Sunoco LP Stock

Sunoco LP engages in the distribution of motor fuels to independent dealers, distributors, and other commercial customers. The company engages in the distribution of motor fuels to end customers at retail sites operated by commission agents. Additionally, the company receives lease income through the leasing or subleasing of real estate used in the retail distribution of motor fuels. As of December 31, 2022, the company also operated 76 retail stores located in Hawaii and New Jersey.

As of February 10, 2023, Energy Transfer owned 100% of the membership interests in the company’s General Partner, which constituted a 28.3% limited partner interest in it, and all of its incentive distribution rights (IDRs).

As of December 31, 2022, the company distributes motor fuels across more than 40 states and territories throughout the East Coast, Midwest, South Central and Southeast regions of the United States from Maine to Florida and from Florida to New Mexico, as well as Hawaii and Puerto Rico. The company distributed approximately 7.7 billion gallons of motor fuel during 2022 through its independent dealers, distributors, other commercial customers, retail sites operated by commission agents and retail sites owned and operated by it.

Segments

The company operates through two segments, Fuel Distribution and Marketing; and All Other.

Fuel Distribution and Marketing segment

This segment is a distributor of motor fuels and other petroleum products which the company supplies to third-party dealers and distributors, to independent operators of commission agent locations, other commercial consumers of motor fuel and to its retail locations. Also included in the segment are transmix processing plants and refined products terminals. 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. Transmix processing plants separate this mixture and return it to salable products of gasoline and diesel.

The company is the exclusive wholesale supplier of the Sunoco-branded and EcoMaxx-branded motor fuels, supplying an extensive distribution network of approximately 5,563 Sunoco-branded company and third-party operated locations throughout the East Coast, Midwest, South Central and Southeast regions of the United States and Puerto Rico. The company is the one of the largest independent motor fuel distributors, by gallons, in the United States. The company is one of the largest distributor of Chevron, Texaco, ExxonMobil and Valero branded motor fuel in the United States. In addition to distributing motor fuels, the company distributes other petroleum products, such as propane and lubricating oil, and it receives lease income from real estate that it leases or subleases.

During 2022, the company purchased motor fuel primarily from independent refiners and major oil companies and distributed it across more than 40 U.S. states and territories throughout the East Coast, Midwest, South Central and Southeast regions of the United States, as well as Hawaii and Puerto Rico.

Dealer Incentives

In addition to motor fuel distribution, the company offers dealers the opportunity to participate in merchandise purchasing and promotional programs arranged with vendors. The vendor relationships the company has established through its retail operations and its ability to develop programs provide it with an advantage over other distributors when recruiting new dealers into its network, as well as retaining dealers. The company’s dealer incentives give its dealers access to discounted rates on products and services that they would likely not be able to obtain on their own.

Sales to Contracted Third Parties

The company distributes 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 is the only third-party dealer or distributor which is individually over 10% of the company’s Fuel Distribution and Marketing segment or individually over 10%, in terms of revenue, of its aggregate business.

Sunoco-branded supply contracts with distributors generally have both time and volume commitments that establish contract duration. These contracts have an initial term of approximately ten years with an estimated volume-weighted term remaining of approximately five years.

Distribution contracts with retail stores generally commit the company to distribute branded (including, but not limited to, Sunoco branded) or unbranded motor fuel to a location or group of locations and arrange for all transportation and logistics. These contracts require, among other things, that dealers maintain the standards established by the applicable fuel brand, if any.

During 2022, the company’s Fuel Distribution and Marketing business distributed fuel to 504 commission agent locations. Under these arrangements, the company generally provides and controls 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.

The company continually seeks to expand through the addition of new branded dealers, distributors and commission agent locations, new unbranded commercial customers, and through acquisitions of contracts for existing independently operated sites from other distributors. The company evaluates potential independent site operators based on their creditworthiness and the quality of their sites and operations, including the site’s size and location, projected monthly volumes of motor fuel, monthly merchandise sales, overall financial performance and previous operating experience.

Sales to Other Commercial Customers

The company distributes unbranded fuel to numerous other customers, including retail stores, unattended fueling facilities and certain other commercial customers. These customers are primarily commercial, governmental and other parties who buy motor fuel by the load or in bulk and who do not generally enter into exclusive contractual relationships with it, if they enter into a contractual relationship with it at all. The company sells propane, lubricating oil and other petroleum products, such as heating fuels, to its commercial customers on both a spot and contracted basis. In addition, the company receives income from the manufacture and distribution sale of race fuels at its Marcus Hook, Pennsylvania manufacturing facility.

