Sunoco Logistics Partners L.P. Reports Record Earnings for 2009 and Declares Fourth Quarter Distribution

Jan 26, 2010, 17:39 ET from Sunoco Logistics Partners L.P.

PHILADELPHIA, Jan. 26 /PRNewswire-FirstCall/ -- Sunoco Logistics Partners L.P. (NYSE: SXL) (the "Partnership") today announced record net income of $250.4 million, or $6.48 per limited partner unit on a diluted basis, for the year ended December 31, 2009.  Operating income for the year increased $49.5 million, or 20.1 percent, to $295.0 million with record results being achieved in all of the Partnership's business segments.  Distributable cash flow ("DCF"), which represents the cash generated during the year which is available to pay distributions, increased $29.2 million to $266.2 million compared to the prior year.  

For the fourth quarter of 2009, net income of $54.4 million was in line with our previous guidance but decreased $21.0 million compared to the same period in 2008. Improved performance within the Refined Products Pipeline System and Terminal Facilities segments were more than offset by decreased earnings in the Crude Oil Pipeline System which were attributable to the timing of income recognition associated with crude oil inventory activities and crude oil market volatility which allowed for extraordinary earnings in the prior year's fourth quarter.  Operating income for the quarter decreased $16.8 million when compared to the prior year period.  DCF for the three months ended December 2009 decreased to $50.2 million compared to $75.9 million in the prior quarter.  

Sunoco Partners LLC, the general partner of Sunoco Logistics Partners L.P., declared a cash distribution for the fourth quarter of 2009 of $1.09 per common partnership unit ($4.36 annualized), which is a 10.1 percent increase over the fourth quarter of 2008 and a 2.3 percent increase over the prior quarter.  The distribution is payable February 12, 2010 to unit holders of record on February 8, 2010.  

The Partnership, in a joint announcement with Sunoco, Inc., also announced today the completion of a repurchase of the incentive distribution rights (IDRs) held by its general partner, Sunoco Partners LLC, a subsidiary of Sunoco, Inc., in exchange for the issuance of a new class of IDRs and $201.2 million, secured by a promissory note.

"2009 was another record year for Sunoco Logistics," said Deborah M. Fretz, President and CEO of Sunoco Logistics.  "We focused on maximizing utilization of our asset base, continuing organic growth programs throughout our system and strengthening our Lease Acquisition business.  We did see some impact with reduced volumes due to a weak demand environment; however, we were able to take advantage of several market opportunities such as contango by utilizing our storage capacity and pipeline flexibility.  In addition, the acquisition of the MagTex system in late 2008 has provided us with expanded opportunities.

"We entered 2010 with a strong balance sheet and excellent distribution coverage.  We will continue to implement our organic growth opportunities and we also expect that there will be numerous potential acquisition opportunities that could fit well with our current asset base.  The IDR repurchase transaction which we completed today is expected to be immediately accretive to our limited partnership unitholders and will serve to improve our competitive position for growth opportunities by lowering our cost of capital."

Segmented Fourth Quarter Results

Refined Products Pipeline System

Operating income for the Refined Products Pipeline System increased $0.6 million to $10.2 million for the fourth quarter 2009 compared to the prior year's fourth quarter. Sales and other operating revenue increased by $3.2 million to $33.1 million due primarily to results from the Partnership's acquisition of the MagTex refined products pipeline and terminals system in November 2008 and increased pipeline fees.  These increases were partially offset by decreased volumes on the Partnership's northeastern pipelines.  Other income increased $1.4 million due primarily to increased income associated with the Partnership's joint venture interests.  Operating expenses, along with depreciation and amortization expense, increased compared to the prior year's fourth quarter primarily as a result of the MagTex acquisition.  

Terminal Facilities

Operating income for the Terminal Facilities segment increased by $4.9 million to $20.5 million for the fourth quarter ended December 31, 2009 compared to the prior year's fourth quarter.  Sales and other operating revenue increased by $8.8 million to $51.9 million despite the reduced volumes experienced in the Partnership's refinery terminals which resulted from the idling of the Eagle Point refinery.  Revenue increases for the quarter were due primarily to increased throughput, higher fees and additional tankage at the Nederland terminal facility and results from the MagTex acquisition.    Revenues and cost of goods sold also increased during the quarter with the commencement of terminal optimization projects at the Partnership's refined products terminal facilities.  

