SUN
Sunoco Lp
NYSE
10-Q: Sunoco LP Reports Mixed Q3 Results Amidst Major Acquisitions and Divestitures
Sentiment:
Quarterly Report
7 November 2024 12:04 PM
Sunoco LP's Q3 2024 results reflect significant changes due to the NuStar acquisition and West Texas divestiture, impacting both revenue and profitability.
Worse than expected
The company's net income decreased significantly due to unfavorable inventory valuation adjustments and increased expenses, indicating worse than expected results.
Summary
- Sunoco LP's third-quarter 2024 results show a net income of $2 million, a significant decrease from $272 million in the same period last year.
- The company's revenue was $5.751 billion, down from $6.320 billion year-over-year.
- The decrease in net income is primarily attributed to unfavorable inventory valuation adjustments of $197 million, increased depreciation, amortization, and interest expenses.
- However, the company's Adjusted EBITDA increased to $456 million from $257 million year-over-year, driven by the NuStar and Zenith European terminals acquisitions.
- For the nine months ended September 30, 2024, net income was $733 million, compared to $500 million in the same period last year, primarily due to a $598 million gain from the West Texas sale.
- The company completed the acquisition of NuStar Energy L.P. on May 3, 2024, adding approximately 9,500 miles of pipeline and 63 terminal facilities.
- Sunoco also divested 204 convenience stores in West Texas, New Mexico, and Oklahoma to 7-Eleven, Inc. for approximately $1.0 billion.
- A joint venture was formed with Energy Transfer combining their Permian Basin crude oil and water gathering assets, with Sunoco holding a 32.5% interest.
- The company's total long-term debt, net, increased to $7.259 billion as of September 30, 2024, compared to $3.580 billion at the end of 2023.
Sentiment
Score: 5
Explanation: The sentiment is neutral to slightly negative. While the company has made strategic moves with acquisitions and divestitures, the significant decrease in net income and increase in debt raise concerns. The increase in Adjusted EBITDA is a positive sign, but the overall financial picture is mixed.
Positives
- Adjusted EBITDA increased significantly due to strategic acquisitions.
- The sale of West Texas convenience stores generated a substantial gain.
- The formation of the Permian joint venture expands the company's midstream operations.
- The company successfully integrated NuStar's assets, adding significant pipeline and terminal infrastructure.
- Sunoco's pipeline throughput increased due to recent acquisitions.
Negatives
- Net income decreased significantly in Q3 2024 due to inventory valuation adjustments and increased expenses.
- The company experienced a decrease in lease profit due to the West Texas sale.
- The company's total long-term debt has increased substantially.
- Unfavorable inventory valuation adjustments negatively impacted net income.
Risks
- The company is exposed to fluctuations in motor fuel prices and demand.
- Integration of acquired businesses may present operational challenges.
- The company is subject to interest rate risk on its variable rate debt.
- The company faces competition in the wholesale motor fuel distribution and retail store industry.
- The company is exposed to environmental, tax, and other regulatory risks.
- The company is subject to cyber and malware attacks.
Future Outlook
The company expects to spend approximately $120 million in maintenance capital expenditures and at least $300 million in growth capital for the full year 2024. The company anticipates that its sources of funds will be adequate to provide for its short-term and long-term liquidity needs.
Management Comments
- Management uses Adjusted EBITDA for internal planning purposes, including aspects of our consolidated operating budget and capital expenditures.
- Management believes it is unlikely that the outcome of known legal matters would have a material adverse impact on our financial condition, results of operations or cash flows.
Industry Context
The report reflects a trend of consolidation in the midstream energy sector, with Sunoco LP actively acquiring and divesting assets to optimize its portfolio. The formation of the Permian joint venture is a strategic move to capitalize on the region's production growth. The company's focus on expanding its pipeline and terminal infrastructure aligns with the industry's need for efficient transportation and storage solutions.
Comparison to Industry Standards
- Sunoco's acquisition of NuStar is comparable to other large-scale midstream mergers, such as the recent acquisition of Western Midstream by Occidental Petroleum, which also aimed to consolidate assets and achieve operational synergies.
- The company's debt levels are higher than some of its peers, such as Magellan Midstream Partners, which has historically maintained a more conservative balance sheet. However, Sunoco's increased debt is largely due to strategic acquisitions.
- Sunoco's Adjusted EBITDA growth is in line with industry trends, where companies are focusing on operational efficiency and strategic acquisitions to drive profitability. Comparatively, companies like Enterprise Products Partners have also shown strong EBITDA growth through similar strategies.
- The company's inventory valuation adjustments are a common issue in the fuel distribution industry, where LIFO accounting can lead to significant fluctuations in reported earnings. Other companies in the sector, such as Marathon Petroleum, also experience similar impacts from inventory valuation.
Stakeholder Impact
- Shareholders will be impacted by the decrease in net income and the increase in debt, but may benefit from the long-term strategic moves.
- Employees may experience changes due to the integration of acquired businesses and the formation of the joint venture.
- Customers may see changes in service offerings and pricing due to the company's expanded operations.
- Suppliers may experience changes in demand and contract terms due to the company's acquisitions and divestitures.
- Creditors will be impacted by the company's increased debt levels.
Next Steps
- The company will continue to integrate the acquired assets from NuStar and Zenith.
- The company will focus on optimizing operations within the newly formed Permian joint venture.
- The company will monitor market conditions and consider opportunities to manage its debt.
- The company will continue to evaluate potential acquisitions and divestitures to optimize its portfolio.
Legal Proceedings
- Sunoco LLC and Sunoco Retail LLC are currently under motor fuel excise tax audits in the state of New York for the periods of March 2017 through May 2020.
Related Party Transactions
- The company has fee-based commercial agreements with various affiliates of Energy Transfer for pipeline, terminalling, and storage services.
- The company also has agreements with subsidiaries of Energy Transfer for the purchase and sale of fuel.
- The company's investments in the J.C. Nolan joint venture entities were $123 million as of September 30, 2024.
- The company's investment in the Permian joint venture was $1.28 billion as of September 30, 2024.
Key Dates
- 2024-03-13: Acquisition of Zenith European Terminals completed.
- 2024-04-16: Sale of West Texas convenience stores to 7-Eleven, Inc. completed.
- 2024-04-30: Issuance of $1.5 billion in senior notes.
- 2024-05-03: Acquisition of NuStar Energy L.P. completed.
- 2024-07-01: Formation of Permian joint venture with Energy Transfer effective.
- 2024-08-30: Acquisition of a terminal in Portland, Maine completed.
- 2024-11-01: Common units and Class C units outstanding as of this date.
- 2024-11-07: Date of the quarterly report filing.
Keywords
Sunoco LP, NuStar Energy, Acquisition, Divestiture, Permian Basin, Midstream, Fuel Distribution, Pipeline Systems, Terminals, Adjusted EBITDA, Motor Fuel, Convenience Stores, Joint Venture
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.
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.
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.
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
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
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
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.
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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