Impressive 4Q at Sunoco - Analyst Blog


Crude oil pipelines and terminals operator Sunoco Logistics Partners L.P. ( SXL ) announced impressive fourth-quarter and fiscal 2011 results, driven by well performing crude pipelines and terminals facilities.

The partnership's diluted earnings per unit ( EPU ) - excluding one-time items - came in at 99 cents, breezing past the Zacks Consensus Estimate of 63 cents and the year-ago profit of 47 cents.

For the full year, diluted EPU stood at $2.54, missing our projection of $2.58. Comparing year over year, earnings declined 18.3% from $3.11.

Revenues of $3,380.0 million in the quarter shot up 51.7% year over year from $2,228.0 million and also beat our projection by 34.0%.

Sunoco Logistics generated revenue of $10,918 million in fiscal 2011, against $7,838 million in 2010. The result also surpassed the Zacks Consensus Estimate of $10,067 million.

Quarterly Distribution

The partnership announced a quarterly dividend of 42 cents or $1.68 per unit annualized. The dividend will be paid on February 14, 2012 to unit holders of record as of February 8, 2012.

Distributable cash flow escalated approximately 59.4% year over year to a record $110.0 million.

Segmental Performance

Effective fourth quarter, the partnership is reporting in four segments: Refined Products Pipelines, Terminal Facilities, Crude Oil Pipelines and the newly formed, Crude Oil Acquisition and Marketing.

Refined Products Pipeline System: Operating income from the segment was $9.0 million in the quarter, down 10% from the fourth quarter of 2010. The negative variance was due to reduced profits from the Partnership's joint venture pipelines and steeper operating costs.

Terminal Facilities: The partnership's Terminal Facilities business segment experienced a quarterly operating loss of $11.0 million, against a profit of $21.0 million in the prior-year period. This was mainly due to expenses associated with the impairment of certain terminal assets.

Crude Oil Pipelines: In the fourth quarter, operating income of the Crude Oil Pipelines segment was up by 44.4% from the year-earlier level to $52.0 million, driven by improved pipeline fees, increased demand for West Texas crude oil along with lowered operating costs.

Crude Oil Acquisition and Marketing:  The brand new segment registered an operating income of $62 million that skyrocketed 287.5% from the prior-year quarter, supported by increased crude oil volumes and margins plus benefits of the acquired business.

Capital Expenditure & Balance Sheet

For the fiscal year, the partnership's maintenance capital expenditure and expansion capital expenditure (including acquisition) totaled $42.0 million and $665.0 million, respectively.

As of December 31, 2011, Sunoco had $1,698.0 million in total debt, representing a debt-to-capitalization ratio of approximately 58.7%.

Stock Split

During the fourth quarter, Sunoco Logistics completed a three-for-one split of the partnership's common units and Class A units.


Going forward, Sunoco Logistics expects to reap significant benefits from the growing fee-based businesses. Management remains optimistic about the collaboration with MarkWest Energy ( MWE ) - Mariner West project that will likely come online by July 2013. The partnership has hiked its organic capital expenditure to approximately $300 million and targets to derive more from the existing assets such as Eagle Point and Nederland.   

Our Recommendation

Sunoco Logistics owns a high-quality and diverse portfolio of midstream assets that generate stable and recurring revenues by way of long-term fee-based contracts. With its low-risk and stable cash flow-generating energy infrastructure assets, the partnership offers investors an opportunity to capture income growth through steadily rising cash distributions and capital appreciation. We are maintaining our 'Outperform' recommendation on the stock for the longer term.

MARKWEST EGY PT ( MWE ): Free Stock Analysis Report
SUNOCO LOGISTIC ( SXL ): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: EPU , MWE , SXL

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