Crude Oil Pipeline System

Operating income for the Crude Oil Pipeline System decreased $22.2 million to $35.6 million for the fourth quarter of 2009 compared to the prior year's fourth quarter due to lower lease acquisition results.  Lease acquisition results in the fourth quarter 2008 were positively impacted by extreme crude oil market volatility and timing of income recognition which was not repeated in the fourth quarter of 2009.    

Higher crude oil prices were a key driver of the overall increase in total revenue, cost of products sold and operating expenses from the prior year's quarter.  The average price of West Texas Intermediate crude oil at Cushing, Oklahoma increased to $76.17 per barrel for the fourth quarter of 2009 from $58.75 per barrel for the fourth quarter of 2008.

Segmented Twelve Month Results

Refined Products Pipeline System

Operating income for the Refined Products Pipeline System increased $10.3 million to a record high of $44.7 million for the twelve months ended December 31, 2009 compared to the prior year period. Sales and other operating revenue increased by $24.3 million to $127.7 million due primarily to results from the MagTex acquisition described above, along with increased pipeline fees.  Other income increased $4.1 million compared to the prior year period as a result of an increase in equity income associated with the Partnership's joint venture interests.  Operating expenses increased by $11.7 million to $60.2 million due primarily to the MagTex acquisition, a reduction in pipeline operating gains and increased environmental remediation expenses.  Depreciation and amortization expense increased $4.4 million during 2009 due primarily to the MagTex acquisition.  Selling, general and administrative expense increased $2.0 million compared to the prior year due primarily to increased employee benefits costs.    

Terminal Facilities

Operating income for the Terminal Facilities segment increased by $25.2 million to a record high of $83.7 million for the twelve months ended December 31, 2009 compared to the prior year period.  Sales and other operating revenue increased by $28.9 million to $191.3 million due primarily to increased terminal fees, additional tankage at the Nederland terminal facility, results from the MagTex acquisition and the addition of refined product sales.  Partially offsetting these increases were reduced volumes at the Partnership's refinery terminals.  Other income increased $1.0 million in 2009 as a result of an insurance recovery associated with the Partnership's refinery terminals.  Cost of goods sold and operating expenses increased by $6.9 million to $71.1 million for the period ended December 31, 2009 due primarily to the commencement of terminal optimization projects, increased terminal operating losses and the addition of the MagTex acquisition.  These increases were partially offset by reduced utility expenses and the absence of hurricane damages incurred during 2008.  Depreciation and amortization expense increased to $18.9 million for the twelve months of 2009 due to the MagTex acquisition and increased tankage at the Nederland facility.  During 2008, a $5.7 million non-cash impairment charge was recognized related to the Partnership's decision to discontinue efforts to expand LPG storage capacity at its Inkster, Michigan facility.  Selling, general and administrative expense increased $1.0 million compared to the prior year due primarily to increased employee benefits costs.    

Crude Oil Pipeline System

Operating income for the Crude Oil Pipeline system increased $14.0 million to a record high of $166.7 million for the year ended December 31, 2009 compared to the prior year period due primarily to increased pipeline fees and higher lease acquisition earnings which benefited from the contango market structure.  These increases were partially offset by a reduction in pipeline operating gains.  Other income decreased $1.5 million compared to the prior year due primarily to decreased equity income associated with the Partnership's joint venture interests and the absence of an insurance gain recognized in 2008.  

Lower crude oil prices were a key driver of the overall decrease in total revenue, cost of products sold and operating expenses from the prior year.  The average price of West Texas Intermediate crude oil at Cushing, Oklahoma decreased to $61.93 per barrel for 2009 from $99.65 per barrel for 2008.

Other Analysis

Financing Costs

Net interest expense increased $13.6 million to $44.7 million for the twelve months ended December 31, 2009, compared to the prior year period.  The increase was due primarily to higher borrowings associated with the $185.4 million MagTex acquisition, increased contango inventory positions and organic growth projects.

