Business Overview
Sunoco LP is a Delaware master limited partnership formed in 2012, primarily engaged in energy infrastructure and distribution of motor fuels in over 40 U.S. states, Puerto Rico, Europe, and Mexico. The company's operations are divided into three reportable segments: Fuel Distribution, Pipeline Systems, and Terminals. The Fuel Distribution segment supplies motor fuel to independently-operated dealer stations, distributors, commission agents, and other consumers. The Pipeline Systems segment includes an integrated pipeline and terminal network, while the Terminals segment operates transmix processing facilities and refined product terminals.
Sunoco LP's midstream operations encompass an extensive network of over 14,000 miles of pipeline and more than 100 terminals. The company's fuel distribution operations serve approximately 7,400 Sunoco and partner branded locations, as well as additional independent dealers and commercial customers.
In 2014, Sunoco LP's general partner was acquired by Energy Transfer, a diversified energy company. This transaction made Energy Transfer the sole owner of Sunoco LP's general partner and the majority owner of the partnership. This strategic partnership has further strengthened Sunoco LP's position in the market, allowing it to leverage Energy Transfer's extensive midstream infrastructure and resources.
In 2017, Sunoco LP faced challenges after the sale of its convenience store business, which impacted the company's revenue and profitability. However, the partnership was able to navigate this transition by focusing on its core fuel distribution and midstream segments. Sunoco LP also encountered environmental liabilities related to underground storage tanks, which required significant expenditures to address.
Despite these challenges, Sunoco LP has demonstrated its ability to adapt and grow its business. In 2022, the company achieved a milestone by delivering its eighth consecutive year of growing distributable cash flow per common unit. Sunoco LP has also maintained a stable and growing distribution to its unitholders, reflecting the strength and resilience of its business model.
Financial Performance and Operational Highlights
In its most recent fiscal year ended December 31, 2024, Sunoco LP reported total revenues of $22.69 billion, representing a decrease of 1.6% compared to the previous year. However, the company's net income rose significantly to $874 million, up from $394 million in the prior year. This impressive performance can be attributed to the successful integration of the NuStar Energy L.P. acquisition, which closed in May 2024, as well as strong operational execution across its business segments.
The Fuel Distribution segment remained a key contributor, generating $908 million in adjusted EBITDA, an impressive 5% increase year-over-year. This segment, which is Sunoco LP's largest business, generated $21.82 billion in total revenue, accounting for 96% of the company's overall revenue. The increase in adjusted EBITDA was primarily due to a 3% increase in gallons sold, partially offset by a decrease in profit per gallon. Notably, Sunoco LP's largest third-party dealer or distributor customer, 7-Eleven, Inc., accounted for approximately 18% of total revenues in 2024, down from 20% in 2023.
The Pipeline Systems segment delivered exceptional results, with adjusted EBITDA reaching $377 million, a substantial 34-fold increase compared to the previous year. This significant improvement was largely driven by the inclusion of the NuStar assets, which have further diversified Sunoco LP's midstream operations. The segment's revenue increased dramatically from $1 million in 2023 to $565 million in 2024, primarily due to the NuStar acquisition.
The Terminals segment also showed strong growth, generating $1.33 billion in revenue and $172 million in adjusted EBITDA in 2024, compared to $485 million in revenue and $88 million in adjusted EBITDA in 2023. This substantial increase was largely attributable to the acquisition of NuStar's terminal assets as well as the purchases of the Zenith Energy terminals in the Netherlands and Ireland in 2024.
Overall, Sunoco LP's diverse operations spanning fuel distribution, pipelines, and terminal services generated consolidated adjusted EBITDA of $1.46 billion in 2024, up from $964 million in 2023. This growth was driven by strong performance across all three of the company's business segments, bolstered by strategic acquisitions like the NuStar deal, which have expanded Sunoco's scale and diversified its asset base.
Financials
Sunoco LP's balance sheet reflects a strong financial position, with $94 million in cash and cash equivalents and $1.25 billion in available borrowing capacity under its revolving credit facility as of December 31, 2024. The company's leverage ratio stood at 4.1x, a level that management considers optimal for maintaining financial flexibility and supporting future growth initiatives.
For the most recent fiscal year, Sunoco LP reported operating cash flow of $549 million and free cash flow of $205 million. The company's debt-to-equity ratio was 1.90, with a current ratio of 1.27 and a quick ratio of 0.72, indicating a solid liquidity position.
In the most recent quarter, Sunoco LP reported revenue of $5.27 billion, representing a 6.6% decrease compared to the year-ago quarter. Net income for the quarter was $103 million.
Liquidity
With $94 million in cash and cash equivalents and $1.25 billion in available borrowing capacity, Sunoco LP maintains a strong liquidity position. This financial flexibility allows the company to pursue growth opportunities and navigate potential market challenges.
