SUN
Sunoco Lp
NYSE
8-K: Sunoco LP Announces Record Second Quarter Earnings, Driven by Strategic Acquisitions
Sentiment:
Quarterly Report
7 August 2024 7:36 AM
Sunoco LP reported a record net income of $501 million for the second quarter of 2024, boosted by recent acquisitions and divestitures.
Better than expected
The company reported a record net income of $501 million, significantly higher than the $87 million reported in the same quarter last year.
Adjusted EBITDA, excluding transaction-related expenses, was $400 million, exceeding the $250 million reported in the same quarter last year.
Distributable Cash Flow, as adjusted, was $295 million, up from $175 million in the prior year's second quarter.
Summary
- Sunoco LP announced record second quarter net income of $501 million, a significant increase from $87 million in the same period last year.
- Adjusted EBITDA for the quarter was $320 million, which includes $80 million in one-time transaction-related expenses, compared to $250 million in the second quarter of 2023.
- Excluding transaction-related expenses, Adjusted EBITDA was $400 million.
- Distributable Cash Flow, as adjusted, reached $295 million, up from $175 million in the prior year's second quarter.
- The company completed the acquisition of NuStar Energy L.P. on May 3, 2024, and divested 204 convenience stores to 7-Eleven, Inc. on April 16, 2024.
- Sunoco reaffirmed its full-year 2024 Adjusted EBITDA guidance of $1.46 billion to $1.52 billion, excluding synergies and transaction-related expenses.
- The company increased its NuStar commercial and expense synergies to $200 million and financial synergies to $60 million.
- A joint venture in the Permian Basin with Energy Transfer was formed, and a definitive agreement to acquire a liquid fuels terminal in Portland, Maine was entered into.
- Fuel distribution segment sold 2.2 billion gallons of fuel, a 5% increase year-over-year, with a fuel margin of 11.8 cents per gallon.
- Pipeline Systems segment averaged throughput volumes of 1.3 million barrels per day.
- Terminals segment averaged throughput volumes of 640 thousand barrels per day.
- The company's leverage ratio was 4.1 times at the end of the second quarter.
- Total capital expenditures for the quarter were $78 million, including $52 million for growth and $26 million for maintenance.
Sentiment
Score: 8
Explanation: The document presents a very positive outlook with record earnings, increased synergies, and strategic acquisitions. While there are some transaction-related expenses and a high leverage ratio, the overall tone is optimistic and suggests strong future performance.
Positives
- Net income significantly increased to $501 million, a record for the second quarter.
- Adjusted EBITDA, excluding transaction-related expenses, reached $400 million, indicating strong operational performance.
- Distributable Cash Flow, as adjusted, rose to $295 million, demonstrating improved cash generation.
- The acquisition of NuStar Energy L.P. and the divestiture of convenience stores were successfully completed.
- The company reaffirmed its full-year Adjusted EBITDA guidance, showing confidence in future performance.
- Increased synergies from the NuStar acquisition are expected to enhance profitability.
- The formation of a joint venture in the Permian Basin and the acquisition of a liquid fuels terminal are strategic moves for growth.
- Fuel distribution volumes increased by 5%, indicating strong demand.
- The company has $1.4 billion of liquidity remaining on its $1.5 billion revolving credit facility.
Negatives
- Adjusted EBITDA includes $80 million in one-time transaction-related expenses, impacting the overall profitability.
- Fuel margin slightly decreased to 11.8 cents per gallon from 11.9 cents per gallon in the same quarter last year.
- The leverage ratio of 4.1 times indicates a significant level of debt.
Risks
- The company faces risks associated with integrating the NuStar acquisition and realizing the expected synergies.
- Transaction-related expenses could continue to impact profitability in the short term.
- Fluctuations in fuel margins could affect the company's revenue and profitability.
- The company's high leverage ratio could pose a risk if economic conditions worsen.
- The company's forward-looking statements are subject to various risks and uncertainties.
