News Release
| | |
 | | Sunoco Logistics Partners L.P.
1801 Market Street
Philadelphia, Pa. 19103-1699 |
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| For further information contact: | | For release: 5.00 p.m. October 20, 2004 |
Jerry Davis (media) 215-977-6298
Colin Oerton (investors) 215-977-6350
No. 17
SUNOCO LOGISTICS PARTNERS L.P.
REPORTS THIRD QUARTER AND NINE MONTH RESULTS AND DECLARES
INCREASED THIRD QUARTER DISTRIBUTION OF $0.6125 PER COMMON AND
SUBORDINATED UNIT
PHILADELPHIA, October 20, 2004 – Sunoco Logistics Partners L.P. (NYSE: SXL) today announced net income for the third quarter ended September 30, 2004 of $12.8 million, or $0.50 per limited partner unit on a diluted basis, compared with $16.9 million for the third quarter of 2003, or $0.72 per limited partner unit on a diluted basis. For the nine months ended September 30, 2004, net income was $43.8 million compared with $46.6 million for the nine months ended September 30, 2003.
Sunoco Partners LLC, the general partner of Sunoco Logistics Partners L.P., also declared an increased cash distribution for the third quarter 2004 of $0.6125 per common and subordinated partnership unit ($2.45 annualized) payable November 12, 2004 to unitholders of record on November 1, 2004, an increase of $0.025 per partnership unit on a quarterly basis ($0.10 annualized increase).
“Our results for the third quarter were impacted by several events,” said Deborah M. Fretz, President and Chief Executive Officer. “Ratable cash flow continues to be strong with the inclusion of a one-third interest in the Harbor Pipeline for the full quarter as well as the acquisitions made in the first half of the year. We are confident that the business will continue to produce ratable cash flows and, therefore, we are declaring a 4.3 percent increase in our quarterly distribution to $0.6125 or $2.45 annually. This increase represents our sixth consecutive quarterly distribution increase.”
The Partnership also recently announced two important transactions: the $8 million acquisition of an approximately 160,000 thousand barrel terminal located in Columbus, Ohio, which is expected to be immediately accretive upon the closing of the transaction, estimated to be within the next 60 days; and effective January 1, 2005 the operatorship of the West Texas Gulf Pipe Line, a 579-mile crude oil pipeline, originating from the West Texas oil fields, at Colorado City, Texas and the Partnership’s Nederland, Texas crude oil import terminal, extending to Longview, Texas where deliveries are made
to several pipelines, including the Mid-Valley Pipeline. The Partnership is the largest shareholder in West Texas Gulf, having acquired its 43.8 percent interest in November 2002.
Net income for the third quarter 2004 decreased $4.1 million from the prior year quarter to $12.8 million due to the impact of a turnaround at Sunoco, Inc.’s Marcus Hook refinery, higher Eastern and Western Pipeline System operating and maintenance expenses, weaker Western Pipeline System lease acquisition margins, and costs related to complying with Sarbanes-Oxley, partially offset by the operating results of recent acquisitions.
For the nine months ended September 30, 2004, net income decreased $2.7 million to $43.8 million due mainly to higher Eastern Pipeline System operating and maintenance expenses, lower Western Pipeline System lease acquisition margins, and costs related to complying with Sarbanes-Oxley, partially offset by the operating results from the acquisitions and higher revenues at the Nederland Terminal.
Segmented Third Quarter Results
Eastern Pipeline System
Operating income for the Eastern Pipeline System decreased $2.3 million to $7.8 million for the third quarter 2004 from $10.1 million for the third quarter 2003. Sales and other operating revenue increased from $24.1 million for the prior year’s third quarter to $24.5 million for the third quarter 2004 due mainly to an increase in total shipments, partially offset by lower revenue per barrel mile. The increase in shipments was principally the result of higher crude oil throughput on the Marysville to Toledo pipeline and higher refined product throughput on the Harbor Pipeline, partially offset by a four-week, planned turnaround at Sunoco, Inc.’s Marcus Hook refinery in September 2004. The increase in volume on the Harbor Pipeline was due mainly to the acquisition of an additional one-third ownership interest in late June 2004 and Sunoco, Inc.’s January 2004 purchase of the Eagle Point, New Jersey refinery. Total expenses increased from $17.6 million for the prior year’s third quarter to $20.2 million for the third quarter 2004 due principally to an increase in scheduled maintenance costs and product line losses caused by meter inaccuracies which have been remedied. In addition, total expenses increased due to the inclusion of an additional one-third interest in the Harbor Pipeline.
