Sunoco Beats Earnings & Rev Estimates

Zacks

Energy pipelines and terminals operator, Sunoco Logistics Partners LP (SXL) reported strong second-quarter 2013 results on the back of robust performance by the new crude pipeline projects and sound market conditions.

Sunoco's diluted earnings per unit (EPU) of $1.08 comfortably surpassed the Zacks Consensus Estimate of 88 cents.

However, the partnership’s per share profits came lower than the second quarter 2012 level of $1.28 amid higher expenses.

Revenues of $4,311.0 million were up 30.1% from second quarter 2012 and surpassed the Zacks Consensus Estimate of $3,457.0 million.  

Distributable cash flow (:DCF) increased 8.9% year over year to $184.0 million.

Quarterly Distribution

Late last month, Sunoco raised its quarterly distribution by 5% sequentially and 28% year over year to 60 cents per unit or $2.40 per unit annualized, representing the thirty-third consecutive quarterly distribution increase.

Segmental Performance

Refined Products Pipeline System: Adjusted earnings before interest, taxes, depreciation and amortization expenses (:EBITDA) in the ‘Refined Products Pipeline System’ segment were $16.0 million, down 5.9% from second quarter 2012. The decrease was due to reduced operating gains and higher costs. However, it was partially offset by contributions from joint ventures.

Terminal Facilities: Sunoco's 'Terminal Facilities' business segment had an adjusted EBITDA (excluding one-time items) of $80.0 million, up 8.1% year over year. This outcome can be mainly attributed to improved results from the acquisition and marketing initiatives of Sunoco's refined products. Better performances at the Eagle Point and Nederland terminals also supported the increase which was partially offset by reduction in volumes and higher general and administration expenses.

Crude Oil Pipelines: Adjusted EBITDA in the Crude Oil Pipeline System segment shot up 25.7% from the year-earlier level to $88.0 million, driven by enhanced throughput volumes as a result of project expansions. However, it was partially dampened by increased operating expenses.

Crude Oil Acquisition and Marketing: Adjusted EBITDA in this segment was $70 million, 22.8% above the second-quarter 2012 level. This reflects wider crude oil margins and volumes supported by contribution from the increase in crude oil trucking fleet.

Operating Expenses

Operating expenses for this quarter were $25.0 million, representing a decrease of 7.4% from the second quarter of 2012.

Capital Expenditure & Balance Sheet

The partnership's maintenance capital expenditure and expansion capital expenditure for the reported quarter totaled $18.0 million and $174.0 million, respectively. Sunoco incurred additional cost of $60.0 million as acquisition expenses.

As of Jun 30, 2013, Sunoco had $2,316.0 million in total debt (consisting of $35.0 million of borrowing under the partnership's credit facility), representing a total debt-to-capitalization ratio of approximately 26.8%.

Stocks to Consider

Sunoco currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can look at other oil and gas pipeline master limited partners (MLP) such as Delek Logistics Partners LP (DKL), Magellan Midstream Partners LP (MMP) and Pioneer Southwest Energy Partner (PSE) as good investment opportunities. All three firms sport a Zacks Rank #2 (Buy).

Read the Full Research Report on SXL

Read the Full Research Report on DKL

Read the Full Research Report on MMP

Read the Full Research Report on PSE

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