Strategic Acquisitions and Investments
Sunoco LP's growth strategy has been characterized by strategic acquisitions and investments that have expanded its operational footprint and diversified its revenue streams. The most notable transaction was the $2.85 billion acquisition of NuStar Energy L.P. in May 2024, which added approximately 9,500 miles of pipeline and 63 terminal and storage facilities to Sunoco LP's portfolio.
In addition to the NuStar acquisition, Sunoco LP has made several other investments to strengthen its position in key markets. In March 2024, the company completed the $170 million acquisition of liquid fuels terminals in Amsterdam, Netherlands and Bantry Bay, Ireland from Zenith Energy, further reinforcing its presence in the European energy infrastructure space. The company also acquired a terminal in Portland, Maine in August 2024, demonstrating its ongoing commitment to strategic growth.
Sunoco LP's joint venture with Energy Transfer, known as ET-S Permian, is another example of its strategic approach. Formed in July 2024, this venture combines the companies' respective crude oil and produced water gathering assets in the Permian Basin, creating a more integrated and efficient midstream operation in a prolific producing region.
In a strategic move to optimize its portfolio, Sunoco LP completed the $1 billion sale of 204 convenience stores in West Texas in 2024. This divestiture allowed the company to focus on its core midstream and fuel distribution operations while strengthening its financial position.
Resilience in Challenging Times
Sunoco LP has consistently demonstrated its ability to navigate through various market challenges, including the COVID-19 pandemic and volatile commodity price environments. During the pandemic, the company's diversified business model and focus on operational excellence allowed it to maintain stable financial performance, underscoring its resilience and adaptability.
Furthermore, Sunoco LP's risk management practices, such as its commodity hedging program, have helped mitigate the impact of price fluctuations on its financial results. The company's disciplined approach to capital allocation and cost management has also been instrumental in preserving its financial strength and cash flow generation capabilities, even in the face of industry-wide headwinds.
Outlook and Growth Prospects
Looking ahead, Sunoco LP is well-positioned to continue its growth trajectory. The company has provided guidance for the fiscal year 2025, targeting an adjusted EBITDA range of $1.9 billion to $1.95 billion. This ambitious target reflects management's confidence in the company's ability to extract synergies from recent acquisitions, optimize its operations, and capitalize on favorable market dynamics.
It's worth noting that Sunoco LP has a track record of meeting and exceeding its guidance. For full-year 2024, the company initially provided an adjusted EBITDA guidance range of $975 million to $1 billion. After the strategic divestiture of West Texas assets in Q2 2024, Sunoco LP maintained this initial guidance range for the legacy Sunoco operations. In Q2 2024, following the NuStar acquisition, the company revised its 2024 adjusted EBITDA guidance upwards to a range of $1.51 billion to $1.57 billion, including $50 million of synergies from the NuStar acquisition. Sunoco LP ultimately delivered adjusted EBITDA at the high end of this revised range for full-year 2024, demonstrating its ability to execute on its strategic initiatives and deliver strong financial results.
Sunoco LP's diversified business model, investments in infrastructure, and strong financial position provide a solid foundation for future growth. The company's focus on expanding its pipeline systems, terminals, and fuel distribution capabilities positions it to benefit from the ongoing demand for energy infrastructure and distribution services.
Furthermore, Sunoco LP's commitment to distribution growth is a key attraction for investors. The company has a track record of consistently increasing its quarterly distributions, with the most recent hike of 1.25% announced in January 2025. Looking forward, Sunoco LP is targeting a distribution growth of at least 5% for 2025, with plans to increase distributions on a quarterly basis not only for 2025 but over a multi-year period. This commitment to rewarding unitholders underscores Sunoco LP's confidence in its ability to generate sustainable cash flows and deliver value to its stakeholders.
The broader energy and logistics industry has seen steady growth, with the midstream and downstream segments benefiting from increased demand for refined products and stable, fee-based revenue models. Sunoco LP's compound annual growth rate (CAGR) in adjusted EBITDA over the past 5 years has been approximately 10%, outpacing many of its industry peers and demonstrating the company's ability to capitalize on favorable market trends.
Conclusion
Sunoco LP's diversified business model, strategic acquisitions, and operational excellence have positioned the company as a leading player in the energy infrastructure and fuel distribution space. With a strong financial foundation, a robust portfolio of assets, and a clear growth strategy, Sunoco LP is well-equipped to navigate the evolving energy landscape and deliver long-term value to its unitholders. As the company continues to capitalize on emerging opportunities and optimize its operations, investors can look forward to Sunoco LP's continued growth and success in the years ahead. The company's strong performance in 2024, successful integration of strategic acquisitions, and confident outlook for 2025 underscore its potential for sustained growth and value creation in the dynamic energy sector.