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What changed in Sunoco LP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Sunoco LP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+481 added−322 removedSource: 10-K (2025-02-14) vs 10-K (2024-02-16)

Top changes in Sunoco LP's 2024 10-K

481 paragraphs added · 322 removed · 233 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

61 edited+99 added−29 removed68 unchanged
Biggest changeCurrently, the ultimate impact of these laws on our business is uncertain—the Governor of California has directed further consideration of the implementation deadlines for each of the laws, and there is potential for legal challenges to be filed with respect to the scope of the laws—but, absent clarification or revisions to the laws, alongside the SEC proposed rule, finalization and implementation may result in additional costs to comply with these disclosure requirements as well as increased costs of and restrictions on access to capital.
Biggest changeReporting under both laws would begin in 2026. Currently, the ultimate impact of these laws on our business is uncertain, but to the extent implemented, we may face additional costs to comply with these disclosure requirements as well as increased costs of and restrictions on access to capital.
Every employee acting on behalf of the Partnership must adhere to these policies. Please refer to “Item 10. Directors, Executive Officers and Corporate Governance” for additional information on our Code of Business Conduct and Ethics. Commitment to Safety . Our goal is operational excellence, which means an injury and incident-free workplace.
Every employee acting on behalf of the Partnership must adhere to these policies. Please refer to “Item 10. Directors, Executive Officers and Corporate Governance” for additional information on our Code of Business Conduct and Ethics. Commitment to Health and Safety . Our goal is operational excellence, which means an injury and incident-free workplace.
At the international level, the United States and 195 other countries reached an agreement (the “Paris Agreement”) during the 21st Conference of the Parties to the United Nations Framework Convention on Climate Change, a long-term, international framework convention designed to address climate change over the next several decades.
At the international level, the United States and 195 other countries previously reached an agreement during the 21st Conference of the Parties to the United Nations Framework Convention on Climate Change (the “Paris Agreement”), a long-term, international framework convention designed to address climate change over the next several decades.
However, any efforts to control and/or reduce GHG emissions by the United States or other countries, or concerted conservation efforts that result in reduced consumption, could adversely impact demand for our products and, in turn, our financial position and results of operations.
Any efforts to control and/or reduce GHG emissions by the United States or other countries, or concerted conservation efforts that result in reduced consumption, could adversely impact demand for our products and, in turn, our financial position and results of operations.
We recognize that people are our most valued resource, and we are committed to hiring and investing in employees who strive for excellence and live by our core values: working safely, corporate stewardship, ethics and integrity, entrepreneurial mindset, our people, excellence and results, and social responsibility.
We recognize that people are our most valued resource, and we are committed to hiring and investing in employees who strive for excellence and live by our core values: working safely, corporate stewardship, ethics and integrity, entrepreneurial mindset, supporting our people, excellence and results, and social responsibility.
President Biden has recommitted the United States to the Paris agreement and, in April 2021, announced a goal of reducing the United States’ emissions by 50-52% below 2005 levels by 2030.
President Biden recommitted the United States to the Paris agreement and, in April 2021, announced a goal of reducing the United States’ emissions by 50-52% below 2005 levels by 2030.
We arrange for motor fuel to be delivered from the storage terminals to the appropriate sites in our distribution network at prices consistent with those historically charged to third parties for the delivery of fuel. We also deliver motor fuel, propane and lubricating oils to commercial customers involved in petroleum exploration and production. J.C.
We arrange for motor fuel to be delivered from the storage terminals to the appropriate sites in our distribution network at prices consistent with those historically charged to third parties for the delivery of fuel. We also deliver motor fuel, propane and lubricating oils to commercial customers involved in petroleum exploration and production.
We are the exclusive wholesale supplier of the Sunoco and EcoMaxx-branded motor fuels, supplying an extensive distribution network of approximately 5,534 company and third-party operated locations throughout the United States and Puerto Rico. We believe we are one of the largest independent motor fuel distributors, by gallons, in the United States.
We are the exclusive wholesale supplier of the Sunoco and EcoMaxx-branded motor fuels, supplying an extensive distribution network of approximately 5,619 company and third-party operated locations throughout the United States and Puerto Rico. We believe we are one of the largest independent motor fuel distributors, by gallons, in the United States.
The markets for distribution of motor fuel and the retail store industry are highly competitive and fragmented, which results in narrow margins. We have numerous competitors, some of which may have significantly greater resources and name recognition than we do.
The markets for distribution of motor fuel and the retail store industry are highly competitive and fragmented, which result in narrow margins. We have numerous competitors, some of which may have significantly greater resources and name recognition than we do.
Technology Technology is an important part of our Fuel Distribution and Marketing operations. We utilize a proprietary web-based system that allows our wholesale customers to access their accounts at any time from a personal computer to obtain prices, place orders and review invoices, credit card transactions and electronic funds transfer notifications.
Technology Technology is an important part of our Fuel Distribution segment. We utilize a proprietary web-based system that allows our wholesale customers to access their accounts at any time from a personal computer to obtain prices, place orders and review invoices, credit card transactions and electronic funds transfer notifications.
In the All Other segment, we face strong competition in the market for the sale of retail gasoline and merchandise. Our competitors include service stations of large integrated oil companies, independent gasoline service stations, convenience stores, fast food stores, supermarkets, drugstores, dollar stores, club stores and other similar retail outlets, some of which are well-recognized national or regional retail systems.
Additionally, we face strong competition in the market for the sale of retail gasoline and merchandise. Our competitors include service stations of large integrated oil companies, independent gasoline service stations, convenience stores, fast food stores, supermarkets, drugstores, dollar stores, club stores and other similar retail outlets, some of which are well-recognized national or regional retail systems.
Under the PMPA, we may not terminate or fail to renew a branded distributor contract, unless certain enumerated preconditions or grounds for termination or nonrenewal are met and we also comply with the prescribed notice requirements.
Under the PMPA, we may not terminate or fail to renew a branded distributor contract, unless certain enumerated preconditions or grounds for termination or non-renewal are met and we also comply with the prescribed notice requirements.
Financial Statements and Supplementary Data.” Hazardous Substances and Releases Certain environmental laws, including the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”), impose strict, and under certain circumstances, joint and several, liability on the owner and operator as well as former owners and operators of properties for the costs of investigation, removal or remediation of contamination and also impose liability for any related damages to natural resources without regard to fault.
Financial Statements and Supplementary Data.” 11 Table of Contents In d ex to Financial Statements Hazardous Substances and Releases Certain environmental laws, including the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”), impose strict, and under certain circumstances, joint and several, liability on the owner and operator as well as former owners and operators of properties for the costs of investigation, removal or remediation of contamination and also impose liability for any related damages to natural resources without regard to fault.
Accordingly, we have recorded estimated undiscounted liabilities for these sites totaling $18 million as of December 31, 2023. As of December 31, 2023, we have additional reserves of $84 million that represent our estimate for future asset retirement obligations for underground storage tanks.
Accordingly, we have recorded estimated undiscounted liabilities for these sites totaling $28 million as of December 31, 2024. As of December 31, 2024, we have additional reserves of $84 million that represent our estimate for future asset retirement obligations for underground storage tanks.
During 2023, our Fuel Distribution and Marketing business distributed fuel to 476 commission agent locations. Under these arrangements, we generally provide and control motor fuel inventory and price at the site and receive actual retail selling price for each gallon sold, less a commission paid to the independent commission agents.
During 2024, our Fuel Distribution business distributed fuel to 252 commission agent locations. Under these arrangements, we generally provide and control motor fuel inventory and price at the site and receive actual retail selling price for each gallon sold, less a commission paid to the independent commission agents.
Financial Statements and Supplementary Data.” Sale of Regulated Products In certain areas where our convenience stores are located, state or local laws limit the hours of operation for the sale of alcoholic beverages and restrict the sale of alcoholic beverages and tobacco products to persons younger than a certain age.
Sale of Regulated Products In certain areas where our convenience stores are located, state or local laws limit the hours of operation for the sale of alcoholic beverages and restrict the sale of alcoholic beverages and tobacco products to persons younger than a certain age.
Transmix processing plants separate this mixture and return it to salable products of gasoline and diesel. Our refined product terminals provide storage and distribution services 8 Table of Contents In dex to Financial Statements used to supply our own retail stations as well as third-party customers. In addition, we provide services at our terminals to various third-party throughput customers.
Transmix processing plants separate this mixture and return it to salable products of gasoline and diesel. Our refined product terminals provide storage and distribution services used to supply our own retail stations as well as third-party customers. In addition, we provide services at our terminals to various third-party throughput customers.
For example, in October 2023, the EPA proposed changes to its new source performance standards for new, modified and reconstructed storage vessels containing volatile organic liquids, a term which includes certain of our products.
For example, in October 2024, the EPA finalized changes to its new source performance standards (“NSPS”) for new, modified and reconstructed storage vessels containing volatile organic liquids, a term which includes certain of our products.
Risk Factors” in this Annual Report on Form 10-K. 13 Table of Contents In dex to Financial Statements Employee Safety We are subject to the requirements of the Occupational Safety and Health Act (“OSHA”) and comparable state statutes that regulate the protection of the health and safety of workers.
Risk Factors” in this Annual Report on Form 10-K. Employee Safety We are subject to the requirements of the Occupational Safety and Health Act (“OSHA”) and comparable state statutes that regulate the protection of the health and safety of workers.
We purchase motor fuel primarily from independent refiners and major oil companies and distribute it across more than 40 U.S. states and territories throughout the United States, including Hawaii and Puerto Rico, to: • 75 company-operated retail stores; • 476 independently operated commission agent locations where we sell motor fuel to retail customers under commission agent arrangements with such operators; • 6,828 retail stores operated by independent operators, which we refer to as “dealers” or “distributors,” pursuant to long-term distribution agreements; and • approximately 1,600 other commercial customers, including unbranded retail stores, other fuel distributors, school districts, municipalities and other industrial customers.
We purchase motor fuel primarily from independent refiners and major oil companies and distribute it across more than 40 U.S. states and territories, including Hawaii and Puerto Rico, to: • 76 company-operated retail stores; • 252 independently operated commission agent locations where we sell motor fuel to retail customers under commission agent arrangements with such operators; • 6,965 retail stores operated by independent operators, which we refer to as “dealers” or “distributors,” pursuant to long-term distribution agreements; and • approximately 2,000 other commercial customers, including unbranded retail stores, other fuel distributors, school districts, municipalities and other industrial customers.
The initial term of these contracts range from three to 20 years, with most contracts for 10 years.
The initial term of these contracts ranges from three to 20 years, with most contracts lasting for 10 years.
Human Capital Management As of December 31, 2023, we employed an aggregate of 2,389 employees, 328 of which are represented by labor unions. We and our subsidiaries believe that our relations with our employees are good. In order to accomplish our objectives, we must continue to attract and retain top talent.
Human Capital Management As of December 31, 2024, we employed an aggregate of 3,298 employees, 359 of which are represented by labor unions. We and our subsidiaries believe that our relations with our employees are good. In order to accomplish our objectives, we must continue to attract and retain top talent.
Energy Transfer, through its wholly owned operating subsidiaries, is primarily engaged in: • natural gas midstream, intrastate and interstate transportation and storage operations; and • crude oil, natural gas liquids (“NGL”) and refined products transportation, terminalling and acquisition and marketing activities as well as NGL storage and fractionation services. 6 Table of Contents In dex to Financial Statements Our Business and Operations Our business is comprised of two reportable segments: Fuel Distribution and Marketing and All Other.
Energy Transfer, through its wholly owned operating subsidiaries, is primarily engaged in: • natural gas midstream, intrastate and interstate transportation and storage operations; and • crude oil, natural gas liquids (“NGL”) and refined products transportation, terminalling services, and acquisition and marketing activities as well as NGL storage and fractionation services and liquefied natural gas (“LNG”) regasification. 6 Table of Contents In d ex to Financial Statements Our Business and Operations Our business is comprised of three reportable segments: Fuel Distribution, Pipeline Systems and Terminals.
Bulk Fuel Purchases We purchase motor fuel in bulk and hold it in inventory or transport it via pipeline. To mitigate inventory risk, we use commodity futures contracts or other derivative instruments, which are matched in quantity and timing to the anticipated usage of the inventory. We also blend in various additives, including ethanol and biomass-based diesel.
Bulk Fuel Purchases We purchase motor fuel in bulk and hold it in inventory or transport it via pipeline. To mitigate inventory risk, we use commodity futures contracts or other derivative instruments, which are matched in quantity and timing to the anticipated usage of the inventory.
As of February 9, 2024, Energy Transfer owned 100% of the membership interest in our General Partner, all of our IDRs and 28,463,967 of our common units, which constituted a 28.2% limited partner interest in us. Given the significant ownership, we believe Energy Transfer will be motivated to promote and support the successful execution of our business strategies.
As of February 7, 2025, Energy Transfer owned 100% of the membership interest in our General Partner, all of our IDRs and 28,463,967 of our common units. Given the significant ownership, we believe Energy Transfer will be motivated to promote and support the successful execution of our business strategies.
Various federal, state and local agencies have the authority to prescribe product quality specifications for the motor fuels that we sell, largely in an effort to reduce air pollution. Failure to comply with these regulations can result in substantial penalties. Although we can give no assurances, we believe we are currently in compliance in all material respects with these regulations.
Various federal, state and local agencies have the authority to prescribe product quality specifications for the motor fuels that we sell, largely in an effort to reduce air pollution. Failure to comply with these regulations can result in substantial penalties.
For more information, see “We are subject to federal laws related to the Renewable Fuel Standard” and “We are subject to federal, state and local laws and regulations that govern the product quality specifications of refined petroleum products we purchase, store, transport, and sell to our distribution customers” in “Item 1A.
For more information, see “We are subject to federal laws related to the RFS” and “We are subject to federal, state and local laws and regulations that govern the product quality 17 Table of Contents In d ex to Financial Statements specifications of refined petroleum products we purchase, store, transport, and sell to our distribution customers” in “Item 1A.
We meet these requirements primarily by maintaining insurance, which we purchase from private insurers. Environmental Reserves We are currently involved in the investigation and remediation of contamination at motor fuel storage and gasoline store sites where releases of regulated substances have been detected. We accrue for anticipated future costs and the related probable state reimbursement amounts for remediation activities.
Environmental Reserves We are currently involved in the investigation and remediation of contamination at motor fuel storage and gasoline store sites where releases of regulated substances have been detected. We accrue for anticipated future costs and the related probable state reimbursement amounts for remediation activities.
Additionally, we cannot predict how financial institutions or investors might consider any information included these disclosures when making investment decisions, and as a result it is possible we could face increased costs related to, or restrictions imposed on, our access to capital.
If implemented, we cannot predict 13 Table of Contents In d ex to Financial Statements how financial institutions or investors might consider any information included in these climate-related disclosures when making investment decisions, and as a result it is possible we could face increased costs related to, or restrictions imposed on, our access to capital.
Fuel Distribution and Marketing Segment We are a distributor of motor fuels and other petroleum products which we supply to third-party dealers and distributors, to independent operators of commission agent locations, other commercial consumers of motor fuel and to our retail locations. Also included in the segment are transmix processing plants and refined products terminals.
Fuel Distribution Segment We are a distributor of motor fuels and other petroleum products which we supply to third-party dealers and distributors, to independent operators of commission agent locations, other commercial consumers of motor fuel and to our retail locations.
Separately, in December 2023, the EPA finalized more stringent methane emission standards for certain sources in the oil and gas sector, including first-ever standards for 11 Table of Contents In dex to Financial Statements existing sources. Under the final rules, states have two years to prepare and submit their plans to impose methane emission controls on existing sources.
For example, the EPA previously finalized more stringent methane emission standards for certain sources in the oil and gas sector, including first-ever standards for existing sources. Under the final rules, states have two years to prepare and submit their plans to impose methane emission controls on existing sources.
Terminals and Transmix We operate four transmix processing facilities and 42 refined product terminals ( one in Puerto Rico, six in Hawaii and 35 in the continental United States). Transmix is the mixture of various refined products (primarily gasoline and diesel) created in the supply chain (primarily in pipelines and terminals) when various products interface with each other.
Terminals Segment Through our Terminals segment, we operate four transmix processing facilities and 56 refined product terminals (two in Europe, six in Hawaii and 48 in the continental United States). Transmix is the mixture of various refined products (primarily gasoline and diesel) created in the supply chain (primarily in pipelines and terminals) when various products interface with each other.
