Q4 2023 Sunoco LP Earnings Call

Operator: Greetings and welcome to Sunoco LPS's fourth quarter and full year 2023 earnings conference. At this time, all participants are on a listen only.

Greetings and welcome to Sunoco L. P S fourth quarter and full year 2023 earnings conference call. At this time, all participants are in a listen only mode.

Operator: A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press Darzi on your telephone. I would now like to turn the conference over to your host, Scott. Thank you.

Speaker Change: A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded I would now like to turn the conference over to your host Scott Chris Schott. Thank you you may begin.

Scott Grischow: Thank you and good morning everyone. On the call with me this morning is Joe Kim, Sunoco LP's President and Chief Executive Officer. Carl Sales, Chief Operations Officer; Dylan Bramhall, Chief Financial Officer. Austin Harkness, Chief Commercial Officer, and other members of the management team. Today's call will contain forward-looking statements that include expectations and assumptions regarding the partnership's future operations and financial performance. Actual results could differ materially, and the partnership undertakes no obligation to update these statements based on subsequent events.

Okay.

Speaker Change: Thank you and good morning, everyone on the call with me. This morning are Joe Kim.

Speaker Change: Bob Pease, President and Chief Executive Officer.

Speaker Change: Sales Chief operations Officer, Don <unk>, Chief Financial Officer, Austin, Harkness, Chief Commercial officer, and other members of the management team.

Speaker Change: Today's call will contain forward looking statements that include expectations and assumptions regarding the partnerships future operations and financial performance.

Speaker Change: Actual results could differ materially and the partnership undertakes no obligation to update these statements based on subsequent events.

Scott Grischow: 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 their 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. 2023 was a record year for the partner.

Speaker Change: Please refer to our earnings release as well as our filings with the SEC for a list of these factors.

Speaker Change: During today's call. We will also discuss certain non-GAAP financial measures, including adjusted EBITDA and distributable cash flow as adjusted.

Speaker Change: Please refer to the Snorkel LP website for a reconciliation of each financial measure.

Speaker Change: 2023 was a record year for the partnership.

Scott Grischow: The combination of a strong and stable base business coupled with a proven history of financial discipline has allowed us to, yet again, deliver on the expectations we lay out each year. I would like to start by looking at some of our fourth quarter and full year 2023 highlights. Suggested EBITDA for the fourth quarter was $236 million, compared to $238 million a year earlier. The partnership sold over 2.2 billion gallons in the fourth quarter, up 11% from the fourth quarter last year. Fuel margin for all gallons sold was 12.3 cents per gallon, compared to 12.8 cents per gallon a year ago.

Speaker Change: The combination of our strong and stable base business, coupled with a proven history of financial discipline has allowed us to yet again deliver on the expectations, we laid out each year.

Speaker Change: I would like to start by looking at some of our fourth quarter and full year 2023 highlights.

Speaker Change: Adjusted EBITDA for the fourth quarter was $236 million.

Speaker Change: <unk> to $238 million a year ago.

Speaker Change: The partnership sold over $2 2 billion gallons in the fourth quarter up 11% from the fourth quarter of last year.

Speaker Change: Steel margin for all gallons sold was $12 three per gallon compared to $12 eight per gallon a year ago.

Scott Grischow: Total fourth-quarter operating expenses were $145 million, an increase of $7 million from the same period last year. During the fourth quarter, we spent $50 million of growth capital and $33 million in maintenance capital. Fourth quarter distributable cash flow as adjusted was $148 million, compared to $153 million in the fourth quarter of 2022, yielding a current quarter coverage ratio of 1.6%. On January 25th, we declared an 84.2 cents per unit distribution, consistent with last month.

Speaker Change: Total fourth quarter operating expenses were $145 million, an increase of $7 million from the same period last year.

Speaker Change: During the fourth quarter, we spent $50 million of growth capital and $33 million and maintenance capital.

Speaker Change: Fourth quarter distributable cash flow as adjusted was $148 million.

Speaker Change: Compared to $153 million in the fourth quarter of 2022, yielding a current quarter coverage ratio of one six times.

