NYSE:SUN Sunoco Q1 2024 Earnings Report $55.76 +2.02 (+3.76%) Closing price 05/7/2025 03:59 PM EasternExtended Trading$56.30 +0.54 (+0.96%) As of 05/7/2025 07:56 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Sunoco EPS ResultsActual EPS$1.06Consensus EPS $1.06Beat/MissMet ExpectationsOne Year Ago EPSN/ASunoco Revenue ResultsActual Revenue$5.50 billionExpected Revenue$5.13 billionBeat/MissBeat by +$372.55 millionYoY Revenue GrowthN/ASunoco Announcement DetailsQuarterQ1 2024Date5/8/2024TimeN/AConference Call DateWednesday, May 8, 2024Conference Call Time10:00AM ETConference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfilePowered by Sunoco Q1 2024 Earnings Call TranscriptProvided by QuartrMay 8, 2024 ShareLink copied to clipboard.There are 9 speakers on the call. Operator00:00:00Greetings, and welcome to the Sonoco LP's First 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. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Scott Kirschip, Senior Vice President, Finance and Treasurer. Operator00:00:29Thank you, sir. You may begin. Speaker 100:00:31Thank you, and good morning, everyone. On the call with me this morning are Joe Kim, Sunoco LP's President and Chief Executive Officer Carl Fails, Chief Operations Officer Dylan Bramhall, Chief Financial Officer Austin Harkness, Chief Commercial Officer and other members of the management team. 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. Speaker 100:01:13During 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. It has been a busy and exciting start 2024 for the Sonoco team, and I'd like to begin my comments by reviewing some of that activity. 1st, on March 13, we completed the acquisition of 2 liquid fuels terminals located in Amsterdam, Netherlands and Bantry Bay, Ireland from Zenith Energy for EUR 170,000,000 Then on April 16, we completed the divestiture of 2 0 4 convenience stores across West Texas, New Mexico and Oklahoma to 711 for approximately $1,000,000,000 And just last week, we closed on the acquisition of NuStar Energy and a transaction valued at approximately $7,200,000,000 The completion of these strategic transactions will not only increase the partnership stability, but will also strengthen our financial foundation and position us for future growth. Now turning to our Q1 results for 2024. Speaker 100:02:27Sunoco delivered a record Q1 with adjusted EBITDA of $242,000,000 compared to $221,000,000 a year ago, an increase of 9%. As Carl will discuss later, this quarter's results demonstrate that our continued focus on gross profit optimization in our fuel distribution business has helped grow our fuel gross profit dollars over time. In the Q1, the partnership sold over 2,100,000,000 gallons, a record volume for a Q1 and a 9% increase from last year. Fuel margin for all gallons sold was $0.117 per gallon compared to $0.129 per gallon a year ago. Fuel margin results include the benefit of a $25,000,000 7.11 makeup payment. Speaker 100:03:15Total first quarter operating expenses were $142,000,000 an increase of $15,000,000 from the Q1 of last year. The vast majority of this year over year increase can be attributed to additional operating expenses from growth, including the Zenith North America terminal acquisition and transaction costs related to acquisition and divestiture activity in the Q1 of this year. In the Q1, we spent $27,000,000 on growth capital and $14,000,000 on maintenance capital. 1st quarter distributable cash flows adjusted was $176,000,000 compared to $160,000,000 in the Q1 of 2023. On May 3, we declared an $0.8756 per unit distribution, a 4% increase over last quarter. Speaker 100:04:05This increase demonstrates continued confidence in our business and our ability to deliver value to our unitholders through distribution increases. Turning to the balance sheet. At the end of the Q1, we had approximately $870,000,000 liquidity remaining on our revolving credit facility. Leverage at the end of the quarter was 3.7x, unchanged from last quarter and below our long term target of 4 times. In anticipation of and in conjunction with the closing of the NuStar acquisition, the partnership recently completed several financing transactions. Speaker 100:04:401st, on April 30, we issued $1,500,000,000 in senior notes in a private offering. The proceeds from this offering will be used to fund the repayment of NuStar's credit and receivables facilities and redeem NuStar's preferred equity and subordinated notes. The reduction in interest expense from this refinancing activity will generate at least $50,000,000 in additional cash flow annually. 2nd, on May 3, we entered into a new $1,500,000,000 revolving credit facility, which matures in 2029. This new credit facility is fully unsecured and will simplify Sunoco's capital structure and enhance our credit profile moving forward. Speaker 100:05:21To that end, both Moody's and S and P upgraded Sonoco's long term credit ratings over the past week, further demonstrating Sonoco's enhanced scale and stability and improved financial profile. Now that we have closed the NuStar acquisition, I want to share an update on our 2024 guidance. We plan to issue more detailed outlook on or before our Q2 earnings call, but as a starting point, we wanted to provide the following perspective on consolidated 2024 guidance. We now expect 2024 adjusted EBITDA to be in a range of $1,460,000,000 to $1,520,000,000 This increase reflects the combination of our reaffirmed adjusted EBITDA guidance of $975,000,000 to $1,000,000,000 for the legacy Sunoco business. Additionally, the increase includes the contribution of approximately 480,000,000 dollars to $520,000,000 of adjusted EBITDA from the NuStar acquisition. Speaker 100:06:20The expected contribution from NuStar reflects a prorated portion of the 2024 adjusted EBITDA guidance the NuStar management team provided in February. This revised 2024 adjusted EBITDA guidance excludes both transaction costs and synergies, which we will also provide more detail on or before our Q2 earnings call. With that, I will now turn the call over to Carl to walk through some additional thoughts on our Q1 performance and recent transaction activity. Speaker 200:06:52Thanks, Scott. Good morning, everyone. This quarter continued the strong performance in our base business and highlighted the continued progress of our growth strategies. As we have stated many times, the key to our gross profit optimization strategy in our fuel distribution business is to look at the combined fuel gross profit rather than evaluating volume or margin separately. This is important as we look at our Q1 performance. Speaker 200:07:19First, our volumes continue to substantially grow. In the Q1, there was a 9% increase compared to the same quarter last year. This period marks the 4th consecutive quarter where we surpassed 2,000,000,000 gallons. In terms of total U. S. Speaker 200:07:35Gasoline and diesel demand, our growth continues to exceed industry averages, showcasing that our investments are yielding tangible results, while always keeping our gross profit optimization strategy front and center. 