The EPA’s proposal would broaden the definition of modification for storage tanks (which would result in significantly broader application of this rule to existing tanks), introduce more stringent emission control requirements for certain tanks, impose additional annual monitoring requirements for certain tanks, and require control of degassing events, amongst other matters.
The EPA’s final rule created new NSPS subpart Kc, which broadened the definition of modification for storage tanks (which would result in significantly broader application of this rule to existing tanks), introduced more stringent emission control requirements for certain tanks, imposed additional annual monitoring requirements for certain tanks, and require control of degassing events, amongst other matters.
The principal competitive factors affecting our retail marketing operations include gasoline and diesel acquisition costs, site location, product price, selection and quality, site appearance and cleanliness, hours of operation, store safety, customer loyalty and brand recognition.
The number of competitors varies depending on the geographical area. Competition also varies with gasoline and convenience store offerings. The principal competitive factors affecting our retail marketing operations include gasoline and diesel acquisition costs, site location, product price, selection and quality, site appearance and cleanliness, hours of operation, store safety, customer loyalty and brand recognition.
We believe we are in compliance in all material respects with applicable environmental laws and regulations, and we do not believe that compliance with federal, state or local environmental laws and regulations will have a material adverse effect on our financial position, results of operations or cash available for distribution to our unitholders.
We do not believe that compliance with federal, state or local environmental laws and regulations will have a material adverse effect on our financial position, results of operations or cash available for distribution to our unitholders. Any future change in regulatory requirements could cause us to incur significant costs.
Travel, recreation and construction activities typically increase in these months in the geographic areas in which we operate, increasing the demand for motor fuel. Therefore, the volume of motor fuel that we distribute is typically somewhat higher in the second and third quarters of our fiscal year. As a result, our results from operations may vary from period to period.
Therefore, the volume of motor fuel that we distribute is typically somewhat higher in the second and third quarters of our fiscal year. As a result, our results from operations may vary from period to period.
Such federal legislation may impose a carbon emissions tax or establish a cap-and-trade program or regulation by the EPA. For example, in 2022 President Biden signed the IRA 2022 into law, which appropriated significant federal funding for renewable energy initiatives and imposed the first-ever federal fee on methane emissions from certain oil and gas facilities.
For example, in 2022 President Biden signed the IRA 2022 into law, which appropriated significant federal funding for renewable energy initiatives and imposed the first-ever federal fee on methane emissions from certain oil and gas facilities.
Real Estate and Lease Arrangements As of December 31, 2023, our real estate and lease arrangements were as follows: Owned Leased Dealer and commission agent sites 635 268 Company-operated retail stores 6 50 Warehouses, offices and other 55 22 Total 696 340 Competition In the Fuel Distribution and Marketing segment, we compete primarily with other independent motor fuel distributors.
Real Estate and Lease Arrangements As of December 31, 2024, our real estate and lease arrangements were as follows: Owned Leased Dealer and commission agent sites 390 199 Company-operated retail stores 8 47 Warehouses, offices and other 125 37 Total 523 283 Competition In the Fuel Distribution segment, we compete primarily with other independent motor fuel distributors.
Even in the absence of new federal legislation, GHG emissions have begun to be regulated by the EPA pursuant to the Clean Air Act. For example, in April 2010, the EPA set a new emissions standard for motor vehicles to reduce GHG emissions.
Even in the absence of new federal legislation, GHG emissions have begun to be regulated by the EPA pursuant to the Clean Air Act as well 12 Table of Contents In d ex to Financial Statements as by state environmental authorities. For example, the EPA has set a new emissions standard for motor vehicles to reduce GHG emissions.
Our dealer incentives give our dealers access to discounted rates on products and services that they would likely not be able to obtain on their own. 7 Table of Contents In dex to Financial Statements Sales to Contracted Third Parties We distribute fuel under long-term contracts to branded distributors, branded and unbranded convenience stores, and branded and unbranded retail fuel outlets operated by third parties. 7-Eleven, Inc. is the only third-party dealer or distributor which is individually over 10% of our Fuel Distribution and Marketing segment or individually over 10%, in terms of revenue, of our aggregate business.
Sales to Contracted Third Parties We distribute fuel under long-term contracts to branded distributors, branded and unbranded convenience stores, and branded and unbranded retail fuel outlets operated by third parties. 7-Eleven, Inc. is the only third-party dealer or distributor which is individually over 10% of our Fuel Distribution segment or individually over 10%, in terms of revenue, of our aggregate business.
The CRFRA requires the disclosure of a climate-related financial risk report in line 12 Table of Contents In dex to Financial Statements with certain stakeholder frameworks every other year for public and private companies that are “doing business in California” and have total annual revenue of $500 million. Reporting under both laws would begin in 2026.
Both laws are vague and potentially overbroad with respect to their applicability, appearing to require only minimal contacts with California. The CRFRA requires the disclosure of a climate-related financial risk report in line with certain stakeholder frameworks every other year for public and private companies that are “doing business in California” and have total annual revenue of $500 million.
Any future change in regulatory requirements could cause us to incur significant costs. We incorporate by reference into this section our disclosures included in Note 13 to our consolidated financial statements included in “Item 8.
We incorporate by reference into this section our disclosures included in Note 13 to our consolidated financial statements included in “Item 8.
Nolan Joint Venture Through our investment in the J.C. Nolan Terminal, a joint venture with Energy Transfer, we provide diesel fuel storage in Midland, Texas. Additionally, through our investment in J.C. Nolan Pipeline, we transport diesel fuel from a tank farm in Hebert, Texas to Midland, Texas, with a throughput capacity of approximately 36 MBbls/d.
Nolan Joint Venture Through our investment in the J.C. Nolan Terminal, a joint venture with Energy Transfer, we provide diesel fuel storage in Midland, Texas with storage capacity of 130,000 barrels. Additionally, through our investment in the J.C.
We have a comprehensive program in place for performing routine tank testing and other compliance activities, which are intended to promptly detect and investigate any potential releases. We believe we are in compliance in all material respects with requirements applicable to our underground storage tanks.
We have a comprehensive program in place for performing routine tank testing and other compliance activities, which are intended to promptly detect and investigate any potential releases. To date, compliance with applicable underground storage tank requirements have not had a material adverse impact on our business, though we cannot guarantee this will always be the case.
In the remaining 23 states, the agencies are implementing the September 2023 rule, which amended the January 2023 rule to incorporate the Sackett decision. However, the September 2023 rule does not define the term “continuous surface connection,” and it is currently unclear how broadly the September 2023 rule and the Sackett decision will be interpreted by the agencies.
However, the September 2023 rule does not define the term “continuous surface connection,” and it is currently unclear how broadly the September 2023 rule and the Sackett decision will be interpreted by the agencies and what the Trump Administration may further propose or finalize.
Transportation Logistics We provide transportation logistics for most of our motor fuel deliveries through our own fleet of fuel transportation vehicles as well as third-party and affiliated transportation providers.
We also blend in various additives, including ethanol and biomass-based diesel. 8 Table of Contents In d ex to Financial Statements Transportation Logistics We provide transportation logistics for most of our motor fuel deliveries through our own fleet of fuel transportation vehicles as well as third-party and affiliated transportation providers.
We value our employees for what they bring to our organization by embracing those from all backgrounds, cultures, and experiences. We also believe that the keys to our success have been the cultivation of an atmosphere of inclusion and respect within our family of partnerships and sustaining organizations that promote diversity and provide support across all communities.
We also believe that the keys to our success have been the cultivation of an atmosphere of belonging and respect within our family of partnerships and sustaining organizations that promote and support all of the communities in which we do business.
We may also be subject to third-party claims alleging property damage and/or personal injury in connection with releases of or exposure to hazardous substances at, from or in the vicinity of, our current properties or off-site waste disposal sites. 10 Table of Contents In dex to Financial Statements We are required to comply with federal and state financial responsibility requirements to demonstrate that we have the ability to pay for remediation or to compensate third parties for damages incurred as a result of a release of regulated materials from our underground storage tank systems.
We may also be subject to third-party claims alleging property damage and/or personal injury in connection with releases of or exposure to hazardous substances at, from or in the vicinity of, our current properties or off-site waste disposal sites.
Failure to comply with these laws may result in the loss of necessary licenses and the imposition of fines and penalties on us.
Failure to comply with these laws may result in the loss of necessary licenses and the imposition of fines and penalties on us. Pipeline Systems Segment Our Pipeline Systems segment includes an integrated pipeline and terminal network comprised of approximately 6,000 miles of refined product pipeline (including the pipeline of our J.C.
We are managed by our general partner, Sunoco GP LLC (our “General Partner”), which is owned by Energy Transfer LP (“Energy Transfer”).
We are managed by our general partner, Sunoco GP LLC (our “General Partner”), which is owned by Energy Transfer LP (“Energy Transfer”). As of February 7, 2025, Energy Transfer owned 100% of the membership interest in our General Partner, 28,463,967 of our common units and all of our incentive distribution rights (“IDRs”).
Efforts at the federal and state level are currently underway to reduce the levels of greenhouse gas (“GHG”) emissions from various sources in the United States. At the federal level, Congress has considered legislation to reduce GHG emissions in the United States.
In recent years, there have been a number of efforts at the federal and state level focused on reducing the levels of greenhouse gas (“GHG”) emissions from various sources in the United States.
Dealer Incentives In addition to motor fuel distribution, we offer dealers the opportunity to participate in merchandise purchasing and promotional programs arranged with vendors.
The Fuel Distribution segment also includes one terminal, the Partnership’s retail operations in Hawaii and New Jersey, credit card services and franchise royalties. 7 Table of Contents In d ex to Financial Statements Dealer Incentives In addition to motor fuel distribution, we offer dealers the opportunity to participate in merchandise purchasing and promotional programs arranged with vendors.
Under the terms of the agreement, NuStar common unitholders will receive 0.400 Sunoco common units for each NuStar common unit. NuStar has approximately 9,500 miles of pipeline and 63 terminal and storage facilities that store and distribute crude oil, refined products, renewable fuels, ammonia and specialty liquids.
We also redeemed all outstanding NuStar preferred units, totaling $784 million, redeemed NuStar's subordinated notes totaling $403 million and repaid and terminated NuStar's credit facility totaling $455 million. NuStar has approximately 9,500 miles of pipeline and 63 terminal and storage facilities that store and distribute crude oil, refined products, renewable fuels, ammonia and specialty liquids.
The transaction is expected to close in the second quarter of 2024, subject to customary closing conditions. On January 11, 2024, we entered into a definitive agreement with 7-Eleven, Inc. to sell 204 convenience stores located in West Texas, New Mexico, and Oklahoma for approximately $1.0 billion, including customary adjustments for fuel and merchandise inventory.
Other Acquisition On August 30, 2024, we acquired a terminal in Portland, Maine for approximately $24 million, including working capital. 5 Table of Contents In d ex to Financial Statements West Texas Sale On April 16, 2024, we completed the sale of 204 convenience stores located in West Texas, New Mexico and Oklahoma to 7-Eleven, Inc. for approximately $1.0 billion, including customary adjustments for fuel and merchandise inventory.
On January 11, 2024, we announced that we will acquire liquid fuels terminals in Amsterdam, Netherlands and Bantry Bay, Ireland from Zenith Energy for €170 million including working capital. The transaction is expected to close in the first quarter of 2024, subject to customary closing conditions.
The acquisition is expected to diversify the Partnership’s business, increase scale and provide vertical integration, as well as improving the Partnership’s credit profile and enhancing growth. Zenith European Terminals Acquisition On March 13, 2024, we completed the acquisition of liquid fuels terminals in Amsterdam, Netherlands and Bantry Bay, Ireland from Zenith Energy for €170 million ($185 million), including working capital.
Our telephone number is (214) 981-0700. Our Internet address is www.sunocolp.com.
Available Information Our principal executive offices are located at 8111 Westchester Drive, Suite 400, Dallas, Texas 75225. Our telephone number is (214) 981-0700. Our Internet address is www.sunocolp.com.
We compete by pricing gasoline competitively, combining our retail gasoline business with convenience stores that provide a wide variety of products, and using advertising and promotional campaigns. Seasonality Our business exhibits some seasonality due to our customers’ increased demand for motor fuel during the late spring and summer months, as compared to the fall and winter months.
Seasonality Our business exhibits some seasonality due to our customers’ increased demand for motor fuel during the late spring and summer months, as compared to the fall and winter months. Travel, recreation and construction activities typically increase in these months in the geographic areas in which we operate, increasing the demand for motor fuel.
The various sub-alliances of GFANZ generally require participants to set short-term, sector-specific targets to transition their financing, investing, and/or underwriting activities to net zero emissions by 2050. There is also a risk that financial institutions will be required to adopt policies that have the effect of reducing the funding provided to the fossil fuel sector.
There is also a risk that financial institutions will be required to adopt policies that have the effect of reducing the funding provided to the fossil fuel sector, although this trend has waned in recent years.
It is likely, however, that the final rule and its requirements will be subject to legal challenges. Additionally, President Biden has announced that climate change will be a focus of his administration.
It is likely, however, that the final rule and its requirements will be subject to legal challenges. We cannot predict whether or on what timeline the Trump Administration may seek to revise or otherwise repeal these rules.
As part of the sale, SUN will also amend its existing take-or-pay fuel supply agreement with 7-Eleven, Inc. to incorporate additional fuel gross profit. The transaction is expected to close promptly upon receipt of regulatory approvals and satisfaction of customary closing conditions.
As part of the sale, SUN also amended its existing take-or-pay fuel supply agreement with 7-Eleven, Inc. to incorporate additional fuel gross profit. ET-S Permian Effective July 1, 2024, SUN and Energy Transfer formed ET-S Permian, a joint venture combining their respective crude oil and produced water gathering assets in the Permian Basin.
In January 2023, the Federal Reserve issued instructions for a pilot climate analysis scenario being undertaken by six of the United States’ largest banks, which concluded in 2023. These efforts may adversely affect the market for our securities and our ability to access capital and financial markets in the future.
To the extent implemented or pursued, these efforts may adversely affect the market for our securities and our ability to access capital and financial markets in the future. Separately, in March of 2024, the SEC has published a rule establishing a framework for reporting of climate risks, targets and metrics.
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As of February 9, 2024, Energy Transfer owned 100% of the membership interests in our General Partner, 28,463,967 of our common units, which constituted a 28.2% limited partner interest in us, and all of our incentive distribution rights (“IDRs”). 4 Table of Contents In dex to Financial Statements The following simplified diagram depicts our organizational structure as of February 9, 2024.
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We are primarily engaged in energy infrastructure and distribution of motor fuels in over 40 U.S. states, Puerto Rico, Europe and Mexico. Our midstream operations include an extensive network of over 14,000 miles of pipeline and over 100 terminals.
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We are primarily engaged in the distribution of motor fuels to independent dealers, distributors and other commercial customers as well as the distribution of motor fuels to end-use customers at retail sites operated by commission agents. Additionally, we receive lease income through the leasing or subleasing of real estate used in the retail distribution of motor fuels.
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Our fuel distribution operations serve approximately 7,400 Sunoco and partner branded locations and additional independent dealers and commercial customers. 4 Table of Contents In d ex to Financial Statements The following simplified diagram depicts our organizational structure as of February 7, 2025.
Removed
As of December 31, 2023, we also operated 75 retail stores located in Hawaii and New Jersey. As of December 31, 2023, we distribute motor fuels across more than 40 states and territories throughout the United States, including Hawaii and Puerto Rico.
Added
Significant Achievements in 2024 NuStar Acquisition On May 3, 2024, we completed the acquisition of 100% of the common units of NuStar Energy L.P. (“NuStar”). Under the terms of the agreement, NuStar common unitholders received 0.400 SUN common units for each NuStar common unit.
Removed
We distributed approximately 8.3 billion gallons of motor fuel during 2023 through our independent dealers, distributors, other commercial customers, retail sites operated by commission agents and retail sites owned and operated by us.
Added
In connection with the acquisition, we issued approximately 51.5 million common units, which had a fair value of approximately $2.85 billion, assumed debt totaling approximately $3.5 billion, including approximately $56 million of lease related financing obligations, and assumed preferred units with a fair value of approximately $800 million.
Removed
Operating Subsidiaries Our primary operations are conducted by the following consolidated subsidiaries: • Sunoco, LLC (“Sunoco LLC”), a Delaware limited liability company, primarily distributes motor fuel in more than 40 states throughout the United States.
Added
The acquisition is expected to supply optimization for the Partnership’s existing East Coast business and continues its focus on growing its portfolio of stable midstream income.