Speaker Change: On January 25th we declared an 84.2 cent per unit distribution consistent with last quarter.

Scott Grischow: The stability of our business and history of delivering results continues to support a secure and growing distribution for our universe. Turning to the balance sheet, at the end of the fourth quarter, we had approximately $400 million outstanding on our revolving credit facility, leaving approximately $1.1 billion of liquidity. Leverage at the end of the quarter was 3.7 times, below our long-term target of four.

Speaker Change: The stability of our business and history of delivering results continues to support a secure and growing distributions for our unit holders.

Speaker Change: Turning to the balance sheet at the end of the fourth quarter, we had approximately $400 million outstanding on our revolving credit facility, leaving approximately $1 $1 billion of liquidity.

Speaker Change: Leverage at the end of the quarter was three seven times.

Speaker Change: Below our long term target of four times.

Speaker Change: Yeah.

Scott Grischow: As I mentioned earlier, 2023 was a record year for the partnership. We met or exceeded expectations in our guidance metrics, further reinforcing our record of delivering on expectations. Full year 2023 adjusted EBITDA was $964 million, a 5% increase versus the prior year. Fuel volume was over 8.3 billion gallons, up 8% versus 2022's volume, and the largest reported in the partnership's history. Fuel margins continue to remain strong at 12.7 cents per gallon, flat to 2022. Total operating expenses were $550 million, in line with our revised guidance.

Speaker Change: As I mentioned earlier 2023 was a record year for the partnership we met or exceeded expectations in our guidance metrics.

Speaker Change: Further reinforcing our record of delivering on expectations.

Speaker Change: Full year 2023, adjusted EBITDA was $964 million, a 5% increase versus the prior year.

Speaker Change: Fuel volume was over $8 3 billion gallons up 8% versus 2020, twos volume and the largest reported in the partnership's history.

Speaker Change: Margins continued to remain strong at $12 seven per gallon.

Speaker Change: That to 2022 levels.

Speaker Change: Total operating expenses were $550 million in line with our revised guidance range.

Scott Grischow: Finally, our full-year coverage ratio of 1.8 times and leverage ratio of 3.7 support key elements of our capital allocation strategy to maintain a secure distribution and protect our balance. I'd like to wrap up my comments by briefly reviewing the series of strategic transactions we announced in January. First, the acquisition of two European product terminals from Zenith Energy for €170 million, including working capital. We plan to close this transaction by the end of the first quarter and fund it with availability on our revolving credit. We expect the acquisition to be accretive to our unit holders in the first year. Next, we will divestiture our West Texas marketing assets to 7-Eleven for approximately $1 billion. This transaction is expected to close in the second quarter of 2024 and will allow Sunoco to materially reduce leverage, positioning us favorably for future growth. And finally, the acquisition of New Star Energy in an all-equity transaction valued at $7.3 billion. We expect this acquisition will close in mid-2021. With that, I will turn the call over to Carl to walk through some additional thoughts on our fourth-quarter performance and commentary on our recent announcements. Thanks, Scott. Good morning, everyone.

Speaker Change: Finally, our full year coverage ratio of one eight times and leverage ratio of three seven times support key elements of our capital allocation strategy to maintain a secured distribution and protect our balance sheet.

Speaker Change: I'd like to wrap up my comments by briefly reviewing.

Speaker Change: The series of strategic transactions, we announced in January.

Speaker Change: First the acquisition of two European product terminals from Zenith energy for 170 million euros, including working capital we plan to close this transaction by the end of the first quarter and funded with availability on our revolving credit facility.

Speaker Change: We expect the acquisition to be accretive to our unit holders in the first year.

Speaker Change: Next the divestiture of our West, Texas marketing assets to 711 for approximately $1 billion.

Speaker Change: This transaction is expected to close in the second quarter of 2024 and will allow sunoco to materially reduce leverage positioning us favorably for future growth.

Speaker Change: And finally, the acquisition of new start energy and an all equity transaction valued at $7 $3 billion. We expect this acquisition will close in mid 2024.