2nd, margins continue to be strong. From a market standpoint, we faced some fairly consistent upward movement in gasoline prices throughout the quarter, which provided the typical compression that happens during similar market conditions. Another factor impacting our overall margin is that some of our year over year volume growth has come in channels that have added incremental fuel gross profit and EBITDA, but at margins below our overall average. This is really an impact on our portfolio mix, not an indication of market conditions. Speaker 200:08:23Overall, higher breakeven margins and overall volatility continue to provide support to margins, and we expect that to continue for the foreseeable future. When you put it all together, we had record Q1 EBITDA, our fuel gross profit continues to trend upwards and our outlook remains strong. Earlier, Scott mentioned the 3 transactions that we've closed in the last few months. Let me give you some insight into the West Texas and Europe transactions and the impact to our overall business outlook before I discuss the exciting NuStar acquisition that we closed last week. Speaker 300:09:00The divestiture of the West Texas business Speaker 200:09:00to 711 was completed at an EBITDA multiple in the high teens. We are a growth company and we are not in the business of selling off parts of our So let me give you some insight into how this fit into our strategy. By selling the West Texas business, we lost some volume in gross profit dollars and our reported margin will drop as the margin of the West Texas business was well above our average. If you do the math, the change in mix reduces our reported fuel margin by a bit less than $0.005 per gallon on a go forward basis. What we gained from the transaction, however, was a significant amount of capital that we could redeploy at lower multiples in building our business and increasing stability. Speaker 200:09:41Bottom line, after this transaction, we are less exposed to West Texas retail margins. Our base fuel distribution business remains strong and we expect fuel gross profit to continue to grow. The acquisition of the Zenith terminals in Europe was completed at a synergized EBITDA multiple in the mid single digits. There are strong assets based in strategic locations. Much of the integration is already completed and we are looking forward to the benefits of having these assets in our portfolio as well as our new team members that have joined us in Europe. Speaker 200:10:15Adding the European terminals provides us with additional opportunities to optimize our supply costs, particularly on the East Coast and deliver increased value to our customers. Further, these terminals can serve as a platform for future growth. Turning to NuStar. We're very excited about the increased stability and diversification that these assets will bring to our portfolio and the many growth opportunities that they will provide. The integration process is well underway and we are looking forward to working together with our new team members to grow the combined business. Speaker 200:10:50Our plans are on track to deliver above our synergy floor of $150,000,000 per year. We have made great progress on identifying the expense savings that will come from the combination and expect to achieve north of $100,000,000 expense synergies annually. We are still digging into the commercial opportunities and working to quantify what those will yield. In particular, we have begun an evaluation of our crude business to determine how we can unlock additional value to improve the performance and profitability of the assets. This evaluation is in the preliminary stages, but the initial work is promising and we look forward to sharing more detail on our overall synergy outlook on or before our next earnings call. Speaker 200:11:34Before turning the time over to Joe, I will wrap up by emphasizing that we are off to a strong start to the year and we'll continue to focus on delivering results for our stakeholders through our proven strategy of gross profit optimization, tight expense control, solid and efficient operations and growing our business. Joe? Speaker 300:11:56Thanks, Carl and good morning everyone. Over the last 4 months, we completed a series of strategic transactions to strengthen Sun for the future. Let me provide some perspective on these actions and also talk about our business as a whole. Starting with our legacy we had a record Q1 reporting the highest Q1 EBITDA and DCF results in the history of the partnership. Our legacy business is strong and we're confident that it will remain strong for the foreseeable future. Speaker 300:12:26Obviously, the closing of the NuStar acquisition resulted in us revising our full year guidance. But I think it is important to note, if you back out the NuStar acquisition for this year, we fully expected to deliver on the guidance that we provided back in December of last year even after the EBITDA loss resulting from the West Texas divestiture and the European Terminal acquisition. Regarding the West Texas divestiture, we got a highly attractive sales multiple and added to our take or pay contract. The net proceeds after tax and other expenses is roughly $800,000,000 This is more than the $750,000,000 that we noted in January. As for the NuStar acquisition, let me start off by publicly welcoming the NuStar employees to the Sun team. Speaker 300:13:16We're excited to work with all the talented people and also to add some great assets our overall portfolio. When we announced the transaction in January, we detailed the strategic rationale and the highly attractive economics. 