Magellan Midstream Partners L.P.

The stable outlook reflects our expectation that Magellan's refined product volumes will recover in 2021 somewhat offset by lower crude cash flows. We expect the partnership to maintain leverage in the 3.6x-3.8x range and distribution coverage above 1.1x in 2021. We also expect the partnership to continue to maintain a prudent financial policy. We could consider a negative rating action if we expected Magellan's debt to EBITDA to exceed 4x on a sustained basis. This could occur if refined products volumes do not recover as we expect. We could also lower the ratings if management shifted its strategy to a pursue unit buybacks to a more aggressive degree than we currently expect. We do not foresee a positive rating action

...We expect the partnership's refined product volumes to increase in 2021 as demand increases. Lower demand for refined products stemming from the COVID-19 pandemic and related lockdowns resulted in lower volumes flowing on Magellan Midstream Partners L.P.'s systems in 2020. We expect demand to recover in 2021 leading to refined product growth of approximately 13% over 2020 and 3% over 2019,which was a more typical year for demand. We expect growth from 2022 onward to be driven by expansion projects resulting in year-over-year growth between 4% and 7%. The partnership's crude cash flows will likely continue declining reflecting lower volumes, especially on the Longhorn Pipeline. Given the competitive environment for long-haul pipeline capacity in Texas, we expect Magellan's volumes and rates to decline as contracts expire. The Longhorn pipeline has historically had the highest tariffs so the volumes rolling off it underpin the decline in operating margin from Magellan's crude segment. We...

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