Executive Summary / Key Takeaways

• Integrated Midstream Powerhouse: Global Partners LP leverages an extensive, flexible terminal network and multi-modal logistics to efficiently connect refined liquid energy products and renewable fuels to downstream markets, a core competitive advantage in a consolidating industry.
• Strategic Asset Expansion Driving Growth: Recent, significant terminal acquisitions, including 25 Motiva terminals with a 25-year take-or-pay contract, have more than doubled storage capacity to 22 million barrels, substantially enhancing wholesale segment performance and future M&A opportunities.
• Resilient Financial Performance: Despite challenging weather and market dynamics in Q2 2025, year-to-date 2025 results demonstrate robust growth in adjusted EBITDA (up 7%) and adjusted distributable cash flow (up 9%), supported by strong wholesale margins and disciplined capital allocation.
• Disciplined Capital Allocation and Shareholder Returns: Management is committed to consistent unitholder returns, evidenced by 15 consecutive quarterly distribution increases, alongside a focused 2025 capital expenditure plan of $60-70 million for maintenance and $65-75 million for expansion (excluding acquisitions).
• Adaptive to Evolving Energy Landscape: While maintaining its core fossil fuel business, GLP is strategically positioning for the future through initiatives like EV charging partnerships, approaching new energy technologies with financial discipline to mitigate early-stage risks.

The Integrated Energy Backbone: Global Partners' Strategic Foundation

Global Partners LP (NYSE: GLP), established in March 2005, has evolved into a critical midstream energy player, owning, controlling, or accessing a vast terminal network for refined petroleum products and renewable fuels stretching from Maine to Florida and into the U.S. Gulf States. This extensive infrastructure, coupled with strategic rail, pipeline, and marine assets, forms the bedrock of its business model. GLP operates across three primary segments: Wholesale, Gasoline Distribution and Station Operations (GDSO), and Commercial, serving a diverse customer base of wholesalers, retailers, and commercial end-users.

The company's overarching strategy centers on leveraging its integrated asset base to optimize product flow, enhance market reach, and capitalize on dynamic energy market conditions. This approach is particularly vital in a consolidating industry where scale and logistical efficiency are paramount. GLP's ability to source, store, blend, and transport a wide array of fuels provides a distinct competitive advantage, allowing it to adapt swiftly to supply chain shifts and market volatility.

Technological Edge: GLP's Operational Moat

Global Partners' "technology" is not found in microchips or software, but in its sophisticated operational infrastructure and logistical prowess. This encompasses its extensive terminal network, advanced blending capabilities, and multi-modal transportation assets. These operational technologies offer tangible, quantifiable benefits that are central to its competitive moat.

The company's terminal network, now boasting approximately 22 million barrels of storage capacity, provides unparalleled flexibility in sourcing and distributing products. This allows GLP to optimize around the lowest cost barrels, whether from domestic refiners, Canadian imports, or global marine shipments. This flexibility is a critical differentiator, especially when facing potential disruptions like tariffs, as management notes their system is "designed to allow us to source barrels from anywhere," enabling rapid adjustments in supply chains within weeks.

GLP's blending expertise further enhances its competitive position, allowing it to create custom fuel solutions, including gasoline blendstocks like ethanol and various distillates. This capability supports compliance with renewable fuel standards (RFS) and the management of Renewable Identification Numbers (RINs), turning regulatory requirements into operational advantages. The strategic investment in its terminal assets, such as the 959,000-barrel East Providence terminal with deepwater dock access, directly translates into superior operational efficiency and reliability. These assets enhance supply chain resilience, reduce transportation costs, and improve delivery times, directly impacting gross margins and customer satisfaction.

Beyond its core infrastructure, GLP is also making disciplined investments in emerging technologies. The partnership with the Massachusetts Department of Transportation (MassDOT) to deploy EV charging stations at strategic retail locations is a prime example. While not yet at "huge scale," this initiative demonstrates a forward-looking approach to the evolving energy landscape. Management emphasizes a "financially disciplined" strategy to limit risk in these early innings, ensuring that new ventures align with long-term capital allocation goals and potential for accretive returns. This cautious yet proactive stance on new energy solutions positions GLP to adapt without overexposing itself to nascent market uncertainties.

