Sunoco LP Aktie

Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Sunoco and SunocoCorp Q2 2026 Earnings Conference Call.

[Operator Instructions] It is now my pleasure to turn the call over to Scott Grischow, Senior Vice President of Finance. Please go ahead.

Thank you, and good morning, everyone. On the call with me this morning are Joe Kim, President and Chief Executive Officer; Karl Fails, Chief Operating Officer; Austin Harkness, Chief Commercial Officer; Brian Hand, Chief Sales Officer; and Dylan Bramhall, Chief Financial Officer.

Today's call will contain forward-looking statements that include expectations and assumptions regarding Sunoco LP's future operations and financial performance. Actual results could differ materially, and we undertake no obligation to update these statements based on subsequent events. Please refer to our earnings release as well as our filings with the SEC for a list of these factors.

During today's call, we will also discuss certain non-GAAP financial measures, including adjusted EBITDA and distributable cash flow as adjusted. Please refer to the Sunoco LP website for a reconciliation of each financial measure.

The partnership continued the strong momentum in 2026 with second quarter adjusted EBITDA of $996 million, excluding approximately $14 million of onetime transaction expenses. Based on our first half results and our confidence in the outlook for the second half of the year, we raised our adjusted EBITDA guidance range to be between $3.5 billion and $3.7 billion, an increase of $400 million from our original guidance range. Joe will provide more detail in his remarks, but this increase reflects the strength of our portfolio and realizing the value of recent acquisitions.

Second quarter distributable cash flow as adjusted was $608 million. On July 27, we declared a distribution of just over $1 per common unit for both Sunoco LP common units and SunocoCorp shares. This represents a quarterly increase of 1.25% from the prior quarter and over 10% versus the second quarter of 2025. Our business continues to generate strong cash flows, resulting in a trailing 12-month coverage ratio of 2.1x.

Our balance sheet and liquidity position remains strong. We had $2.3 billion in availability under our revolving credit facility at the end of the quarter and leverage was approximately 3.7x, below our long-term target. Finally, we spent $125 million on growth capital and $77 million on maintenance capital.

I want to wrap up my comments by stating that our financial position is stronger than ever. Our balance sheet is below our long-term target, and our distribution is comfortably on pace to meet our multiyear growth rate of at least 5%. Our proven history of executing on highly accretive acquisitions, both larger transactions and bolt-on opportunities, combined with our quick spend, quick return organic growth projects will continue to create a positive feedback loop, resulting in increased cash flows to be redeployed across our capital allocation strategy. We are confident this will provide top-tier returns for our investors in the coming years.

With that, I'll turn it over to Karl to walk through some additional thoughts on our second quarter performance.

Thanks, Scott. Good morning, everyone. In his remarks on our first quarter call, Joe highlighted that we are both a defensive play as we distinguish ourselves in challenging environments and a proven growth play. Both are on full display in our second quarter results.

Let me walk through our segment performance for the quarter and how each segment contributed to the outstanding overall result. In addition, each segment remains well positioned to contribute meaningfully toward achieving our increased 2026 EBITDA guidance.

Starting with our Fuel Distribution segment. Adjusted EBITDA was $516 million, excluding (sic) [ including ] $12 million of transaction expenses. This compares to $538 million last quarter and $214 million in the second quarter of 2025, both excluding (sic) [ including ] transaction expenses. Remember that our first quarter results included the 7-Eleven makeup payment and a $92 million onetime benefit of inventory reduction. The very strong performance this quarter demonstrates the strength in our much larger and diverse fuel distribution portfolio and the successful execution of our ongoing gross profit optimization and growth strategies.

We distributed 4.1 billion gallons, up 9% versus last quarter and up 89% versus the second quarter of last year. We continue to deliver volume increases and outperform industry benchmarks as a result of the effective use of capital, both organic and roll-up acquisitions. In addition, during periods of market uncertainty like the second quarter, our commercial teams find opportunities to supply additional customers as we grow our reputation as a reliable fuel supplier in the markets in which we operate.

Reported margin for the quarter was $0.171 per gallon compared to $0.17 per gallon last quarter and $0.105 per gallon for the second quarter of 2025. We saw a return of significant market volatility during the quarter with periods of sharp increases in price followed by declining prices near the end of the quarter. As we have mentioned many times, this volatility, coupled with the continued presence of higher breakeven margins, provides a strong foundation for our fuel distribution business. Once you add on our proven track record of growth, you can see why we remain very excited about this part of our business.

In our Pipeline Systems segment, adjusted EBITDA for the second quarter was $190 million compared to $179 million last quarter and $177 million in the second quarter of 2025. On the volume side, we reported 1.3 million barrels per day of throughput, up 4% from last quarter and up 9% from the same quarter last year. This segment continues to optimize the use of our assets to provide steady and stable income.

Moving on to our Terminals segment. Adjusted EBITDA for the second quarter was $115 million, excluding $2 million of transaction expenses. This compares to $107 million last quarter and $73 million in the second quarter of last year, excluding transaction expenses. We reported 1.1 million barrels per day of throughput, up 5% from last quarter and 52% from the same quarter last year. Growth in both earnings and volumes in this segment were supported by a full quarter of the TanQuid acquisition. This segment continues to deliver stable results that predictably and accretively grow as we add to the portfolio.

Turning to our Refinery segment. Adjusted EBITDA for the second quarter was $175 million compared to $43 million last quarter. Refinery throughput was 57,000 barrels per day compared to 22,000 barrels per day last quarter, which was reduced as a result of our planned turnaround. With refining margin for the quarter over $40 per barrel and operating expenses under $10 per barrel, the contribution from this segment was very strong. While the continued outperformance of the Refinery segment has contributed to our increase in full year guidance, it is only one component of an outstanding first half and what will be another outstanding full year.

Before I wrap up, I wanted to highlight our continued growth. Contributions and synergies from our Parkland acquisition are ahead of schedule. Our bolt-on acquisition strategy continues to demonstrate our track record of buying businesses and getting more out of them than the previous ownership. We continue to focus on quick-hitting, high-return organic capital projects. All of these contribute to DCF per LP unit growth. We expect to maintain this strong momentum into the second half of the year and into 2027.

I will now turn it over to Joe to share his final thoughts. Joe?

Thanks, Karl. Good morning, everyone. We're more than halfway through 2026. And as expected, our business continues to perform well. Scott and Karl discussed the key details related to the second quarter results. Let me provide some additional comments about our business as a whole.

Our combined results for the first and second quarters have been outstanding. As I mentioned on the last earnings call, we have proven that we can distinguish ourselves across various macroeconomic environments. For the full year 2026, we expect to materially exceed our initial adjusted EBITDA guidance and deliver our eighth consecutive year of EBITDA growth.

All 4 business segments are performing at a high level. First, as Karl noted, the industry fundamentals for our Fuel Distribution remains strong. Our ability to optimize acquired assets is paying off. We're confident this will continue for many years to come. Specifically for 2026, we expect our Fuel Distribution segment to perform just as well in the back half of this year as it did our outstanding first half.

Second, within our Pipeline and Terminal segments, the team has done a great job of maintaining the reliability and stability of these assets. Finally, our Refining segment obviously delivered a very strong quarter. We have managed the portfolio so that when refining crack spreads are strong, it enhances our overall upside. But when they're not as strong, we can still have a very good year, given the diversity of our portfolio.

As far as the balance sheet, leverage is below our target of 4x. This puts us in a very good position to both increase distributions over a multi-year period and deliver on accretive growth.

Let me wrap up with some final thoughts. We've had tremendous growth. We've done this while keeping our unitholders in mind. We have delivered 8 consecutive years of DCF per common unit growth, and 2026 will be our ninth. We've also delivered for our debt holders with multiple credit rating upgrades and a stronger balance sheet. The past is noteworthy, but the future is more important. Let me be clear, we expect continued growth.

As a result of the NuStar, Parkland and TanQuid acquisitions, we have a vast canvas to deploy capital across numerous geographies and segments. Our multi-year guidance of at least $500 million a year of bolt-on acquisitions is a modest bar. We expect to surpass this in 2026 and in future years. This is on top of our organic growth opportunities. Bottom line, our growing cash flows puts us in a strong position to continue to grow distributions, deliver accretive growth and maintain a strong balance sheet.

Operator, that concludes our prepared remarks. You may open the line for questions.

[Operator Instructions] Your first question comes from the line of Justin Jenkins with Raymond James.

I guess I want to start where you just ended. Obviously, we've had a positive operating backdrop, and you've shown really strong execution against that. But in that context, and Karl and Joe, you both mentioned this a bit in your remarks, but how is progress against your bolt-on M&A targets? Are you seeing any incremental opportunities there or also for more incremental organic growth in this macro, especially in light of the balance sheet capacity you mentioned?

Justin, it's Joe. I'll repeat a little bit of what I just said. I think the takeaway is -- I think I purposely chose the word that $500 million a year is a modest bar. And let me give you some insights to why. If you look at our last 3 bigger acquisitions, NuStar, Parkland and TanQuid, these are big financial wins for us. And obviously, we've delivered on synergies, and we're going to continue to deliver on synergies.

But beyond the base business, these acquisitions open up a far broader universe for us to invest in. We have geographic opportunities in the U.S., Canada, the Caribbean and Europe. And within these geographies, we can do deals both in fuel distribution sector as well as the midstream sector. When you couple this expanded landscape with our proven ability to deliver on synergy, it makes that $500 million to be a very modest bar. We're at different stages with different targets, and we absolutely expect to exceed the $500 million in 2026. But beyond that, we think the '27 and beyond, it sets up well for us to continue to be a highly attractive growth story on a continued basis.

And then, Justin, on the organic side, just to build on kind of what Joe said, the same is true on organic projects so that larger canvas and footprint gives us increased opportunities to invest. So as I mentioned in my remarks, and I've said many times, we focus right now on these quick hitting good return capital projects. They're not as big as maybe some of our other midstream peers, but in that $600 million plus, we have some $20 million, $30 million projects. Just to give you some examples. In our Fuel Distribution segment, we're signing up a lot of new customers.

And then in some of our geographies, we're finding opportunities to build new tanks in our terminals, whether that's in South America, whether that's in the Caribbean, whether that's in Europe. Many of those tank builds also facilitate our fuel distribution business.

In our Pipeline Systems, we've made new connections to bring new customers on our pipe. So you add that portfolio up, plus, as Joe said, we continue to grow into new geographies. So these kind of roll-up acquisitions, coupled with the organic really can power a lot of additional growth.

Awesome. That's great color. Second question is just on the updated guide. What should we think about for the drivers that you've assumed in the new range for the back half of this year relative to obviously the strong first half you've already put up here?

Justin, it's Joe again. Here's some key insights that I think you should take away from our revised guidance. First and foremost, all 4 of our business segments are performing very well. It's not just one driving the beat. And more importantly, we think this is going to continue for all 4 segments. As far as the range, that's really driven by our Refining segment.

Projecting -- our ability to project the Fuel Distribution segment and the midstream segment, we're really good at that. When it comes to projecting the Refining segment, that's definitely not an exact science. So what we did is, we used the forward curve for refining cracks as a starting point. But all of us know that using the forward curve and how it plays out with actual results, that typically doesn't happen. It's just a starting point for us. That's why we provided a range.

As far as an upside, the simple answer is yes, there's upside. I think we've shown year after year, when the market gives us the opportunity, we're really good on capturing the upside. When the market doesn't and we have market headwinds, I think we've also shown year after year that we can minimize that. So I think the takeaway for all of this is, there's multiple ways this is going to play out. But in every scenario that we looked at, we think it's going to be an outstanding year for 2026.

Your next question comes from the line of Theresa Chen with Barclays.

Back on the refining topic, now that Burnaby has been part of your portfolio for a bit of time, how are you thinking about the long-term earnings power of this segment and your general outlook for West Coast refining margins? And given Burnaby's advantaged position, both from an infrastructure perspective and its ability to serve the broader Pacific markets as well as local Canadian markets, how do you view the strategic value of this asset and its integration into your broader infrastructure and distribution footprint?

