Sunoco Logistics Beats Q3 Earnings on Higher Crude Margin

Energy pipelines and terminals operator, Sunoco Logistics Partners LP (SXL) reported strong third-quarter 2014 results on Nov 5. Higher crude oil margin along with increased performances by the partnership’s bulk marine terminals led to the improvement. Following favorable results and Sunoco Logistics’ recent plan to spend $2.5 billion on the Mariner East 2 project, the stock gained almost 12% on the NYSE.

Earnings per unit (EPU) of 50 cents were well above the Zacks Consensus Estimate of 40 cents and more than double the year-ago figure of 23 cents.

Sunoco Logistics Partners L P - Earnings Surprise | FindTheBest

Quarterly revenues of $4,915 million were up almost 9% from third-quarter 2013 and ahead of the Zacks Consensus Estimate of $4,747 million.

Sunoco Logistics' distributable cash flow (DCF.TO) jumped almost 62% year over year to $194 million.

Quarterly Distribution

Last month, Sunoco Logistics raised its quarterly distribution by 5% sequentially and 21% year over year to 38.25 cents per unit or $1.53 per unit annualized.

Segmental Performance

Crude Oil Pipelines: Adjusted earnings before interest, taxes, depreciation and amortization (:EBITDA) for the segment moved down 3% to $95 million from the year-earlier level of $98 million. Increased operating expenses along with decreased average pipeline revenue per barrel hampered the results.

Crude Oil Acquisition and Marketing: Adjusted EBITDA for this segment came in at $66 million, a whopping 267% increase from the third-quarter 2013 level. The improvement resulted from higher crude oil margins.

Terminal Facilities: The segment’s EBITDA was $61 million, up 30% year over year. Higher margins from the partnership’s refined product primarily drove the upside. Increased volumes and better contributions by the partnership’s bulk marine terminals also boosted the performance.

Refined Products Pipeline System: Adjusted EBITDA for this segment totaled $24 million, up from $18 million in third-quarter 2013. The Mariner West project, which started operations in the fourth quarter of last year, was the key growth driver.

Operating Expenses

Operating expenses totaled $48 million against $36 million in the third quarter of 2013.

Capital Expenditure & Balance Sheet

As of Sep 30, Sunoco Logistics’ maintenance capital expenditure and expansion capital expenditure were $47 million and $1,840 million, respectively.

As of Sep 30, Sunoco Logistics had $58 million cash and cash equivalents. The partnership had $3,640 million in total debt (consisting of $560 million of borrowing under the partnership's revolving credit facility), representing a debt-to-capitalization ratio of approximately 34%.

Other News

Sunoco Logistics declared the successful open season for the Mariner East 2 project. The partnership is now planning to invest roughly $2.5 billion in the development.

The second phase of the Mariner East project is expected to transport propane, ethane and other natural gas liquids from the Marcellus Shale of Pennsylvania and Utica Shale of Ohio to the partnership’s Pennsylvania-based Marcus Hook industrial complex to store and process the transported liquids. From there, the processed products will be distributed to many markets.

Sunoco Logistics added that the Mariner East 2 development will likely come online by the second half of 2016.

Zacks Rank & Stocks to Consider

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

Meanwhile, one can consider better-ranked players in the energy sector like Sandridge Mississippian Trust II (SDR), PBF Logistics LP (PBFX) and Alon USA Partners, LP (ALDW). All these stocks sport a Zacks Rank #1 (Strong Buy).

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