4 months later, we're even more confident that we have better positioned the company for the future. This acquisition makes us larger and more diverse while also providing more growth opportunities. Financially, it's highly attractive with a greater than 10% accretion in the 3rd year following close. Speaker 300:13:50Regarding our balance sheet, we stated back in January that we expect to be at our long term target leverage of 4 times within 12 to 18 months. We're well positioned to deliver on this target. As for the recently announced 4% distribution increase, we're confident in the resiliency and growth potential of our business. A secured distribution is one of our capital allocation pillars and the decision to increase had to meet the following criteria: stay above our target coverage ratio, protect our balance sheet, remain a growth company and finally a clear path to additional distribution increases over a multi year timeframe. We're confident that the answer is yes on all of these factors. Speaker 300:14:35Let me wrap up. We entered 2024 from a position of strength and after a series of strategic moves, we're a stronger company going forward. We'll continue to execute on our strategic focus of improving stability, enhancing growth and maintain a strong balance sheet, resulting in more compelling investment going forward. Operator, that concludes our prepared remarks. You may open the line for questions. Operator00:15:01Thank you. At this time, we will be conducting a question and answer Our first question comes from Theresa Chen with Barclays. Please proceed with your question. Good morning and thank you for taking my questions. I realize we're going to get a much more detailed look at the financial outlook later on. Operator00:15:54But I was hoping you could talk about how you see the crude oil assets in particular fitting within your organization pro form a? How are you planning to further commercialize them? And if there are any complementary or synergistic opportunities with ET's crude oil assets and how all that comes together? Speaker 200:16:13Yes. Thanks, Teresa. Appreciate the question. I mentioned in my prepared remarks that we've started to dive into those and I can add a little bit more color to that kind of on our initial thinking. So first is, we like the stability and diversification that the crude business provides, specifically the Permian system that we just acquired is located on excellent acreage and it's fortunate to have a set of high quality customers. Speaker 200:16:42And as we look at those cash flows going forward, we expect them to deliver a stable cash and returns going forward. As far as my comments on looking for how to unlock additional value, really as we sit here today, all options are on the table, including but not limited to the possibilities of joint ventures or other commercial arrangements. I think maybe the only option not on the table is contemplation of sale. Like I said, we like the assets and the stability they provide. You asked about ET. Speaker 200:17:18Clearly working with ET on creating additional value is an option. This work is still pretty preliminary and we don't have any additional detail to share right now. But I think as Joe and I have talked and we've had questions on crude even from the first announcement, any changes or arrangements we make different than just us operating them as is will be because it adds additional value beyond what we've already assumed. Operator00:17:56Our next question comes from Spiro Dounis with Citi. Please proceed with your question. Speaker 400:18:02Thanks, operator. Good morning, team. Wanted to go back to the synergies quickly, if we could. When the deal was announced, I think you all talked about $150,000,000 of run rate by the 3rd year, probably just mentioned I think hitting $100,000,000 or so cost savings annually. So we're just hoping you guys could sort of reconcile those comments and whether or not that 100,000,000 Operator00:18:24dollars is kind of still on that sort of 3 year timeframe? Speaker 200:18:25Yes, Spiro. I think so. If you dial back to what we initially said, we said 100 $150,000,000 it would be a combination of expense and commercial. We didn't really break down initially what we thought that was. And then we said we'd achieve that by the 3rd year. Speaker 200:18:41Our comments today are really, I think, the more clarity we're we've done enough work to be able to provide is on the expense side. As far as what the total number is and what the commercial is and any updates to our original cadence, I think that's the evaluation that's ongoing that we hope to provide in the next couple of months. But again, the most important thing is everything we've dug into, we should be at or better than what we originally assumed. Speaker 400:19:13Great. Second question maybe going to M and A. Scott, as you had pointed out, very busy start to the year and certainly a lot of initiatives ahead of you from here. So curious maybe what your appetite is on future M and A from here either bolt on or larger scale or maybe is your focus at this point entirely just on extracting synergies and absorbing these deals? Speaker 300:19:36It's Spiro, it's Joe. Obviously, a high priority is integrating and realizing the synergies and getting back to our leverage target for the NuStar acquisition. But equally a high priority for us is optimizing and delivering on our legacy fuel distribution business. And the 3rd high priority is continued growth, which includes M and A. Is it easy to do all 3? Speaker 300:20:00No. But that's not what we're solving for. We're solving for growing unitholder value and we think we can do all 3. Speaker 400:20:08Understood. I'll leave it there for today. Thank you, gentlemen. Operator00:20:21Our next question comes from Elvira Scotto with RBC Capital Markets. Please proceed with your question. Speaker 500:20:28Hey, good morning. Thanks for all the detail. Just going back to I know we'll get a little more on NuStar, so I'll hold off on questions there. But on the Zenith acquisition, you did mention that you could see some future growth opportunities there. Can you provide any kind of additional detail there? Speaker 500:20:48Would these be growth opportunities again outside the U. S? Or how are you thinking about that? Speaker 200:20:56Yes, Elvira. This is Karl. If you think about how we've talked about the terminals in Europe and then maybe even if you go back to our acquisition we made a little over a year ago in Puerto Rico, really the criteria we use to look at that is do they have stable cash flows? Are there strategic fit? What kind of synergies do we think we could extract with our base business or kind of what kind of right to win do we have with our existing fuel distribution business and then potential for growth. Speaker 200:21:30So Puerto Rico hit on that. We feel confident that these two assets that we closed on a couple of months ago in Europe fit that. We are open to additional international expansion if it meets that criteria. Now with that possibility of growth, you can expect us to continue to have the same level of discipline that we've applied either whether