Terminal Facilities
The Terminal Facilities business segment had a $0.9 million increase in operating income to $8.8 million for the third quarter 2004 from $7.9 million for the prior year’s third quarter. Total revenues increased $3.5 million to $28.1 million for the third quarter 2004 due primarily to the acquisition of the Eagle Point logistics assets from Sunoco, Inc. on March 30, 2004 and the purchase of two refined product terminals from ConocoPhillips located in Baltimore, Maryland and Manassas, Virginia on April 28, 2004. Operating expenses increased $1.8 million to $12.5 million for the third quarter 2004 due principally to the expenses associated with the acquired assets and an increase in scheduled tank maintenance costs at the Nederland Terminal. Depreciation and amortization increased
$0.7 million to $3.6 million for the third quarter 2004 due mainly to the inclusion of the acquired assets.
Western Pipeline System
Operating income for the Western Pipeline System decreased $2.8 million to $1.3 million for the third quarter 2004 from $4.1 million for the third quarter 2003. The decrease was primarily the result of an increase in scheduled pipeline maintenance and integrity management expenses, lower lease acquisition volumes and margins, and the absence in the current period of a gain on sale of crude trucks. Total revenues and cost of products sold and operating expenses increased in the third quarter 2004 compared with the prior year’s third quarter due primarily to an increase in the price of crude oil, partially offset by a decline in lease acquisition and bulk volumes. The average price of West Texas Intermediate crude oil at Cushing, Oklahoma, increased to an average price of $43.85 per barrel for the third quarter 2004 from $30.22 per barrel for the third quarter 2003.
Segmented Nine Month Results
Eastern Pipeline System
The Eastern Pipeline System experienced a $3.4 million decrease in operating income from $28.1 million for the nine months ended September 30, 2003 to $24.7 million for the nine months ended September 30, 2004. Sales and other operating revenue increased $1.2 million to $71.5 million for the first nine months of 2004 principally as a result of an increase in total shipments, partially offset by lower revenue per barrel mile. The increase in shipments was primarily the result of higher crude oil throughput on the Marysville to Toledo pipeline and higher refined product throughput on the Harbor Pipeline, partially offset by a decline in volumes as a result of turnarounds at Sunoco, Inc.’s Toledo refinery in March 2004 and Marcus Hook refinery in September 2004. Other income increased $0.8 million to $9.6 million for the first nine months of 2004 due principally to higher equity income from Explorer Pipeline due to a capacity expansion in September 2003. Total expenses increased $5.4 million to $56.4 million for the first nine months of 2004 due mainly to an increase in scheduled maintenance costs, product line losses previously mentioned, and the inclusion of an additional one-third interest in the Harbor Pipeline.
Terminal Facilities
Operating income at the Terminal Facilities business segment increased $4.1 million to $26.2 million for the nine months ended September 30, 2004 compared with $22.1 million for the prior year comparable period. Total revenues increased $8.8 million to $78.2 million for the first nine months of 2004 due principally to revenues from the acquired assets mentioned previously, an increase in the Nederland Terminal’s volumes, and higher volumes at the refined product terminals and the Fort Mifflin Terminal Complex. The Nederland Terminal’s volumes increased from the prior year comparable period due to the construction of two new tanks in the prior year and higher utilization of existing tankage due to improved market conditions for crude oil imports. Operating expenses increased $3.4 million to $32.6 million for the first nine months of 2004 due mainly to expenses
associated with the acquired assets, non-routine dredging activity on the Delaware River at the Fort Mifflin Terminal docks in the first quarter 2004, and an increase in scheduled tank maintenance costs at the Nederland Terminal. Depreciation and amortization increased $1.2 million to $9.6 million for the first nine months of 2004 due primarily to the inclusion of the acquired assets and the construction of two new tanks at the Nederland Terminal in the prior year.
Western Pipeline System
Operating income for the Western Pipeline System was $8.1 million for the nine months ended September 30, 2004 compared with $11.2 million for the prior year comparable period. The decrease was primarily the result of lower lease acquisition margins and volumes and lower equity income from the West Texas Gulf Pipe Line due to a decline in demand for domestic crude oil transported on this pipeline from the prior year’s comparable period and the temporary shutdown of a significant connecting pipeline due to a planned, four-week refinery turnaround during the first half of 2004. Total revenues and cost of products sold and operating expenses increased in the first nine months of 2004 compared with the prior year comparable period due mainly to an increase in the price of crude oil, partially offset by a decline in lease acquisition and bulk volumes. The average price of West Texas Intermediate crude oil at Cushing, Oklahoma, increased to an average price of $39.01 per barrel for the first nine months of 2004 from $30.96 per barrel for the first nine months of 2003.
