SUN - Earnings call transcript Q1 2022

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Operator

Greetings and welcome to Sunoco LP's First Quarter 2022 Earnings Conference Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Scott Grischow, Vice President of Investor Relations. Scott. you, Thank

begin. You may

Scott Grischow

and good you everyone. morning, Thank

related assumptions and are On uncertainties. statements LP's Sunoco Chief call Officer; undertakes these financial to pandemic. Financial will and statements morning team. and future statements the to Please include performance, the Officer; to the our with release for me Operations various Officer; events. the partnership's differ Chief Bramhall, and are call assumptions refer contain list Joe 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 Kim, Karl this 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 outlook for now a the adjusted. call each also the Dylan remainder the website Please LP's During as first to today's measure. results discuss I Sunoco quarter financial discuss XXXX. to refer flow over including call, financial adjusted reconciliation our and cash certain turn we to distributable EBITDA and will measures, of of for

Dylan Bramhall

Scott. Thanks,

and of one on for strongest which in The in quarters our one first efforts against in of executing rapid strategies in prices results Before I on did record. in resulted recent to financial job employees oil and face this thanking outstanding reporting a first of through of quarter walk partnership their our difficult history. start the quarter increase delivering the most its our accomplishments, team an I'd macro gas by like results the excellent backdrops

on demonstrates continued deployment. XX, the portfolio expand acquisition This commitment closed to our acquisition midstream months the six with Energy with third the Moving our low-risk, Gladieux XXXX. Sunoco on capital addition our We March return of asset in base past M&A. assets on to the to solid

expect which, accretion combined with Xx reminder, strong low-cost multiple borrowing in results mix very our a finance sub operations, of on unitholders. we revolver EBITDA from As to a and our to a cash with ability this investment

guidance, EBITDA million early confident remain that provided of December, of Regarding for adjusted business. we XXXX $XXX and the range the million $XXX the energy and Sunoco between the excluded acquisition in legacy Gladieux impact in

We reflect to of are updated adding million which guidance million the results range to $XXX $XX million. to in this acquisition $XXX

the some and acquisitions costs temporarily over the QX that been of quarter was net the terminal results. the Now million. of benefit of income NuStar compared Adjusted XXXX were first recorded quarter Volumes in flat approximately payment quarter results additional X.X per million of year have margin to to million of of the $XXX in by billion to XXXX first Fuel shifting The margin during pandemic. of in we makeup driven first the primarily the up million, onset partnership last XXXX. include $X.XXX and our of EBITDA $X.XXX first the the XXXX. increase QX. versus was X% Fuel $XXX from versus million. over operating COVID quarter gallons, $XXX per first an that increase gallon This expenses were Total million quarter reinstituted in $XX $XXX cut essentially X-Eleven XXXX. of $XXX gallon was

last of XX-month quarter. coverage was distributable and ratio a million, cash flow consistent X.XXx. a of First quarter XX, yielding quarter as unit we ratio declared distribution, April $X.XXXX trailing On $XXX an coverage current per X.XXx adjusted with

increase was which and Leverage secure quarter capital fuel capital a X.Xx one at the of associated our our allocation for to prices higher for remains significant inventory. distribution number unitholders end commodity continue strategy. our the with working We the pillar in which stable a includes maintain behind

an could we facility. to and closed trend amended this toward and the restated five on billion XXXX acceleration an throughout commodity to from maturity April, leverage terms substantially facility. expect $X.X target extended year our similar down We deleveraging as The date of credit levels. early April previous decline was of and current at years see In prices out the

additional to sheet disciplined and growth value investment that, stakeholders maintaining strong performance recently a results, quarter's of on Sunoco's strategy With through of commitment turn over and through demonstrate recent to solid the the our I increase revolving some thoughts first capital balance quarter extension Karl? financial now walk First acquisitions Karl our management. to and closed and our call the to facility, will the credit foundation successful initiatives. to

Karl Fails

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

As in Dylan mentioned, first commodity the prices were highly quarter volatile.