Yes, Theresa, this is Karl. Burnaby has done a really good job. I don't think any of us anticipated that we'd have the refinery cracks that we've had this shortly after ownership. But again, I'll remind everyone, we did the Parkland acquisition and looked at those economics on a mid-cycle basis. And clearly, we've had the benefit of the cash generation. And the team there has done a good job on focusing on the 2 areas that we think are most important, which is increasing the reliability and decreasing our operating expenses on a per barrel basis. So that's where our focus has been.

On your broader questions on the strategic nature, you probably heard me say that we love our British Columbia business. And when Parkland made that acquisition back in 2018, I think the refinery was the headline, but our perspective is it's really the integrated business, and we have a wonderful fuel distribution business there. The team there is doing a great job, and we have a very good market position there with a very good brand partner. So, Burnaby is a component of that. It's not the only piece. Right now, by far it's the best way to supply those markets.

The great thing, and you know our strategy is, as markets evolve and they tend to be efficient, if in some future state, there are other potential opportunities, then we'll look at that and we'll supply our market differently. But right now, as you said, some of the other refiners that have reported have made some arguments that maybe mid-cycle refining cracks are increasing, and I think their arguments are reasonable. So, as we go forward, we'll focus on what we can control and hopefully, the market will provide some tailwinds.

And on the fuel distribution side of things, I want to ask about your outlook for both margins and volumes near term. Given the volatility in commodity prices that has persisted on the front end of the curve, which has traditionally benefited your fuel distribution assets, can you provide color on what you're seeing in terms of the trend of fuel distribution CPG margins so far in the third quarter? And on the volume side, many headlines abound on elevated prices potentially impacting the consumer. What are you seeing as far as demand across your footprint as it translates to the end users?

Yes. Theresa, this is Austin. Happy to walk you through kind of what we're seeing on the demand and margin side of things, given our expanded portfolio, I'll sort of take those in reverse order. So just looking at the demand picture, overall, throughout -- so far this year, the consumer has been, I'd say, surprisingly resilient, right?

So, starting in the U.S., despite the flat price volatility that we've seen, EIA would suggest refined product demand is roughly flat year-over-year despite the volatility that we've seen. And typically, in situations like this, when we're looking to see what the impact of flat price is going to be on consumer demand; one, it tends to be a function of how high flat price goes and for how long it remains volatile. And then two, the things that we typically will see from a consumer behavior standpoint will be either spend rationalization, so same number of trips, but by fewer gallons per trip or octane rationalization where consumers will trade down.

Like I said, we haven't seen much of that in the U.S. In Canada, the demand picture is a touch softer with gasoline demand of low to mid-single digits year-over-year in Canada and roughly flat for ULSD. And then in the Caribbean, as I've shared, that's sort of -- people think of it as this monolithic region, but we are onshore in 24 different markets there, each of which have their own demand profile. But I would say, as a region overall, it's up low to mid-single digits.

Now with all of that, obviously, our volumes have exceeded that in each of these geographies, just given our deployment of growth capital and organic capital and then the scale and diversity we're able to bring as we're capturing synergies over the first, call it, 7 months of the year.

And then on the margin side of things, as we shared in the past, as a result of the acquisition, it's reasonable to expect our margin profile has evolved higher. To what extent and where the specific CPG margin [ print ] is going to be going forward? I think it's hard to say because there's going to be quarter-to-quarter volatility. And frankly, Theresa, you know us well enough. We don't spend a whole lot of time trying to analyze what the CPG margin number is going to be or volume, but rather solve for fuel profit and EBITDA growth overall.

So, overall, I think the second quarter is a reflection of the team's strong execution to leverage our scale and supply chain optionality against the backdrop that Karl mentioned, which has been at times challenging, but at times favorable. So right now, it looks like flat price is back on the rise. That creates a headwind to the margin picture. But if demand does come off, obviously, that paints a fairly bullish picture for margin. And I think, as Joe shared, we're well positioned with our diversity, our scale and our geographic exposure to perform well and close out the year very strong regardless of what the macroeconomic environment looks like.

Your next question comes from the line of Gabe Moreen with Mizuho.

Maybe if I could just follow up with one more on Burnaby. I'm just curious how you kind of look at the cash flow from being thrown off that asset, whether that's something that is at all supporting the distribution? Or is it something where, "Hey, you get high crack spreads, you can reinvest that in the business." I'm just wondering if -- really if there's any distribution capacity off of that asset?

Gabe, it's Joe. I think, I'm not sure if I said this call or the previous call, is that when you look at Burnaby, our refining exposure on our overall portfolio, this is something where whenever we have upside by cracks, it's just going to help us in the quarter for the year. But when the cracks aren't as good, we're still going to have a really, really good year.

So we're obviously getting upside this year, and it's creating more distributable cash flow for us. It just puts us in a better position where we're well on our way, and we feel incredibly confident we're going to increase distributions over a multiyear period. But if the refinery performs at an elevated level for an extended period of time, I think that puts us in a position where we can either increase distributions more, manage our balance sheet even better or allocate that to more accretive growth projects. I think the answer is going to be all 3 of the above.

And I think there's been some news flow about certain large refined products assets potentially being on the market. While I'm not specifically asking about any specific pipeline, I'm just wondering if the game plan to acquire, I guess, North American pipelines considers to be sort of within your purview of M&A and the extent to which you think you can bring value to those assets even if maybe your own wholesale distribution footprint doesn't overlap 100% with those assets at the moment?

Yes. Gabe, obviously, I won't comment on any specific asset. But I think the general theme that you're talking about and which I agree with is if there's anything on the refined product sector, be it a pipeline or terminal or fuel distribution assets, I think from a strategic standpoint, we're in just as good or a better position as anybody to bring synergies to the table. And whenever you bring material synergies to the table, we're always going to be highly competitive.

And if I could just ask one last annoying question around book and cash tax rate. Should we assume the current cash and book tax rates are about where you'll be going forward? Or will that kind of depend on earnings mix going forward?

Gabe, yes, I think we certainly had a step-up in the cash tax expense this year. A lot of that has to do with the performance of the business, right? It's been a strong start to the year. And specifically in the legacy Parkland operations, the refining operations, that creates a greater cash tax expense. That was all included in our economics for the Parkland acquisition and all the statements we make around accretion and EBITDA growth. I think for the full year 2026, you should expect for the back half of the year something under what you saw for the first half of the year in terms of the cash tax expense.

Your next question comes from the line of Spiro Dounis with Citigroup.

This is Chad on for Spiro. Just one quick one for me. Now that we've kind of -- we're further into this volatile commodity environment and the Middle East conflict, I'm just curious, have you seen any supply chain impacts that could be longer lasting across your footprint, either on the volume or margin side across your different segments?

Chad, the short answer is no, we haven't seen anything that suggests there's going to be some long-term lasting impact from the disruption in product flows. We are seeing continued disruption, albeit at slightly less volatile levels than we saw maybe in the -- earlier in the second quarter. That said, we're still leveraging our scale and our newfound geography and commercial capabilities as a result of the acquisition, to leverage and take advantage and create value in this environment, right?

So some things I shared, I believe, on the last call are things that we continue to do, whether it's railing diesel out of the Midwest to our Mid-Atlantic markets that wouldn't have been an option for us prior to our acquisition of rail assets with the Parkland transaction. And we continue to supply our Hawaii [ short ] out of the Burnaby refinery.

Those are 2 small examples. There's dozens of others that happen every day where we're responding to dislocations in the market. But nothing that suggests there's any long-term impairment to the business or our opportunity set. In fact, quite the opposite, and we continue to take what the market gives us.

And your next question comes from the line of Jeremy Tonet with JPMorgan.

This is Eli on for Jeremy. Just wanted to think geographically about some of the opportunities in your M&A pipeline. If we compare the opportunity set across Europe versus North America and the Caribbean, where do you see the most attractive returns? And how should we think about the international strategy more broadly across your segments? Might you go further downstream in Europe? Or any color there would be great.

Eli, this is Joe. Here's the way we look at it. We like the fact, and I think I've emphasized it multiple times that it wasn't that long ago that we're predominantly a Northeast, Mid-Atlantic, U.S. fuel distribution-centric business. So that kind of limited our ability to grow further out because having critical mass, Austin has talked about it 3 separate times today about scale matters. Now that we have all these different geographies in North America, even touching down to South America and Europe, the way that we're looking at is that we just have that same type of optionality where whatever emerges in the market, where we bring the most synergies where the valuation is right, that's the direction we're going to go.

With that said, I think there's going to be opportunities in all those places. I don't think right now, what we're seeing is we see opportunities in fuel distribution, we see opportunities in the midstream sector. We see opportunities in Europe, and we see opportunities in North America. How all that plays out and seeing where value -- what the valuations end up is going to help dictate where we're going to grow. But at the end of the day, I think you're going to see us grow in all those -- all the above.

Got it. And then maybe just thinking about the broader capital allocation philosophy at this point. You obviously have been clear that there's a really strong pipeline for the roll-ups, and you're going to continue to do growth both organically and inorganically. But how should we think about what the inorganic opportunity set looks like and the return thresholds that you need to kind of make those larger chunkier acquisitions versus maybe just continuing to hike the distribution at this clip. Obviously, we've seen a pretty big hike this year, and you've given some guidance for the medium term, but just thinking about weighing those 2 competing capital allocation priorities.

Okay. So yes, as far as when it comes to inorganic growth on the M&A roll-up, we've said in the past that synergized, we're talking mid-single-digit type of synergized multiples. Those opportunities, and you understand our financial model, those are highly accretive to us. That's the way along with big and small acquisitions, that's how we've increased distributable cash flow per unit for 8 consecutive years, and this year will be ninth, and I anticipate next year will be 10.

So, as we continue to do these mid-single-digit type of roll-ups, these are highly, highly attractive. And it gives Austin and team the ability with more scale to create more optionality that plays really well into volatile environment. So we're going to continue to do that. So that's going to get our attention. We think that's going to be for a long period of time. So with that said, you can expect us to allocate a material portion of our free cash flow towards inorganic growth.

At the same time, we still have plenty left over for distribution growth. And so these 2 work together, and I think the word that Scott has used and Karl's used is almost like a flywheel, the more and more we do these accretive acquisitions, they create more free cash flow that we can redeploy back into either additional growth and/or distribution increases.

[Operator Instructions] And your next question comes from the line of Ned Baramov with Wells Fargo.

Just a quick question from me on the Burnaby facility again. It seems the refinery ran above nameplate capacity in the second quarter. Can you maybe talk about how sustainable this rate is over multiple quarters?

Yes Ned, this is Karl. Like I said, the refineries team there has done a great job. We came out of a major turnaround. And given the market dynamics, it made sense to run full. Now exactly what that balance means. We co-process low-carbon feedstocks at that facility as well, right? So the nameplate of 55 was really set a while ago based on running crude and exactly what crude you run and what your low-carbon feedstock is will dictate.

Again, we were a little bit over that on a combined basis. And the hope is that we can continue that. But inevitably, I've been in the refining business for a long time, and there are always -- whether they're minor maintenance issues that come up whether you deal with or whether it's our planned turnarounds. But -- the only other comment I'll make, Ned, is we do look at running our assets on a sustained long-term basis and not sacrificing kind of that long-term reliability just for a little bit of short-term quarterly gain. So that philosophy, you should read that into how we operate it as well.

And with no further questions in queue, I will hand the call back over to Scott Grischow for closing remarks.

Thank you for joining us on the call today and your continued interest in Sunoco. As always, reach out if you have any questions, and we appreciate the support. Thanks, and have a great day.

Thank you again for joining us today. This does conclude today's call. You may now disconnect.

Hello. Thank you for standing by. Welcome to Sunoco LP and Sonoco Corp. Q1 2026 Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to Scott Grischow, you may begin.

