Q1 2025 Sunoco LP Earnings Call
Operator: Greetings and welcome to the Sunoco LP's first quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode.
Greetings and welcome to the Snowball piece first quarter 2025 earnings conference call.
Speaker Change: At this time all participants are in a listen only mode. A brief 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 it is now my pleasure to introduce your host Scott.
Operator: A brief question and answer session will follow the formal presentation.
Operator: 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.
Scott Grischow: It is now my pleasure to introduce your host, Scott Grischow, Senior Vice President, Finance and Treasurer. Thank you sir, you may begin. Thank you and good morning everyone.
Chris Schott: Chris Schott Senior Vice President Finance and Treasurer.
Speaker Change: Thank you Sir you may begin.
Scott Grischow: On the call with me this morning are Joe Kim, Sunoco LP's President and Chief Executive Officer.
Joe Kim: And good morning, everyone on the call with me. This morning are Joe Kim Sunoco, Lp's, President and Chief Executive Officer.
Scott Grischow: Karl Fails, Chief Operating Officer, Austin Harkness, Chief Commercial Officer, and Dylan Bramhall, Chief Financial Officer. 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. Please refer to our earnings release as well as our filings with the SEC for a list of these factors.
Speaker Change: Sales Chief operating Officer, Austin, Harkness, Chief Commercial officer, and John <unk>, Chief Financial Officer.
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.
Speaker Change: Please refer to our earnings release as well as our filings with the SEC for a list of these factors.
Scott Grischow: During today's call, we will also discuss our non-GAAP financial measures, including adjusted EBITDA and distributable cash flow as adjusted. Please refer to the Sunoco LP website for reconciliation of each financial measure.
Speaker Change: 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.
Scott Grischow: Before I begin my remarks on the first quarter results, I want to start with the announcement we made yesterday that Sunoco will be acquiring Parkland Corporation in a cash and equity transaction valued at approximately $9.1 billion. We expect to close in the second half of 2025, subject to customary closing conditions and other regulatory clearances.
Speaker Change: Before I begin my remarks on the first quarter results I want to start with the announcement, we made yesterday that sunoco will be acquiring parkland Corporation, and our cash and equity transaction valued at approximately $9 $1 billion.
Speaker Change: We expect to close in the second half of 2025 subject to customary closing conditions and other regulatory clearance.
Scott Grischow: On today's call, we would like to focus on our first quarter results and our European acquisition. We would refer you to what was disclosed in the news release. Subsequent AK filings, investor presentation, and joint conference call we held on May 5th for details on the Parkland acquisition. So please keep that in mind as we enter the Q&A portion in a few minutes.
Speaker Change: On today's call, we would like to focus on our first quarter results and our European acquisition, we would refer you to what was disclosed in the news release.
Speaker Change: Subsequent 8-K filings Investor presentation, and joint Conference call. We held on May 5th for details on the parkland acquisition. So please keep that in mind as we enter the Q&A portion in a few minutes.
Scott Grischow: 2025 is off to a good start following our first quarter performance. We remain on track to achieve our full year financial guidance, our balance sheet and liquidity are strong, and we are well positioned to continue our growth.
Speaker Change: 2025 is off to a good start following our first quarter performance, we remain on track to achieve our full year financial guidance, our balance sheet and liquidity are strong and we are well positioned to continue our growth objectives.
Scott Grischow: I'd like to start with a brief review of our consolidated The partnership delivered a solid first quarter with adjusted EBITDA of $458 million and distributable cash flow as adjusted of $310 million. In the first quarter, we spent $75 million on growth capital. and $26 million on maintenance capital. This includes the partnership's proportionate share of capital expenditures related to our two joint ventures with energy transfer of $18 million for growth capital and $2 million for maintenance.
Speaker Change: I'd like to start with a brief review of our consolidated results. The partnership delivered a solid first quarter with adjusted EBITDA of $458 million and distributable cash flow as adjusted of $310 million.