it's on the M and A side or on the organic growth capital side. Speaker 500:22:00Okay, great. Thank you very much. Operator00:22:07Our next question comes from Selman Akyol with Stifel. Please proceed with your question. Speaker 600:22:13Hey guys, this is Tim on for Selman. I appreciate the color on the West Texas divestiture to 711. So just curious as you look out at the rest of your footprint, do you see any more similar opportunities to make these sort of transactions? Speaker 300:22:30Hey, Candace, this is Joe. I think Carl did a really good job on his prepared remarks talking about how that divestiture fit into the bigger picture of us moving forward. But I'll reiterate what he said, we're a growth company. This was a unique opportunity for us to do a highly attractive acquisition with NuStar and have a very defined path to get our leverage down to the right level. So I don't see any other divestitures in our future. Speaker 600:23:00Got it. Understood. And then shifting to the distribution growth, 4% was a nice step up. But just wondering how you guys think about this longer term with NuStar and just curious if the 4% was made with or without NuStar in mind? Speaker 300:23:17Yes. Let me try to answer that in 2 parts. I guess first and foremost, we're confident about the resiliency and the growth potential of our business on a going forward basis and that's evident by the 2% increase we did last year and the 4% we did this year. As far as establishing a number on an hour years, I think it's too early. We have the flexibility, we like the flexibility to assess market opportunities and we'll properly allocate our capital using the same strategy we have right now. Speaker 300:23:51And obviously your last question was Newstar contemplated in us with our 4% distribution. The answer is of course, yes. As part of our business going forward, we like the accretion. I think anytime you're talking double digit accretion, that's a big number and we're confident we're going to deliver on that. Speaker 600:24:12Got it. Thank you guys for the time. Operator00:24:17Our next question comes from Robert Moskow with Mizuho Securities. Please proceed with your question. Speaker 700:24:24Hi, good morning, everyone. Just wondering if you could talk about the puts and takes around your margin expectations. It sounds like there might be a couple of drags in the form of more low margin volumes and the West Texas sale. Just want to check whether the $0.125 guidance still holds or whether we should think about it more holistically in terms of volume and margin? Speaker 200:24:48Yes. This is Karl. I talked in my prepared remarks that really we look at it from an overall fuel gross profit. So I'm going to hand it off over to Austin Harkness, our Chief Commercial Officer. He can dig a little deeper there. Speaker 800:25:03Yes. Hey, Robert. In terms of macro macro view, as Carl shared in his prepared remarks, we haven't seen any fundamental shift in the volume or margin picture, right? So our view going forward is from a macro standpoint, volumes for 2024 are going to continue on the trend that they've been on recently, which is roughly flat for refined products. And the margin picture remains elevated, right? Speaker 800:25:27So breakevens remain high. We continue to see volatility in flat price, all of which paints a fairly constructive picture for the margin environment. If you take a step back and look at our Q1 results, as a reminder, we manage our portfolio of income streams across different sales channels. And the way to think about our Q1 results is the market gave us an opportunity to sell more fuel above our historical run rate volume at a pool margin that was below our historical run rate margin, all resulting in a fuel gross profit number that ultimately allowed us to deliver a record Q1 EBITDA. And as Carl mentioned, we really do optimize around fuel gross profit versus solving for any volume or CPG margin number independently. Speaker 800:26:19So as you think about the future and going forward, there's a couple of things I would share. One is we manage the business on a long term basis, right? So we take a 12 month view recognizing there's going to be volatility on a quarter to quarter basis whether it's impacting to volume or margins independently. Separately, as Carl mentioned in his prepared remarks, the West Texas divestiture accounts for about 50 points of enterprise margin, right? So you have to account for that along with the fuel gross profit associated with it. Speaker 800:26:51I would reiterate Joe's comments that it's a deal that we're very happy with given the multiple that we were able to transact at and our ability to quickly redeploy that capital to highly accretive M and A. All that said, fundamentally we're a growth company. And I think our track record and our forward view is very much that we will continue to grow fuel gross profit in the long run multiple years in the future. Speaker 700:27:19No, understood. Thanks for the time today everyone. Operator00:27:25There are no further questions at this time. I would now like to turn the floor back over to Scott Gershun for closing comments. Speaker 100:27:32Thanks everyone for joining us on the call this morning. As I said before, it's been a busy, exciting and strong start to the year for the partnership. Please feel free to reach out if you have any questions or want to discuss anything. Thanks and have a great day.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallSunoco Q1 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Quarterly report(10-Q) Sunoco Earnings HeadlinesParkland agrees to be bought by U.S. heavyweight Sunoco in US$9.1B dealMay 7 at 4:54 PM | financialpost.comUpper Makefield board votes to allow recovery wells at site of oil leak, but residents say questions remainMay 7 at 3:26 AM | msn.comWhite House to reset Social Security?Elon Musk's parting DOGE gift looks set to shock America... A single announcement by July 22nd could soon bring Elon Musk's DOGE operation to its final, dramatic conclusion - with huge consequences for millions of investors. So if you have any money in the market... you're almost out of time to prepare. This plan has already been put in place... and can operate even if Elon's long gone from Washington. May 8, 2025 | Altimetry (Ad)3 questions about Parkland’s sale to SunocoMay 7 at 3:26 AM | finance.yahoo.comTexas-based Sunoco makes $9 billion deal to buy Canadian fuel distributorMay 6 at 5:24 PM | msn.comWhy Did Sunoco Stock Fall After Q1 Earnings?May 6 at 5:18 PM | benzinga.comSee More Sunoco Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Sunoco? