Must-know: Analysis of Sunoco Logistics' first quarter earnings

Must-know: Analysis of Sunoco Logistics' first quarter earnings (Part 1 of 8)

Must-know: Introduction to Sunoco Logistics

Sunoco Logistics Partners L.P. (SXL) is a master limited partnership (or MLP) that owns and operates a logistics business, consisting of pipeline, terminalling, and acquisition and marketing assets that are used to facilitate the purchase and sale of crude oil, refined products, and natural gas liquids (or NGLs). Following the acquisition on October 5, 2012, SXL became a consolidated subsidiary of Energy Transfer Partners L.P. (ETP). Energy Transfer Partners is the general partner of Sunoco Logistics Partners.

Assets overviewEnlarge Graph

SXL has a diversified portfolio that is spread over 30 states in the United States. The company has four operating segments:

  1. The Crude Oil Pipelines – This segment transports 4,900 miles of crude oil primarily in Oklahoma and Texas, and approximately 500 miles of crude oil gathering lines that supply the trunk pipelines. SXL expects to include a joint venture interest in a crude oil pipeline company in Texas, which is expected to be operational in 2015.
  2. The Crude Oil Acquisition and Marketing business – This segment gathers, purchases, markets, and sells crude oil mainly in the middle of the United States. The segment operates a fleet of 300 crude oil transport trucks and approximately 130 crude oil truck unloading facilities.
  3. The Terminal Facilities – This segment has aggregate storage capacity of approximately 46 million barrels, including the 22 million barrel Nederland, Texas crude oil terminal; the 5 million barrel Eagle Point, New Jersey refined products and crude oil terminal; and the 5 million barrel Marcus Hook, Pennsylvania refined products and NGL facility. The terminals receive fees for the terminalling, blending, and other services provided.
  4. The Refined Products Pipelines – This segment has 2,500 miles of refined products pipelines. It has joint venture interests in four refined product pipelines in the Northwest and Midwest United States.
    Share PriceEnlarge Graph

SXL had a market cap of ~$9.6 billion and an enterprise value of ~$12.6 billion (as of May 9, 2014). The company’s adjusted EBITDA for the last 12 months was $842 million. SXL is currently trading at the EV–to–EBITDA from 12 months ago of ~14.9x. Distribution per unit declared on April 23, 2014, was $0.695 per unit, or $2.78 per unit annualized. This amounts to a distribution yield of 3% for a stock price of $92.97 as of May 8, 2014.

On May 6, 2014, Sunoco Logistics announced a two-for-one split of its common units. The unit split will be effective through a distribution of one additional common unit for every one unit.

GP StructureEnlarge Graph

Sunoco Logistics Partners L.P. (SXL) is a master limited partnership (or MLP) that operates in the midstream business. The general partnership (or GP) interest of SXL is owned by Energy Transfer Partners (ETP); while the GP interest of ETP is owned by Energy Transfer Equity L.P. (ETE). Other energy players operating in the same sector as SXL include Enterprise Products Partners L.P. (EPD), Plains All American Pipeline L.P. (PAA), and Energy Transfer Partners L.P. (ETP). All of these companies are components of the Alerian MLP ETF (AMLP). ETE is a component of Global X MLP & Energy Infrastructure ETF (MLPX). Continue reading the next article in this series for detailed discussions on the first quarter of 2014 earnings and growth drivers of SXL.

The Realist Discussions