Anadarko Petroleum Q3 Earnings Call Highlights

Key Points

• Third-quarter earnings improved: Net income rose to $13.3 million, adjusted EBITDA increased 9.4% to $41 million, and discretionary cash flow grew 22%. ARKO Petroleum raised its 2026 adjusted EBITDA outlook to $156 million–$157 million.
• Higher fuel margins offset lower volumes: Wholesale fuel contribution increased 6.6% despite a 4.3% decline in gallons, while Fleet Fueling contribution rose 5.2% as its volume edged lower.
• USPP acquisition is expected to close in Q4: The deal is projected to add about 280 million annual gallons across roughly 400 dealer locations and contribute approximately $30 million in annualized adjusted EBITDA. The company also declared a $0.50 quarterly dividend.

ARKO Petroleum reported higher third-quarter earnings and raised its full-year adjusted EBITDA outlook, as stronger fuel margins offset lower sales volumes and the company worked toward closing an acquisition in the fourth quarter.

Net income rose to $13.3 million from $10.1 million a year earlier. Adjusted EBITDA increased 9.4% to $41 million, while discretionary cash flow grew 22% to $32.3 million. Net cash provided by operating activities fell to approximately $21.6 million from $25 million.

The company now expects full-year 2026 adjusted EBITDA of $156 million to $157 million. Chairman, President and CEO Arie Kotler attributed the higher outlook to year-to-date performance, expectations for the rest of the year and the anticipated closing of the U.S. Petroleum Partners acquisition.

Higher margins offset lower fuel volumes

Kotler said elevated fuel prices weighed on demand during the quarter. Regular gasoline ended the period at approximately $4.31 a gallon, about $1.32 above the prior year, while diesel prices surpassed $6.50 in September, he said.

Wholesale fuel contribution rose 6.6% to $26.7 million, despite a 4.3% decline in gallons. Chief Financial Officer Jordan Mann said the decline was partly offset by additional volume from dealer locations added through ARKO Corp.’s dealerization program.

The wholesale segment’s blended fuel margin increased to $0.107 a gallon from $0.096 a year earlier, primarily reflecting higher prompt-pay discounts associated with increased fuel costs. Wholesale operating income rose 7% to $25.8 million.

Fleet Fueling fuel contribution increased 5.2% to $17.6 million, even as volume slipped to 36.2 million gallons from 36.6 million. The segment’s blended fuel margin rose approximately 6.2% to $0.486 a gallon, and operating income increased 8.9% to $13.3 million. Kotler said approximately 80% of Fleet Fueling volume is diesel.

Asked about margins next year, Kotler said he expects lower fuel prices, if they occur, to increase gallons sold while reducing the benefit from prompt-pay discounts. He also said lower prices could ease working-capital requirements, though he expressed uncertainty about whether prices would fall.

Acquisition and capital spending

ARKO Petroleum expects to close its acquisition of U.S. Petroleum Partners, or USPP, during the fourth quarter. The Great Lakes fuel supply and distribution business is expected to add approximately 280 million gallons of annual volume across about 400 dealer locations, increasing ARKO Petroleum’s trailing 12-month volume as of Sept. 30 by approximately 14%.

Management expects USPP to contribute approximately $30 million in annualized adjusted EBITDA. Its assets include terminals in Novi, Michigan, and Toledo, Ohio, as well as a transportation fleet that delivers more than 80% of its distributed volume.

In response to an analyst’s question about the acquisition’s contribution to guidance, Kotler said the company had previously told the market it expected a fourth-quarter acquisition to deliver approximately $5 million toward a $156 million adjusted EBITDA target. He cited progress toward closing USPP and nine-month results as factors behind the raised outlook.

ARKO Petroleum has added seven cardlock locations this year and has 16 more in planning and development. Kotler said the company targets 20 cardlocks annually, with mid-to-high teens returns and construction costs generally no more than $2 million per site. He added that acquisitions remain the main target for capital allocation.

Dividend and balance sheet

The board declared a quarterly dividend of $0.50 per share, consistent with its $2-per-share annualized target for 2026. As of Sept. 30, the company had approximately $705 million available under its credit lines and net debt of $338.4 million, with net debt at 2.2 times adjusted EBITDA, Mann said.

Kotler said the acquisition market remains active and has changed little from the prior quarter. Higher fuel prices have increased working-capital needs for some smaller operators, he said, potentially limiting their ability to capture prompt-pay discounts.

About Anadarko Petroleum (NASDAQ:APC)

Anadarko Petroleum Corporation was an independent oil and natural gas exploration and production company headquartered in The Woodlands, Texas. Its operations focused on finding, developing and producing crude oil, natural gas and natural gas liquids, with additional activities in gathering, processing and other midstream services.

The company's principal resource areas included U.S. onshore properties, particularly in the Delaware and DJ basins, as well as assets in the Gulf of Mexico.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.