributable to the partial outage of a major oil sands plant that was damaged by a fire in early January. The plant owner has indicated repairs will be complete and full production will be restored in September 2005. To a lesser degree, volumes were also reduced by: timing of bitumen production that uses cyclic steaming techniques, limited upstream refinery maintenance turnarounds which tend to divert supply to downstream markets, and additional takeaway capacity from western Canada available on a third-party pipeline. The Lakehead volume shortfall was partially offset by higher average tariffs on all three Liquids systems. The Natural Gas segment contributed $24.7 million to operating income in the second quarter of 2005, an increase of $2.1 million over the same period in 2004. The increase would have been larger except that higher forward natural gas prices generated a noncash $4.7 million mark-to-market loss on financial instruments that do not qualify for hedge accounting treatment or are partially ineffective. Average daily volumes on our major natural gas systems increased 21 percent principally due to additional wellhead supply contracts on our East Texas and Anadarko systems, in addition to the contribution of the North Texas gathering and processing assets we acquired in January 2005. Drilling activity continues to be strong in the Anadarko basin and Bossier trend areas, which has produced higher volumes on the Anadarko and East Texas systems. In addition, stronger natural gas liquids prices enhanced processing returns on the East Texas and Anadarko Systems. The positive growth in our Natural Gas segment was partially offset by increases in workforce related costs and down time for maintenance activities at our processing plants. The Marketing segment incurred an operating loss of $3.1 million in the second quarter of 2005, compared with operating income of $0.7 million in the corresponding period in 2004. The second quarter operating loss included a net, noncash loss of $5.1 million related to mark-to-market adjustments associated with non-qualified and discontinued hedges under FAS 133. The mark-to-market adjustments include a $2.1 million expense related to discontinued hedges that were closed. The expense associated with the closed hedge positions will settle on a cash basis over the next 18 months. Sunoco Increased Distribution of $0.6375 PRNewswire 7-27 Sunoco Partners declared an increased cash distribution for Q2-05 of $0.6375 per common and subordinated partnership unit ($2.55 annualized) payable August 12, 2005 to unitholders of record on August 8, 2005, an increase of $0.0125 per partnership unit on a quarterly basis ($0.05 annualized increase). Sunco Net Income Falls to $0.67, Up from $0.67 PRNewswire 7-27 Sunoco Logistics announced net income for Q2-05 of $17.8 million, or $0.68 per limited partner unit on a diluted basis, compared with $17.0 million for Q2-04, or $0.67 per limited partner unit on a diluted basis. For the six months ended June 30, 2005, net income was $33.1 million compared with $30.0 million for six months ended June 30, 2004. Net income for Q2-05 was $17.8 million, a $0.8 million increase from net income of $17.0 million for the second quarter 2004. The quarter over quarter increase was due mainly to higher pipeline volumes and lower pipeline operating costs in the Western pipeline system and higher Terminal Facilities results, partially offset by lower Eastern Pipeline System results and Western Pipeline System lease acquisition margins. Operating income for the Eastern Pipeline System decreased $0.8 million to $8.2 million for Q2-05 from $8.9 million for Q2-04. This decrease was primarily the result of a $0.9 million decrease in sales and other operating revenue and $0.4 million decrease in other income, partially offset by a $0.3 million decrease in operating expenses. Sales and other operating revenue decreased from $24.3 million for the prior year's quarter to $23.4 million for the Q2-05 mainly due to a decrease in total shipments partially offset by higher revenue per barrel mile. The decrease in shipments was principally the result of lower throughput on the Marysville to Toledo crude oil pipeline caused by production issues at two third-party Canadian synthetic crude oil plants as a result of fire damage, partially offset by higher volumes on the Harbor pipeline due to the acquisition of an additional one-third interest in late June 2004. Management expects lower crude oil throughput on the Marysville to Toledo crude oil pipeline through the third quarter of 2005 due to the continued reduced production at one of the third-party facilities. Other income decreased to $3.2 million for the second