SUN - Earnings call transcript Q4 2021

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Operator

Greetings and welcome to Sunoco LP's Fourth Quarter 2021 Earnings Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Scott Grischow.

begin. may You

Scott Grischow

good and Thank morning you everyone.

related assumptions and call Joe uncertainties. statements are the Chief call Officer; undertakes these financial to pandemic. Financial will and statements this team. and future statements the to Please include performance, the Officer; to morning our Sunoco release for LP's Operations various Officer; events. the partnership's differ Chief Bramhall, and are me assumptions refer contain list Kim, update subsequent Dylan impact including COVID-XX members with earnings the SEC President Today's These a operations as the Actual regarding Fails, of materially, management On Karl with factors. expectations of other that and and no these subject could as forward-looking results Executive well on Chief and risks filings expectations of to the based partnership obligation our

will non-GAAP for a adjusted. each also the website Please LP During as today's measure. Sunoco financial discuss refer flow including call, financial adjusted reconciliation and cash certain we to distributable EBITDA measures, of

ratio X% quarter up XXXX. partnership quarter, sold The quarter in The of quarter the distributable for cash gallons the X.Xx. XXXX. in to fourth coverage XXXX million I the The XXXX, the $XXX Total Adjusted fourth EBITDA a compared coverage the million a to the to gallons flow compared cover want quarter of of of ratio results was last the expenses was fourth sold X.Xx. fourth $XXX million all net gallon recorded $X.XX of on fourth Before million X.X ago. to year-over-year were $XX turn the of a for briefly X.X full Fourth I Dylan, million in income million over higher compared quarter per call cents yielding fourth adjusted was $XXX basis. $XX quarter million XXXX. to fourth operating $XXX margin gallon per $XXX of in quarter year year of partnership billion to Fuel for the year. compared was from as

Finally, our The history I results call declared to secure a unitholders. and we over stable unit the of last of continues full results durability year our XX, on distribution distribution, XXXX. $X.XXXX for quarter. Dylan business to with turn outlook delivering consistent will January support per for to discuss the and and now our

Dylan Bramhall

Scott. Thanks,

recently a XXXX capital. our of you continue walk on comments midstream low-risk year deployment another Indiana. opportunity results our of acquisition facility represents solid the asset full build to XX,XXX a in barrel few like and I announced This through Huntington, really to to exciting with Before our return acquisition transmix make accomplishments, base a I'd out day

Our to strong value continue and for additional invest to contribute SUN will of in years allow distribution to balance come. stakeholders coverage types to which these sheet opportunities, our

XXXX. improved as from X.Xx Now of and million, X% $XXX in strong XXXX. shifting results recorded guidance flow year. prior $XXX coverage cash in the year and midpoint of we full adjusted EBITDA XXXX range Distributable and XXXX to million, accomplishments, our over our above up distribution X% was to X.Xx XXXX up We our adjusted the from versus X.Xx, up ratio already

availability sheet $XXX the on of strong balance approximately of million. credit the remains year Our liquidity end of and at leverage facility with position our and X.XXx

margin assumptions: Underpinning backdrop, December, deliver accomplishments refined fuel to this construction strong financial volumes and acquisition and EBITDA adjusted products of the a the XXXX of million of poised continue we of enter to provided million. us take strong between of gallons, following billion all a X.X greenfield Texas. With $XXX for nine billion X.X to including the to position as diversified opportunities XXXX, in allowed our Finally, terminal set XXXX, terminals in growth of results. $XXX of expenses these between we $XX in $XXX the $XXX the stable advantage capital pursue In guidance range of guidance are Brownsville, and in through million first, acquisition, the which pillars million growth allocation $X.XXX for generating cash we strategy: operating to gallon, debt opportunities our balance and growth sheet like protect today. paydown of flow allows our of approximately to and our unitholders; distribution of capital fuel when on our our disciplined maintain $X.XXX capability to The maintenance investment million, and to total per second, $XXX prudent; the between annual capital us of and free operations million. focus announced secure third,

and additional be Sunoco's will for X.Xx outlook With thoughts financially and ratio of commodity we least same. financial X.Xx. expenses cycles ratio become walk on leverage the of a a volumes, at to coverage will the and of disciplined hallmark our We expect with consistent over have results our target XXXX partnership target I'll XXXX. throughout more that, Karl to of bring now some call through Karl? turn a

Karl Fails

another discipline. everyone. strong strength by in Good continued quarter, margins We delivered supported Dylan. Thanks, morning and expense

but weeks, Omicron over We contribution as of returning. addition, completed the creep variant United line This into States. spreading been did end volumes the last have the acquisitions into see of we carried with the our the have in a quarter in for up couple seen from result quarter in January, beginning Volumes our recently of X% In last the of the some were the expectations. from year. weakness