Speaker Change: In the first quarter, we spent $75 million on growth capital.
Speaker Change: And $26 million on maintenance capital.
Speaker Change: This includes the partnership's proportionate share of capital expenditures related to our two joint ventures with energy transfer of $18 million for growth capital and $2 million for maintenance capital.
Scott Grischow: Now turning to the balance. On March 20th, we completed an offering of $1 billion of 6.25% senior notes due 2036. Net proceeds from the offering were used to repay $600 million of senior notes that matured this October in all-outstanding borrowing. on our revolving. This transaction extended our debt maturity profile. We improved our financial flexibility and de-risked our balance sheet for the remainder of the year. Combined with our strong liquidity, this financing put us in an advantaged position to execute on future growth and deliver on our other capital allocation priorities.
Speaker Change: Now turning to the balance sheet.
Speaker Change: On March 20th we completed an offering of $1 billion of six 5% senior notes due 2033.
Speaker Change: Net proceeds from the offering were used to repay $600 million of senior notes that matured. This October and all outstanding borrowings on our revolving credit facility.
Speaker Change: This transaction extended our debt maturity profile.
Speaker Change: Improved our financial flexibility and de risked our balance sheet for the remainder of the year.
Speaker Change: Combined with our strong liquidity this financing put us in an advantaged position to execute on future growth and deliver on our other capital allocation priorities.
Scott Grischow: As of March 31st, our $1.5 billion revolving credit facility had no borrowings outstanding. Leverage at the end of the quarter was 4.1 times, in line with our long-term target.
Speaker Change: As of March 31, our $1 5 billion revolving credit facility had no borrowings outstanding.
Speaker Change: Leverage at the end of the quarter was four one times in line with our long term target.
Scott Grischow: In March, we signed a definitive agreement to acquire Tankwit, Germany's largest independent storage operator, for approximately 500 million euros, including approximately 300 million euros of assumed debt. This acquisition consists of a portfolio of 16 terminals, including 15 terminals across Germany, and one terminal in Poland.
Speaker Change: In March we signed a definitive agreement to acquire tank with Germany's largest independent storage operator for approximately 500 million euros, including approximately 300 million euros of assumed debt.
Speaker Change: This acquisition consists of a portfolio of 16 terminals, including 15 terminals across Germany, and one terminal in Poland.
Scott Grischow: The transaction is expected to close in the second half of 2025. subject to customary closing conditions, and will be accretive to unit holders in their first year of ownership.
Speaker Change: The transaction is expected to close in the second half of 2025.
Speaker Change: Subject to customary closing conditions, and we will be accretive to unitholders in the first year of ownership.
Scott Grischow: Karl will provide some additional thoughts on this acquisition and his comments.
Speaker Change: Carl will provide some additional thoughts on this acquisition in his comments.
Scott Grischow: Finally, on April 23rd, we declared a distribution for the first quarter of 89.76 cents per common unit. for $3.59 on an annualized basis. This represents an increase of just over 1.25% compared with the previous quarter and resulted in a trailing 12-month coverage ratio of 1.9 times.
Speaker Change: Finally on April 20, <unk>, we declared a distribution for the first quarter of $89.76 per common unit.
Speaker Change: Or $3 59.
Speaker Change: On an annualized basis.
Speaker Change: This represents an increase of just over $1, two 5% compared with the previous quarter and resulted in a trailing 12 month coverage ratio of one nine times.
Scott Grischow: This marks the second consecutive quarterly increase in Sunoco's distribution and is consistent with our capital allocation strategy and 2025 business outlook, which includes an annual distribution growth rate of at least 5%. Since 2022, Sun has increased distributions by approximately 9%, underscoring the partnership's ongoing commitment to returning capital to its unit.
Speaker Change: This marks the second consecutive quarterly increase in sooner because distribution and is consistent with our capital allocation strategy in 2025 business outlook, which includes an annual distribution growth rate of at least 5%.