quarter 2005 from $3.6 million for the prior year's quarter due primarily to a decrease in joint venture equity income. Operating expenses decreased from $11.4 million in the second quarter 2004, to $11.1 million for the second quarter 2005 due mainly to the timing of scheduled maintenance activity. The Terminal Facilities business segment had operating income of $9.3 million for Q2-05, an increase of $0.2 million from $9.1 million for Q2-04. Total revenues increased $1.1 million from the prior year's second quarter to $27.9 million for Q2-05 due primarily to the purchase of two refined product terminals located in Baltimore, Maryland and Manassas, Virginia in late April 2004, and the acquisition of a refined product terminal located in Columbus, Ohio in November 2004. Operating expenses increased $1.3 million from the prior year's second quarter to $11.8 million for Q2-05 due principally to the acquired assets. Operating income for the Western Pipeline System increased $1.6 million to $5.7 million for Q2-05 from $4.1 million for Q2-04. The increase was primarily the result of higher crude oil pipeline throughput volumes, lower pipeline operating expenses, and higher other income partially offset by lower lease acquisition margins. The increase in pipeline volumes was due mainly to higher throughput on the Nederland to Longview, Texas pipeline. Other income increased to $0.9 million in the second quarter 2005, compared to $0.2 million in the second quarter 2004, due to higher equity income from the ownership in the West Texas Gulf pipeline. Total revenues and cost of products sold and operating expenses increased in Q2-05 compared with the prior year's quarter due principally to an increase in the price of crude oil. The average price of West Texas Intermediate crude oil at Cushing, Oklahoma, increased to an average price of $53.13 per barrel for Q2-05 from $38.34 per barrel for Q2-04. Magellan Midstream Net Income $0.48, Up from $0.31 in Q2-04 PRNewswire 7-27 Magellan Midstream Partners reported increased operating profit, net income and net income per limited partner unit for Q2-05 compared to Q2-04. The partnership also reported record quarterly transportation barrels shipped and inland terminal throughput during the current period. Q2-05 operating profit was $51.4 million compared to $43.5 million for Q2-04, representing an 18% increase. Net income increased to $39.0 million during Q2-05 from $18.5 million in Q2-04 period, a 111% increase. Net income per limited partner unit was 48 cents during Q2-05 compared to 31 cents during Q2-04, for a 55% increase. "Our second-quarter financial results were significantly better than last year primarily due to positive contributions from the pipeline system we acquired in Oct. 2004 and from debt refinancing costs that negatively impacted the 2004 period," said Don Wellendorf, chief executive officer. "Magellan's asset portfolio continues to generate strong earnings and cash flows, allowing us to increase our distribution again this quarter while maintaining sufficient headroom to provide future distribution growth potential." Petroleum products pipeline system operating margin was $60.0 million, an increase of $10.6 million. Operating results from the pipeline system acquired during Oct. 2004 and additional equity earnings from our investment in the Osage pipeline were the primary contributors to the increase. Environmental expenses related to a May 2005 pipeline leak negatively impacted the current quarter. Petroleum products terminals operating margin was $18.2 million, an increase of $3.1 million, and represented record quarterly financial results for this segment. The 2005 period benefited from higher utilization and rates at the partnership's marine terminals and the addition of the East Houston facility as part of the pipeline system acquisition in Oct. 2004. Further, record throughput at the partnership's inland terminals and higher ancillary revenues benefited second-quarter 2005. Ammonia pipeline system operating margin was unchanged between periods at $1.5 million. Incremental revenue from increased transportation volume during the current period was offset by higher system integrity expenses. Monthly Rating Changes On 7-28 RBC Capital Mkts Downgradee MMP from Outperform to Sector Perform. On 7-26 Harris Nesbitt Initiated EPD at Neutral. On 7-21 RBC Capital Mkts Downgraded KMP from Outperform to Sector Perform. On 7-19 Goldman Sachs Downgraded NBP from Outperform to In-Line. On 7-18 Raymond James Upgraded MMP to Outperform from Strong Buy. On 7-08 Deutsche Securities initiated EPD and KMP at Hold. On 7-20 Wachovia Initiated APL at Outperform. On 7-08 Deutsche Securities Initiated KMP at Hold. |