Speaker Change: With that I will turn the call over to Karl to walk through some additional thoughts on our fourth quarter performance and commentary on our recent announcements.

Karl: Thanks, Scott Good morning, everyone. We.

Carl: We delivered another strong quarter, capping off another record year. When you look at both the quarter and the full year, our results were supported by continued margin strength, volume growth, consistent expense discipline, and efficient operations, starting with margins. This quarter continued many of the same themes of the past few years, mainly higher break-even margins, continued volatility in fuel prices, and efficient execution of our gross profit optimization strategy.

Karl: We delivered another strong quarter capping off another record year.

Karl: When you look at both the quarter and the full year. Our results were supported by continued margin strength volume growth consistent expense discipline and efficient operations.

Karl: Turning with margins this quarter.

Karl: Continued many of the same themes of the past few years, mainly higher breakeven margins continued volatility in fuel prices and efficient execution of our gross profit optimization strategies.

Carl: These have all contributed to expanded margins the past few years, and we don't see any of those factors changing as we look forward. With respect to volumes, we were up 11% in the fourth quarter versus the fourth quarter of last year and up about 4% from the third quarter of this year. The continued growth in volume relative to prior years comes primarily from good execution on capital deployed. This quarter marks the highest volume quarter in our history and the third consecutive quarter above 2 billion gallons.

Karl: These have all contributed to expanded margins of past few years, and we don't see any of those factors changing as we look forward.

Karl: With respect to volumes, we were up 11% in the fourth quarter versus the fourth quarter of last year and up about 4% from the third quarter of this year.

Karl: The continued growth in volume relative to prior years comes primarily from good execution on capital deployed.

Karl: This quarter marks the highest volume quarter in our history and the third consecutive quarter above 2 billion gallons.

Karl: As I pointed out on our last call when compared to overall U S gasoline and diesel demand. It is clear we continue to outpace the sector. Another sign that our growth is delivering tangible results.

Carl: Turning to expenses, consistent discipline in managing our expenses remains one of our core strengths, and our fourth-quarter results firmly demonstrate that as they were only slightly up from the third quarter and remained within our guidance for the full year even as we continue to grow. For 2024, we're off to a good start.

Karl: Turning to expenses.

Karl: Consistent discipline in managing our expenses remains one of our core strengths and our fourth quarter results firmly demonstrate that as they were only slightly up from the third quarter and remained within our guidance for the full year, even as we continue to grow.

Karl: For 2024, we're off to a good start.

Karl: Our base business remains strong.

Carl: 2023 was evidence of this, and we expect 2024 to be a continuation of the same, as we expect the same factors that contributed to our overall performance last year to remain in place for this year and beyond. Let me give you some added perspective on a couple of our recent announcements, starting with the acquisition of the Zenith terminals in Europe. These are great assets.

Karl: 2023 was evidence of this and we expect 2024 to be a continuation of the same as we expect the same factors that contributed to our overall performance last year to remain in place for this year and beyond.

Speaker Change: Let me give you some added perspective on a couple of our recent announcements starting with the acquisition of the Siemens terminals in Europe.

Speaker Change: These are great assets.

Carl: They have high-quality, long-term customers, and their strategic position in Europe guarantees a long, useful life. Additionally, they provide us with increased supply optionality when it comes to our East Coast and Caribbean operations. When you think about our vast network of East Coast locations, roughly 50% of these are supplied by water.

Speaker Change: Have high quality long term customers and their strategic position in Europe guarantees a long useful life.

Speaker Change: Additionally, they provide us with increased ply optionality when it comes to our east coast and Caribbean operations.

Speaker Change: When you think about our vast network of east coast locations roughly 50% of these are supplied by water.