all-time up up headwinds dramatic showed these quarter. diesel the both prices our gallon. highs first resiliency a year. hovered were around quarter addition, the gallon conditions, futures the challenging a of diesel quarter in it first of In last since business From end, To Volumes perspective, first about model. market versus were and XXXX. the the the $X.XX for $X.XX not rise gasoline reached quarter X% beginning gasoline were and for Despite up created again quarter prices during seen significant in to and futures put futures

in February. call, but early March see January our seasonal April. in some starting are were some in demand last pickup weakness there saw weakness mentioned We As in signs of Omicron-related returning to I volumes volume in with earnings in

per the There are the across gallon, at margins. increases the factors mentioning. worth I of we In delivered price record that already Looking first shared. in quarter of a quarter, contributing few key the face margins strong even $X.XXX

we that risk annually market years the that profit part payment the which inflation; model breakeven stay asymmetric few helps finally, face be particularly our industry to day-to-day our hypothesis first conditions. ago, the continues introduced our the of first market movements. The continue volatile in strategy to gross business X-Eleven in A occurs of is second, especially business elevated, makeup quarter; in us optimization to margins exhibited rising

our show the conditions are that when strategies then want we effects And rising While thoughts market quarter capitalize to few market falling to immune expenses. not like upside. prices. market to of able optimization we provides this are and challenging of the to able some also on with I favorable prices, to continues are to counteract conditions dynamics, a add deliver the

This most As higher given on generally breakeven some Much and times, faced impact mind discussed we important part of passed in fuel costs control overall that expense headwinds keep operation many DNA. have are contemplated was December, guidance to in and expenses inflation. we higher contribute margins. impact with in to our of this of the is our and through year, is thing prices not. was The higher efficient

our our other we relative As space. and scale players use even an to efficient remain to this size in can for us advantage be

to on Brownsville. Moving

share this XX ramp to service export developed March. strategic We're and in are commercial demand the domestic or months excited terminals operations in as as commenced over excited We strong to our late location. be a next into the with from sales well asset bring that organically opportunities operational our so. natural There will this

our is meaningful integration expansion performing going of is portfolio. We Gladieux in are The the and expected. our another is closing well we of the the as This pleased although with early to the quarter. the acquisition business also midstream end are at process,

assets well the reminder, North consist a in in Huntington, product largest Indiana of processing America As as the associated primarily facility the refined acquired located transmix as terminal.

transmix Partner's facility Indianola in a operating which operate We we outside lease also Pittsburgh. Buckeye will long-term acquired of

excited As the our in to market. like assets about acquisitions, most the with combination we are are of these with our distribution all and fuel looking business, forward the midstream we portfolio our presence Indiana while growing stand-alone

will business. to I Joe, of reiterate turning strength underlying over the Before our

through off a strong our are results to optimization, business. We of for on the and efficient Joe? profit our we'll gross our start tight to operations proven expense year solid recipe focus delivering core to control, and growing continue stakeholders

Joe Kim

We Karl the you Thanks, first and have Dylan details. strong delivered quarter. morning, everyone. Karl. walked a through key Good

highlight. few would However, there I to further that a are like items

presents unique quarter a subsided we in last increase cases. side, set challenges than On quarter recovery to the every quarter saw beginning massive had the this volume the that of COVID more at a most. volume due The of but year

has rapid prices will we how return will remain; The recovery second, short corner. to key volumes questions: and long finally, economy do to more start the down higher determined. cases how street schedule. in prices workers these will start of Even continued long-term how many with is breakeven. result performing; and fuel a to year. commuter healthy has to traditional pre-COVID and all more to of ability quarter, and overall earning center a increase pace volume around questions, to when key allowed have as to a material we another expect expect strong year been upside we the Quarter volume costs. profit higher commodity power the allows seasonality to it. the us the control progresses we as market gross to a industry This looking to our typical The durability margins and And Sunoco's minimize capture fuel increase fuel expect every few impact go first, the and forward, recover, XXXX and higher The also be optimize us remain downside As evident to of at after supports of became our be still proven given prices is business.

growth. to on Moving

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

the synergy valued distribution platform for of continue With attractively vertically for addition a Gladieux with and the opportunities. to more start-up to integrate provide the Brownsville material growth. We'll enhanced continue we and of assets terminal, midstream look fuel

distribution attractively we field the side, opportunities. valued also grow to look will acquisition On and continue for organically

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

line the for open may questions. You

Operator

Theresa first Barclays. question Our Instructions] [Operator comes Chen from with

Theresa Chen

prices first margin wanted first Understandably, very move you about in of quarter. in the results outlook. near-term the most the strong gasoline had the quarter ask upward despite wholesale unrelenting to for I

be we that that? volatility, on about and be margin we seems decreases some seems quarter to depending than into second first think move increases and normalized expect Now how with day. should the the pattern the Would pattern that -- to Or quarter? you more better

