Sunoco Logistics Earnings Miss; Buys Bakken Pipeline Stake - Analyst Blog

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Energy pipelines and terminals operator Sunoco Logistics Partners L.P.SXL reported disappointing first-quarter 2015 results. Weak inventory pricing in the Terminal Facilities unit and subdued refined product terminal processing volumes led to the downside.

Sunoco Logistics reported adjusted earnings per unit of 2 cents, which was way below the Zacks Consensus Estimate of 44 cents and the year-ago quarter earnings of 33 cents.

Sunoco Logistics Partners LP - Quarterly EPS | FindTheCompany

Quarterly revenues of $2,572 million were down 42.6% from first-quarter 2014 and also lagged the Zacks Consensus Estimate of $3,973 million.

Sunoco Logistics' quarterly distributable cash flow (DCF) increased 1.9% year over year to $160 million.

To Own Partial Interest in Bakken Pipeline

Along with the earnings release, Sunoco Logistics announced the decision to own 30% stake in the proposed 1,100-mile Bakken pipeline. The conduit - to run from North Dakota's Bakken shale field to the partnership's Nederland terminal on the Gulf Coast - will provide initial daily takeaway capacity of 470,000 barrels. Energy Transfer Partners L.P. ETP and Phillips 66 PSX would be the remaining shareholders in the project.

Quarterly Distribution

Last month, Sunoco Logistics raised its quarterly distribution by 5% sequentially and 21% year over year to 41.90 cents per unit or $1.68 per unit annualized.

Segmental Performance

Crude Oil Pipelines: Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the segment inched up 2.2% to $95 million from the year-earlier level of $93 million. Positive effects from expansion project-driven additional throughput volumes were largely offset by lower volumes on higher-priced tariff transportations.

Crude Oil Acquisition and Marketing: Adjusted EBITDA for this segment came in at $31 million, a 158.3% jump from the first-quarter 2014 level. Higher crude margins, increase in oil volumes due to last year's acquisitions, plus the expansion of Sunoco Logistics' trucking fleet, contributed to the improvement.

Terminal Facilities: This segment's EBITDA was $52 million, down 39.5% year over year. Weak performance from the partnership's products acquisition and marketing activities primarily led to the downside.

Products Pipelines: Adjusted EBITDA for this segment totaled $43 million, a significant increase from $17 million earned in first-quarter 2014. Contribution from the Mariner NGL pipeline projects that drove volumes and revenue, together with higher income from joint venture interests, were the key growth drivers.

Operating Expenses

Operating expenses totaled $49 million against $41 million in the prior-year quarter.

Capital Expenditure & Balance Sheet

As of Mar 31, 2015, Sunoco Logistics' maintenance capital expenditure and expansion capital expenditure were $15 million and $423 million, respectively.

As of the end of first quarter 2015, Sunoco Logistics had $54 million cash and cash equivalents. The partnership had $4,457 million in total debt (consisting of $385 million of borrowing under the partnership's revolving credit facility), representing a debt-to-capitalization ratio of approximately 38.3%.


The partnership increased its organic capital projection for 2015 by $500 million to $2,500 million.

Zacks Rank & Stocks to Consider

Sunoco Logistics currently carries a Zacks Rank #2 (Buy).

An even better-ranked player from the same industry would be Energy Transfer Equity L.P. ETE , which sports a Zacks Rank #1 (Strong Buy).

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SUNOCO LOGISTIC (SXL): Free Stock Analysis Report

ENERGY TRAN PTR (ETP): Free Stock Analysis Report

ENERGY TRAN EQT (ETE): Free Stock Analysis Report

PHILLIPS 66 (PSX): Free Stock Analysis Report

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

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

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