Business Overview and History
Global Partners LP (GLP) is a master limited partnership that owns, controls, and has access to a vast network of refined petroleum products and renewable fuel terminals, strategic rail and marine assets, and a sizable portfolio of gasoline stations and convenience stores. The company’s integrated business model spanning wholesale, distribution, and retail operations has enabled it to navigate industry challenges and capitalize on emerging opportunities.
Global Partners was formed in March 2005 and has since grown to become one of the largest independent owners, suppliers, and operators of gasoline stations and convenience stores in the Northeast and Mid-Atlantic regions, as well as a leading distributor of gasoline, distillates, residual oil, and renewable fuels. As of September 30, 2024, the Partnership had a portfolio of 1,589 owned, leased, and/or supplied gasoline stations, including 306 directly operated convenience stores, primarily in the Northeast, as well as 64 gasoline stations located in Texas that are operated by its unconsolidated affiliate, Spring Partners Retail LLC.
The company’s operations are organized into three reportable segments: Wholesale, Gasoline Distribution and Station Operations (GDSO), and Commercial. The Wholesale segment engages in the logistics of selling, gathering, blending, storing, and transporting refined petroleum products, gasoline blendstocks, renewable fuels, crude oil, and propane. The GDSO segment includes gasoline distribution, which encompasses sales of branded and unbranded gasoline to gasoline station operators and sub-jobbers, as well as station operations, which cover convenience store and prepared food sales, rental income, and sundries. The Commercial segment focuses on sales and deliveries of unbranded gasoline, home heating oil, diesel, kerosene, residual oil, and bunker fuel to end-user customers in the public sector and large commercial and industrial entities.
Global Partners has been actively expanding its terminal network through strategic acquisitions. In the past 11 months, the company has acquired a combined 29 terminals from Motiva Enterprises and Gulf Oil, significantly enhancing its Wholesale segment footprint. These acquisitions, along with the recent purchase of a 730-acre liquid energy terminal in East Providence, Rhode Island from ExxonMobil Oil Corporation, have strengthened the company’s operational capabilities and supply options in the Northeast.
The company’s growth has not been without challenges. In 2011 and 2012, Global Partners received letters from the EPA containing requirements and testing orders as part of an investigation into potential violations of the Clean Air Act at certain of its terminal locations in New England. In 2014, the EPA issued a Notice of Violation alleging certain violations of the terminal’s Air Emissions License in Maine. The company successfully resolved this issue by entering into a consent decree with the EPA and Department of Justice in 2019.
In 2022, Global Partners completed the sale of its terminal located on Boston Harbor in Revere, Massachusetts for $150 million in cash. This transaction included a leaseback agreement that allowed the company to continue business operations at the Revere Terminal. The company faced some additional expenses related to this transaction, which were shared with the Initial Sellers per the terms of the original 2015 purchase agreement.
Financial Performance and Ratios
Global Partners’ financial performance has shown improvement in recent quarters, with the company navigating challenges in certain product markets while capitalizing on growth opportunities in others. In the third quarter of 2024, the Partnership reported revenue of $4.42 billion, a 5% increase from $4.22 billion in Q3 2023. Net income rose significantly to $45.92 million, up 72% from $26.81 million in the prior-year period. Operating cash flow (OCF) increased 26% to $122.71 million, while free cash flow (FCF) saw a substantial jump of 643% to $313.44 million.
For the first nine months of 2024, Global Partners’ total sales increased to $12.98 billion, up from $12.08 billion in the same period of 2023, primarily driven by increased volume across its Wholesale and Commercial segments. The company’s combined product margin, which represents its gross profit, increased to $882.02 million in the first nine months of 2024, up from $762.49 million in the same period of 2023, largely due to the acquisitions of the Motiva Terminal Facilities and the Gulf Terminals, as well as more favorable market conditions in certain product lines.
Looking at the full year 2023 results, Global Partners reported revenue of $16.49 billion, net income of $152.51 million, operating cash flow of $512.44 million, and free cash flow of $110.42 million.
