Exhibit 99.1
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 | | News Release Sunoco Logistics Partners L.P. 1735 Market Street Philadelphia, Pa. 19103-7583 |
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For further information contact: Thomas Golembeski (media) 215-977-6298 Neal Murphy (investors) 866-248-4344 | | For release: 5:00 p.m. October 27, 2008 |
No. 15
SUNOCO LOGISTICS PARTNERS L.P. REPORTS THE THIRD QUARTER 2008 RESULTS AND
DECLARES THIRD QUARTER DISTRIBUTION
PHILADELPHIA, October 27, 2008 – Sunoco Logistics Partners L.P. (NYSE: SXL) (the “Partnership”) today announced quarterly net income for the third quarter ended September 30, 2008 of $50.3 million, or $1.19 per limited partner unit on a diluted basis, compared with $37.5 million, or $0.97 per limited partner unit on a diluted basis, for the third quarter ended September 30, 2007. Operating income for the third quarter ended September 30, 2008 increased by $11.9 million, or 26.0 percent, from the prior year’s third quarter. The improvement was driven by higher margins and fees across all segments, increased volumes within certain segments of the Western Pipeline system and additional tankage placed into service at the Nederland terminal. These improvements to operating income were partially offset by lower volumes within certain terminal facilities and the Eastern Pipeline, as well as a $2.5 million charge associated with property damages caused by the hurricanes experienced during the quarter. In addition, the Partnership estimates that approximately $3.0 million of revenue was lost during the quarter as a result of hurricane disruptions. Decreased interest expense contributed further to the $12.8 million increase in net income.
For the nine months ended September 30, 2008, net income increased to $139.2 million compared to $85.1 million for the nine months ended September 30, 2007. Operating income for the nine months ended September 30, 2008 increased $50.8 million, or 45.6 percent, when compared to the prior year period. The increase was the result of higher margins and fees across all segments, increased volumes within certain segments of the Western Pipeline system and additional tankage placed into service at the Nederland terminal. These improvements to operating income were partially offset by lower volumes within certain terminal facilities and the Eastern Pipeline, a $5.7 million non-cash impairment charge related to a cancelled project and property damages caused by the hurricanes noted above. Decreased interest expense contributed further to the $54.1 million increase in net income.
Sunoco Partners LLC, the general partner of Sunoco Logistics Partners L.P., declared a cash distribution for the third quarter of 2008 of $0.965 per common partnership unit ($3.86 annualized) payable November 14, 2008 to unit holders of record on November 7, 2008.
“The third quarter results, which were just short of the record set in the last quarter, evidenced the focus we have on continued sustainable cash flow growth across all business segments. Our Western Crude Oil system, in particular, had a very strong quarter despite the impact of Hurricanes Ike and Gustav. Margins in the Lease Acquisition business continue to be strong with higher than normal volumes in Oklahoma, as well as favorable crude oil market differentials. Pipeline volumes, despite being lower than last year, were reasonable given the hurricane disruptions. Our businesses benefited from higher pipeline tariffs and terminal rates as the escalating cost of building new infrastructure has enabled margin expansion from our existing infrastructure,” said Deborah M. Fretz, President and Chief Executive Officer. “We expect to close the acquisition of the ExxonMobil MagTex pipeline system in the fourth quarter and, with our strong balance sheet and a debt to EBITDA ratio of 2.1x, among the lowest in our competitive group, we will debt finance
this transaction. The acquisition will be immediately accretive to the LP unitholders and will provide a refined products platform in the Gulf Coast which will facilitate additional organic investments. Despite the turmoil in the credit markets, our business model remains solid and transparent and our strong financial position supports future growth. We announced a cash distribution of $0.965, a 3.2% increase versus last quarter and a 13.5% increase versus the third quarter 2007. It is the twenty-first distribution increase in the last twenty-two quarters. As announced last quarter, we expect to increase our 2009 distribution by at least 10% and we reaffirm this guidance given the investment opportunities we have underway.”
Segmented Third Quarter Results
Eastern Pipeline System
Operating income for the Eastern Pipeline system increased $2.7 million to $17.4 million for the third quarter ended September 30, 2008 compared to the prior year’s third quarter. Sales and other operating revenue increased by $0.7 million to $31.7 million due primarily to higher fees across the Partnership’s refined product and crude oil pipelines, partially offset by decreased volumes. Other income decreased $1.9 million compared to the prior year’s third quarter due primarily to decreased refined product volumes experienced during 2008 by the Partnership’s joint venture interests. Operating expenses decreased by $4.5 million to $9.0 million due primarily to the impact of increased crude oil and refined product prices on operating gains and a decreased level of environmental charges compared to the prior year period.
