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Sunoco Logistics Reports Record Earnings for the Fourth Quarter 2012



  Sunoco Logistics Reports Record Earnings for the Fourth Quarter 2012

Business Wire

PHILADELPHIA -- February 20, 2013

Sunoco Logistics Partners L.P. (NYSE: SXL) (the “Partnership”) today announced
its financial results for the fourth quarter ended December 31, 2012. Adjusted
EBITDA for the three months ended December 31, 2012 increased $40 million to
$219 million compared to the fourth quarter 2011. Net income attributable to
partners for the fourth quarter 2012 was $139 million ($1.10 per limited
partner unit diluted), compared with $76 million ($0.60 per limited partner
unit diluted) for the fourth quarter 2011. Additional highlights include:

  * Increased distributable cash flow for 2012 to a record level of $604
    million
  * Ended the quarter with a Debt to Adjusted EBITDA ratio of 2.0x
  * Record full year Adjusted EBITDA of $810 million, an increase of 41
    percent compared to the prior year
  * 31^st consecutive quarterly distribution increase; a 30 percent increase
    compared to the fourth quarter 2011
  * Successfully completed $700 million in debt financing in January to
    support the 2013 organic growth program

“2012 was a record year for our Partnership,” said Michael J. Hennigan,
president and chief executive officer. “Our earnings reached new highs and we
successfully developed six major organic expansion projects that will position
us well for 2013 and beyond.”

Speaking on the record earnings in 2012, Hennigan said, “Our crude oil
businesses continue to perform well as demand for services to transport
domestic production is at an all-time high level. Successful integration of
our 2011 acquisitions, combined with our ongoing organic capital program,
delivered increasing fee-based cash flows which grew approximately 20 percent
versus 2011.”

In regard to organic expansion, Hennigan said, “We completed six successful
open seasons during 2012 in addition to our open season for Mariner West which
occurred in 2011. These projects, which are primarily crude oil and natural
gas liquid driven, will provide additional takeaway capacity out of key
domestic production areas and will generate long-term ratable earnings for the
Partnership. We are forecasting a 2013 organic capital program of
approximately $700 million which would more than double our record 2012
organic growth of nearly $325 million.”

DETAILS OF FOURTH QUARTER SEGMENT ADJUSTED EBITDA

                                                                     
                                                  Three Months Ended
                                                  December 31,
                                                  2012      2011      Variance
                                                  (in millions)
Crude Oil Pipelines                               $ 72      $ 58      $  14
Crude Oil Acquisition and Marketing                 81        68         13
Terminal Facilities                                 52        36         16
Refined Products Pipelines                          14        17         (3  )
Adjusted earnings before interest, taxes,
depreciation and amortization expense             $ 219     $ 179     $  40   
("Adjusted EBITDA") ^(1)
                                                                              

 
^(1) The Partnership's definition of Adjusted EBITDA has been revised
beginning in the fourth quarter 2012. Prior period results have been recast to
conform to the current presentation. For a detailed definition of the
components included within Adjusted EBITDA, see the Non-GAAP Financial
Measures table for a reconciliation to the applicable generally accepted
accounting principle ("GAAP") metric.
 

General Partner Acquisition

During the fourth quarter of 2012, Sunoco, Inc. (“Sunoco”) was acquired by
Energy Transfer Partners, L.P. (“Energy Transfer”). Prior to this transaction,
Sunoco (through its wholly-owned subsidiary Sunoco Partners LLC) served as the
Partnership’s general partner and owned a two-percent general partner
interest, all of the incentive distribution rights and a 32.4 percent limited
partner interest in the Partnership. In connection with the acquisition,
Sunoco’s interests in the general partner and limited partnership were
contributed to Energy Transfer, resulting in a change in control of the
Partnership’s general partner. The Partnership has elected to apply
“push-down” accounting as a result of this change which required the
Partnership’s assets and liabilities to be adjusted to fair value on the
closing date of the transaction, October 5, 2012. Operating results for the
fourth quarter 2012 have been adjusted accordingly to reflect the new basis of
accounting.

Crude Oil Pipelines

Adjusted EBITDA for the fourth quarter 2012 increased $14 million compared to
the prior year period due primarily to higher pipeline tariffs which were the
result of organic projects placed into service during 2012 and an improved mix
of higher tariff movements driven by strong demand for West Texas crude oil.
These improvements were partially offset by lower pipeline operating gains,
higher maintenance and integrity management costs and higher selling, general
and administrative expenses compared to the prior year period.