Competitive Landscape: A Regional Powerhouse in a Fragmented Market

Global Partners operates within a highly competitive energy midstream and downstream sector. Its primary direct competitors include integrated refiners and marketers like Marathon Petroleum (MPC) and Delek US Holdings (DK), as well as other fuel distributors and convenience store operators such as Sunoco LP (SUN) and CVR Energy (CVI).

GLP's market positioning is strongest in regional logistics, particularly in the Northeast, where its dense terminal network and flexible sourcing capabilities provide a distinct advantage. This allows GLP to offer superior supply chain reliability and adaptability, a qualitative edge over competitors whose assets might be more geographically dispersed or less interconnected. For instance, while Marathon Petroleum boasts greater scale and refining capabilities, GLP's agility in regional markets and its ability to source from "anywhere in the world" can translate into more responsive customer service and optimized local supply.

Financially, GLP's latest TTM Gross Profit Margin of 4.29% and Operating Profit Margin of 1.16% are competitive but generally trail larger, more integrated players like Sunoco (Gross Profit Margin 8%, Operating Profit Margin 3%) and Marathon Petroleum (Gross Profit Margin 7%, Operating Profit Margin 4%). This suggests that while GLP's specialized logistics drive efficiency, the broader scale and vertical integration of some rivals can yield higher overall profitability. However, GLP's focus on blending and renewable fuels, a segment where it holds expertise, offers a differentiator against competitors like CVR Energy, potentially leading to enhanced revenue opportunities in environmentally conscious markets.

The market is also undergoing consolidation, which management believes will lead to "structurally higher fuel margins" due to increased breakeven costs for smaller operators. This trend favors scaled players like GLP, reinforcing its competitive position. Its flexible system, capable of sourcing the lowest cost barrels, is highlighted as a key differentiator, especially in the face of potential tariffs or supply chain disruptions.

Financial Performance: Resilience Amidst Dynamic Markets

Global Partners delivered a resilient performance through the first half of 2025, underscoring the strength of its integrated business model. For the six months ended June 30, 2025, net income increased 8% year-over-year, adjusted EBITDA rose 7% to $189.4 million, and adjusted distributable cash flow (DCF) grew 9% to $98.8 million. This strong year-to-date growth provides a more accurate gauge of performance, as Q2 2025 faced a difficult comparison due to outsized Wholesale segment results in Q2 2024 from mark-to-market valuation timing.

The Wholesale segment was a primary growth driver. For the six months ended June 30, 2025, Wholesale sales surged to $6.32 billion from $5.30 billion in the prior year, a 19.25% increase, with product margin growing 31.20% to $185.37 million. This robust performance was largely attributed to more favorable market conditions in gasoline in Q1 2025 and the successful integration of the acquired terminals from Gulf Oil and ExxonMobil (XOM) in 2024. Distillates and other oils also saw increased product margin due to favorable market conditions.

Conversely, the Gasoline Distribution and Station Operations (GDSO) segment experienced headwinds. For the six months ended June 30, 2025, GDSO sales decreased 12.64% to $2.35 billion, and product margin declined 3.28% to $395.75 million. This was primarily due to a lower site count, as GLP continued its strategic portfolio optimization, divesting 42 sites year-over-year to reach 1,553 sites. Additionally, adverse weather conditions in the Northeast, including a "record 13 weekends of consecutive rain" in Q2 2025, significantly impacted fuel volumes and convenience store sales. Despite these challenges, fuel margins per gallon remained flat at $0.36 in Q2 2025, reflecting the structural changes in the market. The Commercial segment saw a slight decrease in product margin in Q2 2025 due to less favorable bunkering conditions, though year-to-date product margin remained stable at $13.25 million.