Thank you. Good morning, everyone. On the call with me this morning are Joe Kim, President and Chief Executive Officer; Karl Fails, Chief Operating Officer; Austin Harkness, Chief Commercial Officer; Brian Hahn, Chief Sales Officer; and Dylan Bramhall, Chief Financial Officer.

Today's call will contain forward-looking statements that include expectations and assumptions regarding Snokolp's future operations and financial performance. Actual results could differ materially, and we undertake no obligation to update these statements based on subsequent events. Please refer to our earnings release as well as our filings with the SEC for a list of these factors.

During today's call, we will also discuss certain non-GAAP financial measures, including adjusted EBITDA and distributable cash flow as adjusted. Please refer to the Sunoco LP website for a reconciliation of each financial measure. The partnership started off 2026 with a strong quarter, delivering adjusted EBITDA of $867 million, excluding approximately $9 million of onetime transaction expenses. The first quarter benefited from a onetime gain on a sale of inventory of approximately $102 million.

With the acquisition of Parkland Corporation here and the elevated commodity price environment in the first quarter, we proactively optimized our inventory levels, which resulted in this onetime gain. Karl will provide more detail on the impact from these inventory reduction efforts and discuss segment performance in his remarks.

We continued our growth efforts in the first quarter with the closing of the Tank wood acquisition on January 16. Following the acquisition, Sunoco is Germany's largest independent terminal operator with a network of 16 assets across Germany and Poland. We expect this acquisition to be immediately accretive to distributable cash flow per common unit in 2026. During the quarter, we spent $106 million on growth capital and $93 million maintenance capital. First quarter distributable cash flow as adjusted was $535 million.

On April 21, we declared a distribution of $0.9899 per common unit for both Sunoco LP common units and Sunoco Corp. shares. This 6.25% increase represents a onetime step-up of 5% and a quarterly increase of 1.25%. This distribution represents an increase of over 10% versus the first quarter of 2025 and as the result of Sunoco's continued financial stability, execution of highly accretive acquisitions and growth projects and confidence in future distribution increases. Our trailing 12-month coverage ratio was 1.9x, and we continue to target a multiyear distribution growth rate of at least 5%.

Our balance sheet and liquidity position remains strong. We had $2.2 billion in availability under our revolving credit facility at the end of the quarter and leverage at the end of the quarter was approximately 4x, in line with our long-term target. In summary, our financial position continues to strengthen, which will provide us with continued flexibility to pursue high-return growth opportunities while maintaining a healthy balance sheet and a secure and growing distribution for our unitholders.

With that, I'll now turn it over to Karl to walk through some additional thoughts on our first quarter performance.

Thanks, Scott. Good morning, everyone. Our results this quarter continued the trend of accretive and sustainable growth for Sunoco. As we benefited from a full quarter of operations from Parkland and the closing of our Tank wood acquisition in Europe. Each of our segments delivered strong performance in the first quarter, and they are all well positioned to contribute meaningfully toward achieving our 2026 EBITDA guidance. Starting with our fuel distribution segment. Adjusted EBITDA was $538 million, excluding $9 million of transaction expenses. This compares to $391 million last quarter, excluding transaction expenses and $220 million in the first quarter of 2025.

This growth reflects continued strength in our legacy Sunoco operations, coupled with a full quarter of operations from Parkland. It is also supported by our ongoing gross profit optimization and growth strategies both through roll-up acquisitions and growth capital. As Scott mentioned in his remarks, these results also include a onetime benefit of inventory reduction. The level of fuel inventory we hold is always a trade-off between holding more to provide reliable supply and carrying less to deliver better returns on capital. This is especially true as we grow our fuel distribution business.

Naturally, our inventory also grows, but we frequently look to optimize our inventory levels to ensure we are delivering on our target returns. This quarter, as a result of inventory reductions we delivered a $92 million benefit in this segment, unlocking additional cash to reinvest in future growth. While the size of the benefit was clearly impacted by market prices during the quarter, this was a result of active management of our inventory to a level that is sustainable on an ongoing basis.

We distributed 3.8 billion gallons, up 15% versus last quarter, up 82% versus the first quarter of last year. We continue to see volume growth in our legacy Sunoco business with an increase of almost 6% and over prior year compared to a relatively flat U.S. demand profile. This growth is a result of effectively deployed capital via our growth capital plan and roll up M&A transactions. We continue to work on optimizing our volumes in the legacy Parkland assets as we implement our gross profit optimization approach that we've evolved over the years. Reported margin for the quarter was $0.17 per gallon compared to $0.177 per gallon last quarter and $0.115 per gallon for the first quarter of 2025. There were many factors influencing our margin this quarter with the 7-Eleven makeup payment, the gain on inventory reduction and the return of market volatility compensating for the margin compression experienced with dramatic increases in commodity prices during the quarter.

For reference, RBOB futures increased over $1.60 a gallon during the quarter with diesel futures increasing over $2 a gallon. In our Pipeline Systems segment, adjusted EBITDA for the first quarter was $179 million compared to $187 million last quarter and $172 million in the first quarter of 2025. On the volume side, we reported 1.3 million barrels per day of throughput, slightly down from the seasonally strong throughput last quarter and slightly up from the same quarter last year. This segment continues to provide steady and stable income.

Moving on to our Terminals segment. Adjusted EBITDA for the first quarter was $107 million. This compares to $87 million last quarter and $66 million in the first quarter of last year. We reported around 1 million barrels per day of throughput, which is up from both last quarter and the first quarter of last year. Growth in both earnings and volumes in this segment were supported by the inclusion of Tank wood and a full quarter of legacy Parkland operations. This segment continues to deliver stable results that predictably and accretively grow as we add to the portfolio.

Turning to our refining segment. Adjusted EBITDA for the first quarter was $43 million compared to $41 million last quarter. There was a $10 million benefit in this segment from our inventory reduction efforts that I discussed earlier. Refinery throughput was 22,000 barrels per day compared to 50,000 barrels per day last quarter. As we shared previously, throughput was down as a result of a planned 50-day maintenance turnaround that began at the end of January, which was completed on time and on budget.

During the turnaround, we continue to meet regional demand by sourcing supply through our refinery tank farm. The refining margin was strong during the periods of refinery operation and that continues into the second quarter. To provide more clarity to the market on our refinery performance, we posted an updated indicator crack on our website yesterday and expect to post updates at the beginning of each month. This calculation is intended to be an indicator of general profitability for the refinery using market prices.

Before I wrap up, I wanted to make a few comments on the integration of the recent Parkland acquisition. The balance sheet has returned to our long-term target. We are already delivering on synergies, both expense and commercial, which puts us well on track to deliver on 10-plus percent accretion before our year 3 commitment.

In summary, we continue to build on the strong momentum over the past few years. Each of our segments is delivering, and we will continue to remain focused on safe and reliable operations, expense discipline and accretive growth. I will now turn it over to Joe to share his final thoughts. Joe?

Thanks, Karl, and good morning, everyone. Every quarter presents a new set of challenges. This first quarter provided more than most. Obviously, the events in the Middle East created a volatile market. Costs and prices rose dramatically and at times fell and went back up. Furthermore, normal supply patterns were disrupted specifically within Sonoco, we completed a turnaround at our Burnaby Refinery and made significant progress on the Parkland integration. And despite all these events, we still delivered an outstanding first quarter.

More importantly, we're confident that we'll deliver on our full year EBITDA guidance even without the onetime gain from optimizing our inventory. Operationally, our refining team completed the turnaround on budget, our fuel distribution and midstream teams maintain reliable supply for our customers. And finally, we're on track to deliver 10% plus accretion from the Parkland acquisition. We have proven year after year and crisis after crisis that we can distinguish ourselves in challenging environments. And thus, we have gained a reputation as a strong defensive play.

However, we're also a proven growth play. Already this year, we closed on the Tank wood acquisition in Europe, a multi-island acquisition in the Caribbean and various smaller field distribution bolt-on acquisitions in the U.S. We're on track to complete over $500 million of bolt-on acquisitions in 2026.

Separately and in totality, these are immediately accretive while maintaining our balance sheet target. When you combine our ongoing accretive growth with the resilient-based business, we're stronger than any point since the establishment of Sunoco LP. As a result, we're able to announce a meaningful increase in our quarterly distribution 2 weeks ago. The decision to materially increase the distribution had to meet the following criteria: maintain a strong coverage ratio, protect our balance sheet, remain a growth company and finally, provide a clear path to increase distributions quarter after quarter over a multiyear time frame.

We're confident the answer is yes on all these factors. Operator, that concludes our prepared remarks. You may open the line for questions.

[Operator Instructions] Our first question comes from the line of Justin Jenkins with Raymond James.

I guess maybe just to start on a housekeeping item here, the inventory gain. You gave us a lot of detail on the impact here in the quarter. And I think, Karl, you suggested you're at an overall level you're comfortable with, but does that inventory level fluctuate with where commodity prices sit -- or how should we think about the moving pieces going forward here?

Yes. Thanks, Justin. This is Karl. Yes, as I talked in my prepared remarks, inventory decisions are really a trade-off between supply reliability and return on capital. And as part of that inventory management, we use derivatives to hedge inventory in the normal course of business. So as you mentioned, based on market conditions, we actively manage those inventory positions. So in periods of high prices and steep backwardation like we've had in the past few months will typically draw.

And then in the less frequent periods of contango, we would build and our hedging practices are set up accordingly to make sure we can optimize that. I think if you look at what we reported in the first quarter, that's just a larger step we took as a result of a lot of the growth that we've done over the last 6 to 9 months, including the recent Parkland acquisition. So the level that we reduce our inventory, too, we feel is responsible and we could stay there for a long time some of those minor optimizations that I talked about base to market conditions, yes, we'll continue to do regularly.

But this $100 million was sized and impacted by the higher prices, but it's something that we would have done regardless to manage our business. And it does differ from some of the other companies that have reported so far in the quarter, talking about timing-related inventory impacts because like I said, we're confident we can operate at this level going forward, and there is no symmetric risk if and when prices fall, that this gain is reversed.

That's helpful. Second question here on the distribution. Certainly, the step-up in the quarter very well received. I guess, how does this play into your overall views on capital allocation for the long term? And then maybe for 2026, more specifically, Joe, you hinted at this, but presumably, this shows a very high degree of confidence in your outlook for the year, even if it might be just a little too soon to update the guidance. Is that right?

Justin, this is Joe. Just to build off on Carlson, I'll take your first question first. On the inventory optimization, that was just a result of gossip and good timing. With that said, the recent 5% step up, we would have done with or without the inventory optimization. As far as kind of giving you some better background as to our step up in our capital allocation, think maybe kind of talking through how we made this decision would be helpful.

Our past investments have paid off, especially the NuStar acquisition we did 2 years ago in the Parkland acquisition we did last year. And just as importantly, our base business has proven to be year after year very resilient. As a result, our DCF per common unit has grown materially, and we believe a step-up followed by continued quarterly distribution increases would be highly valued by our unitholders. As far as the step-up, we wanted that step-up to be material. But at the same time, we didn't want to affect our ability to increase distributions over a multiyear period nor affect our ability to continue to grow.

And we think that the actions that we've taken recently have put us in a very good position to achieve these goals. As far as -- I think, Justin, if I understand you correctly, the second part of the question was really more about guidance. Is that how I should read it?

Yes. Yes.

The 1 key message that I hope that you and the rest of the people on this call take away from today is that we're going to have an outstanding year and deliver on guidance. That's even after you take out the onetime inventory optimization. Our established practice is not to give guidance after the first quarter unless there's a major acquisition. So is the question -- is there upside, of course.

However, the amount is still to be determined, and our history shows that we're good at capturing the upside as well as protecting the downside.

Our next question comes from the line of Spiro Dounis with Citigroup.

This is Chad on for Spiro. Just starting off, could you provide an update on how the conflict in the Middle East is impacting your business and trends today? And have you started to see any demand impacts from the higher prices yet?