Removed
Sunoco LLC also processes transmix and distributes refined product through its terminals in over 15 states. • Sunoco Retail LLC (“Sunoco Retail”), a Pennsylvania limited liability company, owns and operates retail stores that sell motor fuel and merchandise primarily in New Jersey.
Added
SUN contributed all of its Permian crude oil gathering assets and operations to ET-S Permian. Energy Transfer contributed its Permian crude oil and produced water gathering assets and operations to ET-S Permian. Energy Transfer’s long-haul crude pipeline network that provides transportation of crude oil out of the Permian Basin to Nederland, Houston, and Cushing is excluded from ET-S Permian.
Removed
Sunoco Retail also leases owned sites to commission agents who sell motor fuels to the motoring public on Sunoco Retail's behalf for a commission. • Aloha Petroleum LLC, a Delaware limited liability company, distributes motor fuel and operates terminal facilities on the Hawaiian Islands. • Aloha Petroleum, Ltd.
Added
ET-S Permian operates more than 5,000 miles of crude oil and water gathering pipelines with crude oil storage capacity in excess of 11 million barrels. SUN holds a 32.5% interest, with Energy Transfer holding the remaining 67.5% interest in ET-S Permian. Energy Transfer serves as the operator of ET-S Permian.
Removed
(“Aloha”), a Hawaii corporation, owns and operates retail stores on the Hawaiian Islands and leases owned sites to commission agents who sell motor fuels to the motoring public on Aloha's behalf for a commission. 5 Table of Contents In dex to Financial Statements • Peerless Oil & Chemicals, Inc.
Added
Our dealer incentives give our dealers access to discounted rates on products and services that they would likely not be able to obtain on their own.
Removed
(“Peerless”), a Delaware corporation, is a terminal operator that distributes fuel products to over 100 locations primarily within Puerto Rico. Recent Developments On January 22, 2024, we entered into a definitive agreement with NuStar Energy L.P. (“NuStar”) to acquire NuStar in an all-equity transaction valued at approximately $7.3 billion, including assumed debt.
Added
Nolan joint venture), approximately 6,000 miles of crude oil pipeline (including the pipelines of ET-S Permian), approximately 2,000 miles of ammonia pipeline and 67 terminals. The following details our pipelines and storage facilities, excluding our investments in J.C.
Removed
On September 20, 2023, the Partnership completed a private offering of $500 million in aggregate principal amount of 7.000% senior notes due 2028. We used the proceeds to repay a portion of the outstanding borrowings under our Credit Facility (as defined herein).

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

117 edited+93 added−34 removed269 unchanged
Biggest changeOur results of operations and financial condition could be impacted by many risks that are beyond our control, including the following: • cash distributions are not guaranteed and may fluctuate with our performance and other external factors; • general economic, financial, and political conditions; • changes in the prices of motor fuel; • demand for motor fuel, including consumer preference for alternative motor fuels or improvements in fuel efficiency; • seasonal trends; • dangers inherent in the storage and transportation of motor fuel; • operational and business risks associated with our fuel storage terminals; • events or developments associated with our branded suppliers; • extreme weather events that may be more severe or frequent than historically experienced and that may be attributable to changes in climate due to adverse effects of an industrialized economy; • competition and fragmentation within the wholesale motor fuel distribution industry; • competition within the convenience store industry, including the impact of new entrants; • possible increased costs related to land use and facilities and equipment leases; • possible future litigation; • potential loss of key members of our senior management team; • failure to attract and retain qualified employees; • failure to insure against risks incident to our business; • terrorist attacks and threatened or actual war; • cybersecurity attacks, data breaches and other disruptions affecting us, or our service providers; • disruption of our information systems; • failure to protect sensitive customer, employee or vendor data, or to comply with applicable regulations relating to data security and privacy; • failure to obtain trade credit terms to adequately fund our ongoing operations; • our dependence on cash flow generated by our subsidiaries; and • potential impairment of goodwill and intangible assets.
Biggest changeOur results of operations and financial condition could be impacted by many risks that are beyond our control, including the following: • cash distributions are not guaranteed and may fluctuate with our performance and other external factors; • general economic, financial, and political conditions, including the impact of tariffs, to the extent enacted; • the imposition or increase of tariffs on steel or other raw materials, or changes in trade agreements or trade relations; • changes in the prices of motor fuel; • demand for motor fuel, including consumer preference for alternative motor fuels or improvements in fuel efficiency; • demand for and supply of crude oil, refined products, renewable fuels, and anhydrous ammonia; • seasonal trends; • dangers inherent in the storage and transportation of motor fuel, crude oil, renewable fuels and anhydrous ammonia; • operational and business risks associated with our pipelines and fuel storage terminals; • tariff and/or contractually determined rates and fees we charge and the revenue we realize for our services; • domestic and foreign governmental laws, regulations, sanctions, embargoes, and taxes; • events or developments associated with our branded suppliers; • extreme weather events that may be more severe or frequent than historically experienced and that may be attributable to changes in climate due to adverse effects of an industrialized economy; • competition and fragmentation within the wholesale motor fuel distribution industry; • competition within the convenience store industry, including the impact of new entrants; • possible increased costs related to land use and facilities and equipment leases; • possible future litigation; • potential loss of key members of our senior management team; • failure to attract and retain qualified employees; • failure to insure against risks incident to our business; • terrorist attacks and threatened or actual war; • cybersecurity attacks, data breaches and other disruptions affecting us, or our service providers; • disruption of our information systems; • failure to protect sensitive customer, employee or vendor data, or to comply with applicable regulations relating to data security and privacy; • failure to obtain trade credit terms to adequately fund our ongoing operations; • our dependence on cash flow generated by our subsidiaries; and • potential impairment of goodwill and intangible assets.
Examples of such conditions could include: • a general or prolonged decline in, or shocks to, regional or broader macro-economies; • regulatory changes that could impact the markets in which we operate, such as immigration or trade reform laws or regulations prohibiting or limiting hydraulic fracturing, which could reduce demand for or supply of our goods and services or lead to pricing, currency, or other pressures; and • deflationary economic pressures, which could hinder our ability to operate profitably in view of the challenges inherent in making corresponding deflationary adjustments to our cost structure.
Examples of such conditions could include: • a general or prolonged decline in, or shocks to, regional or broader macro-economies; • regulatory changes that could impact the markets in which we operate, such as immigration, tariffs or trade reform laws or regulations prohibiting or limiting hydraulic fracturing, which could reduce demand for or supply of our goods and services or lead to pricing, currency, or other pressures; and • deflationary economic pressures, which could hinder our ability to operate profitably in view of the challenges inherent in making corresponding deflationary adjustments to our cost structure.
Any of these actions could result in fewer visits to our convenience stores or independently operated commission agents and dealer locations, a reduction in demand from our wholesale customers, decreases in both fuel and merchandise sales revenue, or reduced profit margins, any of which could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders.
Any of these or similar actions could result in fewer visits to our convenience stores or independently operated commission agents and dealer locations, a reduction in demand from our wholesale customers, decreases in both fuel and merchandise sales revenue, or reduced profit margins, any of which could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders.
Laws such as the Bipartisan Infrastructure Act and the IRA 2022 allocate funds to the development of electric vehicle infrastructure and provide incentives for consumers and manufacturers related to their use or development of electric vehicles, and the adoption rate of electric vehicles in the U.S. has continued to accelerate, with projections for the future rate of adoption in some reports more than doubling in recent years.
Additionally, laws such as the Bipartisan Infrastructure Act and the IRA 2022 allocate funds to the development of electric vehicle infrastructure and provide incentives for consumers and manufacturers related to their use or development of electric vehicles, and the adoption rate of electric vehicles in the U.S. has continued to accelerate, with projections for the future rate of adoption in some reports more than doubling in recent years.
Integration of assets acquired in past acquisitions or future acquisitions with our existing business will be a complex, time-consuming and costly process, particularly given that assets acquired to date significantly increased our size and diversified the geographic areas in which we operate.
Integration of assets and businesses acquired in past acquisitions or future acquisitions with our existing business will be a complex, time-consuming and costly process, particularly given that assets acquired to date significantly increased our size and diversified the geographic areas in which we operate.
Our fuel storage terminals are subject to operational and business risks which may adversely affect our financial condition, results of operations, cash flows and ability to make distributions to our unitholders.
Our pipeline and fuel storage terminals are subject to operational and business risks which may adversely affect our financial condition, results of operations, cash flows and ability to make distributions to our unitholders.
Any acquisitions involve potential risks, including, among others: • the validity of our assumptions about revenues, capital expenditures and operating costs of the acquired business or assets, as well as assumptions about achieving synergies with our existing business; 23 Table of Contents In dex to Financial Statements • the validity of our assessment of environmental and other liabilities, including legacy liabilities; • the costs associated with additional debt or equity capital, which may result in a significant increase in our interest expense and financial leverage resulting from any additional debt incurred to finance the acquisition, or the issuance of additional common units on which we will make distributions, either of which could offset the expected accretion to our unitholders from such acquisition and could be exacerbated by volatility in the equity or debt capital markets; • a failure to realize anticipated benefits, such as increased available cash per unit, enhanced competitive position or new customer relationships; • a decrease in our liquidity by using a significant portion of our available cash or borrowing capacity to finance the acquisition; • the incurrence of other significant charges, such as impairment of goodwill or other intangible assets, asset devaluation or restructuring charges; and • the risk that our existing financial controls, information systems, management resources and human resources will need to grow to support future growth and we may not be able to react timely.
Any acquisitions involve potential risks, including, among others: • the validity of our assumptions about revenues, capital expenditures and operating costs of the acquired business or assets, as well as assumptions about achieving synergies with our existing business; 29 Table of Contents In d ex to Financial Statements • the validity of our assessment of environmental and other liabilities, including legacy liabilities; • the costs associated with additional debt or equity capital, which may result in a significant increase in our interest expense and financial leverage resulting from any additional debt incurred to finance the acquisition, or the issuance of additional common units on which we will make distributions, either of which could offset the expected accretion to our unitholders from such acquisition and could be exacerbated by volatility in the equity or debt capital markets; • a failure to realize anticipated benefits, such as increased available cash per unit, enhanced competitive position or new customer relationships; • a decrease in our liquidity by using a significant portion of our available cash or borrowing capacity to finance the acquisition; • the incurrence of other significant charges, such as impairment of goodwill or other intangible assets, asset devaluation or restructuring charges; and • the risk that our existing financial controls, information systems, management resources and human resources will need to grow to support future growth and we may not be able to react timely.
We have rental agreements for approximately 33% of the partnership, commission agent or dealer operated retail service stations where we currently control the real estate. We also have rental agreements for certain logistics facilities. As such, we are subject to the possibility of increased costs under rental agreements with landowners, primarily through rental increases and renewals of expired agreements.
We have rental agreements for approximately 38% of the partnership, commission agent or dealer operated retail service stations where we currently control the real estate. We also have rental agreements for certain logistics facilities. As such, we are subject to the possibility of increased costs under rental agreements with landowners, primarily through rental increases and renewals of expired agreements.
Similarly, declines in consumer confidence and/or consumer spending, changes in unemployment, significant inflationary or deflationary changes or disruptive regulatory or geopolitical events could contribute to increased volatility and diminished expectations for the economy and our markets, including the market for our goods and services, and lead to demand or cost pressures that could negatively and adversely impact our business.
For example, declines in consumer confidence and/or consumer spending, changes in unemployment, significant inflationary or deflationary changes or disruptive regulatory or geopolitical events could contribute to increased volatility and diminished expectations for the economy and our markets, including the market for our goods and services, and lead to demand or cost pressures that could negatively and adversely impact our business.
As of December 31, 2023, Energy Transfer owned 28,463,967 of our common units. The sale or disposition of a substantial portion of these units in the public or private markets could reduce the market price of our outstanding common units. Our partnership agreement restricts the voting rights of unitholders owning 20% or more of our outstanding common units.
As of December 31, 2024, Energy Transfer owned 28,463,967 of our common units. The sale or disposition of a substantial portion of these units in the public or private markets could reduce the market price of our outstanding common units. Our partnership agreement restricts the voting rights of unitholders owning 20% or more of our outstanding common units.
Because there are no specific rules governing the U.S. federal income tax consequence of loaning a partnership interest, a unitholder whose common units are the subject of a securities loan may be considered as having disposed of the loaned common units.
Because there are no specific rules governing the U.S. federal income tax consequences of loaning a partnership interest, a unitholder whose common units are the subject of a securities loan may be considered as having disposed of the loaned common units.
In addition, the actual amount of cash we will have available for distribution will depend on other factors such as: • the level and timing of capital expenditures we make; • the cost of acquisitions, if any; 16 Table of Contents In dex to Financial Statements • our debt service requirements and other liabilities; • fluctuations in our general working capital needs; • reimbursements made to our General Partner and its affiliates for all direct and indirect expenses they incur on our behalf pursuant to the partnership agreement; • our ability to borrow funds at favorable interest rates and access capital markets, including as a result of recent increases in cost of capital resulting from Federal Reserve policies; • restrictions contained in debt agreements to which we are a party; • the level of costs related to litigation and regulatory compliance matters; and • the amount of cash reserves established by our General Partner in its discretion for the proper conduct of our business.
In addition, the actual amount of cash we will have available for distribution will depend on other factors such as: • the level and timing of capital expenditures we make; • the cost of acquisitions, if any; • our debt service requirements and other liabilities; • fluctuations in our general working capital needs; • reimbursements made to our General Partner and its affiliates for all direct and indirect expenses they incur on our behalf pursuant to the partnership agreement; • our ability to borrow funds at favorable interest rates and access capital markets, including as a result of recent increases in cost of capital resulting from Federal Reserve policies; • restrictions contained in debt agreements to which we are a party; • the level of costs related to litigation and regulatory compliance matters; and • the amount of cash reserves established by our General Partner in its discretion for the proper conduct of our business.
Our fuel storage terminals are subject to operational and business risks, the most significant of which include the following: • our inability to renew a ground lease for certain of our fuel storage terminals on similar terms or at all; • our dependence on third parties to supply our fuel storage terminals; • outages at our fuel storage terminals or interrupted operations due to weather-related or other natural causes; • the threat that the nation’s terminal infrastructure may be a future target of terrorist organizations; • the volatility in the prices of the products stored at our fuel storage terminals and the resulting fluctuations in demand for our storage services; • the effects of a sustained recession or other adverse economic conditions; • the possibility of federal and/or state regulations that may discourage our customers from storing gasoline, diesel fuel, ethanol and jet fuel at our fuel storage terminals or reduce the demand by consumers for petroleum products; • competition from other fuel storage terminals that are able to supply our customers with comparable storage capacity at lower prices; and • climate change legislation or regulations that restrict emissions of GHGs could result in increased operating and capital costs and reduced demand for our storage services.
Our pipeline and fuel storage terminals are subject to operational and business risks, the most significant of which include the following: • our inability to renew a ground lease for certain of our pipelines or fuel storage terminals on similar terms or at all; • our dependence on third parties to supply our fuel storage terminals; • outages on our pipelines or at our fuel storage terminals or interrupted operations due to weather-related or other natural causes; • the threat that the nation’s terminal infrastructure may be a future target of terrorist organizations; • the volatility in the prices of the products transported on our pipelines or stored at our fuel storage terminals and the resulting fluctuations in demand for our storage services; • the effects of a sustained recession or other adverse economic conditions; • the possibility of federal and/or state regulations that may discourage our customers from transporting or storing gasoline, diesel fuel, ethanol and jet fuel at our fuel storage terminals or reduce the demand by consumers for petroleum products; • competition from other pipelines and fuel storage terminals that are able to provide our customers with comparable transportation service or storage capacity at lower prices; and • climate change legislation or regulations that restrict emissions of GHGs could result in increased operating and capital costs and reduced demand for our transportation and storage services.
The issuance of additional common units or other equity interests of equal or senior rank will have the following effects: • our existing unitholders’ proportionate ownership interest in us will decrease; • the amount of cash available for distribution on each unit may decrease; • the ratio of taxable income to distributions may increase; • the relative voting strength of each previously outstanding unit may be diminished; and • the market price of the common units may decline. 34 Table of Contents In dex to Financial Statements The market price of our common units could be adversely affected by sales of substantial amounts of our common units in the public or private markets, including sales by Energy Transfer.
The issuance of additional common units or other equity interests of equal or senior rank will have the following effects: • our existing unitholders’ proportionate ownership interest in us will decrease; • the amount of cash available for distribution on each unit may decrease; • the ratio of taxable income to distributions may increase; • the relative voting strength of each previously outstanding unit may be diminished; and • the market price of the common units may decline. 41 Table of Contents In d ex to Financial Statements The market price of our common units could be adversely affected by sales of substantial amounts of our common units in the public or private markets, including sales by Energy Transfer.
