Sunoco LP Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Announced acquisition of Parkland Corporation in a cash and equity transaction valued at approximately $9.1 billion, expected to close in the second half of 2025, subject to customary closing conditions and regulatory clearance.
• First quarter results: partnership delivered adjusted EBITDA of $458 million and distributable cash flow as adjusted of $310 million. Spent $75 million on growth capital and $26 million on maintenance capital, including proportionate share of joint ventures with Energy Transfer.
• Completed offering of $1 billion of 6.25% senior notes due 2033, used to repay maturing senior notes and revolving credit facility borrowings, extending debt maturity profile and improving financial flexibility.
• Signed agreement to acquire TanQuid, Germany's largest independent storage operator for approximately €500 million, expected to close in the second half of 2025, accretive to unitholders.
• Declared first quarter distribution of $0.8976 per common unit or $3.59 on an annualized basis, a 1.25% increase from the previous quarter, with a trailing 12-month coverage ratio of 1.9x.

Segment Performance

• Fuel Distribution: Adjusted EBITDA was $220 million compared to $192 million in the fourth quarter of 2024 and $218 million in the first quarter of 2024. Volumes came in at 2.1 billion gallons, down 3% from the previous quarter and flat to the first quarter of 2024. Reported margin was $0.1105 per gallon compared to $0.1006 per gallon in the fourth quarter of 2024 and $0.1009 per gallon in the first quarter of 2024. Included a $32 million benefit from the 7-Eleven makeup payment.
• Pipeline Systems: Reported $172 million of adjusted EBITDA compared to $188 million for the fourth quarter. Throughput on the system was approximately 1.3 million barrels per day compared to 1.4 million barrels per day in the fourth quarter.
• Terminals: Delivered adjusted EBITDA of $66 million compared to $59 million in the fourth quarter and $24 million in the first quarter of last year. Throughput was 620,000 barrels per day, up from around 600,000 barrels per day in the fourth quarter and a little over 400,000 barrels per day in the first quarter of last year.

Guidance

• 2025 is off to a good start and remains on track to achieve full-year financial guidance.
• Balance sheet and liquidity are strong, well positioned for growth objectives.
• Expect to deliver another record year and continued distribution growth for unitholders.

Risks

• Actual results could differ materially from forward-looking statements due to various factors.
• Regulatory clearance and closing conditions for acquisitions may impact the timing and completion of acquisitions.

Question and Answer

• Q: How do you think about future capital allocation among your regions post-Parkland close? Are some regions delivering more attractive returns than others?

A: Karl Fails stated they don't have a particular target per region, best projects win, and they look at opportunities in totality across segments and geographies, with flexibility based on circumstances.

• Q: In '24, you added more conventional midstream assets to the portfolio, and Parkland is a heavy shift back to fuel distributions. What do you see as the right mix between the two assets for your business longer term? And how should we think about adding more conventional midstream assets from here, following the large investment in Fuel Distribution?

A: Joseph Kim mentioned they will continue to execute capital allocation strategy to diversify the portfolio, Parkland was an opportunity, and long-term goal is a balanced portfolio, with flexibility based on opportunities as the year shapes up