Yes. Chad. Yes, let me -- I'll answer your questions kind of in order there in terms of impact to our operations given the current market volatility and then I can touch on margins and demand separately. If you take a step back, given our scale, supply chain optionality and logistics capabilities, it's really -- the business really shines during these types of periods of extreme market volatility.

Just to give you 1 example, we normally supply our Hawaii business out of South Korea. What we're finding though right now is it's actually economical to load vessels out of the U.S. Gulf Coast and supply the business via the Panama Canal. I share that because that's really only a move that's available if you have our scale and logistics capabilities.

There's literally countless other examples of how our operations have been impacted by some of the global disruption of product flows, but that's not always a bad thing. In fact, in our world, a lot of times, that can mean value creation. Just quickly touching on margins. We've always talked about flat price volatility, being bullish for margins in the long run. But the way that you get there is margins compress as flat prices on the way up, but then it widens disproportionately on the way down.

And I'd say you get an overall kind of net bullish margin environment. If you were to pull an RBOB or ULSD chart for year-to-date, I think what you'd find is we've been on a pretty sharp up and to the right for -- essentially through the first 4.5 months or 4 months in a week of the year. Despite that, we just closed out a really strong first quarter for the segment. The second quarter is off to a great start. And we haven't even gotten to the part of the story where flat price comes off and margins widen. So we feel really good about where we're positioned there.

And then I think you mentioned a question around impact to consumer demand. We haven't seen any evidence of demand destruction yet. I say that because it's kind of a function of how high flat prices go and for how long they remain there. That said, I think those of you who follow our story know that if we do encounter a scenario where there's demand destruction that creates a really strong margin environment as retailers are forced to respond to rising breakeven by taking price. So all that said, we're out of the gate really strong to start the year, and we feel really good about both the second quarter and delivering on an outstanding 2026.

Okay. Got it. That's very helpful. And just wanted to get your thoughts on kind of your M&A outlook with the current macro environment in 2 quarters of sort of the pro forma business. it sounds like you're tracking the $500 million of annual M&A cadence this year. But has there been any changes in the way that you view M&A as a cadence or a scale standpoint from your business yet?

Chad, this is Joe. The simple answer is no. We view it exactly the way that we outlined it late last year and early this year. So just to kind of give you an update if you take a step back and you look at all the recent acquisitions that we've done, we've greatly expanded our scale and our geographic footprint. It wasn't too long ago that we were a U.S.-only business predominantly on the East Coast and in the South. Now we have investment opportunities in the U.S., Canada, Latin America, Greater Caribbean and Europe.

And so to give you an example, already this year, we have almost $200 million of bolt-on M&A that are either closed or signed are going to be closed in the very near future. And this doesn't include the $500 million plus tank with acquisition that we started the year with. So the $500 million a year plus bolt-on acquisition is very reasonable for us. And bottom line, we're in a good position to deliver on an attractive long-term growth story.

Our next question comes from the line of Theresa Chen with Barclays.

First question is related to the Burnaby Refinery. Post your planned turnaround, how are operations trending at this point? And given the significant disruption to the liquids markets over the past 2 months plus following the Middle East conflict -- can you talk about your ability to capture these elevated margins not only on the West Coast of North America, but broadly across the Pacific Basin into Asia and Australia, given your fleet of assets from an infrastructure perspective as well as the refining facility at Burnaby.

Yes, Theresa. Thanks for the question. This is Karl. As Joe and I mentioned in our prepared remarks, the team and the refinery did a great job delivering on the turnaround on time and on budget, and that really allowed us to restart the refinery in the back part of the quarter into the higher cracks that were in the market. Our -- we've used this phrase a lot, but our crystal ball is in perfect as far as how long those refining margins will last. But I think the possibility of a period of longer cracks is reasonable and would be a tailwind for overall results.

If you look at that, the refinery business, it really is a foundational piece of our overall business in British Columbia. And most of the refinery production goes into that market in British Columbia, -- and so I think that's a tailwind for that overall business that we'll be able to see the results as we go through the year. Now clearly, so far into the year, the refinery is outperforming assumptions we made for the Parkland acquisition or even the midpoint of our guidance, as Joe talked about.

The refinery is an important part of the portfolio. not a large part of the portfolio. It's our smallest segment, but it fits well into our overall business. When there are big price movements, and we have the higher cracks that can help offset some of the margin compression that Lawson talked about in our fuel distribution business and the opposite is also true. And as far as your broader question for the rest of the Pacific I think Austin has come do a great job of looking at what the market is giving us and supplying as an example of how we supply Hawaii, of choosing the options we have to supply our base business in the most economical way possible and then finding additional opportunities to supply fuel to new customers. So yes, I think there's going to be opportunity.

And going back to your earlier comments about synergies post the acquisitions and the broader more comprehensive set of assets you have under 1 portfolio now. Can you speak to the progress made both on the commercial side as well as any existing cost synergies still to be harvested at this point and what your outlook is for that?

Yes, I think the outlook is good. You know us, and we've looked backwards on various acquisitions we've done. We start the synergy process even before we close, and that was true in the Parkland acquisition. So there were changes that we made, particularly on the expense side as soon as we took ownership in the fourth quarter, and those are continuing. I think the breadth of the Parkland portfolio means that, that runway of getting to the end result on the expense side takes a little longer than some of the other deals we've done, but that work is all going well.

I think on the commercial side, there are significant commercial synergies that we outlined over the last year since we announced the Parkland deal and many of those have already been delivered. Many are in flight, and there are some still to come. So our guidance was based on $125 million of in-year synergies and to be able to hit that number, we needed to exit the year much higher than that, and we're still on pace with that and expect that to continue and us to the final kind of run rate of $250 million plus, we feel very comfortable with, and that should be a floor. You bet.

Next question comes from the line of Gabriel Moreen with Mizuho.

Can I maybe just ask for an update on sort of the midstream side of things and to the extent you're planning to spend on the capital there this year. I noticed that your parent announced an expansion in the Bayou Bridge going into same game. So just curious if maybe that would necessitate more storage there, for example..

Yes, Gabe, this is Karl again. Clearly, our midstream portfolio, we really like, whether it's the pipeline systems assets, our terminal network. Joe talked about, we're excited to have tanked as part of that portfolio. So -- we spend capital on those, whether it's maintenance capital to keep our tanks ready to go when market opportunities come or some growth capital. I think our current portfolio is we're always looking for opportunities for larger projects. But as we sit here right now, I think our sweet spot is kind of the these small to midsize projects.

And so we have a portfolio of those and then really looking for accretive M&A and any projects we do in the midstream space would be to optimize and to help us gain synergies on the M&A. So that -- as we sit here today, that can change down the road, but that's our current plan.

And then maybe I can follow up. I think 7-Eleven is doing a bit of portfolio repositioning in terms of their store base. Can you just talk about whether there's any implications at the 7-Eleven from any of those moves?

Gabe, it's Joe. As far as -- we've got a great relationship with 7-Eleven. So as far as the supply agreement we have with them, nothing changes on that one. That's a rock solid take-or-pay contract with highly profitable investment-grade company. So we feel good on that one.

As far as the 7-Eleven doing portfolio optimization, obviously, with our scale and our geographic footprint, anytime there's anything on the market, I think we're a viable partner for a lot of people that are looking to exit and we -- with the synergies we bring to the table, we're always going to be competitive.

Joe, maybe if I just squeeze 1 more in, the M&A question from a different angle. Is the current volatile backdrop making it easier to transact in your mind or harder. I'm just curious what your thoughts are on there.

Yes. harder, easier, I would probably say all things equal, maybe harder overall may be more opportunistically better for Sunoco. I think we have -- we know what we're good at and scale and geographic diversity -- and given our midstream assets, especially on the term level, we're in a good position. So I think from that standpoint, it's not going to affect us. As far as now that we're more than just a U.S. company and we're in various geographies.

As far as opportunities in foreign markets, there's always going to be some level of tension between countries. The extent of it and Magia always kind of evolving. But the 1 thing that we do believe in is that cross-border foreign investment is going to continue across the world, and we're in a good position to find the right assets wherever it may be. And with the synergies that we bring to the table, we're going to be in a good position to be highly competitive.

[Operator Instructions] Our next question comes from the line of Ned Baramov with Wells Fargo.

Could you maybe talk about the interplay between Burnaby refining margins and the margins on the fuel distribution side in British Columbia. Does the higher crack spread imply lower potential FD margin? Or is this market also not seeing any change in demand from higher fuel prices as you commented earlier.

Yes, Ned, this is Karl. I'll try to pull together to answer your question, a couple of points that Austin made in his overall answer on margins. and then some of the things I talked about at Burnaby. The short answer is -- as far as the refinery margin, the fuel distribution margin, as we look at it, we use internal transfer prices like most people do, and those are based on the market. So as most we can run the business while we like having the integrated margin, and we're always making choices to optimize the overall result for Sunoco, as we're looking at those 2 businesses, we also look at them independently.

And so I think on the overall margin and consumer demand question, I think Austin hit the nail on the head that those margins will adjust -- and I would expect that the overall fuel gross profit and the EBITDA that we get in British Columbia should stay the same or grow over time the refining margin is going to vary more, right? That's going to really flow based on supply/demand going on in the world. And so right now, we're in a period of higher cracks, but -- while we manage that supply chain as an integrated supply chain. I wouldn't necessarily imply that when refinery cracks are high, that the fuel distribution margins are low, sometimes they're both higher together.

Hopefully, that answers the first question.

Yes, very clear. And then second 1 on the housekeeping side. Was the Burnaby turnaround spending included in your $93 million of maintenance CapEx for the quarter?

Yes. And there was some component of growth CapEx there as well that was included in our reported capital.

Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to Scott for closing remarks.

Well, thank you for joining us on the call today and for your continued interest in Sunoco. As we said, there's a lot of great things to look forward to in 2026, and we look forward to updating you across the year. Please reach out if you have any questions. Thanks for tuning in, and I always appreciate your support.

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Sunoco LP and the Sunoco Corp. LLC Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Scott Grischow, Senior Vice President of Finance. Please go ahead.

Thank you, and good morning, everyone. On the call with me this morning are Joe Kim, President and Chief Executive Officer; Karl Fails, Chief Operating Officer; Austin Harkness, Chief Commercial Officer; Brian Hahn, Chief Sales Officer; and Dylan Bramhall, Chief Financial Officer. Today's call will contain forward-looking statements that include expectations and assumptions regarding Sunoco LP's future operations and financial performance. Actual results could differ materially, and we undertake no obligation to update these statements based on subsequent events.

Please refer to our earnings release as well as our filings with the SEC for a list of these factors. During today's call, we will also discuss certain non-GAAP financial measures, including adjusted EBITDA and distributable cash flow as adjusted. Please refer to the Sunoco LP website for a reconciliation of each financial measure. Before reviewing our fourth quarter and full year 2025 financial results, I'd like to take a moment to briefly discuss some changes to our financial reporting format, which is included in today's earnings release.

First, we have incorporated Parkland's legacy operations into our 3 segments and have also added a fourth reporting segment for our newly added refining operations.

Second, today's and future earnings releases will include select financial information for Sunoco Corp. LLC, which we will refer to by its New York Stock Exchange ticker symbol of Sun Sea. As a reminder, Sunse's only asset is its limited partner interest in SnokeLP. Because of its limited partner interest in Sun, Suns consolidates Sunoco LP into its financial statements. Accordingly, on today's call and future calls, we do not intend to cover SUSE's results. Instead, we have included a schedule in our earnings release that reconciled Suns distribution from Sun with Suns distributable cash flow as well as a summarized consolidating balance sheet.