The level of our future indebtedness could have important consequences to us, including: • making it more difficult for us to satisfy our obligations with respect to our senior notes and our credit agreements governing our Credit Facility; 29 Table of Contents In dex to Financial Statements • limiting our ability to borrow additional amounts to fund working capital, capital expenditures, acquisitions, debt service requirements, the execution of our growth strategy and other activities; • requiring us to dedicate a substantial portion of our cash flow from operations to pay interest on our debt, which would reduce our cash flow available to make distributions to our unitholders and to fund working capital, capital expenditures, acquisitions, execution of our growth strategy and other activities; • making us more vulnerable to adverse changes in general economic conditions, our industry and government regulations and in our business by limiting our flexibility in planning for, and making it more difficult for us to react quickly to, changing conditions; and • placing us at a competitive disadvantage compared with our competitors that have less debt.
The level of our future indebtedness could have important consequences to us, including: • making it more difficult for us to satisfy our obligations with respect to our senior notes and our credit agreement governing our Credit Facility; • limiting our ability to borrow additional amounts to fund working capital, capital expenditures, acquisitions, debt service requirements, the execution of our growth strategy and other activities; • requiring us to dedicate a substantial portion of our cash flow from operations to pay interest on our debt, which would reduce our cash flow available to make distributions to our unitholders and to fund working capital, capital expenditures, acquisitions, execution of our growth strategy and other activities; 36 Table of Contents In d ex to Financial Statements • making us more vulnerable to adverse changes in general economic conditions, our industry and government regulations and in our business by limiting our flexibility in planning for, and making it more difficult for us to react quickly to, changing conditions; and • placing us at a competitive disadvantage compared with our competitors that have less debt.
Moreover, while we may create and publish voluntary disclosures regarding ESG matters from time to time, many of the statements in those voluntary disclosures may be based on expectations and assumptions.
Moreover, while we may create and publish voluntary disclosures regarding ESG matters from time to time, many of the statements in those voluntary disclosures may be based on expectations, assumptions and hypothetical scenarios.
To the extent possible under these rules, our General Partner may elect to either pay the taxes (including any applicable penalties and interest) directly to the IRS or, if we are eligible, issue an information statement to our current and former unitholders with respect to an audited and adjusted return.
To the extent possible, our General Partner may elect to either pay the taxes (including any applicable penalties and interest) directly to the IRS or, if we are eligible, issue an information statement to our current and former unitholders with respect to an audited and adjusted return.
If our unitholders are dissatisfied with the performance of our General Partner, they have limited ability to remove our General Partner. Our General Partner generally may not be removed except upon the vote of the holders of 66⅔% of our outstanding common units, including units owned by our General Partner and its affiliates.
If our unitholders are dissatisfied with the performance of our General Partner, they have limited ability to remove our General Partner. Our General Partner generally may not be removed except upon the vote of the holders of 66⅔% of our outstanding common units, including units owned by our General Partner and its affiliate s.
Although we may from time to time consult with professional appraisers regarding valuation matters, we make many fair market value estimates using a methodology based on the market value of our common units as a means to measure the fair market value of our respective assets.
Although we may from time to time consult with professional appraisers regarding valuation matters, we make many fair market value estimates using a methodology based on the market value of our common units as a means to measure the fair market value of our respective assets. Our methodology may be viewed as understating the value of our assets.
Increases in interest rates could reduce the amount of cash we have available for distributions as well as the relative value of those distributions to yield-oriented investors, which could cause a decline in the market value of our common units. Approximately $411 million of our outstanding indebtedness as of December 31, 2023 bears interest at variable interest rates.
Increases in interest rates could reduce the amount of cash we have available for distributions as well as the relative value of those distributions to yield-oriented investors, which could cause a decline in the market value of our common units. Approximately $203 million of our outstanding indebtedness as of December 31, 2024 bears interest at variable interest rates.
If we violate any provisions of our credit agreement or the indentures governing our senior notes that are not cured or waived within the appropriate time period provided therein, a significant portion of our indebtedness may become immediately due and payable, our ability to make distributions to our unitholders will be inhibited and our lenders’ commitment to make further loans to us may terminate.
If we violate any provisions of our credit agreement, the indentures governing our senior notes, the indentures governing the NuStar senior notes, the agreements governing the GoZone Bonds or any agreements governing future indebtedness that are not cured or waived within the appropriate time period provided therein, a significant portion of our indebtedness may become immediately due and payable, our ability to make distributions to our unitholders will be inhibited and our lenders’ commitment to make further loans to us may terminate.
For example, our credit agreement and the indentures governing our senior notes restrict our ability to, among other things: • incur certain additional indebtedness; • incur, permit, or assume certain liens to exist on our properties or assets; • make certain investments or enter into certain restrictive material contracts; • repurchase units; and • merge or dispose of all or substantially all of our assets.
For example, our credit agreement, the indentures governing our senior notes, the indentures governing the NuStar senior notes and the agreements governing the GoZone Bonds restrict our ability to, among other things: • incur certain additional indebtedness; • incur, permit, or assume certain liens to exist on our properties or assets; • make certain investments or enter into certain restrictive material contracts; • make distributions; • repurchase units; and • merge or dispose of all or substantially all of our assets.
We might not have, or be able to obtain, sufficient funds to make these accelerated payments. 30 Table of Contents In dex to Financial Statements Detail of Risk Factors Related to Our Structure Our General Partner Energy Transfer owns and controls our General Partner, which has sole responsibility for conducting our business and managing our operations.
We might not have, or be able to obtain, sufficient funds to make these accelerated payments. 37 Table of Contents In d ex to Financial Statements Detail of Risk Factors Related to Our Structure Our General Partner Energy Transfer owns and controls our General Partner, which has sole responsibility for conducting our business and managing our operations.
Our inability to renew leases or otherwise maintain the right to utilize such facilities and equipment on acceptable terms, or the increased costs to maintain such rights, could have a material adverse effect on our financial condition, results of operations and cash flows. Future litigation could adversely affect our financial condition and results of operations.
Our inability to renew leases or otherwise maintain the right to utilize such facilities and equipment on acceptable terms, or the increased costs to maintain such rights, could have a material adverse effect on our financial condition, results of operations and cash flows.
The risk factors set forth below are not all the risks we face and other factors that we face in the ordinary course of our business, that are currently considered immaterial or that are currently unknown to us may impact our future operations. 14 Table of Contents In dex to Financial Statements Risk Factor Summary Risks Related to Our Business Results of Operations and Financial Condition.
The risk factors set forth below are not all the risks we face and other factors that we face in the ordinary course of our business, that are currently considered immaterial or that are currently unknown to us may impact our future operations. 18 Table of Contents In d ex to Financial Statements Risk Factor Summary Risks Related to Our Business Results of Operations and Financial Condition.
Additionally, the Federal Reserve and other central banks have implemented policies in an effort to curb inflationary pressure on the costs of goods and services across the U.S., including the significant increases in prevailing interest rates that occurred during 2022 and 2023 as a result of the 525 aggregate basis point increase in the federal funds rate, and the associated macroeconomic impact on slowdown in economic growth could negatively impact our business.
Additionally, the Federal Reserve and other central banks have implemented policies in an effort to curb inflationary pressure on the costs of goods and services across the U.S., including the significant increases in prevailing interest rates that occurred during 2022 and 2023 as a result of the 525 aggregate basis point 21 Table of Contents In d ex to Financial Statements increase in the federal funds rate, and the associated macroeconomic impact on slowdown in economic growth could negatively impact our business.
A failure to successfully integrate the acquired assets with our existing business in a timely manner may have a material adverse effect on our business, financial condition, results of operations or cash available for distribution to our unitholders.
A failure to successfully integrate the acquired assets or businesses, such as NuStar, with our existing business in a timely manner may have a material adverse effect on our business, financial condition, results of operations or cash available for distribution to our unitholders.
These hazards and risks include, but are not limited to, traffic accidents, fires, explosions, spills, discharges, and other releases, any of which could result in distribution difficulties and disruptions, environmental pollution, governmentally-imposed fines 18 Table of Contents In dex to Financial Statements or clean-up obligations, personal injury or wrongful death claims, and other damage to our properties and the properties of others.
These hazards and risks include, but are not limited to, traffic accidents, fires, explosions, spills, discharges, and other releases, any of which could result in distribution difficulties and disruptions, environmental pollution, governmentally-imposed fines or clean-up obligations, personal injury or wrongful death claims, and other damage to our properties and the properties of others.
A significant decrease in demand for motor fuel, including increased consumer preference for alternative motor fuels or improvements in fuel efficiency or a material shift toward electric or other alternative-power vehicles, in the areas we serve would reduce our ability to make distributions to our unitholders.
A significant decrease in demand for motor fuel, crude oil or refined petroleum products, including increased consumer preference for alternative motor fuels or improvements in fuel efficiency or a material shift toward electric or other alternative-power vehicles, in the areas we serve would reduce our ability to make distributions to our unitholders.
Additionally, a shift toward electric, hydrogen, natural gas or other alternative-power vehicles could fundamentally change our customers’ shopping habits or lead to new forms of fueling destinations or new competitive pressures. New technologies have been developed and governmental mandates have been implemented to improve fuel efficiency, which may result in decreased demand for petroleum-based fuel.
Additionally, a shift toward electric, hydrogen, natural gas or other alternative-power vehicles could fundamentally change our customers’ shopping habits or lead to new forms of fueling destinations or new competitive pressures. 22 Table of Contents In d ex to Financial Statements New technologies have been developed and governmental mandates have been implemented to improve fuel efficiency, which may result in decreased demand for petroleum-based fuel.
In the event that we do not receive distributions from our subsidiaries, we may be unable to meet our financial obligations or make distributions to our unitholders. An impairment of goodwill and intangible assets could reduce our earnings. As of December 31, 2023, our consolidated balance sheet reflected $1.60 billion of goodwill and $544 million of intangible assets.
In the event that we do not receive distributions from our subsidiaries, we may be unable to meet our financial obligations or make distributions to our unitholders. An impairment of goodwill and intangible assets could reduce our earnings. As of December 31, 2024, our consolidated balance sheet reflected $1.48 billion of goodwill and $547 million of intangible assets.
If the IRS makes audit adjustments to our income tax returns for tax years beginning after December 31, 2017, it (and some states) may assess and collect directly from us taxes (including any applicable penalties and interest) resulting from such audit adjustments, in which case our cash available for distribution to our unitholders might be substantially reduced.
If the IRS makes audit adjustments to our income tax returns, it (and some states) may assess and collect directly from us taxes (including any applicable penalties and interest) resulting from such audit adjustments, in which case our cash available for distribution to our unitholders might be substantially reduced.
It is possible, however, that Energy Transfer could exercise this reset election at a time when it is experiencing, or expects to experience, declines in the cash distributions it receives related to its IDRs and may, therefore, desire to be issued common units rather than retain the right to receive incentive distributions based on the initial target distribution levels.
It is possible, however, that Energy Transfer could exercise this reset election at a time when it is experiencing, or expects to experience, declines in the cash distributions it receives related to its 40 Table of Contents In d ex to Financial Statements IDRs and may, therefore, desire to be issued common units rather than retain the right to receive incentive distributions based on the initial target distribution levels.
We may be subject to third-party claims alleging property damage and/or personal injury in connection with releases of or exposure to hazardous substances at, from, or in the vicinity of our current or former 25 Table of Contents In dex to Financial Statements properties or off-site waste disposal sites.
We may be subject to third-party claims alleging property damage and/or personal injury in connection with releases of or exposure to hazardous substances at, from, or in the vicinity of our current or former properties or off-site waste disposal sites.
Sales of refined motor fuels accounted for approximately 98% of our total revenues and 69% of our profit for the year ended December 31, 2023. A significant decrease in demand for motor fuel in the areas we serve could significantly reduce our revenues and our ability to make distributions to our unitholders.
Sales of refined motor fuels accounted for approximately 94% of our total revenues and 47% of our profit for the year ended December 31, 2024. A significant decrease in demand for motor fuel in the areas we serve could significantly reduce our revenues and our ability to make distributions to our unitholders.
As a result, any new regulations or modifications to existing regulations could 28 Table of Contents In dex to Financial Statements significantly increase the cost of derivative contracts, materially alter the terms of derivative contracts, reduce the availability and/or liquidity of derivatives to protect against risks we encounter, reduce our ability to monetize or restructure our existing derivative contracts, and increase our exposure to less creditworthy counterparties.
As a result, any new regulations or modifications to existing regulations could significantly increase the cost of derivative contracts, materially alter the terms of derivative contracts, reduce the availability and/or liquidity of derivatives to protect against risks we encounter, reduce our ability to monetize or restructure our existing derivative contracts, and increase our exposure to less creditworthy counterparties.
The IRS may challenge this treatment, which could adversely affect the value of the common units. Because we cannot match transferors and transferees of common units, we have adopted certain methods for allocating depreciation and amortization deductions that may not conform to all aspects of existing Treasury regulations.
The IRS may challenge this treatment, which could result in a unitholder owing more tax and may adversely affect the value of the common units. Because we cannot match transferors and transferees of common units, we have adopted certain methods for allocating depreciation and amortization deductions that may not conform to all aspects of existing Treasury regulations.
Impairment charges are allowed to be removed from our debt covenant calculations. See Note 7 to our consolidated financial statements included in “Item 8. Financial Statements and Supplementary Data.” Acquisitions and Future Growth If we are unable to make acquisitions on economically acceptable terms from third parties, our future growth and ability to increase distributions to unitholders will be limited.
See Note 7 to our consolidated financial statements included in “Item 8. Financial Statements and Supplementary Data.” Acquisitions and Future Growth If we are unable to make acquisitions on economically acceptable terms from third parties, our future growth and ability to increase distributions to unitholders will be limited.
By purchasing common units, common unitholders consent to be bound by the partnership agreement, and pursuant to our partnership agreement, each unitholder consents to various actions and conflicts of interest contemplated in our partnership agreement that might otherwise constitute a breach of fiduciary or other duties under Delaware law.
By purchasing common units, common unitholders consent to be bound by the partnership agreement, and pursuant to our partnership agreement, each unitholder consents to 39 Table of Contents In d ex to Financial Statements various actions and conflicts of interest contemplated in our partnership agreement that might otherwise constitute a breach of fiduciary or other duties under Delaware law.
The difficulties of integrating past and future acquisitions with our business include, among other things: • operating a larger combined organization in new geographic areas and new lines of business; • hiring, training or retaining qualified personnel to manage and operate our growing business and assets; • integrating management teams and employees into existing operations and establishing effective communication and information exchange with such management teams and employees; • diversion of management’s attention from our existing business; • assimilation of acquired assets and operations, including additional regulatory programs; • loss of customers or key employees; • maintaining an effective system of internal controls in compliance with the Sarbanes-Oxley Act of 2002 as well as other regulatory compliance and corporate governance matters; and • integrating new technology systems for financial reporting.
The difficulties of integrating past and future acquisitions with our business include, among other things: • operating a larger combined organization in new geographic areas and new lines of business; • hiring, training or retaining qualified personnel to manage and operate our growing business and assets; • integrating management teams and employees into existing operations and establishing effective communication and information exchange with such management teams and employees; • diversion of management’s attention from our existing business; • assimilation of acquired assets and operations, including additional regulatory programs, operational philosophies and complex systems; • loss of customers, suppliers or key employees; • maintaining an effective system of internal controls in compliance with the Sarbanes-Oxley Act of 2002 as well as other regulatory compliance and corporate governance matters; • integrating new technology systems for financial reporting; and • assuming contractual obligations of acquired businesses, potential unknown liabilities and unforeseeable increased expenses as a result of such acquisitions.
Although our General Partner may elect to have our current and former unitholders take such audit adjustment into account in accordance with their interests in us during the tax year under audit, there can be no assurance that such election will be practical, permissible or effective in all circumstances.
Although our General Partner may elect to have our current and former unitholders take such audit adjustment into account and pay any resulting taxes (including applicable penalties or interest) in accordance with their interests in us during the tax year under audit, there can be no assurance that such election will be practical, permissible or effective in all circumstances.
If we are unable to make acquisitions from third parties for any reason, including if we are unable to identify attractive acquisition candidates or negotiate acceptable purchase contracts, we are unable to obtain financing for these acquisitions on economically acceptable terms, we are outbid by competitors, or we or the seller are unable to obtain all necessary consents, our future growth and ability to increase distributions to unitholders will be limited.