Terminal Facilities
Operating income for the Terminal Facilities segment increased by $1.2 million to $13.7 million for the third quarter ended September 30, 2008 compared to the prior year’s third quarter. Sales and other operating revenue increased by $4.8 million to $40.6 million due primarily to increased terminal fees, the addition of tankage at the Nederland terminal and increased refined product additive revenues. These increases were partially offset by decreased throughput within the refinery and refined product terminals. Operating expenses increased by $3.1 million to $17.9 million for the third quarter of 2008 due primarily to damages incurred from hurricanes during the third quarter, increased product additive costs and higher utility costs. These higher costs were partially offset by product overages which were favorably impacted by the increased price of crude oil.
Western Pipeline System
Operating income for the Western Pipeline system increased $8.1 million to $26.7 million for the third quarter of 2008 compared to the prior year’s third quarter due primarily to the establishment of a bi-directional pipeline connection to the Partnership’s Nederland terminal, increased volumes on certain pipeline segments, increased pipeline fees and higher lease acquisition margins.
Higher crude oil prices were a key driver of the overall increase in total revenue, cost of products sold and operating expenses from the prior year’s quarters. The average price of West Texas Intermediate crude oil at Cushing, Oklahoma increased to $118.13 per barrel for the third quarter of 2008 from $75.33 per barrel for the third quarter of 2007.
Segmented Nine Month Results
Eastern Pipeline System
Operating income for the Eastern Pipeline system increased $7.5 million to $42.7 million for the nine months ended September 30, 2008 compared to the prior year period. Sales and other operating revenue increased by $3.7 million to $89.6 million due primarily to higher fees across the Partnership’s refined product and crude oil pipelines, partially offset by decreased volumes. Other income decreased $3.9 million compared to the prior year period as a result of decreased refined product volumes experienced during 2008 by the Partnership’s joint venture interests. Operating expenses decreased by $8.1 million to $31.0 million due primarily to the impact of increased crude oil and refined product prices on operating gains and a decreased level of environmental charges compared to the prior year. This decrease was partially offset by increased utility costs throughout the system.
Terminal Facilities
Operating income for the Terminal Facilities segment increased by $2.5 million to $42.9 million for the nine months ended September 30, 2008 compared to the prior year period. Operating income was reduced during the first nine months of 2008 due to a $5.7 million non-cash impairment charge related to the Partnership’s decision to discontinue efforts to expand LPG storage capacity at its Inkster, Michigan facility. Sales and other operating revenue increased by $15.3 million to $119.3 million due primarily to the addition of new tankage at the Nederland terminal, higher fees at the Partnership’s Nederland and refined products terminals, and increased product additive revenues. The increases were partially offset by decreased volumes in the Partnership’s refinery and refined products terminals. Other income increased $0.8 million from the first nine months of 2008 as a result of an insurance recovery recorded during the second quarter associated with hurricane damage sustained in 2005. Operating expenses increased by $5.4 million to $45.5 million for the period ended September 30, 2008 due primarily to increased product additive costs, damages incurred at the Partnership’s Nederland terminal from the hurricanes experienced during the third quarter, higher utility costs and timing of maintenance activity. These higher costs were partially offset by product overages which were favorably impacted by the increased price of crude oil. Selling, general and administrative expenses increased by $1.7 million to $13.9 million for the nine months ended September 30, 2008. During 2007, expenses were reduced by $0.9 million in connection with an insurance recovery.
Western Pipeline System
Operating income for the Western Pipeline system increased $40.9 million to $76.9 million for the first nine months of 2008 compared to the prior year period due primarily to the establishment of a bi-directional pipeline connection to the Partnership’s Nederland terminal, increased volumes on certain pipeline segments, increased pipeline fees and higher lease acquisition margins. Other income also contributed to the increased profitability due to increased equity income associated with the Partnership’s joint venture interests and the gain on an insurance recovery discussed above.
Higher crude oil prices were a key driver of the overall increase in total revenue, cost of products sold and operating expenses from the prior year period. The average price of West Texas Intermediate crude oil at Cushing, Oklahoma increased to $113.38 per barrel for the first nine months of 2008 from $66.26 per barrel for the first nine months of 2007.