Increased quarter In we quarter, volatility in to per strongest contributed. Turning the margins. strong margins $X.XX delivered of fourth gallon, XXXX. our margin

from flat gallon were during per low from prices the quarter. quarter, $X.XX RBOB spread a the over to the there of was high end the beginning to While

benefit the near market addition, we of carried of see dynamic higher volumes same to the year. margins, the including continue of In softened has end this into breakeven beginning quarter. That when the

XXXX. to Turning

issues primarily from typically impacts the mentioned the all inflation, Again, last Omicron of remind we high volumes, be of another volumes solid the confident a labor were number supply in With and we would the Omicron. we've are that breakeven volumes for of and to higher I issued some that experienced days volume guidance. years. crude We we despite variant, considered offset lowest EBITDA quarter. in to due general achieving everyone to sustain to of which of time, I earlier year expect to some to respect guidance prices, period weakness the first lower if expect growth are impact when margins we two as by chain year and quarter our potential the extent it for would from

opportunities focused as asset with our fuel organically-developed this distribution well from export the strong remains terminal, on does to end CapEx last chain. on supply But primarily track This be for supply our than call, challenges expanding on first mentioned spend impact which with XXXX December deal in will strategic implemented the XXXX Even capital provided location. this bring service some the the XXXX. by on as growth Continuing completion $XXX commissioning subject spent capital in excited of demand those did adjustments, longer We're business with in quarter's operations. As guidance our domestic we lower with the guidance. the to to our chain lower with Brownsville contribute includes strategies of million capital not spend midstream capital, the quarter. have of guided the

and announce with midstream transmix on-site deal transmix in to our of and acquisition be meaningful In has operations storage addition, transaction XX,XXX-barrel acquire our is per our product to consistent approximately for America strategy the terminal Huntington, largest second barrels. will another processing million. midstream in the and The through a North expansion thrilled expansion of plant facility our By our the facility Indiana XXX,XXX portfolio including we're day will business synergies, to $XXX immediately Xx. with and grow multiple, operation, The below of diversify be is year to accretive. the

acquisition the quarter We early expect quarter regulatory to first or subject the second to in late approvals. customary close

Let me excited deal. by minute we a so explain and this spend why are

our operations year. delivering even delivering expenses, processing of we been exciting strong business follow-up Alabama. will well Texas start First, transmix a purchase the an underlying to stating have the wrap the this years were located Those remember When solid and diesel at our over our proven plant proven to and gasoline will we up as record, been through of with trucking stakeholders last up that that with ago business last the operations with Birmingham, and we'll recipe five entered growing are and did us related and you a transmix our and Joe? on over strategically for years integrate the on fuel business. is Midwest on and of U.S., and the assets transmix you XXXX, great crossroads we to routes five business and of distribution for Indiana acquisition continue optimization, deal profit focus is contributor expected, off distribution I will in stable many price, operations with existing attractive business. Gladieux in synergy our by track core purchase have our NuStar fuel Margins the than our solid to efficient The pipelines volumes. volumes build and our results solid operations. more several match the gross

Joe Kim

financial stronger healthy very came Good XXXX. we results financially Karl. year delivered We A the finished year. DCF. few morning where in record delivered highlights from than We EBITDA last year We started. strong the Thanks, everyone. into we and and

and our remains provide continue to capital EBITDA resilient DCF business Our incremental highly expenditures and growth.

year to coverage guidance model. deliver towards continues the ratio resilience Our is our demonstrate after leverage X.Xx on Year decrease to business continue while our of now around we our ratio our target. and Xx LTM

year, have to as margin and We're variant. volume and into We're with a the of Looking virus in we're grow to month volume forward expect year we currently Karl the expect environment experiencing, half into a year. Omicron continue provided learning to good factoring and the some the our about another progresses. to the new we impact live insights

mind about think business for you following. keep XXXX, As in our the

will in Underlying range back as of the performing the breakevens industry we provided margin expected passing to well is guidance rest be the quarter high. pressure first Rack December. as exists. is that profitability we the year, short-term on as seeing when when There the quarter to the continue first Street. out The in times be market play and increases We're price this

higher environment. historical have we is margin overall on proven gross optimizing than floor headwind the and averages. believe of in a both finally, And track profit we record However, tailwind

expect have overall we expenses. year. proven of track good managing Bottom a also We line, to have another record

Moving on to growth.

