Sunoco LP

Good day and thank you for standing by. Welcome to the Sunoco LP and the Sunoco Corp LLC fourth quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Scott Grishow, Senior Vice President of Finance. Please go ahead.

Thank you and good morning, everyone. On the call with me this morning are Joe Kim, President and Chief Executive Officer, Carl Phelps, Chief Operating 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 Sunoco LP's future operations and financial performance. Actual results could differ materially, and we undertake 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 a reconciliation of each financial measure. Before reviewing our fourth quarter and full year 2025 financial results, I'd like to take a moment to briefly discuss some changes to our financial reporting format, which is included in today's earnings release. First, we have incorporated Parkland's legacy operations into our three segments and have also added a fourth reporting segment for our newly added refining operations. Second, today's and future earnings releases will include select financial information for Sunoco Corp LLC, which we will refer to by its New York Stock Exchange ticker symbol of Sunsea. As a reminder, Sunsea's only asset is its limited partner interest in Sunoco LP. Because of its limited partner interest in Sun, Sunsea consolidates Sunoco LP into its financial statements. Accordingly, on today's call and future calls, we do not intend to cover Sunsea's results. Instead, we have included a schedule in our earnings release that reconciles Sunsea's distribution from Sun with Sunsea's distributable cash flow, as well as a summarized consolidating balance sheet. Sunsea began trading shortly after we closed the Parkland transaction and will be an attractive option to invest in Sunoco, especially for investors outside of the United States, institutional investors, and in personal retirement accounts. We expect minimal corporate income taxes at Sunsea for at least five years, which will allow for the Sunsea distribution to remain very similar to the Sunoco LP distribution for this period of time. Moving to this quarter's results, the fourth quarter marked the end of a transformative and record-setting year for Sunoco. We closed the Parkland transaction on October 31st, and our team is now fully engaged in integration efforts that are progressing well. The partnership delivered record-adjusted EBITDA of $706 million in the fourth quarter, excluding approximately $60 million of one-time transaction expenses. Carl will discuss the segment performance in his remarks. However, this consolidated result reflects the ongoing strength of our operation and the contribution from the Parkland acquisition. During the quarter, we spent $130 million on growth capital and $103 million on maintenance capital. Fourth quarter, distributable cash flow as adjusted was $442 million. On January 27th, we declared a distribution of 93.17 cents per common unit for both Sunoco LP common units and Sunoco Corp shares. This represents a 1.25% increase over the prior quarter and marks our fifth consecutive quarterly distribution increase. Our trailing 12-month coverage ratio finished the year at a strong 1.9 times. We continue to see a multi-year path for an annual distribution growth rate of at least 5%. Looking at the full year 2025, adjusted EBITDA, excluding transaction related expenses, came in at a record $2.12 billion. a 36% increase over the prior year. This record year reflected solid underlying growth in our base business, a full year of contribution from our new stock acquisition, and approximately two months from Parkland. Our balance sheet and liquidity position remained strong. We had $2.5 billion in availability under our revolving credit facility at the end of the year, and leverage at the end of the quarter was approximately four times, in line with our long-term target. In summary, our financial position continues to be stronger than at any time in Sunoco LP's history, which we believe will provide us with continued flexibility to balance pursuing high return growth opportunities, maintaining a healthy balance sheet, and targeting a secure and growing distribution for our unit holders. With that, I will turn it over to Carl to walk through some additional thoughts on our fourth quarter performance.

