Sunoco LP (SUN) Earnings

Management highlights

### Financial Position & Capital Returns - Q2 2026 adjusted distributable cash flow was $608 million. A quarterly distribution of just over $1 per common unit/share was declared, representing a 1.25% increase quarter-over-quarter and over 10% increase year-over-year. Trailing 12-month distribution coverage ratio is 2.1x. - Balance sheet remains strong: $2.3 billion in available liquidity under the revolving credit facility as of quarter-end, with a leverage ratio of 3.7x, below the long-term 4x target. - Capital expenditure totaled $125 million for growth projects and $77 million for maintenance. Management is on track to meet its multi-year annual distribution growth target of at least 5%. ### Acquisition & Operational Execution - Synergy and integration progress from the Parkland acquisition is ahead of schedule. The company has a proven track record of improving performance of acquired assets relative to previous ownership. - Management prioritizes quick-hitting, high-return organic capital projects that deliver fast cash flow returns. - All four segments are currently performing at high levels, demonstrating the company's ability to outperform across varying macroeconomic environments, with 2026 set to deliver the ninth consecutive year of adjusted EBITDA growth. - Fuel distribution benefited from market price volatility in Q2 2026, with the company growing its reputation as a reliable supplier and gaining new customers amid market uncertainty. ### Strategic Growth Foundation - Recent large acquisitions (NuStar, Parkland, Tankwood) have expanded the company's geographic footprint to include the U.S., Canada, the Caribbean, and Europe, opening new opportunities for both bolt-on acquisitions and organic growth across fuel distribution and midstream segments. - Management's multi-year target of at least $500 million in annual bolt-on acquisitions is considered a modest bar, and the company expects to exceed this target in 2026 and future years.

Guidance

- Management raised full-year 2026 adjusted EBITDA guidance to a range of $3.5 billion to $3.7 billion, a $400 million upward increase from the original guidance range. - The upward guidance revision reflects broad strength across all four business segments, value realization from recent acquisitions, and stronger-than-expected performance from the refinery segment, with contributions from all segments, not just refining. - The breadth of the guidance range is driven by volatility in refining crack spreads, as refining performance is harder to predict than the company's more stable midstream and fuel distribution segments. Guidance uses the refining forward curve as a starting point, and management notes there is upside potential to the new range. - Management expects the fuel distribution segment will perform as strongly in the second half of 2026 as it did in the first half, and that full-year 2026 results will be outstanding even in downside scenarios for refining margins.

Segment performance

1. Fuel Distribution Segment: Adjusted EBITDA was $516 million (excluding $12 million in one-time transaction expenses), compared to $538 million in Q1 2026 and $214 million in Q2 2025 (both excluding transaction expenses). Volume reached 4.1 billion gallons, up 9% quarter-over-quarter and 89% year-over-year. Reported margin was 17.1 cents per gallon, compared to 17 cents per gallon in Q1 2026 and 10.5 cents per gallon in Q2 2025. This segment accounts for approximately 51.8% of total Q2 2026 adjusted EBITDA (excluding one-time expenses). 2. Pipeline System Segment: Adjusted EBITDA was $190 million, compared to $179 million in Q1 2026 and $177 million in Q2 2025. Throughput hit 1.3 million barrels per day, up 4% quarter-over-quarter and 9% year-over-year. This segment accounts for approximately 19.1% of total Q2 2026 adjusted EBITDA (excluding one-time expenses). 3. Terminal Segment: Adjusted EBITDA was $115 million (excluding $2 million in one-time transaction expenses), compared to $107 million in Q1 2026 and $73 million in Q2 2025 (both excluding transaction expenses). Throughput reached 1.1 million barrels per day, up 5% quarter-over-quarter and 52% year-over-year. Growth was supported by the full-quarter contribution of the Tankwood acquisition. This segment accounts for approximately 11.5% of total Q2 2026 adjusted EBITDA (excluding one-time expenses). 4. Refinery Segment: Adjusted EBITDA was $175 million, compared to $43 million in Q1 2026 (which was reduced by planned turnaround maintenance). Throughput reached 57,000 barrels per day, up from 22,000 barrels per day in Q1 2026. Refining margin exceeded $40 per barrel, with operating expenses under $10 per barrel. This segment accounts for approximately 17.6% of total Q2 2026 adjusted EBITDA (excluding one-time expenses). Total adjusted EBITDA for Q2 2026 (excluding $14 million in total one-time transaction expenses) was $996 million.

Risks & headwinds

- Refining segment earnings are dependent on volatile crack spread prices, which cannot be predicted accurately and create uncertainty around full-year results. - Sustained high fuel prices could lead to consumer demand rationalization (lower gallons per trip or octane downgrades) that could reduce segment volumes. - Geopolitical conflict (specifically the Middle East conflict) has created ongoing commodity market and supply chain disruption, though the company has not observed any long-lasting negative impacts to date.

Analyst Q&A

• Q: With the company's strong balance sheet and recent performance, what is the progress on bolt-on M&A opportunities and organic growth? /

  A: Management states the $500 million annual bolt-on acquisition target is a modest bar. Recent large acquisitions (NuStar, Parkland, Tankwood) opened a much broader geographic opportunity set across North America, the Caribbean, and Europe for both fuel distribution and midstream deals, and the company expects to exceed the 2026 target. On the organic side, the expanded footprint creates opportunities for new terminal tank builds and new pipeline customer connections that also support fuel distribution growth.

• Q: What is the long-term earnings power and strategic value of the Burnaby refinery acquired as part of the Parkland deal? /

  A: The Burnaby refinery has outperformed expectations with strong recent crack spreads, and the team has successfully increased reliability and reduced per-barrel operating expenses. Strategically, Burnaby is a key component of the company's integrated British Columbia business, which already has a strong market position in fuel distribution; the refinery is currently the most efficient way to supply that regional market, and management will adapt if market conditions change long-term.

• Q: What is the company's approach to capital allocation between inorganic M&A growth and distribution increases? /

  A: The company prioritizes bolt-on roll-up acquisitions that sell for mid-single-digit synergized multiples, which are highly accretive to distributable cash flow per unit. This strategy has delivered eight consecutive years of DCF per unit growth (nine in 2026), and management will continue allocating a material share of free cash flow to these acquisitions. Accretive acquisitions generate additional free cash flow, creating a flywheel effect that also supports continued distribution growth, so the two priorities work in tandem rather than competing.

• Q: Have you seen any long-lasting supply chain impacts from the ongoing Middle East conflict? /

  A: The company has not seen any long-term negative impacts from ongoing market disruptions. Volatility remains slightly lower than earlier in Q2, and the company's expanded scale, geographic footprint, and commercial capabilities (gained from recent acquisitions) allow it to leverage dislocations to create value, for example by railing diesel from the Midwest to mid-Atlantic markets or supplying Hawaii out of Burnaby.