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Sunoco and other key companies, straight to your email. Email Address About SunocoSunoco (NYSE:SUN), together with its subsidiaries, distributes and retails motor fuels in the United States. It operates through two segments: Fuel Distribution and Marketing, and All Other. The Fuel Distribution and Marketing segment purchases motor fuel, as well as other petroleum products, such as propane and lubricating oil from independent refiners and oil companies and supplies it to company-operated retail stores, independently operated commission agents, and retail stores, as well as other commercial customers, including unbranded retail stores, other fuel distributors, school districts, municipalities, and other industrial customers. It owns and operates retail stores under the APlus and Aloha Island Mart brand names; and offers food, beverages, snacks, grocery and non-food merchandise, motor fuels, and other services. The All Other segment includes partnership credit card services, franchise royalties, and retail operations; and offers credit card processing, car washes, lottery, automated teller machines, money order, prepaid phone cards, and wireless services. The company was formerly known as Susser Petroleum Partners LP and changed its name to Sunoco LP in 2014. Sunoco LP was founded in 1886 and is headquartered in Dallas, Texas.View Sunoco ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Disney Stock Jumps on Earnings—Is the Magic Sustainable?Archer Stock Eyes Q1 Earnings After UAE UpdatesFord Motor Stock Rises After Earnings, But Momentum May Not Last Broadcom Stock Gets a Lift on Hyperscaler Earnings & CapEx BoostPalantir Stock Drops Despite Stellar Earnings: What's Next?Is Eli Lilly a Buy After Weak Earnings and CVS-Novo Partnership?Is Reddit Stock a Buy, Sell, or Hold After Earnings Release? 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There are 9 speakers on the call. Operator00:00:00Greetings, and welcome to the Sonoco LP's First 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. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Scott Kirschip, Senior Vice President, Finance and Treasurer. Operator00:00:29Thank you, sir. You may begin. Speaker 100:00:31Thank you, and good morning, everyone. On the call with me this morning are Joe Kim, Sunoco LP's President and Chief Executive Officer Carl Fails, Chief Operations Officer Dylan Bramhall, Chief Financial Officer Austin Harkness, Chief Commercial Officer and other members of the management team. 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. Speaker 100:01:13During 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. It has been a busy and exciting start 2024 for the Sonoco team, and I'd like to begin my comments by reviewing some of that activity. 1st, on March 13, we completed the acquisition of 2 liquid fuels terminals located in Amsterdam, Netherlands and Bantry Bay, Ireland from Zenith Energy for EUR 170,000,000 Then on April 16, we completed the divestiture of 2 0 4 convenience stores across West Texas, New Mexico and Oklahoma to 711 for approximately $1,000,000,000 And just last week, we closed on the acquisition of NuStar Energy and a transaction valued at approximately $7,200,000,000 The completion of these strategic transactions will not only increase the partnership stability, but will also strengthen our financial foundation and position us for future growth. Now turning to our Q1 results for 2024. Speaker 100:02:27Sunoco delivered a record Q1 with adjusted EBITDA of $242,000,000 compared to $221,000,000 a year ago, an increase of 9%. As Carl will discuss later, this quarter's results demonstrate that our continued focus on gross profit optimization in our fuel distribution business has helped grow our fuel gross profit dollars over time. In the Q1, the partnership sold over 2,100,000,000 gallons, a record volume for a Q1 and a 9% increase from last year. Fuel margin for all gallons sold was $0.117 per gallon compared to $0.129 per gallon a year ago. Fuel margin results include the benefit of a $25,000,000 7.11 makeup payment. Speaker 100:03:15Total first quarter operating expenses were $142,000,000 an increase of $15,000,000 from the Q1 of last year. The vast majority of this year over year increase can be attributed to additional operating expenses from growth, including the Zenith North America terminal acquisition and transaction costs related to acquisition and divestiture activity in the Q1 of this year. In the Q1, we spent $27,000,000 on growth capital and $14,000,000 on maintenance capital. 1st quarter distributable cash flows adjusted was $176,000,000 compared to $160,000,000 in the Q1 of 2023. On May 3, we declared an $0.8756 per unit distribution, a 4% increase over last quarter. Speaker 100:04:05This increase demonstrates continued confidence in our business and our ability to deliver value to our unitholders through distribution increases. Turning to the balance sheet. At the end of the Q1, we had approximately $870,000,000 liquidity remaining on our revolving credit facility. Leverage at the end of the quarter was 3.7x, unchanged from last quarter and below our long term target of 4 times. In anticipation of and in conjunction with the closing of the NuStar acquisition, the partnership recently completed several financing transactions. Speaker 100:04:401st, on April 30, we issued $1,500,000,000 in senior notes in a private offering. The proceeds from this offering will be used to fund the repayment of NuStar's credit and receivables facilities and redeem NuStar's preferred equity and subordinated notes. The reduction in interest expense from this refinancing activity will generate at least $50,000,000 in additional cash flow annually. 