Thanks, Scott. Good morning, everyone. Our results this quarter cap another record year for Sunoco. as we meaningfully expanded our operations and significantly grew our cash flows. With the addition of the parkland and tankwood assets, we now operate a diversified footprint spanning 32 countries and territories and have become the largest independent fuel distributor in the Americas. Each of our segments delivered strong performance in 2025 and are well positioned to contribute meaningfully toward achieving our 2026 guidance. Let me share some more perspective on our fourth quarter results by segment, as well as some thoughts on our 2026 guidance we released last month. Starting with our fuel distribution segment, adjusted EBITDA was $391 million, excluding $59 million of transaction expenses. This compares to $238 million last quarter and $192 million in the fourth quarter of 2024, both excluding transaction expenses. This growth reflects continued strength in our legacy Sunoco operations, coupled with two months of contribution from Parkland. We distributed 3.3 billion gallons, up 44% versus last quarter, and up 54% versus the fourth quarter of last year. We continue to see volume growth in our legacy Sunoco business, with an increase of more than 2% over prior year, compared to a relatively flat US demand profile. This growth is a result of effectively deployed capital via our growth capital plan and roll-up M&A transactions. We have begun the work to optimize our volumes in Canada and the Caribbean as we implement our gross profit optimization approach that we've evolved over the years. Reported margin for the quarter was 17.7 cents per gallon compared to 10.7 cents per gallon last quarter and 10.6 cents per gallon for the fourth quarter of 2024. The much higher margin is a result of the addition of the legacy Parkland business to our portfolio that consists of higher margin geographies and channels. We've also begun the process of evaluating the channels of operation in each geography to ensure the business is matched with the appropriate channel to optimize return on capital. When we step back and look at our fuel distribution business, we have a proven track record of delivering results in the US and the Parkland assets easily fit into our business strategy there. The Caribbean business is proving to be just as good as we thought. Stable income with the opportunity for growth, especially when it couples with our scale in supplying our East Coast business from the water. In Canada, as we dig into the operation, the business is even better than we expected, with higher stability and higher margins than our US business, which we have proven is very stable. When you put the pieces together, the business is strong, and we're confident that we will continue to grow both fuel profit and EBITDA in this segment going forward. That confidence comes from a foundation of strong underlying businesses with good industry fundamentals. Higher break-even margins and market volatility continue to support our fuel profit. Adding on our proven gross profit optimization approach, quick and thoughtful channel management evaluations, and our capital deployment strategy only increases our optimism. The final layer comes from the greater scale, enhanced geographic diversity, and improved supply optionality delivering synergies and enabling continued EBITDA growth. We are very excited about the future of our fuel distribution business. In our pipeline system segment, adjusted EBITDA for the fourth quarter was $187 million compared to $182 million in the third quarter and $193 million in the fourth quarter of 2024 excluding transaction expenses. On the volume side, we reported 1.4 million barrels per day of throughput, up from the third quarter and consistent with fourth quarter of last year. Like last year, the fourth quarter was our strongest quarter of the year with seasonal strength in our agricultural supported markets, as well as good performance across the rest of the system. Moving on to our terminal segment. Adjusted EBITDA for the fourth quarter was $87 million. This compares to $76 million in the third quarter and $61 million in the fourth quarter of 2024, all excluding the impact of transaction expenses. We reported around 715,000 barrels per day of throughput, which is up from both last quarter and the fourth quarter of last year. Earnings and volumes in this segment were boosted by the inclusion of terminals income from our parkland acquisition. This segment continues to deliver stable results, and we're looking forward to the positive addition of our recently closed tankwood acquisition in the first quarter. Turning to our new refining segment, adjusted EBITDA for the fourth quarter was $41 million, excluding $1 million of transaction expenses. This reflects approximately two months of operations following the close of the Parkland transaction at the end of October. Refinery performance was much improved in 2025 compared to previous years, and we look forward to that trend continuing under our ownership. As we've stated before, the refinery is an important piece of the supply chain supporting our market-leading fuel distribution business in Western Canada. Our goal is to stabilize and improve operations regardless of what the market crack provides in terms of earnings. Before I wrap up, let me talk a little bit more about 2026. In early January, we shared our full year guidance. On the last call, we highlighted our confidence in the highly accretive value Parkland brings to our operations, and the guidance reflects this confidence with an adjusted EBITDA range of $3.1 to $3.3 billion. Supporting that EBITDA guidance were a few assumptions. First, that we would close on our tankwood acquisition in the first quarter, and we accomplished that in January. We expect to realize $125 million of the total $250 million annual synergy target in 2026. And as Scott mentioned earlier, the integration is going well, and we are well on track to deliver on synergies. Third, the guidance includes the planned 50-day maintenance turnaround at the refinery that began in late January. Turning to capital allocation, we expect maintenance capital to be in the $400 to $450 million range consistent with our much larger footprint and the refinery turnaround in the first quarter. Additionally, we continue to see very attractive opportunities to grow our business. This will come from a portfolio of at least $600 million of generally quick spend, quick return capital projects, as well as acquisitions, which we included an expected floor on for the first time. To summarize, 2025 was another record year for Sunoco, and we are well positioned for another record year in 2026. Our outlook is supported by disciplined expense management, a proven strategy of optimizing gross profit, and effectively and accretively deploying capital. We enter the year with strong momentum and confidence in our ability to deliver sustained value for our investors. I will now turn it over to Joe to share his final thoughts. Joe?