We continue by business midstream our to assets. growing strengthen our

of portion the Gladieux value chain distribution distribution acquisition addition and a overall integrate a integrate vertically vertically terminal, start-up With the critical helped to Terminals the business. these the and the owning our future and field us capture continue are larger the Brownsville we of fuel of margin. of part assets

If our rate a integrated adding business the especially you they've to at all been transactions terminals our acquisitions attractive we of higher midstream part helps and field and after very field Financially, terminals keep utilization provide distribution projects, look at these The at an business grow. valuations, executed synergies. distribution further ability play. the

the on we'll as On continue organically well opportunities. as field acquisition grow distribution to capitalize side,

Let financial remarks. me maintaining our of by means sheet. future close build security prepared our history the growth and current concludes plans balance that our that also protecting protecting stating discipline, distributions will our while which of on Operator our

open the may for You questions. line

Operator

question. will be your At Theresa question-and-answer Our proceed comes [Operator time, with session. Please Barclays. a we from Instructions] you. this Chen question with first Thank conducting

Theresa Chen

I'd and Gladieux more related thank clarification morning to of the economics acquisition. you the on ask my to questions. Good of taking a for questions love couple

getting So multiple us will now, if you put LTM part, synergies primarily a the at Xx, And paying you cost Xx able to as through as system? with those that looking in from was? to going multiple Or be captive you result are a share can and sell acquisition? Can related, synergies. to third-party are maybe back terminal to this you what them take of your they, volumes first, additional product there you're right revenue with

Dylan Bramhall

for Yes, thanks your question. Theresa,

running of walk Karl off Let that economics, a let get is once X here. more Yes, then the But which me There bit on much synergies bit a undertake modest about sub-X, a synergies basis a amount the sub-X very are really and and detail that of too there. little really out these. that a we getting through a on gate. mix than only the the multiple on up is start it activities not kind little I'll We're of us is full here. synergies right higher or the various of synergies really we

this? want give you detail more do little Karl, so, And a to on

Karl Fails

Dylan. Thanks, sure. Yes,

at look Gladieux was company. you operating it, separate If as a

transmix business some business separate our gasoline through operation. kind just transmix plant where So folding transmix is then a there of the synergies into and a is diesel get that you the expense have out. chain, supply clearly are really we'll mix aggregated it regional back by of the that and

So much serves physical provides good some where, are Indiana. as with fuel a distribution prepared some Midwest is mentioned business, country fit and We us. having grow. to remarks, assets in really our the business is as have this There for the in part fit of his good and Joe Midwest commercial not as a for us already a platform opportunities

should for us be a this So to opportunity that. good grow

Theresa Chen

like we wholesale resilient, quarter inversely on relentless But I like XXXX And on to as share understand I'm be? with correlated your also that of that prices, up breakeven you've that follow outlook. that's in typically a I the now, makeup bounced you it what about and although the and result us has seems with remains first quarter, get Joe's how which also of Thank you understand higher that gasoline from you. take of reflects demand sorry, since the to – payment the I'd some what margins. that much a margin floor discussed. are first upward comments annual CPG and could was is back and XXXX, in X-Eleven boost kind expect dynamics can that you over typically wondering, the is

Karl Fails

Yes. Sure, Theresa.

of end quarter. first if to And makeup as you X-Eleven, it's volumes. – payment the really the out, related get at the we that On overall pointed

it we received one say the the be would XXXX in received last I closer So will to payment than we year.

some been of thing first to quarter I As the overall what far provides as fourth but decent the I'd outlook, prepared along headwinds amount the on in positively a only market mentioned has clearly as your and quarter. is the contributed it rises, comment remarks Joe in I which add the volatility said way, there

in that helps with some deliver optimization upward more of face some us strategies, of the even results So gross our profit of those movements. solid

Theresa Chen

you. Thank

Operator

with Our Please Moreen comes question with next question. Gabe your proceed Mizuho. from

Gabe Moreen

with, I just just appreciating follow transmix structured of be on Good terms acquisition, talk can you that's the commodity, hedged about commodity morning everyone. the the do that is sensitivity, in downstream? If then fee-based kind up can may from, And also of standpoint, the competition how I these transmix of some think, And guess, there any pipelines? further supply naturally in long any how versus I contracts run area? contractually you

Karl Fails

processing a Yes, stable transmix diesel. But is Gabe, fee-based. at we business questions. to thanks because you most really not the transmix discount I'd purchased the is, of it and we for the on say, margin It's that a purchased, gasoline The take a really processing.

product provides to on So tied purchasing that the when you're you're a going how actually what imagine structure you more pricing to can stability. make,

the is processed processing country refineries feedstocks. other a across plants with As as are, sometimes really, transmix in and call far about it, competition, there dozen transmix

these business aggregates. naturally, up spread you to has so I where have situated where out and transmix plants built think, And the

the Midwest operation. theory, in but yes, can be So really, is there competition, premier transmix this

Gabe Moreen

Understood. up then if that. I terms follow just Great. in And can maybe of

the I nonfuel on prior in anything pretty XQ for think going kind there there ticked the Is margin to nicely up numbers? relative quarters. of

Scott Grischow

from contribution the what's Yes, really going is NuStar Yes, there Gabe, the Scott. this on is acquisition.

the that, of terminaling which in cetera, fees, were throughput into third fees, et all there So, quarter. not the flowing

Gabe Moreen

it. Got

Okay. Thanks guys.