Future Outlook
Sunoco LP reaffirms its full-year 2024 Adjusted EBITDA guidance of $1.46 billion to $1.52 billion, excluding synergies and transaction-related expenses. The company expects approximately $50 million in synergies related to the acquisition of NuStar and approximately $100 million in transaction-related expenses. Growth capital expenditures are expected to be greater than $300 million, and maintenance capital expenditures are expected to be approximately $120 million.
Management Comments
- Sunoco LP management will hold a conference call on Wednesday, August 7, 2024, to discuss results and recent developments.
Industry Context
The results reflect a period of significant strategic activity for Sunoco LP, including major acquisitions and divestitures. The company's focus on expanding its midstream operations and fuel distribution network aligns with broader industry trends towards consolidation and optimization of energy infrastructure assets. The formation of a joint venture in the Permian Basin and the acquisition of a liquid fuels terminal are strategic moves to enhance the company's market position.
Comparison to Industry Standards
- Sunoco's Adjusted EBITDA of $400 million (excluding transaction expenses) for the quarter is a strong result compared to other midstream and fuel distribution companies. For example, companies like Magellan Midstream Partners (MMP) and Enterprise Products Partners (EPD) typically report quarterly EBITDA in the range of $300-$500 million, but these are larger companies with more diversified assets.
- The 5% increase in fuel distribution volumes is a positive sign, indicating strong demand in a competitive market. This compares favorably to some competitors who have seen flat or declining volumes in recent quarters.
- The leverage ratio of 4.1 times is relatively high compared to some peers, such as EPD, which typically maintain a leverage ratio closer to 3.5 times. However, this is not unusual for companies that have recently completed significant acquisitions.
- The increase in NuStar synergies to $260 million is a positive development, suggesting that the acquisition is on track to deliver the expected benefits. This is a key metric that investors will be watching closely.
- The company's capital expenditure plans for 2024, with growth capex exceeding $300 million, indicate a commitment to future growth, which is in line with industry trends of investing in infrastructure and expansion.
Stakeholder Impact
- Shareholders will benefit from the increased net income and distributable cash flow, as well as the declared distribution of $0.8756 per unit.
- Employees may experience changes due to the integration of NuStar and the formation of the joint venture.
- Customers will likely see improved services and infrastructure due to the company's strategic acquisitions and investments.
- Suppliers may see increased business opportunities due to the company's growth and expansion.
- Creditors may be concerned about the company's high leverage ratio but reassured by the strong financial performance.
Next Steps
- The company will continue to integrate the NuStar acquisition and realize the expected synergies.
- The company will focus on the development of the joint venture in the Permian Basin.
- The company will proceed with the acquisition of the liquid fuels terminal in Portland, Maine.
- The company will hold a conference call on August 7, 2024, to discuss results and recent developments.
Key Dates
- April 16, 2024: Divestiture of 204 convenience stores to 7-Eleven, Inc.
- May 3, 2024: Completion of the acquisition of NuStar Energy L.P.
- June 28, 2024: Partnership entered into a definitive agreement to acquire a liquid fuels terminal in Portland, Maine.
- June 30, 2024: End of the second fiscal quarter.
- July 1, 2024: Effective date of the joint venture with Energy Transfer in the Permian Basin.
- July 16, 2024: Announcement of the joint venture with Energy Transfer.
- July 25, 2024: Declaration of a distribution for the second quarter of 2024 of $0.8756 per unit.
- August 7, 2024: Date of the earnings release and investor conference call.
- August 9, 2024: Record date for the second quarter distribution.
- August 19, 2024: Payment date for the second quarter distribution.
Keywords
Sunoco LP, Adjusted EBITDA, Net Income, Distributable Cash Flow, NuStar Energy, Fuel Distribution, Pipeline Systems, Terminals, Acquisition, Divestiture, Synergies, Permian Basin, Energy Transfer, Liquid Fuels Terminal
SUN
Sunoco Lp
NYSE
Sector: Energy
Filings with Classifications
Better than expected
29 May 2025 7:00 AM
Merger Announcement
- The transaction offers a 25% premium to Parkland shareholders based on recent trading prices.