If we are unable to make acquisitions from third parties for any reason, including if we 28 Table of Contents In d ex to Financial Statements are unable to identify attractive acquisition candidates or negotiate acceptable purchase contracts, we are unable to obtain financing for these acquisitions on economically acceptable terms, we are outbid by competitors, or we or the seller are unable to obtain all necessary consents, our future growth and ability to increase distributions to unitholders will be limited.
As we do not compute our cumulative net income for such purposes due to the complexity of the calculation and lack of clarity in how it would apply to us, we intend to treat all of our distributions as being in excess of our cumulative net income for such purposes and subject to such 10% withholding tax.
As we do not compute our 46 Table of Contents In d ex to Financial Statements cumulative net income for such purposes due to the complexity of the calculation and lack of clarity in how it would apply to us, we intend to treat all of our distributions as being in excess of our cumulative net income for such purposes and subject to such 10% withholding tax.
The Clean Water Act also requires us to maintain spill prevention control and countermeasure plans at our terminal facilities with above-ground storage tanks and pipelines. In addition, OPA 90 requires that most fuel transport and storage companies maintain and update various oil spill prevention and oil spill contingency plans.
The Clean Water Act also requires us to maintain spill prevention control and countermeasure plans at our terminal facilities with above-ground storage tanks and pipelines. In addition, OPA 90 requires that most fuel transport and storage companies maintain and update various oil spill 30 Table of Contents In d ex to Financial Statements prevention and oil spill contingency plans.
Our partnership agreement provides that any action taken by our General Partner to limit its liability is not a breach of our General Partner’s contractual duties to us, even if we could have obtained more favorable terms without the limitation on liability.
Our partnership agreement provides that any action 38 Table of Contents In d ex to Financial Statements taken by our General Partner to limit its liability is not a breach of our General Partner’s contractual duties to us, even if we could have obtained more favorable terms without the limitation on liability.
We anticipate that Energy Transfer would exercise this reset right in order to facilitate acquisitions or internal growth projects that would not be sufficiently 33 Table of Contents In dex to Financial Statements accretive to cash distributions per common unit without such conversion.
We anticipate that Energy Transfer would exercise this reset right in order to facilitate acquisitions or internal growth projects that would not be sufficiently accretive to cash distributions per common unit without such conversion.
Our business is subject to various federal, state and local environmental laws and regulations, including those relating to terminals, underground storage tanks, the release or discharge of regulated materials into the air, water and soil, the generation, storage, handling, use, transportation and disposal of hazardous materials, the exposure of persons to regulated materials, and the health and safety of our employees.
Our operations are subject to increasingly stringent international, federal, state and local environmental, health, safety and security laws and regulations, including those relating to terminals, underground storage tanks, the release or discharge of regulated materials into the air, water and soil, the generation, storage, handling, use, transportation and disposal of hazardous materials, the exposure of persons to regulated materials, and the health and safety of our employees.
Any decrease in demand could consequently reduce demand for our services and could have a negative effect on our business. 27 Table of Contents In dex to Financial Statements Increased attention to environmental, social and governance (“ESG”) matters and conservation measures may adversely impact our business.
Any decrease in demand could consequently reduce demand for our services and could have a negative effect on our business. Increased attention to environmental, social and governance (“ESG”) matters and conservation measures may adversely impact our business.
Despite the fact that we are organized as a limited partnership under Delaware law, we will be treated as a corporation for U.S. federal income tax purposes unless we satisfy a “qualifying income” requirement.
Despite the fact that we are organized as a limited partnership under Delaware law, we will be treated as a corporation for U.S. federal income tax purposes unless we satisfy a “qualifying income” requirement. Based upon our current operations, we believe we satisfy the qualifying income requirement.
The amount of cash generated from operations will fluctuate from quarter to quarter based on a number of factors, some of which are beyond our control, which include, among others: • demand for motor fuel in the markets we serve, including the result of secular trends towards increased usage of electric vehicles and/or seasonal fluctuations in demand for motor fuel; • competition from other companies that sell motor fuel products or have convenience stores in the market areas in which we or our commission agents or dealers operate; • regulatory action affecting the supply of or demand for motor fuel, our operations, our existing contracts or our operating costs; • prevailing economic conditions; • rising interest rates and slowing economic growth; • the accelerated transition to a low carbon economy; • geopolitical events such as the armed conflict in Ukraine and political instability in the Middle East; • supply, extreme weather and logistics disruptions; and • volatility of margins for motor fuel.
The amount of cash generated from operations will fluctuate from quarter to quarter based on a number of factors, some of which are beyond our control, which include, among others: • demand for motor fuel in the markets we serve, including the result of secular trends towards increased usage of electric vehicles and/or seasonal fluctuations in demand for motor fuel; • competition from other companies that sell motor fuel products or have convenience stores in the market areas in which we or our commission agents or dealers operate; • the amount of crude oil and refined petroleum products transported through our subsidiaries’ pipelines; • the level of competition from other midstream, transportation and storage and retail marketing companies and other energy providers; • regulatory action affecting the supply of or demand for motor fuel, crude oil, refined petroleum products, our operations, our existing contracts or our operating costs; 20 Table of Contents In d ex to Financial Statements • prevailing economic conditions; • the price of crude oil and refined petroleum products; • rising interest rates and slowing economic growth; • the accelerated transition to a low carbon economy; • geopolitical events such as the armed conflict in Ukraine and political instability in the Middle East; • supply, extreme weather and logistics disruptions; and • volatility of margins for motor fuel.
Liability under, or a violation of compliance with, these laws and regulations, or any future laws or regulations, could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders.
Liability under, or a violation of compliance with, these laws and regulations, or any future laws or regulations, could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders. Pipeline operations are also subject to a number of environmental and safety programs and regulations.
The EPA has also adopted rules requiring the monitoring and reporting of GHG emissions from certain sources in the United States on an annual basis, including certain of our operations; moreover, as part of President Biden’s focus on climate change, the EPA has proposed new methane standards for both new and existing sources in the oil and gas sector.
The EPA has also adopted rules requiring the monitoring and reporting of GHG emissions from certain sources in the United States on an annual basis, including certain of our operations; moreover, the EPA issued new methane standards for both new and existing sources in the oil and gas sector.
Our business, results of operations, cash flows and financial condition, as well as our ability to make distributions and the market value of our common units, could be impacted by the following: • our future debt levels; • increases in interest rates, including the impact to the relative value of our distributions to yield-oriented investors; and • restrictions and financial covenants associated with our debt agreements. 15 Table of Contents In dex to Financial Statements Risks Related to Our Structure Our General Partner.
Our business, results of operations, cash flows and financial condition, as well as our ability to make distributions and the market value of our common units, could be impacted by the following: • our debt levels; • increases in interest rates, including the impact to the relative value of our distributions to yield-oriented investors; and • restrictions and financial covenants associated with our debt agreements.
President Biden has recommitted the United States to the Paris 26 Table of Contents In dex to Financial Statements agreement and, in April 2021, announced a goal of reducing the United States’ emissions by 50-52% below 2005 levels by 2030.
President Biden recommitted the United States to the Paris agreement and, in April 2021, announced a goal of reducing the United States’ emissions by 50-52% below 2005 levels by 2030.
Certain environmental laws, including CERCLA, impose strict, and under certain circumstances, joint and several, liability on the current and former owners and operators of properties for the costs of investigation and removal or remediation of contamination and also impose liability for any related damages to natural resources without regard to fault.
For more information, see our regulatory disclosure titled “Pipeline Safety Regulation.” Certain environmental laws, including CERCLA, impose strict, and under certain circumstances, joint and several, liability on the current and former owners and operators of properties for the costs of investigation and removal or remediation of contamination and also impose liability for any related damages to natural resources without regard to fault.
We are exposed to various litigation claims in the ordinary course of our wholesale business operations, including dealer litigation and industry-wide or class-action claims arising from the products we carry, the equipment or processes we use or employ or industry-specific business practices.
Future litigation could adversely affect our financial condition and results of operations. We are exposed to various litigation claims in the ordinary course of our wholesale business operations, including, but not limited to, dealer litigation and industry-wide or class-action claims arising from the products we carry, the equipment or processes we use or employ or industry-specific business practices.
A violation of, liability under, or noncompliance with these laws and regulations, or any future environmental law or regulation, could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders.
A violation of, liability under, or noncompliance with these laws and regulations, or any future environmental law or regulation, could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders. Regulations under the Clean Water Act, the OPA 90 and state laws impose regulatory burdens on terminal operations.
Similarly, a failure to comply with such laws and regulations by the third parties could have a material adverse effect on our financial condition and results of operations. Indebtedness Our future debt levels may impair our financial condition and our ability to make distributions to our unitholders. We had $3.6 billion of debt outstanding as of December 31, 2023.
Similarly, a failure to comply with such laws and regulations by the third parties could have a material adverse effect on our financial condition and results of operations. Indebtedness Our debt levels may impair our financial condition and our ability to make distributions to our unitholders.
Although we believe that we have a comprehensive environmental, health, and safety program, we may not have identified all environmental liabilities at all of our current and former locations; material environmental conditions not known to us may exist; existing and future laws, ordinances or regulations may impose material environmental liability or compliance costs on us; or we may be required to make material environmental expenditures for remediation of contamination that has not been discovered at existing locations or locations that we may acquire.
Although we believe that we have a comprehensive environmental, health, and safety program, we may not have identified all environmental liabilities at all of our current and former locations; material environmental or pipeline safety conditions not known to us may exist; existing and future laws, ordinances or regulations may impose material environmental or pipeline safety liability or 31 Table of Contents In d ex to Financial Statements compliance costs on us; or we may be required to make material expenditures for the remediation of contamination or pipeline integrity and safety matters.
Increasing attention to climate change, societal expectations on companies to address climate change and other ESG matters, investor and societal expectations regarding voluntary ESG disclosures, and consumer demand for alternative forms of energy may result in increased costs, reduced demand for our products, reduced profits, increased investigations and litigation, and negative impacts on our common unit price and access to capital markets.
Attention from investors, customers, employees, regulatory bodies and other stakeholders to climate change, societal expectations on companies to address climate change or social and employment initiatives and other ESG matters, investor and societal expectations regarding voluntary ESG disclosures, and consumer demand for alternative forms of energy may result in increased costs, reduced demand for our products, reduced profits, increased investigations and litigation, heightened scrutiny of our statements and initiatives, and negative impacts on our common unit price and access to capital markets.
Significant increases or high volatility in petroleum costs could impact consumer demand for motor fuel and convenience merchandise. Such volatility makes it difficult to predict the impact that future petroleum costs fluctuations may have on our operating results and financial condition. We are subject to dealer tank wagon pricing structures at certain locations further contributing to margin volatility.
Such volatility makes it difficult to predict the impact that future petroleum costs fluctuations may have on our operating results and financial condition. We are subject to dealer tank wagon pricing structures at certain locations further contributing to margin volatility.
Failing to meet the qualifying income requirement or a change in current law could cause us to be treated as a corporation for U.S. federal income tax purposes or otherwise subject us to taxation as an entity.
However, no ruling has been or will be requested regarding our treatment as a partnership for U.S. federal income tax purposes. Failing to meet the qualifying income requirement or a change in current law could cause us to be treated as a corporation for U.S. federal income tax purposes or otherwise subject us to taxation as an entity.
Terrorist attacks and threatened or actual war may adversely affect our business. Our business is affected by general economic conditions and fluctuations in consumer confidence and spending, which can decline as a result of numerous factors outside of our control.
Our business is affected by general economic conditions and fluctuations in consumer confidence and spending, which can decline as a result of numerous factors outside of our control.
As a result, our results from operations may vary widely from period to period, affecting our cash flow. The dangers inherent in the storage and transportation of motor fuel could cause disruptions in our operations and could expose us to potentially significant losses, costs or liabilities. We store motor fuel in underground and above ground storage tanks.
As a result, our results from operations may vary widely from period to period, affecting our cash flow. The dangers inherent in the storage and transportation of motor fuel, crude oil, refined petroleum products and anhydrous ammonia could cause disruptions in our operations and could expose us to potentially significant losses, costs or liabilities.
See “Item 1C. Cybersecurity” for additional information on our cybersecurity risk management, strategy and governance. 21 Table of Contents In dex to Financial Statements We rely on our information systems to manage numerous aspects of our business, and a disruption of these systems could adversely affect our business.
See “Item 1C. Cybersecurity” for additional information on our cybersecurity risk management, strategy and governance. We rely on our information systems to manage numerous aspects of our business, and a disruption of these systems could adversely affect our business. We depend on our information systems to manage numerous aspects of our business transactions and provide analytical information to management.
Such expectations and assumptions are necessarily uncertain and may be prone to error or subject to misinterpretation given the long timelines involved and the lack of an established single approach to identifying, measuring and reporting on many ESG matters.
Such expectations, assumptions and hypothetical scenarios are necessarily uncertain and may be prone to error or subject to misinterpretation given the long timelines involved and the lack of an established approach to identifying, measuring and reporting on many ESG matters. Additionally, while we may announce various voluntary ESG targets, such targets are often aspirational.
Subject to certain limitations, the EPA now has significant discretion to set renewable fuel targets under the RFS, which could result in increased compliance obligations on refiners and importers and transportation fuels.
Subject to certain limitations, the EPA now has significant discretion to set renewable fuel targets under the RFS, which could result in increased compliance obligations on refiners and importers and transportation fuels. It remains unclear how the Trump Administration may adjust existing or future renewable fuel targets under the RFS.
If we determine that any of our goodwill or intangible assets were impaired, we would be required to take an immediate charge to earnings with a correlative effect on partners’ 22 Table of Contents In dex to Financial Statements capital and balance sheet leverage as measured by debt to total capitalization.
If we determine that any of our goodwill or intangible assets were impaired, we would be required to take an immediate charge to earnings with a correlative effect on partners’ capital and balance sheet leverage as measured by debt to total capitalization. Impairment charges are allowed to be removed from our debt covenant calculations.
Our business, results of operations, cash flows, financial condition and future growth could be impacted by the following: • significant expenditures or liabilities resulting from federal, state and local laws and regulations pertaining to environmental protection, operational safety, or the Renewable Fuel Standard (“RFS”); • changes in demand for motor fuel resulting from federal and/or state regulations that may discourage the use or storage of petroleum products; • significant expenditures or penalties associated with federal, state and local laws and regulations that govern the product quality specifications of refined petroleum products we purchase; • changes in federal, state or local laws and regulations pertaining to the facilities and operations of third parties that supply fuel to or transport for our storage terminals; • impacts to our business as a result of the energy transition and legislative, regulatory, and financial risks relating to climate change; and • regulatory provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and the rules adopted thereunder.
Our business, results of operations, cash flows, financial condition and future growth could be impacted by the following: • significant expenditures or liabilities resulting from federal, state and local laws and regulations pertaining to environmental protection, operational safety, pipeline safety or the Renewable Fuel Standard (“RFS”); • changes in demand for motor fuel, crude oil, renewable fuels or other petroleum products resulting from federal and/or state regulations that may discourage the use or storage of petroleum products; • significant expenditures or penalties associated with federal, state and local laws and regulations that govern the product quality specifications of refined petroleum products we purchase and sell; • changes in federal, state or local laws and regulations pertaining to the facilities and operations of third parties that supply fuel to or transport for our storage terminals; • laws, regulations and policies governing the rates, terms and conditions of our services; • failure to recover the full amount of increases in the costs of our pipeline operations; • costs and liabilities resulting from performance of pipeline integrity programs and related repairs; • new or more stringent pipeline safety controls or enforcement of legal requirements; 19 Table of Contents In d ex to Financial Statements • impacts to our business as a result of the energy transition and legislative, regulatory and financial risks relating to climate change; and • regulatory provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and the rules adopted thereunder.
We depend on our information systems to manage numerous aspects of our business transactions and provide analytical information to management. Our information systems are an essential component of our business and growth strategies, and a serious disruption to our information systems could significantly limit our ability to manage and operate our business efficiently.
Our information systems are an essential component of our business and growth strategies, and a serious disruption to our information systems could significantly limit our ability to manage and operate our business efficiently.
Unfavorable ESG ratings and recent activism directed at shifting funding away from companies with fossil fuel-related assets could lead to increased negative investor sentiment toward us and our industry and to the diversion of investment to other industries, which could have a negative impact on our common unit price and our access to and costs of capital.