Operating expenses increased $12.3 million for the six months ended June 30, 2025, to $262.4 million, primarily due to the integration of the newly acquired terminals. Selling, General, and Administrative (SG&A) expenses also rose, reflecting increases in wages, benefits, and long-term incentive compensation. Interest expense increased 8% to $70.5 million for the six-month period, driven by higher average balances on credit facilities related to terminal acquisitions. A $2.8 million loss on early extinguishment of debt was recorded in Q2 2025 from the redemption of the 2027 senior notes.

Liquidity, Capital Allocation, and Outlook

Global Partners maintains a strong balance sheet and robust liquidity. As of June 30, 2025, working capital stood at $187.9 million. The company's primary liquidity sources are cash from operations, its working capital revolving credit facility, and debt/equity offerings. A key financial maneuver in Q2 2025 was the issuance of $450 million in 7.125% senior notes due 2033, which allowed for the redemption of the higher-coupon 7.00% senior notes due 2027. This transaction "strengthens our balance sheet, extends our debt maturity profile, [and] enhances our financial flexibility moving forward." The credit agreement was also amended in March 2025, extending its maturity to March 20, 2028, and increasing the working capital revolving credit facility to $1 billion.

For the full year 2025, Global Partners anticipates maintenance capital expenditures of approximately $60 million to $70 million, primarily for gasoline station investments. Expansion capital expenditures, excluding acquisitions, are projected to be $65 million to $75 million, a $10 million reduction from previous guidance, reflecting disciplined project timing and resource availability. These investments are focused on enhancing its gasoline station and terminal businesses. The company expects to fund maintenance CapEx from operations and expansion CapEx through a combination of cash from operations, its credit facility, or further debt/equity issuances.

Analyst sentiment is positive, with Zacks Equity Research upgrading GLP to a "Strong Buy" due to an upward trend in earnings estimates. The company's EPS is projected to grow 23.2% this year, significantly outpacing the industry average of 10.7%, with sales expected to increase 37.2% against an industry average of 0%. This reflects confidence in GLP's strategic initiatives and operational execution.

Risks and Challenges

Despite a compelling investment thesis, Global Partners faces several risks. The GDSO segment remains vulnerable to adverse weather conditions, as demonstrated by the Q2 2025 rain events, which can directly impact fuel volumes and convenience store sales. Broader market volatility in commodity prices can affect margins, although GLP's hedging strategies are designed to mitigate this.

The long-term shift towards electric vehicles and alternative fuels poses a secular challenge to its core motor fuel sales. While GLP is cautiously investing in EV charging, the pace of this transition and its impact on demand for traditional fuels remains a key uncertainty. Regulatory changes, including potential tariffs on oil imports, could increase supply costs, though management believes its flexible sourcing capabilities provide a competitive advantage in adapting to such changes. Litigation, such as the wrongful death petition against its SPR joint venture and environmental complaints, also presents potential financial and reputational risks.

Conclusion

Global Partners LP stands as a robust, integrated energy midstream and downstream entity, strategically positioned to capitalize on its extensive logistical network and operational expertise. The company's history of disciplined acquisitions, culminating in the significant expansion of its terminal footprint in 2023 and 2024, has created a powerful platform for growth and enhanced market leadership. This "operational technology" – its ability to efficiently source, store, blend, and distribute diverse fuels – forms a critical competitive moat, enabling resilience against market volatility and supply chain disruptions.

Despite facing short-term headwinds like adverse weather affecting its GDSO segment, GLP's year-to-date 2025 financial performance underscores the strength of its integrated model, with healthy growth in key profitability metrics. Management's commitment to disciplined capital allocation, including strategic investments in its core assets and a measured approach to emerging opportunities like EV charging, alongside consistent unitholder distributions, reinforces the long-term investment thesis. While commodity price volatility and the evolving energy landscape present ongoing challenges, Global Partners' strategic flexibility, robust asset base, and proactive management position it to continue delivering value in a dynamic industry. Investors seeking exposure to a resilient, income-generating energy infrastructure play with a clear growth trajectory should consider GLP's compelling narrative.