Sunoco began trading shortly after we closed the Parkland transaction and will be an attractive option to invest in Sunoco, especially for investors outside of the United States, institutional investors and in personal retirement accounts. We expect minimal corporate income taxes at Suns for at least 5 years, which will allow for the Sunsea distribution to remain very similar to -- so distribution for this period of time. Moving to this quarter's results. The fourth quarter marked the end of a transformative and record-setting year for Sunoco. We closed the Parkland transaction on October 31, and our team is now fully engaged in integration efforts that are progressing well. The partnership delivered record adjusted EBITDA of $706 million in the fourth quarter, excluding approximately $60 million of onetime transaction expenses. Karl will discuss the segment performance in his remarks. However, this consolidated result reflects the ongoing strength of our operations and the contribution from the Parkland acquisition.

During the quarter, we spent $130 million on growth capital and $103 million on maintenance capital. Fourth quarter distributable cash flow as adjusted was $442 million. On January 27, we declared a distribution of $0.9317 per common unit for those Sunoco LP common units and Sunoco Corp. shares. This represents a 1.25% increase over the prior quarter and marks our fifth consecutive quarterly distribution increase. Our trailing 12-month coverage ratio finished the year at a strong 1.9x. We continue to see a multiyear path for an annual distribution growth rate of at least 5%. Looking at the full year 2025. Adjusted EBITDA, excluding transaction-related expenses, came in at a record $2.12 billion, a 36% increase over the prior year. This record year reflected solid underlying growth in our base business, a full year of contribution from our NuStar acquisition in approximately 2 months from Parkland. Our balance sheet and liquidity position remains strong. We had $2.5

billion in availability under our revolving credit facility at the end of the year and leverage at the end of the quarter was approximately 4x in line with our long-term target. In summary, our financial position continues to be stronger than at any time in Sonoco's history, which we believe will provide us with continued flexibility to balance pursuing high-return growth opportunities maintaining a healthy balance sheet and targeting a secure and growing distribution for our unitholders. With that, I will turn it over to Karl to walk through some additional thoughts on our fourth quarter performance.

Thanks, Scott. Good morning, everyone. Our results this quarter capped another record year for Sonoco as we meaningfully expanded our operations and significantly grew our cash flows. With the addition of the Parkland and Tank wood assets, we now operate a diversified footprint, spanning 32 countries and territories and have become the largest independent fuel distributor in the Americas. Each of our segments delivered strong performance in 2025 and are well positioned to contribute meaningfully toward achieving our 2026 guidance. Let me share some more perspective on our fourth quarter results by segment as well as some thoughts on our 2026 guidance we released last month.

Starting with our fuel distribution segment. Adjusted EBITDA was $391 million, excluding $59 million of transaction expenses. This compares to $238 million last quarter, and $192 million in the fourth quarter of 2024, both excluding transaction expenses. This growth reflects continued strength in our legacy Sunoco operations, coupled with 2 months of contribution from Parkland. We distributed 3.3 billion gallons, up 44% versus last quarter and up 54% versus the fourth quarter of last year. We continue to see volume growth in our legacy Sunoco business with an increase of more than 2% over prior year compared to a relatively flat U.S. demand profile. This growth is a result of effectively deployed capital via our growth capital plan and roll-up M&A transactions.

We have begun the work to optimize our volumes in Canada and the Caribbean as we implement our gross profit optimization approach that we have evolved over the years. Reported margin for the quarter was $0.177 per gallon compared to $0.107 per gallon last quarter and $0.106 per gallon for the fourth quarter of 2024. The much higher margin is a result of the addition of the legacy Parkland business to our portfolio that consists of higher-margin geographies and channels. We have also begun the process of evaluating the channels of operation in each geography to ensure the business is matched with the appropriate channel to optimize return on capital. When we step back and look at our fuel distribution business, we have a proven track record of delivering results in the U.S. and the Parkland assets easily fit into our business strategy there.

The Caribbean business is proving to be just as good as we thought, stable income with the opportunity for growth, especially when it couples with our scale in supplying our East Coast business from the water. In Canada, as we dig into the operation, the business is even better than we expected, with higher stability and higher margins than our U.S. business, which we have proven is very stable. When you put the pieces together, the business is strong, and we are confident that we will continue to grow both fuel profit and EBITDA in the segment going forward. That confidence comes from a foundation of strong underlying businesses with good industry fundamentals. Higher breakeven margins and market volatility continued to support our fuel profit.

Adding on our proven gross profit optimization approach, quick and thoughtful channel management evaluations and our capital deployment strategy only increases our optimism. The final layer comes from the greater scale enhanced geographic diversity and improved supply optionality, delivering synergies and enabling continued EBITDA growth. We are very excited about the future of our field distribution business. In our Pipeline Systems segment, adjusted EBITDA for the fourth quarter was $187 million compared to $182 million in the third quarter and $193 million in the fourth quarter of 2024, excluding transaction expenses.

On the volume side, we reported 1.4 million barrels per day of throughput, up from the third quarter and consistent with fourth quarter of last year. Like last year, the fourth quarter was our strongest quarter of the year with seasonal strength in our agricultural supported markets as well as good performance across the rest of the system. Moving on to our terminal segment. Adjusted EBITDA for the fourth quarter was $87 million. This compares to $76 million in the third quarter and $61 million in the fourth quarter of 2024, all excluding the impact of transaction expenses, we reported around 715,000 barrels per day of throughput, which is up from both last quarter and the fourth quarter of last year. Earnings and volumes in this segment were boosted by the inclusion of terminals income from our Parkland acquisition. This segment continues to deliver stable results, and we're looking forward to the positive addition of our recently closed tanked acquisition in the first quarter.

Turning to our new refining segment. Adjusted EBITDA for the fourth quarter was $41 million, excluding $1 million of transaction expenses. This reflects approximately 2 months of operations following the close of the Parkland transaction at the end of October. Refinery performance was much improved in 2025 compared to previous years, and we look forward to that trend continuing under our ownership. As we have stated before, the refinery is an important piece of the supply chain supporting our market-leading fuel distribution business in Western Canada. Our goal is to stabilize and improve operations regardless of what the market crack provides in terms of earnings.

Before I wrap up, let me talk a little bit more about 2026. In early January, we shared our full year guidance. On the last call, we highlighted our confidence in the highly accretive value Parkland brings to our operations. And the guidance reflects this confidence with an adjusted EBITDA range of $3.1 billion to $3.3 billion. Supporting that EBITDA guidance were a few assumptions. First, that we would close on our Tank wood acquisition in the first quarter, and we accomplished that in January. Second, we expect to realize $125 million of the total $250 million annual synergy target in 2026 and as Scott mentioned earlier, the integration is going well, and we are well on track to deliver on synergies. Third, the guidance includes the planned 50-day maintenance turnaround at the refinery that began in late January. Turning to capital allocation. We expect maintenance capital to be in the $400 million to $450 million range, consistent with our much larger footprint and the refinery turnaround in the first quarter.

Additionally, we continue to see very attractive opportunities to grow our business. This will come from a portfolio of at least $600 million of generally quick spend, quick return capital projects as well as acquisitions which we included in expected floor on for the first time.

To summarize, 2025 was another record year for Sunoco, and we are well positioned for another record year in 2026. Our outlook is supported by disciplined expense management, a proven strategy of optimizing gross profit and effectively and accretively deploying capital. We entered the year with strong momentum and confidence in our ability to deliver sustained value for our investors. I will now turn it over to Joe to share his final thoughts. Joe?

Thanks, Karl. Good morning, everyone. We came into 2025 financially healthy, and we finished the year bigger and stronger than where we started. Within a very eventful year, there are a few highlights that I want to point out. First, our legacy Sunoco business remains resilient. All segments performed well in 2025, and we delivered on our guidance. And more importantly, we expect continued strong performance. All segments are off to a good start and independently, 2026 would have been another record year for Sunoco legacy assets. Second, we expect the Parkland acquisition to be a home run. Karl and Scott have already discussed the material progress we've made on creating value for our stakeholders. But I think it's worthwhile to take a step back and look at the bigger picture. The Parkland acquisition will be another example of our ability to deliver on value-creating growth year after year. There is growth and there's value-creating growth. We delivered value creating growth for our unitholders let me provide a couple of examples. First, our DCF per common unit continues to grow.

Sonoco is the only ANGI constituent to grow DCF per common unit for each of the last 8 years, and we expect this to continue. Second, our credit profile continues to improve. We are already ahead of schedule with our leverage back to 4x. Our balance sheet is in a very good position. I'll finish with the final thought. We have earned a solid reputation as a defensive play within the midstream sector. given our ability to deliver strong results and volatile commodity environments as well as macro challenges such as inflation and even pandemics.

I think it is well deserved, and we remain well positioned to differentiate ourselves within future challenges. But let's also recognize that we're an attractive growth play. The products that we move and distribute will continue to fuel the U.S. and other economies across the world for decades to come. We have positioned ourselves as a consolidator. With the addition of Parkland and Tank wood, we're now a bigger company. In our case, bigger means more scale, more scale equates to more synergies and more synergies mean continued value-creating growth. We have a strong track record of identifying and delivering on growth. Thus, we stated in our January guidance that we have at least $500 million of bolt-on acquisition opportunities each year for the foreseeable future.

This is beyond our growth capital. Simply put, we are uniquely positioned as both a thoughtful defensive play as well as an attractive growth story. As a result, we have never reduced our distribution, but instead, we have increased our distribution for the last 3 years. With Parkland and other investments, we're in an even better position to continue distribution growth for both Sun and SunC unitholders expect a minimum of 5% annual growth in 2026 and continued growth over a multiyear period. Operator, that concludes our prepared remarks. You may open the line for questions.

[Operator Instructions] Our first question comes from the line of Theresa Chen from Barclays.

Maybe beginning with the fundamentals of the fuel distribution business. How is demand trending across your footprint pro forma Parkland? And on the $0.177 per gallon metric, can you walk us through the drivers of the result this quarter here? And how much of that performance was driven by structural versus maybe more transient factors in your view? And from your perspective, is this CPG sustainable over the medium to long term? Or what would you consider as a good run rate or a normalized ICPG. And to completely close this loop, is there a specific CVG level that underlie your $250 million synergy target as well?

Theresa, this is Austin. Let me maybe start in sort of reverse order answering your question. So starting with CPG, as you pointed out, as a result of the transaction, our margin profile has evolved higher. Whether to put stock in 17.7% and pegging that as the new water line, I think is probably it's directionally accurate in terms of direction and magnitude. But with precision, I think we've always said a couple of caveats. One, there's going to be quarter-to-quarter variability in our CPG numbers. And then second, as Karl shared in his prepared remarks, as a result of this acquisition, we're going to be breaking out and executing against our playbook on gross profit optimization and channel management. And so for those reasons, there might be movement in both our volume and CPG numbers independent of what the market might afford. And in terms of do we have a specific number in mind, historically, we haven't we don't target or solve for a CPG number. What we saw for -- as we've shared in the past, is fuel profit and sustained EBITDA growth over time.

And so with that said, in terms of drivers, it might make sense to walk through the different geographic regions in our kind of newly expanded portfolio now and what's driving that? Because essentially, what you're going to -- what we found is Parkland had more street margin exposure in their portfolio than the legacy Sunoco business. And we've always said we were very specific and selective in where we want that street margin exposure in the geographies that Parkland had exposure to, we really like. So

starting with the U.S. business. I think the story is pretty familiar. Demand from an EIA standpoint has been flat to slightly off toward the end of the year on a year-over-year basis. Obviously, Sunoco outperformed those trends, given our deployment of growth capital. And then on the margin side, we continue to see a bullish margin environment buoyed by elevated breakevens. And so if demand moves 1 way or the other relative to trend, if it exceeds trend, we're well positioned to participate in that environment. If it underperforms trend, obviously, as we've seen in the past, you guys know that, that creates a pretty bullish margin environment for us to operate in. And so we feel really good about the U.S. business.