Speaker Change: Since 2022 Sun has increased distributions by approximately 9% underscoring the partnership's ongoing commitment to returning capital to its unit holders.
Scott Grischow: To close, Sunoco entered 2025 in a position of strength. Strong results in cash flow generation over the past several years have allowed us to execute on our cash flow allocation strategy. With leverage at our long term target and healthy distribution coverage, we have been able to reinvest capital back into our business through organic growth and acquisition. The result is a record of increasing distributable cash flow per common unit that has, in turn, positioned us for ongoing distribution increases to our unit holders and additional growth.
Speaker Change: To close Sonoco entered 2025 and a position of strength.
Speaker Change: Strong results and cash flow generation over the past several years have allowed us to execute on our capital allocation strategy.
Speaker Change: With leverage at our long term target and healthy distribution coverage, we have been able to reinvest capital back into our business through organic growth and acquisitions.
Speaker Change: The result is a record of increasing distributable cash flow per common unit that has in turn positioned us for ongoing distribution increases to our unit holders and additional growth.
Scott Grischow: Sunoco's financial stability, distribution yield, and growth prospects make our equity a compelling value proposition in any environment.
Speaker Change: Sunoco has financial stability distribution yield and growth prospects make our equity a compelling value proposition in any environment.
Karl Fails: With that, I will now turn the call over to Karl to walk through some additional thoughts on our first quarter performance. and Recent Growth Initiative. Thanks, Scott. Good morning, everyone. We have had a solid start to 2025 with good performance across all three segments. Let me walk through segment results and then add some perspective on our exciting growth announcements this week.
Speaker Change: With that I will now turn the call over to Karl to walk through some additional thoughts on our first quarter performance and recent growth initiatives.
Karl: Thanks, Scott good morning, everyone.
Karl: We've had a solid start to 2025 with good performance across all three segments.
Karl: Let me walk through segment results and then add some perspective on our exciting growth announcements this week.
Karl Fails: starting with fuel distribution. Adjusted EBITDA was $220 million compared to $192 million in the fourth quarter and $218 million for the first quarter of 2024. Volumes came in at 2.1 billion gallons, down 3% from last quarter, and flat to the first quarter of last year. Finally, reported margin was 11.5 cents per gallon compared to 10.6 cents per gallon in the fourth quarter and 10.9 cents per gallon in the first quarter of 2024. Our results in the first quarter included the benefit of $32 million from the 7-Eleven makeup payment. As we've said before, our strategy is to capture what the market provides.
Karl: Starting with fuel distribution, adjusted EBITDA was $220 million compared to $192 million in the fourth quarter and $218 million for the first quarter of 2024.
Karl: Volumes came in at $2 1 billion gallons down 3% from last quarter and flat to the first quarter of last year.
Karl: Finally reported margin was 11 five cents per gallon compared to $10.06 per gallon in the fourth quarter and $10 nine per gallon in the first quarter of 2024.
Karl: Our results in the first quarter included the benefit of $32 million from the 711 make a payment.
Karl: As we've said before our strategy is to capture what the market provides the.
Karl Fails: The efficient use of capital continues to support our volume. which can be seen by our volumes being flat compared to the first quarter of last year, even with the sale of our West Texas marketing assets. and this volume growth continues to beat industry benchmarks. On the margin side, elevated breakevens and commodity market volatility continue to provide support to our fuel profit as our teams deliver on profit optimization strategies in various market environments.
Karl: The efficient use of capital continues to support our volumes, which can be seen by our volumes being flat compared to the first quarter of last year, even with the sale of our West Texas marketing assets.
Karl: And this volume growth continues to beat industry benchmarks.
Karl: On the margin side elevated breakeven and commodity market volatility continue to provide support to our fuel profit as our teams deliver on profit optimization strategies in various market environments.