Other Analysis
Financing Costs
Net interest expense was relatively unchanged for the third quarter 2004 and the nine months ended September 30, 2004 compared with the prior year comparable periods. Total debt outstanding at September 30, 2004 of $313.3 million consists of $248.8 million of the Senior Notes and $64.5 million of borrowings under the credit facility.
Capital Expenditures
Maintenance capital expenditures increased $1.1 million to $7.7 million for the third quarter 2004 due to changes in the timing of scheduled pipeline and terminal maintenance activity. Maintenance capital expenditures of $16.6 million for the nine months ended September 30, 2004 were relatively unchanged when compared to the prior year comparable period. Management anticipates maintenance capital expenditures to be approximately $25.5 million for the year ended December 31, 2004.
Expansion capital expenditures for the third quarter 2004 consisted primarily of pipeline connections and new truck stations in the Western Pipeline System and terminal capacity expansions. Expansion capital expenditures for the nine months ended September 30, 2004 consisted primarily of the third quarter 2004 items noted previously and the acquisition of the Eagle Point logistics assets from Sunoco on March 30 for $20.0 million, the purchase of two refined product terminals from ConocoPhillips on April 28 for $12.0 million, and the purchase of an additional one-third interest in the Harbor Pipeline from an affiliate of El Paso Corporation on June 28 for $7.3 million.
Sunoco Logistics Partners L.P.
Financial Highlights
(in thousands, except units and per unit amounts)
(unaudited)
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| | | Three Months Ended | | Nine Months Ended | | | | |
| | | September 30,
| | September 30,
| | | | |
Income Statement
| | 2004
| | 2003
| | 2004
| | 2003
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| Sales and other operating revenue | | $ | 857,603 | | | $ | 653,160 | | | $ | 2,419,490 | | | $ | 2,026,120 | | | | | |
| Other income | | | 4,172 | | | | 4,780 | | | | 11,049 | | | | 11,619 | | | | | |
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| Total Revenues | | | 861,775 | | | | 657,940 | | | | 2,430,539 | | | | 2,037,739 | | | | | |
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| Cost of products sold and operating expenses | | | 824,325 | | | | 617,221 | | | | 2,313,172 | | | | 1,919,893 | | | | | |
| Depreciation and amortization | | | 7,886 | | | | 6,918 | | | | 22,098 | | | | 20,512 | | | | | |
| Selling, general and administrative expenses | | | 11,597 | | | | 11,665 | | | | 36,293 | | | | 35,939 | | | | | |
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| Total costs and expenses | | | 843,808 | | | | 635,804 | | | | 2,371,563 | | | | 1,976,344 | | | | | |
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| Operating income | | | 17,967 | | | | 22,136 | | | | 58,976 | | | | 61,395 | | | | | |
| Net interest expense | | | 5,202 | | | | 5,268 | | | | 15,130 | | | | 14,822 | | | | | |
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| Net Income | | $ | 12,765 | | | $ | 16,868 | | | $ | 43,846 | | | $ | 46,573 | | | | | |
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Calculation of Limited Partners’ interest: | | | | | | | | | | | | | | | | | | | | |
| Net Income | | $ | 12,765 | | | $ | 16,868 | | | $ | 43,846 | | | $ | 46,573 | | | | | |
| Less: General Partner’s interest | | | (707 | ) | | | (399 | ) | | | (2,009 | ) | | | (993 | ) | | | | |
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Limited Partners’ interest in Net Income | | $ | 12,058 | | | $ | 16,469 | | | $ | 41,837 | | | $ | 45,580 | | | | | |
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Net Income per Limited Partner unit | | | | | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.50 | | | $ | 0.72 | | | $ | 1.78 | | | $ | 2.00 | | | | | |
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| Diluted | | $ | 0.50 | | | $ | 0.72 | | | $ | 1.76 | | | $ | 1.99 | | | | | |
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Weighted average Limited Partners’ units outstanding: | | | | | | | | | | | | | | | | | | | | |
| Basic | | | 23,988,734 | | | | 22,771,793 | | | | 23,557,919 | | | | 22,771,793 | | | | | |
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| Diluted | | | 24,238,763 | | | | 22,908,454 | | | | 23,786,248 | | | | 22,880,382 | | | | | |
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Capital Expenditure Data: | | | | | | | | | | | | | | | | | | | | |
| Maintenance capital expenditures | | $ | 7,687 | | | $ | 6,637 | | | $ | 16,554 | | | $ | 16,766 | | | | | |
| Expansion capital expenditures | | | 4,775 | | | | 4,507 | | | | 48,813 | | | | 9,348 | | | | | |
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| Total | | $ | 12,462 | | | $ | 11,144 | | | $ | 65,367 | | | $ | 26,114 | | | | | |
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| | | September 30, | | December 31, |
| | | 2004
| | 2003
|
Balance Sheet Data (at period end): | | | | | | | | |
| Cash and cash equivalents | | $ | 59,785 | | | $ | 50,081 | |
| Total Debt | | | 313,263 | | | | 313,136 | |
| Total Partners’ Capital | | | 452,464 | | | | 400,871 | |
Sunoco Logistics Partners L.P.