Segment Performance
The Wholesale segment, the largest contributor to Global Partners’ overall sales, reported $8.03 billion in sales for the first nine months of 2024, up from $6.90 billion in the same period of 2023. The segment’s product margin increased to $212.43 million, up from $150.03 million, driven by recent acquisitions and favorable market conditions in gasoline, gasoline blendstocks, and distillates.
The GDSO segment saw sales decrease to $4.11 billion in the first nine months of 2024, down from $4.43 billion in the same period of 2023, due to a decrease in gasoline sales. However, the segment’s product margin increased to $646.90 million, up from $589.15 million, primarily driven by higher fuel margins per gallon and increases in sundries and rental income.
The Commercial segment reported sales of $836.67 million in the first nine months of 2024, up from $758.19 million in the same period of 2023, primarily due to an increase in volume sold. The segment’s product margin slightly decreased to $22.70 million from $23.31 million, primarily due to less favorable market conditions in the first half of 2024.
Liquidity
Global Partners’ balance sheet remains strong, with leverage, as defined in its credit agreement, at 3.27x funded debt-to-EBITDA as of September 30, 2024. The company has ample excess capacity in its credit facilities, with $219.2 million in borrowings outstanding on its working capital revolver and $177 million on its revolving credit facility.
As of September 30, 2024, Global Partners had a debt-to-equity ratio of 2.19, cash on hand of $20.57 million, and $1.09 billion available for borrowings and letters of credit under its $1.55 billion senior secured credit facility. The company’s current ratio stood at 1.14, while its quick ratio was 0.64.
Risks and Challenges
Global Partners faces several risks and challenges that could impact its financial performance and growth prospects. The company’s operations are influenced by the overall markets for refined petroleum products, gasoline blendstocks, renewable fuels, crude oil, and propane, and changes in the prices of these commodities can significantly affect its financial condition, results of operations, and cash available for distribution.
Additionally, the company’s gasoline, convenience store, and prepared food sales could be significantly reduced by a decline in demand due to higher prices, inflation, and the increasing adoption of alternative fuel-powered motor vehicles. Warmer weather conditions could also adversely affect the company’s home heating oil and residual oil sales.
Global Partners is also subject to various federal, state, and municipal environmental and non-environmental regulations, which could increase its costs and have a material adverse effect on its businesses. The company’s general partner and its affiliates also have conflicts of interest and limited fiduciary duties, which could lead them to favor their own interests over those of the Partnership’s unitholders.
Outlook and Conclusion
Despite the challenges, Global Partners remains well-positioned to navigate the evolving energy landscape. The company’s recent terminal acquisitions have strengthened its Wholesale segment, and its integrated business model spanning wholesale, distribution, and retail operations provides the potential to enhance its market leadership and long-term growth.
Global Partners’ management has demonstrated its ability to adapt to changing market conditions and capitalize on emerging opportunities, as evidenced by its recent expansion into the electric vehicle charging infrastructure space through a partnership with the Massachusetts Department of Transportation.
For the full year of 2024, Global Partners currently expects maintenance CapEx in the range of $50 million to $60 million. The company has revised its planned expansion CapEx for 2024 to a range of $40 million to $50 million, down from the previous expectation of $60 million to $70 million. This revision depends on the timing of project completion, availability of equipment and workforce, weather, and unanticipated events or opportunities.
As Global Partners continues to integrate its newly acquired assets, optimize its operations, and explore additional growth initiatives, the company’s long-term prospects remain promising. The refined petroleum products and convenience retail industries have seen moderate growth, with a compound annual growth rate (CAGR) of around 3-5% over the past 5 years, while the renewable fuels segment has experienced stronger growth with a CAGR of 8-10% over the same period, driven by government mandates and consumer preferences.
Investors will want to closely monitor the company’s ability to navigate industry dynamics, manage risks, and deliver sustainable financial performance in the quarters and years ahead. With its strong market position in the Northeast and Mid-Atlantic regions, diverse business segments, and strategic growth initiatives, Global Partners is well-positioned to capitalize on opportunities in the evolving energy landscape.
Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.