- It provides flexible consideration options, including immediate cash liquidity and participation in future upside via SunocoCorp units.
- The deal is expected to generate significant annual run-rate synergies of US$250 million, indicating improved financial performance for the combined entity.
- The creation of SunocoCorp offers a more tax-efficient structure for non-U.S. and institutional investors, enhancing shareholder value.
Capital raise
29 May 2025 7:00 AM
Merger Announcement
- Committed bridge financing is in place for the cash portion of the acquisition.
Worse than expected
28 May 2025 9:29 PM
Acquisition Update
- The unaudited pro forma net income attributable to limited partners for the full year ended December 31, 2024, shows a loss of $(262) million, which is a negative financial outcome for the combined entity.
Capital raise
28 May 2025 9:29 PM
Acquisition Update
- Sunoco has secured a $2.65 billion 364-day bridge term loan to fund the cash consideration for the Parkland Acquisition.
- In connection with the Parkland Acquisition, Sunoco would issue $1 billion in preferred units.
- Sunoco would issue $1.7 billion in aggregate principal amount of senior notes for the Parkland Acquisition.
- SunocoCorp (a wholly-owned subsidiary of SunocoCorp) is expected to issue 51,442,494 common units to Parkland shareholders as part of the acquisition consideration.
Capital raise
28 May 2025 9:25 PM
Acquisition Update
- Sunoco has secured a $2.65 billion 364-day bridge term loan to fund the proposed cash consideration for the Parkland Acquisition.
- In connection with the Parkland Acquisition, Sunoco would issue $1 billion in preferred units.
- In connection with the Parkland Acquisition, Sunoco would issue $1.7 billion aggregate principal amount of senior notes.
Worse than expected
28 May 2025 9:25 PM
Acquisition Update
- The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2024, shows a net loss attributable to limited partners of $(262) million, which is a negative financial outcome for the combined entity on a pro forma basis.
- The pro forma basic net income (loss) per limited partner unit for the year ended December 31, 2024, is also negative at $(1.40).
Capital raise
8 May 2025 4:25 PM
Quarterly Report
- Sunoco has secured a $2.65 billion 364-day bridge term loan for the proposed cash consideration of the Parkland acquisition.
- The transaction is expected to be funded using cash on hand and amounts available under the Partnership's Credit Facility.
Worse than expected
8 May 2025 4:25 PM
Quarterly Report
- Net income decreased compared to the same period last year, primarily due to increased operating expenses, depreciation, and interest expense.
Capital raise
6 May 2025 8:50 AM
Merger Announcement
- The $2.6 billion cash consideration is supported by a fully committed bridge facility.
- Sunoco expects to permanently finance this through a combination of senior notes and preferred equity prior to close.
- The transaction includes the creation of SUNCorp, a new publicly traded vehicle, to support growth and attract a new investor base.
Better than expected
6 May 2025 7:12 AM
Earnings Release
- Adjusted EBITDA and Distributable Cash Flow were significantly higher than the same quarter last year.
Capital raise
5 May 2025 9:45 PM
Merger Announcement
- Sunoco has secured debt financing commitments of $7.55 billion to fund the acquisition.
- The transaction involves the issuance of new SUNCorp Units to Parkland shareholders.
Delay expected
5 May 2025 9:43 PM
Merger Announcement
- The Effective Time does not occur on or prior to February 4, 2026, or such later date as may be agreed to in writing by the parties (the Outside Date ) (provided that the Outside Date may be extended by either party for 90 days following February 4, 2026 if certain required regulatory approvals have not yet been obtained).
Capital raise
5 May 2025 9:21 AM
Merger Announcement
- Sunoco has secured a $2.65 billion 364-day bridge term loan for the proposed cash consideration.