Carl: Adding the European terminals gives us additional opportunities to optimize our supply costs and deliver increased value to our customers. Our overall thoughts around this deal were similar to the deal we announced over a year ago in Puerto Rico, the opportunity to create value with the combination of a fuel distribution business with strong midstream assets that also provide a platform for growth. New Star has a high-quality asset portfolio that strengthens and diversifies our company. We laid out our strategic rationale for this acquisition in our investor presentation a few weeks ago. Sitting here a month later, we could not be more excited about the opportunity to bring these two companies together. We have a very detailed integration planning process and have begun working with NuSTAR on getting that in motion.

Speaker Change: Adding the European terminals gives us additional opportunities to optimize our supply cost and deliver increased value to our customers.

Speaker Change: Our overall thoughts around this deal were similar to the deal we announced over a year ago in Puerto Rico.

Speaker Change: The opportunity to create value with a combination of our fuel distribution business with strong midstream assets that also provide a platform for growth.

Speaker Change: Next the acquisition of New Star Neustar has a high quality asset portfolio that strengthens and Diversifies our company.

Speaker Change: We laid out our strategic rationale for this acquisition and our Investor presentation, a few weeks ago.

Speaker Change: Sitting here a month later, we cannot be more excited about the opportunity to bring these two companies together.

Speaker Change: We have a very detailed integration planning process and have begun working with new star on getting that in motion.

Carl: As we laid out a few weeks ago, this acquisition will open up new opportunities for the company in terms of geography, business lines, and operations. And we are looking forward to our expected closing in the second quarter. While these transactions provide a boost to our growth, they are really a continuation of our strategy of the past few years. This is who we are.

Speaker Change: As we laid out a few weeks ago. This acquisition will open up new opportunities for the company in terms of geography business lines and operations and we are looking forward to our expected closing in the second quarter.

Speaker Change: While these transactions provide a boost to our growth they are really a continuation of our strategy of the past few years.

Speaker Change: This is who we are.

Joe: We complete and integrate acquisitions that deliver attractive returns. We successfully deploy capital in projects that deliver EBITDA growth. And we remain focused on optimizing our gross profit and remaining disciplined on expenses. With that, I will turn it over to Joe for closing thoughts. Thanks, Carl. Good morning, everyone.

Speaker Change: We complete and integrate acquisitions that deliver attractive returns.

Speaker Change: We successfully deployed capital in projects that deliver EBITDA growth.

Speaker Change: And we remain focused on optimizing our gross profit and remain disciplined on expenses.

Speaker Change: With that I will turn it over to Joe for closing thoughts.

Joseph Kim: Thanks, Karl and good morning, everyone, we're a month and a half into 2024 and its already been a very busy year for Sun given our recent announcements, let me take the opportunity to bring it all together and put it into perspective.

Joe: We're a month and a half into 2024, and it's already been a very busy year for Sun. Given our recent announcements, let me take this opportunity to bring it all together and put it into perspective. First and foremost, our current business is strong. We had an outstanding fourth quarter, and overall, 2023 was another record year for both EBITDA and DCF. Looking forward, we expect this year to be another record year.

Joseph Kim: First and foremost our current business is strong we had an outstanding fourth quarter and overall 2023 was another record year for both EBITDA and DCF.

Joseph Kim: Looking forward, we expect this year to be another record year.

Joe: The 2024 EBITDA guidance that we provided in December remains very appropriate, even after factoring in the announced sale of our West Texas marketing assets and the Zenith Europe acquisition. Bottom line, we're confident in our base business, and our financial foundation remains solid. Thus, we're positioned to announce another distribution increase in April. Moving on to our recent announcement, Sun's strategic focus remains the same, improving stability, enhancing growth, and maintaining a strong balance sheet, resulting in a larger and, more importantly, a more compelling investment going forward. Our actions speak for themselves.

Joseph Kim: The 2020 for EBITDA guidance that we provided in December remains very appropriate even after factoring in the announced sale of our west, Texas marketing assets and Zenith Europe acquisition.

Joseph Kim: <unk> line, we're confident in our base business and our financial Foundation remains solid thus we're positioned to announce another distribution increase in April.

Joseph Kim: Moving on to our recent announcement sense strategic focus remains the same improving stability enhancing growth and maintaining a strong balance sheet, resulting in a larger and more importantly, a more compelling investment going forward our actions speak for themselves.