Karl Fails: Moving to the pipeline system segment, we reported $172 million of adjusted EBITDA compared to $188 million for the fourth quarter. Throughput on the system was approximately 1.3 million barrels per day, compared to 1.4 million barrels per day in the fourth quarter. Overall, the system performed well even in light of some headwinds as a result of a few reliability challenges at refineries that feed our city. When we step back and look at full year performance, we remain very happy with how the system is performing, as well as some of the optimization opportunities we have going forward.
Karl: Moving to the pipeline system segment.
Karl: We reported $172 million of adjusted EBITDA compared to $188 million for the fourth quarter.
Karl: Throughput on the system was approximately $1 3 million barrels per day compared to $1 4 million barrels per day in the fourth quarter.
Karl: Overall, the system performed well even in light of some headwinds as a result of a few reliability challenges at refineries that feed our system.
Karl: When we step back and look at full year performance, we remain very happy with how the system is performing as well as some of the optimization opportunities we have going forward.
Karl Fails: Turning to terminals. We delivered a just-ad-evada of $66 million compared to $59 million in the fourth quarter and $24 million in the first quarter of last year. Throughput was 620,000 barrels per day, up from around 600,000 barrels per day in the fourth quarter, and a little over 400,000 barrels per day in the first quarter of last year. Performance was consistent across our network, and we're excited about the addition of our second European acquisition to this segment that Scott mentioned earlier.
Karl: Turning to terminals, we delivered adjusted EBITDA of $66 million compared to $59 million in the fourth quarter and $24 million in the first quarter of last year.
Karl: Throughput was 620000 barrels per day up from around 600000 barrels per day in the fourth quarter and a little over 400000 barrels per day in the first quarter of last year.
Speaker Change: Performance was consistent across our network and we're excited about the addition of our second European acquisition to this segment that Scott mentioned earlier.
Karl Fails: Yesterday we discussed in detail our announced acquisition of Parkway. That deal will expand our geographic reach in North America and the Caribbean and builds on the same strategy we have employed over the past seven years in our fuel distribution business of growing scale, focusing on fuel profit optimization, and integration with midstream assets. Our purchase of Tankwade also builds on the same strategy we discussed last year when we first entered Europe. Tankwood is the largest independent operator of terminals in Germany. The strong network of 16 terminals across Germany and Poland has delivered consistent cash flow stability and growth over the last decade.
Speaker Change: Yesterday, we discussed in detail our announced acquisition of parkland.
Speaker Change: That deal will expand our geographic reach in North America, and the Caribbean and builds on the same strategy. We have employed over the past seven years and our fuel distribution business of growing scale, focusing on fuel profit optimization and integration with midstream assets.
Speaker Change: Our purchase of tank, which also builds on the same strategy. We discussed last year when we first entered Europe.
Speaker Change: <unk> is the largest independent operator of terminals in Germany, the strong network of <unk> terminals across Germany, and Poland has delivered consistent cash flow stability and growth over the last decade.
Karl Fails: These terminals serve an important role in the fuel distribution supply chains in Germany and Poland. The cash flow is supported by a long-term and high credit quality customer base. We are also looking forward to adding the Tankwood team members to our organization and finding ways to optimize with our existing European assets in Amsterdam and Ireland.
Speaker Change: These terminals serve an important role in the fuel distribution supply chain in Germany and Poland.
Speaker Change: The cash flow is supported by a long term and high credit quality customer base.
Speaker Change: We are also looking forward to adding the tank with team members to our organization and finding ways to optimize with our existing European assets in Amsterdam in Ireland.
Karl Fails: There are many aspects to like about growing our business into new geography. Our core business is distributing refined products that fuel the transportation of people and goods around the world. Globally, over 90% of transportation energy consumption comes from refined products. with another 5% coming from renewables, which we also distribute. As we look forward, our view is that the importance of refined products to fuel our economy will remain. Whether here in the United States or across the world, a fact that is often overlooked and undervalued. As we turn to Europe more specifically, while they are ahead of the United States in reducing the carbon content of their energy mix, Many of these lower carbon solutions are also liquid fuels that need to be stored and distributed to customers.
