Sunoco LP(SUN) - 2024 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Financial Statements H1 2024 consolidated financials show substantial asset and liability growth driven by the NuStar acquisition and increased net income Consolidated Balance Sheets As of June 30, 2024, total assets and liabilities significantly increased due to the NuStar acquisition, expanding the company's equity base Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Assets | $14,465 | $6,826 | | Property and equipment, net | $8,846 | $1,836 | | Goodwill | $1,484 | $1,599 | | Total Liabilities | $10,135 | $5,848 | | Long-term debt, net | $7,304 | $3,580 | | Total Equity | $4,330 | $978 | Consolidated Statements of Operations Q2 and H1 2024 net income attributable to partners significantly increased, primarily driven by the substantial gain on the West Texas Sale Key Operating Results (in millions, except per unit data) | Metric | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $6,174 | $5,745 | $11,673 | $11,107 | | Operating Income | $150 | $141 | $447 | $340 | | Gain on West Texas Sale | $598 | $— | $598 | $— | | Net Income Attributable to Partners | $493 | $87 | $723 | $228 | | Diluted Net Income per Common Unit | $3.85 | $0.78 | $6.37 | $2.19 | Consolidated Statements of Cash Flows H1 2024 cash flows reflect decreased operating cash, significant investing cash from the West Texas Sale, and increased financing outflows for debt Six Months Ended June 30, Cash Flow Summary (in millions) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $216 | $417 | | Net cash provided by (used in) investing activities | $727 | $(170) | | Net cash used in financing activities | $(746) | $(90) | | Net increase in cash and cash equivalents | $197 | $157 | Notes to Consolidated Financial Statements Notes detail 2024 corporate events including the NuStar acquisition and West Texas Sale, significantly altering debt structure and segment reporting - On May 3, 2024, the company completed the acquisition of NuStar Energy L.P., issuing approximately 51.5 million common units valued at $2.85 billion and assuming debt of approximately $3.5 billion[19] - On April 16, 2024, the company sold 204 convenience stores to 7-Eleven, Inc. for approximately $1.0 billion, recognizing a pre-tax gain of $598 million[29] - On July 16, 2024, SUN and Energy Transfer announced the formation of a Permian Basin joint venture, effective July 1, 2024, in which SUN holds a 32.5% interest[30] - Following the NuStar acquisition, the company's reportable segments were changed to Fuel Distribution, Pipeline Systems, and Terminals[64] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the transformative impact of recent acquisitions and divestitures on financial performance, liquidity, and capital expenditure plans Recent Developments This section highlights key 2024 strategic transactions, including the NuStar acquisition, West Texas divestiture, and Permian joint venture formation - Completed the acquisition of NuStar Energy L.P. on May 3, 2024, adding approximately 9,500 miles of pipeline and 63 terminal facilities[78] - Completed the sale of 204 convenience stores in West Texas, New Mexico, and Oklahoma to 7-Eleven, Inc. for approximately $1.0 billion on April 16, 2024[80] - Formed a joint venture with Energy Transfer, effective July 1, 2024, combining their respective Permian Basin crude oil and produced water gathering assets, with SUN holding a 32.5% interest[81] Results of Operations Q2 2024 consolidated Adjusted EBITDA increased, primarily driven by strong contributions from the Pipeline Systems segment following the NuStar acquisition Segment Adjusted EBITDA (in millions) | Segment | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Fuel Distribution | $245 | $226 | $19 | | Pipeline Systems | $53 | $3 | $50 | | Terminals | $22 | $21 | $1 | | Total Adjusted EBITDA | $320 | $250 | $70 | - The increase in net income for Q2 and H1 2024 was primarily due to the $598 million gain on the West Texas Sale[83] Liquidity and Capital Resources The company maintains strong liquidity with substantial credit facility availability, while total debt increased significantly due to the NuStar acquisition - As of June 30, 2024, the company had $226 million of cash and cash equivalents and $1.40 billion of borrowing capacity on its Credit Facility[93] - Full-year 2024 capital expenditure is expected to be approximately $120 million for maintenance and at least $300 million for growth[99] - In April 2024, the Partnership issued $1.5 billion in Senior Notes to fund the NuStar acquisition and related debt/preferred unit redemptions[101] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company is exposed to interest rate and commodity price risks, managing the latter with derivative instruments for its significant fuel inventory - A one percentage point change in floating interest rates on variable rate debt would change annualized interest expense by approximately $1 million[110] - As of June 30, 2024, the company held approximately $944 million of fuel inventory, exposing it to commodity price risk, which it manages with derivative instruments[111] Item 4. Controls and Procedures Management concluded disclosure controls were effective, with ongoing integration of NuStar's internal controls causing some procedural changes - Management concluded that disclosure controls and procedures were effective at a reasonable assurance level[113] - The company is integrating NuStar's operations and internal control structure, which has resulted in changes to conform to Sunoco LP's existing controls[114] PART II – OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any litigation expected to have a material adverse impact on its financial condition - The company does not believe it is party to any litigation that will have a material adverse impact[116] Item 1A. Risk Factors No material changes have occurred to the risk factors previously disclosed in the 2023 Form 10-K and Q1 2024 Form 10-Q - No material changes from the risk factors described in the 2023 Form 10-K and Q1 2024 Form 10-Q have occurred[117] Item 6. Exhibits This section lists all exhibits filed with the quarterly report, including key merger and joint venture agreements - Lists key agreements filed as exhibits, including the NuStar merger agreement (Exhibit 2.1) and the Permian JV Contribution Agreement (Exhibit 2.2)[118]