While such ratings do not impact all investors’ investment or voting decisions, unfavorable ESG ratings and activism directed at shifting funding away from companies with fossil fuel-related assets could lead to increased negative investor sentiment toward us and our industry and to the diversion of investment to other industries, which could have a negative 33 Table of Contents In d ex to Financial Statements impact on our common unit price and our access to and costs of capital.
We are not fully insured against all risks incident to our business. We may be unable to obtain or maintain insurance with the coverage that we desire at reasonable rates. As a result of market conditions, the premiums and deductibles for certain of our insurance policies have increased and could continue to do so.
We may be unable to obtain or maintain insurance with the coverage that we desire at reasonable rates. As a result of market conditions, the premiums and deductibles for certain of our insurance policies have increased and could continue to do so. Certain insurance coverage could become unavailable or available only for reduced amounts of coverage.
As of December 31, 2023, Energy Transfer and its affiliates held approximately 33.7% of our outstanding common units, which constitutes a 28.2% limited partner interest in us. Our General Partner interest or the control of our General Partner may be transferred to a third party without unitholder consent.
As of December 31, 2024, Energy Transfer and its affiliates held approximately 20.9% of our outstanding common units. Our General Partner interest or the control of our General Partner may be transferred to a third party without unitholder consent.
The threat of climate change continues to attract considerable attention in the United States and in foreign countries. In the United States to date, no comprehensive climate change legislation has been implemented at the federal level. However, President Biden has announced that climate change will be a focus of his administration.
The threat of climate change continues to attract considerable attention in the United States and in foreign countries. In the United States to date, no comprehensive climate change legislation has been implemented at the federal level.
Our operating results are influenced by prices for motor fuel. General economic and political conditions, acts of war or terrorism and instability in oil producing regions, particularly in the Middle East, South America, Russia and Africa could significantly impact crude oil supplies and refined product petroleum costs.
General economic and political conditions, acts of war or terrorism and instability in oil producing regions, particularly in the Middle East, South America, Russia and Africa could significantly impact crude oil supplies and refined product petroleum costs. Significant increases or high volatility in petroleum costs could impact consumer demand for motor fuel and convenience merchandise.
Pursuant to the Bipartisan Budget Act of 2015, for tax years beginning after December 31, 2017, if the IRS makes audit adjustments to our income tax returns, it (and some states) may assess and collect any taxes (including any applicable penalties and interest) resulting from such audit adjustment directly from us.
If the IRS makes audit adjustments to our income tax returns, it (and some states) may assess and collect any taxes (including any applicable penalties and interest) resulting from such audit adjustment directly from us.
However, application of the forum selection provision may in some instances be limited 35 Table of Contents In dex to Financial Statements by applicable law.
However, application of the forum selection provision may in some instances be limited by applicable law.
The IRS may challenge these valuation methods and the resulting allocations of income, gain, loss and deduction. 38 Table of Contents In dex to Financial Statements A successful IRS challenge to these methods or allocations could adversely affect the amount, character, and timing of taxable income or loss being allocated to our unitholders.
A successful IRS challenge to these methods or allocations could adversely affect the amount, character, and timing of taxable income or loss being allocated to our unitholders.
Regulations under the Clean Water Act, the Oil Pollution Act of 1990 (“OPA 90”) and state laws impose regulatory burdens on terminal operations. Spill prevention control and countermeasure requirements of federal and state laws require containment to mitigate or prevent contamination of waters in the event of a refined product overflow, rupture, or leak from above-ground pipelines and storage tanks.
Spill prevention control and countermeasure requirements of federal and state laws require containment to mitigate or prevent contamination of waters in the event of a refined product overflow, rupture, or leak from above-ground pipelines and storage tanks.
Unitholders desiring to assure their status as partners and avoid the risk of gain recognition from a securities loan are urged to consult a tax advisor to discuss whether it is advisable to modify any applicable brokerage account agreements to prohibit their brokers from borrowing their common units.
Unitholders desiring to assure their status as partners and avoid the risk of gain recognition from a securities loan are urged to consult a tax advisor to discuss whether it is advisable to modify any applicable brokerage account agreements to prohibit their brokers from borrowing their common units. 45 Table of Contents In d ex to Financial Statements We have adopted certain valuation methodologies in determining a unitholder’s allocations of income, gain, loss and deduction.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeImpact of Risks from Cybersecurity Threats As of the date of this Annual Report on Form 10-K, though the Partnership and our service providers have experienced certain cybersecurity incidents, we are not aware of any previous cybersecurity threats that have materially affected the Partnership, either financially or operationally.
Biggest changeAs of the date of this Annual Report on Form 10-K, though the Partnership and our service providers have experienced certain cybersecurity incidents, we are not aware of any cybersecurity threats that have materially affected, or are reasonably likely to materially affect, the Partnership, either financially or operationally.
This program includes processes that are modeled after the National Institute of Standards and Technology’s Cybersecurity Framework and focuses on using business drivers to guide cybersecurity activities. This program is managed by a team of full-time employees, overseen by our Chief Information Officer, that are tasked with conducting our day-to-day information technology (“IT”) operations (collectively, the “IT team”).
This program includes processes that are modeled after the National Institute of Standards and Technology’s Cybersecurity Framework and focuses on using business drivers to guide cybersecurity activities. This program is managed by a team of full-time employees, overseen by our Chief Information Officer, that are tasked with conducting our day-to-day IT operations (collectively, the “IT team”).
Risk Factors - Cybersecurity attacks, data breaches and other disruptions affecting us, or our service providers, could materially and adversely affect our business, operations, reputation, and financial results; and - We rely on our information 40 Table of Contents In dex to Financial Statements technology systems to manage numerous aspects of our business, and a disruption of these systems could adversely affect our business. ” Board of Directors’ Oversight and Management’s Role Our Chief Information Officer oversees the Partnership’s functions of IT, cybersecurity, infrastructure and IT governance (including the Partnership’s IT team) and has more than 35 years of experience leading business technology functions.
Risk Factors - Cybersecurity attacks, data breaches and other disruptions affecting us, or our service providers, could materially and adversely affect our business, operations, reputation, and financial results; and - We rely on our information systems to manage numerous aspects of our business, and a disruption of these systems could adversely affect our business. ” Board of Directors’ Oversight and Management’s Role Our Chief Information Officer oversees the Partnership’s functions of IT, cybersecurity, infrastructure and IT governance (including the Partnership’s IT team) and has more than 35 years of experience leading business technology functions.
Management also updates the Audit Committee as new risks are identified and the steps taken to mitigate such risks.
Management also updates the Audit Committee as new risks are identified and regarding the steps taken to mitigate such risks. The Audit Committee reviews periodic reporting and updates regarding our cybersecurity risk management.
Added
Impact of Risks from Cybersecurity Threats The energy industry’s increasing dependence on IT and operational technology to support critical functions, such as energy distribution and management activities, has heightened its vulnerability to cybersecurity incidents.
Added
Consequently, the global surge in 47 Table of Contents In d ex to Financial Statements cybersecurity incidents, whether caused by intentional attacks or accidental events, presents a significant challenge to our sector. As cybersecurity threats grow in complexity and scale, preventing, detecting, mitigating and remediating these incidents remains a continuous and increasingly demanding task for the industry.
Added
Compliance with evolving cybersecurity reporting requirements, such as those mandated by FERC, presents significant challenges. These regulations necessitate timely and detailed reporting of cyber incidents, demanding substantial resources and robust internal processes to ensure adherence. Failure to comply could result in legal penalties, increased regulatory scrutiny and reputational damage.
Added
Moreover, the dynamic nature of these requirements may lead to overlapping or inconsistent obligations, further complicating compliance efforts. Monitoring these developments and integrating them into our cybersecurity and compliance frameworks is essential to mitigate potential risks.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed3 unchanged
Biggest changeIn addition, we believe that we have, or are in the process of obtaining, all required material approvals, authorizations, orders, licenses, permits, franchises and consents of, and have obtained or made all required material registrations, qualifications and filings with, the various state and local government and regulatory authorities which relate to ownership of our properties or the operations of our business.
Biggest changeIn addition, we believe that we have, or are in the process of obtaining, all required material approvals, authorizations, orders, licenses, permits, franchises and consents of, and have obtained or made all required material registrations, qualifications and filings with, the various state and local government and regulatory authorities which relate to ownership of our properties or the operations of our business. 48 Table of Contents In d ex to Financial Statements

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAs of February 9, 2024, Energy Transfer directly owned approximately 33.7% of our outstanding common units, which constituted a 28.2% limited partner ownership interest in us. Our General Partner is 100% owned by Energy Transfer and owns a non-economic general partner interest in us. Energy Transfer also owns all of our IDRs.
Biggest changeAs of February 7, 2025, Energy Transfer directly owned approximately 20.9% of our outstanding common units. Our General Partner is 100% owned by Energy Transfer and owns a non-economic general partner interest in us. Energy Transfer also owns all of our IDRs.
The distributions on the Class C Units are paid out of our available cash, except that the Class C Units do not share in distributions of available cash to the extent such cash is derived from or attributable to any distribution received by us from Sunoco Retail, our indirect wholly owned subsidiary that is subject to state and federal income tax, the proceeds of any sale of the membership interests in Sunoco Retail, or any interest or principal payments we receive with respect to indebtedness of Sunoco Retail or its subsidiaries.
The distributions on the Class C Units are paid out of our available cash, except that the Class C Units do not share in distributions of available cash to the extent such cash is derived from or attributable to any distribution received by us from Sunoco Retail LLC, our indirect wholly owned subsidiary that is subject to state and federal income tax (“Sunoco Retail”), the proceeds of any sale of the membership interests in Sunoco Retail, or any interest or principal payments we receive with respect to indebtedness of Sunoco Retail or its subsidiaries.
Energy Transfer currently owns all of our IDRs. 42 Table of Contents In dex to Financial Statements Marginal percentage interest in distributions Total quarterly distribution per common unit target amount Common Unitholders IDR Holder Minimum Quarterly Distribution $0.4375 100 % — First Target Distribution Above $0.4375 up to $0.503125 100 % — Second Target Distribution Above $0.503125 up to $0.546875 85 % 15 % Third Target Distribution Above $0.546875 up to $0.656250 75 % 25 % Thereafter Above $0.656250 50 % 50 % Class C Units We have outstanding an aggregate of 16,410,780 Class C Units, all of which are held by wholly owned subsidiaries of the Partnership.
Energy Transfer currently owns all of our IDRs. 50 Table of Contents In d ex to Financial Statements Marginal percentage interest in distributions Total quarterly distribution per common unit target amount Common Unitholders IDR Holder Minimum Quarterly Distribution $0.4375 100 % — First Target Distribution Above $0.4375 up to $0.503125 100 % — Second Target Distribution Above $0.503125 up to $0.546875 85 % 15 % Third Target Distribution Above $0.546875 up to $0.656250 75 % 25 % Thereafter Above $0.656250 50 % 50 % Class C Units We have outstanding an aggregate of 16,410,780 Class C Units, all of which are held by wholly owned subsidiaries of the Partnership.
Holders At the close of business on February 9, 2024, we had 21 holders of record of our common units and two holders of record of our Class C Units. The number of record holders does not include holders of units in “street names” or persons, partnerships, associations, corporations or other entities identified in security position listings maintained by depositories.
Holders At the close of business on February 7, 2025, we had 216 holders of record of our common units and two holders of record of our Class C Units. The number of record holders does not include holders of units in “street names” or persons, partnerships, associations, corporations or other entities identified in security position listings maintained by depositories.
Item 5. Market for Registrant's Common Equity, Related Unitholder Matters and Issuer Purchases of Equity Securities Our Partnership Interest As of February 9, 2024, we had outstanding 84,428,109 common units, 16,410,780 Class C units representing limited partner interests in the Partnership (“Class C Units”), a non-economic general partner interest and IDRs.
Item 5. Market for Registrant's Common Equity, Related Unitholder Matters and Issuer Purchases of Equity Securities Our Partnership Interest As of February 7, 2025, we had outstanding 136,235,878 common units, 16,410,780 Class C units representing limited partner interests in the Partnership (“Class C Units”), a non-economic general partner interest and IDRs.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

41 edited+52 added−26 removed47 unchanged
Biggest changeThe following table presents a reconciliation of net income to Adjusted EBITDA for the years ended December 31, 2023 and 2022: Year Ended December 31, 2023 2022 Change Net income and comprehensive income $ 394 $ 475 $ (81) Depreciation, amortization and accretion 187 193 (6) Interest expense, net 217 182 35 Non-cash unit-based compensation expense 17 14 3 Gain on disposal of assets (7) (13) 6 Unrealized (gain) loss on commodity derivatives (21) 21 (42) Inventory adjustments 114 (5) 119 Equity in earnings of unconsolidated affiliates (5) (4) (1) Adjusted EBITDA related to unconsolidated affiliates 10 10 — Other non-cash adjustments 22 20 2 Income tax expense 36 26 10 Adjusted EBITDA $ 964 $ 919 $ 45 Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 The following discussion of results compares the operations for the years ended December 31, 2023 and 2022. 46 Table of Contents In dex to Financial Statements Net Income and Comprehensive Income .
Biggest changeResults of Operations Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023 Consolidated Results of Operations Year Ended December 31, 2024 2023 Change Segment Adjusted EBITDA: Fuel Distribution $ 908 $ 865 $ 43 Pipeline Systems 377 11 366 Terminals 172 88 84 Total $ 1,457 $ 964 $ 493 53 Table of Contents In d ex to Financial Statements Year Ended December 31, 2024 2023 Change Reconciliation of net income to Adjusted EBITDA: Net income $ 874 $ 394 $ 480 Depreciation, amortization and accretion 368 187 181 Interest expense, net 391 217 174 Non-cash unit-based compensation expense 17 17 — (Gain) loss on disposal of assets and impairment charges 45 (7) 52 Loss on extinguishment of debt 2 — 2 Unrealized (gains) losses on commodity derivatives 12 (21) 33 Inventory valuation adjustments 86 114 (28) Equity in earnings of unconsolidated affiliates (60) (5) (55) Adjusted EBITDA related to unconsolidated affiliates 101 10 91 Gain on West Texas Sale (586) — (586) Other non-cash adjustments 32 22 10 Income tax expense 175 36 139 Adjusted EBITDA (consolidated) $ 1,457 $ 964 $ 493 The following discussion of results compares the operations for the years ended December 31, 2024 and 2023.
Investing Activities Cash flows from investing activities primarily consist of capital expenditures, cash contributions to unconsolidated affiliates, cash amounts paid for acquisitions and cash proceeds from sale or disposal of assets. Changes in capital expenditures between periods primarily result from increases or decreases in our growth capital expenditures to fund our expansion projects. Cash Flows Used in Investing Activities.
Investing Activities Cash flows from investing activities primarily consist of capital expenditures, cash contributions to unconsolidated affiliates, cash amounts paid for acquisitions and cash proceeds from sale or disposal of assets. Changes in capital expenditures between periods primarily result from increases or decreases in our growth capital expenditures to fund our expansion projects.
Some of these limitations include: • it does not reflect interest expense or the cash requirements necessary to service interest or principal payments on our Credit Facility; • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect cash requirements for such replacements; and • as not all companies use identical calculations, our presentation of Adjusted EBITDA may not be comparable to similarly titled measures of other companies.
Some of these limitations include: • it does not reflect interest expense or the cash requirements necessary to service interest or principal payments on our Credit Facility or senior notes; • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect cash requirements for such replacements; and • as not all companies use identical calculations, our presentation of Adjusted EBITDA may not be comparable to similarly titled measures of other companies.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular dollar and unit amounts, except per unit data, are in millions) The following discussion and analysis of our financial condition and results of operations for the years ended December 31, 2023 and 2022 should be read in conjunction with our audited consolidated financial statements and notes to audited consolidated financial statements included elsewhere in this report.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular dollar and unit amounts, except per unit data, are in millions) The following discussion and analysis of our financial condition and results of operations for the years ended December 31, 2024 and 2023 should be read in conjunction with our audited consolidated financial statements and notes to audited consolidated financial statements included elsewhere in this report.
Non-cash items include recurring non-cash expenses, such as depreciation, depletion and amortization expense and non-cash unit-based compensation expense. Cash flows from operating activities also differ from earnings as a result of non-cash charges that may not be recurring, such as impairment charges.
Non-cash items include recurring non-cash expenses, such as depreciation, amortization and accretion expense and non-cash unit-based compensation expense. Cash flows from operating activities also differ from earnings as a result of non-cash charges that may not be recurring, such as impairment charges.
