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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 ________________________________________

FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File No.: 1-16335
 __________________________________

 Magellan Midstream Partners, L.P.
(Exact name of registrant as specified in its charter)
Delaware   73-1599053
(State or other jurisdiction of
incorporation or organization) 		  (IRS Employer
Identification No.)
One Williams Center, P.O. Box 22186, Tulsa, Oklahoma 74121-2186
(Address of principal executive offices and zip code)
(918) 574-7000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Units MMP New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer x    Accelerated filer ☐    Non-accelerated filer ☐     
Smaller reporting company ☐ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    
Yes  ☐    No  x
As of April 28, 2021, there were 223,282,818 common units outstanding.



TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
 
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
4
5
6
7
CONSOLIDATED STATEMENT OF PARTNERS’ CAPITAL
8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:
1.
9
2.
10
3.
12
4.
14
5.
16
6.
17
7.
18
8.
18
9.
19
10.
20
11.
22
12.
24
13.
24
14.
25
15.
26
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
27
27
27
30
32
33
33
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
34
ITEM 4. CONTROLS AND PROCEDURES
35
PART II
OTHER INFORMATION
ITEM 1.
36
ITEM 1A.
36
ITEM 2.
36
ITEM 3.
36
ITEM 4.
37
ITEM 5.
37
ITEM 6.
37
INDEX TO EXHIBITS
38
SIGNATURES
39
 
1


Forward-Looking Statements

Except for statements of historical fact, all statements in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements may be identified by words like “anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,” “forecasts,” “goal,” “guidance,” “intends,” “may,” “might,” “plans,” “potential,” “projected,” “scheduled,” “should,” “will” and other similar expressions. The absence of such words or expressions does not necessarily mean the statements are not forward-looking. Although we believe our forward-looking statements are reasonable, statements made regarding future results are not guarantees of future performance and are subject to numerous assumptions, uncertainties and risks that are difficult to predict, including those described in Part II, Item 1A – Risk Factors of this Quarterly Report on Form 10-Q. Actual outcomes and results may be materially different from the results stated or implied in such forward-looking statements included in this report. You should not put any undue reliance on any forward-looking statement.
 
The following are among the important factors that could cause future results to differ materially from any expected, projected, forecasted, estimated or budgeted amounts, events or circumstances we have discussed in this report:
 
•overall demand for refined products, crude oil and liquefied petroleum gases;
•price fluctuations for refined products, crude oil and liquefied petroleum gases and expectations about future prices for these products;
•changes in the production of crude oil in the basins served by our pipelines;
•changes in general economic conditions, interest rates and price levels;
•changes in the financial condition of our customers, vendors, derivatives counterparties, lenders or joint venture co-owners;
•our ability to secure financing in the credit and capital markets in amounts and on terms that will allow us to execute our business strategy, refinance our existing obligations when due and maintain adequate liquidity;
•development and increasing use of alternative energy sources, including but not limited to natural gas, solar power, wind power, electric and battery-powered engines and geothermal energy, increased use of renewable fuels such as ethanol, biodiesel and renewable diesel, increased conservation or fuel efficiency, increased use of electric vehicles, as well as regulatory developments or other trends that could affect demand for our services;
•changes in population in the markets served by our refined products pipeline system and changes in consumer preferences, driving patterns or rates of automobile ownership;
•changes in the product quality, throughput or interruption in service of refined products or crude oil pipelines owned and operated by third parties and connected to our assets;
•changes in demand for transportation or storage in our refined products or crude oil segments;
•changes in supply and demand patterns for our facilities due to geopolitical events, the activities of the Organization of the Petroleum Exporting Countries (“OPEC”) and other non-OPEC oil producing countries with large production capacity, changes in U.S. trade policies or in laws governing the importing and exporting of petroleum products, technological developments or other factors;
•our ability to manage interest rate and commodity price exposures;
•changes in our tariff rates or other terms of service required by the Federal Energy Regulatory Commission or state regulatory agencies;
•shut-downs or cutbacks at refineries, oil fields, petrochemical plants or other customers or businesses that use or supply our services;
•the effect of weather patterns and other natural phenomena, including climate change, on our operations and demand for our services;
•an increase in the competition our operations encounter, including the effects of capacity over-build in the areas where we operate;
•the occurrence of natural disasters, epidemics, terrorism, sabotage, protests or activism, operational hazards, equipment failures, system failures or unforeseen interruptions;
2


•changes in general economic conditions, including market and macro-economic disruptions resulting from the COVID-19 pandemic and related governmental responses;
•our ability to obtain adequate levels of insurance at a reasonable cost, and the potential for losses to exceed the insurance coverage we do obtain;
•the treatment of us as a corporation for federal or state income tax purposes or if we become subject to significant forms of other taxation or more aggressive interpretation or increased assessments under existing forms of taxation;
•our ability to identify expansion projects, accretive acquisitions and joint ventures with acceptable expected returns and to complete these projects on time and at projected costs;
•our ability to successfully execute our capital allocation priorities including unit repurchases with acceptable expected returns;
•the effect of changes in accounting policies and uncertainty of estimates, including accruals and costs of environmental remediation;
•our ability to cooperate with and rely on our joint venture co-owners;
•actions by rating agencies concerning our credit ratings;
•our ability to timely obtain and maintain all necessary approvals, consents and permits required to operate our existing assets and to construct, acquire and operate any new or modified assets;
•our ability to promptly obtain all necessary services, materials, labor, supplies and rights-of-way required for maintenance and operation of our current assets and construction of our growth projects, without significant delays, disputes or cost overruns;
•risks inherent in the use and security of information systems in our business and implementation of new software and hardware;
•changes in laws and regulations or the interpretations of such laws that govern our gas liquids blending activities or changes regarding product quality specifications or renewable fuel obligations that impact our ability to produce gasoline volumes through our gas liquids blending activities or that require significant capital outlays for compliance;
•changes in laws and regulations to which we or our customers are or could become subject, including tax withholding requirements, safety, security, employment, hydraulic fracturing, derivatives transactions, trade and environmental, including laws and regulations designed to address climate change;
•the cost and effects of legal and administrative claims and proceedings against us, our subsidiaries or our joint ventures;
•the amount of our indebtedness, which could make us vulnerable to general adverse economic and industry conditions, limit our ability to borrow additional funds, place us at competitive disadvantages compared to our competitors that have less debt or have other adverse consequences;
•the potential that our internal controls may not be adequate, weaknesses may be discovered or remediation of any identified weaknesses may not be successful;
•the ability and intent of our customers, vendors, lenders, joint venture co-owners or other third parties to perform their contractual obligations to us;
•petroleum product supply disruptions;
•global and domestic repercussions from terrorist activities, including cyberattacks, and the government’s response thereto; and
•other factors and uncertainties inherent in the transportation, storage and distribution of petroleum products and the operation, acquisition and construction of assets related to such activities.
 
This list of important factors is not exhaustive. The forward-looking statements in this Quarterly Report speak only as of the date hereof, and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changes in assumptions or otherwise, unless required by law.

3


PART I
FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

MAGELLAN MIDSTREAM PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per unit amounts)
(Unaudited)
 
Three Months Ended
  March 31,
  2020 2021
Transportation and terminals revenue $ 458,395  $ 425,170 
Product sales revenue 319,120  230,601 
Affiliate management fee revenue 5,291  5,302 
Total revenue 782,806  661,073 
Costs and expenses:
Operating 149,508  130,604 
Cost of product sales 249,236  184,867 
Depreciation, amortization and impairment 63,534  58,128 
General and administrative 36,908  46,580 
Total costs and expenses 499,186  420,179 
Other operating income (expense) (511) (462)
Earnings of non-controlled entities 43,660  39,052 
Operating profit 326,769  279,484 
Interest expense 55,900  56,979 
Interest capitalized (4,951) (508)
Interest income (420) (153)
Gain on disposition of assets (12,887) — 
Other (income) expense 807  1,059 
Income before provision for income taxes 288,320  222,107 
Provision for income taxes 756  789 
Net income $ 287,564  $ 221,318 
Basic net income per common unit $ 1.26  $ 0.99 
Diluted net income per common unit
$ 1.26  $ 0.99 
Weighted average number of common units outstanding used for basic net income per unit calculation
227,571  223,593 
Weighted average number of common units outstanding used for diluted net income per unit calculation
227,571  223,593 

    


See notes to consolidated financial statements.
4


MAGELLAN MIDSTREAM PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited, in thousands)
 
  Three Months Ended March 31,
  2020 2021
Net income $ 287,564  $ 221,318 
Other comprehensive income (loss):
Derivative activity:
Net loss on cash flow hedges (11,914) — 
Reclassification of net loss on cash flow hedges to income
809  887 
Changes in employee benefit plan assets and benefit obligations recognized in other comprehensive income:
Net actuarial loss (747) — 
Curtailment gain 1,703  — 
Recognition of prior service credit amortization in income (45) (45)
Recognition of actuarial loss amortization in income 1,531  1,691 
Recognition of settlement cost in income 969  — 
Total other comprehensive income (loss) (7,694) 2,533 
Comprehensive income $ 279,870  $ 223,851 



























See notes to consolidated financial statements.
5


MAGELLAN MIDSTREAM PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
(In thousands)
 
December 31,
2020 		March 31,
2021
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 13,036  $ 4,073 
Trade accounts receivable
109,136  142,948 
Other accounts receivable
37,075  35,355 
Inventory 167,389  212,773 
Commodity derivatives deposits 34,165  40,029 
Other current assets 44,392  42,967 
Total current assets 405,193  478,145 
Property, plant and equipment 8,352,825  8,370,208 
Less: accumulated depreciation 2,091,134  2,143,840 
Net property, plant and equipment 6,261,691  6,226,368 
Investments in non-controlled entities 1,213,856  1,203,339 
Right-of-use asset, operating leases 166,078  194,463 
Long-term receivables 22,755  21,590 
Goodwill 52,830  52,830 
Other intangibles (less accumulated amortization of $9,228 and $9,881 at December 31, 2020 and March 31, 2021, respectively)
44,925  44,272 
Restricted cash
9,411  8,878 
Other noncurrent assets 20,243  18,343 
Total assets $ 8,196,982  $ 8,248,228 
LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities:
Accounts payable $ 100,022  $ 102,199 
Accrued payroll and benefits 52,490  40,035 
Accrued interest payable 58,998  49,992 
Accrued taxes other than income 68,313  48,481 
Deferred revenue 98,897  98,710 
Accrued product liabilities 79,166  137,976 
Commodity derivatives contracts, net 22,372  20,792 
Current portion of operating lease liability 27,533  26,661 
Other current liabilities 50,783  35,917 
Total current liabilities 558,574  560,763 
Long-term operating lease liability 137,483  168,817 
Long-term debt, net 4,978,691  4,996,142 
Long-term pension and benefits 163,776  165,145 
Other noncurrent liabilities 54,652  60,329 
Commitments and contingencies
Partners’ capital:
Common unitholders (223,120 units and 223,283 units outstanding at December 31, 2020 and March 31, 2021, respectively)
2,486,996  2,477,689 
Accumulated other comprehensive loss (183,190) (180,657)
Total partners’ capital 2,303,806  2,297,032 
Total liabilities and partners’ capital $ 8,196,982  $ 8,248,228 



See notes to consolidated financial statements.
6


MAGELLAN MIDSTREAM PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
  Three Months Ended
March 31,
  2020 2021
Operating Activities:
Net income $ 287,564  $ 221,318 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and impairment expense 63,534  58,128 
Gain on sale and retirement of assets (13,002) — 
Earnings of non-controlled entities (43,660) (39,052)
Distributions from operations of non-controlled entities 54,743  51,434 
Equity-based incentive compensation expense 155  4,679 
Settlement gain, amortization of prior service credit and actuarial loss 1,113  1,646 
Changes in operating assets and liabilities:
Trade accounts receivable and other accounts receivable 29,988  (32,092)
Inventory 112,007  (45,384)
Accounts payable 7,926  10,235 
Accrued payroll and benefits (43,962) (12,455)
Accrued interest payable (16,792) (9,006)
Accrued taxes other than income (17,673) (19,832)
Accrued product liabilities (38,440) 58,810 
Deferred revenue 3,656  (187)
Other current and noncurrent assets and liabilities (2,536) (8,003)
Net cash provided by operating activities 384,621  240,239 
Investing Activities:
Additions to property, plant and equipment, net(1)
(172,671) (29,952)
Proceeds from sale and disposition of assets 332,789  656 
Investments in non-controlled entities (28,325) (1,865)
Net cash provided (used) by investing activities 131,793  (31,161)
Financing Activities:
Distributions paid (234,774) (229,423)
Net commercial paper borrowings —  17,000 
Payments associated with settlement of equity-based incentive compensation (14,700) (6,151)
Repurchases of common units (201,982) — 
Net cash used by financing activities (451,456) (218,574)
Change in cash, cash equivalents and restricted cash 64,958  (9,496)
Cash, cash equivalents and restricted cash at beginning of period 84,599  22,447 
Cash, cash equivalents and restricted cash at end of period $ 149,557  $ 12,951 
Supplemental non-cash investing activities:
(1) Additions to property, plant and equipment
$ (152,292) $ (20,723)
 Changes in accounts payable and other current liabilities related to capital expenditures (20,379) (9,229)
 Additions to property, plant and equipment, net $ (172,671) $ (29,952)









See notes to consolidated financial statements.
7


MAGELLAN MIDSTREAM PARTNERS, L.P.
CONSOLIDATED STATEMENT OF PARTNERS’ CAPITAL
(Unaudited, in thousands)

Common Unitholders  Accumulated Other Comprehensive Loss Total Partners’ Capital
Balance, January 1, 2020 $ 2,877,105  $ (162,077) $ 2,715,028 
Comprehensive income:
Net income 287,564  —  287,564 
Total other comprehensive income (loss) —  (7,694) (7,694)
Total comprehensive income (loss) 287,564  (7,694) 279,870 
Distributions (234,774) —  (234,774)
Equity-based incentive compensation expense 155  —  155 
Repurchases of common units (201,982) —  (201,982)
Issuance of common units in settlement of equity-based incentive plan awards
600  —  600 
Payments associated with settlement of equity-based incentive compensation
(14,700) —  (14,700)
Other (220) —  (220)
Three Months Ended March 31, 2020 $ 2,713,748  $ (169,771) $ 2,543,977 
Balance, January 1, 2021 $ 2,486,996  $ (183,190) $ 2,303,806 
Comprehensive income:
Net income 221,318  —  221,318 
Total other comprehensive income (loss) —  2,533  2,533 
Total comprehensive income (loss) 221,318  2,533  223,851 
Distributions (229,423) —  (229,423)
Equity-based incentive compensation expense 4,679  —  4,679 
Issuance of common units in settlement of equity-based incentive plan awards
520  —  520 
Payments associated with settlement of equity-based incentive compensation
(6,151) —  (6,151)
Other (250) —  (250)
Three Months Ended March 31, 2021 $ 2,477,689  $ (180,657) $ 2,297,032 











See notes to consolidated financial statements.
8





MAGELLAN MIDSTREAM PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.Organization, Description of Business and Basis of Presentation

Organization

Unless indicated otherwise, the terms “our,” “we,” “us” and similar language refer to Magellan Midstream Partners, L.P. together with its subsidiaries. Magellan Midstream Partners, L.P. is a Delaware limited partnership, and its common units are traded on the New York Stock Exchange under the ticker symbol “MMP.” Magellan GP, LLC, a wholly-owned Delaware limited liability company, serves as its general partner.

