Sunoco Logistics Partners L.P. Increases Distribution and Reports Earnings for the Fourth Quarter 2011

Friday, Jan 27, 2012

Sunoco Logistics Partners L.P. (NYSE: SXL) (the “Partnership”) today announced net income attributable to owners for the fourth quarter 2011 of $76 million ($0.60 per unit diluted), compared with $59 million ($0.47 per unit diluted) for the fourth quarter 2010. Net income for the fourth quarter 2011 includes a $42 million charge to impair certain assets and account for regulatory obligations associated with the Partnership’s assets which could be negatively impacted by Sunoco, Inc.’s (“Sunoco”) announced exit from its refining operations. Excluding the charge, the Partnership had net income of $118 million ($0.99 per unit diluted). Highlights of the fourth quarter and full year 2011 include:

“The Partnership had a record year in 2011”

• Adjusted EBITDA for the quarter rose to a record level of $165 million and $544 million for the full year
• Record distributable cash flow of $110 million for the quarter and $388 million for the full year
• Continued to focus on growth: $665 million of expansion capital spending, including major acquisitions
• Completed a three-for-one unit split on December 2, 2011

Sunoco Partners LLC, the general partner of the Partnership, declared a cash distribution for the fourth quarter 2011 of $0.42 per common unit ($1.68 annualized) to be paid on February 14, 2012 to unit holders of record on February 8, 2012. This represents the twenty-seventh consecutive quarterly distribution increase and resulted in a 2.0 times coverage ratio for the quarterly cash distribution.

“The Partnership had a record year in 2011,” said Lynn L. Elsenhans, chairman and chief executive officer. “The West Texas crude oil market and developing shale production areas provided many opportunities for us to optimize our assets to generate additional cash flow. In addition, we continue to grow our ratable business which was up 14 percent year over year. 2011 expansion capital was $665 million, including $494 million of major acquisitions. Our acquisitions and organic projects over the past year are in alignment with our goal of creating long-term, sustainable growth.”

In looking towards expectations for the future, Elsenhans said, “Although we do not expect market opportunities to be as strong as 2011, we are excited about the potential to grow our fee-based businesses. Our Mariner West project with MarkWest Energy to deliver ethane to Canada is underway. This project is backed by long-term shipper commitments and is expected to be operational by July 2013. We continue to develop our West Texas crude expansion project, which is expected to be on-line in the first quarter of 2013. For 2012, we plan to increase organic capital spending to approximately $300 million in order to capture more value from existing assets such as Eagle Point, Nederland and our patented butane blending technology, as well as Mariner West and the West Texas crude expansion.”

DETAILS OF FOURTH QUARTER SEGMENT RESULTS

During 2011, the Partnership realigned its reporting segments. Prior to this date, the Partnership’s Crude Oil Pipeline segment included its crude oil pipeline and crude oil acquisition and marketing operations. The Partnership has determined that it is more meaningful to segregate these into different reporting segments given the growth in the crude oil acquisition and marketing business. For the purpose of comparability, certain prior year amounts have been recast to conform to the current year presentation. Such recasts have no impact on previously reported consolidated net income.

Refined Products Pipelines

Operating income for the fourth quarter 2011 decreased compared to the prior year period due primarily to higher operating expenses and decreased equity income from the Partnership’s joint ventures. Higher operating expenses were due largely to increased property taxes and reduced pipeline operating gains. Contributions from the 2011 acquisition of a controlling financial interest in the Inland pipeline system partially offset these reductions in operating income.

Terminal Facilities

Operating income for the fourth quarter 2011 decreased compared to the prior year period due to a $42 million charge to impair certain terminal assets and recognize the associated regulatory obligations discussed below. Excluding the charge, operating income increased compared to the prior year period due primarily to expansion of the Partnership’s refined products acquisition and marketing activities, which include butane blending services, as well as contributions from the acquisition of the Eagle Point tank farm in 2011.

Crude Oil Pipelines

Operating income for the fourth quarter 2011 increased from the prior year period to a record level due primarily to higher pipeline fees which benefited from tariff increases from the prior year period and increased demand for West Texas crude oil. Lower operating expenses, driven primarily by increased pipeline operating gains and lower environmental expenses, further contributed to the improved performance.

Crude Oil Acquisition and Marketing

Operating income for the fourth quarter 2011 increased from the prior year period to a record level due primarily to expanded crude oil volumes and margins, which benefited from market-related opportunities. Operating results were further improved by increased volumes from the recently acquired crude oil acquisition and marketing assets from Texon L.P.

Financing Update

Net interest expense increased compared to the prior year period. Higher interest expense related to the third quarter 2011 offering of $600 million of Senior Notes was partially offset by decreased borrowings under the Partnership’s revolving credit facilities compared to 2010. At December 31, the Partnership’s total debt balance was $1.7 billion, with no borrowings under its revolving credit facilities. In the fourth quarter 2011, the Partnership repaid the $100 million promissory note to Sunoco, Inc. using cash flows from operations.

Impairment Charge and Related Matters

In the third quarter 2011, Sunoco announced its intention to sell its Philadelphia and Marcus Hook, PA refineries. If arrangements for a sale cannot be made, Sunoco intends to idle the facilities by July 2012. During the fourth quarter 2011, Sunoco indefinitely idled its Marcus Hook refinery. The Partnership assessed the impact that Sunoco’s intention to exit the refining business will have on the Partnership’s assets and recognized a $42 million charge in the fourth quarter 2011 for certain terminal assets which could be negatively impacted if the refineries are permanently idled. The charge included a $31 million non-cash impairment for asset write-downs and $11 million for regulatory obligations which could be required if certain terminal assets were idled.

UNIT SPLIT

On December 2, 2011, the Partnership completed a three-for-one split of the Partnership’s common units and Class A units. The unit split resulted in the issuance of two additional common and Class A units for every one unit owned as of the record date of November 18, 2011. The Partnership had 99.4 million limited partnership units and 3.9 million Class A units outstanding at December 31, 2011.

Source: Business Wire

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