Speaker Change: There are many aspects to like about growing our business into new geographies.
Speaker Change: Our core business is distributing refined products have fueled the transportation of people and goods around the world.
Speaker Change: Globally over 90% of transportation energy consumption comes from refined products with another 5% coming from renewables, which we also distributed.
Speaker Change: As we look forward our view is that the importance of refined products to fuel our economy will remain whether here in the United states or across the world.
Speaker Change: Fact that is often overlooked and undervalued.
Speaker Change: As we turn to Europe more specifically, while they are ahead of the United States and reducing the carbon content of their energy mix. Many of these lower carbon solutions are also liquid fuels that need to be stored and distributed to customers.
Karl Fails: Existing infrastructure will always have an advantage over building new supply chains, and as the energy portfolio continues to develop, we are confident that these assets will only become more valuable. One can only look to California as an example where, even with a focus on lower carbon fuels, terminal assets in California have been trading at a premium to other regions of the United States.
Speaker Change: Existing infrastructure will always have an advantage over building new supply chains and as the energy portfolio continues to develop we are confident that these assets will only become more valuable.
Speaker Change: One can only look to California, as an example, where even with a focus on lower carbon fuels terminal assets in California have been trading at a premium to other regions of the United States.
Karl Fails: Looking at the growth of our portfolio over the last few years. Each of our acquisitions have hit our target criteria. Stable cash flows, synergies with our existing business, good valuation, and opportunities to grow. These most recent deals hit all four of these. As we continue to grow our asset base and face new and evolving challenges, our focus remains the same. Strong operational execution, expense discipline, commercial creativity, and profit optimization, and ensuring we deliver strong returns on capital that we deploy.
Speaker Change: Looking at the growth of our portfolio over the last few years each of our acquisitions have hit our target criteria stay.
Speaker Change: The stable cash flows synergies with our existing business, good valuation and opportunities to grow.
Speaker Change: These most recent deals hit all four of these.
Speaker Change: As we continue to grow our asset base and face new and evolving challenges. Our focus remains the same strong operational execution and expense discipline commercial creativity and profit optimization and ensuring we deliver strong returns on capital that we deploy.
Joe Kim: I'll now turn it over to Joe to share his final thoughts.
Speaker Change: I'll now turn it over to Joe to share his final thoughts Joe.
Joe Kim: Good morning, everyone. As Scott and Karl both mentioned, we talked about the parkland acquisition yesterday. Thus, for my comments today, I'll focus on our current business. Year after year, we continue to raise the standard for Sunoco. Embracing higher expectations, we delivered a solid first quarter. Given our results today and our projections going forward, we remain confident in our full year 2025 guidance. Each year presents a new set of challenges, but it also presents opportunities. Persistent inflation and possible recession would obviously be problematic for the United States and the world, and of course, we would like to see inflation subside, and we all want economic growth.
Speaker Change: Good morning, everyone as Scott Carl both mentioned, we've talked about the <unk> acquisition yesterday, thus for my comments today I'll focus on our current business.
Speaker Change: Year after year, we continue to raise the standard for Sunoco embracing higher expectations, we delivered a solid first quarter.
Speaker Change: Given our results today, and our projections going forward, we remain confident in our full year 2025 guidance.
Speaker Change: Each year presents a new set of challenges, but it also presents opportunities persistent inflation and possible recession would obviously be problematic for the United States and the world and of course, we would like to see inflation subside and we all one economic growth. However, we have proven year after year and crisis after <unk>.