Description of Business

We are principally engaged in the transportation, storage and distribution of refined petroleum products and crude oil.  As of March 31, 2021, our asset portfolio consisted of:

•our refined products segment, comprised of our approximately 9,800-mile refined petroleum products pipeline system with 54 connected terminals, as well as 25 independent terminals not connected to our pipeline system and two marine storage terminals (one of which is owned through a joint venture); and

•our crude oil segment, comprised of approximately 2,200 miles of crude oil pipelines, a condensate splitter and 37 million barrels of aggregate storage capacity, of which approximately 27 million barrels are used for contract storage. Approximately 1,000 miles of these pipelines, the condensate splitter and 30 million barrels of this storage capacity (including 24 million barrels used for contract storage) are wholly-owned, with the remainder owned through joint ventures.

The following terms are commonly used in our industry to describe products that we transport, store, distribute or otherwise handle through our petroleum pipelines and terminals:

•refined products are the output from crude oil refineries that are primarily used as fuels by consumers. Refined products include gasoline, diesel fuel, aviation fuel, kerosene and heating oil.  Diesel fuel, kerosene and heating oil are also referred to as distillates;

•transmix is a mixture that forms when different refined products are transported in pipelines. Transmix is fractionated and blended into usable refined products;

•liquefied petroleum gases, or LPGs, are liquids produced as by-products of the crude oil refining process and in connection with natural gas production. LPGs include butane and propane;

•blendstocks are products blended with refined products to change or enhance their characteristics such as increasing a gasoline’s octane or oxygen content. Blendstocks include alkylates, oxygenates and natural gasoline;

•crude oil, which includes condensate, is a naturally occurring unrefined petroleum product recovered from underground that is used as feedstock by refineries, splitters and petrochemical facilities; and

•renewable fuels, such as ethanol, biodiesel and renewable diesel, are fuels derived from living materials and typically blended with other refined products as required by government mandates.

We use the term petroleum products to describe any, or a combination, of the above-noted products.
 
9





MAGELLAN MIDSTREAM PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Basis of Presentation

In the opinion of management, our accompanying consolidated financial statements which are unaudited, except for the consolidated balance sheet as of December 31, 2020, which is derived from our audited financial statements, include all normal and recurring adjustments necessary to present fairly our financial position as of March 31, 2021, the results of operations for the three months ended March 31, 2020 and 2021 and cash flows for the three months ended March 31, 2020 and 2021. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the full year ending December 31, 2021 for several reasons. Profits from our gas liquids blending activities are realized largely during the first and fourth quarters of each year.  Additionally, gasoline demand, which drives transportation volumes and revenues on our refined products pipeline system, generally trends higher during the summer driving months.  Further, the volatility of commodity prices impacts the profits from our commodity activities and the volume of petroleum products we transport on our pipelines. 

Pursuant to the rules and regulations of the Securities and Exchange Commission, the financial statements in
this report have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the U.S. for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020.

Reclassifications

Certain prior period amounts have been reclassified to conform with the current period’s presentation.

Use of Estimates

The preparation of our consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities that exist at the date of our consolidated financial statements, as well as their impact on the reported amounts of revenue and expense during the reporting periods. Actual results could differ from those estimates.

New Accounting Pronouncements

None.

2.Segment Disclosures

Our reportable segments are strategic business units that offer different products and services. Our segments are managed separately because each segment requires different marketing strategies and business knowledge. Management evaluates performance based on segment operating margin, which includes revenue from affiliates and third-party customers, operating expenses, cost of product sales, other operating (income) expense and earnings of non-controlled entities.
We believe that investors benefit from having access to the same financial measures used by management. Operating margin, which is presented in the following tables, is an important measure used by management to evaluate the economic performance of our core operations. Operating margin is not a GAAP measure, but the components of operating margin are computed using amounts that are determined in accordance with GAAP. A reconciliation of operating margin to operating profit, which is the nearest comparable GAAP financial measure, is
10





MAGELLAN MIDSTREAM PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


included in the tables below (presented in thousands). Operating profit includes depreciation, amortization and impairment expense and general and administrative (“G&A”) expense that management does not consider when evaluating the core profitability of our separate operating segments.
  Three Months Ended March 31, 2020
  Refined Products Crude Oil Intersegment
Eliminations 		Total
Transportation and terminals revenue $ 314,319  $ 145,658  $ (1,582) $ 458,395 
Product sales revenue 312,986  6,134  —  319,120 
Affiliate management fee revenue 1,584  3,707  —  5,291 
Total revenue 628,889  155,499  (1,582) 782,806 
Operating expense 105,882  46,772  (3,146) 149,508 
Cost of product sales 233,342  15,894  —  249,236 
Other operating (income) expense (1,892) 2,403  —  511 
Earnings of non-controlled entities (14,220) (29,440) —  (43,660)
Operating margin 305,777  119,870  1,564  427,211 
Depreciation, amortization and impairment expense 46,059  15,911  1,564  63,534 
G&A expense 26,654  10,254  —  36,908 
Operating profit $ 233,064  $ 93,705  $ —  $ 326,769 
 
  Three Months Ended March 31, 2021
  Refined Products Crude Oil Intersegment
Eliminations 		Total
Transportation and terminals revenue $ 310,768  $ 116,214  $ (1,812) $ 425,170 
Product sales revenue 201,431  29,170  —  230,601 
Affiliate management fee revenue 1,550  3,752  —  5,302 
Total revenue 513,749  149,136  (1,812) 661,073 
Operating expense 94,853  39,202  (3,451) 130,604 
Cost of product sales 154,742  30,125  —  184,867 
Other operating (income) expense (239) 701  —  462 
Earnings of non-controlled entities (9,171) (29,881) —  (39,052)
Operating margin 273,564  108,989  1,639  384,192 
Depreciation, amortization and impairment expense 39,585  16,904  1,639  58,128 
G&A expense 33,583  12,997  —  46,580 
Operating profit $ 200,396  $ 79,088  $ —  $ 279,484 

 


11





MAGELLAN MIDSTREAM PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


3.Revenue

Statement of Income Disclosures

The following tables provide details of our revenues disaggregated by key activities that comprise our performance obligations by operating segment (in thousands):
Three Months Ended March 31, 2020
Refined Products Crude Oil Intersegment Eliminations Total
Transportation $ 178,456  $ 86,782  $ —  $ 265,238 
Terminalling 40,386  3,309  —  43,695 
Storage 55,075  29,183  (1,582) 82,676 
Ancillary services 32,240  7,076  —  39,316 
Lease revenue 8,162  19,308  —  27,470 
Transportation and terminals revenue
314,319  145,658  (1,582) 458,395 
Product sales revenue 312,986  6,134  —  319,120 
Affiliate management fee revenue
1,584  3,707  —  5,291 
Total revenue
628,889  155,499  (1,582) 782,806 
Revenue not under the guidance of ASC 606, Revenue from Contracts with Customers:
Lease revenue(1)
(8,162) (19,308) —  (27,470)
(Gains) losses from futures contracts included in product sales revenue(2)
(121,047) (2,722) —  (123,769)
Affiliate management fee revenue
(1,584) (3,707) —  (5,291)
Total revenue from contracts with customers under ASC 606
$ 498,096  $ 129,762  $ (1,582) $ 626,276 

(1) Lease revenue is accounted for under Accounting Standards Codification (“ASC”) 842, Leases.
(2) The impact on product sales revenue from futures contracts falls under the guidance of ASC 815, Derivatives and Hedging.
12





MAGELLAN MIDSTREAM PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Three Months Ended March 31, 2021
Refined Products Crude Oil Intersegment Eliminations Total
Transportation $ 193,427  $ 55,046  $ —  $ 248,473 
Terminalling 32,791  6,117  —  38,908 
Storage 49,157  29,262  (1,812) 76,607 
Ancillary services 31,246  7,946  —  39,192 
Lease revenue 4,147  17,843  —  21,990 
Transportation and terminals revenue
310,768  116,214  (1,812) 425,170 
Product sales revenue 201,431  29,170  —  230,601 
Affiliate management fee revenue
1,550  3,752  —  5,302 
Total revenue
513,749  149,136  (1,812) 661,073 
Revenue not under the guidance of ASC 606, Revenue from Contracts with Customers:
Lease revenue(1)
(4,147) (17,843) —  (21,990)
(Gains) losses from futures contracts included in product sales revenue(2)
48,437  5,356  —  53,793 
Affiliate management fee revenue
(1,550) (3,752) —  (5,302)
Total revenue from contracts with customers under ASC 606
$ 556,489  $ 132,897  $ (1,812) $ 687,574 

(1) Lease revenue is accounted for under ASC 842, Leases.
(2) The impact on product sales revenue from futures contracts falls under the guidance of ASC 815, Derivatives and Hedging.
Balance Sheet Disclosures

The following table summarizes our accounts receivable, contract assets and contract liabilities resulting from contracts with customers (in thousands):
December 31, 2020 March 31, 2021
Accounts receivable from contracts with customers $ 108,843  $ 141,387 
Contract assets $ 12,220  $ 11,429 
Contract liabilities $ 102,964  $ 100,824 

For the three months ended March 31, 2021, we recognized $66.4 million of transportation and terminals revenue that was recorded in deferred revenue as of December 31, 2020.

13





MAGELLAN MIDSTREAM PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Unfulfilled Performance Obligations

The following table provides the aggregate amount of the transaction price allocated to our unfulfilled performance obligations (“UPOs”) as of March 31, 2021 by operating segment, including the range of years remaining on our contracts with customers and an estimate of revenues expected to be recognized over the next 12 months (dollars in thousands):
Refined Products Crude Oil Total
Balances at March 31, 2021 $ 2,047,797  $ 1,197,666  $ 3,245,463 
Remaining terms
1 - 17 years
1 - 11 years
Estimated revenues from UPOs to be recognized in the next 12 months
$ 389,591  $ 260,319  $ 649,910 


4.Investments in Non-Controlled Entities

Our equity investments in non-controlled entities at March 31, 2021 were comprised of:
Entity Ownership Interest
BridgeTex Pipeline Company, LLC (“BridgeTex”) 30%
Double Eagle Pipeline LLC (“Double Eagle”) 50%
HoustonLink Pipeline Company, LLC (“HoustonLink”) 50%
MVP Terminalling, LLC (“MVP”)(1)
50%
Powder Springs Logistics, LLC (“Powder Springs”) 50%
Saddlehorn Pipeline Company, LLC (“Saddlehorn”) 30%
Seabrook Logistics, LLC (“Seabrook”) 50%
Texas Frontera, LLC (“Texas Frontera”) 50%
(1) Subsequent to March 31, 2021, we sold a portion of our interest in MVP (see Note 15 – Subsequent Events for further detail of this transaction).

We serve as operator of BridgeTex, HoustonLink, MVP, Powder Springs, Saddlehorn, Texas Frontera and the pipeline activities of Seabrook. We receive fees for management services as well as reimbursement or payment to us for certain direct operational payroll and other overhead costs. The management fees we receive are reported as affiliate management fee revenue on our consolidated statements of income. Cost reimbursements we receive from these entities in connection with our operating services are included as reductions to costs and expenses on our consolidated statements of income and totaled $1.2 million and $0.5 million during the three months ended March 31, 2020 and 2021, respectively.

14





MAGELLAN MIDSTREAM PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


We recorded the following revenue and expense transactions from certain of these non-controlled entities in our consolidated statements of income (in thousands):
Three Months Ended March 31,
2020 2021
Transportation and terminals revenue:
BridgeTex, pipeline capacity and storage $ 10,748  $ 10,740 
Double Eagle, throughput revenue $ 1,600  $ 976 
Saddlehorn, storage revenue $ 566  $ 580 
Operating expenses:
Seabrook, storage lease and ancillary services $ 6,899  $ 5,310 
Other operating income:
Seabrook, gain on sale of air emission credits $ 1,410  $ — 

Our consolidated balance sheets reflected the following balances related to transactions with our non-controlled entities (in thousands):
December 31, 2020
Trade Accounts Receivable Other Accounts Receivable Other Accounts Payable Long-Term Receivables
BridgeTex $ 355  $ 27  $ 970  $ — 
Double Eagle $ 277  $ —  $ —  $ — 
HoustonLink $ —  $ —  $ 144  $ — 
MVP $ —  $ 467  $ 2,297  $ — 
Powder Springs $ —  $ —  $ —  $ 10,223 
Saddlehorn $ —  $ 121  $ —  $ — 
Seabrook $ —  $ —  $ 7,274  $ — 

March 31, 2021
Trade Accounts Receivable Other Accounts Receivable Other Accounts Payable Long-Term Receivables
BridgeTex $ 263  $ 12  $ 1,308  $ — 
Double Eagle $ 310  $ —  $ —  $ — 
HoustonLink $ —  $ —  $ 149  $ — 
MVP $ —  $ 633  $ 862  $ — 
Powder Springs $ 101  $ 96  $ —  $ 10,293 
Saddlehorn $ —  $ 175  $ —  $ — 
Seabrook $ —  $ 105  $ 2,528  $ — 

We entered into a long-term terminalling and storage contract with Seabrook for exclusive use of dedicated tankage that provides our customers with crude oil storage capacity and dock access for crude oil imports and exports on the Texas Gulf Coast (see Note 7 – Leases for more details regarding this lease).

15





MAGELLAN MIDSTREAM PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


The financial results from MVP, Powder Springs and Texas Frontera are included in our refined products segment and the financial results from BridgeTex, Double Eagle, HoustonLink, Saddlehorn and Seabrook are included in our crude oil segment, each as earnings of non-controlled entities.

A summary of our investments in non-controlled entities (representing only our proportionate interest) follows (in thousands):
Investments at December 31, 2020 $ 1,213,856 
Additional investment 1,865 
Earnings of non-controlled entities:
Proportionate share of earnings 39,505 
Amortization of excess investment and capitalized interest
(453)
Earnings of non-controlled entities 39,052 
Less:
Distributions from operations of non-controlled entities
51,434 
Investments at March 31, 2021 $ 1,203,339 

5.Inventory

Inventory at December 31, 2020 and March 31, 2021 was as follows (in thousands): 
December 31, 2020 March 31,
2021
Refined products $ 79,473  $ 94,098 
Crude oil 32,431  47,993 
Liquefied petroleum gases 26,734  20,926 
Transmix 23,397  44,940 
Additives 5,354  4,816 
Total inventory $ 167,389  $ 212,773 



16





MAGELLAN MIDSTREAM PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


6.Debt
Long-term debt at December 31, 2020 and March 31, 2021 was as follows (in thousands):
  December 31,
2020 		March 31,
2021
Commercial paper $ —  $ 17,000 
3.20% Notes due 2025
250,000  250,000 
5.00% Notes due 2026
650,000  650,000 
3.25% Notes due 2030
500,000  500,000 
6.40% Notes due 2037
250,000  250,000 
4.20% Notes due 2042
250,000  250,000 
5.15% Notes due 2043
550,000  550,000 
4.20% Notes due 2045
250,000  250,000 
4.25% Notes due 2046
500,000  500,000 
4.20% Notes due 2047
500,000  500,000 
4.85% Notes due 2049
500,000  500,000 
3.95% Notes due 2050
800,000  800,000 
Face value of long-term debt 5,000,000  5,017,000 
Unamortized debt issuance costs(1)
(40,143) (39,631)
Net unamortized debt premium(1)
18,834  18,773 
Long-term debt, net $ 4,978,691  $ 4,996,142 

(1)        Debt issuance costs and note discounts and premiums are being amortized or accreted to the applicable notes over the respective lives of those notes.

All of the instruments detailed in the table above are senior indebtedness.

