Sunoco LP

Greetings and welcome to Sunoco LP's second quarter 2022 earnings conference call. At this time, all participants are on a listen-only mode. A 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 call over to your host, Scott Grizzo, Vice President, Investor Relations and Treasury. Thank you. You may begin.

Thank you, and good morning, everyone. On the call with me this morning are Joe Kim, Snoop 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 released 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 second quarter results and our outlook for the remainder of 2022. Thanks, Scott.

The second quarter brought a continuation of Sunoco's strong financial performance, with the resiliency of our business more evident than ever. Sunoco's consistent financial results throughout commodity cycles and various macro environments have become the hallmark of our partnership. We expect the second half of the year will bring more of the same. The free cash flow generation of our operations allows us to remain consistent in our capital allocation strategy and focus on our three pillars. First, to maintain a stable and secure distribution for our unit holders. Second, to protect our balance sheet through debt pay down when prudent. And third, to pursue disciplined investment in our growth opportunities like the recent acquisitions we've announced the past few quarters. With leverage around our target level and strong distribution coverage, we're able to reinvest increasing amounts of capital back into the business through organic growth and acquisitions. The result is value accretion from these investments, which creates a positive feedback loop that leads to increased distributable cash flow and increased DCF per unit, all while preserving a strong balance sheet. Regarding guidance, In May, we added $25 million to our previous EBITDA range to reflect the acquisition of Gladio Energy. We are reaffirming our updated full-year 2022 adjusted EBITDA guidance of $795 to $835 million and remain highly confident in our ability to hit these numbers. Now, shifting over to our second quarter 2022 results, the partnership recorded net income of $121 million and adjusted EBITDA was $214 million compared to $201 million in the second quarter of 2021. Volumes were approximately 2 billion gallons, up 3% versus a comparable period of 2021. Fuel margin was $0.123 per gallon versus $0.113 per gallon. And total operating expenses were $128 million, up from $102 million in Q2 of last year. This increase was primarily driven by the New Star and Gladio acquisitions and some additional costs that we reinstated over 2021 that had been temporarily cut during the onset of the COVID pandemic. Second quarter distributable cash flow, as adjusted, was $159 million, yielding a current quarter coverage ratio of 1.83 times and a trailing 12-month coverage ratio of 1.7 times. On July 26, we declared an 82.55 cent per unit distribution consistent with last quarter. Leverage at the end of the quarter was 4.17 times a decrease from the first quarter as we worked through the integration of the Gladio acquisition and got down to a lower run rate inventory level. We expect to continue to work this number down closer to our long-term target of 4.0 times as the year progresses. The second quarter's strong results demonstrate our continued consistent performance throughout any operating environment. Our belief is that Sunoco's financial stability and distribution yield make our equity a very compelling value proposition during these volatile times. With that, I'll now turn the call over to Carl to walk through some additional thoughts on the second quarter performance and recent growth initiatives. Thanks, Dylan.