Sunoco Logistics' Profits Surge - Analyst Blog
July 27 2011 - 10:00AM
Zacks
Crude oil pipelines and terminals
operator Sunoco Logistics Partners L.P.
(SXL) announced a jump in its
second-quarter 2011 profits, driven by strong contributions from
the crude pipeline system and terminals facilities.
The partnership’s diluted earnings
per unit (“EPU”) came in at $2.40, significantly ahead of the Zacks
Consensus Estimate of $1.31 and the year-ago period profit of
$1.29. Revenues of $2,428.0 million were up 19.1% from the second
quarter 2010 and also beat our projection by 12.0%.
Quarterly
Distribution
Importantly, the partnership raised
its quarterly distribution by 1.7% sequentially and 6.6%
year-over-year to $1.215 per unit or $4.86 per unit annualized,
representing the twenty-fifth consecutive quarterly distribution
increase. Distributable cash flow increased approximately 92.7%
year over year to a record $106.0 million.
Segmental
Performance
Refined Products Pipeline
System: Operating income in the ‘Refined Products Pipeline
System’ segment was $8.0 million, down 38.5% from the second
quarter of 2010. The negative variance can be attributed to lower
pipeline volumes on Sunoco Logistics’ refined product pipelines in
the southwest and unplanned refinery outages in the northeast,
partially offset by results from the acquisition of a controlling
interest in fuel transporter firm Inland Corporation in May.
Terminal
Facilities: The partnership’s ‘Terminal Facilities’
business segment had an operating income of $34.0 million – a
quarterly record – up 21.4% year over year. This can be mainly
attributed to increased contribution from the butane blending
business acquired in July 2010 and higher tank rentals/fees at the
Nederland crude oil terminal. These factors were partially negated
by lower throughput at the partnership’s refined products and
refinery terminals.
Crude Oil Pipeline
System: Operating income in the Crude Oil Pipeline System
segment was up by a whopping 172.4% from the year-earlier level to
a record $79.0 million, driven by wider crude oil volumes and
margins as well as increased earnings related to Sunoco Logistics’
acquisition of additional joint venture interests.
Capital Expenditure
& Balance Sheet
The partnership’s maintenance
capital expenditure and expansion capital expenditure (including
acquisition) for the quarter totaled $7.0 million and $133.0
million, respectively. As of June 30, 2011, Sunoco had $1,463.0
million in total debt (consisting of $265.0 million of borrowing
under the partnership’s credit facility), representing a
debt-to-capitalization ratio of approximately 57.0%.
Asset
Acquisition
Sunoco Logistics announced that it
has agreed to purchase Texon L.P.'s crude oil purchasing and
marketing business for $205 million plus inventory. The
partnership, which plans to finance the acquisition with borrowings
under its revolving credit facilities, expects to close the deal in
the third quarter.
Our
Recommendation
Sunoco Logistics – which competes
in the ‘Oil and Gas Production Pipeline’ industry with firms like
Atlas Pipeline Partners L.P.
(APL), Williams Partners L.P.
(WPZ), Regency Energy Partners
L.P. (RGNC) etc. – has a Zacks #3 Rank
(Hold rating) in the short run. We are maintaining our ‘Neutral’
recommendation in the longer term.
ATLAS PIPLN PTR (APL): Free Stock Analysis Report
REGENCY ENERGY (RGNC): Free Stock Analysis Report
SUNOCO LOGISTIC (SXL): Free Stock Analysis Report
WILLIAMS PTNRS (WPZ): Free Stock Analysis Report
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