Adjusted EBITDA, as used throughout this document, is defined as earnings before net interest expense, income taxes, depreciation, amortization and accretion expense, allocated non-cash unit-based compensation expense, unrealized gains and losses on commodity derivatives, inventory adjustments and certain other operating expenses reflected in net income that we do not believe are indicative of ongoing core operations, such as gain or loss on disposal of assets and non-cash impairment charges.
Key Measures Used to Evaluate and Assess Our Business Adjusted EBITDA, as used throughout this document, is defined as earnings before net interest expense, income taxes, depreciation, amortization and accretion expense, allocated non-cash unit-based compensation expense, unrealized gains and losses on commodity derivatives, inventory adjustments and certain other operating expenses reflected in net income that we do not believe are indicative of ongoing core operations, such as gain or loss on disposal of assets and non-cash impairment charges.
Fuel hedging positions are not significant to our operations. On a consolidated basis, the Partnership had a position of 1.1 million barrels with an aggregated unrealized loss of $8.6 million at December 31, 2023. Off-Balance Sheet Arrangements We do not maintain any off-balance sheet arrangements for the purpose of credit enhancement, hedging transactions or other financial or investment purposes.
Fuel hedging positions are not significant to our operations. On a consolidated basis, the Partnership had a position of 0.3 million barrels with an aggregated unrealized loss of $3.8 million at December 31, 2024. Off-Balance Sheet Arrangements We do not maintain any off-balance sheet arrangements for the purpose of credit enhancement, hedging transactions or other financial or investment purposes.
Our daily working capital requirements fluctuate within each month, primarily in response to the timing of payments for motor fuels, motor fuels tax and rent. Cash Flows Provided by Operations. Net cash provided by operations was $600 million and $561 million, for 2023, and 2022, respectively.
Our daily working capital requirements fluctuate within each month, primarily in response to the timing of payments for motor fuels, motor fuels tax and rent. Net cash provided by operations was $549 million and $600 million for 2024 and 2023, respectively.
Under the guideline company method, the Partnership determines the estimated fair value of each of our reporting units by applying valuation multiples of comparable publicly-traded companies to each reporting unit’s projected EBITDA and then averaging that estimate with similar historical calculations using a 50 Table of Contents In dex to Financial Statements three year average.
Under the guideline company method, the Partnership determines the estimated fair value of each of our reporting units by applying valuation multiples of comparable publicly-traded companies to each reporting unit’s projected EBITDA and then averaging that estimate with similar historical calculations using a three year average.
We are, however, subject to a statutory requirement that our non-qualifying income cannot exceed 10% of our total gross income, determined on a calendar year basis under the applicable income tax provisions. If the amount of our non-qualifying income exceeds this statutory limit, we would be taxed as a corporation.
We are, however, subject to a statutory requirement that our non-qualifying income cannot exceed 10% of our total gross income, determined on a calendar year basis under the applicable income 61 Table of Contents In d ex to Financial Statements tax provisions. If the amount of our non-qualifying income exceeds this statutory limit, we would be taxed as a corporation.
On January 25, 2024, we declared a quarterly distribution of $0.8420 per common unit based on the results for the three months ended December 31, 2023, excluding distributions to Class C unitholders.
On January 27, 2025 , we declared a quarterly distribution of $0.8865 per common unit based on the results for the three months ended December 31, 2024, excluding distributions to Class C unitholders.
For a reconciliation of Adjusted EBITDA to the most directly comparable financial measure calculated and presented in accordance with GAAP, read “Key Operating Metrics and Results of Operations” below.
For a reconciliation of Adjusted EBITDA to the most directly comparable financial measure calculated and presented in accordance with GAAP, read “Results of Operations” below.
Seasonality Our business exhibits some seasonality due to our customers’ increased demand for motor fuel during the late spring and summer months, as compared to the fall and winter months. Travel, recreation, and construction activities typically increase in these months, driving up the demand for motor fuel sales.
Seasonality Our business exhibits some seasonality due to our customers’ increased demand for motor fuel during the late spring and summer months, as compared to the fall and winter months. Travel, recreation, and construction activities typically increase in these months, 52 Table of Contents In d ex to Financial Statements driving up the demand for motor fuel sales.
The unrealized gains and losses on our commodity derivatives represent the changes in fair value of our commodity derivatives. The change in unrealized gains and losses between periods was impacted by the notional amounts and commodity price changes on our commodity derivatives. Additional information on commodity derivatives is included in “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” below.
Unrealized (Gains) Losses on Commodity Derivatives. The unrealized gains and losses on our commodity derivatives represent the changes in fair value of our commodity derivatives. The change in unrealized gains and losses between periods was impacted by the notional amounts and commodity price changes on our commodity derivatives. Additional information on commodity derivatives is included in “Item 7A.
Year Ended December 31, 2023 2022 Net cash provided by (used in) Operating activities $ 600 $ 561 Investing activities (288) (464) Financing activities (365) (40) Net increase (decrease) in cash and cash equivalents $ (53) $ 57 Operating Activities Changes in cash flows from operating activities between periods primarily result from changes in earnings, excluding the impacts of non-cash items and changes in operating assets and liabilities (net of effects of acquisitions).
Year Ended December 31, 2024 2023 Net cash provided by (used in) Operating activities $ 549 $ 600 Investing activities 477 (288) Financing activities (961) (365) Net increase (decrease) in cash and cash equivalents $ 65 $ (53) Operating Activities Changes in cash flows from operating activities between periods primarily result from changes in earnings, excluding the impacts of non-cash items and changes in operating assets and liabilities (net of effects of acquisitions and divestitures).
As of December 31, 2023, we had $29 million of cash and cash equivalents on hand and borrowing capacity of $1.084 billion under the Credit Facility.
As of December 31, 2024, we had $94 million of cash and cash equivalents on hand and borrowing capacity of $1.25 billion under the Credit Facility.
There can be no guarantee that financing will be available on acceptable terms or at all. Debt financing, if available, could impose additional cash payment obligations and additional covenants and operating restrictions. In addition, any of the items discussed in detail under “Item 1A.
There can be no guarantee that financing will be available on acceptable terms or at all. Debt financing, if available, could impose additional cash payment obligations and additional covenants and operating restrictions. In addition, any of the items discussed in detail under “Item 1A. Risk Factors” included in this Annual Report on Form 10-K may also significantly impact our liquidity.
Year Ended December 31, 2023 During the year ended December 31, 2023 we: • issued $500 million of 7.000% senior notes due 2028; 48 Table of Contents In dex to Financial Statements • borrowed $3.3 billion and repaid $3.8 billion under the Credit Facility to fund daily operations; and • paid $371 million in distributions to our unitholders, of which $171 million was paid to Energy Transfer.
During the year ended December 31, 2023 we: • borrowed $500 million in senior notes; • borrowed $3.3 billion and repaid $3.8 billion under the Credit Facility to fund daily operations; • paid $5 million in loan origination costs; and • paid $371 million in distributions to our unitholders, of which $171 million was paid to Energy Transfer.
Adjusted EBITDA reflects amounts for unconsolidated affiliates based on the same recognition and measurement methods used to record equity in earnings of unconsolidated affiliates. Adjusted EBITDA related to unconsolidated affiliates excludes the same items with respect to the unconsolidated affiliates as those excluded from the calculation of Adjusted EBITDA, such as interest, taxes, depreciation, depletion, amortization and other non-cash items.
Adjusted EBITDA related to unconsolidated affiliates excludes the same items with respect to the unconsolidated affiliates as those excluded from the calculation of Adjusted EBITDA, such as interest, taxes, depreciation, amortization and accretion and other non-cash items.
We expect our ongoing sources of liquidity to include cash generated from operations, borrowings under our Credit Facility and the issuance of additional long-term debt or partnership units as appropriate given market conditions. We expect that these sources of funds will be adequate to provide for our short-term and long-term liquidity needs.
We expect our ongoing sources of liquidity to include cash generated from 56 Table of Contents In d ex to Financial Statements operations, borrowings under our Credit Facility and the issuance of additional long-term debt or partnership units as appropriate given market conditions.
The distribution will be approximately $71 million in the aggregate for common units and approximately $19 million with respect to IDRs, and will be paid on February 20, 2024 to all unitholders of record on February 7, 2024. Capital Expenditures Included in our capital expenditures for 2023 was $70 million in maintenance capital and $145 million in growth capital.
The distribution will be approximately $121 million in the aggregate for common units and approximately $37 million with respect to IDRs, and will be paid on February 19, 2025 to unitholders of record on February 7, 2025 .
Inflation has a minimal impact on our results of operations, because we are generally able to pass along energy cost increases in the form of increased sales prices to our customers.
Market and Industry Trends and Outlook We expect that certain trends and economic or industry-wide factors will continue to affect our business, both in the short-term and long-term. Inflation has a minimal impact on our results of operations, because we are generally able to pass along energy cost increases in the form of increased sales prices to our customers.
Year Ended December 31, 2022 During the year ended December 31, 2022 we: • borrowed $4.1 billion and repaid $3.8 billion under the Credit Facility to fund daily operations; and • paid $359 million in distributions to our unitholders, of which $166 million was paid to Energy Transfer.
During the year ended December 31, 2024 we: • borrowed $1.50 billion and repaid $421 million in senior notes; • borrowed $2.79 billion and repaid $3.45 billion under the Credit Facility to fund daily operations; • paid $19 million in loan origination costs; • redeemed $784 million of preferred units; • paid $566 million in distributions to our unitholders, of which $226 million was paid to Energy Transfer; and • paid $8 million in distributions to noncontrolling interests.
For business combinations, assets and liabilities are required to be recorded at estimated fair value in connection with the initial recognition of the transaction. For impairment testing, long-lived assets are required to be tested for recoverability whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.
For 60 Table of Contents In d ex to Financial Statements impairment testing, long-lived assets are required to be tested for recoverability whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.
Financing Activities Changes in cash flows from financing activities between periods primarily result from changes in the levels of borrowings and equity issuances, which are primarily used to fund our acquisitions and growth capital expenditures. Distributions increase between the periods based on increases in the number of common units outstanding or increases in the distribution rate.
Proceeds from disposal of property and equipment were $23 million and $31 million in 2024 and 2023, respectively. Financing Activities Changes in cash flows from financing activities between periods primarily result from changes in the levels of borrowings and equity issuances, which are primarily used to fund our acquisitions and growth capital expenditures.
The increase in cash flows provided by operations was primarily due to a $26 million net increase in cash basis net income compared to the prior year; partially offset by a decrease in net cash flow from operating assets and liabilities of $13 million compared to the prior year.
The increase in cash flows provided by operations was primarily due to a $28 million net increase in net income (excluding the impacts of the gain on West Texas Sale in 2024, as well as depreciation, amortization and accretion, inventory valuation adjustments and other non-cash items) compared to the prior year; partially offset by a decrease in net cash flow from operating assets and liabilities of $79 million compared to the prior year.
Risk Factors” included in this Annual Report on Form 10-K may also significantly impact our liquidity. 47 Table of Contents In dex to Financial Statements The Partnership is party to a Second Amended and Restated Credit Agreement among the Partnership, as borrower, the lenders from time to time party thereto and Bank of America, N.A., as administrative agent, collateral agent, swingline lender and a line of credit issuer (the "Credit Facility").
The Partnership is party to a Third Amended and Restated Credit Agreement among the Partnership, as borrower, the lenders from time to time party thereto and Bank of America, N.A., as administrative agent, collateral agent, swingline lender and a line of credit issuer (the "Credit Facility").
NuStar has approximately 9,500 miles of pipeline and 63 terminal and storage facilities that store and distribute crude oil, refined products, renewable fuels, ammonia and specialty liquids. The transaction is expected to close in the second quarter of 2024, subject to customary closing conditions.
NuStar has approximately 9,500 miles of pipeline and 63 terminal and storage facilities that store and distribute crude oil, refined products, renewable fuels, ammonia and specialty liquids. The acquisition is expected to diversify the Partnership’s business, increase scale and provide vertical integration, as well as improving the Partnership’s credit profile and enhancing growth.
On January 11, 2024, we entered into a definitive agreement with 7-Eleven, Inc. to sell 204 convenience stores located in West Texas, New Mexico, and Oklahoma for approximately $1.0 billion, including customary adjustments for fuel and merchandise inventory.
Other Acquisition On August 30, 2024, we acquired a terminal in Portland, Maine for approximately $24 million, including working capital. Divestiture West Texas Sale On April 16, 2024, we completed the sale of 204 convenience stores located in West Texas, New Mexico and Oklahoma to 7-Eleven, Inc. for approximately $1.0 billion, including customary adjustments for fuel and merchandise inventory.
Net cash used in investing activities was $288 million and $464 million, for 2023 and 2022, respectively. Net cash used in investing activities included $111 million and $318 million of cash paid for acquisitions in 2023 and 2022, respectively. Capital expenditures were $215 million and $186 million for 2023 and 2022, respectively.
Net cash provided by investing activities was $477 million in 2024 and net cash used in investing activities was $288 million in 2023. Capital expenditures were $344 million and $215 million in 2024 and 2023, respectively.
Inventory Adjustments. Inventory adjustments represent changes in lower of cost or market reserves on the Partnership’s inventory. These amounts are unrealized valuation adjustments applied to fuel volumes remaining in inventory at the end of the period. For 2023, a decline in fuel prices caused lower of cost or market reserve requirements to increase by $114 million, which reduced net income.
Quantitative and Qualitative Disclosures about Market Risk” below. Inventory Valuation Adjustments. Inventory valuation adjustments represent changes in lower of cost or market reserves using the last-in, first-out method (“LIFO”) on the Partnership’s inventory. These amounts are unrealized valuation adjustments applied to fuel volumes remaining in inventory at the end of the period.
The unused availability on the Credit Facility at December 31, 2023 was $1.1 billion. The weighted average interest rate on the total amount outstanding at December 31, 2023 was 7.54%. The Partnership was in compliance with all financial covenants at December 31, 2023.
Credit Facility As of December 31, 2024, the balance on the Credit Facility was $203 million, and $43 million in standby letters of credit were outstanding. The unused availability on the Credit Facility at December 31, 2024 was $1.25 billion. The weighted average interest rate on the total amount outstanding at December 31, 2024 was 6.57%.
On January 11, 2024, we announced that we will acquire liquid fuels terminals in Amsterdam, Netherlands and Bantry Bay, Ireland from Zenith Energy for €170 million including working capital. The transaction is expected to close in the first quarter of 2024, subject to customary closing conditions.
Zenith European Terminals Acquisition On March 13, 2024, we completed the acquisition of liquid fuels terminals in Amsterdam, Netherlands and Bantry Bay, Ireland from Zenith Energy for €170 million ($185 million), including working capital. The acquisition is expected to supply optimization for the Partnership’s existing East Coast business and continues its focus on growing its portfolio of stable midstream income.
Description of Indebtedness Our outstanding consolidated indebtedness was as follows: December 31, 2023 December 31, 2022 Credit Facility $ 411 $ 900 6.000% Senior Notes due 2027 600 600 5.875% Senior Notes due 2028 400 400 7.000% Senior Notes due 2028 500 — 4.500% Senior Notes due 2029 800 800 4.500% Senior Notes due 2030 800 800 Lease-related financing obligations 94 94 Total debt 3,605 3,594 Less: current maturities — — Less: debt issuance costs 25 23 Long-term debt, net of current maturities $ 3,580 $ 3,571 Credit Facility As of December 31, 2023, the balance on the Credit Facility was $411 million, and $5 million in standby letters of credit were outstanding.
We currently expect to spend approximately $150 million in maintenance capital and at least $400 million in growth capital for the full year 2025. 58 Table of Contents In d ex to Financial Statements Description of Indebtedness Our outstanding consolidated indebtedness was as follows: December 31, 2024 December 31, 2023 Credit Facility $ 203 $ 411 5.750% senior notes due 2025 (1) (2) 600 — 6.000% senior notes due 2026 (1) 500 — 6.000% senior notes due 2027 600 600 5.625% senior notes due 2027 (1) 550 — 5.875% senior notes due 2028 400 400 7.000% senior notes due 2028 500 500 4.500% senior notes due 2029 800 800 7.000% senior notes due 2029 750 — 4.500% senior notes due 2030 800 800 6.375% senior notes due 2030 (1) 600 — 7.250% senior notes due 2032 750 — GoZone Bonds (1) (2) 322 — Lease-related financing obligations 132 94 Net unamortized premiums, discounts, and fair value adjustments 16 — Deferred debt issuance costs (37) (25) Total debt 7,486 3,580 Less: current maturities 2 — Total long-term debt, net $ 7,484 $ 3,580 (1) These senior notes and bonds, totaling $2.57 billion aggregate principal amount, were assumed by the Partnership in connection with the closing of the NuStar acquisition in May 2024.