Operator

comes John Our your proceed Instructions] with Chase. Royall [Operator with the line question next from JPMorgan Please of question.

John Royall

mine my taking asked. for Thanks been Most guys. morning of have questions. good Hi,

guys into expectations year. quarter. next clear I'm the on the X-Eleven So, for payment thinking that just pretty on makeup just are this you one follow-up

your XXXX got remains given guidance the you've below and that So pre-pandemic volume some acquisitions levels in XQ there. payment,

fair it's seeing payment well. to think I affecting from to we be that that as should be modeling? year a assume the Is guidance next

Karl Fails

think expectation. Yes, reasonable a John, I that's

John Royall

Okay. That had. was I all you. Thank

Karl Fails

bet. You

Operator

with Our comes Please your proceed question. question Stifel. next Selman with Akyol from

Selman Akyol

morning. Good Thank you.

follow acquisition. to wanted Just on up the

look said tankage did high XXx is your all the there, to a over last throughput. there of back Or for able distribution? be I increase like it on – tankage utilization as it, plus your Was are you thinking XX As at you have might you the utilization your I that months? look

Karl Fails

Yes, going There's the processing associated of it. look transmix segregate sulfur you're with think segregated Selman, that maybe to associated and aggregate terminal I tankage flavors even some you with where different at of transmix, maybe and content. some by

out, a But the as the won't necessarily yes, is of point on I'd So rest operation. that of comment previous And say, the commercially on really you us optimize. some clearly, able tankage, to as uses I much tankage. to be And strong we the I take opportunities. value to grow able advantage I that. like yes, of feel to that's being all distribution ours fuel going things our business equal, that find hopefully, being we're is And think earlier, of to suit commercial said in

Selman Akyol

one then And expansion to then your there room if Is there? wanted just for increase there right. tankage thing All also you little there.

Karl Fails

if makes room, some There's sense. that

Selman Akyol

Karl. you, thank right, All Okay.

Karl Fails

Thanks, Selman.

Operator

next Markets. Scotto Please question Elvira your proceed comes RBC Our from with Capital question. with

Elvira Scotto

Hi, morning. good

question one from Just me.

Just thoughts I for prices on volumes inflation, – consumer. go on demand high, overall destruction? the thoughts of around with pinching just how think thoughts your know Would so breakeven SUN, that. potential gasoline I'd down love your higher, but if about are margins love you And kind macro broader the

Karl Fails

commented ways, are on Yes, in Elvira, breakeven the really one already margins that the our It provides on the model. is inflation that increased for many and is share business pass-through a mean and maybe gasoline Karl. this inflationary pressures first prices general. I in I'll they few in thoughts you stability.

looking relative at is standpoint it component level. from is other really on it The our a

maybe about margin more than really enables in us bit some and capture a think bring face little to table the that size the we we scale of of the competitors. those so even the And to

As demand big the or that. in prices on clearly, push, far prices, look, short-term, – a can travel the I'd but macro or higher we that like say see macro choices history as in higher shown the impact change don't discretionary has

a of seen lot that. haven't We

go as long is we fact, high prices In But what like answer how demand spring there's that's year, we into the we're are. expecting. the last summer, how sustained think pent-up real there some and saw just and we

ball is we seen So haven't the area, but perfect my in crystal that in anything short-term. not

Elvira Scotto

very Great. much. Thank you

Karl Fails

bet. You

Operator

Fargo. Baramov Please Our next question comes your question. Wells from with with proceed Ned

Ned Baramov

morning. Good taking Hi. Thanks question. for the

that could about potential few Cato assets in Now assets? opportunities talk investment NuStar around months, you and operated for maybe the a you've and these

Karl Fails

This Ned. again. Sure, Karl is

mention last You we positive heard that, anything, than investment we material but They're margin, on. sizable on say on we me incremental That's since generally no identified a few opportunities. quarter's more we planned initially gained had call to if I'll maybe or ownership true. still assumed. originally the had relative all or there's opportunities what

Ned Baramov

deal. transmix Got or immediately And one first it. the in clarification year operation? of just the transaction the Is then accretive on accretive

Dylan Bramhall

Yes. I out It's accretive. the before synergies. multiple of immediately right sub-Xx gate, Like we're of said, kind coming

to on we're picking going so this day accretion And acquisition. start up one

Ned Baramov

I you. Thank all had. That's Great.

Operator

the have session. I the comments. now over end question-and-answer closing Grischow reached will We to of for call Scott turn the back

Scott Grischow

on for thanks us the joining Well, today. call

with feel Have always, reach to free As great a any please day. questions. out

Operator

conference. today's concludes This

your and at You time we may disconnect your thank you participation. lines this for

Sunoco (SUN) 16 Feb 222021 Q4 Earnings call transcript