Joe: The upcoming addition of the two terminals in Europe is a good example of a tuck-in acquisition at a missed single-digit synergized multi-terminal. It will provide supply optimization, increased stable income, and future growth opportunities. The announced sale of our West Texas marketing assets demonstrates our ability to optimize a portfolio of income streams, position the balance sheet for material growth, and provide an accretive transaction for unit holders on a standalone basis. And finally, the New Star Acquisition will be another big step forward. It diversifies our cash flows, boosts our credit profile, improves our trading liquidity, and enhances our growth opportunities. Financially, it is highly attractive.

Joseph Kim: The upcoming addition of the two terminals in Europe is a good example of a tuck in acquisition at a mid single digit synergize multiple it will provide supplier optimization increased stable income and future growth opportunities.

Joseph Kim: The announced sale of our West, Texas marketing assets demonstrates our ability to optimize our portfolio of income streams.

Joseph Kim: Positioned our balance sheet for material growth and provide an accretive transaction for unit holders on a standalone basis.

Joseph Kim: And finally, the new store acquisition will be another big step forward in <unk>.

Joseph Kim: <unk>, our cash flows boosts, our credit profile improves our trading liquidity and enhances our growth opportunities financially. It is highly attractive we expect a greater than 10% accretion in year, three and our balance sheet is expected to be back to our target leverage of four times within.

Operator: We expect a greater than 10% accretion in year three, and our balance sheet is expected to be back to our target leverage of four times within 12 to 18 months. With all these strategic moves set in motion, it is now time for us to execute. We have a proven history of creating value for our stakeholders, and we have positioned ourselves to build on our record of delivering results. Operator, that concludes our prepared remarks. You may open the line for questions. Thank you.

Joseph Kim: 12 to 18 months.

Joseph Kim: With all of these strategic moves set in motion. It is now time for us to execute we have a proven history of creating value for our stakeholders and we are positioning ourselves to build on our record of delivering results. Operator that concludes our prepared remarks, you may open the line for questions.

Speaker Change: Thank you at this time, we'll be conducting a question and answer session.

Operator: At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the queue. You may press star 2 if you'd like to remove your question from the queue.

Speaker Change: If you'd like to ask a question. Please press star one on your telephone keypad.

Speaker Change: A confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue.

Speaker Change: Adjustments using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.

Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button. One moment, please, while we poll for questions. Our first question comes from Spiro Dunis with Citi. Please proceed with your question. Hi, this is Chad on First Spiro.

Joseph Kim: Our first question comes from Spiro <unk> with Citi. Please proceed with your question.

Joseph Kim: Hi, This is Chad on for Spiro, just starting off just wanted to touch on the synergies with the new Star deal just kind of curious could you give us a sense of what opportunities could push you above that $150 million target.

Carl: Just starting off, just wanted to touch on the synergies with the New Start deal. I'm just kind of curious, could you give us a sense of what opportunities could push you above that $150 million target currently? Are those opportunities more about a timeline or a feasibility question? Yeah, Chad, this is Carl.

Chad: Currently are those opportunities more about like a timeline or feasibility question there.

Chad: Yes, Chad this is Carl and I.

Carl: Thank you you caught in our when we talked about this three weeks ago that that really we said at least $150 million of synergies. So $150 million is a solid number and we will definitely take some work and we laid out the timeline on that but our goal will be to figure out how to surpass that and really I think it's.

Carl: And I think you caught in our conversation when we talked about this three weeks ago that really, we said at least 150 million synergies. So, you know, 150 million is a solid number, and it'll definitely take some work. And we laid out the timeline for that. But our goal will be to figure out how to surpass that.

Joseph Kim: Too early to be able to categorize.

Joseph Kim: It's.

Joseph Kim: A more of a timeline issue I think theres going be a combination of expense optimization that we can find as well as our commercial ideas and then I think the area that we probably need to do more work on and probably will have upside is on the growth side of us being able to understand where we can put some capital to.

