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Rising energy use and a rebounding economy in the months ahead are expected to further strengthen the share price and net income of Magellan Midstream Holdings LP, analysts say.

A publicly traded master limited partnership, Magellan Midstream Holdings trades on the New York Stock Exchange under the symbol MGG.

The company owns the general partner interest and incentive distribution rights of Magellan Midstream Partners LP, whose ticker symbol is MMP on the New York Stock Exchange. MMP transports, stores and distributes refined petroleum products along an 8,500-mile pipeline that is the nation's longest, and 81 petroleum terminals.

In the second quarter of 2009, MGG reported net income of $49.1 million, a 45.6 percent decrease from second quarter 2008 net income of $90.3 million.

MGG's second-quarter operating profit was $63.9 million, a 37.4 percent decline from the same period a year ago. The second quarter last year benefited from unusually high product margins and a $12.1 million one-time expense reduction related to a favorable settlement for an environmental matter, company executives said.

Brett Kramer, managing partner of Pinnacle Investment Advisors, said he likes Magellan Midstream Holdings because MMP primarily moves liquids through its pipelines.

"There is an oversupply of natural gas. Liquids are a more stable market with more growth opportunties," Kramer said. "In 2010, they (MGG) will be growing their distribution as the economy improves."

Bruce DeShazo, vice president of American Heritage Bank, likes MGG's dividends, which he says have been consistently high.

"The big thing I like is their growth potential," DeShazo said. "Their operating income is expected to average 6.3 percent (growth) over the next 10 years. They keep acquiring additional properties and units, and they have the cash flow to do it."

Since the first of the year, MGG's share price has increased from $15 to between $22 and $23, said James Brock, who follows the company with Brock & Associates. "Lower (fuel) prices could stimulate more use, which would increase their revenue," he said.

Downsides for MGG include a prolonged recession, a sustained move by the country toward fuel conservation or alternative fuels, the analysts said.

D.R. Stewart 581-8451

Originally published by D.R. STEWART World Staff Writer.

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