And then turning to Canada, as we shared and Joe and Carl shared in the prepared remarks, we're really excited about the Canadian business and the closer we get to it, the more we like it. And that's for a couple of reasons. If you think about demand, from a trend standpoint, Canadian refined product demand tends to mirror that in the U.S. albeit on a relative basis, it's been stronger in recent years. So where the U.S. has been flat to slightly off on a year-over-year basis, Canada has been flat to slightly up over the last couple of years.

And the margin environment is actually very strong. So where we have street margin exposure in Canada are markets that structurally look and feel very similar to the West Coast and the U.S. and the Northeast, where you have high barriers to entry, highly regulated markets, high real estate costs, high labor costs. And if you followed our story, you know that those things are highly correlated with strong margin environments. So we feel really good about the business. And overall, the Canadian business is going to be an outstanding addition to our portfolio.

And then moving on to the Caribbean. Matt, we continue to be really excited about the Caribbean. I think it's important to remember that we talk about the Caribbean as if it's the singular monolithic region. The reality is we deliver refined products to 25 different jurisdictions in the region, 22 of which we have onshore business in. And so each of those are going to come with their own specific volume and demand -- or volume and margin profiles. What I will say largely is volume is very strong in the region. A lot of that's driven by markets where exposure like in South America, where, for example, a country like Guyana, where we're the major share player has had 20-plus percent GDP growth over the last 3 years. and Suriname is likely up next, given the offshore oil discoveries in both of those countries.

But across the region, we've seen strong demand. And then on the margin side of things, the markets kind of fall into 1 of 2 categories. What we've seen is there's highly regulated pricing environments, which has actually had the result of stabilizing margins higher for all participants in those markets. And then there's the more kind of free market open competition markets where our share, our global supply chain and our scale allow us to enjoy and command a significant margin advantage over other participants in the market.

So just to wrap it all up, I think overall, I think we've proven over the years the consistency and resiliency of the field distribution segment and our ability to grow EBITDA year-over-year. And now with our addition of the Canadian business and the Caribbean business, we're better positioned than ever in the segment to continue to grow EBITDA going forward.

Thank you for that detailed answer Austin. Maybe turning to the infrastructure outlook. Can you walk us through the pro forma terminaling portfolio post integration of Parkland and Tankland? And how do the assets now position you across the Atlantic and Pacific basins amid evolving product flows? And where do you see the most attractive growth opportunities from here within your portfolio?

Yes, Theresa, this is Karl. Yes. We've got -- as you point out, across the geographies that Austin just talked about in each 1 of those geographies, and then if you add Europe into the mix, we have critical infrastructure in each of those markets. And I think it varies by market, but our general approach and view is in many of those markets, I'd say the Caribbean is probably the easiest 1 to think about our infrastructure really supports and is foundational for our fuel distribution business. In other markets, take Europe, we don't have a fuel distribution business yet, but the assets that we've picked up are highly utilized and very important infrastructure to -- in the supply chain of those markets.

And then we have other geographies, whether it's in the West Coast or in the Northeast, where our terminal and pipeline network supports other people's moving product around as well as our own business. And so I think we have examples of each end of that spectrum and we've talked about the opportunity for this vertical integration between our field distribution business and our assets. But we've also talked about how all parties are welcome, and we have customers because our overall approach is to fully utilize the assets that we have. So as we go forward, I think the same playbook is applicable.

We think there's more runway to go. I think there's there's more opportunity, whether it's through kind of quick hitting capital projects that we've talked about or additional M&A opportunities to grow that footprint.

Our next question comes from the line of Jeremy Tonet from JPMorgan Securities LLC.

This is Eli on for Jeremy. Just wanted to start on the outlook for bolt-on M&A, which I know you touched on in opening remarks. I'm not sure if this has historically been part of forward guidance, but if we think about the $500 million annual target with respect to your guide, should we think about sort of execution there as upside to the guide? And the long-term outlook, I know you guys executed a roll up earlier in the year. So just thinking about contributions from that and the overall strategy with respect to guidance.

Eli, this is Joe. Like I said in my prepared remarks, I think we have a highly attractive long-term growth story. The foundation of that is we're in a very good financial position -- we've invested wisely and our free cash flow continues to grow. So we have more dollars to spend on growth on a going-forward basis. And as Karl and Austin talked about the Parkland acquisition and with our entrant to Europe, we've greatly expanded our scale and our geographies. So not too long ago, we were basically a U.S.-only business. Now we have investment opportunities in U.S., Canada, Greater Caribbean and Europe. The U.S. is going to still remain our foundation. Like for example, last year, we did over 10 small bolt-on acquisitions in the U.S. alone. And we could have probably done a lot more but we kind of slowed down because we had the part acquisition we're closing on.

So the runway of doing these, we gave the guidance of $500 million, we could probably do that alone in the U.S. Then you add on Canada, Greater Caribbean and you add on Europe, you can see why we think that providing guidance of doing at least $500 million, we think is a floor and is very reasonable for us for next year and for multiple years to come. On the valuation standpoint, the landscape hasn't changed that much for us. We think the valuations are still highly attractive. And the reason why we believe that is because we're 1 of the very few may be only company in this sector that can bring material synergies to the table.

So valuation remains in the same ballpark. But as we get bigger and we have more scale, we remain efficient being a low-cost provider, we get advantage economics. That's why we felt very comfortable this year providing a bolt-on guidance for our investors. As far as -- you mentioned a question about guidance. Here's the way I think you should think about it. If we do more than materially more than $500 million and '26, yes, that gives us some upside for '26. It depends on the timing of that. But I think the way you should think about it is that that's the floor, and that's a sustainable floor on a multiyear basis which gives us kind of a year-after-year growth in our story.

Awesome. Appreciate the color there. And then thinking about the impact of these bolt-ons maybe with respect to the Suns dividend and some distribution equivalents, I know you extended that equivalence recently. But if we think about sort of these bolt-ons helping avoid any tax leakage has the team considered extending that guidance? Again, I know you already extended it, but just in the context of Sun and Sun s the way they trade. Just thinking about the long-term kind of tax protection there?

Yes. Eli, this is Scott. In our investor materials that we published last year, we talked about the fact that we expect minimal corporate income taxes for at least 5 years. A lot of that was predicated on our outlook for the business itself and certainly continuing to invest in the business either through acquisitions or growth capital will help us manage that tax profile going forward. So as we sit here today, there's really no change to that minimal corporate income taxes for at least 5 years, which, again, has given us confidence that the distribution between SunC and Sunoco LP will continue for that period of time.

Let me add 1 other thing to that. I think 1 of your -- where you're going with the question is that we gave the 5-year -- at least 5 years with, I would say, probably a modest assumption of growth we believe we're going to grow materially. So any type of material growth on top of that will put us in a better position on a going-forward basis.

[Operator Instructions] Our next question comes from the line of Selman Akyol from Stifel.

So just a point of clarification real quick. On the $500 million in bolt-on acquisitions, would that all be U.S.-based? Or would that be across your entire footprint now?

It's Joe. It will be across the whole footprint. And I guess the point I was trying to make earlier is that the U.S. is kind of the foundation. And on a U.S. alone, we may be able to do that just on U.S. alone. But the way we're going to look at it is best project win. So now we get to choose between U.S., Caribbean, Europe, Canada. And then so the best projects are the ones we're going to take -- we're going to look at first. But in totality, it's the whole kind of a global perspective.

Got it. And then last week, there was a revision on the greenhouse gases endangerment finding. So rolling back sort of greenhouse gas as a threat to public health. Can you guys just talk about how that may be impacting you or what you think that might do?

Yes. It's early stages. So more clarity is going to come out in the future. But there's some initial thoughts. In the short run, there is no effect on Sun, longer term, it is bullish for refined products, other variables equal. Additionally, any time there's any legislation that creates potentially state-by-state specs and add complexity that's always going to be good for Sun. We thrive in those environments whenever there's complexity and we have the team and scale to source from all different areas. So that's going to be bullish for us.

On a personal level, and I think I speak for many people, the elimination of the annoying start-stop engine cutoff function, I think, is going to be a really good development.

Okay. And then last 1 for me. You've kind of teased it up several times where you talk about distribution growth of at least 5% and then listening to all your comments, things seem to be going exceedingly well, your outlook seems to be very confident and very bright. So what does it actually take to see something on the plus side of 5%?

Yes. So here's the most important takeaway. We have a multiyear growth in distribution. For this year, we raised the 2% 3 years ago, 4% of -- 4% 2 years ago, and we raised a little bit over 5% last year. And this year, we stated at a minimum 5%. As far as an exact amount, we haven't determined that yet, but then the takeaway is going to be on a multiyear basis. We're in a really good position. It's not just distribution. We're going to take care of our balance sheet. We're going to remain a growth company. So -- we fully -- you can tell from our results, and you could tell from the guidance, you can tell from the tone of this call, we think that we're going to continue to grow our business. And we're going to grow DCF per common unit our cash flows are going to expand. We're in a very good position from a capital allocation standpoint. We're going to have more dollars to deploy to all 3 areas. The exact allocation, that's our job to optimize that to make sure that we don't just take care of the short run before the long run. So stay tuned. We'll -- as the year goes on, we'll provide more clarity at the exact allocation, but the takeaway should be the number is growing. So we're going to have more options to deploy that in all 3 areas.

Our next question comes from the line of Elvira Scotto from RBC Capital Markets.

On M&A, I have a couple of questions on M&A. I guess, first, where do you see the greatest opportunity? Is it terminals, fuel distribution and then my second question on M&A. Is there a gating item on M&A? You talked about sort of a $500 million floor. You've become a much bigger, more diversified company. I mean, is there a ceiling or anything that would keep you from doing more substantial M&A?

Elvira, it's Joe. As far as the greater opportunity, the answer is all of the above. We're going to grow our Midstream business. We're going to grow our fuel distribution business, and we're going to grow in all the geographies that we're in right now. So that's the position that we like being in. We're not so focused on a single geography or so focused on a single segment of our business. And the way we're going to do it is that we have growing growth capital some of the Parkland acquisitions that we acquired, for example, like in Guyana, Suriname, we've already had 3 terminal projects in the works in those markets.

So we're going to get some natural growth from being in the right market with the right business from a decision between which one, I would go back to capital discipline and choosing the best projects. And we've got a wide range of opportunities, and we'll pick the best projects. As far as your question about a gating item or ceiling, probably a little bit of clarification on the guidance we gave. We said at least $500 million of bolt-on acquisition. That's not saying that we think that's a target acquisition number. And based on the fact that we're already back to our 4x leverage within 3 or 4 months -- 2 months.

So we're going to take care of our balance sheet. If we were -- I think after the Parkland transaction, we said we'll be back between 12 to 18 months. Well, we got back a lot quicker. So now we're in even a better position to grow on a going-forward basis. [ 500 ] for us I thought, was a pretty low bar for us to at least give -- the Street that these bolt-on acquisitions aren't just sporadic that we may pick up a few this year, maybe a few -- a couple of years now, they're ratable and the fact that U.S. is a super highly fragmented market on the field distribution side. So we have ample opportunities as far as Canada and the Greater Caribbean it's not as fragmented as the U.S., but there's plenty of opportunities.

And I keep emphasizing scale matters in this business. Whenever you're the biggest player with the most efficiencies regardless of what the market valuation is, we have the opportunity to take a turn or 2 or more down that acquisition. So that becomes highly attractive to us. So I would give guidance to -- that we think that $500 million of bolt-on acquisitions, this doesn't include growth capital. It doesn't include. Bigger opportunistic acquisition. But as a baseline, I think you should view us is that we have a solid layer of organic growth capital and we have a solid layer of bolt-on M&A.

That's very helpful. And then my next question is, now that you've closed on Parkland, you've had it for a few months, how do you feel about your synergy target? And you have a very good track record of exceeding these targets on your acquisitions. So do you think there's a possibility of exceeding your target here?