Carl: And really, I think it's probably too early to be able to categorize whether it's more a timeline issue. I think there's gonna be a combination of expense optimization that we can find as well as commercial ideas. And then I think the area that we probably need to do more work on and probably will have upside is on the growth side of us being able to understand where we can put some capital to bed at a really good return, maybe projects and new starts he has in the pipe that they've just not moved forward on. And I think that's the area where, once we get later in the process, and we're able to dig in, there's probably some upside that we're excited about. Okay, understood that makes sense.

Joseph Kim: Bed at a really good return maybe projects and new start he has in the pipe that they've just.

Joseph Kim: Not move forward on and I think Thats the area, where we're once we get later in the process and we're able to dig in that there's probably some upside that we're excited about.

Speaker Change: Okay understood that makes sense and I guess, just kind of looking at post the transaction. This will obviously be a larger company and it sounds like M&A remains a part of our growth strategy. So just kind of curious on how.

Speaker Change: How that plays into the appetite for larger M&A going forward or do you expect that kind of the M&A component of that growth to resemble the tuck in transactions that we've seen in the past upwards.

Joe: And I guess just kind of looking ahead, this will obviously be a larger company, and it sounds like M&A remains a part of the growth strategy. So just kind of curious about how, you know, how that plays into the appetite for larger M&A going forward, or do you expect that kind of M&A component of growth to resemble the token transactions that we've seen in the past? Chad, this is Joe.

Speaker Change: Hey, Chad This is Joe I think the answer is all of the above.

Joseph Kim: The Europe acquisition.

Joseph Kim: Our new store, but we're really excited about all the possibilities.

Joseph Kim: There's going to be opportunities for us both on the midstream side and the field distribution side at various different geographies to do tuck in acquisitions that I think historically, we've done in a mid single digit synergize multiples those have been highly successful for us. So we're going to continue to do that.

Joe: I think the answer is all of the above. You know, the Europe acquisition is a lot smaller than New START, but we're really excited about all the possibilities, and there's going to be opportunities for us both on the midstream side and the field distribution side at various different geographies to do tuck-in acquisitions that I think historically we've done in a, you know, mid-single-digit synergized multiple On the organic side, the one thing I want to make sure the screener understands is that priority one is getting New START integrated and getting all the synergies out of this, so we have some maybe some short-term resources that we have to properly deploy, but at the same time, on the organic capital, those are separate resources, and the plan that we outlined in December, we're continuing to move forward with our organic plans.

Joseph Kim: On the more on the organic side.

Joseph Kim: The one thing I want to make sure the street understands it said priority one is getting new star integrated and getting all the synergies out of it. So we have some may be some short term resource risk.

Joseph Kim: Resources that we have to properly deploy but at the same time on the organic capital those are separate resources and the plan that we outlined in December we're continuing to move forward with our with our organic plans as far as other M&A.

Joseph Kim: The resource is the short term resource question and and we think we can get this done rapidly and will be in position to continue to do that as far as large acquisitions. If there are double digit accretion opportunities for us where we improve our credit profile, we're going to jump all over that.

Speaker Change: Okay, Yes that makes sense that's helpful. Thanks for the time today.

Speaker Change: As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad one moment, please while we poll for questions.

Joe: As far as other M&A, it's a resource, it's a short-term resource question, and, you know, we think we can get this done rapidly, and we'll be in position to continue to do that. As far as large acquisitions, if there are, you know, double-digit accretion opportunities for us where we improve our credit profile, we're going to jump all over that. Okay. Yeah, that makes sense.

Speaker Change: Our next question comes from Robert Moskow with Mizuho Securities. Please proceed with your question.

Robert Moskow: So looking at new stars Midwest footprint, I think you've alluded to its potential as a springboard for greater involvement on the fuel distribution side in that geography, and wondering whether there are specific opportunities or areas you could be interested in from a growth perspective, and then whether you view organic or any.

Robert Moskow: Got it and then as the most appropriate method by which to establish a presence.

Operator: That's helpful. Thanks for your time today. As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad. One moment, please, while we poll for questions.