Other Debt

Revolving Credit Facility. At March 31, 2021, the total borrowing capacity under our revolving credit facility maturing in May 2024 was $1.0 billion. Any borrowings outstanding under this facility are classified as long-term debt on our consolidated balance sheets. Borrowings under the facility are unsecured and bear interest at LIBOR plus a spread ranging from 0.875% to 1.500% based on our credit ratings. Additionally, an unused commitment fee is assessed at a rate from 0.075% and 0.200% depending on our credit ratings. The unused commitment fee was 0.125% at March 31, 2021. Borrowings under this facility may be used for general purposes, including capital expenditures. As of December 31, 2020 and March 31, 2021, there were no borrowings outstanding under this facility and $3.5 million was obligated for letters of credit. Amounts obligated for letters of credit are not reflected as debt on our consolidated balance sheets, but decrease our borrowing capacity under this facility.

Commercial Paper Program. We have a commercial paper program under which we may issue commercial paper notes in an amount up to the available capacity under our $1.0 billion revolving credit facility. The maturities of the commercial paper notes vary, but may not exceed 397 days from the date of issuance. Because the commercial paper we can issue is limited to amounts available under our revolving credit facility, amounts outstanding under the program are classified as long-term debt. The commercial paper notes are sold under customary terms in the commercial paper market and are issued at a discount from par, or alternatively, are sold at par and bear varying interest rates on a fixed or floating basis. Commercial paper borrowings outstanding at March 31, 2021 were $17.0 million. The weighted-average interest rate for commercial paper borrowings based on the number of days outstanding was 0.2% for the three months ended March 31, 2021.

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MAGELLAN MIDSTREAM PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


7.Leases

Operating Leases – Lessee

Related-Party Operating Lease. We entered into a long-term terminalling and storage contract with Seabrook for exclusive use of dedicated tankage that provides our customers with crude oil storage capacity and dock access for crude oil imports and exports on the Texas Gulf Coast.

The following tables provide information about our third-party and Seabrook operating leases (in thousands):
Three Months Ended March 31, 2020 Three Months Ended March 31, 2021
Third-Party Leases Seabrook Lease All Leases Third-Party Leases Seabrook Lease All Leases
Total lease expense $ 5,990  $ 6,899  $ 12,889  $ 7,021  $ 5,310  $ 12,331 
December 31, 2020 March 31, 2021
Third-Party Leases Seabrook Lease All Leases Third-Party Leases Seabrook Lease All Leases
Current lease liability $ 17,099  $ 10,434  $ 27,533  $ 17,257  $ 9,404  $ 26,661 
Long-term lease liability $ 84,982  $ 52,501  $ 137,483  $ 118,291  $ 50,526  $ 168,817 
Right-of-use asset $ 103,142  $ 62,936  $ 166,078  $ 134,533  $ 59,930  $ 194,463 

8.Employee Benefit Plans

We sponsor a defined contribution plan in which we match our employees’ qualifying contributions, resulting in additional expense to us. Expenses related to the defined contribution plan were $4.5 million and $3.1 million for the three months ended March 31, 2020 and 2021, respectively.

In addition, we sponsor two pension plans, including one for all non-union employees and one that covers union employees, and a postretirement benefit plan for certain employees. Net periodic benefit expense for the three months ended March 31, 2020 and 2021 was as follows (in thousands):
 
Three Months Ended Three Months Ended
  March 31, 2020 March 31, 2021
  Pension
Benefits 		Other  Postretirement
Benefits 		Pension
Benefits 		Other  Postretirement
Benefits
Components of net periodic benefit costs:
Service cost $ 7,203  $ 62  $ 7,353  $ 76 
Interest cost 2,802  112  2,400  95 
Expected return on plan assets (2,886) —  (3,046) — 
Amortization of prior service credit (45) —  (45) — 
Amortization of actuarial loss 1,412  119  1,544  147 
Settlement cost 969  —  —  — 
Settlement gain on disposition of assets (1,342) —  —  — 
Net periodic benefit cost $ 8,113  $ 293  $ 8,206  $ 318 
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MAGELLAN MIDSTREAM PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


The service component of our net periodic benefit costs is presented in operating expense and G&A expense, and the non-service components are presented in other (income) expense in our consolidated statements of income.

The changes in accumulated other comprehensive loss (“AOCL”) related to employee benefit plan assets and benefit obligations for the three months ended March 31, 2020 and 2021 were as follows (in thousands):

Three Months Ended Three Months Ended
March 31, 2020 March 31, 2021
Gains (Losses) Included in AOCL Pension Benefits Other Postretirement Benefits Pension Benefits Other Postretirement Benefits
Beginning balance $ (104,739) $ (8,378) $ (117,782) $ (10,409)
Net actuarial loss (747) —  —  — 
Curtailment gain 1,703  —  —  — 
Recognition of prior service credit amortization in
income
(45) —  (45) — 
Recognition of actuarial loss amortization in income 1,412  119  1,544  147 
Recognition of settlement cost in income 969  —  —  — 
Ending balance $ (101,447) $ (8,259) $ (116,283) $ (10,262)
Contributions estimated to be paid into the plans in 2021 are $28.0 million and $0.2 million for the pension plans and other postretirement benefit plan, respectively.

9.Long-Term Incentive Plan

The compensation committee of our general partner’s board of directors administers our long-term incentive plan (“LTIP”) covering certain of our employees and the independent directors of our general partner. The LTIP primarily consists of phantom units and permits the grant of awards covering an aggregate payout of 11.9 million of our common units. The estimated units remaining available under the LTIP at March 31, 2021 totaled approximately 0.6 million.
 
Equity-based incentive compensation expense for the three months ended March 31, 2020 and 2021, primarily recorded as G&A expense on our consolidated statements of income, was as follows (in thousands):
  Three Months Ended March 31,
  2020 2021
Performance-based awards $ (1,947) $ 2,216 
Time-based awards 2,102  2,463 
Total $ 155  $ 4,679 

During 2020, LTIP expense related to performance-based awards was reduced due to the impacts of COVID-19 and the significant decline in commodity prices on our financial results.

On February 5, 2021, 558,516 unit awards were granted pursuant to our LTIP. These awards included both performance-based and time-based awards and have a three-year vesting period that will end on December 31, 2023.

19





MAGELLAN MIDSTREAM PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Basic and Diluted Net Income Per Common Unit

The difference between our actual common units outstanding and our weighted-average number of common units outstanding used to calculate basic net income per unit is due to the impact of: (i) the unit awards issued to non-employee directors and (ii) the weighted average effect of units actually issued or repurchased during a period.  The difference between the weighted-average number of common units outstanding used for basic and diluted net income per unit calculations on our consolidated statements of income is primarily due to the dilutive effect of unit awards associated with our LTIP that have not yet vested.

10.Derivative Financial Instruments

Commodity Derivatives

Our open futures contracts at March 31, 2021 were as follows:
Type of Contract/Accounting Methodology Product Represented by the Contract and Associated Barrels Maturity Dates
Futures - Economic Hedges
3.0 million barrels of refined products and crude oil
Between April 2021 and November 2022
Futures - Economic Hedges
0.2 million barrels of gas liquids
Between April and December 2021

Commodity Derivatives Contracts and Deposits Offsets

At December 31, 2020 and March 31, 2021, we had made margin deposits of $34.2 million and $40.0 million, respectively, for our futures contracts with our counterparties, which were recorded as current assets under commodity derivatives deposits on our consolidated balance sheets. We have the right to offset the combined fair values of our open futures contracts against our margin deposits under a master netting arrangement for each counterparty; however, we have elected to present the combined fair values of our open futures contracts separately from the related margin deposits on our consolidated balance sheets. Additionally, we have the right to offset the fair values of our futures contracts together for each counterparty, which we have elected to do, and we report the combined net balances on our consolidated balance sheets. A schedule of the derivative amounts we have offset and the deposit amounts we could offset under a master netting arrangement are provided below as of December 31, 2020 and March 31, 2021 (in thousands):
Description Gross Amounts of Recognized Liabilities Gross Amounts of Assets Offset in the Consolidated Balance Sheets Net Amounts of Liabilities Presented in the Consolidated Balance Sheets Margin Deposit Amounts Not Offset in the Consolidated Balance Sheets
Net Asset Amount(1)
As of 12/31/2020 $ (22,988) $ 1,690  $ (21,298) $ 34,165  $ 12,867 
As of 3/31/2021 $ (24,099) $ 2,626  $ (21,473) $ 40,029  $ 18,556 
(1) Amount represents the maximum loss we would incur if all of our counterparties failed to perform on their derivative contracts.

Basis Derivative Agreement
During 2019, we entered into a basis derivative agreement with a joint venture co-owner’s affiliate, and, contemporaneously, that affiliate entered into an intrastate transportation services agreement with the joint venture. Settlements under the basis derivative agreement are determined based on the basis differential of crude oil prices at different market locations and a notional volume of 30,000 barrels per day. As a result, we account for this agreement as a derivative. The agreement will expire in early 2022. We recognize the changes in fair value of this agreement based on forward price curves for crude oil in West Texas and the Houston Gulf Coast in other operating
20





MAGELLAN MIDSTREAM PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


income (expense) in our consolidated statements of income. The liability for this agreement at December 31, 2020 and March 31, 2021 was $10.2 million and $7.3 million, respectively.

Impact of Derivatives on Our Financial Statements

Comprehensive Income

The changes in derivative activity included in AOCL for the three months ended March 31, 2020 and 2021 were as follows (in thousands):
 
Three Months Ended
  March 31,
Derivative Losses Included in AOCL 2020 2021
Beginning balance $ (48,960) $ (54,999)
Net loss on cash flow hedges (11,914) — 
Reclassification of net loss on cash flow hedges to income 809  887 
Ending balance $ (60,065) $ (54,112)

The following is a summary of the effect on our consolidated statements of income for the three months ended March 31, 2020 and 2021 of derivatives that were designated as cash flow hedges (in thousands):
Interest Rate Contracts
Amount of Loss Recognized in AOCL on Derivatives Location of Loss Reclassified from AOCL into  Income Amount of Loss Reclassified from AOCL into Income
Three Months Ended March 31, 2020 $ (11,914) Interest expense $ (809)
Three Months Ended March 31, 2021 $ —  Interest expense $ (887)

As of March 31, 2021, the net loss estimated to be classified to interest expense over the next twelve months from AOCL is approximately $3.5 million. This amount relates to the amortization of losses on interest rate contracts over the life of the related debt instruments.
The following table provides a summary of the effect on our consolidated statements of income for the three months ended March 31, 2020 and 2021 of derivatives that were not designated as hedging instruments (in thousands):
    Amount of Gain (Loss) Recognized on Derivatives
Three Months Ended
  Location of Gain (Loss)
Recognized on Derivatives 		March 31,
Derivative Instrument 2020 2021
Futures contracts Product sales revenue $ 123,769  $ (53,793)
Futures contracts Cost of product sales (3,927) 1,670 
Basis derivative agreement Other operating income (expense) (2,899) (650)
Total $ 116,943  $ (52,773)
The impact of the derivatives in the above table was reflected as cash from operations on our consolidated statements of cash flows.
21





MAGELLAN MIDSTREAM PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Balance Sheets
The following tables provide a summary of the fair value of derivatives, which are presented on a net basis in our consolidated balance sheets, that were not designated as hedging instruments as of December 31, 2020 and March 31, 2021 (in thousands):
  December 31, 2020
  Asset Derivatives Liability Derivatives
Derivative Instrument Balance Sheet Location Fair Value Balance Sheet Location Fair Value
Futures contracts
Commodity derivatives contracts, net
$ 616 
Commodity derivatives contracts, net
$ 22,988 
Future contracts Other noncurrent assets 1,074  Other noncurrent liabilities — 
Basis derivative agreement
Other current assets
— 
Other current liabilities
8,774 
Basis derivative agreement
Other noncurrent assets
— 
Other noncurrent liabilities
1,468 
Total $ 1,690  Total $ 33,230 
  March 31, 2021
  Asset Derivatives Liability Derivatives
Derivative Instrument Balance Sheet Location Fair Value Balance Sheet Location Fair Value
Futures contracts
Commodity derivatives contracts, net
$ 2,626 
Commodity derivatives contracts, net
$ 23,418 
Futures contracts Other noncurrent assets —  Other noncurrent liabilities 681 
Basis derivative agreement Other current assets —  Other current liabilities 7,341 
Total $ 2,626  Total $ 31,440 
 
11.Fair Value

Fair Value Methods and Assumptions - Financial Assets and Liabilities

We used the following methods and assumptions in estimating fair value of our financial assets and liabilities:

•Commodity derivatives contracts. These include exchange-traded futures contracts related to petroleum products. These contracts are carried at fair value on our consolidated balance sheets and are valued based on quoted prices in active markets. See Note 10 – Derivative Financial Instruments for further disclosures regarding these contracts.

•Basis derivative agreement. During 2019, we entered into a basis derivative agreement with a joint venture co-owner’s affiliate, and, contemporaneously, that affiliate entered into an intrastate transportation services agreement with the joint venture. Settlements under the basis derivative agreement are determined based on the basis differential of crude oil prices at different market locations and a notional volume of 30,000 barrels per day (see Note 10 - Derivative Financial Instruments for further disclosures regarding this agreement). The fair value of this derivative was calculated based on observable market data inputs, including published commodity pricing data and market interest rates. The key inputs in the fair value calculation include the forward price curves for crude oil, the implied forward correlation in crude oil prices between West Texas and the Houston Gulf Coast, and the implied forward volatility for crude oil futures contracts.

•Long-term receivables. These primarily include payments receivable under a sales-type leasing arrangement and cost reimbursement payments receivable. These receivables were recorded at
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MAGELLAN MIDSTREAM PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


fair value on our consolidated balance sheets, using then-current market rates to estimate the present value of future cash flows.

•Guarantees and contractual obligations. At March 31, 2021, these primarily include a long-term contractual obligation we entered into in connection with the sale of three marine terminals to a subsidiary of Buckeye Partners, L.P. (“Buckeye”). This obligation requires us to perform certain environmental remediation work on Buckeye’s behalf at the New Haven, Connecticut terminal.  The contractual obligation was recorded at fair value on our consolidated balance sheets upon initial recognition and was calculated using our best estimate of potential outcome scenarios to determine our liability for the remediation costs required in this agreement.

•Debt. The fair value of our publicly traded notes was based on the prices of those notes at December 31, 2020 and March 31, 2021; however, where recent observable market trades were not available, prices were determined using adjustments to the last traded value for that debt issuance or by adjustments to the prices of similar debt instruments of peer entities that are actively traded. The carrying amount of borrowings, if any, under our revolving credit facility and our commercial paper program approximates fair value due to the frequent repricing of these obligations.