Yes, Elvira, this is Karl. Yes, we're very excited about Parkland. I think Austin gave a good rundown of the various geographies from the fuel distribution side. And I'd say from the other parts of the business that we picked up, I think we're equally excited. Yes, I think our past history would show if you were deciding to take the over the under, I would take the over on us delivering on our synergies also. I think our main focus is delivering on the synergies quickly. And so for us to be -- to deliver in year in 2026, $125 million. Clearly, we'll be ramping up through the year. Some of those activities already started in the fourth quarter. And so we should exit the year well north of that $125 million on a run rate basis.

But the other thing that's super important is the base business. And so our view on how strong that base business is and the sustainability of that going forward is just as important. And so it's really the combination of those factors that gives us confidence in the 2016 guidance and then going forward in '27 and '28. Joe mentioned in his last answer, the 2 metrics that we look at in totality that are the most important. It's really where our leverage sits. And are we delivering on our commitments on growing the DCF per LP unit. And we're very confident in those for this year and beyond. And I guess bottom line is, I think NuStar was a home run acquisition and Parkland is going to be another home run acquisition for us.

Thank you. At this time, I would now like to turn the conference back over to Scott Grischow for closing remarks.

Thanks for joining us on the call today. There are a lot of exciting things to look forward to in 2026 for Sunoco, and we look forward to updating you across the year. In the meantime, please feel free to reach out if you have any questions. Thanks for tuning in, and we appreciate your support.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Greetings, and welcome to Sunoco's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Scott Grischow. Thank you. You may begin.

Thank you, and good morning, everyone. On the call with me this morning are Joe Kim, Sunoco LP's President and Chief Executive Officer; Karl Fails, Chief Operating Officer; Austin Harkness, Chief Commercial Officer; Brian Hand, Chief Sales Officer; and Dylan Bramhall, Chief Financial Officer.

Today's call will contain forward-looking statements. Please refer to our earnings release and SEC filings for risk factors and reconciliations of non-GAAP financial measures, including adjusted EBITDA and distributable cash flow as adjusted. It has been another busy quarter for Sunoco, and I'd like to begin my remarks by providing a brief recap. Last week, we successfully completed the acquisition of Parkland Corporation. In a transaction valued at approximately $9 billion. This transaction has created the largest independent fuel distributor in the Americas and a leading operator of energy infrastructure. We are confident it will provide compelling financial benefits for our unitholders.

As our asset portfolio has evolved over the past several years, we have significantly improved the stability of our income while also strengthening our financial position and scale. Over the past 12 months, Sunoco and Parkland on a combined basis, generated over $3 billion in pro forma adjusted EBITDA, across our field distribution business and our midstream operations. The Parkland acquisition will be immediately accretive to distributable cash flow per common unit, and we expect over $250 million in synergies by 2028, which will result in greater than 10% accretion.

Additionally, our highly successful financing transactions executed in September outperformed our expectations and will deliver approximately $40 million of additional annual cash savings. This transaction, combined with our proven track record of disciplined capital allocation will create greater financial flexibility for ongoing distribution growth solid free cash flow and strengthened credit profile. Finally, I'm pleased to remind investors that tomorrow, Thursday, November 6, Sunoco will begin trading on the New York Stock Exchange under the ticker Sun C. This new C corp tracker broadens investment options. As a reminder, Sun C is taxed as a corporation and issues of Form 1099, making it an attractive option for investors outside of the United States, domestic institutional investors and personal retirement accounts.

Now turning to our financial and operating results. The third quarter continued Sunoco's strong financial and operational performance throughout 2025. The partnership delivered a record third quarter with adjusted EBITDA of $496 million compared to $470 million a year ago, both excluding onetime transaction-related expenses. Distributable cash flow as adjusted came in at $326 million for the third quarter. In the third quarter, we spent approximately $115 million on growth capital and $42 million on maintenance capital. This includes the partnership's proportionate share of capital expenditures related to our 2 joint ventures with Energy Transfer of $16 million for growth capital and $4 million for maintenance capital.

Turning to the balance sheet. As of the end of the third quarter, a $1.5 billion revolving credit facility had no outstanding borrowings. Leverage at the end of the quarter was approximately 3.9x. Following the closing of the Parkland transaction, our credit facility was increased by $1 billion to $2.5 billion, which will provide greater liquidity for the partnership moving forward. As of today, our credit facility is currently undrawn. On October 20, we declared a distribution for the third quarter of $0.9202 per common unit or approximately $3.68 on an annualized basis. This represents an increase of 1.25% compared with the previous quarter and resulted in a trailing 12-month coverage ratio of 1.8x. This marks the fourth consecutive quarterly increase in Sunoco's distribution and is consistent with an annual distribution growth rate of at least 5%.

I would like to conclude my remarks by stating that our financial position continues to be stronger than any time in Sunoco's history. Our legacy business remained strong as exhibited by our record third quarter adjusted EBITDA. Prior to closing the Parkland acquisition last week, we were on a path to achieve our 2025 adjusted EBITDA guidance. And intend to provide formal 2026 guidance for the combined company early next year.

With that, I will turn the call over to Karl to discuss our operational results.

Thanks, Scott. Good morning, everyone. As Scott walked through, our teams have been very busy this quarter and the operational and financial results highlight the strength of our business and the benefits that come from accretive growth. We delivered strong results across all 3 segments. So let me walk through some of those details. Starting with our fuel distribution segment. Adjusted EBITDA came in at $238 million excluding $6 million of transaction-related expenses compared to $214 million in the second quarter and $253 million in the third quarter of last year.

Volumes came in at 2.3 billion gallons during the quarter, up 5% from last quarter and up 7% compared to the third quarter of last year. This volume growth far outpaces total U.S. volume growth for both gasoline and diesel, showcasing that our investments are yielding tangible results in both our growth capital program and fuel distribution bolt-on transactions. Reported margin for the second quarter was $0.107 per gallon compared to $0.105 per gallon in the second quarter and $0.128 per gallon in the third quarter of 2024. When we look at margins across our system, there are a few perspectives worth pointing out. First, we believe that breakeven margins continue to be supported by by many of the same factors that we have discussed over the past few years, including inflation resulting in higher costs, limited overall volume growth across the industry and higher interest rates.

Second, we have seen some tempering of market volatility, which has not produced an outsized fuel profit quarter like we saw during the second and third quarters of last year. Even with that headwind, however, this has been a great year in our fuel distribution business. Once you normalize for the sale of our West Texas retail business in 2024 at a very attractive multiple, we expect that in 2025, we will have grown segment EBITDA for the seventh year in a row. The business continues to deliver very strong results. In our Pipeline Systems segment, adjusted EBITDA for the quarter was $182 million, compared to $177 million for the second quarter and $147 million for the third quarter of last year, all excluding transaction-related expenses. Segment throughput was 1.3 million barrels per day compared to 1.2 million barrels per day in the second quarter and 1.2 million barrels per day in the third quarter of last year.

During the quarter, we saw strong performance across all our pipeline systems on both volumes and gross profit. Turning to our terminal segment. We delivered adjusted EBITDA of $76 million, excluding $1 million of transaction-related expenses compared to $73 million in the second quarter and $70 million in the third quarter of last year, both excluding transaction-related expenses. Segment throughput was 656,000 barrels per day, down from 692,000 barrels per day in the second quarter and 694,000 barrels per day in the third quarter of last year. Our transmix business continues to have a strong year, supported by good performance in our terminals assets across all our regions. We expect to finish the year strong in our 2 midstream segments, highlighting the stability of the underlying assets which continues to deliver market share gains and stable earnings.

This strategy is complemented by our midstream operations. With the Parkland transaction now closed, our confidence in its highly accretive value has grown steadily over the past several months. It is another opportunity for us to deliver on our strategies complement maintaining reliable operations with the Parkland [indiscernible] closed optimizing gross profit highly accretive value effective and deploying capital. It is another. I will now turn the call over to [indiscernible].

Thanks, Karl. Good morning, everyone. Management .

We delivered a very optimizing gross profit, although 2025 is not quite over I want the to provide house. On the last earnings call, we back half of this year the first half we delivered third quarter results. In the playing out as mandated and we'll deliver another record year on this year as a whole. All 3 business segments are performing well. our field distribution business continues to grow and provide stable earnings. With the third quarter pipeline and terminal segments also form at a high level, and we'll deliver another New Star acquisition is proving to be well we've reduced expenses by 25% to grow improving gross profit and maintaining reliance Pipeline and Terminal segment for the Parkland acquisition, let me start off by last year's [ NuStar ] acquisition is proving to be outstanding. We have reduced expenses by 25% while improving gross profit and maintaining reliability. As for the Parkland acquisition, let me start off by publicly welcoming the Parkland employees to the Sunoco team. With the closing complete, we posted a new investor presentation earlier this week. I want to highlight some key insights. Both legacy Sunoco and legacy Parkland are performing as expected. As I said earlier, Sunoco will have another record year. As for Parkland, the 2025 year-to-date results have materially outperformed 2024. When you combine the 2 businesses together, our diversified portfolio spans across the U.S., Canada, the Greater Caribbean and Europe.

We will deliver over 15 billion gallons of refined products. Scale is vital in our business, and we are now the largest fuel distributor in the Americas. Specifically within our midstream and fuel distribution portfolio, the Parkland addition greatly enhanced our position in the Atlantic Basin. We have over 7 billion gallons of contracted fuel demand from Eastern Canada to the U.S. East Coast to the Caribbean to South America. Throughout this footprint, we also have a leading position of terminals and the expertise to manage waterborne and other sourcing options. Bottom line, scale plus key assets equals a leading supply cost advantage. Moving forward, our immediate top 2 priorities are: number one, integrating Parkland; and number two, getting our balance sheet back to 4x leverage. Just like we did with the NuStar acquisition, we'll quickly make key decisions to integrate the 2 companies to achieve synergies as soon as possible. We expect more than $250 million in synergies, we're digging deep into every part of the acquired business. We will provide more precision and timing when we complete the process. As for the balance sheet, we expect to be back to our long-term target leverage of 4x within 12 months.

This is faster than the time line that we gave back in May. Let me wrap up. As Scott mentioned earlier, the [ PowerPlan ] transaction is highly attractive with a greater than 10% accretion. Going forward, we expect free cash flow to be over $1 billion a year in the near future. The over 50% increase versus our stand-alone case puts us in a better position to execute on our capital allocation strategy, which is accretive investments, distribution growth and a strong balance sheet.

Operator, that concludes our prepared remarks. You may open the line for questions.

[Operator Instructions] Our first question comes from Spiro Dounis with Citi.

First question, Joe, maybe just to pick up on some of those closing comments around synergies. Looking like the floor now is sort of firmly around over $250 million here. I know you're a few days into this merger, but I also know you've been busy in the background, getting ready for this integration. So curious if you have a sense for just maybe how much above that $250 million we should have in mind? Are these more commercial or cost in nature maybe how are you thinking about the cadence of realizing those over the next 3 years?

Spiro, this is Karl. Yes, really, to build on Joe's comments in his prepared remarks, there were really 2 updates that we provided in the release and in the investor deck earlier One was the floor on the synergy number and then the second was tightening our time frame on getting back to the 4x leverage to within 12 months. And really, that comes because of the confidence we have based on the work we've done in the last 6 months. There are material synergies on both the expense and commercial side. I think the best way to think about the expense side of things, whenever you put 2 large companies together, you get to leverage the scale to find efficiencies and we've spent the integration planning period planning that. And I'd say, already a lot of those plans were started to be executed this weekend after we closed.

Then you layer on that, that we have a very strong track record of good expense discipline. And so we feel there's a lot of opportunity there. But on the commercial side, our scale helps us as well. The teams have begun putting together plans. Most of those are on the supply side, but there are also going to be some opportunities on how we go to market that should yield results, as far as your question on the cadence, you should expect that when we issue guidance early next year that we'll give more details on what that ramp looks like through year 3 where the $250-plus million should be able to be delivered. And as far as your question on the ultimate upside looks like, here's how we think about it. The 2 primary measures on this acquisition that we're going to be focused on and both of them are very visible to -- the street. Are first, that we meet our commitment on getting leverage back to 4x within 12 months. And second, that we're going to show a double-digit accretion on a DCF per LP unit basis.