At December 31, 2009, the Partnership had total debt outstanding of $868.4 million, which consisted of $599.4 million of Senior Notes and $269.0 million of borrowings under the Partnership's credit facilities as compared to $747.6 million of total debt outstanding at December 31, 2008.  The Partnership had available borrowing capacity of $188.5 million under its credit facilities as of December 31, 2009 and a Debt to EBITDA ratio of 2.5 for the twelve months ended December 31, 2009.

Capital Expenditures

Maintenance capital expenditures for 2009 were $32.2 million. The Partnership expects that maintenance capital spending will be approximately $32.0 million for 2010.

Expansion capital expenditures for 2009 were $193.6 million compared to $305.6 million in 2008.  Expansion capital for 2009 includes the acquisitions of a refined products terminal in Romulus, MI and Excel Pipeline LLC, the owner of a crude oil pipeline which services Gary Williams' Wynnewood, OK refinery.  Expansion capital also includes construction costs associated with the completed project to connect the Nederland terminal to Motiva's Port Arthur, Texas refinery, construction of additional storage tanks at Nederland and refined products terminal optimization projects.  Expansion capital expenditures for 2008 include the $185.4 million MagTex acquisition.

Sunoco Logistics Partners L.P.

Financial Highlights

(in thousands, except units and per unit amounts)

(unaudited)

Three Months Ended

December 31,

Twelve Months Ended

December 31,

Income Statement

2009

2008

2009

2008

Sales and other operating revenue

$   1,661,010 

$ 1,573,003 

$   5,401,804 

$10,112,320 

Other income

6,575 

4,444 

27,873 

24,298 

Total Revenues

1,667,585 

1,577,447 

5,429,677 

10,136,618 

Cost of products sold and operating expenses

1,572,817 

1,469,294 

5,023,307 

9,786,014 

Depreciation and amortization

12,692 

10,555 

48,020 

40,054 

Selling, general and administrative expenses

15,690 

14,457 

63,306 

59,284 

Impairment Charge

5,674 

Total costs and expenses

1,601,199 

1,494,306 

5,134,633 

9,891,026 

Operating income

66,386 

83,141 

295,044 

245,592 

Interest cost and debt expense, net

12,729 

9,063 

49,007 

34,967 

Capitalized interest

(696)

(1,242)

(4,325)

(3,855)

Net Income

$        54,353 

$  75,320 

$      250,362 

$ 214,480 

Calculation of Limited Partners' interest:

 Net Income

$        54,353 

$75,320 

$      250,362 

$214,480 

 Less: General Partner's interest (1)

(13,780)

(10,912)

(52,665)

(37,097)

 Limited Partners' interest in Net Income

$        40,573 

$ 64,408 

$      197,697 

$  177.383 

Net Income per Limited Partner unit (1)  

   Basic

$            1.31 

$2.25 

$            6.52 

$6.19 

   Diluted

$            1.30 

$ 2.23 

$            6.48 

$6.15 

Weighted average Limited Partners' units

  outstanding:

  Basic

30,981,265 

28,657,485 

30,310,618 

28,650,069 

  Diluted

31,199,159 

28,854,397 

30,517,891 

28,836,603 

Capital Expenditure Data:

  Maintenance capital expenditures

$      16,846 

$        9,997 

$      32,172 

$      25,652 

  Expansion capital expenditures

50,179 

232,203 

193,656 

305,592 

     Total

$      67,025 

$    242,200 

$    225,828 

$    331,244 

December 31, 2009

December 31, 2008

Balance Sheet Data (at period end):

 Cash and cash equivalents  

$ 2,000

          $    2,000

 Total Debt

868,424

      747,631

 Total Partners' Capital                                                        

861,614

      669,900

(1) Effective January 1, 2009, the Partnership changed its calculation of earnings per unit to conform to updated accounting guidance that requires undistributed earnings to be allocated to the limited partner and general partner interests in accordance with the Partnership agreement.  Prior period amounts have been restated for comparative purposes.  This change resulted in an increase in net income per diluted LP unit of $0.61 and $1.17 for the three and twelve months ended December 31, 2008 respectively.

Sunoco Logistics Partners L.P.