Fair Value Measurements - Financial Assets and Liabilities

The following tables summarize the carrying amounts, fair values and fair value measurements recorded or disclosed as of December 31, 2020 and March 31, 2021 based on the three levels established by ASC 820, Fair Value Measurements and Disclosures (in thousands):
Assets (Liabilities)   Fair Value Measurements as of
December 31, 2020 using:
 Carrying Amount Fair Value Quoted Prices in Active Markets
for Identical
Assets
(Level 1) 		Significant
Other
Observable
Inputs
(Level 2) 		Significant
Unobservable
Inputs
(Level 3)
Commodity derivatives contracts
$ (21,298) $ (21,298) $ (21,298) $ —  $ — 
Basis derivative agreement $ (10,242) $ (10,242) $ —  $ (10,242)
Long-term receivables $ 22,755  $ 22,755  $ —  $ —  $ 22,755 
Guarantees and contractual
obligations
$ (11,207) $ (11,207) $ —  $ —  $ (11,207)
Debt $ (4,978,691) $ (5,880,850) $ —  $ (5,880,850) $ — 
Assets (Liabilities)   Fair Value Measurements as of
March 31, 2021 using:
 Carrying Amount Fair Value Quoted Prices in Active Markets
for Identical
Assets
(Level 1) 		Significant
Other
Observable
Inputs
(Level 2) 		Significant
Unobservable
Inputs
(Level 3)
Commodity derivatives contracts
$ (21,473) $ (21,473) $ (21,473) $ —  $ — 
Basis derivative agreement $ (7,341) $ (7,341) $ —  $ (7,341) $ — 
Long-term receivables $ 21,590  $ 21,590  $ —  $ —  $ 21,590 
Guarantees and contractual
obligations
$ (11,172) $ (11,172) $ —  $ —  $ (11,172)
Debt $ (4,996,142) $ (5,341,424) $ —  $ (5,341,424) $ — 
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MAGELLAN MIDSTREAM PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


12.Commitments and Contingencies

Butane Blending Patent Infringement Proceeding

On October 4, 2017, Sunoco Partners Marketing & Terminals L.P. (“Sunoco”) brought an action for patent infringement in the U.S. District Court for the District of Delaware alleging Magellan Midstream Partners, L.P. (“Magellan”) and Powder Springs Logistics, LLC (“Powder Springs”) have infringed patents related to butane blending at the Powder Springs facility located in Powder Springs, Georgia. Sunoco subsequently submitted pleadings alleging that Magellan is also infringing various patents related to butane blending at nine Magellan facilities, in addition to Powder Springs. Sunoco is seeking monetary damages, attorneys’ fees and a permanent injunction enjoining Magellan and Powder Springs from infringing the subject patents. We deny and are vigorously defending against all claims asserted by Sunoco. Although it is not possible to predict the ultimate outcome, we believe the ultimate resolution of this matter will not have a material adverse impact on our results of operations, financial position or cash flows.

Environmental Liabilities

Liabilities recognized for estimated environmental costs were $14.3 million and $12.7 million at December 31, 2020 and March 31, 2021, respectively. We have classified environmental liabilities as other current or noncurrent based on management’s estimates regarding the timing of actual payments. Environmental expenses recognized as a result of changes in our environmental liabilities are included in operating expense on our consolidated statements of income. Environmental expenses were $0.4 million and $1.1 million for the three months ended March 31, 2020 and 2021, respectively.

Other

In first quarter 2020, we entered into a long-term contractual obligation in connection with the sale of three marine terminals to Buckeye.  This obligation requires us to perform certain environmental remediation work on Buckeye’s behalf at the New Haven terminal.  At December 31, 2020 and March 31, 2021, our consolidated balance sheets reflect a current liability of $0.6 million and a noncurrent liability of $10.2 million to reflect the fair value of this obligation.

We have entered into an agreement to guarantee our 50% pro rata share, up to $25.0 million, of obligations under the Powder Springs’ credit facility. As of March 31, 2021, our consolidated balance sheets reflected a $0.4 million other current liability and a corresponding increase in our investment in non-controlled entities on our consolidated balance sheets to reflect the fair value of this guarantee.

We and the non-controlled entities in which we own an interest are a party to various other claims, legal actions and complaints. While the results cannot be predicted with certainty, management believes the ultimate resolution of these claims, legal actions and complaints after consideration of amounts accrued, insurance coverage or other indemnification arrangements will not have a material adverse effect on our results of operations, financial position or cash flows.

13.Related Party Transactions

Stacy Methvin is an independent member of our general partner’s board of directors and also serves as a director of two of our customers.  We received tariff, terminalling and other ancillary revenue from these customers of $8.4 million and $11.3 million for the three months ended March 31, 2020 and 2021, respectively. We occasionally have transmix settlements with these customers as well. We recorded receivables of $3.9 million and $4.0 million from these customers at December 31, 2020 and March 31, 2021, respectively. 
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MAGELLAN MIDSTREAM PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



See Note 4 – Investments in Non-Controlled Entities and Note 7 – Leases for details of transactions with our joint ventures.

14.Partners’ Capital and Distributions

Partners’ Capital

Our general partner’s board of directors authorized the repurchase of up to $750 million of our common units through 2022. The timing, price and actual number of common units repurchased will depend on a number of factors including our expected expansion capital spending needs, excess cash available, balance sheet metrics, legal and regulatory requirements, market conditions and the trading price of our common units. The repurchase program does not obligate us to acquire any particular amount of common units, and the repurchase program may be suspended or discontinued at any time. No units were repurchased during the three months ended March 31, 2021.

The following table details the changes in the number of our common units outstanding from December 31, 2020 through March 31, 2021:
Common units outstanding on December 31, 2020 223,119,811 
January 2021–Settlement of employee LTIP awards 150,435 
During 2021–Other(a)
12,572 
Common units outstanding on March 31, 2021 223,282,818 
(a) Common units issued to settle the equity-based retainers paid to independent directors of our general partner.

Distributions

Distributions we paid during 2020 and 2021 were as follows (in thousands, except per unit amounts):
 
Payment Date Per Unit
 Distribution Amount 		Total Distribution
02/14/2020 $ 1.0275  $ 234,774 
05/15/2020 1.0275  231,245 
08/14/2020 1.0275  231,245 
11/13/2020 1.0275  229,853 
Total 4.1100  927,117 
02/12/2021 $ 1.0275  229,423 
05/14/2021(a)
1.0275 229,423 
Total $ 2.0550  $ 458,846 
(a) Our general partner’s board of directors declared this distribution in April 2021 to be paid on May 14, 2021 to unitholders of record at the close of business on May 7, 2021.

25





MAGELLAN MIDSTREAM PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


15.Subsequent Events

Recognizable events

No recognizable events occurred subsequent to March 31, 2021.

Non-recognizable events

Sale of Partial Interest in MVP. In April 2021, we sold nearly half of our membership interest in MVP and received $271.0 million in cash, including working capital adjustments. Following the sale, we own approximately 25% of MVP and remain the operator of the facility.

Distribution. In April 2021, our general partner’s board of directors declared a quarterly distribution of $1.0275 per unit for the period of January 1, 2021 through March 31, 2021. This quarterly distribution will be paid on May 14, 2021 to unitholders of record on May 7, 2021.
26


ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

We are a publicly traded limited partnership principally engaged in the transportation, storage and distribution of refined petroleum products and crude oil. As of March 31, 2021, our asset portfolio consisted of:
•our refined products segment, comprised of our approximately 9,800-mile refined petroleum products pipeline system with 54 connected terminals, as well as 25 independent terminals not connected to our pipeline system and two marine storage terminals (one of which is owned through a joint venture); and

•our crude oil segment, comprised of approximately 2,200 miles of crude oil pipelines, a condensate splitter and 37 million barrels of aggregate storage capacity, of which approximately 27 million barrels are used for contract storage. Approximately 1,000 miles of these pipelines, the condensate splitter and 30 million barrels of this storage capacity (including 24 million barrels used for contract storage) are wholly-owned, with the remainder owned through joint ventures.

The following discussion provides an analysis of the results for each of our operating segments, an overview of our liquidity and capital resources and other items related to our partnership. The following discussion and analysis should be read in conjunction with (i) our accompanying interim consolidated financial statements and related notes and (ii) our consolidated financial statements, related notes and management’s discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the year ended December 31, 2020.

Recent Developments

Sale of Partial Interest in MVP Terminalling, LLC. In April 2021, we sold nearly half of our membership interest in MVP and received $271.0 million in cash, including working capital adjustments. Following the sale, we own approximately 25% of MVP and remain the operator of the facility.

Distribution. In April 2021, our general partner’s board of directors declared a quarterly distribution of $1.0275 per unit for the period of January 1, 2021 through March 31, 2021. This quarterly distribution will be paid on May 14, 2021 to unitholders of record on May 7, 2021.

Results of Operations

We believe that investors benefit from having access to the same financial measures utilized by management. Operating margin, which is presented in the following table, is an important measure used by management to evaluate the economic performance of our core operations. Operating margin is not a generally accepted accounting principles (“GAAP”) measure, but the components of operating margin are computed using amounts that are determined in accordance with GAAP. A reconciliation of operating margin to operating profit, which is the nearest comparable GAAP financial measure, is included in the following table. Operating profit includes expense items, such as depreciation, amortization and impairment expense and general and administrative (“G&A”) expense, which management does not focus on when evaluating the core profitability of our separate operating segments. Additionally, product margin, which management primarily uses to evaluate the profitability of our commodity-related activities, is provided in this table. Product margin is a non-GAAP measure but the components of product sales revenue and cost of product sales are determined in accordance with GAAP. Our gas liquids blending, fractionation and other commodity-related activities generate significant revenue. However, we believe the product margin from these activities, which takes into account the related cost of product sales, better represents the importance to our results of operations.


27


Three Months Ended March 31, 2020 compared to Three Months Ended March 31, 2021
  Three Months Ended March 31, Variance
Favorable  (Unfavorable)
  2020 2021 $ Change % Change
Financial Highlights ($ in millions, except operating statistics)
Transportation and terminals revenue:
Refined products $ 314.3  $ 310.8  $ (3.5) (1)
Crude oil 145.7  116.2  (29.5) (20)
Intersegment eliminations (1.6) (1.8) (0.2) (13)
Total transportation and terminals revenue 458.4  425.2  (33.2) (7)
Affiliate management fee revenue 5.3  5.3  —  —
Operating expenses:
Refined products 105.9  94.9  11.0  10
Crude oil 46.8  39.2  7.6  16
Intersegment eliminations (3.2) (3.5) 0.3  9
Total operating expenses 149.5  130.6  18.9  13
Product margin:
Product sales revenue 319.1  230.6  (88.5) (28)
Cost of product sales 249.2  184.9  64.3  26
Product margin 69.9  45.7  (24.2) (35)
Other operating income (expense) (0.5) (0.5) —  —
Earnings of non-controlled entities 43.6  39.1  (4.5) (10)
Operating margin 427.2  384.2  (43.0) (10)
Depreciation, amortization and impairment expense 63.5  58.1  5.4  9
G&A expense 36.9  46.6  (9.7) (26)
Operating profit 326.8  279.5  (47.3) (14)
Interest expense (net of interest income and interest capitalized) 50.5  56.3  (5.8) (11)
Gain on disposition of assets (12.9) —  (12.9) (100)
Other (income) expense 0.9  1.1  (0.2) (22)
Income before provision for income taxes 288.3  222.1  (66.2) (23)
Provision for income taxes 0.7  0.8  (0.1) (14)
Net income $ 287.6  $ 221.3  $ (66.3) (23)
Operating Statistics:
Refined products:
Transportation revenue per barrel shipped $ 1.582  $ 1.672 
Volume shipped (million barrels):
Gasoline 66.2  65.0 
Distillates 43.8  46.5 
Aviation fuel 9.4  6.1 
Liquefied petroleum gases 0.4  0.5 
Total volume shipped 119.8  118.1 
Crude oil:
Magellan 100%-owned assets:
Transportation revenue per barrel shipped $ 0.918  $ 0.789 
Volume shipped (million barrels)(1)
75.1  46.5 
Terminal average utilization (million barrels per month) 22.7  25.5 
Select joint venture pipelines:
BridgeTex - volume shipped (million barrels)(2)
37.1  26.9 
Saddlehorn - volume shipped (million barrels)(3)
16.3  16.1 

(1) Volume shipped includes shipments related to our crude oil marketing activities.
(2) These volumes reflect the total shipments for the BridgeTex pipeline, which is owned 30% by us.
(3) These volumes reflect the total shipments for the Saddlehorn pipeline, which was owned 40% by us through January 31, 2020 and 30% thereafter.
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Transportation and terminals revenue decreased $33.2 million resulting from:
•a decrease in refined products revenue of $3.5 million primarily due to the absence of revenues in the current period associated with the three marine terminals we sold in March 2020. This decline was partially offset by increased transportation revenue as a higher average tariff, in part driven by our mid-year 2020 tariff increase, more than offset slightly lower volumes. Supply disruptions during the current period caused by recent winter storms allowed us to meet market demand with our extensive pipeline system, resulting in longer-haul movements and additional volumes in the period. The current period also benefited from contributions from the West Texas pipeline expansion that began operations in the third quarter of 2020. These increased volumes were more than offset by lingering impacts of COVID-19 and still-recovering drilling activity; and
•a decrease in crude oil revenue of $29.5 million due to lower average tariff rates and less volume shipped. Average tariff rates decreased primarily as a result of the recent expiration of several higher-priced contracts on our Longhorn pipeline and deficiency revenue recognized in the year-ago period. Transportation volumes also declined partially due to those recent Longhorn contract expirations, with much of this volume replaced by activities of our marketing affiliate. Tariff movements on the Houston distribution system partially decreased due to a change in the way customers now contract for services at the partnership’s Seabrook export facility joint venture. Further, short-term supply disruptions caused by the recent winter storms also negatively impacted shipments on both Longhorn and the Houston distribution system.
Operating expense decreased by $18.9 million primarily resulting from:
•a decrease in refined products expenses of $11.0 million primarily due to the absence of costs in the current period associated with the divested marine terminals as well as lower power costs from our recent optimization efforts and gains from power hedging activity driven by the recent winter storms; and
•a decrease in crude oil expenses of $7.6 million primarily due to lower power costs from our recent optimization efforts and gains from power hedging activity driven by the recent winter storms.

Product margin decreased $24.2 million primarily due to lower sales volume and reduced margins on our gas liquids blending activities.
Earnings of non-controlled entities decreased $4.5 million primarily due to decreased volume and margin from Powder Springs blending activities, partially offset by additional contributions from MVP due to new storage and dock assets placed into service in early 2020 and recognition of deficiency revenue in the current period.
Depreciation, amortization and impairment expense decreased $5.4 million due to an impairment loss in first quarter 2020 related to our sale of three marine terminals.
G&A expense increased $9.7 million primarily due to higher incentive compensation costs to reflect improved economic conditions in 2021.

Interest expense, net of interest income and interest capitalized, increased $5.8 million primarily due to lower capitalized interest as a result of reduced ongoing expansion capital spending as well as higher outstanding debt. Our weighted-average debt outstanding was $5.1 billion in first quarter 2021 compared to $4.8 billion in first quarter 2020. The weighted average interest rate was 4.4% in first quarter 2021 compared to 4.6% in first quarter 2020.

Gain on disposition of assets was $12.9 million unfavorable due to a gain on the sale of a portion of our interest in Saddlehorn recognized in first quarter 2020.


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Adjusted EBITDA, Distributable Cash Flow and Free Cash Flow

We believe that investors benefit from having access to the same financial measures utilized by management. In the following tables, we present the financial measures of adjusted EBITDA, distributable cash flow (“DCF”) and free cash flow (“FCF”), which are non-GAAP measures.

Adjusted EBITDA is an important measure utilized by management and the investment community to assess the financial results of a company. A reconciliation of adjusted EBITDA to net income, the nearest comparable GAAP measure, is included in the following tables.

Our partnership agreement requires that all of our available cash, less amounts reserved by our general partner’s board of directors, be distributed to our unitholders. DCF is used by management to determine the amount of cash that our operations generated, after maintenance capital spending, that is available for distribution to our unitholders, as well as a basis for recommending to our general partner’s board of directors the amount of distributions to be paid each period. We also use DCF as the basis for calculating our performance-based equity long-term incentive compensation. A reconciliation of DCF to net income, the nearest comparable GAAP measure, is included in the following tables.

