Sunoco LP

Hello, thank you for standing by. Welcome to Sunoco LP and Sunoco Corp Q1 2026 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. I will now like to hand the conference over to Scott Grishaw. You may begin.

Thank you. Good morning, everyone. On the call with me this morning are Joe Kim, President and Chief Executive Officer, Carl Fales, 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 Snoqualmie'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. The partnership started off 2026 with a strong quarter, delivering adjusted EBITDA of $867 million, excluding approximately $9 million of one-time transaction expenses. The first quarter benefited from a one-time gain on a sale of inventory of approximately $102 million. With the acquisition of Parkland Corporation last year and the elevated commodity price environment in the first quarter, we proactively optimized our inventory levels, which resulted in this one-time gain. Carl will provide more detail on the impact from these inventory reduction efforts and discuss segment performance in his remarks. We continued our growth efforts in the first quarter with the closing of the Tankwood acquisition on January 16th. Following the acquisition, Sunoco is Germany's largest independent terminal operator with a network of 16 assets across Germany and Poland. We expect this acquisition to be immediately accretive to distributable cash flow per common unit in 2026. During the quarter, we spent $106 million on growth capital and $93 million on maintenance capital. First quarter distributable cash flow as adjusted was $535 million. On April 21st, we declared a distribution of 98.99 cents per common unit for both Sunoco LP common units and Sunoco Corp shares. This 6.25% increase represents a one-time step up of 5% and a quarterly increase of 1.25%. This distribution represents an increase of over 10% versus the first quarter of 2025 and is the result of Sunoco's continued financial stability execution of highly accretive acquisitions and growth projects, and confidence in future distribution increases. Our trailing 12-month coverage ratio was 1.9 times, and we continue to target a multi-year distribution growth rate of at least 5%. Our balance sheet and liquidity position remains strong. We had $2.2 billion in availability under our revolving credit facility at the end of the quarter, 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 strengthen, which will provide us with continued flexibility to pursue high return growth opportunities while maintaining a healthy balance sheet and a secure and growing distribution for our unit holders. With that, I'll now turn it over to Carl to walk through some additional thoughts on our first quarter performance. Thanks, Scott.

Good morning, everyone. Our results this quarter continue the trend of a creative and sustainable growth for Sunoco. as we benefited from a full quarter of operations from Parkland and the closing of our Tankwood acquisition in Europe. Each of our segments delivered strong performance in the first quarter, and they are all well positioned to contribute meaningfully toward achieving our 2026 EBITDA guidance. Starting with our fuel distribution segment, adjusted EBITDA was $538 million, excluding $9 million of transaction expenses. This compares to $391 million last quarter, excluding transaction expenses, and $220 million in the first quarter of 2025. This growth reflects continued strength in our legacy Sunoco operations, coupled with a full quarter of operations from Parkland. It is also supported by our ongoing gross profit optimization and growth strategies, both through roll-up acquisitions and growth capital. As Scott mentioned in his remarks, These results also include a one-time benefit of inventory reduction. The level of fuel inventory we hold is always a trade-off between holding more to provide reliable supply and carrying less to deliver better returns on capital. This is especially true as we grow our fuel distribution business. Naturally, our inventory also grows, but we frequently look to optimize our inventory levels to ensure we are delivering on our target returns. This quarter, as a result of inventory reductions, we delivered a $92 million benefit in this segment, unlocking additional cash to reinvest in future growth. While the size of the benefit was clearly impacted by market prices during the quarter, this was a result of active management of our inventory to a level that is sustainable on an ongoing basis. We distributed 3.8 billion gallons, up 15% versus last quarter, and up 82% versus the first quarter of last year. We continue to see volume growth in our legacy Sunoco business with an increase of almost 6% 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 continue to work on optimizing our volumes in the legacy parkland assets as we implement our gross profit optimization approach that we've evolved over the years. Reported margin for the quarter was 17 cents per gallon compared to 17.7 cents per gallon last quarter and 11.5 cents per gallon for the first quarter of 2025. There were many factors influencing our margin this quarter with the 7-11 makeup payment, the gain on inventory reduction, and the return of market volatility compensating for the margin compression experienced with dramatic increases in commodity prices during the quarter. For reference, RBOB futures increased over $1.60 a gallon during the quarter, with diesel futures increasing over $2 a gallon. In our pipeline system segment, adjusted EBITDA for the first quarter was $179 million compared to $187 million last quarter and $172 million in the first quarter of 2025. On the volume side, we reported 1.3 million barrels per day of throughput, slightly down from the seasonally strong throughput last quarter and slightly up from the same quarter last year. This segment continues to provide steady and stable income. Moving on to our terminal segment, adjusted EBITDA for the first quarter was $107 million. This compares to $87 million last quarter and $66 million in the first quarter of last year. We reported around 1 million barrels per day of throughput, which is up from both last quarter and the first quarter of last year. Growth in both earnings and volumes in this segment were supported by the inclusion of tankwood and a full quarter of legacy parkland operations. This segment continues to deliver stable results that predictably and accretively grow as we add to the portfolio. Turning to our refining segment. Adjusted EBITDA for the first quarter was $43 million compared to $41 million last quarter. There was a $10 million benefit in this segment from our inventory reduction efforts that I discussed earlier. Refinery throughput was 22,000 barrels per day compared to 50,000 barrels per day last quarter. As we shared previously, throughput was down as a result of a planned 50-day maintenance turnaround that began at the end of January, which was completed on time and on budget. During the turnaround, we continued to meet regional demand by sourcing supply through our refinery tank farm. The refining margin was strong during the periods of refinery operation, and that continues into the second quarter. To provide more clarity to the market on our refinery performance, we posted an updated indicator crack on our website yesterday and expect to post updates at the beginning of each month. This calculation is intended to be an indicator of general profitability for the refinery using market prices. Before I wrap up, I wanted to make a few comments on the integration of the recent Parkland acquisition. The balance sheet has returned to our long-term target. We are already delivering on synergies, both expense and commercial, which puts us well on track to deliver on 10 plus percent accretion before our year three commitment. In summary, We continue to build on the strong momentum of the past few years. Each of our segments is delivering, and we will continue to remain focused on safe and reliable operations, expense discipline, and accretive growth. I will now turn it over to Joe to share his final thoughts. Joe?