Earnings Contribution by Business Segment
(in thousands, unaudited)
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| | | Three Months Ended | | Nine Months Ended |
| | | September 30,
| | September 30,
|
| | | 2004
| | 2003
| | 2004
| | 2003
|
Eastern Pipeline System: | | | | | | | | | | | | | | | | |
| Sales and other operating revenue | | $ | 24,472 | | | $ | 24,133 | | | $ | 71,488 | | | $ | 70,298 | |
| Other income | | | 3,555 | | | | 3,523 | | | | 9,591 | | | | 8,810 | |
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| Total Revenues | | | 28,027 | | | | 27,656 | | | | 81,079 | | | | 79,108 | |
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| Operating expenses | | | 13,286 | | | | 10,411 | | | | 34,674 | | | | 29,299 | |
| Depreciation and amortization | | | 2,725 | | | | 2,703 | | | | 8,123 | | | | 7,972 | |
| Selling, general and administrative expenses | | | 4,195 | | | | 4,462 | | | | 13,584 | | | | 13,752 | |
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| Operating Income | | $ | 7,821 | | | $ | 10,080 | | | $ | 24,698 | | | $ | 28,085 | |
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Terminal Facilities: | | | | | | | | | | | | | | | | |
| Total Revenues | | $ | 28,078 | | | $ | 24,608 | | | $ | 78,192 | | | $ | 69,371 | |
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| Operating expenses | | | 12,500 | | | | 10,724 | | | | 32,594 | | | | 29,154 | |
| Depreciation and amortization | | | 3,583 | | | | 2,865 | | | | 9,626 | | | | 8,442 | |
| Selling, general and administrative expenses | | | 3,163 | | | | 3,110 | | | | 9,764 | | | | 9,671 | |
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| Operating Income | | $ | 8,832 | | | $ | 7,909 | | | $ | 26,208 | | | $ | 22,104 | |
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Western Pipeline System: | | | | | | | | | | | | | | | | |
| Sales and other operating revenue | | $ | 805,066 | | | $ | 604,419 | | | $ | 2,269,823 | | | $ | 1,886,466 | |
| Other income | | | 604 | | | | 1,257 | | | | 1,445 | | | | 2,794 | |
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| Total Revenues | | | 805,670 | | | | 605,676 | | | | 2,271,268 | | | | 1,889,260 | |
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| Cost of products sold and operating expenses | | | 798,539 | | | | 596,086 | | | | 2,245,904 | | | | 1,861,440 | |
| Depreciation and amortization | | | 1,578 | | | | 1,350 | | | | 4,349 | | | | 4,098 | |
| Selling, general and administrative expenses | | | 4,239 | | | | 4,093 | | | | 12,945 | | | | 12,516 | |
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| Operating Income | | $ | 1,314 | | | $ | 4,147 | | | $ | 8,070 | | | $ | 11,206 | |
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Sunoco Logistics Partners L.P.