Other Analysis
Financing Costs
Net interest expense decreased $3.2 million for the nine months ended September 30, 2008, compared to the prior year period. The decrease was due primarily to decreased borrowings and lower interest rates related to the Partnership’s revolving credit facility. As of September 30, 2008, the Partnership had total debt outstanding of $525.2 million, which consisted of $424.2 million of Senior Notes and $101.0 million of borrowings under the Partnership’s credit facilities as compared to $515.1 million of total debt outstanding at December 31, 2007. As of September 30, 2008, the Partnership had available borrowing capacity of $399.0 million under its credit facilities and a Debt to EBITDA ratio of 2.1x for the trailing twelve month period.
Capital Expenditures
Maintenance capital expenditures for the nine months ended September 30, 2008 were $15.7 million. The Partnership expects that maintenance capital spending for 2008 will be approximately $27.0 million for the full year.
Expansion capital expenditures for the nine months ended September 30, 2008 were $73.4 million compared to $72.5 million for the first nine months of 2007. Expansion capital for 2007 included the $13.4 million acquisition of a 50 percent interest in a Syracuse, New York refined products terminal. Expansion capital for 2008 includes construction in progress, in connection with the Partnership’s agreement with Motiva Enterprises LLC, of three crude oil storage tanks at its Nederland Terminal and a crude oil pipeline from Nederland to Motiva’s Port Arthur, Texas refinery. Expansion capital also includes construction of five additional crude oil storage tanks at Nederland, for a total of eight crude oil storage tanks under various levels of construction at Nederland during 2008. These eight crude oil storage tanks will have a combined shell capacity of approximately 4.8 million barrels.
Non-GAAP Financial Measures
Management of the Partnership believes EBITDA information enhances an investor’s understanding of a business’ ability to generate cash for payment of distributions and other purposes. EBITDA does not represent and should not be considered an alternative to net income as determined under United States GAAP and may not be comparable to other similarly titled measures of other businesses. Reconciliations of this measure to the comparable GAAP measure are provided in the table accompanying this release.
Sunoco Logistics Partners L.P.
Financial Highlights
(in thousands, except units and per unit amounts)
(unaudited)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30, | | | Nine Months Ended
September 30, | |
| | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
Income Statement | | | | | | | | | | | | | | | | |
Sales and other operating revenue | | $ | 2,829,507 | | | $ | 1,936,215 | | | $ | 8,539,317 | | | $ | 5,116,065 | |
Other income | | | 6,245 | | | | 8,388 | | | | 19,854 | | | | 21,125 | |
| | | | | | | | | | | | | | | | |
Total Revenues | | | 2,835,752 | | | | 1,944,603 | | | | 8,559,171 | | | | 5,137,190 | |
| | | | | | | | | | | | | | | | |
Cost of products sold and operating expenses | | | 2,752,609 | | | | 1,875,714 | | | | 8,316,720 | | | | 4,955,302 | |
Depreciation and amortization | | | 10,010 | | | | 9,556 | | | | 29,499 | | | | 27,867 | |
Selling, general and administrative expenses | | | 15,270 | | | | 13,411 | | | | 44,827 | | | | 42,417 | |
Impairment Charge | | | — | | | | — | | | | 5,674 | | | | — | |
| | | | | | | | | | | | | | | | |
Total costs and expenses | | | 2,777,889 | | | | 1,898,681 | | | | 8,396,720 | | | | 5,025,586 | |
| | | | | | | | | | | | | | | | |
Operating income | | | 57,863 | | | | 45,922 | | | | 162,451 | | | | 111,604 | |
Interest cost and debt expense, net | | | 8,506 | | | | 9,360 | | | | 25,904 | | | | 28,979 | |
Capitalized interest | | | (977 | ) | | | (952 | ) | | | (2,613 | ) | | | (2,450 | ) |
| | | | | | | | | | | | | | | | |
Net Income | | $ | 50,334 | | | $ | 37,514 | | | $ | 139,160 | | | $ | 85,075 | |
| | | | | | | | | | | | | | | | |
Calculation of Limited Partners’ interest: | | | | | | | | | | | | | | | | |