Joe Kim: However, we have proven year after year and crisis after crisis that we can distinguish ourselves in challenging environments. During COVID, when volumes fell, we still grew EBITDA. During peak inflation, we held expenses flat, while others saw significant increases. As we look towards the future, which always includes various challenges, we're well positioned to continue to grow and create value. Our confidence is supported by the following. First, our business model performs well in volatile environments. Why? We're anchored by our pipeline and terminal assets, critical infrastructure that provide long-term stable income. As for our fuel distribution business, it's anchored by our 711 taker pay contract and our real estate income.
Speaker Change: <unk> that we can distinguish ourselves in challenging environments during.
Speaker Change: During COVID-19 when volumes fell we still grew EBITDA during peak inflation, we held expenses flat, while others saw significant increases.
Speaker Change: As we look towards the future, which always includes various challenges, we're well positioned to continue to grow and create value. Our confidence is supported by the following.
Speaker Change: First our business model performs well in volatile environments wise, we're anchored by our pipeline and terminal assets critical infrastructure that provide long term stable income as for our fuel distribution business is anchored by our 711 take or pay contract and our real estate income. Furthermore, volatility creates margin <unk>.
Joe Kim: Furthermore, volatility creates margin capture opportunities. We are positioned to gain market share and optimize fuel profit in these environments given our scale, our supply expertise, and our strong balance sheet. Second, we continue to effectively manage expenses. Even within the current environment where inflation persists, we're proactively managing our expenses to be below the operating expense guidance that we provided in December. And finally, our investments, both organic and acquisitions, continue to meet or exceed our expectations. This will drive our EBITDA growth, our DCF per common unit growth, and our distribution growth, while maintaining a strong balance sheet.
Speaker Change: <unk> opportunities, we are positioned to gain market share and optimize fuel profit in these environments, given our scale, our supply expertise and a strong balance sheet.
Speaker Change: Second we continued to effectively manage expenses, even within the current environment, where inflation persists, we're proactively managing our expenses to be below the operating expense guidance that we provided in December.
Speaker Change: And finally, our investments both organic and acquisitions continue to meet or exceed our expectations.
Speaker Change: This will drive our EBITDA growth, our DCF per common unit growth and our distribution growth, while maintaining a strong balance sheet bottom line, we're uniquely positioned to be both an offensive and defensive play we fully expect to deliver another record year and continued distribution growth for our unit holders operator that concludes our prepared remarks.
Joe Kim: Bottom line, we're uniquely positioned to be both an offensive and defensive play.
Joe Kim: We fully expect to deliver another record year and continue distribution growth for our unit holders.
Scott Grischow: Operator, that concludes our prepared remarks. You may open the line for questions. Thank you.
Speaker Change: <unk> you May open the line for questions.
Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue.
Speaker Change: Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue. We ask that analysts limit themselves to one question and follow up so that others.
Operator: We ask that analysts limit themselves to one question and a follow-up so that others can have time to ask a question as well. For participants 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.
Speaker Change: Can have time to ask a question as well for participants 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.
Spiro Dounis: Our first question comes from Spiro Dounis with Citi. Please proceed with your question.
Speaker Change: Our first question comes from Spiro <unk> with Citi. Please proceed with your question.
Chad: Hi, this is Chad on for Spiro. Starting off, how do you think about future capital allocation among your regions post-Parkland close? Are some regions delivering more attractive returns than others?
Speaker Change: Hi, This is Chad on for Spiro starting off how do you think about future capital allocation among the regions post heartland close are some regions delivering more attractive returns than others.
Karl Fails: Hey Chad, this is Karl. I think if you think about our overall growth capital program and how we look at it, and that might include even some of the roll-up M&A that we've done, we don't have a particular target per region. We do look at it in totality across all the segments and across all the geographies, and it really is kind of best projects win. And the kind of projects that we have in our growth capital plan, generally we try to focus on items that have a shorter time frame between when we spend the cash and when they deliver.
Speaker Change: Yeah, Hey, Chad. This is Carl I think if you think about our overall growth capital program and how we look at it and that might include.
Speaker Change: Even some of the role of M&A that we've done we don't have a particular target per region. We do look at it in totality across all the segments and across all the geographies and it really is kind of best projects win.