2nd, on May 3, we entered into a new $1,500,000,000 revolving credit facility, which matures in 2029. This new credit facility is fully unsecured and will simplify Sunoco's capital structure and enhance our credit profile moving forward. Speaker 100:05:21To that end, both Moody's and S and P upgraded Sonoco's long term credit ratings over the past week, further demonstrating Sonoco's enhanced scale and stability and improved financial profile. Now that we have closed the NuStar acquisition, I want to share an update on our 2024 guidance. We plan to issue more detailed outlook on or before our Q2 earnings call, but as a starting point, we wanted to provide the following perspective on consolidated 2024 guidance. We now expect 2024 adjusted EBITDA to be in a range of $1,460,000,000 to $1,520,000,000 This increase reflects the combination of our reaffirmed adjusted EBITDA guidance of $975,000,000 to $1,000,000,000 for the legacy Sunoco business. Additionally, the increase includes the contribution of approximately 480,000,000 dollars to $520,000,000 of adjusted EBITDA from the NuStar acquisition. Speaker 100:06:20The expected contribution from NuStar reflects a prorated portion of the 2024 adjusted EBITDA guidance the NuStar management team provided in February. This revised 2024 adjusted EBITDA guidance excludes both transaction costs and synergies, which we will also provide more detail on or before our Q2 earnings call. With that, I will now turn the call over to Carl to walk through some additional thoughts on our Q1 performance and recent transaction activity. Speaker 200:06:52Thanks, Scott. Good morning, everyone. This quarter continued the strong performance in our base business and highlighted the continued progress of our growth strategies. As we have stated many times, the key to our gross profit optimization strategy in our fuel distribution business is to look at the combined fuel gross profit rather than evaluating volume or margin separately. This is important as we look at our Q1 performance. Speaker 200:07:19First, our volumes continue to substantially grow. In the Q1, there was a 9% increase compared to the same quarter last year. This period marks the 4th consecutive quarter where we surpassed 2,000,000,000 gallons. In terms of total U. S. Speaker 200:07:35Gasoline and diesel demand, our growth continues to exceed industry averages, showcasing that our investments are yielding tangible results, while always keeping our gross profit optimization strategy front and center. 2nd, margins continue to be strong. From a market standpoint, we faced some fairly consistent upward movement in gasoline prices throughout the quarter, which provided the typical compression that happens during similar market conditions. Another factor impacting our overall margin is that some of our year over year volume growth has come in channels that have added incremental fuel gross profit and EBITDA, but at margins below our overall average. This is really an impact on our portfolio mix, not an indication of market conditions. Speaker 200:08:23Overall, higher breakeven margins and overall volatility continue to provide support to margins, and we expect that to continue for the foreseeable future. When you put it all together, we had record Q1 EBITDA, our fuel gross profit continues to trend upwards and our outlook remains strong. Earlier, Scott mentioned the 3 transactions that we've closed in the last few months. Let me give you some insight into the West Texas and Europe transactions and the impact to our overall business outlook before I discuss the exciting NuStar acquisition that we closed last week. Speaker 300:09:00The divestiture of the West Texas business Speaker 200:09:00to 711 was completed at an EBITDA multiple in the high teens. We are a growth company and we are not in the business of selling off parts of our So let me give you some insight into how this fit into our strategy. By selling the West Texas business, we lost some volume in gross profit dollars and our reported margin will drop as the margin of the West Texas business was well above our average. If you do the math, the change in mix reduces our reported fuel margin by a bit less than $0.005 per gallon on a go forward basis. What we gained from the transaction, however, was a significant amount of capital that we could redeploy at lower multiples in building our business and increasing stability. Speaker 200:09:41Bottom line, after this transaction, we are less exposed to West Texas retail margins. Our base fuel distribution business remains strong and we expect fuel gross profit to continue to grow. The acquisition of the Zenith terminals in Europe was completed at a synergized EBITDA multiple in the mid single digits. There are strong assets based in strategic locations. Much of the integration is already completed and we are looking forward to the benefits of having these assets in our portfolio as well as our new team members that have joined us in Europe. Speaker 200:10:15Adding the European terminals provides us with additional opportunities to optimize our supply costs, particularly on the East Coast and deliver increased value to our customers. Further, these terminals can serve as a platform for future growth. Turning to NuStar. We're very excited about the increased stability and diversification that these assets will bring to our portfolio and the many growth opportunities that they will provide. The integration process is well underway and we are looking forward to working together with our new team members to grow the combined business. Speaker 200:10:50Our plans are on track to deliver above our synergy floor of $150,000,000 per year. We have made great progress on identifying the expense savings that will come from the combination and expect to achieve north of $100,000,000 expense synergies annually. We are still digging into the commercial opportunities and working to quantify what those will yield. In particular, we have begun an evaluation of our crude business to determine how we can unlock additional value to improve the performance and profitability of the assets. This evaluation is in the preliminary stages, but the initial work is promising and we look forward to sharing more detail on our overall synergy outlook on or before our next earnings call. Speaker 200:11:34Before turning the time over to Joe, I will wrap up by emphasizing that we are off to a strong start to the year and we'll continue to focus on delivering results for our stakeholders through our proven strategy of gross profit optimization, tight expense control, solid and efficient operations and growing our business. Joe? Speaker 300:11:56Thanks, Carl and good morning everyone. Over the last 4 months, we completed a series of strategic transactions to strengthen Sun for the future. Let me provide some perspective on these actions and also talk about our business as a whole. Starting with our legacy we had a record Q1 reporting the highest Q1 EBITDA and DCF results in the history of the partnership. Our legacy business is strong and we're confident that it will remain strong for the foreseeable future. Speaker 300:12:26Obviously, the closing of the NuStar acquisition resulted in us revising our full year guidance. But I think it is important to note, if you back out the NuStar acquisition for this year, we fully expected to deliver on the guidance that we provided back in December of last year even after the EBITDA loss resulting from the West Texas divestiture and the European Terminal acquisition. Regarding the West Texas divestiture, we got a highly attractive sales multiple and added to our take or pay contract. The net proceeds after tax and other expenses is roughly $800,000,000 This is more than the $750,000,000 that we noted in January. As for the NuStar acquisition, let me start off by publicly welcoming the NuStar employees to the Sun team. Speaker 300:13:16We're excited to work with all the talented people and also to add some great assets our overall portfolio. When we announced the transaction in January, we detailed the strategic rationale and the highly attractive economics. 