Magellan could see financials dinged by Texas pipeline spill

Magellan said during the weekend that repairs were made to its Longhorn pipeline system and the network was back in service less than a week after a contractor working on the pipeline struck a fitting during routine maintenance activities, causing a spill.

A similar incident caused the release of about 1,000 barrels of oil from a pipeline system operated by Magellan in Oklahoma two years ago. A report from Zacks Equities Research put Magellan (NYSE: MMP) at sell.

"We would like to inform investors that Magellan's non-fee based assets continue to be under pressure due to weak crude prices," the report read. "This may result in reduced earnings and revenues for the firm. The leakage in the Longhorn pipeline may make matters worse."

Magellan releases financial results for the second quarter Aug. 2. The company reported net income of $222.7 million for the first quarter, an improvement of 7.5 percent, or $15.6 million, from first quarter 2016. For the year, the company said it expected to spend about $600 million for the year, but lower that to $350 million next year.

The preliminary size of the release from the Longhorn pipeline was around 1,200 barrels and the spill caused the brief evacuation of 15 residences in Bastrop County, located in southeast Texas. Residents were allowed to return later on the same day as the incident.

The Longhorn system carries about 275,000 barrels of oil equivalent per day from the Permian shale basin in Texas to area refineries and southern U.S. export terminals.

The company said it had about 100 representatives on site monitoring activities. Site monitoring and clean-up operations were ongoing.

No waterways were contaminated and no injuries were reported as a result of the release.