Karl Fails

really is first margin. I our in Theresa, my remarks, that Karl. this few a quarter mentioned to different factors contributed prepared

makeup X-Eleven the is payment. first the so And

the us really is -- -- as third base of about breakeven scale that that's help across volatility the is we've the And generally chain. really fuel strategy whole and And and our optimization profit margins. that's really advantage supply then size higher constructive. before, gross the take really, talked Second our volatility

X-Eleven those not so in maybe the a look them third not some from benefit think year, into to a As of I pieces we or much. some forward are have second of the makeup relevant We're quarter. and of so payment going

I hard mean, you've other we're movements. gross going volatility trend going we the to continue was volatility, on breakeven its March inflation said, think with profit margin May to it's and had then in to optimization I be the is the -- April And as with and the saw own but starting mimic volatility that factors. some and

terms our of ability to So But going isn't perfect my to be. crystal conditions going our what in I take market advantage are is to and of think that remain. ball the system

basis. have that annual guided business of we've factors And strength than that So the how will other are in take at the but look others through we overall, to out. year. be There we on I'm the some of think talked advantage to those before, we is but which our as of will where not ability an and outweighs the margins those our of stronger margin terms it weigh quarters sure is? things are them these

Theresa Chen

I'm sorry the would have per And if the without X-Eleven this payment first what it. quarter? Got but been cent in missed I gallon

Karl Fails

I I don't Scott, it. know, you don't have have the if math.

XX around probably it's or think XX I points. XX points

Theresa Chen

we'll of prices? escalation forward, of it. And higher just result? demand we're clearly, comments. When you point substitution demand the of the side far prices, inflection at kind And per any you But along octane demand volume resilient, the you looking picture seeing that any elasticity? absent seeing gasoline think a similarly, in as seeing softening Got do as are the the to has going of remained the as then are curve COVID reach response as things, impact prepared Joe's

Joe Kim

is this Theresa, Joe.

only as it's -- answer -- so. second been about let or far As about probably days first. roughly me XX question the

time whenever record -- So it's still a gasoline hitting of pretty period March short when started when prices. -- prices

applicable at kind on look So a if back you insight in probably to history I'll and try probably ball, put backwards give some a crystal of see by going-forward and that's it looking basis.

prices back to we roughly that So saw and kind And somewhere we happen period, of whenever from $X. mark time gas trading $X.XX go demand down we in volume that that saw see, were during between you $X XXXX, destruction think saw happened, some when if back prices people sitting down unleaded. we to XXXX. regular what And did premium down and hit

you applicability if think think going kind as in a potential time, I use So point a I some it has of forward. that

in prices One somewhere of the keep XXXX and to above. about mind things the $X sitting

If you more we're $X.XX about of XX-year the the efficiency since sitting midpoint improved of think is of other on cars got miles one let that inflation environment. of for you adjust American, like that, of in average. you also in about today's somewhere an driven you if a and dollars kind average the that's average you inflation per have kind price XXXX, if think about a to factor think And it

The other down. it factor going remarks, prices, with and saw is I high $X-plus alluded combination really of recession. is recession and had economy to volume and the coupled the XXXX, gasoline prepared recession a my what In matters. in big we the And

as early. remarks, prepared So my in I it's said

element. that economy the But do I also our out. year. all going is So believe the I is important think schedule said, the playing that volume commuter and prices, high those of to the with throughout are increase an effects All

started look at today, around seen we time. around recent If a increase volume mid-April this most that you through have somewhere numbers, our happening

are some signs. those encouraging So

Operator

Spiro from Suisse. comes Credit next with question Dounis Our

Spiro Dounis

is question actually. M&A, on First

thinking Just of deals funding the for about rest the year. future

liquidity, Dylan, before that the to few I there, no been last sort as item natural more I expectation Or goes has you active you just you your delevering But you at of getting year issues. deals. sort is kind a But know up think are If would after look guys gating fine of a leverage is on. mentioned that ticking yet? prefer your these And of first path necessarily again? curious, delever not of

Dylan Bramhall

Yes.

this I'll remarks, In I you're some that point. at I we right. anything say never would the the deleveraging think it's year. more take prepared latter the through I expect table. the mentioned off absolutely

look well. lower probably I a of expect are at think happens and you if look -- from then what that today. with we a bit commodity a bit at the with they tailwind be guidance on depending our prices, little as And -- levels then to where could inventory

all right lead bit say So analysis, going leverage. our for that's M&A, out liquidity lower where of out a or think look a in at be to more I from to standpoint to there. would leverage But the at probably will little I that now, when little standpoint a critical market. don't going we deal, more a us keep the right selective we're we're

Spiro Dounis

Got it.