- The bridge loan is expected to be permanently financed through a combination of senior notes and a preferred equity offering prior to closing.
Capital raise
5 May 2025 8:36 AM
Merger Announcement
- Sunoco has secured a $2.65 billion 364-day bridge term loan for the proposed cash consideration.
- The bridge facility is expected to be permanently financed through a combination of senior notes and a preferred equity offering prior to closing.
Capital raise
20 March 2025 5:03 PM
Debt Offering Announcement
- Sunoco LP is conducting a private offering of $1 billion in senior notes due 2033.
- The offering was upsized from an initial $750 million.
- The proceeds will be used to repay existing indebtedness.
Capital raise
20 March 2025 8:06 AM
Current Report on Form 8-K
- Sunoco LP announced a private offering of $750 million in senior notes due 2033.
- The company intends to use the net proceeds from the offering to repay indebtedness, including redeeming in full NuStar Logistics, L.P.'s 5.750% senior notes due 2025 and repaying a portion of the outstanding borrowings under Sunoco's revolving credit facility.
- The Notes Offering is not conditioned on the consummation of the acquisition of the German and Polish terminalling assets.
Capital raise
14 February 2025 1:59 PM
Annual Results
- The company has the ability to further incur additional debt under its Credit Facility and the indentures governing its senior notes.
- The company may issue debt or equity securities prior to that time as it deems prudent to provide liquidity for new capital projects or other partnership purposes.
Better than expected
11 February 2025 7:21 AM
Earnings Release
- The company's net income, Adjusted EBITDA, and Distributable Cash Flow all significantly increased compared to the previous year.
- The company is targeting a distribution growth rate of at least 5% for 2025, indicating confidence in future performance.
- The company anticipates strong Adjusted EBITDA growth in 2025.
Better than expected
27 January 2025 7:18 AM
Distribution Announcement
- The company announced a 1.25% increase in the quarterly distribution, which is better than the previous quarter.
- The company also announced a target of at least 5% distribution growth for 2025, which is a positive outlook for investors.
Worse than expected
7 November 2024 12:04 PM
Quarterly Report
- The company's net income decreased significantly due to unfavorable inventory valuation adjustments and increased expenses, indicating worse than expected results.
Worse than expected
6 November 2024 8:04 AM
Quarterly Report
- The net income decreased significantly from $272 million to $2 million year-over-year, indicating a substantial decline in profitability despite improvements in other areas.
Better than expected
8 August 2024 11:59 AM
Quarterly Report
- The company's net income and adjusted EBITDA were significantly better than the same period last year due to the gain on the West Texas sale and the positive impact of acquisitions.
Capital raise
8 August 2024 11:59 AM
Quarterly Report
- Sunoco issued $1.5 billion in senior notes in April 2024 to fund the NuStar acquisition and related transactions.
- The company may issue debt or equity securities prior to the end of 2024 as deemed prudent to provide liquidity for new capital projects or other partnership purposes.
Better than expected
7 August 2024 7:36 AM
Quarterly Report
- The company reported a record net income of $501 million, significantly higher than the $87 million reported in the same quarter last year.
- Adjusted EBITDA, excluding transaction-related expenses, was $400 million, exceeding the $250 million reported in the same quarter last year.
- Distributable Cash Flow, as adjusted, was $295 million, up from $175 million in the prior year's second quarter.
Capital raise
9 May 2024 11:56 AM
Quarterly Report
- The Partnership issued $750 million of 7.000% senior notes due 2029 and $750 million of 7.250% senior notes due 2032 in a private offering on April 30, 2024.
- The net proceeds from the offering were used to repay NuStar's debt, fund the redemption of NuStar's preferred units, and pay offering fees and expenses in connection with the merger.
Better than expected
9 May 2024 11:56 AM
Quarterly Report
- Net income and Adjusted EBITDA both increased year-over-year, indicating better than expected financial performance.