The use of Adjusted EBITDA or Adjusted EBITDA related to unconsolidated affiliates as an analytical tool should be limited accordingly. Key Operating Metrics and Results of Operations The following information is intended to provide investors with a reasonable basis for assessing our historical operations, but should not serve as the only criteria for predicting our future performance.
The use of Adjusted EBITDA or Adjusted EBITDA related to unconsolidated affiliates as an analytical tool should be limited accordingly.
(“NuStar”) to acquire NuStar in an all-equity transaction valued at approximately $7.3 billion, including assumed debt. Under the terms of the agreement, NuStar common unitholders will receive 0.400 Sunoco common units for each NuStar common unit.
Under the terms of the agreement, NuStar common unitholders received 0.400 SUN common units for each NuStar common unit.
Cash Flows Used in Financing Activities. Net cash used in financing activities was $365 million and $40 million for 2023 and 2022, respectively.
Distributions increase between the periods based on increases in the number of common units outstanding or increases in the distribution rate. Net cash used in financing activities was $961 million and $365 million for 2024 and 2023, respectively.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in conjunction with our audited consolidated financial statements and notes to audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 17, 2023.
Discussion and analysis of matters pertaining to the year ended December 31, 2022 and year-to-year comparisons between the years ended December 31, 2023 and 2022 are not included in this Form 10-K, but can be found under Part II, Item 7 of our annual report on Form 10-K for the year ended December 31, 2023 that was filed with the SEC on February 16, 2024 and in Exhibit 99.1 to the Partnership’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 24, 2024.
As part of the sale, SUN will also amend its existing take-or-pay fuel supply agreement with 7-Eleven, Inc. to incorporate additional fuel gross profit. The transaction is expected to close promptly upon receipt of regulatory approvals and satisfaction of customary closing conditions.
As part of the sale, SUN also amended its existing take-or-pay fuel supply agreement with 7-Eleven, Inc. to incorporate additional fuel gross profit. Other Transactions ET-S Permian Effective July 1, 2024, SUN and Energy Transfer formed ET-S Permian, a joint venture combining their respective crude oil and produced water gathering assets in the Permian Basin.
Proceeds from disposal of property and equipment were $31 million and $32 million in 2023 and 2022, respectively. Distributions from unconsolidated affiliates in excess of cumulative earnings were $9 million in 2023 and $8 million in 2022.
In 2024, we received $27 million in cash from the NuStar acquisition and we received $987 million in cash proceeds from the West Texas Sale. 57 Table of Contents In d ex to Financial Statements Distributions from unconsolidated affiliates in excess of cumulative earnings were $8 million in 2024 and $9 million in 2023.
These increases are discussed in more detail below; and • a decrease in motor fuel profit of $51 million (including unrealized valuation adjustments), which was primarily due to unfavorable inventory adjustments in the current year (see below for explanation of inventory adjustments), partially offset by an increase in volume; partially offset by • an increase in non-motor fuel profit and lease income of $37 million in the aggregate.
For the year ended December 31, 2024 compared to the prior year, Adjusted EBITDA increased primarily due to an increase in segment profit of $705 million, excluding inventory valuation adjustments (see below for explanation of inventory adjustments), primarily related to the acquisitions of NuStar and Zenith European terminals, partially offset by increases in operating costs (including operating expenses, general and administrative expenses and lease expense) of $344 million, primarily related to the acquisitions of NuStar and Zenith European terminals.
Removed
For a discussion and analysis of our financial condition and results of operations for the years ended December 31, 2022 and 2021, please see “Item 7.
Added
We are primarily engaged in energy infrastructure and distribution of motor fuels in over 40 U.S. states, Puerto Rico, Europe and Mexico. Our midstream operations include an extensive network of over 14,000 miles of pipeline and over 100 terminals.
Removed
We are a Delaware master limited partnership primarily engaged in the distribution of motor fuels to independent dealers, distributors and other customers as well as the distribution of motor fuels to end-use customers at retail sites operated by commission agents.
Added
Our fuel distribution operations serve approximately 7,400 Sunoco and partner branded locations and additional independent dealers and commercial customers. 51 Table of Contents In d ex to Financial Statements Acquisitions NuStar Acquisition On May 3, 2024, we completed the acquisition of 100% of the common units of NuStar Energy L.P. (“NuStar”).
Removed
In addition, we receive lease income through the leasing or subleasing of real estate used in the retail distribution of motor fuels. As of December 31, 2023, we also operated 75 retail stores located in Hawaii and New Jersey.
Added
In connection with the acquisition, we issued approximately 51.5 million common units, which had a fair value of approximately $2.85 billion, assumed debt totaling approximately $3.5 billion, including approximately $56 million of lease related financing obligations, and assumed preferred units with a fair value of approximately $800 million.
Removed
We are the exclusive wholesale supplier of the Sunoco and EcoMaxx-branded motor fuels, supplying an extensive distribution network of approximately 5,534 company and third-party operated locations throughout the United States and Puerto Rico. We believe we are one of the largest independent motor fuel distributors, by gallons, in the United States.
Added
Subsequent to the closing of the NuStar acquisition, the Partnership redeemed all outstanding NuStar preferred units totaling $784 million, redeemed NuStar's subordinated notes totaling $403 million and repaid and terminated the NuStar credit facility totaling $455 million.
Removed
We also are one of the largest 43 Table of Contents In dex to Financial Statements distributors of Chevron, Texaco, ExxonMobil and Valero branded motor fuel in the United States. In addition to distributing motor fuel, we also distribute other petroleum products such as propane and lubricating oil.
Added
SUN contributed all of its Permian crude oil gathering assets and operations to ET-S Permian. Energy Transfer contributed its Permian crude oil and produced water gathering assets and operations to ET-S Permian. Energy Transfer’s long-haul crude pipeline network that provides transportation of crude oil out of the Permian Basin to Nederland, Houston, and Cushing is excluded from ET-S Permian.
Removed
We purchase motor fuel primarily from independent refiners and major oil companies and distribute it across more than 40 states and territories throughout the United States, including Hawaii and Puerto Rico, to: • 75 company-operated retail stores; • 476 independently operated commission agent locations where we sell motor fuel to retail customers under commission agent arrangement with such operators; • 6,828 retail stores operated by independent operators, which we refer to as “dealers” or “distributors,” pursuant to long-term distribution agreements; and • approximately 1,600 other commercial customers, including unbranded retail stores, other fuel distributors, school districts, municipalities and other industrial customers.
Added
ET-S Permian operates more than 5,000 miles of crude oil and water gathering pipelines with crude oil storage capacity in excess of 11 million barrels. SUN holds a 32.5% interest, with Energy Transfer holding the remaining 67.5% interest in ET-S Permian. Energy Transfer serves as the operator of ET-S Permian.
Removed
Our retail stores operate under several brands, including our proprietary brands APlus and Aloha Island Mart, and offer a broad selection of food, beverages, snacks, grocery and non-food merchandise, motor fuels and other services. Acquisitions On January 22, 2024, we entered into a definitive agreement with NuStar Energy L.P.
Added
The formation of the joint venture was effective on July 1, 2024. Upon formation, the SUN Permian entities were deconsolidated, and the net book value of the related assets was recorded as the initial carrying value of SUN's equity method investment in the joint venture.
Removed
On May 1, 2023, the Partnership completed the acquisition of 16 refined product terminals located across the East Coast and Midwest from Zenith Energy for $111 million, including working capital. Market and Industry Trends and Outlook We expect that certain trends and economic or industry-wide factors will continue to affect our business, both in the short-term and long-term.
Added
Adjusted EBITDA reflects amounts for unconsolidated affiliates based on the same recognition and measurement methods used to record equity in earnings of unconsolidated affiliates.
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Key Measures Used to Evaluate and Assess Our Business Management uses a variety of financial measurements to analyze business performance, including the following key measures: • Motor fuel gallons sold . One of the primary drivers of our business is the total volume of motor fuel sold through our channels.
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Net Income . For the year ended December 31, 2024 compared to the prior year, net income increased primarily due to a $586 million gain on the West Texas Sale in April 2024, as discussed below. In addition, the increase in net income reflected favorable results from our operations, as reflected in the increases in Segment Adjusted EBITDA.
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Fuel distribution contracts with our customers generally provide that we distribute motor fuel at a fixed, volume- 44 Table of Contents In dex to Financial Statements based profit margin or at an agreed upon level of price support. As a result, profit is directly tied to the volume of motor fuel that we distribute.
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These increases were partially offset by unfavorable inventory valuation adjustments, unrealized losses on commodity derivatives, increases in depreciation, amortization and accretion, and losses on disposal of asset and impairment charges. The increases in net income were also offset by increases in interest expense and income tax expense. These changes are discussed in more detail below. Adjusted EBITDA .
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Total motor fuel profit dollars earned from the product of profit per gallon and motor fuel gallons sold are used by management to evaluate business performance. • Profit per gallon .
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Additional discussion on the changes impacting net income and Adjusted EBITDA for the year ended December 31, 2024 compared to the prior year is available below and in “Segment Operating Results.” Depreciation, Amortization and Accretion. Depreciation, amortization and accretion was $368 million in 2024, an increase of $181 million from 2023.
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Profit per gallon is calculated as the profit on motor fuel (excluding non-cash inventory adjustments) divided by the number of gallons sold, and is typically expressed as cents per gallon. Our profit per gallon varies amongst our third-party relationships and is impacted by the availability of certain discounts and rebates from suppliers.
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This increase was primarily due to additional depreciation and amortization from assets recently placed in service and from recent acquisitions, as well as changes in certain estimates. Interest Expense . Interest expense was $391 million in 2024, an increase of $174 million from 2023.
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Retail profit per gallon is heavily impacted by volatile pricing and intense competition from retail stores, supermarkets, club stores and other retail formats, which varies based on the market. • Adjusted EBITDA .
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This increase was primarily attributable to an increase in average total long-term debt, including debt assumed in the NuStar acquisition. (Gain) Loss on Disposal of Assets and Impairment Charges . For the year ended December 31, 2024, loss on disposal of assets and impairment charges primarily related to the termination of a lease in June 2024.
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Key operating metrics set forth below are presented for the years ended December 31, 2023 and 2022, and have been derived from our historical consolidated financial statements. 45 Table of Contents In dex to Financial Statements Year Ended December 31, 2023 2022 Fuel Distribution and Marketing All Other Total Fuel Distribution and Marketing All Other Total Revenues: Motor fuel sales $ 21,908 $ 617 $ 22,525 $ 24,508 $ 708 $ 25,216 Non-motor fuel sales 148 244 392 140 230 370 Lease income 139 12 151 132 11 143 Total revenues $ 22,195 $ 873 $ 23,068 $ 24,780 $ 949 $ 25,729 Cost of Sales: Motor fuel sales $ 21,007 $ 572 $ 21,579 $ 23,585 $ 634 $ 24,219 Non-motor fuel sales 27 97 124 27 104 131 Lease — — — — — — Total cost of sales $ 21,034 $ 669 $ 21,703 $ 23,612 $ 738 $ 24,350 Net income and comprehensive income $ 394 $ 475 Adjusted EBITDA (1) $ 853 $ 111 $ 964 $ 807 $ 112 $ 919 Operating data: Motor fuel gallons sold 8,342 7,720 Motor fuel profit cents per gallon (2) 12.7 ¢ 12.8 ¢ _______________________________ (1) We define Adjusted EBITDA, which is a non-GAAP financial measure, as described above under “Key Measures Used to Evaluate and Assess Our Business.” (2) Excludes the impact of inventory adjustments consistent with the definition of Adjusted EBITDA.
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For the years ended December 31, 2024 and 2023, the Partnership’s cost of sales included unfavorable inventory adjustments of $86 million and $114 million, respectively, which decreased net income for the respective periods. Equity in Earnings of Unconsolidated Affiliates and Adjusted EBITDA Related to Unconsolidated Affiliates.
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The Partnership’s results of operations are discussed on a consolidated basis below. Those results are primarily driven by the Partnership’s fuel distribution and marketing segment, which is its only significant segment.
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For the year ended December 31, 2024, the increase in the amounts reported related to unconsolidated affiliates was primarily due to the formation of ET-S Permian effective July 1, 2024. 54 Table of Contents In d ex to Financial Statements Gain on West Texas Sale.
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To the extent that results of operations are significantly impacted by discrete items or activities within the All Other segment, such impacts are specifically attributed to the All Other segment in the discussion and analysis below.
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The gain on West Texas Sale related to the gain recognized by SUN upon completion of the sale of convenience stores to 7-Eleven Inc. in April 2024. During the fourth quarter of 2024, the Partnership recorded a $12 million reduction to the gain to reflect adjustments to the cash proceeds and certain balance sheet accounts associated with the business sold.
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In the discussion below, the analysis of the Partnership’s primary revenue generating activities are discussed in the analysis of net income and Adjusted EBITDA, and other significant items impacting net income are analyzed separately.
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Income Tax Expense . Income tax expense was $175 million in 2024, an increase of $139 million from 2023. The increase was primarily due to the taxable gain recognized by a corporate subsidiary on the sale of convenience stores in April 2024.
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Total net income and comprehensive income for 2023 was $394 million, a decrease of $81 million from 2022. The decrease was primarily attributable to the following changes: • an increase in interest expense, general and administrative expenses and other operating expense of $59 million in the aggregate.
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Segment Operating Results We evaluate segment performance based on Segment Adjusted EBITDA, which we believe is an important performance measure of the core profitability of our operations. This measure represents the basis of our internal financial reporting and is one of the performance measures used by senior management in deciding how to allocate capital resources among business segments.
Removed
These items are discussed in more detail below. Adjusted EBITDA . Total Adjusted EBITDA for 2023 was $964 million, an increase of $45 million from 2022.
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The following tables identify the components of Segment Adjusted EBITDA, which is calculated as follows: • Segment profit, operating expenses and selling, general and administrative expenses . These amounts represent the amounts included in our consolidated financial statements that are attributable to each segment. • Adjusted EBITDA related to unconsolidated affiliates .
Removed
The increase was primarily attributable to the following changes: • an increase in the profit on motor fuel sales of $34 million, primarily due to an 8.1% increase in gallons sold; and • an increase in non-motor fuel profit of $37 million, primarily due to increased throughput and storage margin from the Gladieux and Zenith acquisitions and increased rental income; partially offset by • an increase in operating costs of $26 million, including other operating expense, general and administrative expense and lease expense.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe had no interest rate swaps in effect during the years ended December 31, 2023 and 2022. 51 Table of Contents In dex to Financial Statements Commodity Price Risk Our subsidiaries hold working inventories of refined petroleum products, renewable fuels, gasoline blendstocks and transmix in storage. As of December 31, 2023, we held approximately $812 million of such inventory.
Biggest changeWe had no interest rate swaps in effect during the years ended December 31, 2024 and 2023. Commodity Price Risk Our subsidiaries hold working inventories of refined petroleum products, renewable fuels, gasoline blendstocks and transmix in storage. As of December 31, 2024, we held approximately $960 million of such inventory.
A hypothetical change of 100 basis points would result in a maximum potential change to interest expense of $4 million annually. Our primary exposure relates to: • interest rate risk on short-term borrowings; and • the impact of interest rate movements on our ability to obtain adequate financing to fund future acquisitions.
A hypothetical change of 100 basis points would result in a maximum potential change to interest expense of $2 million annually. Our primary exposure relates to: • interest rate risk on short-term borrowings; and • the impact of interest rate movements on our ability to obtain adequate financing to fund future acquisitions.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk Interest Rate Risk We are subject to market risk from exposure to changes in interest rates based on our financing, investing and cash management activities. We had outstanding variable interest rate borrowings on the Credit Facility of $411 million as of December 31, 2023.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk Interest Rate Risk We are subject to market risk from exposure to changes in interest rates based on our financing, investing and cash management activities. We had outstanding variable interest rate borrowings on the Credit Facility of $203 million as of December 31, 2024.
We may also engage in controlled trading in accordance with specific parameters set forth in a written risk management policy. On a consolidated basis, the Partnership had a position of 1.1 million barrels with an aggregated unrealized gain of $8.6 million at December 31, 2023.
We may also engage in controlled trading in accordance with specific parameters set forth in a written risk management policy. On a consolidated basis, the Partnership had a position of 0.3 million barrels with an aggregated unrealized loss of $3.8 million at December 31, 2024.

Other SUN 10-K year-over-year comparisons