Sunoco LP

Greetings and welcome to Sunoco's LP's third quarter 2024 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. Should anyone require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Scott Grishow, Senior Vice President, Finance and Treasurer. Thank you. You may begin.

Thank you. 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, Austin Harkness, Chief Commercial Officer, Brian Hand, Chief Sales Officer, and Dylan Bramhall, Chief Financial Officer. Today's call will contain forward-looking statements that include expectations and assumptions regarding the partnership's future operations and financial performance. 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. The third quarter brought a continuation of Sunoco's strong financial and operational performance throughout 2024. The partnership delivered record third quarter adjusted EBITDA of $470 million, excluding approximately $14 million of one-time transaction expenses. In the third quarter, we spent $67 million on growth capital and $26 million on maintenance capital. In addition, on August 30th, we closed on the previously announced acquisition of a liquid fuels terminal in Portland, Maine. Third quarter distributable cash flows adjusted was $349 million, yielding a current quarter coverage ratio of 2.3 times and a trailing 12-month ratio of 1.9 times. On October 28th, we declared an 87.56 cent per unit distribution consistent with last quarter. Our liquidity position and balance sheet remained strong. At the end of the third quarter, we had approximately $1.4 billion of liquidity remaining on our revolving credit facility. Leverage at the end of the quarter was four times, in line with our long-term leverage target. I would like to conclude by stating that we are confident in our ability to meet our 2024 EBITDA guidance range. Our financial position remains strong, enabling us to pursue growth opportunities while maintaining a healthy balance sheet and targeting a secure and growing distribution for our unit holders. With that, I will now turn it over to Carl to walk through some additional thoughts on our third quarter performance.

Thanks, Scott. Good morning, everyone. Our results this quarter highlight the strength of our business and the benefits that come from the new additions to our portfolio. Let me now walk through our segment results and provide some additional perspective on each segment. Starting with our fuel distribution segment, we had a very strong quarter. Adjusted EBITDA for the segment was $253 million, up 3% from the second quarter and up 8% over the third quarter of last year. We distributed 2.1 billion gallons, down 2% versus the second quarter and up 1% versus the third quarter of last year. Reported margin for the quarter was 12.8 cents per gallon compared to 11.8 cents per gallon in the second quarter, and 12.5 cents per gallon for the third quarter of 2023. Looking back over our recent history, our record shows that we take advantage of market upsides. And when there are market headwinds, we are very good at mitigating the downsides. If you zoom out from quarterly results, the basis of our fuel profit optimization strategies is to evaluate our fuel distribution business on total fuel profit dollars rather than volumes and margins separately. We have a demonstrated record of increasing our volumes by growing our market share. Higher break-evens across the industry have led to higher average margins. These factors have led to consistent growth in fuel profit dollars year after year, and we expect that to continue going forward. In our pipeline system segment, adjusted EBITDA for the third quarter was $147 million, excluding $11 million of transaction expenses. compared to $111 million for the second quarter. On the volume side, we reported nearly 1.2 million barrels per day of throughput. These numbers are not directly comparable to the second quarter for two reasons. First, the NuSTAR acquisition only contributed two months of volume in the second quarter. And second, beginning in the third quarter, volumes from our Permian assets are not included since they are now part of our JV with energy transfer. During the third quarter, our volumes and revenue were impacted by extended maintenance activity at two refineries connected to our pipelines in our Southwest and MidCon regions. Excluding those impacts, overall performance of the segment was solid, and we expect a stronger fourth quarter with those turnarounds behind us, as well as higher seasonal demand in our MidCon region. Let me take a minute and share some additional thoughts on the Permian JV with energy transfer. The joint venture is making good progress in integrating the combined systems, and has begun executing on synergies and growth opportunities that will drive additional value. We remain very excited about the deal, as it will drive additional growth and perform better in any market condition than what our Permian system would have been able to do on a standalone basis. Moving on to our terminal segment. Adjusted EBITDA for the third quarter was $70 million, excluding $3 million of transaction expenses compared to $43 million in the second quarter. We reported nearly 700,000 barrels per day of throughput up from the second quarter, primarily due to a full quarter of contribution from legacy NuSTAR assets. Our combined portfolio performed well with throughput and storage revenues in line with expectations. I'm pleased to share that we are done with the NuSTAR integration. All major integration efforts have been completed and we have already delivered the majority of the cost synergies into our run rate business. We are well on our way in executing the commercial synergy plans that have been identified. We remain confident that we will deliver on our commitments of $125 million of synergies in 2025 and $200 million in 2026. These are on top of the $60 million in annual financial synergies that we have already realized. Even with a larger portfolio of business, our focus remains the same. Strong operational execution, expense discipline, commercial creativity, and profit optimization in ensuring we deliver strong returns on capital that we deploy. I will now turn it over to Joe to share his final thoughts. Joe?