Sunoco announces ownership in Bakken Pipeline

Sunoco Logistics Partners L.P. announced its results for the first quarter 2015. Adjusted EBITDA for the three months ended 31 March, 2015 was US$221 million, a US$13 million increase compared to the first quarter 2014. Net income attributable to partners for the first quarter 2015 was US$36 million (US$0.10 loss per limited partner unit diluted), which included a US$41 million inventory write down resulting from the decline in commodity prices. This non-cash charge was excluded from the Partnership's determination of Adjusted EBITDA and Distributable Cash Flow. Net income attributable to partners was US$107 million (US$0.33 per limited partner unit diluted) for the first quarter 2014.

Recent highlights 

• Distributable cash flow of US$160 million for the first quarter 2015.
• 21% distribution increase to US$1.68 (annualised) compared to the first quarter 2014.
• Ended the quarter with a Debt-to-Adjusted EBITDA ratio of 3.4x calculated in accordance with our credit agreement.
• Issued US$771 million of equity financing to date in 2015 in support of our expansion capital programme.
• Commenced initial start up operations on the Allegheny Access refined products pipeline project.
• Increased our existing credit facility to US$2.50 billion with maturity in March 2020 in order to continue supporting our expansion capital programme.

"We are pleased to announce our first quarter earnings where, most importantly, our ratable (blue bar) earnings increased over 30% compared to the first quarter of 2014," said Michael Hennigan, President and Chief Executive Officer. "Growing our blue bar cash flow is core to our strategy and we are very pleased that our team continues to execute on our extensive program of organic expansion projects. As we anticipated, with the lower price commodity market, our market-related earnings have declined from prior years’ levels. In addition, due to inventory timing, earnings in our Terminals Facilities segment are materially lower than recent results, but we expect a reversal of this temporary occurrence, leading to a positive earnings benefit in the second quarter."

The Partnership also announced that it has reached agreement with ETP to participate in the Bakken Pipeline project, which is jointly owned by ETP and Phillips 66. The project consists of existing and newly constructed pipelines that are expected to provide aggregate takeaway capacity of approximately 470 000 bpd of crude oil from the Bakken/Three Forks production area in North Dakota to key refinery and terminalling hubs in the Midwest and Gulf Coast including the Partnership’s Nederland terminal. The ultimate takeaway capacity target for the project is 570 000 bpd. The pipeline system is supported by long-term fee based contracts and is expected to begin commercial operations in the fourth quarter of 2016. The Partnership will fund its proportionate share of the construction costs and is expected to have a 30 percent interest in project. The Partnership also anticipates reaching agreement with ETP to become the operator of the pipeline system.

On the Bakken pipeline project, Hennigan said, "We are pleased to announce that SXL will have a 30% interest in the Bakken Pipeline and anticipates reaching agreement with ETP to become the operator of the pipeline system. This is another example of the synergistic benefits that occur within the Energy Transfer family of partnerships. We are very happy to not only be an owner, but also able to bring our crude oil operating expertise to this pipeline system."

On Sunoco Logistics growth, Hennigan added, "Our targeted emphasis on shale production areas continues to anchor our growth plans. We currently project to have approximately US$2.5 billion of organic capital in 2015. Despite the current commodity price environment, and decrease in our market-related earnings, our strategy has not changed, our distribution philosophy and expectations have not changed, our capital program has not changed, and we are confident that we will continue to execute our long term plan."

Crude oil pipelines

Adjusted EBITDA for the crude oil pipelines segment increased US$2 million to US$95 million compared to the prior year period. The increase was due primarily to additional throughput volumes largely driven by expansion projects placed into service in Texas and Oklahoma during 2014. This positive impact was largely offset by reduced volumes on higher-priced tariff movements.

Crude oil acquisition and marketing

Adjusted EBITDA for the crude oil acquisition and marketing segment increased US$19 million to US$31 million. The increase was primarily attributable to higher realised crude oil margins compared to the prior year period. Increased crude oil volumes resulting from 2014 acquisitions and the expansion of our crude oil trucking fleet also contributed to the improvement.

Terminal facilities

Adjusted EBITDA for the terminal facilities segment decreased US$34 million to US$52 million. The decrease was primarily attributable to lower results from our products acquisition and marketing activities. During the first quarter 2015, we utilised our storage capabilities to increase our level of certain refined products inventories in order to capture the contango market structure. These inventory positions, combined with the timing of butane blending sales, were negatively impacted by inventory accounting during the quarter. This decrease in operating results was partially offset by higher contributions from our bulk marine and refined products terminals.

Products pipelines

Adjusted EBITDA for the Products Pipelines segment increased US$26 million to US$43 million compared to the prior year period. The increase was due primarily to higher throughput volumes and higher average pipeline revenue per barrel, which were largely driven by contributions from the Mariner NGL pipeline projects. Higher contributions from joint venture interests also contributed to the improvement.

Financing update

Net interest expense was US$29 million for the three months ended 31March, 2015, compared to US$16 million for the prior year period. The US$13 million increase was due primarily to higher interest expense attributable to the April 2014 and November 2014 issuance of senior notes for a total of US$2 billion. This was partially offset by higher capitalised interest associated with our expansion capital program.

In March 2015, we amended and restated our existing US$1.50 billion unsecured revolving credit facility, increasing our borrowing capacity under the facility to US$2.50 billion and extending maturity to March 2020. The facility is available to fund our working capital requirements, to finance acquisitions and capital projects, to pay distributions, and for general partnership purposes. The facility includes an "accordion" feature, under which the total aggregate commitment may be extended to US$3.25 billion under certain conditions.

In March 2015, we completed an overnight equity offering of 13.5 million units for net proceeds of US$547 million. When combined with the 3.4 million units issued under our ATM program for US$142 million of net proceeds, we raised US$689 million in the first quarter 2015 to support our expansion capital programme. In April 2015, we issued an additional 2 million common units for net proceeds of US$82 million related to the exercise of an option in connection with the March 2015 offering.

Adapted from press release by Hannah Priestley-Eaton

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