FCF is a financial metric used by many investors and others in the financial community to measure the amount of cash generated by a company during a period after accounting for all investing activities, including both maintenance and expansion capital spending, as well as proceeds from divestitures. We believe FCF is important to the financial community as it reflects the amount of cash available for distributions, unit repurchases, debt reduction, additional investments or other partnership uses. A reconciliation of FCF to net income and to net cash provided by operating activities, the nearest comparable GAAP measures, is included in the following tables.

Since the non-GAAP measures presented here include adjustments specific to us, they may not be comparable to similarly-titled measures of other companies.

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Adjusted EBITDA, DCF and FCF are non-GAAP measures. A reconciliation of each of these measures to net income for the three months ended March 31, 2020 and 2021 is as follows (in millions):
Three Months Ended March 31,
2020 2021
Net income $ 287.6  $ 221.3 
Interest expense, net 50.5  56.3 
Depreciation, amortization and impairment(1)
63.1  59.2 
Equity-based incentive compensation(2)
(14.5) (1.5)
Gain on disposition of assets(3)
(10.5) — 
Commodity-related adjustments:
Derivative (gains) losses recognized in the period associated with future transactions(4)
(66.7) 17.4 
Derivative gains (losses) recognized in previous periods associated with transactions completed in the period(4)
(11.7) (22.4)
Inventory valuation adjustments(5)
71.7  1.4 
Total commodity-related adjustments (6.7) (3.6)
Distributions from operations of non-controlled entities in excess of (less than) earnings 11.0  12.4 
Adjusted EBITDA 380.5  344.1 
Interest expense, net, excluding debt issuance cost amortization (49.6) (55.5)
Maintenance capital(6)
(24.4) (12.1)
Distributable cash flow 306.5  276.5 
Expansion capital(7)
(155.0) (10.5)
Proceeds from asset sales 332.8  0.7 
Free cash flow 484.3  266.7 
Distributions paid (234.8) (229.4)
Free cash flow after distributions $ 249.5  $ 37.3 
(1)    Depreciation, amortization and impairment expense is excluded from DCF to the extent it represents a non-cash expense.
(2)    Because we intend to satisfy vesting of unit awards under our equity-based long-term incentive compensation plan with the issuance of common units, expenses related to this plan generally are deemed non-cash and excluded for DCF purposes. The amounts above have been reduced by cash payments associated with the plan, which are primarily related to tax withholdings.
(3) Gains on disposition of assets are excluded from DCF to the extent they are not related to our ongoing operations.
(4) Certain derivatives have not been designated as hedges for accounting purposes and the mark-to-market changes of these derivatives are recognized currently in net income.  We exclude the net impact of these derivatives from our determination of DCF until the transactions are settled and, where applicable, the related products are sold.  In the period in which these transactions are settled and any related products are sold, the net impact of the derivatives is included in DCF.
(5)    We adjust DCF for lower of average cost or net realizable value adjustments related to inventory and firm purchase commitments as well as market valuation of short positions recognized each period as these are non-cash items. In subsequent periods when we physically sell or purchase the related products, we adjust DCF for the valuation adjustments previously recognized.
(6)    Maintenance capital expenditures maintain our existing assets and do not generate incremental DCF (i.e. incremental returns to our unitholders). For this reason, we deduct maintenance capital expenditures to determine DCF.
(7)    Includes additions to property, plant and equipment (excluding maintenance capital and capital-related changes in accounts payable and other current liabilities), acquisitions and investments in non-controlled entities, net of distributions from returns of investments in non-controlled entities and deposits from undivided joint interest third parties.




31


A reconciliation of FCF to net cash provided by operating activities for the three months ended March 31, 2020 and 2021 is as follows (in millions):
Three Months Ended March 31,
2020 2021
Net cash provided by operating activities $ 384.6  $ 240.2 
Changes in operating assets and liabilities (34.2) 57.9 
Net cash provided (used) in investing activities 131.8  (31.2)
Payments associated with settlement of equity-based incentive compensation (14.7) (6.2)
Settlement gain, amortization of prior service credit and actuarial loss (1.1) (1.6)
Changes in accrued capital items 20.4  9.2 
Commodity-related adjustments(1)
(6.7) (3.6)
Other 4.2  2.0 
Free cash flow 484.3  266.7 
Distributions paid (234.8) (229.4)
Free cash flow after distributions $ 249.5  $ 37.3 
(1) Please refer to the preceding table for a description of these commodity-related adjustments.


Liquidity and Capital Resources

Cash Flows and Capital Expenditures

Operating Activities. Net cash provided by operating activities was $384.6 million and $240.2 million for the three months ended March 31, 2020 and 2021, respectively. The $144.4 million decrease in 2021 was due to changes in our working capital and lower net income as previously described, partially offset by adjustments for non-cash items and distributions in excess of earnings of our non-controlled entities.
Investing Activities. Net cash provided by investing activities for the three months ended March 31, 2020 was $131.8 million and net cash used by investing activities for the three months ended March 31, 2021 was $31.2 million. During the 2021 period, we used $30.0 million for capital expenditures. During the 2020 period, we used $172.7 million for capital expenditures, which included $1.3 million for undivided joint interest projects for which cash was received from a third party. Also, during 2020, we sold three marine terminals for cash proceeds of $252.6 million and sold a portion of our interest in Saddlehorn for cash proceeds of $79.8 million. Additionally, we contributed capital of $28.3 million in conjunction with our joint venture capital projects, which we account for as investments in non-controlled entities.
Financing Activities. Net cash used by financing activities for the three months ended March 31, 2020 and 2021 was $451.5 million and $218.6 million, respectively. During the 2021 period, we paid distributions of $229.4 million to our unitholders. Also, in January 2021, our equity-based incentive compensation awards that vested December 31, 2020 were settled by issuing 163,007 common units and distributing those units to the long-term incentive plan (“LTIP”) participants, resulting in payments primarily associated with tax withholdings of $6.2 million. During the 2020 period, we paid distributions of $234.8 million to our unitholders and made common unit repurchases of $202.0 million. Also, in January 2020, our equity-based incentive compensation awards that vested December 31, 2019 were settled by issuing 284,643 common units and distributing those units to the LTIP participants, resulting in payments primarily associated with tax withholdings of $14.7 million.
The quarterly distribution amount related to first quarter 2021 earnings is $1.0275 per unit (to be paid in second quarter 2021).  If we were to continue paying distributions at this level on the number of common units currently outstanding, total distributions of approximately $918 million would be paid to our unitholders related to 2021 earnings. Management believes we will have sufficient DCF to fund these distributions.
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Capital Requirements

Capital spending for our business consists primarily of:
•Maintenance capital expenditures. These expenditures include costs required to maintain equipment reliability and safety and to address environmental or other regulatory requirements rather than to generate incremental DCF; and
•Expansion capital expenditures. These expenditures are undertaken primarily to generate incremental DCF and include costs to acquire additional assets to grow our business and to expand or upgrade our existing facilities and to construct new assets, which we refer to collectively as organic growth projects. Organic growth projects include, for example, capital expenditures that increase storage or throughput volumes or develop pipeline connections to new supply sources.

For the three months ended March 31, 2021, our maintenance capital spending was $12.1 million. For 2021, we expect to spend approximately $85 million on maintenance capital.

During the first three months of 2021, we spent $8.6 million for our expansion capital projects and contributed $1.9 million for expansion capital projects in conjunction with our joint ventures. Based on the progress of expansion projects already underway, we expect to spend approximately $75 million in 2021 to complete our current slate of expansion capital projects.
Liquidity

Cash generated from operations is a key source of liquidity for funding debt service, maintenance capital expenditures, quarterly distributions and unit repurchases. Additional liquidity for purposes other than quarterly distributions, such as expansion capital expenditures and debt repayments, is available through borrowings under our commercial paper program and revolving credit facility, as well as from other borrowings or issuances of debt or common units (see Note 6 – Debt and Note 14 – Partners’ Capital and Distributions of the consolidated financial statements included in Item 1 of Part I of this report for detail of our borrowings and changes in partners’ capital).

Off-Balance Sheet Arrangements

None.

Other Items

Commodity Derivative Agreements. Certain of our business activities result in our owning various commodities, which exposes us to commodity price risk. We generally use forward physical commodity contracts and exchange-traded futures contracts to hedge against changes in prices of the commodities that we expect to sell or purchase in future periods. We are a party to a basis derivative agreement for which settlements are determined based on the basis differential of crude oil prices at different market locations.

For further information regarding the quantities of refined products and crude oil hedged at March 31, 2021 and the fair value of open hedge and basis derivative contracts at that date, please see Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Related Party Transactions. See Note 13 – Related Party Transactions in Item 1 of Part I of this report for detail of our related party transactions.


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ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We may be exposed to market risk through changes in commodity prices and interest rates and have established policies to monitor and mitigate these market risks. We use derivative agreements to help manage our exposure to commodity price and interest rate risks. 

Commodity Price Risk

Our commodity price risk primarily arises from our gas liquids blending and fractionation activities, and from managing product overages and shortages associated with our refined products and crude oil pipelines and terminals. We generally use derivatives such as forward physical contracts and exchange-traded futures contracts to help us manage our commodity price risk.

Forward physical contracts that qualify for and are elected as normal purchases and sales are accounted for using traditional accrual accounting. As of March 31, 2021, we had commitments under forward purchase and sale contracts as follows (in millions):
Total 2021 2022-2025 Beyond 2026
Forward purchase contracts – notional value $ 344.0  $ 101.7  $ 118.6  $ 123.7 
Forward purchase contracts – barrels 10.4  2.1  3.8  4.5 
Forward sales contracts – notional value $ 47.9  $ 47.9  $ —  $ — 
Forward sales contracts – barrels 0.8  0.8  —  — 
We generally use exchange-traded futures contracts to hedge against changes in the price of the petroleum products we expect to sell or purchase. We did not elect hedge accounting treatment under ASC 815, Derivatives and Hedging, for our open contracts and as a result we accounted for these contracts as economic hedges, with changes in fair value recognized currently in earnings. The fair value of these open futures contracts, representing 3.0 million barrels of petroleum products we expect to sell and 0.2 million barrels of gas liquids we expect to purchase, was a net liability of $21.5 million. With respect to these contracts, a $10.00 per barrel increase (decrease) in the prices of petroleum products we expect to sell would result in a $30.0 million decrease (increase) in our operating profit, while a $10.00 per barrel increase (decrease) in the price of gas liquids we expect to purchase would result in a $2.0 million increase (decrease) in our operating profit. These increases or decreases in operating profit would be substantially offset by higher or lower product sales revenue or cost of product sales when the physical sale or purchase of those products occurs, respectively. These contracts may be for the purchase or sale of products in markets different from those in which we are attempting to hedge our exposure, and the related hedges may not eliminate all price risks.

We are a party to a basis derivative agreement with a joint venture co-owner’s affiliate, and that affiliate is a party to an intrastate transportation services agreement with the joint venture, which was entered into contemporaneously with the basis derivative agreement. Settlements under the basis derivative agreement are determined based on the basis differential of crude oil prices at different market locations and a notional volume of 30,000 barrels per day. As a result, we are exposed to the differential in the forward price curves for crude oil in West Texas and the Houston Gulf Coast. With respect to this agreement, a $0.50 per barrel increase (decrease) in the differential would result in an approximately $1 million increase (decrease) in our operating profit.

Interest Rate Risk
Our use of variable rate debt and any future issuances of fixed rate debt expose us to interest rate risk. As of March 31, 2021, we did not have any variable rate debt outstanding.


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ITEM 4.CONTROLS AND PROCEDURES

We performed an evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures” (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. We performed this evaluation under the supervision and with the participation of our management, including our general partner’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”). Based upon that evaluation, our general partner’s CEO and CFO concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Our disclosure controls and procedures include controls and procedures designed so that information required to be disclosed in reports filed or submitted under the Exchange Act is accumulated and communicated to management, including the CEO and the CFO, as appropriate, to allow timely decisions regarding required disclosure. There has been no change in our internal control over financial reporting that occurred during the quarter ended March 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


35




PART II
OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

Butane Blending Patent Infringement Proceeding.  On October 4, 2017, Sunoco Partners Marketing & Terminals L.P. (“Sunoco”) brought an action for patent infringement in the U.S. District Court for the District of Delaware alleging Magellan Midstream Partners, L.P. (“Magellan”) and Powder Springs Logistics, LLC (“Powder Springs”) are infringing patents related to butane blending at the Powder Springs facility located in Powder Springs, Georgia. Sunoco subsequently submitted pleadings alleging that Magellan is also infringing various patents related to butane blending at nine Magellan facilities, in addition to Powder Springs. Sunoco is seeking monetary damages, attorneys’ fees and a permanent injunction enjoining Magellan and Powder Springs from infringing the subject patents. We deny and are vigorously defending against all claims asserted by Sunoco. Although it is not possible to predict the ultimate outcome, we believe the ultimate resolution of this matter will not have a material adverse impact on our results of operations, financial position or cash flows.

We and the non-controlled entities in which we own an interest are a party to various other claims, legal actions and complaints. While the results cannot be predicted with certainty, management believes the ultimate resolution of these claims, legal actions and complaints after consideration of amounts accrued, insurance coverage or other indemnification arrangements will not have a material adverse effect on our future results of operations, financial position or cash flows. 

ITEM 1A.RISK FACTORS

In addition to the information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not our only risks. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also could materially adversely affect our business, financial condition or operating results.


ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

In first quarter 2020, we announced that our general partner’s board of directors authorized the repurchase of up to $750 million of our common units through 2022. We intend to purchase our common units from time-to-time through a variety of methods, including open market purchases and negotiated transactions, all in compliance with the rules of the Securities and Exchange Commission and other applicable legal requirements. The timing, price and actual number of common units repurchased will depend on a number of factors including our expected expansion capital spending, excess cash available, balance sheet metrics, legal and regulatory requirements, market conditions and the trading price of our common units. The repurchase program does not obligate us to acquire any particular amount of common units, and the repurchase program may be suspended or discontinued at any time.

At March 31, 2021, the remaining available capacity under the program was $473.1 million. No units were repurchased during the three months ended March 31, 2021.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None.

36



ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.


ITEM 5.OTHER INFORMATION

None.


ITEM 6.EXHIBITS

The exhibits listed below on the Index to Exhibits are filed or incorporated by reference as part of this report.



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INDEX TO EXHIBITS
Exhibit Number Description
Exhibit 10.1 —
Exhibit 10.2 —
Exhibit 31.1 —
Exhibit 31.2 —
Exhibit 32.1 —
Exhibit 32.2 —
Exhibit 101.INS — XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
Exhibit 101.SCH — XBRL Taxonomy Extension Schema Document.
Exhibit 101.CAL — XBRL Taxonomy Extension Calculation Linkbase Document.
Exhibit 101.DEF — XBRL Taxonomy Extension Definition Linkbase Document.
Exhibit 101.LAB — XBRL Taxonomy Extension Label Linkbase Document.
Exhibit 101.PRE — XBRL Taxonomy Extension Presentation Linkbase Document.





38



SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized in Tulsa, Oklahoma on April 29, 2021.
 
