Energy pipelines and terminals operator
Sunoco Logistics Partners L.P.
) posted bright third-quarter 2012 profits, owing to higher
average crude oil price and lower interest expense.
The partnership's diluted earnings per unit ("EPU") came in at
$1.09, significantly ahead of the Zacks Consensus Estimate of 85
cents and the year-ago period profit of 78 cents.
Revenues of $3,218.0 million were up 12.9% from the third quarter
of 2011 and were almost in line with our projection.
Importantly, the partnership raised its quarterly distribution by
10.0% sequentially and 25.0% year over year to 51.75 cents per
unit or $2.07 per unit annualized. Distributable cash flow
increased 37.0% year over year to $149 million.
Refined Products Pipeline System:
Operating income in the 'Refined Products Pipeline System'
segment was $11.0 million, unchanged from the third quarter of
2011. Higher income coming from asset sale was wiped out by a
drop in pipeline revenues due to the shutdown of the Marcus Hook
refinery in the fourth quarter of 2011.
The partnership's 'Terminal Facilities' business segment had an
operating income of $39.0 million, up 18.2% year over year. This
impressive outcome can be mainly attributed to improved results
from Sunoco Logistics' refined products acquisition and marketing
initiatives. Contributions from the last year's purchases of the
Eagle Point tank farm as well as refined products terminal in
East Boston from an energy major firm
) also aided the upsurge.
Crude Oil Pipeline System:
Operating income in the Crude Oil Pipeline System segment shot up
55.8% from the year-earlier level to $67.0 million, driven by
enhanced mix of pipeline movements along with growth in organic
projects and better tariff rates.
Crude Oil Acquisition and Marketing:
Operating income for the July-September period was $48 million,
17.1% above the third quarter of 2011 level. This reflects wider
crude oil margins, supported by contribution from the purchase of
Texon L.P.'s crude oil purchasing and marketing business in the
third quarter of 2011.
Capital Expenditure & Balance Sheet
The partnership's maintenance capital expenditure and expansion
capital expenditure for the quarter totaled $11.0 million and
$90.0 million, respectively. As of September 30, 2012, Sunoco had
$1,627.0 million in total debt (consisting of $179.0 million of
borrowing under the partnership's credit facility), representing
a debt-to-capitalization ratio of approximately 54.1%.
Rating & Recommendation
Sunoco Logistics Partners currently retains a Zacks #1 Rank
(short-term Strong Buy rating). We are also maintaining our
long-term Outperform recommendation on the unit.
With its low-risk and stable cash flow-generating energy
infrastructure assets, we believe that Sunoco Logistics offers
investors an opportunity to capture income growth through
steadily-rising cash distributions and capital appreciation.
CONOCOPHILLIPS (COP): Free Stock Analysis
SUNOCO LOGISTIC (SXL): Free Stock Analysis
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