Okay. That's helpful.

also It in but move fuel sounds more we're seeing update Second as moving question, basin just that's running. been has to kind of well. an higher there for Nolan looking how like on that and J.C. demand competition

competitive about you're of going and that the just curious the pipeline forward? dynamics performance how So thinking

Karl Fails

about Yes, rest in talked diesel Texas Spiro. and business last to of in I'd say before country. the demand our And has West our I've recovery the the lagged three the pipeline four months, catching out and we've there's that volume. fracking Activity and you'd in in has the been these as higher seen some oil with expect drilling increased prices. there, up how

full pipeline the I had just if quite few those a was that up occurred. XXXX. you we're in We're in to not XXXX it started the demand expect days we up at wouldn't ramping say of volumes in quite and end first pipeline where remember, volumes. COVID -- So back then to quarter those back the we've in of operation the to first the of kind but and And and impact quarter first the was

promising. it's So been

Operator

Our next question comes from Gabe Mizuho. Moreen with

Gabriel Moreen

it It much have really line the tax a line flowing curious didn't a sort DCF through this seems impact know what was? of but the like I to prior of income transaction. bottom related stuff was just

Dylan Bramhall

is to retail Absolutely. related X-Eleven. the included It's the asset return Yes. Dylan. divestiture of XXXX to This the that

and tax first we basis, related an in tax the income about it filed a updated increase with that quarter, $XX to federal million refund. had XXXX. returns And returns, in in some amended state these we resulted So

And to refund back is what tax reconciliation so looking where related item DCF that don't on that's that since the you out. that the M&A refund you that there -- where cash it at you're that -- backs but see transaction, line that see normally

The That's only place the that line we'll receive and increase as for a well current asset this cash balance expect taking that we that the to there see later year. that So DCF. in showing credit of as sheet. we is in we're up on have part other on the receivable not in

Gabriel Moreen

through And cheaper seeing to a where gasoline Sunoco -- capital it a then has prices then these mentioned others high you And currently assume you maybe it. -- breakevens. to if pressure raise you whether commodity Costs industry with I Some I'm talk Got and mean result industry there of also you potential look, -- did about some you're wholesalers, broader as some there's just cost at? or stays think are clearly I costs. just anticipated kind not? -- what I just is you're in on it's and seeing? and passed pressure ask you question on one related smaller there's if didn't. if throughout, -- of but wondering increasing relative could unexpected Can to that anticipate breakevens of Karl is didn't that, were what

Karl Fails

not that anticipate. there our increases we wage seen into and/or we be Yes, we baked you partners. of that's of increase things cost and anything some in the did into didn't necessarily example an I'll of mean, our we that area would give card we An assumptions costs of original some guidance I haven't have like anticipated, services Gabe, -- credit fees. baked that our pressures that

obviously, pay credit we for So be cards processed. to

on Some through right, XX with that the to are customers, we is New since percentage in price those passed often for that Turnpike the company are XX be a those going operate, pay we fees; customers covered now We our absolute But based of on that but of fee. our fuel, Jersey in to pay it's wholesale sites the Hawaii. margins. those generally the

anticipate necessarily the things have this didn't And prices we so are. prefer equal, we being year. going that to lower we were retail have they we be that prices All the than currently

The that that's expense another of guidance margins. So be on is passed is anticipate the through size our And the working will then we higher on -- this to our impacts gets capital an us withstand requirements inflationary higher withstand size an struggle that yes, we marketplace that of are example we able benefits maybe smaller it where building in some but upward or and capital that the put your second question, like tight. didn't higher breakeven prices with is pressure our breakeven pressures and and this we're able margins. based where periods are to where to in that think competitors scale on and that will that example

Operator

Royall next comes with [Operator Instructions] from Our question John JPMorgan.

John Royall

looking but the you've there's and moving just with well guidance then EBITDA the a it's I the about. know looks didn't on this OpEx. bumped you So about pressures your OpEx, throughout you move talking year up And just guidance, that also of volumes as back XQ variable up got end as component like you're the range. of the And guidance high the X/X the at acquisition

understood maybe it the point guidance this you margin? -- am Because with move but is? kind elsewhere anything want numbers so upwards to message correctly make offset know didn't of that the the biased could interpreting what Is for be I guidance that I I OpEx So sure that I EBITDA, with is this that.