4 months later, we're even more confident that we have better positioned the company for the future. This acquisition makes us larger and more diverse while also providing more growth opportunities. Financially, it's highly attractive with a greater than 10% accretion in the 3rd year following close. Speaker 300:13:50Regarding our balance sheet, we stated back in January that we expect to be at our long term target leverage of 4 times within 12 to 18 months. We're well positioned to deliver on this target. As for the recently announced 4% distribution increase, we're confident in the resiliency and growth potential of our business. A secured distribution is one of our capital allocation pillars and the decision to increase had to meet the following criteria: stay above our target coverage ratio, protect our balance sheet, remain a growth company and finally a clear path to additional distribution increases over a multi year timeframe. We're confident that the answer is yes on all of these factors. Speaker 300:14:35Let me wrap up. We entered 2024 from a position of strength and after a series of strategic moves, we're a stronger company going forward. We'll continue to execute on our strategic focus of improving stability, enhancing growth and maintain a strong balance sheet, resulting in more compelling investment going forward. Operator, that concludes our prepared remarks. You may open the line for questions. Operator00:15:01Thank you. At this time, we will be conducting a question and answer Our first question comes from Theresa Chen with Barclays. Please proceed with your question. Good morning and thank you for taking my questions. I realize we're going to get a much more detailed look at the financial outlook later on. Operator00:15:54But I was hoping you could talk about how you see the crude oil assets in particular fitting within your organization pro form a? How are you planning to further commercialize them? And if there are any complementary or synergistic opportunities with ET's crude oil assets and how all that comes together? Speaker 200:16:13Yes. Thanks, Teresa. Appreciate the question. I mentioned in my prepared remarks that we've started to dive into those and I can add a little bit more color to that kind of on our initial thinking. So first is, we like the stability and diversification that the crude business provides, specifically the Permian system that we just acquired is located on excellent acreage and it's fortunate to have a set of high quality customers. Speaker 200:16:42And as we look at those cash flows going forward, we expect them to deliver a stable cash and returns going forward. As far as my comments on looking for how to unlock additional value, really as we sit here today, all options are on the table, including but not limited to the possibilities of joint ventures or other commercial arrangements. I think maybe the only option not on the table is contemplation of sale. Like I said, we like the assets and the stability they provide. You asked about ET. Speaker 200:17:18Clearly working with ET on creating additional value is an option. This work is still pretty preliminary and we don't have any additional detail to share right now. But I think as Joe and I have talked and we've had questions on crude even from the first announcement, any changes or arrangements we make different than just us operating them as is will be because it adds additional value beyond what we've already assumed. Operator00:17:56Our next question comes from Spiro Dounis with Citi. Please proceed with your question. Speaker 400:18:02Thanks, operator. Good morning, team. Wanted to go back to the synergies quickly, if we could. When the deal was announced, I think you all talked about $150,000,000 of run rate by the 3rd year, probably just mentioned I think hitting $100,000,000 or so cost savings annually. So we're just hoping you guys could sort of reconcile those comments and whether or not that 100,000,000 Operator00:18:24dollars is kind of still on that sort of 3 year timeframe? Speaker 200:18:25Yes, Spiro. I think so. If you dial back to what we initially said, we said 100 $150,000,000 it would be a combination of expense and commercial. We didn't really break down initially what we thought that was. And then we said we'd achieve that by the 3rd year. Speaker 200:18:41Our comments today are really, I think, the more clarity we're we've done enough work to be able to provide is on the expense side. As far as what the total number is and what the commercial is and any updates to our original cadence, I think that's the evaluation that's ongoing that we hope to provide in the next couple of months. But again, the most important thing is everything we've dug into, we should be at or better than what we originally assumed. Speaker 400:19:13Great. Second question maybe going to M and A. Scott, as you had pointed out, very busy start to the year and certainly a lot of initiatives ahead of you from here. So curious maybe what your appetite is on future M and A from here either bolt on or larger scale or maybe is your focus at this point entirely just on extracting synergies and absorbing these deals? Speaker 300:19:36It's Spiro, it's Joe. Obviously, a high priority is integrating and realizing the synergies and getting back to our leverage target for the NuStar acquisition. But equally a high priority for us is optimizing and delivering on our legacy fuel distribution business. And the 3rd high priority is continued growth, which includes M and A. Is it easy to do all 3? Speaker 300:20:00No. But that's not what we're solving for. We're solving for growing unitholder value and we think we can do all 3. Speaker 400:20:08Understood. I'll leave it there for today. Thank you, gentlemen. Operator00:20:21Our next question comes from Elvira Scotto with RBC Capital Markets. Please proceed with your question. Speaker 500:20:28Hey, good morning. Thanks for all the detail. Just going back to I know we'll get a little more on NuStar, so