- The company's motor fuel sales volume increased by 9%, demonstrating strong operational performance.
Capital raise
8 May 2024 7:27 AM
Quarterly Report
- The company issued $1.5 billion in unsecured notes on April 30, 2024.
- The proceeds from this offering will be used to fund the repayment of NuStar's credit and receivables facilities, and redeem NuStar's preferred equity and subordinated notes.
Better than expected
8 May 2024 7:27 AM
Quarterly Report
- The company reported a record first quarter net income of $230 million, significantly higher than the $141 million reported in the same period last year.
- Adjusted EBITDA for the quarter was $242 million, up from $221 million in the first quarter of 2023.
- The company increased its full-year Adjusted EBITDA guidance to $1.46 billion to $1.52 billion.
Better than expected
3 May 2024 4:45 PM
Merger Announcement
- The acquisition is expected to be immediately accretive to distributable cash flow per LP unit, growing to greater than 10% accretion by the third year following close.
- The company also expects to realize at least $150 million of expense and commercial synergies and at least $50 million per year of additional cash flow from refinancing activity.
Capital raise
30 April 2024 4:47 PM
Debt Offering Announcement
- Sunoco LP completed a private offering of $1.5 billion in senior notes.
- The offering included $750 million in 7.000% Senior Notes due 2029 and $750 million in 7.250% Senior Notes due 2032.
- Net proceeds were approximately $1.485 billion after deducting discounts and commissions.
- The funds will be used to repay NuStar Energy debt, redeem NuStar's preferred units, and cover offering expenses related to the merger.
Capital raise
30 April 2024 4:45 PM
Debt Offering Announcement
- Sunoco LP completed a private offering of $1.5 billion in senior notes.
- The net proceeds will be used to repay NuStar's debt, redeem NuStar's preferred units, and cover offering expenses.
Capital raise
16 April 2024 7:06 PM
Debt Offering Announcement
- Sunoco LP has priced a private offering of $1.5 billion in senior notes.
- The offering includes $750 million of 7.000% senior notes due 2029 and $750 million of 7.250% senior notes due 2032.
- The proceeds will be used to refinance debt and redeem preferred units of NuStar Energy in connection with the pending merger.
Capital raise
16 April 2024 6:59 PM
Debt Offering Announcement
- Sunoco has priced a private offering of $1.5 billion in senior notes.
- The offering is split into $750 million of 7.000% notes due 2029 and $750 million of 7.250% notes due 2032.
- The proceeds will be used to refinance NuStar's debt and preferred units, and to fund the merger.
Capital raise
16 April 2024 8:36 AM
Current Report on Form 8-K
- Sunoco is conducting a private offering of $1.5 billion in senior notes due 2029 and 2032.
- The proceeds will be used to repay NuStar Energy's debt, fund the redemption of NuStar's preferred units, and pay offering fees and expenses related to the pending merger.
- The offering is not contingent on the completion of the NuStar Merger.
Capital raise
16 April 2024 8:34 AM
Debt Offering Announcement
- Sunoco is conducting a private offering of $1.5 billion in senior notes.
- The notes are split into $750 million due in 2029 and $750 million due in 2032.
Capital raise
16 February 2024 12:21 PM
Partnership Agreement Details
- The partnership agreement authorizes the issuance of an unlimited number of additional partnership interests without unitholder approval.
- The document mentions that the partnership may fund acquisitions through the issuance of additional common units or other partnership interests.
Worse than expected
14 February 2024 9:43 AM
Quarterly Report
- The company reported a net loss for the fourth quarter of 2023, compared to a net income in the same period of 2022.
- The company's net income for the full year 2023 decreased compared to 2022.
Capital raise
22 January 2024 5:26 PM
Merger Announcement
- Sunoco has secured a $1.6 billion 364-day bridge term loan to refinance NuStar's existing debt.
- The transaction is an all-equity deal, with NuStar unitholders receiving Sunoco units.
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