Sunoco Logistics Partners L.P. (SXL)
Q4 2012 Results Earnings Call
February 21, 2013 8:30 AM ET
Mike Hennigan - President and CEO
Pete Gvazdauskas - Vice President, Finance
Martin Salinas - Chief Financial Officer
Mackie McCrea - Chairman
Steve Sherowski - Goldman Sachs
Brian Zarahn - Barclays
Jason Stevens - Morningstar
Bradley Olsen - Tudor Pickering
Elvira Scotto - RBC Capital Markets
Ross Payne - Wells Fargo
Cathleen King - Bank of America Merrill Lynch
John Edwards - Credit Suisse
Eric McCarthy - Balyasny
Welcome to Sunoco Logistics Q4 2012 Earnings Conference Call. All lines have been placed in a listen-only mode until the question-and-answer session. Today’s call is being recorded. If anyone has any objections you may disconnect at this time.
I would now like to turn the call over to Mike Hennigan, President and CEO. Sir, you may begin.
Thank you, Tim. Good morning, everyone. Welcome to Sunoco Logistics Partners conference call to discuss our fourth quarter 2012 results. I’m Mike Hennigan, President and Chief Executive Officer for the General Partner. Joining me today is Pete Gvazdauskas, Vice President of Finance; and also on the call are Martin Salinas; and Mackie McCrea.
In the course of our remarks and in the subsequent Q&A session, we’ll be referring to slides that have been posted on our website entitled Fourth Quarter 2012 Earnings Conference Call and we may be making some forward looking statements. In that regard for the purpose of facilitating the discussion, I refer you to slide two.
With regard to our results, I’m pleased to report that we are in $219 million of EBITDA, a new quarterly record and full year earnings of $810 million, which is also a new record. Our 2012 earnings represent a 41% increase over our 2011 results and resulted in $604 million of distributable cash flow.
As indicated in the accompanying slides, we changed our definition of adjusted EBITDA and distributable cash flow to confront to our General Partners presentation. The changes better align EBITDA with cash generated from operations and only have a minimal net impact on distributable cash flow.
We have restated our historical results for comparison and reconciliations are provided in the slides on our website. Pete will be available after this call to walk you through the mechanics in detail.
Our strategy over the last several years of moving the company more into the crude and NGL areas has been very probable for us, and we continue to see strong results in these areas.
Our crude oil pipeline business is leading our earnings and is the heart of our company’s result with $275 million of EBITDA in 2012, as we strive to be the best crude oil service provider in the industry.
Our Crude Oil Acquisition and Marketing business has also been delivering excellent results. Market conditions continue to be favorable for our business with the wide WTI LLS spread and our asset portfolio enables us to get producers the best possible net back for their production.
Our terminals business is also contributing strong results with $225 million of EBITDA in 2012 as we grow our services in our terminals. And next let me give you a summary of our major organic growth projects.
In 2012, we announced six successful open season -- seasons which are starting to be implemented. We have three successful open seasons related to the expansion of our West Texas crude system, totaling 110,000 barrels per day.
These projects are on track to meet the market needs delivering Permian Basin crude to various markets utilizing existing pipeline. We expect to be fully operational in the April, May timeframe with construction being completed towards the end of the first quarter.
Our Permian Express Phase I project, which provides crude oil transportation service originating in Wichita Falls, Texas, culminating in the nearly Nederland Beaumont, Port Arthur and Lake Charles markets is on track to be operational by the second quarter of 2013 with an initial capacity of 90,000 barrels per day. Full capacity of 150,000 barrels per day is expected by late 2013 or early 2014.
We continue to develop Permian Express Phase II which would increase the takeaway capacity at Colorado City by an additional 200,000 barrels per day and provide further market access to the Gulf Coast. We had considerable market interest in this project and hope to be able to give you more details in the near future.
The NGL area, our Mariner West project which will deliver ethane to the Sarnia marketplace is on schedule for mid-2013 startup with a capacity approximately 50,000 barrels per day and the ability to scale higher.
Engineering is underway for our Mariner East project. This project will deliver ethane and propane from the Marcellus to Marcus Hook, Pennsylvania where it will be processed, stored and distributed to the local, regional and international markets.
Total capacity is approximately 70,000 barrels a day with the ability to scale higher. We expect to be able to deliver propane by the second half of 2014, and both ethane and propane in the first half of 2015.
As you are aware propane is already being exported from the terminal today as the Northeast as long and we’ll continue to go longer NGLs as Marcellus and Utica develop further. Marcus Hook link the Mariner East project as repurpose and further develop this key waterborne industrial site.
Based upon the significant interest during our Mariner East open season, we are developing a Phase II. As production in the Marcellus and Utica continues to grow, additional NGL takeaway capacity will be needed by producers.
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