I'll hold off on questions there. But on the Zenith acquisition, you did mention that you could see some future growth opportunities there. Can you provide any kind of additional detail there? Speaker 500:20:48Would these be growth opportunities again outside the U. S? Or how are you thinking about that? Speaker 200:20:56Yes, Elvira. This is Karl. If you think about how we've talked about the terminals in Europe and then maybe even if you go back to our acquisition we made a little over a year ago in Puerto Rico, really the criteria we use to look at that is do they have stable cash flows? Are there strategic fit? What kind of synergies do we think we could extract with our base business or kind of what kind of right to win do we have with our existing fuel distribution business and then potential for growth. Speaker 200:21:30So Puerto Rico hit on that. We feel confident that these two assets that we closed on a couple of months ago in Europe fit that. We are open to additional international expansion if it meets that criteria. Now with that possibility of growth, you can expect us to continue to have the same level of discipline that we've applied either whether it's on the M and A side or on the organic growth capital side. Speaker 500:22:00Okay, great. Thank you very much. Operator00:22:07Our next question comes from Selman Akyol with Stifel. Please proceed with your question. Speaker 600:22:13Hey guys, this is Tim on for Selman. I appreciate the color on the West Texas divestiture to 711. So just curious as you look out at the rest of your footprint, do you see any more similar opportunities to make these sort of transactions? Speaker 300:22:30Hey, Candace, this is Joe. I think Carl did a really good job on his prepared remarks talking about how that divestiture fit into the bigger picture of us moving forward. But I'll reiterate what he said, we're a growth company. This was a unique opportunity for us to do a highly attractive acquisition with NuStar and have a very defined path to get our leverage down to the right level. So I don't see any other divestitures in our future. Speaker 600:23:00Got it. Understood. And then shifting to the distribution growth, 4% was a nice step up. But just wondering how you guys think about this longer term with NuStar and just curious if the 4% was made with or without NuStar in mind? Speaker 300:23:17Yes. Let me try to answer that in 2 parts. I guess first and foremost, we're confident about the resiliency and the growth potential of our business on a going forward basis and that's evident by the 2% increase we did last year and the 4% we did this year. As far as establishing a number on an hour years, I think it's too early. We have the flexibility, we like the flexibility to assess market opportunities and we'll properly allocate our capital using the same strategy we have right now. Speaker 300:23:51And obviously your last question was Newstar contemplated in us with our 4% distribution. The answer is of course, yes. As part of our business going forward, we like the accretion. I think anytime you're talking double digit accretion, that's a big number and we're confident we're going to deliver on that. Speaker 600:24:12Got it. Thank you guys for the time. Operator00:24:17Our next question comes from Robert Moskow with Mizuho Securities. Please proceed with your question. Speaker 700:24:24Hi, good morning, everyone. Just wondering if you could talk about the puts and takes around your margin expectations. It sounds like there might be a couple of drags in the form of more low margin volumes and the West Texas sale. Just want to check whether the $0.125 guidance still holds or whether we should think about it more holistically in terms of volume and margin? Speaker 200:24:48Yes. This is Karl. I talked in my prepared remarks that really we look at it from an overall fuel gross profit. So I'm going to hand it off over to Austin Harkness, our Chief Commercial Officer. He can dig a little deeper there. Speaker 800:25:03Yes. Hey, Robert. In terms of macro macro view, as Carl shared in his prepared remarks, we haven't seen any fundamental shift in the volume or margin picture, right? So our view going forward is from a macro standpoint, volumes for 2024 are going to continue on the trend that they've been on recently, which is roughly flat for refined products. And the margin picture remains elevated, right? Speaker 800:25:27So breakevens remain high. We continue to see volatility in flat price, all of which paints a fairly constructive picture for the margin environment. If you take a step back and look at our Q1 results, as a reminder, we manage our portfolio of income streams across different sales channels. And the way to think about our Q1 results is the market gave us an opportunity to sell more fuel above our historical run rate volume at a pool margin that was below our historical run rate margin, all resulting in a fuel gross profit number that ultimately allowed us to deliver a record Q1 EBITDA. And as Carl mentioned, we really do optimize around fuel gross profit versus solving for any volume or CPG margin number independently. Speaker 800:26:19So as you think about the future and going forward, there's a couple of things I would share. One is we manage the business on a long term basis, right? So we take a 12 month view recognizing there's going to be volatility on a quarter to quarter basis whether it's impacting to volume or margins independently. Separately, as Carl mentioned in his prepared remarks, the West Texas divestiture accounts for about 50 points of enterprise margin, right? So you have to account for that along with the fuel gross profit associated with it. Speaker 800:26:51I would reiterate Joe's comments that it's a deal that we're very happy with given the multiple that we were able to transact at and our ability to quickly redeploy that capital to highly accretive M and A. All that said, fundamentally we're a growth company. And I think our track record and our forward view is very much that we will continue to grow fuel gross profit in the long run multiple years in the future. Speaker 700:27:19No, understood. Thanks for the time today everyone. Operator00:27:25There are no further questions at this time. I would now like to turn the floor back over to Scott Gershun for closing comments. Speaker 100:27:32Thanks everyone for joining us on the call this morning. As I said before, it's been a busy, exciting and strong start to the year for the partnership. Please feel free to reach out if you have any questions or want to discuss anything. Thanks and have a great day.Read morePowered by