Operating Highlights
(unaudited)
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended |
| | | September 30,
| | September 30,
|
| | | 2004
| | 2003
| | 2004
| | 2003
|
Eastern Pipeline System:(1) | | | | | | | | | | | | | | | | |
Total shipments (barrel miles per day)(2) | | | 59,503,096 | | | | 57,459,042 | | | | 57,825,743 | | | | 54,898,010 | |
| Revenue per barrel mile (cents) | | | 0.447 | | | | 0.457 | | | | 0.451 | | | | 0.469 | |
Terminal Facilities: | | | | | | | | | | | | | | | | |
| Terminal throughput (bpd): | | | | | | | | | | | | | | | | |
| Nederland terminal | | | 497,380 | | | | 504,293 | | | | 492,792 | | | | 450,304 | |
Other terminals(3) | | | 1,022,359 | | | | 761,913 | | | | 942,971 | | | | 769,110 | |
Western Pipeline System:(1) | | | | | | | | | | | | | | | | |
| Crude oil pipeline throughput (bpd) | | | 295,684 | | | | 302,502 | | | | 298,523 | | | | 305,970 | |
| Crude oil purchases at wellhead (bpd) | | | 184,079 | | | | 190,227 | | | | 186,726 | | | | 195,605 | |
Gross margin per barrel of pipeline throughput (cents)(4) | | | 18.2 | | | | 25.1 | | | | 23.9 | | | | 25.1 | |
| (1) | | Excludes amounts attributable to equity ownership interests in the corporate joint ventures. |
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| (2) | | Represents total average daily pipeline throughput multiplied by the number of miles of pipeline through which each barrel has been shipped. |
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| (3) | | Consists of the Partnership’s refined product terminals, the Fort Mifflin Terminal Complex, the Marcus Hook Tank Farm and the Eagle Point logistics assets. |
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| (4) | | Represents total segment sales and other operating revenue minus cost of products sold and operating expenses and depreciation and amortization divided by crude oil pipeline throughput. |
An investor call with management regarding our third-quarter results is scheduled for Thursday morning, October 21 at 9:00 am EDT. Those wishing to listen can access the call by dialing (USA toll free) 1-877-297-3442; International (USA toll) 1-706-643-1335 and request “Sunoco Logistics Partners Earnings Call, Conference Code 1228658”. This event may also be accessed by a webcast, which will be available at www.sunocologistics.com. A number of presentation slides will accompany the audio portion of the call and will be available to be viewed and printed shortly before the call begins. Individuals wishing to listen to the call on the Partnership’s web site will need Windows Media Player, which can be downloaded free of charge from Microsoft or from Sunoco Logistics Partners’ conference call page. Please allow at least fifteen minutes to complete the download.
Audio replays of the conference call will be available for two weeks after the conference call beginning approximately two hours following the completion of the call. To access the replay, dial 1-800-642-1687. International callers should dial 1-706-645-9291. Please enter Conference ID# 1228658.
Sunoco Logistics Partners L.P. (NYSE: SXL), headquartered in Philadelphia, was formed to acquire, own and operate substantially all of Sunoco, Inc.’s refined product and crude oil pipelines and terminal facilities. The Eastern Pipeline System consists of approximately 1,900 miles of primarily refined product pipelines and interests in four refined products pipelines, consisting of a 9.4 percent interest in Explorer Pipeline Company, a 31.5 percent interest in Wolverine Pipe Line Company, a 12.3 percent interest in West Shore Pipe Line Company and a 14.0 percent interest in Yellowstone Pipe Line Company. The Terminal Facilities consist of 8.8 million barrels of refined product terminal capacity and 16.0 million barrels of crude oil terminal capacity (including 12.5 million barrels of capacity at the Texas Gulf Coast Nederland Terminal). The Western Pipeline System consists of approximately 2,700 miles of crude oil pipelines, located principally in Oklahoma and Texas, and a 43.8 percent interest the West Texas Gulf Pipe Line Company. For additional information visit Sunoco Logistics’ web site at www.sunocologistics.com.
NOTE: Those statements made in this release that are not historical facts are forward-looking statements. Although Sunoco Logistics Partners L.P. (the “Partnership”) believes that the assumptions underlying these statements are reasonable, investors are cautioned that such forward-looking statements are inherently uncertain and necessarily involve risks that may affect the Partnership’s business prospects and performance causing actual results to differ from those discussed in the foregoing release. Such risks and uncertainties include, by way of example and not of limitation: whether or not the transactions described in the foregoing news release will be cash flow accretive; increased competition; changes in demand for crude oil and refined products that we store and distribute; changes in operating conditions and costs; changes in the level of environmental remediation spending; potential equipment malfunction; potential labor relations problems; the legislative or regulatory environment; plant construction/repair delays; nonperformance by major customers or suppliers; and political and economic conditions, including the impact of potential terrorist acts and international hostilities. These and other applicable risks and uncertainties have been described more fully in the Partnership’s June 30, 2004 Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 5, 2004. The Partnership undertakes no obligation to update any forward-looking statements in this release, whether as a result of new information or future events.
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