MAGELLAN MIDSTREAM PARTNERS, L.P.
By: Magellan GP, LLC,
  its general partner
/s/ Jeff Holman
Jeff Holman
Chief Financial Officer
(Principal Accounting and Financial Officer)


39

Exhibit 10.1


Magellan Midstream Holdings GP, LLC
Executive Severance Pay Plan
and Summary Plan Description


(Amended and Restated
Effective April 1, 2021)


 
INTRODUCTION

Magellan Midstream Holdings GP, LLC has adopted an Executive Severance Pay Plan (“Plan”) to provide for the payment of severance benefits to eligible executives under the terms described herein. For purposes of this Plan: (i) the term “Company” means Magellan Midstream Partners, L.P. and any Person that directly or indirectly through one or more intermediaries controls, is controlled by or is under common control with, Magellan Midstream Partners, L.P; for this purpose, the term “control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise; (ii) the term “Magellan” means Magellan Midstream Holdings GP, LLC; (iii) the term “Board” means the Board of Directors of Magellan GP, LLC; (iv) the terms “Compensation Committee” and “Plan Administrator” mean the Compensation Committee of the Board; and (v) the term “Person” means an individual, corporation, limited liability company, partnership, joint venture, trust, unincorporated organization, association, government agency or political subdivision thereof or other entity.
Magellan hereby amends and restates the Plan effective as of April 1, 2021. The terms of the Plan as described herein apply to eligible executives who are in the employ of the Company on or after April 1, 2021.
This document is drafted in a manner to serve as both the Plan document and the summary plan description for the Plan. Contact the Benefits Department if you want to receive a copy of the latest version of the Plan document.
Neither the Plan nor the benefits provided by the Plan is a promise of continued employment with the Company. Except in connection with or after a Change in Control Event, as described in more detail herein, the Plan may be amended or terminated at any time without the consent of any eligible executive. If the Plan is amended or terminated, your benefits, if any, may be different than those described herein.
ELIGIBILITY
You will receive severance pay only if your employment termination meets specific guidelines and you satisfy certain additional requirements, such as the timely execution and return of a Release of Claims (as hereinafter defined). To be eligible to receive severance pay, you must be: (i) an eligible executive whose employment terminated because of a reduction in force or job elimination prior to consummation of a Change in Control Event, as described in more detail below; or (ii) an eligible executive whose employment is terminated voluntarily for Good Reason or involuntarily during a Change in Control Period, as described in more detail below.
An eligible executive for purposes of this Plan is any senior executive officer of Magellan GP, LLC, which is limited to the Chief Executive Officer (“CEO”), Chief Operating Officer (“COO”), any Senior Vice President (“SVP”) and any other senior executive officer who the Compensation Committee declares as an eligible executive.


In addition to the foregoing eligibility requirements, the following individuals shall not be eligible for benefits under the Plan under any circumstances: (i) any “leased employee” (as such term is defined in Section 414 of the Internal Revenue Code); (ii) any nonresident alien; (iii) any member of a collective bargaining unit with respect to which welfare benefits were a bona fide subject of collective bargaining (unless and to the extent that the collective bargaining agreement specifically covers such members of a collective bargaining unit); or (iv) any person while he or she is considered by the Company (accurately or inaccurately) to be an independent contractor.
Termination of Employment Due to a Reduction in Force or Job Elimination
The severance benefits described in this section are referred to in this Plan as “Non-Change in Control Benefits.”
To receive severance pay benefits due to a reduction in force or job elimination, your employment must be terminated because of a designated reduction in force or job elimination prior to consummation of a Change in Control Event. If you are so terminated from employment or your job is eliminated, you will not receive severance pay hereunder unless the Plan Administrator approves the reduction in force or job elimination and you are notified in writing by the Plan Administrator, or its designee, that your employment is being terminated because of a reduction in force or job elimination. As described in more detail below, if your employment is terminated, you will not receive severance pay if you have accepted an offer of employment with the Company or with a successor company to any of such entities, even if the position is not considered comparable, prior to receipt of such payment.
If you are given advance notice of a reduction in force or job elimination that will be prior to consummation of a Change in Control Event, you must remain in employment until the designated termination date in order to receive severance pay. Severance pay may be paid if you terminate employment prior to the designated termination date only if approved in advance in writing by the Plan Administrator, or its designee.
Even if you meet the above requirements, you will not be entitled to severance pay under the Plan due to a reduction in force or job elimination that is prior to consummation of a Change in Control Event if you:
•    Are discharged for unsatisfactory performance, including but not limited to, failure to adequately perform job responsibilities, poor attendance, violation of Company policy or practice or acts of dishonesty or moral turpitude;
•    Voluntarily resign for any reason, including retiring, prior to your scheduled termination date;
•    Receive any benefits from the Company or a successor company under an incentive retirement plan established for the purpose of encouraging you to terminate employment within a specified time period;
•    Receive more favorable severance pay benefits under any other severance pay plan, agreement or arrangement of or with the Company or a successor company;
•    Are transferred to or receive an offer of employment for a comparable position within the Company prior to your termination date. A position will be deemed “comparable” if the position provides a total base salary, Annual Incentive Program (or similar program) target and Long-Term Incentive Plan (or similar program) target (collectively, “Total Compensation”) on the termination date at least equal to 90% of each of the foregoing components of your Total Compensation as it existed on the termination date. Such a position includes any position within the Company, regardless of whether such position requires you to transfer to a different work location, but only so long as the location of your principal place of employment is not more than 50 miles from the location you were employed prior to the termination date;
•    Receive an offer of comparable employment with a successor company or an affiliate of such a company after a corporate rearrangement, total or partial merger, acquisition, sale or other transaction prior to your termination date. A position will be deemed “comparable” if the position provides a total base salary, annual cash bonus target and annual equity or other long-term incentive target (collectively, “Aggregate


Compensation”) on the termination date at least equal to 90% of your Aggregate Compensation as it existed on the termination date. Such a position includes any position with a successor company or an affiliate of such a company, regardless of whether such position requires you to transfer to a different work location, but only so long as the location of your principal place of employment is not more than 50 miles from the location you were employed prior to the termination date;
•    Prior to your termination date, accept an offer of employment with the Company or with a successor company or an affiliate of such a company after a corporate rearrangement, total or partial merger, acquisition, sale, or other transaction, even if the offer of employment is not for a comparable position;
•    Die before your established termination date;
•    Are receiving long-term disability benefits under a long-term disability program maintained by the Company or any successor company;
•    Are receiving short-term disability benefits at the time of termination of employment due to a reduction in force or job elimination, unless you are released to return to work within the initial six-month period of short-term disability and the Plan Administrator, or its designee, approves eligibility for severance upon release to return to work, such determination for severance eligibility to be made in the sole discretion of the Plan Administrator or its designee (with payment of benefits, if applicable, to be made within 30 days after such determination is made provided that all other requirements to receive benefits are satisfied); or
•    Fail to sign and deliver a release of claims, which may include, but not be limited to, an agreement regarding protection of confidential information and business reputation (a “Release of Claims”), prepared by the Company; however, you will not be required to release your rights to indemnification from the Company under by-laws, partnership agreements, limited liability company agreements, employee benefit plans or other agreements. You will not be paid any benefits hereunder unless the Release of Claims is executed and returned to the SVP – Human Resources or the Chair of the Compensation Committee by the deadline as stated in the Release of Claims (which will be no later than 45 days following your termination of employment). You also will not be paid any benefits hereunder if you revoke the Release of Claims within seven (7) days of your execution of such Release of Claims.
The foregoing exclusions do not apply to eligibility to receive severance benefits due to termination of employment during a Change in Control Period. The sole exclusions applicable to such benefits are described in the following section.
Termination of Employment During a Change in Control Period
The severance benefits described in this section are referred to in this Plan as “Change in Control Benefits.”
For purposes of this Plan, a “Change in Control Period” shall begin upon the earliest of: (1) the public announcement of the future occurrence of one or more Change in Control Events (as defined below); (2) the execution of a definitive agreement in connection with the future occurrence of one or more Change in Control Events; or (3) the occurrence of one or more Change in Control Events, and, in any such case, shall continue during the two (2) year period after such Change in Control Event is consummated. For purposes of this Plan, the term “Change in Control Event” means: (i) any direct or indirect sale, lease, exchange, liquidation, division or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of Magellan Midstream Partners, L.P. to any Person or Persons, other than to one or more controlled subsidiaries of Magellan Midstream Partners, L.P.: (ii) the consolidation, reorganization, merger, recapitalization, exchange, division or other similar transaction (in one transaction or a series of related transactions) (any such transaction or series of transactions referred to herein as a “Merger”) pursuant to which (a) more than 50% of the combined voting power of the outstanding equity interests in Magellan GP, LLC or its successor entities cease to be owned, directly or indirectly, by Magellan Midstream Partners, L.P., (b) more than 50% of the combined voting power of the outstanding equity interests in Magellan Midstream Partners, L.P. or its successor entities cease to be, directly or


indirectly, owned immediately following the Merger by the owners of such interests immediately prior to the Merger or (c) Magellan GP, LLC or one or more of the other controlled subsidiaries of Magellan Midstream Partners, L.P. ceases to be general partner(s) of Magellan Midstream Partners, L.P. or its successor; (iii) a Person or group other than Magellan Midstream Partners, L.P. or its controlled subsidiaries directly or indirectly becoming the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities and Exchange Act of 1934, as amended) of more than 30% of the voting power of the then outstanding common units of Magellan Midstream Partners, L.P. or its successor; or (iv) individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board of Directors of Magellan GP, LLC or of the board of directors or equivalent body of any successor parent or general partner of Magellan Midstream Partners, L.P.; provided, however, that any individual becoming a director subsequent to the date hereof whose election or nomination for election by Magellan Midstream Partners, L.P.’s unitholders was approved by a vote of at least a majority of the directors then comprising the Incumbent Board in the ordinary course of business shall be considered as though such individual was a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board or otherwise outside the ordinary course of business. A Change in Control Event shall not be deemed to have occurred as a result of a transaction or series of transactions undertaken solely for the purpose of converting Magellan Midstream Partners, L.P. from a limited partnership to a c-corporation or limited liability company.
To become eligible to receive severance pay benefits due to a Change in Control Event, your employment must be terminated either: (i) voluntarily for Good Reason during a Change in Control Period; or (ii) involuntarily during a Change in Control Period. An eligible executive who has a termination of employment prior to consummation of the Change in Control Event but after the beginning of a Change in Control Period (i.e., following the public announcement of such future event or execution of a definitive agreement with respect to such future event) shall have no right to receive Change in Control Benefits under this Plan unless and until the Change in Control Event has been consummated and the eligible executive has completed any additional requirements to receive benefits, including, but not limited to, execution and return of a Release of Claims.
Voluntary termination of employment for “Good Reason” or a “Good Reason Event” occurs if you voluntarily terminate your employment during a Change in Control Period because of one or more of the following that occurs during the same period:
(a)    a reduction of more than 10% in your base salary or incentive compensation opportunities;
(b)    a significant reduction in your authority, duties or responsibilities;
(c)    a significant reduction in the authority, duties or responsibilities of your direct supervisor, including a requirement that you report to an employee of the Company instead of reporting directly to the Board, CEO or COO of Magellan GP, LLC, as applicable;
(d)    a significant reduction in the budget over which you retain authority;
(e)    a requirement that you transfer the location of your principal place of employment more than 50 miles from the location you were employed immediately prior to the Change in Control Period;
(f)    any other action or inaction that constitutes a material breach by the Company of any provision of this Plan or any agreement under which you provide services; or
(g)    the Company’s or Magellan’s breach of its obligations under this Plan to require a successor to the Company or Magellan, as applicable, to expressly and unconditionally assume and agree to perform the obligations of the Company and Magellan under this Plan, in the same manner and to the same extent that the Company and Magellan would be required to perform if no succession had taken place.


A termination of employment for Good Reason shall not be effective unless you notify the Company of the Good Reason Event within a period not to exceed 90 days of the initial existence of the Good Reason Event. Upon receipt of your notification, the Company shall have at least 30 days during which it may remedy the Good Reason Event and not be required to pay the severance pay. If the Company: (i) does not cure the Good Reason Event within 30 days; or (ii) gives notice to the eligible executive of its intent to not remedy the Good Reason Event, the eligible executive’s resignation shall be effective immediately, and the Company shall be obligated to make severance payments to the eligible executive as provided herein upon satisfaction of all Plan requirements, including timely execution and delivery of a Release of Claims.
Even if you meet the above requirements, you will not be entitled to severance pay due to a termination during a Change in Control Period under the Plan if you:
•    Are discharged for acts of dishonesty or moral turpitude;
•    Die before your established termination date; or
•    Fail to sign and deliver a Release of Claims prepared by the Company; however, you will not be required to release your rights to indemnification from the Company under by-laws, partnership agreements, limited liability company agreements, employee benefit plans or other agreements. You will not be paid any benefits hereunder unless the Release of Claims is executed and returned to the SVP – Human Resources or Chair of the Compensation Committee by the deadline as stated in the Release of Claims (which, except as provided in the following paragraph, will be no later than 45 days following your termination of employment). You also will not be paid any benefits hereunder if you revoke the Release of Claims within seven (7) days of your execution of such Release of Claims.
If your employment is terminated prior to consummation of the Change in Control Event but after the beginning of a Change in Control Period (i.e., following the public announcement of such future event or execution of a definitive agreement with respect to such future event), your Release of Claims must be executed and returned to the SVP – Human Resources or the Chair of the Compensation Committee by the deadline as stated in the Release of Claims (which will be no later than 45 days following the consummation of the Change in Control Event). If you have received Non-Change in Control Benefits and then become eligible to receive Change in Control Benefits, you will be required to execute and return another Release of Claims to receive any additional Change in Control Benefits. Such additional Release of Claims must be executed and returned to the SVP – Human Resources or the Chair of the Compensation Committee by the deadline as stated in the Release of Claims (which will be no later than 45 days following the consummation of the Change in Control Event).
SEVERANCE PAY BENEFITS
Subject to your signing (and not revoking) a Release of Claims prepared by the Company (which will not require you to release your rights to indemnification from the Company under by-laws, partnership agreements, limited liability company agreements, employee benefit plans or other agreements), the amount of severance pay you receive pursuant to this Plan will be determined pursuant to the following provisions.
Force Reduction and Job Elimination Benefits (Non-Change in Control Benefits)
Subject to the provisions described in “Payment of Severance Benefits” below, if you become entitled to severance benefits under the Plan due to a reduction in force or job elimination prior to consummation of a Change in Control Event and all other requirements to receive benefits are satisfied, you will receive two (2) weeks of severance pay for each full, completed year of your employment service with the Company, with a minimum of six (6) weeks of severance pay and a maximum of fifty-two (52) weeks of severance pay. Only full years of employment service will be counted in setting the amount of severance pay. If you have less than one (1) full,