Net Income | | $ | 50,334 | | | $ | 37,514 | | | $ | 139,160 | | | $ | 85,075 | |
Less: General Partner’s interest | | | (16,070 | ) | | | (9,682 | ) | | | (42,288 | ) | | | (15,313 | ) |
| | | | | | | | | | | | | | | | |
Limited Partners’ interest in Net Income | | $ | 34,264 | | | $ | 27,832 | | | $ | 96,872 | | | $ | 69,762 | |
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Net Income per Limited Partner unit | | | | | | | | | | | | | | | | |
Basic | | $ | 1.20 | | | $ | 0.97 | | | $ | 3.38 | | | $ | 2.44 | |
| | | | | | | | | | | | | | | | |
Diluted | | $ | 1.19 | | | $ | 0.97 | | | $ | 3.36 | | | $ | 2.43 | |
| | | | | | | | | | | | | | | | |
Weighted average Limited Partners’ unitsoutstanding: | | | | | | | | | | | | | | | | |
Basic | | | 28,657,485 | | | | 28,586,280 | | | | 28,647,578 | | | | 28,579,263 | |
| | | | | | | | | | | | | | | | |
Diluted | | | 28,845,559 | | | | 28,739,232 | | | | 28,830,653 | | | | 28,722,026 | |
| | | | | | | | | | | | | | | | |
Capital Expenditure Data: | | | | | | | | | | | | | | | | |
Maintenance capital expenditures | | $ | 7,884 | | | $ | 7,021 | | | $ | 15,655 | | | $ | 14,562 | |
Expansion capital expenditures | | | 28,665 | | | | 16,254 | | | $ | 73,389 | | | $ | 72,528 | |
| | | | | | | | | | | | | | | | |
Total | | $ | 36,549 | | | $ | 23,275 | | | $ | 89,044 | | | $ | 87,090 | |
| | | | | | | | | | | | | | | | |
| | | | |
| | | September 30,
2008 | | | December 31,
2007 | | | | | | | |
Balance Sheet Data (at period end): | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 2,000 | | | $ | 2,000 | | | | | | | | | |
Total Debt | | | 525,249 | | | | 515,104 | | | | | | | | | |
Total Partners’ Capital | | | 631,979 | | | | 591,045 | | | | | | | | | |
Sunoco Logistics Partners L.P.
Earnings Contribution by Business Segment
(in thousands, unaudited)
| | | | | | | | | | | | |
| | | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| | | 2008 | | 2007 | | 2008 | | 2007 |
Eastern Pipeline System: | | | | | | | | | | | | |
Sales and other operating revenue | | $ | 31,736 | | $ | 30,984 | | $ | 89,579 | | $ | 85,874 |
Other income | | | 2,271 | | | 4,116 | | | 6,521 | | | 10,448 |
| | | | | | | | | | | | |
Total Revenues | | | 34,007 | | | 35,100 | | | 96,100 | | | 96,322 |
| | | | | | | | | | | | |
Operating expenses | | | 9,021 | | | 13,491 | | | 31,006 | | | 39,074 |
Depreciation and amortization | | | 2,442 | | | 2,259 | | | 7,321 | | | 6,815 |
Selling, general and administrative expenses | | | 5,156 | | | 4,626 | | | 15,092 | | | 15,206 |
| | | | | | | | | | | | |
Operating Income | | $ | 17,388 | | $ | 14,724 | | $ | 42,681 | | $ | 35,227 |
| | | | | | | | | | | | |
Terminal Facilities: | | | | | | | | | | | | |
Sales and other operating revenues | | $ | 40,634 | | $ | 35,874 | | $ | 119,290 | | $ | 104,033 |
Other Income | | | — | | | — | | | 825 | | | — |
| | | | | | | | | | | | |
Total Revenues | | | 40,634 | | | 35,874 | | | 120,115 | | | 104,033 |
| | | | | | | | | | | | |
Operating expenses | | | 17,938 | | | 14,883 | | | 45,539 | | | 40,161 |
Depreciation and amortization | | | 4,198 | | | 3,878 | | | 12,191 | | | 11,368 |
Selling, general and administrative expenses | | | 4,760 | | | 4,550 | | | 13,853 | | | 12,158 |
Impairment Charge | | | — | | | — | | | 5,674 | | | — |
| | | | | | | | | | | | |
Operating Income | | $ | 13,738 | | $ | 12,563 | | $ | 42,858 | | $ | 40,346 |
| | | | | | | | | | | | |
Western Pipeline System: | | | | | | | | | | | | |
Sales and other operating revenue | | $ | 2,757,137 | | $ | 1,869,366 | | $ | 8,330,448 | | $ | 4,926,152 |
Other income | | | 3,974 | | | 4,263 | | | 12,508 | | | 10,683 |
| | | | | | | | | | | | |
Total Revenues | | | 2,761,111 | | | 1,873,629 | | | 8,342,956 | | | 4,936,835 |
| | | | | | | | | | | | |
Cost of products sold and operating expenses | | | 2,725,650 | | | 1,847,340 | | | 8,240,175 | | | 4,876,067 |
Depreciation and amortization | | | 3,370 | | | 3,419 | | | 9,987 | | | 9,684 |
Selling, general and administrative expenses | | | 5,354 | | | 4,235 | | | 15,882 | | | 15,053 |
| | | | | | | | | | | | |
Operating Income | | $ | 26,737 | | $ | 18,635 | | $ | 76,912 | | $ | 36,031 |
| | | | | | | | | | | | |
Sunoco Logistics Partners L.P.
