Sunoco LP — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual filing, not a standalone fourth-quarter report; results below compare full years 2022 and 2021. Sunoco distributes motor fuel across more than 40 states and territories, operates 76 retail stores, and is managed by a general partner owned by Energy Transfer LP.
Key financial and operating metrics
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $25.729 billion | $17.596 billion |
| Net income | $475 million | $524 million |
| Basic earnings per common unit | $4.74 | $5.35 |
| Adjusted EBITDA (non-GAAP) | $919 million | $754 million |
| Cash provided by operating activities | $561 million | $543 million |
| Cash used in investing activities | $464 million | $387 million |
| Cash used in financing activities | $40 million | $228 million |
| Total debt at year-end | $3.594 billion | $3.281 billion |
| Cash at year-end | $82 million | $25 million |
- Motor fuel sales were $25.216 billion; motor fuel represented approximately 98% of revenue. The partnership sold 7.720 billion gallons, versus 7.545 billion in 2021. Motor fuel profit averaged 12.8 cents per gallon, up from 11.2 cents.
- The filing does not present a single consolidated margin measure. Reported operating income was $678 million, compared with $749 million; net income was $475 million, compared with $524 million.
- At December 31, the $1.50 billion revolving facility had $900 million drawn and $593 million available after $7 million of standby letters of credit. The partnership reported compliance with debt covenants and a leverage ratio of 3.84x.
- Common-unit distributions remained $0.8255 per quarter, or approximately $3.30 per unit for the year. Sunoco paid $359 million in distributions during 2022. A $0.8255-per-unit fourth-quarter distribution was declared in January 2023, payable February 21, 2023.
Changes versus FY2021
- Revenue increased 46%, while gallons sold rose 2.3%. Management attributed the higher Adjusted EBITDA chiefly to improved motor-fuel profit per gallon and volume, plus stronger terminal and storage results, including contributions from acquisitions.
- Adjusted EBITDA increased $165 million, or about 22%, while net income declined $49 million. The comparison was affected by a $190 million favorable inventory adjustment in 2021 versus $5 million in 2022. Higher operating costs, interest expense, and depreciation also weighed on 2022 net income.
- Interest expense increased to $182 million from $163 million. Debt rose to $3.594 billion from $3.281 billion, and cash from operating activities increased modestly to $561 million from $543 million.
- Investing outflows included $318 million of acquisition payments, compared with $256 million in 2021. Capital expenditures were $186 million, including $54 million maintenance and $132 million growth capital.
Outlook, risks, and notable items
- For 2023, management expected approximately $60 million of maintenance capital spending and at least $150 million of growth capital spending. It stated that operating cash flow and revolving-facility capacity were expected to meet near-term liquidity needs; financing availability is not guaranteed.
- 2022 acquisitions included a transmix-processing and terminal facility in Indiana for $252 million, net of cash acquired, and Peerless Oil & Chemicals for $76 million, net of cash acquired. Peerless serves Puerto Rico and the Caribbean.
- Management said inflation had a limited direct effect because energy-cost increases are generally passed through to customers, but higher interest rates raised financing costs and could constrain expansion. Key business exposures include narrow and volatile fuel margins, supplier and trade-credit dependence, competition, seasonality, severe weather, cyber risk, and a potential shift away from petroleum fuels.
- Climate and regulatory risks include potential fuel-demand changes, compliance costs, and constraints on access to capital. The filing cites the Inflation Reduction Act’s methane charge, scheduled to begin in 2024 for covered emissions, as a possible industry cost; the filing does not quantify Sunoco’s expected exposure.
- Environmental remediation liabilities were estimated at $18 million at year-end; asset-retirement obligations for underground storage tanks were $81 million. Sunoco said it believed it was in material compliance with applicable environmental requirements, while noting potential for additional costs and liabilities.
- Energy Transfer owns the general partner, incentive distribution rights, and approximately 33.9% of common units (a 28.3% limited-partner interest). 2022 related-party activity included $2.188 billion of bulk fuel purchases from affiliates and $33 million of general-partner expense reimbursements.
- The independent auditor issued unqualified opinions on the financial statements and internal control over financial reporting. No goodwill impairment was identified in 2022.
Investor facts to verify
- Review the full-year comparison and the effect of the unusually large 2021 inventory adjustment when assessing earnings quality and EBITDA-to-net-income differences.
- Check the latest debt balance, borrowing availability, interest rates, covenant headroom, and refinancing needs; about $900 million of year-end borrowings carried variable rates.
- Assess whether 2023 growth-capital plans and acquisitions generate expected returns without compromising leverage or distributions.
- Examine fuel-margin and volume trends, customer concentration (7-Eleven is the only customer above 10% of segment or total revenue), and reliance on suppliers and affiliate transactions.
- Monitor environmental remediation estimates, tank retirement obligations, and any new climate, fuel-standard, or other regulatory costs.