completed year of employment service with the Company and you are otherwise eligible for benefits under this Plan, you will receive two (2) weeks of severance pay.
Your weekly severance pay shall be determined by reference to your regular, normal workweek base wage, as determined by the Plan Administrator, on the date of employment termination. Your regular, normal workweek base wage is your total weekly salary or wages, including any salary deferral contributions you make to the Company’s defined contribution and deferred compensation plans, and salary deferral contributions made to any cafeteria or flexible benefit plan maintained by the Company. Unless otherwise determined by the Plan Administrator, your regular, normal workweek base wage does not include bonuses, overtime, commissions, cost of living pay, housing pay, relocation pay, incentive pay, equity compensation, other taxable fringe benefits and extraordinary compensation. Severance pay will be equal to the number of weeks of severance pay granted according to the above formula multiplied by your regular, normal workweek base wage, as described above.
Your length of employment service with the Company may or may not include service with any predecessor company. For purposes of calculating length of employment service with the Company, the Company will recognize an eligible executive’s years of employment service as of December 31, 2003 with The Williams Companies, Inc., and its affiliates, if such eligible executive’s employment was transferred from The Williams Companies, Inc. or its affiliates to the Company prior to or on January 1, 2004. Service with any other predecessor company may be included to the extent the Plan Administrator determines such employment service be included, and the Plan Administrator, or its designee, notifies you that part or all of your service with any predecessor company will be counted. The Plan Administrator’s determination, in its discretion, of the years of employment service completed and the weeks of severance pay granted will be final and binding on all Persons.
If you terminate employment following the last day of a fiscal year and prior to the payment date of the Annual Incentive Program (or similar annual cash bonus program) bonus for such fiscal year preceding your termination of employment, you will receive an additional severance payment equal to the Annual Incentive Program (or similar annual cash bonus program) bonus that you would have been entitled to receive for such fiscal year but for your termination of employment prior to the payment date of such bonus.
If you are enrolled in medical and prescription drug coverage on your termination date, you will receive an additional severance payment equal to: (i) the monthly premium for COBRA continuation coverage less the monthly employee contribution for active employee coverage for the medical and prescription drug coverage in effect on your termination date; multiplied by (ii) one hundred fifty percent (150%); multiplied by (iii) three (3). Dental, vision and health care flexible spending account coverage premiums will not be included in determining such payment.
Subject to the provisions described in “Payment of Severance Benefits” below, the amounts described above will be paid in a lump sum.
Change in Control Benefits
Subject to the provisions described in “Payment of Severance Benefits” below, if you become entitled to severance benefits under the Plan due to a termination of employment during a Change in Control Period and all other requirements to receive benefits are satisfied, you will receive a lump sum payment that is the sum of:
(a)    An amount equal to two (2) times your current base salary in the case of the COO or a SVP (or any other senior executive officer who the Compensation Committee declares as an eligible executive), or an amount equal to three (3) times your current base salary in the case of the CEO (for purposes of this calculation, your “current base salary” shall be your base salary (disregarding any reduction in base salary that would qualify as Good Reason) on your termination date); plus
(b)    An amount equal to two (2) times your current year Annual Incentive Program (or similar annual cash bonus program) target (the “AIP Target”) in the case of the COO or a SVP (or any other senior executive officer who the Compensation Committee declares as an eligible executive), or an amount equal to three (3) times


your current year AIP Target in the case of the CEO (for purposes of this calculation, your current year AIP Target shall be your AIP Target (disregarding any reduction in AIP Target that would qualify as Good Reason) for the year in which you terminate employment; provided that if, at the time of your termination of employment, your AIP Target has not been established for such fiscal year, your AIP Target for purposes of this calculation shall be the AIP Target established for you for the preceding fiscal year; plus
(c)    An amount equal to your Pro-Rata Annual Bonus. For this purpose, the term “Pro-Rata Annual Bonus” means, with respect to the Company’s fiscal year in which you terminate employment, an amount equal to your AIP Target multiplied by a fraction, the numerator of which is the number of days from and including the first day of such fiscal year through and including the date you terminate employment, and the denominator of which is three hundred sixty-five (365), provided that such amount shall be reduced (but not below zero (0)) by the amount of any Annual Incentive Program (or similar annual cash bonus program) amount previously paid to you with respect to the Company’s fiscal year in which you terminate employment (if, at the time of your termination of employment, your AIP Target has not been established for the fiscal year in which you terminate employment, your AIP Target for purposes of this calculation shall be the AIP Target established for you for the preceding fiscal year); plus
(d)    If you terminate employment following the last day of a fiscal year and prior to the payment date of the Annual Incentive Program (or similar annual cash bonus program) bonus for such fiscal year preceding your termination of employment, an amount equal to the Annual Incentive Program (or similar annual cash bonus program) bonus that you would have been entitled to receive for such fiscal year but for your termination of employment prior to the payment date of such bonus; plus
(e)    If you are enrolled in medical and prescription drug coverage on your termination date, an amount equal to: (i) the monthly premium for COBRA continuation coverage less the monthly employee contribution for active employee coverage for the medical and prescription drug coverage in effect on your termination date; multiplied by (ii) one hundred fifty percent (150%); multiplied by (iii) twelve (12). Dental, vision and health care flexible spending account coverage premiums will not be included in determining such amount.
If you receive payment of your Pro-Rata Annual Bonus as a component of your Change in Control Benefits (as described in (c) above), you will forfeit any right to receive any subsequent Annual Incentive Program (or similar annual cash bonus program) payment under such program.
Payment of Severance Benefits
Subject to your signing and returning a Release of Claims by the deadline outlined therein (and not revoking such Release of Claims by the deadline outlined therein) and fulfilling all other obligations as outlined in the Release of Claims, severance pay benefits (Non-Change in Control Benefits or Change in Control Benefits, as applicable) will be paid to you in a lump sum, subject to deductions required by law which include, by example and not by limitation, applicable employment and income taxes. Except as provided below, this payment will be made within 60 days following your termination of employment.
The following provisions apply if your termination occurs during the period following the public announcement of a future Change in Control Event or the execution of a definitive agreement with respect to a future Change in Control Event, and prior to consummation of the Change in Control Event:
(a)     If you are eligible to receive and have satisfied all requirements to receive Non-Change in Control Benefits, you will receive those Non-Change in Control Benefits within 60 days following your termination of employment.
(b)     If, upon consummation of the Change in Control Event, you become eligible to receive and have satisfied all requirements to receive Change in Control Benefits, you will receive those Change in Control Benefits within 60 days following the consummation of the Change in Control Event, reduced by the amount of any Non-Change in Control Benefits that you have previously received.


(c)     For the avoidance of doubt, in no event will you be entitled to receive the full amount of Non-Change in Control Benefits and the full amount of Change in Control Benefits. If you are eligible for Change in Control Benefits, the amount of such benefits shall be reduced by any Non-Change in Control Benefits that you have previously received.
Payment Obligations Absolute Upon or After a Change in Control Event
Upon a termination of employment during a Change in Control Period, the obligations of the Company and its successors to pay or provide the severance benefits shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company or any Person may have against any eligible executive. In no event shall an eligible executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to an eligible executive under any of the provisions of this Plan, nor shall the amount of any payment or value of any benefit hereunder be reduced by any compensation or benefits earned by an eligible executive as a result of employment by another employer.
Notice
If a federal, state or local law does not require the Company, as an employer, to make a payment to you or provide a specified period of notice related to your involuntary termination from employment, or pursuant to a plant closing law, and you are terminated because of a reduction in force or job elimination, the Company generally will give you at least two (2) weeks notice prior to your termination. If less than two (2) weeks notice is provided by the Company, you will receive, in addition to the severance benefits described above, an amount of severance pay equal to your regular base wage for your normal work week, multiplied by two (2), less the amount of your regular base wage paid over the period for which notice was given.
Integration with Plant Closing Law(s)
To the extent the Company makes a payment to you in connection with your involuntary termination from employment, because of a federal, state or local plant closing law, the benefit payable under this Plan shall be reduced by the amount of all such payments. The federal plant closing law (Worker Adjustment and Retraining Notification Act) requires that notice be given under certain circumstances to certain employees that the Company will terminate their employment. If you are covered by this Plan and you are also entitled to a notice pursuant to federal, state or local plant closing law, then the period for which severance pay under this Plan is payable shall be reduced for each week for which notice is required to be given to you, but only to the extent that you remain on active payroll beyond the Company’s preferred termination date.
Other Benefit Plans
If you are entitled to receive severance pay hereunder, you may be eligible to continue participation in certain other benefits as well. However, continuation in various Company plans is subject to terms and conditions of the applicable plan documents or insurance contracts in effect on the date of your termination. Each of these plans and contracts may be changed as provided by the terms of such plans and contracts. Therefore, you should consult each of the plans and contracts in effect at the time of your termination to determine continuation eligibility for these benefits. In addition, you should schedule an exit interview to discuss how your separation effects your participation in the various plans with the Human Resources Department at the time of your termination.
Rehired Employees
If your employment ends because of a reduction in force or job elimination and you are rehired by the Company within 12 months, your years of service with the Company prior to such termination will be counted in determining your PTO, short-term disability and severance pay benefits, subject to each respective policy or plan.



CLAIM REVIEW PROCEDURE
Initial Claim for Benefits
In order to claim benefits under this Plan, the claimant must be an eligible executive. Unless the Company automatically pays severance benefits due hereunder, a written claim must be filed within 90 days of the later of (i) the date of the claimant’s termination or (ii) the date upon which the claimant first knew of the facts upon which the claim for benefits is based. The claims review procedure described in this section shall apply to all claims any person has with respect to the Plan, including claims against fiduciaries and former fiduciaries, except to the extent the Plan Administrator determines, in its sole discretion, that it does not have the power to grant, in substance, all relief reasonably being sought by the claimant. You will have no right to seek review of a denial of benefits under the Plan prior to having filed a claim for benefits.
You will be notified of your claim’s approval or denial within 90 days after the receipt of such claim unless special circumstances require an extension of time for processing the claim. If such an extension of time for processing is required, written notice of the extension shall be furnished to you prior to termination of the initial 90-day period which will specify the special circumstances requiring an extension and the date by which a final decision will be reached (which date will not be later than 180 days after the date of which the claim was filed). You will be given a written notice as to whether the claim is granted or denied, in whole or in part. If the claim is denied, in whole or in part, you will be given written notice that will contain: (i) the specific reasons for the denial; (ii) reference(s) to pertinent Plan provisions upon which the denial is based; (iii) a description of any additional material or information necessary to perfect the claim and an explanation of why such material or information is necessary; and (iv) notice of your right to seek a review of the denial.
Review of Claim Denial
If your claim is denied, in whole or in part, you will have the right to request that the Plan Administrator (or its designee), review the denial, provided you file a written request for review with the Plan Administrator within 60 days after the date on which you received written notification of the denial. You (or your duly authorized representative) may review pertinent documents and submit issues and comments in writing to the Plan Administrator. Within 60 days after a request for review is received, the review will be made and you will be advised in writing of the decision on review, unless special circumstances require an extension of time for processing the review, in which case you will be given a written notification within such initial 60-day period specifying the reasons for the extension and when such review will be completed (provided that such review will be completed within 120 days after the date on which the request for review was filed).
The decision on review will be forwarded to you in writing and will include specific reasons for the decision and references to Plan provisions upon which the decision is based. The decision on review will include a statement that you are entitled to receive, upon request and free of charge, copies of all documents relevant to your claim. The decision on review will also describe your right to bring a civil action under Section 502(a) of the Employee Retirement Income Security Act of 1974 (“ERISA”).
Exhaustion of Review Remedies
You must properly file a claim for benefits and request a review of any complete or partial denial prior to seeking a review of your claim for benefits in a court of law. A decision on a Review of Claim Denial (see preceding paragraph) will be the final decision of the Plan Administrator. After this final decision is provided by the Plan Administrator, you may seek judicial remedies in accordance with your rights under ERISA.
Choice of Law
This Plan shall be construed, administered and governed in all respects under applicable federal law, including, without limitation, the provisions of ERISA, and to the extent not preempted by federal law, under the laws of the State of Oklahoma without regard to conflicts of law provisions. If any provision of this Plan shall be


held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective.
The Plan is intended to be an unfunded welfare benefit plan maintained for the purpose of providing benefits to a select group of management or highly compensated employees as described in 29 C.F.R. §2520.104-24. Nothing in this Plan shall be construed as requiring compliance with ERISA provisions that do not otherwise apply.
Exclusive Forum for Litigation and Limitations of Claims
Any suit or claim relating to this Plan, including eligibility for benefits under the Plan or the amount of benefits due under the Plan, must be brought exclusively in the District Court of Tulsa County, Oklahoma or the United States District Court for the Northern District of Oklahoma. Any suit or claim relating to the Plan must be brought no later than one (1) year after the final decision of the Plan Administrator or the claim accrues, whichever is earlier, or it will be time-barred.
Successors
The Plan shall bind any successor to the Company or Magellan, as applicable, of the Company’s or Magellan’s assets, equity, businesses and/or its interests (whether direct, indirect, by purchase, merger, consolidation, reorganization, or otherwise), in the same manner and to the same extent that the Company or Magellan would be obligated under the Plan if no succession had taken place. In the case of any transaction in which a successor would not by the foregoing provision or by operation of law be bound by the Plan, the Company or Magellan, as applicable, as a condition precedent to such transaction, shall require such successor to expressly and unconditionally assume and agree to perform the obligations of the Company and Magellan under this Plan, in the same manner and to the same extent that the Company and Magellan would be required to perform if no succession had taken place. The terms “Company” and “Magellan,” as used in this Plan, shall also mean any successor to or assignee of the assets, businesses and/or interests that by reason hereof becomes bound by this Plan.
TECHNICAL INFORMATION
The Plan is a welfare benefit plan within the meaning of ERISA. Magellan Midstream Holdings GP, LLC is the Plan Sponsor. For identification purposes, the Plan Sponsor has assigned to the Plan number 507. The employer identification number for Magellan Midstream Holdings GP, LLC is 20-0019326. The end of the Plan year is December 31. Plan records are kept on a calendar year basis.
Plan Administration
The Compensation Committee is the Plan Administrator. The Plan Administrator shall have discretionary authority to construe and interpret the Plan, make all determinations that the Plan requires for its administration, decide all questions of eligibility, determine the amount, manner and time of payment of any benefits hereunder, grant or deny claims for benefits, and resolve any ambiguities or questions with respect to any of the terms and provisions of the Plan as written and as applied in the operation of the Plan. The Plan Administrator does not receive any form of compensation from the Plan for acting as the Plan Administrator.
The Plan Administrator’s decisions and interpretations and the application of the rules and regulations to a particular case shall be made in good faith and shall not be subject to review by anyone, and shall be final, conclusive and binding on all Persons interested in the Plan, subject only to the claims review procedure described herein.
The Plan Administrator shall have such duties and powers as may be necessary to discharge its duties hereunder, including, but not limited to the following:
(a)    to prescribe procedures to be followed by participants in making elections under the Plan and in filing claims under the Plan;


(b)    to prepare and distribute, in such manner as the Plan Administrator determines to be appropriate, information explaining the Plan;
(c)    to receive from the Company and from the participants such information as shall be necessary for the proper administration of the Plan;
(d)    to furnish the Company, upon request, such annual reports with respect to the administration of the Plan as are reasonable and appropriate; and
(e)    to appoint or employ individuals and any other agents it deems advisable, including legal counsel, to assist in the administration of the Plan and to render advice with respect to any fiduciary responsibility of the Plan Administrator, or any of its individual members, under the Plan.
The Plan Administrator may adopt such procedures as it deems necessary, desirable, or appropriate for the administration of the Plan. All procedures and decisions of the Plan Administrator shall be uniformly and consistently applied to all participants in similar circumstances. When making a determination or calculation, the Plan Administrator shall be entitled to rely upon information furnished by a participant, or the legal counsel for the Plan Administrator.
The Plan Administrator may require a participant to complete and file such forms as are provided for herein and all other forms prescribed by the Plan Administrator, and to furnish all pertinent information requested by the Plan Administrator. The Plan Administrator shall be entitled to rely upon all such information, including the participant’s current mailing address.
The Plan Administrator shall keep all necessary records. The Plan Administrator shall make available to each participant such of his or her records under the Plan as pertain to him or her, for examination at reasonable times during normal business hours.
Legal Agent
The agent for legal service is:
Magellan Midstream Holdings GP, LLC Executive Severance Pay Plan
c/o Magellan Midstream Holdings GP, LLC
One Williams Center, Suite 2800
Tulsa, OK 74172
Attn: General Counsel
(918) 574 7000

Company Location
The address of the Company’s executive offices is:
One Williams Center, Suite 2800
Tulsa, OK 74172

Funding
The Plan is unfunded and all payments for benefits and administrative expenses will be made from the Company’s or another related company’s general assets as determined by the Company. There is no trust or similar fund from which benefits or administrative expenses are paid.