Operating Highlights
(unaudited)
| | | | | | | | |
| | | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| | | 2008 | | 2007 | | 2008 | | 2007 |
Eastern Pipeline System:(1) | | | | | | | | |
Total shipments (barrel miles per day)(2) | | 62,856,632 | | 67,671,264 | | 61,428,075 | | 64,820,837 |
Revenue per barrel mile (cents) | | 0.549 | | 0.498 | | 0.532 | | 0.485 |
Terminal Facilities: | | | | | | | | |
Terminal throughput (bpd): | | | | | | | | |
Refined product terminals(3) | | 437,018 | | 442,054 | | 428,146 | | 432,685 |
Nederland terminal | | 545,105 | | 490,272 | | 541,517 | | 521,147 |
Refinery terminals(4) | | 646,478 | | 727,870 | | 647,891 | | 686,033 |
Western Pipeline System:(1) | | | | | | | | |
Crude oil pipeline throughput (bpd) | | 492,823 | | 528,407 | | 530,109 | | 532,656 |
Crude oil purchases at wellhead (bpd) | | 176,739 | | 177,025 | | 175,173 | | 180,826 |
Gross margin per barrel of pipeline throughput (cents)(5) | | 62.0 | | 38.3 | | 55.3 | | 27.8 |
| (1) | Excludes amounts attributable to equity ownership interests in corporate joint ventures. |
| (2) | Represents total average daily pipeline throughput multiplied by the number of miles of pipeline through which each barrel has been shipped. |
| (3) | Includes results from the Partnership’s purchase of a 50% undivided interest in a refined products terminal in Syracuse, New York in June 2007. |
| (4) | Consists of the Partnership’s Fort Mifflin Terminal Complex, the Marcus Hook Tank Farm and the Eagle Point Dock. |
| (5) | 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. |
Sunoco Logistics Partners L.P.
Non-GAAP Financial Measures
(in thousands, unaudited)
| | | | | | | | |
| | | Nine Months
Ended
September 30,
2008 | | | Three
Months
Ended
December 31,
2007 | |
Earnings before interest, taxes, depreciation and amortization (“EBITDA”) | | | | | | | | |
Net Income | | $ | 139,160 | | | $ | 35,800 | |
Add: Interest cost and debt expense, net | | | 25,904 | | | | 9,720 | |
Less: Capitalized interest | | | (2,613 | ) | | | (969 | ) |
Add: Depreciation and amortization | | | 29,499 | | | | 9,474 | |
Add: Impairment charge | | | 5,674 | | | | — | |
| | | | | | | | |
EBITDA | | $ | 197,624 | | | $ | 54,025 | |
| | | | | | | | |
Total Debt as of September 30, 2008 | | | | | | $ | 525,249 | |
Trailing twelve month EBITDA as of September 30, 2008 | | | | | | $ | 251,649 | |
Total Debt to EBITDA Ratio | | | | | | | 2.1x | |
An investor call with management regarding the third-quarter results is scheduled for Tuesday morning, October 28 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 67276570”. This event may also be accessed by a webcast, which will be available atwww.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 #67276570.
Sunoco Logistics Partners L.P. (NYSE: SXL), headquartered in Philadelphia, is a master limited partnership formed to acquire, own and operate refined product and crude oil pipelines and terminal facilities. The Eastern Pipeline System consists of approximately 1,800 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 9.2 million shell barrels of refined products terminal capacity and 23.4 million shell barrels of crude oil terminal capacity (including approximately 16.5 million shell barrels of capacity at the Texas Gulf Coast Nederland Terminal). The Western Pipeline System consists of approximately 3,700 miles of crude oil pipelines, located principally in Oklahoma and Texas, a 55.3 percent interest in Mid-Valley Pipeline Company, a 43.8 percent interest in the West Texas Gulf Pipe Line Company and a 37.0 percent interest in the Mesa Pipe Line System. For additional information visit Sunoco Logistics’ web site atwww.sunocologistics.com.
Although Sunoco Logistics Partners L.P. 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 issues; 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 Form 10-Q filed with the Securities and Exchange Commission on August 6, 2008. 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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