Fuel Supplier Arrangements

The company distributes branded motor fuel under the Aloha, Chevron, Citgo, Conoco, EcoMaxx, Exxon, Mahalo, Mobil, Phillips 66, Shamrock, Shell, Sunoco, Texaco, and Valero brands. The company purchases branded motor fuel from major oil companies and refiners under supply agreements. The company’s largest branded fuel suppliers in terms of volume are Chevron, Exxon, Phillips 66 and Valero. The branded fuel supply agreements generally have an initial term of three to five years. Each supply agreement typically contains provisions relating to payment terms, use of the supplier’s brand names, credit card processing, compliance with other of the supplier’s requirements, insurance coverage and compliance with legal and environmental requirements, among others. The company also distributes unbranded motor fuel.

Bulk Fuel Purchases

The company purchases motor fuel in bulk and hold it in inventory or transport it via pipeline. To mitigate inventory risk, it uses commodity futures contracts or other derivative instruments, which are matched in quantity and timing to the anticipated usage of the inventory. The company also blends in various additives, including ethanol and biomass-based diesel.

Terminals and Transmix

The company operates four transmix processing facilities and twenty-seven refined product terminals (one in Puerto Rico, six in Hawaii and twenty 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. Transmix processing plants separate this mixture and return it to salable products of gasoline and diesel. The company’s refined product terminals provide storage and distribution services used to supply its own retail stations as well as third-party customers. In addition, the company provides services at its terminals to various third-party throughput customers.

Transportation Logistics

The company provides transportation logistics for most of its motor fuel deliveries through its own fleet of fuel transportation vehicles, as well as third-party and affiliated transportation providers. The company arranges for motor fuel to be delivered from the storage terminals to the appropriate sites in its distribution network at prices consistent with those historically charged to third parties for the delivery of fuel. The company also delivers motor fuel, propane, and lubricating oils to commercial customers involved in petroleum exploration and production.

Technology

Technology is an important part of the company’s Fuel Distribution and Marketing operations. The company utilizes a proprietary web-based system that allows its 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. Substantially all of the company’s customer payments are processed by electronic funds transfer. The company uses an Internet-based system to assist with fuel inventory management and procurement and an integrated distribution fuel system for financial accounting, procurement, billing and inventory management.

All Other segment

All Other segment includes the company’s retail operations in Hawaii and New Jersey, credit card services, and franchise royalties.

Subsidiaries

Sunoco, LLC (Sunoco LLC), a Delaware limited liability company, primarily distributes motor fuel in approximately 40 states and territories throughout the East Coast, Midwest, South Central and Southeast regions of the United States. Sunoco LLC also processes transmix and distributes refined product through its terminals in Alabama, Arkansas, Florida, Indiana, Illinois, Maryland, New Jersey, New York, Texas and Virginia.

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 and distributes motor fuel in Puerto Rico. 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. (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.

Sale of Regulated Products

In certain areas where its 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. State and local regulatory agencies have the authority to approve, revoke, suspend or deny applications for and renewals of permits and licenses relating to the sale of alcoholic beverages, as well as to issue fines to convenience stores for the improper sale of alcoholic beverages and tobacco products. Failure to comply with these laws may result in the loss of necessary licenses and the imposition of fines and penalties on the company.

Seasonality

The company’s business exhibits some seasonality due to its customers’ increased demand for motor fuel during the late spring and summer months, as compared to the fall and winter months. The volume of motor fuel that the company distributes is typically somewhat higher in the second and third quarters of its fiscal year (year ended December 31, 2022).

Acquisitions

On November 30, 2022, the company completed the acquisition of Peerless Oil & Chemicals, Inc. (Peerless). Peerless is an established terminal operator that distributes fuel products to over 100 locations within Puerto Rico and throughout the Caribbean.

Environmental Matters

The company is 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. In addition, OSHA’s hazard communication standards require that information be maintained about hazardous materials used or produced in operations and that this information be provided to employees, state and local government authorities and citizens.

History

The company was founded in 1886. It was incorporated in 2012. The company was formerly known as Susser Petroleum Partners LP and changed its name to Sunoco LP in 2014.