Speaker Change: Yes, Rob this is Karl.

Karl: Probably a little too early for us to outline specific parts of that system and and the other interesting thing about that system right. It's an open stock system. So that provides a little more flexibility even than may be some transit time pipeline system. So.

Carl: Our next question comes from Robert Mosca with Mizuho Securities. Please proceed with your, So looking at NuSTAR's Midwest footprint, I think you've alluded to its potential to springboard for greater involvement on the fuel distribution side in that geography. I was wondering whether there are specific opportunities or areas you could be interested in from a growth perspective, and then whether you view organic or inorganic investment as the most appropriate method by which to establish a presence. Yeah Rob, this is Carl.

Karl: I think theres, probably going to be opportunities in multiple fashions, whether it's on the branded business, where we're investing capital in and either distributing our own brand or other brands that we're partnering with or even just deploying working capital to build an unbranded business in those areas I think kind of.

Speaker Change: Similar to Joe's question on the M&A front I think it's all of the above.

Speaker Change: That's really the key to our strategy that we've done for the last five or six years and we're looking at with Neustar is is we have these things that we do well and as we grow and we just have a bigger platform that we can continue to do those so I think we're going to look at all those different pieces of our portfolio as potential growth options.

Carl: It's probably a little too early for us to outline specific parts of that system. And the other interesting thing about that system, right? It's an open stock system, so that provides a little more flexibility even than maybe some transit Time Pipeline systems. So I think there's probably going to be opportunities in multiple fashions, whether it's the branded business where we're investing capital and either distributing our own brand or other brands that we're partnering with, or even just deploying working capital to build an unbranded business in those areas. Kind of, similar to Joe's question on the M&A front. I think it's all of the above.

Speaker Change: Okay.

Speaker Change: Thanks, I appreciate that Carl and could you remind us of the contract profile on the European terminal assets and when you could use that capacity with greater scale for supply optimization on the east coast.

Speaker Change: The East coast.

Speaker Change: Contract profile.

Speaker Change: Sorry, the European terminal contract profile got it yes, it really does.

Carl: Those terminals are pretty well contracted now so there is going to be some time component our general strategy with terminals that we've acquired is we don't necessarily favor ourselves we want all third parties to come in into those assets and so we really.

Carl: That's really the key to our strategy that we've done for the last five or six years and what we're looking at with New Star is that we have these things that we do well, and as we grow, we just have a bigger platform that we can continue to do those. So I think we're gonna look at all those different kinds of pieces of our portfolio as potential growth options. The East Coast Contract Profile. Oh, sorry, the European terminal contract profile. Got it. Yeah, really. Those terminals are pretty well-contracted now.

Speaker Change: Have the option to to fill any empty space. So I think there are some contracts that will roll off in the near future that we're going to look at probably filling in but both assets are pretty well contracted today.

Speaker Change: Alright, Thanks, I appreciate the time everyone.

Speaker Change: You bet.

Speaker Change: Our next question is from Selman <unk> with Stifel. Please proceed with your question.

Speaker Change: Hey, guys. This is tyler on for Selman.

Tyler: I was wondering if in light of the new <unk> acquisition lose if there was any color on how you are viewing the idea or so.

Carl: So there is going to be some time component. Our general strategy with terminals that we've acquired is we don't necessarily favor ourselves. We want all third parties to come into those assets.

Speaker Change: Hey, Tyler this is Joe.

Joseph Kim: The simple answer is nothing has changed.

Speaker Change: Our goal is to create value for all our stakeholders and each is definitely one of them I think our history shows that we've created value for all our stakeholders in this new star transaction I think is a Prime example, where this is good for our general partners. Good for Sun unitholders as good for New Star unit holders is good for the people.

Carl: And so we really have the option to fill any empty space. So I think there are some contracts that will roll off in the near future that we're going to look at probably filling in. But both assets are pretty well-contracted today.