So synergies clearly are the strongest lever we have to hit those metrics. But at some point in the future, those are going to merge with just improvements in growth in the base business that we've acquired. So -- so bottom line is we feel very confident and we're going to hit on those metrics as we've laid out.

Great. Second one, maybe just going to Sunoco Corp's dividend equivalency looks like the latest update points to minimal taxes for at least 5 years. Just curious, can you put a finer point on what that means for SUN C dividend equivalent over that period. And what's within your control to maybe push that out even further?

Yes, Spiro, this is Scott. Look, there was no change to our 2-year dividend equivalency that we announced with the transaction in May. This was a feature that we granted as part of the Parkland transaction. Our intention is to keep the Sense distribution very similar to Sunoco LP's past this time period and having minimal corporate income taxes is the foundation for achieving that. And as we laid out in our investor materials, we expect this to be the case for at least 5 years. I will continue to pursue opportunities and strategies that allow us to minimize corporate taxes at Sun C on an ongoing basis. Namely by deploying capital on organic CapEx and acquisitions, things of that nature, and we'll update investors when appropriate on the outlook past the 5-year period.

Our next question comes from Justin Jenkins with Raymond James.

I guess I'd like to start on the distribution side of things. So obviously, growing at a nice 5% clip, but obviously a much bigger business and a more stable business with a lot of free cash flow with Parkland. Does that give you the potential to eventually maybe push that growth target up over time beyond the at least 5% window that you've looked at here recently?

Justin, it's Joe. Obviously, I think I've said it like a broken record quarter after quarter, the foundation of our capital allocation is having a stable, reliable and growing distribution. And I think the foundation of that is we continue to grow cash flow. I think we've stated a few times that for the eighth consecutive year, we've grown DCF per common unit, and we expect that to continue for the future. Our coverage is hovering around 1.8%. Our balance sheet is in a good position. So when we said, I think, last year that we expect a multiyear distribution increase, we said that pre-Parkland, you add in Parkland with double-digit accretion. So we were in a good place before Parkland, we're in a better place after Parkland. As far as an exact amount for 2026 and above, we'll provide that as part of our kind of overall guidance early next year. But I think what you can take away though is that we're in a better position than we were even last year for meaningful distribution growth on a multiyear path.

Great. I appreciate that, Joe. Second question is on Hurricane Melissa impact. Certainly, you've got some presence in the Caribbean over time and Parkland is a bigger business in the Caribbean. Anything that you want to highlight here in terms of impact from the hurricane itself on the broader Caribbean portfolio for the fourth quarter and into 2026?

Justin, this is Austin. First, I'd just start with -- on the human side of things. Our thoughts are with the people in the region and the loss of life and property associated with the storm. This is a powerful storm. From a business standpoint, specifically, the impact to our portfolio was largely limited to the Jamaica business. And fortunately, all employees in the region have been accounted for. I think this is a credit to the team. We've got a fantastic team down there. From the work they did, including their meticulous preparation in advance of the store, making sure that the area was as prepared as possible to the swift recovery or swift response, I should say, bringing necessary people, supplies, resources into the island to assist with recovery efforts.

Just to put the business impact into a little bit more perspective, Jamaica is 1 of 25 jurisdictions and markets that we serve in the Caribbean region. And so overall, we don't expect there to be any material impact to our fourth quarter results for the segment or 2026 and beyond, but that's in no way intended to minimize, obviously, the human impact and devastation to some of the folks that were impacted in the region.

Our next question comes from Theresa Chen with Barclays Bank.

Looking at your comprehensive asset base at this point, could you share your perspective on potential opportunities for your West Coast terminaling assets as well as any incremental profitability upside for the [ Bina ] refinery in light of ongoing California refinery closures?

Yes, Theresa, this is Karl. I think Here's what I'd say. I'll start with the refinery. One is we're thankful and you see the results that the refinery team has delivered this year on improved reliability that's really been our focus and will be our focus going forward on the refinery operation. Clearly, California, there have been plenty of refinery shutdowns and different things in the news. Our strong asset base on the West Coast, while it's not as big as on the East Coast is growing and I think there's going to be opportunities. So while I don't know exactly how the markets are going to shape out over the next 2 or 3 or 4 years. I think our track record shows that when product flows shift that we have the scale and expertise to be able to take advantage of them.

So the refinery really is the platform for our fuel distribution business in Western Canada. And we have key assets down through the Pacific Northwest and into California. So if refinery shutdowns continue in the West Coast of the U.S. and Canada become import markets, we should have opportunity to supply from our refinery in Canada or we should have facilities that should enable imports coming in from outside the U.S. So I think we're well positioned to be able to take advantage of whatever wherever the markets shake out.

Got it. And what are your expectations regarding how the recently announced refined product pipeline projects could impact or create opportunities for your own Gold Coast Mid-Continent refined product pipeline infrastructure as well as your fuel distribution assets in pads 2 and 5?

Yes, Theresa. I think my answer is pretty similar to the California question. I think the -- what we don't comment specifically on certain competitors' projects, I think those, pipeline open seasons and projects that you mentioned really are an indication of some of the changes in U.S. refined product flows as a result of refinery shutdown in California. So I think the same principles are in play. We have a fuel distribution business that we have a track record taking advantage of changes in product flows. We now have an asset portfolio, terminals on the West Coast. Some pipeline systems in the Mid-Con and in Texas that we can use to invest in to provide services for either our own business or our customers.

Obviously, when things change, sometimes there are assets that are impacted negatively, but we'll have assets that are impacted positively. So as we look at that all together and our ability to work with our customers, see where we can help, meet their strategic objectives, we feel really good about our ability to benefit from these changes.

[Operator Instructions] Our next question comes from Jeremy Tonet with JPMorgan.

This is Ely on for Jeremy. I just wanted to start on the outlook. I guess what went into the decision not to update the 2025 guide today to include Parkland contributions? Would that be part of the TanQuid assent closing and just thoughts there. And then maybe on to '26 and kind of early thoughts there. I think you said you'd release guidance earlier next year versus maybe December this year. Just what are the kind of key puts and takes, base business and synergies to expect as components to the '26 guide?

This is Joe. Let me start with '25. I think the obvious reason is we just closed on Parkland and one of the statements we made earlier is that we expect to close on TanQuid with in the fourth quarter. So trying to get put too much precision on when tank what's going to happen. It gave us a good reason to be sure about what we're going to provide for guidance for next year instead of just giving an update in '25. The other thing is that -- for the reason why we typically have given guidance in December of every year, we push it to early next year. We just got all the budgets that Parkland put together for their business. Going through that with a fine [ tune ] come. [indiscernible] base business is going to perform like and that will be a significant part of our guidance for next year. As far as early thoughts on '26, I can give you a few things, I think, that might be helpful. First of all, the Parkland business is performing year-to-date, better than 2024. So we're starting with a really good baseline with Parkland. Secondly, for Sunoco, legacy business, we continue to grow. We've grown year after year and 2026 on a stand-alone basis won't be any different.

And I think Karl talked in depth about the synergies. We increased -- we put the at least $250 million in synergies. We think this is going to be an outstanding acquisition for us. We're in the process of going through more precision and exact timing and all that will come together when we give guidance. But I think the takeaway is that we feel even better about this acquisition than when we announced it in May, and we're well positioned to have another outstanding year in 2026.

Awesome. And then maybe just back to the base business. I think you talked about kind of just steady improvement there. Maybe on the fuel distribution side, just thinking about the CPG margins following the integration of PKI assets, how should we think about those margins trending as we move forward? I know you guys are the largest fuel distributor in North America, and you have a lot of economies of scale. So should we see any kind of upward pressure on those margins going forward?

Yes. Eli, let me give you a couple of thoughts about more on a segment basis. And I'll give you the pieces and then when we give guidance, all that, all this will kind of tie out together. First of all, we'll start with the PKI Parkland U.S. business, the legacy business. I think it's been well documented that they've passed some stroke with over the last few years. The exact reason, the detailed insider view. We don't have the exact details yet, but we will. And then -- but here's what I think to give you clarity on the U.S. business. We view Parkland's U.S. distribution business, just like a bolt-on acquisition, we've done time over and over again. So we're going to manage it for income stability. We're going to do gross profit optimization. We're going to cut expenses.

So in due time, pretty darn quickly, we expect the Parkland U.S. business that struggled to perform in line with what Sunoco has done year after year. So we feel very positive about that. As far as the Canadian business, the way that I would probably look at it is they had strong third quarter results. I'm not surprised these assets in Canada on field distribution has performed well year after year. The Canadian assets has some key elements that I really like. First of all, they got scale. We got scale. 1 in 5 fuel station is fueled by Parkland. So incredible scale in Parkland in Canada.

Secondly, the Canadian relative to the U.S., they've had a long history of sustained higher margins than U.S. We don't think this is going to change. And finally, we have channel management opportunities. We've done that with every acquisition we've done. We've taken the assets and we'll put it into the right channel where we think we can have the most income stability. So from a Canadian field distribution side, we think this is going to be additive to our overall fuel distribution portfolio. In the Caribbean, we see -- these are a bunch of niche markets with high margins, and we think this is going to continue. We have history in niche markets like Hawaii and Puerto Rico. And then some of these markets also have -- have material GDP growth in some of these areas that we think we'll share in the upside. So if you put it all together, I feel better about our field distribution portfolio, and that's the reason why we thought Parkland was a great fit for us.

Our next question comes from Ned Baramov with Wells Fargo.

I want to stay on the legacy Sunoco U.S. fuel distribution business here. A few factors in play on the one hand, the ongoing government shutdown and some signs of weaker fuel demand don't seem constructive for volumes. But on the other hand, as Carl pointed out, your CapEx program and roll-up transactions year-to-date add gallons to your system. Either way, you've already demonstrated an ability to protect the overall contribution from this segment across different environments. Just wanted to check if there is a change in how you think about the prospects of the fuel distribution business in the next 6 to 12 months?

Yes. This is Austin. I think you hit it. Overall, I think what we're seeing from a fuel volume standpoint is in the U.S. more broadly, demand for refined products is roughly flat year-over-year. There has been maybe some softening in recent months. But our legacy business has outperformed the broader segment, right? We're up mid to high single digits for Q3 on volumes. And a lot of that, as you pointed out, is owed to our capital allocation strategy and growth capital deployment, including growth CapEx and some of the bolt-on accretive M&A that we did in the first half of this year that's yielding benefits in Q3 and beyond.

In terms of changes to expectations, we actually see the fundamentals as strong for the segment as they've ever been. The business is healthy and with our combined now asset base with the Parkland acquisition, we're well positioned to continue our historical trend of growing EBITDA for the segment accretively year-over-year going forward.

Great. And I guess a quick question on growth capital. Could you talk about the key areas of investment for Sunoco in the third quarter other than the $16 million contribution to the gathering JV. Are you still primarily spending in support of the fuel distribution business? Or are there organic opportunities in your pipeline and terminals segments?

Yes, Ned, this is Karl. Our growth capital is spread across all of our segments. But really, it is in a best project wins type of mentality. And I -- obviously, we haven't done any large projects in our pipeline systems or terminal segments, but there's plenty of what we call smaller to medium-sized optimization-type projects. Some of them unlock more opportunities with our fuel distribution business. Some of them unlock more ratable income from third-party customers. So really, it's fuel distribution pipelines and terminals all have growth capital in addition to our parts of the JVs.

We have reached the end of the question-and-answer session. I'd now like to turn the call back over to Scott Grischow for closing comments.

Thanks for joining us on the call today. As we said, there are a lot of great things to look forward to in 2025 and beyond for Sunoco, and we look forward to updating you going forward. Please reach out if you have any questions. Thanks for tuning in, and I always appreciate your support.

This concludes today's teleconference. You may disconnect your lines at this time, and we thank you for your participation.