Magellan Midstream Partners operates petroleum highway

Magellan's network transports oil from the wells to refineries and moves gasoline, diesel, jet fuel and other products from the refineries to consumers.

Because the partnership does not own the fuel, but instead charges other companies for the use of its petroleum highway, Magellan is relatively unaffected by the energy industry's infamous price swings, Magellan CEO Mike Mears said.

“We have a stable, fee-based business that doesn't fluctuate with price in the market,” Mears said. “It's driven by overall demand, which is very stable. We don't have the ups and downs of other companies that produce energy or market energy because we're not exposed to the price of the commodities.”

While Magellan's refined products system supplies most of the partnership's revenue, the future lies with crude oil, Mears said.

“Crude oil is a relatively new business for our company,” he said. “If you back up two or two and a half years ago, we had very little assets deployed to crude oil. Now we're rapidly growing.”

The combination of the steady refined products business and the growing oil transportation business helped Magellan climb to No. 4 on this year's Oklahoma Inc. list.

The partnership benefitted from a 24 percent one-year total return in stocks and dividends, a 14 percent increase in revenues and a 33 percent increase in earnings per share, all measured from July 2011 through June 2012 in the Standard & Poors Capital IQ rankings.

While there are many refined products pipeline companies and many crude oil pipelines, Magellan benefits from having both lines in its inventory, Mears said.

“It allows us to be more financially flexible,” Mears said. “It allows us to finance the opportunities at a lower cost.”