Operator: All right. Thanks. Appreciate the time, everyone. You bet. Our next question is from Salmon Ackle with Stiefel. Please proceed with your question. Hey guys, this is Tyler on for Selman. I was wondering if, in light of the new star acquisition news, if there was any color on how y'all are viewing the IDRs now? Hey Tyler, this is Joe.

Speaker Change: Hold our credit so.

Speaker Change: Our path is exactly the same.

Speaker Change: I appreciate that Joe.

Speaker Change: Also wanted to know if was there anything driving the recent volume shrunk or if it would be good to look at sort of that $2 billion is a good run rate going forward.

Speaker Change: Yes, I think as you've seen over the last couple of years, we've been successful at growing our volume I talked about that a little bit in my prepared remarks, and that's really.

Joe: The simple answer is that nothing's changed. You know, our goal is to create value for all our stakeholders, and ET is definitely one of them. I think our history shows that we've created value for all our stakeholders, and this New Star transaction is a prime example where this is good for our general partners, good for Sun unit holders, good for New Star unit holders, and it's good for the people that hold our credit. So, you know, our path is exactly the same.

Speaker Change: Like I pointed out we've been successful at deploying capital. So when we updated our guidance for the Europe, and the West, Texas as asset announcements.

Speaker Change: In January we reaffirmed our EBITDA guidance and then I think with this earnings release, we also reaffirmed that EBITDA guidance of $975 billion to $1 billion.

Speaker Change: Obviously pre any new star impacts and I do think the components of that whether it's the volume or the margin or the capital.

Joe: Appreciate that, Joe. Also wanted to know, was there anything driving the recent volume shrink, or if it would be good to look at sort of that $2 billion as a good run rate going forward? Yeah, I think, as you've seen over the last couple years, we've been successful at growing our volume. I talked about that a little bit in my prepared remarks. And that's really, like I pointed out, we've been successful at deploying capital.

Speaker Change: Also need to be updated a little and I think we're going to we're going to wait until we get closer to the new star close and we'll update all of those components of guidance.

Speaker Change: At the same time, specifically on volume I think our goal is to continue to grow our volume I think the team has done a good job at finding opportunities and deploying capital again, both in those areas of branded and unbranded and I think that should continue and if anything we should be able to accelerate some of that.

Carl: So, you know, when we updated our guidance for the Europe and the West Texas asset announcements in January, we reaffirmed our EBITDA guidance, and then I think with this earnings release, we also reaffirmed that EBITDA guidance of 975 to a billion, obviously, before any new star impacts. And I do think the components of that, whether it's the volume or the margin or the capital, you know, also need to be updated a little. And I think we're going to wait until we get closer to the new star, and we'll update all those components of guidance at the same time. Specifically on volume, I think our goal is to continue to grow our volume. I think the team has done a good job at finding opportunities and deploying capital again, both in those areas of branded and unbranded. And I think that should continue. And if anything, you know, we should be able to accelerate some of that after the new star.

Speaker Change: Post new star and we will fold that into our guidance that we give.

Speaker Change: Later in the year, when we close a new star and clearly will fold that in is at the end of the year right, we'll give guidance for 2025.

Speaker Change: Great color. Thanks for the thanks for the time.

Speaker Change: We have reached the end of the question and answer session I would now like to turn the call back over to Scott <unk> for closing comments.

Scott: Well, thanks, everyone for joining us on the call today as always we're available for follow up questions. So please feel free to reach out at any time. Thanks.

Speaker Change: Thanks, everyone have a good day.

Speaker Change: This concludes today's conference you may disconnect your lines at this time and we thank you for your participation.

Carl: And we'll fold that into our guidance that we give, you know, later in the year when we close on the new star. And clearly, we'll fold that in at the end of the year, right; we'll give guidance for 2025. We have reached the end of the question and answer session. I would now like to turn the call back over to Scott Grischow for closing. Well, thanks, everyone, for joining us on the call today. As always, we're available for follow-up questions, so please feel free to reach out at any time. Thanks, everyone. Have a good day. This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation. Today's conference has ended. Please.

Speaker Change: Today's conference has ended.

Scott Grischow: Please disconnect your lines. Thank you.