Operating Highlights

(unaudited)

Three Months Ended December  31,

Twelve Months Ended December 31,

2009

2008

2009

2008

Refined Products Pipeline System: (1)(2)(3)

Total shipments (barrel miles per day) (4)

56,540,785

55,025,429

57,741,323

46,867,934

Revenue per barrel mile (cents)

0.636

0.590

0.606

0.603

Terminal Facilities:

Terminal throughput (bpd):

 Refined product terminals (3)

466,167

460,239

462,219

436,213

 Nederland terminal

531,405

479,609

597,144

525,954

 Refinery terminals (5)

573,344

669,478

591,180

653,326

Crude Oil Pipeline System: (1)(2)(6)

Crude oil pipeline throughput (bpd)

687,095

711,620

657,991

682,616

Crude oil purchases at wellhead (bpd)

177,164

184,965

181,564

177,662

Gross margin per barrel of pipeline throughput (cents) (7)

60.4

93.4

73.0

63.0

(1) Excludes amounts attributable to equity ownership interests in corporate joint ventures.

(2) Effective January 1, 2009, the Partnership realigned its operating segments as discussed above.  Prior period amounts have been recast to reflect the current operating segments.

(3) Includes results from the Partnership's purchase of the Romulus, MI terminal and the MagTex refined products pipeline and terminals system from the acquisition date.

(4) Represents total average daily pipeline throughput multiplied by the number of miles of pipeline through which each barrel has been shipped.

(5) Consists of the Partnership's Fort Mifflin Terminal Complex, the Marcus Hook Tank Farm and the Eagle Point Dock.

(6) Includes results from the Partnership's purchase of the Excel pipeline from the acquisition date.

(7) Represents total segment sales minus cost of products sold and operating expenses and depreciation and amortization divided by crude oil pipeline throughput.

Sunoco Logistics Partners L.P.

Earnings Contribution by Business Segment

(in thousands, unaudited)

Three Months Ended

December 31,

Twelve Months Ended

December  31,

2009

2008

2009

2008

Refined Products Pipeline System:

Sales and other operating revenue

33,081

$       29,879

127,729

$103,457

Other income

3,438

2,014

12,629

8,535

Total Revenues

36,519

31,893

140,358

111,992

Operating expenses

16,405

14,825

60,152

48,433

Depreciation and amortization

4,118

2,702

13,711

9,351

Selling, general and administrative expenses

5,750

4,684

21,807

19,776

Operating Income

10,246

$       9,682

44,688

$       34,432

Terminal Facilities:

Sales and other operating revenues

51,895

$       43,134

191,284

$   162,424

Other Income

456

8

1,860

833

Total Revenues

52,351

$43,142

193,144

163,257

Cost of products sold and operating expenses

22,699

18,744

71,137

64,283

Depreciation and amortization

4,448

4,255

18,937

16,446

Selling, general and administrative expenses

4,685

4,525

19,406

18,378

Impairment Charge

-

-

-

5,674

Operating Income

20,519

$       15,618

83,664

$       58,476

Crude Oil Pipeline System:

Sales and other operating revenue

1,576,034

$  1,499,990

5,082,791

$  9,846,439

Other income

2,681

2,422

13,384

14,930

Total Revenues

1,578,715

1,502,412

5,096,175

9,861,369

Cost of products sold and operating expenses

1,533,713

1,435,725

4,892,018

9,673,298

Depreciation and amortization

4,126

3,598

15,372

14,257

Selling, general and administrative expenses

5,255

5,248

22,093

21,130

Operating Income

35,621

$       57,841

166,692

$     152,684

Sunoco Logistics Partners L.P.

Non-GAAP Financial Measures

(in thousands, unaudited)

Distributable Cash Flow ("DCF")

Three Months Ended

December 31, 2009

Three Months Ended

December  31, 2008

Twelve Months Ended

December 31, 2009

Twelve Months Ended

December 31, 2008

Net Income

54,353 

75,320 

250,362 

214,480 

Add: Interest cost and debt expense

12,729 

9,063 

49,007 

34,967 

Less: Capitalized Interest

(696)

(1,242)

(4,325)

(3,855)