Dylan Bramhall

Yes.

only We So the right. move we -- did not we updated EBITDA any not guidance. did you're --

now obviously, it, to look OpEx is at OpEx the That going as think stale. guidance Gladieux. be to said, so And some there's I we related

of the -- you to seasonality. pointed some think I

is And we've taken We've little a some we bit. I you out with so things think I'd of hit accrue we out items changes that to for business of of the things we how some some lumpiness what don't the there. the one in in get then the seasonality touch that there. some see on smooth last OpEx done some really

of that things a of and You noted to talked pass some is more which like Karl through there. margin credit about it's cards

put And bit like we're little so of not think that from guidance going you clarity and I looking hopefully that I -- said, how -- -- we should gives in together updating we're that a but of kind at OpEx forward. all

John Royall

wondering then Yes. Understood. just payment. X-Eleven the makeup And

this year, smaller last payment I Your than was year. think,

all got that you've direction. think And headed -- volumes continues that the Some volumes in hope of way. kind it right we I

be thinking that kind Or I be the and the I of -- or not it how close trying just from -- contract question would need too to little a one get see we there? has here here much kind won't and of payments Are of So But for anymore? contract. sort because we with to granular still out? guess you we bit to these to to dig through getting about know have anymore is are growth do think to under

Karl Fails

Yes.

got out contract. contract that business. -- remains And our I why that some as manage contract you you partner to been flexibility and to it of it's makes But got the and about think volume them here's the at and clear I not with how a on really And good a and they probably a is gross great the X-Eleven that for guaranteed we of sense they already way of one relationship their of an the give how it. is they're touched is ever on choice X-Eleven's profit I'm the one that. discretion really on as annual things things out Here's going it's Overall, basis. and answer. manage it we like

by give is so wouldn't of they're a choices industry-wide on And I that as making. read-through driven the it really necessarily volumes. payment some makeup that

be But flexibility don't any guidance a take to would going I X-Eleven's much I expect So we're too to slightly similar plans to are. give smaller what again, want or in on range. of the

John Royall

And you mind, could don't a sneak one in if just Understood. there. third I if

guys of summertime on business? in to the gasoline. a think such not band. EXX to waiver is impact you to just any You impactful the are on Do expect I view that as just as player -- maybe want us Or they politicians huge your wanted be have real your get just that it is?

Karl Fails

Yes. it's grow EXX going continue really is a but is product from a starting that base. to to low in demand

If only it's in you X-pound waiver, gasoline conventional dissect the really available market.

So that off still wholesalers EXX EXX. have that margins others with that is on then of even a and think which as who And huge a whether interesting any clear and makes some it's And then seen adjust already one when hasn't and that, EXX have are perspective, success taken I then more today's other -- offered but things than some fuel still geography. from have offered we the it worse be attractive pickup for cheaper our you in -- it's maybe it not that makes demand there or the the even to that the BTU going it haven't lower are the better content, that is says limits much. that. there for market with today's retailers prices, been it a certain that to really And thing,

not we it's pretty looking of So we our a And small just base, what more though even we're ways demand now. our will at that bigger it's picks that that's looking right a sell view part that From is can as up, it. sell, customers. become how and offer for at EXX material we're

Operator

question from with Ned comes next Baramov Fargo. Our Wells

Ned Baramov

You reaffirmed is fairly CapEx light budget. this QX for XXXX guidance and spending growth after a

if remainder of CapEx could talk items that the for the CapEx year? larger just could bring So the the the go over above maybe cadence million of about threshold? $XXX And of you some

Karl Fails

in the traditionally for comfortable a a reasons. of $XX read particular. been anything growth for Ned, are -- Yes, still has lighter of $XXX wouldn't and I quarter million through And say capital. capital QX we multitude million maintenance I'd with us of

up majority up we're you half is then project, Brownsville If I of the growth larger And of vast new on us component CapEx. mean, projects, look back a the field is the that finishing distribution growth signing at rest of of the the customers. the

Operator

questions this closing floor time. at turn comments. no are any I Grischow like to over for would back the Scott to further There

Scott Grischow

Well, thanks, everyone, joining call us the for on morning. this

As to feel with We'll to follow-up free always, questions. me any out soon. reach everyone see

Operator

This concludes today's conference.

disconnect your at you for your You may time. participation. this Thank lines

Sunoco (SUN) 4 May 222022 Q1 Earnings call transcript