Duration
The Plan shall remain in effect until terminated as allowed under the Plan. Notwithstanding the foregoing, if a Change in Control Period begins, the Plan shall continue in full force and effect and shall not terminate or expire until after all eligible executives who become entitled to any payments or benefits hereunder shall have received such payments or benefits in full.
Amendment and Termination
Subject to the limitations described in this paragraph and the following paragraph, the Compensation Committee reserves the right, at any time, in its sole discretion, and for any reason or no reason, to terminate this Plan, or to modify or amend this Plan in whole or in part, either retroactively or prospectively. Unless a Change in Control Period has begun, any such termination, modification or amendment may be made even if it is not required by financial emergency; without limitation, the Compensation Committee may terminate, modify or amend this Plan because it wants to reduce the Company’s personnel expenses, because it wants to modify the Company’s fringe benefit package, because it wants to redirect or eliminate the Company’s expenditures for benefits, because it wants to reduce the Company’s risk, for any other reason which benefits no one but the Company, or for no reason at all. No employee, dependent or other person shall have the right to object to any such termination, modification or amendment; provided, however, the duties or liabilities of a fiduciary may not be increased without the written consent of the one affected.
After the Compensation Committee has knowledge of a possible transaction or event that if consummated would constitute a Change in Control Event, the Plan may not be terminated or amended in any manner which would adversely affect the rights or potential rights of eligible executives, unless and until the Compensation Committee has determined that all transactions or events that, if consummated, would constitute a Change in Control Event have been abandoned and will not be consummated, and, provided that, the Compensation Committee does not have knowledge of other transactions or events that, if consummated, would constitute a Change in Control Event. Upon and during a Change in Control Period, the Plan shall no longer be subject to amendment, change, substitution, deletion, revocation or termination in any respect that adversely affects the rights of eligible executives, and no eligible executive shall be removed from Plan participation, unless such eligible executive, in his or her sole discretion, agrees in writing to be removed from participation.
No Right to Employment
The Company reserves the right to discharge any employee at any time for any reason and to pay such employee only the benefits, if any, to which he or she is entitled under Plan terms. The Plan is not an employment contract and does not give any employee any right to be retained in the service of the Company.
Assignment
An eligible executive shall have no right to sell, assign, transfer, pledge, anticipate or otherwise encumber, transfer, hypothecate or convey any amounts payable under the Plan prior to the date that such amounts are paid.
Section 409A of the Code
The Plan shall be interpreted, construed and operated to reflect the intent of the Company that all payments and benefits under the Plan are exempt from the provisions of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”). However, solely to the extent Section 409A of the Code applies to the Plan, it is the intent of the Company to comply with Section 409A of the Code and any regulations and other guidance thereunder, and the Plan shall be interpreted, construed and operated to reflect such intent. Notwithstanding anything to the contrary in the Plan document, the Plan may be amended at any time, without the consent of any eligible executive, to avoid the application of Section 409A of the Code in a particular circumstance or to the extent determined necessary or desirable to satisfy any of the requirements under Section 409A of the Code, but the Company shall not be under any obligation to make any such amendment. Nothing in the Plan shall provide a basis for any person to take action


against the Company based on matters covered by Section 409A of the Code, including the tax treatment of any award made under the Plan, and the Company shall not under any circumstances have any liability to any eligible executive or other person for any taxes, penalties or interest due on amounts paid or payable under the Plan, including taxes, penalties or interest imposed under Section 409A of the Code. Notwithstanding any provision to the contrary in this Plan, no payment or benefit under this Plan which constitutes an item of deferred compensation under Section 409A of the Code and becomes payable by reason of a eligible executive’s termination of employment will be made prior to the earlier of: (i) the expiration of the six (6)-month period measured from the date of his “separation from service” (as such term is defined in Treasury Regulations issued under Section 409A of the Code); or (ii) the date of the eligible employee’s death, if he is deemed at the time of such separation from service to be a “specified employee” within the meaning of that term under Section 409A(a)(2)(B)(i) of the Code and such delayed commencement is otherwise required in order to avoid a prohibited distribution under Section 409A of the Code. Upon the expiration of the applicable Section 409A deferral period, all payments and benefits deferred pursuant to this provision shall be paid or reimbursed to such key employee in a lump sum on the first payroll date following such expiration.
In addition, if a payment under this Plan constitutes an item of deferred compensation under Section 409A of the Code: (i) to the extent necessary to comply with Section 409A of the Code, if the payment could be paid under this Plan in more than one calendar year, it will be paid in the latest calendar year in which the payment may be made; and (ii) each amount to be paid under the Plan shall be construed as a separately identified payment for purposes of Section 409A of the Code.
[Signature Page Follows]




 
IN WITNESS WHEREOF, Magellan Midstream Holdings GP, LLC, in its capacity as Plan Sponsor, has amended and restated this Executive Severance Pay Plan on this 1st day of April, 2021.


MAGELLAN MIDSTREAM HOLDINGS GP, LLC
By: /s/ Michael N. Mears
Name: Michael N. Mears
Title: Chief Executive Officer

IN WITNESS WHEREOF, Magellan Midstream Partners, L.P. hereby acknowledges acceptance of its obligations described in this Executive Severance Pay Plan on this 1st day of April, 2021.


MAGELLAN MIDSTREAM PARTNERS, L.P.
By: Magellan GP, LLC, its general partner
By: /s/ Michael N. Mears
Name:    Michael N. Mears
Title:     Chief Executive Officer



Exhibit 10.2

AMENDMENT NO. 1 TO
MAGELLAN MIDSTREAM PARTNERS
LONG-TERM INCENTIVE PLANS
This AMENDMENT NO. 1 TO MAGELLAN MIDSTREAM PARTNERS LONG-TERM INCENTIVE PLANS (this “Amendment”), dated as of April 1, 2021, amends that certain (i) Magellan Midstream Partners Long-Term Incentive Plan, as amended and restated on January 26, 2016 (the “2016 LTIP”), and (ii) Magellan Midstream Partners Long-Term Incentive Plan, as amended and restated on January 26, 2021 (the “2021 LTIP”). For the avoidance of doubt, this Amendment shall continue to be effective as to the 2021 LTIP after the 2021 LTIP is approved by Magellan Midstream Partners, L.P.’s unitholders at the April 22, 2021 annual meeting of limited partners. Unless otherwise indicated, all capitalized terms used herein and not otherwise defined herein shall have the respective meanings provided such terms in the 2016 LTIP and 2021 LTIP.
Pursuant to Sections 8(a) and (b) of the 2016 LTIP and 2021 LTIP, the 2016 LTIP and 2021 LTIP and all Awards granted or to be granted thereunder, are hereby amended by amending and restating Section 7, Change in Control, in its entirety as follows:
SECTION 7.     Change in Control.
(a)    Change in Control. A “Change in Control” shall be deemed to have occurred upon the occurrence of one or more of the following events: (i) any direct or indirect sale, lease, exchange, liquidation, division or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Partnership to any person or persons, other than to one or more Affiliates; (ii) the consolidation, reorganization, merger, recapitalization, exchange, division or other similar transaction (in one transaction or a series of related transactions) (any such transaction or series of transactions referred to herein as a “Merger”) pursuant to which (a) more than 50% of the combined voting power of the outstanding equity interests in the Company or its successor entities cease to be owned, directly or indirectly, by the Partnership, (b) more than 50% of the combined voting power of the outstanding equity interests in the Partnership or its successor entities cease to be, directly or indirectly, owned immediately following the Merger by the owners of such interests immediately prior to the Merger, or (c) the Company or one or more other Affiliates of the Partnership cease to be general partner(s) of the Partnership or its successor; (iii) a person or group other than the Partnership or its consolidated subsidiaries directly or indirectly becoming the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act) of more than 30% of the voting power of the then outstanding common units of the Partnership or its successor; or (iv) individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board or of the board of directors or equivalent body of any successor parent of the Partnership or of the Company; provided, however, that any individual becoming a director subsequent to the date hereof whose election or nomination for election by the Partnership’s unitholders was approved by a vote of at least a majority of the directors then comprising the Incumbent Board in the ordinary course of business shall be considered as though such individual was a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board or otherwise outside the ordinary course of business. A Change in Control shall not be deemed to have occurred as a result of a transaction or series of transactions undertaken solely for the purpose of converting the Partnership from a limited partnership to a c-corporation or limited liability company.
(b)     Payout of Awards after Change in Control. If (i), during the period commencing on the earlier of (A) public announcement of the future occurrence of a Change in Control and (B) the execution


of a definitive agreement in connection with the future occurrence of a Change in Control until two (2) years following a Change in Control (a “Change in Control Period”), a Participant has a Termination of Affiliation (excluding any transfer to an Affiliate of the Company) voluntarily by the Participant for Good Reason or involuntarily by the Company, the Partnership or an Affiliate thereof (other than due to Cause), and (ii) a Change in Control actually occurs during such Change in Control Period, then Awards granted prior to a Change in Control, shall automatically vest and become payable, in full, and all Restricted Periods shall terminate and all performance criteria, if any, shall be deemed to have been achieved at the maximum level with respect to such Awards. Any payout owed to the Participant pursuant to this section shall be settled in cash.
(c)    Notification of Good Reason Event. If, during a Change in Control Period, a Good Reason Event occurs, the Participant shall provide written notice to the Company not later than 90 days after the occurrence of the Good Reason Event setting forth in reasonable detail the circumstances that constitute the Good Reason Event and tendering his or her resignation for Good Reason. If the Participant does not provide notice as set forth above, the Participant shall not have the right to resign for Good Reason based on any Good Reason Event occurring more than 90 days before a notice is given. Upon receipt of the Participant’s written notice, the Company shall have 30 days to remedy the Good Reason Event or to notify the Participant of its intent to not remedy the Good Reason Event. If the Company remedies the Good Reason Event within such 30 day period, the Participant’s resignation for Good Reason shall be rescinded and the Company shall have no obligation to pay the amount due pursuant to this section. If the Company (i) does not cure the Good Reason Event within such 30 day period or (ii) provides notice to the Participant of its intent to not remedy the Good Reason Event, the Participant’s resignation shall be effective immediately, and the Company shall be obligated to make payment to the Participant as provided herein.
(d)    Definitions. For purposes of this Section 7 only, the following terms shall have the meanings set forth below:
(i)    “Cause” means, unless otherwise defined in an Award Agreement, the occurrence of any one or more of the following, as determined in the good faith and reasonable judgment of the Committee: (i) willful failure by a Participant to substantially perform his or her duties (as they existed immediately prior to a Change of Control), other than any such failure resulting from a Disability, or (ii) gross negligence or willful misconduct of the Participant which results in a significantly adverse effect upon the Company, the Partnership, or an Affiliate thereof, or (iii) willful violation or disregard of the code of business conduct or other published policy of the Company, the Partnership, or an Affiliate thereof by the Participant, or (iv) Participant’s conviction of a crime involving an act of fraud, embezzlement, theft, or any other act constituting a felony or causing material harm, financial or otherwise, to the Company, the Partnership, or an Affiliate thereof.
(ii)    “Termination of Affiliation” occurs on the first day on which an individual is for any reason no longer providing services to the Company, the Partnership, or an Affiliate thereof.
(iii)    “Good Reason” or “Good Reason Event” means, unless otherwise defined in an Award Agreement, the occurrence, within t a Change of Control Period and without a Participant’s prior written consent, of any one or more of the following:
(1)    a material change in the Participant’s duties from those assigned to the Participant immediately prior to a Change of Control Period, unless associated with a bona fide promotion of the Participant and a commensurate increase in the Participant’s compensation, in which case the Participant shall be deemed to consent;
(2)    a significant reduction in the authority and responsibility assigned to the Participant;


(3)    the removal of the Participant from, or failure to reelect the Participant to, any corporate or similar office of the Company, the Partnership, or an Affiliate thereof to which the Participant may have been elected and was occupying immediately prior to a Change of Control Period, unless associated with a bona fide promotion of the Participant and a commensurate increase in the Participant’s compensation or in connection with the election or appointment of the Participant to a corresponding or higher office of the Company or any Affiliate, in each which case the Participant shall be deemed to consent;
(4)    a reduction of more than 10% of a Participant’s base salary;
(5)    termination of any of the incentive compensation plans of the Partnership or the Company in which the Participant shall be participating at the time of commencement of a Change of Control Period, unless such plan is replaced by a successor plan providing incentive opportunities and awards at least as favorable to the Participant as those provided in the plan being terminated;
(6)    amendment of any of the incentive compensation plans of the Partnership or the Company in which the Participant shall be participating at the time of commencement of a Change of Control Period so as to provide for incentive opportunities and awards less favorable to the Participant than those provided in the plan being amended;
(7)    failure by the Company, the Partnership, or an Affiliate thereof to continue the Participant as a participant in any of the Company’s or Partnership’s incentive compensation plans in which the Participant is participating immediately prior to a Change of Control Period on a basis comparable to the basis on which other similarly situated employees participate in such plan;
(8)    except in relation to a wage freeze applicable to all employees of the Company, the Partnership, or an Affiliate thereof, modification of the administration of any of the incentive compensation plans so as to adversely affect the level of incentive opportunities or awards actually received by the Participant;
(9)    a requirement by the Company, the Partnership, or an Affiliate thereof that the Participant’s principal duties be performed at a location more than fifty (50) miles from the location where the Participant was employed immediately preceding a Change of Control Period, except for travel reasonably required in the performance of the Participant’s duties;
(10)    a signification reduction in the authority, duties or responsibilities of the supervisor to whom the Participant reports, including a requirement that the Participant report to an officer of the Company or employee instead of reporting directly to the board of directors of the Company;
(11)    a significant reduction in the budget over which the Participant retains authority; or
(12)    any other action or inaction that constitutes a material breach by the Partnership, Company or Affiliate of an agreement, if any, under which the Participant provides services.


Exhibit 31.1
CERTIFICATION
I, Michael N. Mears, certify that:
 
1.I have reviewed this Quarterly Report on Form 10-Q for the quarter ending March 31, 2021 (this “report”) of Magellan Midstream Partners, L.P. (the “registrant”);
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: April 29, 2021
 
/s/ Michael N. Mears
Michael N. Mears, principal executive officer



Exhibit 31.2
CERTIFICATION
I, Jeff Holman, certify that:
 
1.I have reviewed this Quarterly Report on Form 10-Q for the quarter ending March 31, 2021 (this “report”) of Magellan Midstream Partners, L.P. (the “registrant”);
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: April 29, 2021
 
/s/ Jeff Holman
Jeff Holman, principal financial and accounting officer



Exhibit 32.1
The following certification shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section. Such certification shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Magellan Midstream Partners, L.P. (the “Partnership”) for the quarter ending March 31, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael N. Mears, Chief Executive Officer of Magellan GP, LLC, the General Partner of the Partnership, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.
 
/s/ Michael N. Mears
Michael N. Mears, Chief Executive Officer
Date: April 29, 2021
A signed original of this written statement required by Section 906 has been provided to the Partnership and will be retained by the Partnership and furnished to the Securities and Exchange Commission or its staff upon request.



Exhibit 32.2
The following certification shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section. Such certification shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Magellan Midstream Partners, L.P. (the “Partnership”) for the quarter ending March 31, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jeff Holman, Chief Financial Officer of Magellan GP, LLC, the General Partner of the Partnership, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.
 
/s/ Jeff Holman
Jeff Holman, Chief Financial Officer
Date: April 29, 2021
A signed original of this written statement required by Section 906 has been provided to the Partnership and will be retained by the Partnership and furnished to the Securities and Exchange Commission or its staff upon request.