Add. Depreciation and amortization

12,692 

10,555 

48,020 

40,054 

Add: Impairment charge

5,674 

EBITDA

79,078 

93,696 

343,064 

291,320 

Less: Interest cost and debt expense; net

12,033 

7,821 

44,682 

31,112 

Less: Maintenance Capital

16,846 

9,997 

32,172 

25,652 

Add: Sunoco reimbursements

2,426 

Distributable Cash Flow ("DCF")

50,199 

75,878 

266,210 

236,982 

Earnings before interest, taxes, depreciation and amortization ("EBITDA")

Twelve Months Ended December 31, 2009

Net Income

250,362 

Add: Interest cost and debt expense, net

49,007 

Less: Capitalized interest

(4,325)

Add: Depreciation and amortization

48,020 

EBITDA

343,064 

Total Debt as of December 31, 2009

868,424 

Total Debt to EBITDA Ratio

2.5 

An investor call with management regarding the fourth-quarter results is scheduled for Wednesday morning, January 27 at 9:00 am EST. Those wishing to listen can access the call by dialing (USA toll free) 1-877-297-3442; International (USA toll) 1-706-643-1335 and request "Sunoco Logistics Partners Earnings Call, Conference Code 49826444".  This event may also be accessed by a webcast, which will be available at www.sunocologistics.com.  A number of presentation slides will accompany the audio portion of the call and will be available to be viewed and printed shortly before the call begins.  Individuals wishing to listen to the call on the Partnership's web site will need Windows Media Player, which can be downloaded free of charge from Microsoft or from Sunoco Logistics Partners' conference call page.  Please allow at least fifteen minutes to complete the download.

Audio replays of the conference call will be available for two weeks after the conference call beginning approximately two hours following the completion of the call.  To access the replay, dial 1-800-642-1687.  International callers should dial 1-706-645-9291. Please enter Conference ID #49826444.

Sunoco Logistics Partners L.P. (NYSE: SXL), headquartered in Philadelphia, is a master limited partnership formed to acquire, own and operate refined product and crude oil pipelines and terminal facilities. The Refined Products Pipeline System consists of approximately 2,200 miles of refined product pipelines located in the Northeastern and Midwestern United States, the recently acquired MagTex Pipeline System, and interests in four refined products pipelines, consisting of a 9.4 percent interest in Explorer Pipeline Company, a 31.5 percent interest in Wolverine Pipe Line Company, a 12.3 percent interest in West Shore Pipe Line Company and a 14.0 percent interest in Yellowstone Pipe Line Company. The Terminal Facilities consist of approximately 10.1 million shell barrels of refined products terminal capacity and approximately 23.0 million shell barrels of crude oil terminal capacity (including approximately 19.6 million shell barrels of capacity at the Texas Gulf Coast Nederland Terminal). The Crude Oil Pipeline System consists of approximately 3,850 miles of crude oil pipelines, located principally in Oklahoma and Texas, a 55.3 percent interest in Mid-Valley Pipeline Company, a 43.8 percent interest in the West Texas Gulf Pipe Line Company and a 37.0 percent interest in the Mesa Pipe Line System. For additional information visit Sunoco Logistics' web site at www.sunocologistics.com.

Portions of this document constitute forward-looking statements as defined by federal law. Although Sunoco Logistics Partners L.P. believes that the assumptions underlying these statements are reasonable, investors are cautioned that such forward-looking statements are inherently uncertain and necessarily involve risks that may affect the Partnership's business prospects and performance causing actual results to differ from those discussed in the foregoing release. Such risks and uncertainties include, by way of example and not of limitation: whether or not the transactions described in the foregoing news release will be cash flow accretive; increased competition; changes in demand for crude oil and refined products that we store and distribute; changes in operating conditions and costs; changes in the level of environmental remediation spending; potential equipment malfunction; potential labor issues; the legislative or regulatory environment; plant construction/repair delays; nonperformance by major customers or suppliers; and political and economic conditions, including the impact of potential terrorist acts and international hostilities. These and other applicable risks and uncertainties have been described more fully in the Partnership's Form 10-Q filed with the Securities and Exchange Commission on November 4, 2009. The Partnership undertakes no obligation to update any forward-looking statements in this release, whether as a result of new information or future events.

SOURCE Sunoco Logistics Partners L.P.



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