Sunoco LP

Greetings, and welcome to Sunoco LP's third quarter 2021 earnings call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Scott Grishow, VP of IR and Treasury.

Thank you and good morning everyone. On the call with me this morning are Joe Kim, Sunoco LP's President and Chief Executive Officer, Carl Fales, Chief Operations Officer, Dylan Bramhall, Chief Financial Officer, and other members of the management team. Today's call will contain forward-looking statements that are subject to various risks and uncertainties. These statements include expectations and assumptions regarding the partnership's future operations and financial performance. including expectations and assumptions related to the impact of the COVID-19 pandemic. Actual results could differ materially, and the partnership undertakes no obligation to update these statements based on subsequent events. Please refer to our earnings release as well as our filings with the SEC for a list of these factors. During today's call, we will also discuss certain non-GAAP financial measures, including adjusted EBITDA, and distributable cash flow as adjusted. Please refer to the Sunoco LP website for reconciliation of each financial measure. I will now turn the call over to Dylan to discuss the third quarter results.

Thanks, Scott. In the third quarter, Sunoco continued to demonstrate the strength of its business model with strong financial results in a period of continuing economic recovery. For the third quarter of 2021, the partnership recorded net income of $104 million. Adjusted EBITDA was $198 million compared to $189 million in the third quarter of 2020. Volumes were approximately 2 billion gallons, a sequential increase of 2% from the second quarter. Year-over-year volumes increased 6.4%. Fuel margin was 11.3 cents per gallon versus 12.1 cents per gallon in the third quarter of 2020. Total operating expenses in the third quarter were up as expected compared to the second quarter, at $113 million versus $102 million and were flat to the third quarter of 2020. Third quarter distributable cash flows adjusted was $146 million, yielding a current quarter coverage ratio of 1.68 times and a trailing 12 months coverage ratio of 1.43 times, consistent with our long-term target of a minimum of 1.40 times. On October 25th, we declared an 82.55 cent per unit distribution consistent with last quarter. We continue to maintain a stable and secure distribution for our unit holders, which remains the number one pillar behind our capital allocation strategy. Leverage at the end of the quarter was 4.05 times, which we expect to increase minimally with the closing of the Neustar acquisition. Leverage is expected to trend lower towards our 4.0 times target as we move into next year. Our 2021 full-year EBITDA guidance remains $725 to $765 million, excluding the New Star and Cato acquisitions. As anticipated, second half expenses are trending higher than the first half. However, we expect a full year to come in below our previously guided range due to the extension of many of our 2020 cost-cutting initiatives throughout the first half of 2021. We are reducing full-year 2021 operating expense guidance to $425 to $435 million compared to our previous guidance of $440 to $450 million. Finally, we continue to expect maintenance capital of $45 million and growth capital expenditures of approximately $150 million. Next, with respect to the recently closed expansions to our midstream business, given the size and timing of the closing of these acquisitions, they will have only a modest impact to 2021 adjusted EBITDA and have been excluded from that guidance. In the fourth quarter, we took advantage of bond market conditions to de-risk our balance sheet and reduce our financing costs. In October, we issued $800 million of 4.5% senior notes due 2030, using the proceeds to redeem $800 million of our existing 5.5% senior notes due 2026. The transactions lower our interest rate on this debt by 100 basis points, while extending the maturity date by approximately four years. We will continue to take prudent and proactive measures to strengthen our financial position when opportunities like this arise. The third quarter's strong results, the recently closed acquisitions, and our opportunistic refinancing demonstrate our commitment to maintaining Sunoco's solid financial foundation and to increasing value to our stakeholders through a strategy of disciplined capital investment and balance sheet management. With that, I will now turn the call over to Carl to walk through some additional thoughts on fuel gross profit expenses, and the operational outlook for the remainder of the year.