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Sunoco Reports Strong Earnings, Record DCF

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Energy pipelines and terminals operator, Sunoco Logistics Partners LP posted strong first-quarter 2013 results on the back of robust performance by the Crude Oil Pipeline, Terminal Facilities and Crude Oil Acquisition and Marketing segments, together with lower operating costs.

Sunoco's diluted earnings per unit ("EPU") came in at $1.09, significantly ahead of the Zacks Consensus Estimate of 86 cents and the year-ago period of 77 cents. Revenues of $3,512.0 million were up 2.9% from the first quarter of 2012 and also surpassed the Zacks Consensus Estimate of $3,382.0 million.  

Distributable cash flow (DCF) increased 57.3% year over year to a record $195 million.

Quarterly Distribution

Last month, Sunoco raised its quarterly distribution by 5.0% sequentially and 34.0% year over year to 57.25 cents per unit or $2.29 per unit annualized.  

Segmental Performance

Refined Products Pipeline System: Adjusted earnings before interest, taxes, depreciation and amortization expenses (EBITDA) in the ‘Refined Products Pipeline System’ segment were $9.0 million, down by 40.0% from the first quarter of 2012. The weak performance was owing to a planned and periodic shut down of the partnership’s refinery process at Philadelphia coupled with capital expenses related to the Mariner West development.

Terminal Facilities: Sunoco's 'Terminal Facilities' business segment had an adjusted EBITDA of $54.0 million, up 14.9% year over year. This impressive outcome can be mainly attributed to improved results from Sunoco's refined products acquisition and marketing initiatives. Moreover, better performances at the Eagle Point and Nederland terminals also aided the upsurge.

Crude Oil Pipeline System: Adjusted EBITDA in the Crude Oil Pipeline System segment shot up 2.0% from the year-earlier level to $61.0 million, driven by enhanced throughput volumes and better tariff rates.

Crude Oil Acquisition and Marketing: Adjusted EBITDA in this segment was $112 million, 138.3% above the first-quarter 2012 level. This reflects wider crude oil margins and volumes supported by contribution from the increase in crude oil trucking fleet.

Operating Expenses

Operating expenses for this quarter came at $24.0 million representing a decrease of 22.6% as compared to the first quarter of 2012.

Capital Expenditure & Balance Sheet

The partnership's maintenance capital expenditure and expansion capital expenditure for the reported quarter totaled $4.0 million and $136.0 million, respectively. As of Mar 31, 2013, Sunoco had $2,318.0 million in total debt (consisting of $33.0 million of borrowing under the partnership's credit facility), representing a debt-to-capitalization ratio of approximately 27.0%.
Stocks to Consider

Sunoco currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can look at other oil and gas pipeline master limited partners (MLP) like Magellan Midstream Partners LP (MMP - Free Report) , Delek Logistics Partners LP (DKL - Free Report) and Enbridge Energy Management LLC (EEQ - Free Report) as attractive investments. All three firms sport Zacks Rank #2 (Buy).

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