Speaker Change: And the kind of projects that we have in our in our growth capital plan generally we try to focus on on items that have a shorter timeframe between when we spend the cash and when they deliver and then clearly we.
Karl Fails: And then clearly we look for opportunities that might benefit multiple segments, right? We might have a fuel distribution project that increases utilization in some of our midstream assets, or we might spend money in the midstream assets that enables additional fuel distribution opportunities. So we don't start the year with particular targets, and we also have flexibility as the year shapes up or as we have opportunities in M&A or other growth opportunities. to either flex that down or up, depending on the circuit.
Speaker Change: Look for opportunities that might benefit multiple segments right we might.
Speaker Change: Have a fuel distribution projected increases utilization in our some of our midstream assets or we might spend money in the midstream assets that enables additional fuel distribution opportunities. So we don't start the year with particular targets.
Speaker Change: And we also have flexibility as the year shapes up or as we have opportunities in M&A or other growth opportunities.
Speaker Change: To either flex that down or up depending on the circumstances.
Chad: Okay, that makes sense. And just second question, in 24, you added more conventional midstream assets to the portfolio and Parkland is a heavy shift back to fuel distributions. What do you see as the right mix between the two assets for your business longer term? And how should we think about adding more conventional midstream assets from here following the large investment in fuel distribution?
Speaker Change: Okay that makes sense and.
Speaker Change: Just second question in 'twenty four you added more conventional midstream assets to the portfolio in parkland has a heavy shift back to fuel distributions. What do you see as the right mix between the two assets for your business longer term and how should we think about adding more conventional midstream assets from here following the large investment in fuel distribution.
Joe Kim: Hey, Chad, this is Joe. We're going to continue to execute our capital allocation strategy, and ensuring that our portfolio becomes stronger and stronger over the long run. At different points in time, the portfolio may not be perfectly balanced at 50-50. But directly, we want a diversified portfolio. And Parkland gave us an opportunity, you don't get too many opportunities where you have this powerful industrial logic and excellent financial benefits. So we took advantage of that. And, and we're going to be up to take take opportunities to get more accretion, keep our balance strong. And this happens to be on the field distribution side.
Joe Kim: Hey, Chad this is Joe.
Speaker Change: Going to continue to execute our capital allocation strategy.
Speaker Change: Ensuring that our portfolio becomes stronger and stronger over the long run at different points in time that portfolio may not be perfectly balanced 50, 50, but directionally, we want a diversified portfolio and parkland gave us an opportunity.
Speaker Change: Get too many opportunities where you have this powerful industrial logic in excellent financial benefits and so we took advantage of that and we're going to be after.
Speaker Change: Take opportunities to get more accretion keep our balance sheet strong and this happens to be on the field distribution side, but over the long run we want to have a very balanced portfolio.
Chad: But over the long run, we want to have have a very balanced portfolio. Okay, that makes sense. Thanks for the time. As a reminder, to ask a question, please press star 1 on your telephone keypad. There are no further questions at this time.
Speaker Change: Okay got it thanks, thanks for the time.
Speaker Change: Thank you.
Speaker Change: As a reminder to ask a question. Please press star one on your telephone keypad.
Speaker Change: There are no further questions at this time I would now like to turn the floor back over to Scott, Chris Shaw for closing comments.
Scott Grischow: I would now like to turn the floor back over to Scott Grischow for closing comments. Thanks everyone for joining us on the call this morning. As always, if you have any follow-ups, feel free to reach out.
Scott Carl: Well, thanks, everyone for joining us on the call. This morning as always if you have any follow ups feel free to reach out and have a great day.
Scott Grischow: Thanks and have a great day.
Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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Scott Carl: Okay.
Scott Carl: Yes.
Scott Carl: Okay.
Scott Carl: Sure.
Scott Carl: Yes.
Scott Carl: Sure.