Crude Oil Acquisition and Marketing

Adjusted EBITDA for the fourth quarter 2012 increased $13 million compared to
the prior year period due primarily to expanded crude oil margins which were
the result of an expansion in our crude oil trucking fleet, market related
opportunities in West Texas and contributions from the assets acquired from
Texon L.P. in the third quarter of 2011.

Terminal Facilities

Adjusted EBITDA for the fourth quarter 2012 increased $16 million compared to
the prior year period. During the fourth quarter 2011, the Partnership
recognized an $11 million charge for certain regulatory obligations which were
expected to be incurred if Sunoco’s Philadelphia refinery were shut down.
Excluding this amount, Adjusted EBITDA for the Terminal Facilities increased
$5 million compared to the prior year period due primarily to increased
operating results from the Partnership’s refined products acquisition and
marketing activities and contributions from organic projects to expand
services at the Partnership’s Eagle Point and Nederland terminals. Partially
offsetting these improvements were volume reductions at the Partnership’s
refined products terminals, increased repair costs resulting from Hurricane
Sandy and increased selling, general and administrative expenses.

Refined Products Pipelines

Adjusted EBITDA for the fourth quarter 2012 decreased $3 million compared to
the prior year period due primarily to a shift to shorter pipeline movements
at lower average tariffs. Further contributing to the decrease in results were
higher selling, general and administrative expenses.

Financing Update

Net interest expense decreased $12 million for the fourth quarter 2012
compared to the prior year period due to the repayment of $250 million of
Senior Notes in February 2012, the repayment of the $100 million promissory
note to Sunoco in the fourth quarter of 2011 and higher capitalized interest
associated with the Partnership’s expansion capital program. Further
contributing to the overall decrease in interest expense was $6 million
related to the non-cash amortization of a premium recorded on the
Partnership’s long-term debt to increase the balance to fair value in
connection with Energy Transfer’s acquisition of the Partnership’s general
partner. At December 31, 2012, the Partnership’s total debt balance was $1.59
billion, excluding $143 million of unamortized fair value adjustments.

CAPITAL EXPENDITURES

                                                 
                                     Twelve Months Ended
                                     December 31,
                                     2012          2011
                                     (in millions)
                                                      
Maintenance capital expenditures     $  50         $ 42
Expansion capital expenditures          324          171
Major acquisitions ^(1)                 -            494
Total                                $  374        $ 707
                                                      

 
^(1) Includes July 2011 acquisition of the Eagle Point tank farm from Sunoco
for $100 million, consisting of: Class A (deferred distribution) units with a
fair value of $98 million and $2 million in cash. This related party
transaction was recorded at Sunoco’s carrying value of $22 million under
generally accepted accounting principles.
 

The Partnership’s expansion capital spending for the twelve months ended
December 31, 2012 included projects to invest in the Partnership’s crude oil
infrastructure by increasing its pipeline capabilities through previously
announced organic growth projects in West Texas and expanding its trucking
fleet, expand upon refined products acquisition and marketing services,
upgrade the service capabilities at the Eagle Point and Nederland terminals
and continued investment in the previously announced Mariner West, Mariner
East and Allegheny Access projects. The Partnership expects to invest
approximately $700 million in expansion capital during 2013, excluding major
acquisitions. Maintenance capital spending is estimated to be approximately
$65 million in 2013.

INVESTOR CALL

The Partnership will host a conference call regarding fourth quarter results
on Thursday, February 21, 2013 at 8:30am ET (7:30am CT). Those wishing to
listen can access the call by dialing (USA toll free) 1-800-369-2171;
International (USA toll) 1-517-308-9315 and request “Sunoco Logistics Partners
Earnings Call, Conference Code: Sunoco Logistics.” This event may also be
accessed by a webcast, which will be available at www.sunocologistics.com. A
number of presentation slides will accompany the audio portion of the call and
will be available to be viewed and printed shortly before the call begins.
Audio replays of the conference call will be available for two weeks after the
conference call beginning approximately two hours following the completion of
the call. To access the replay, dial 1-866-383-3009. International callers
should dial 1-203-369-0379.

ABOUT SUNOCO LOGISTICS

Sunoco Logistics Partners L.P. (NYSE: SXL), headquartered in Philadelphia, is
a master limited partnership that owns and operates a logistics business
consisting of a geographically diverse portfolio of complementary crude oil
and refined product pipeline, terminalling, and acquisition and marketing
assets. SXL’s general partner is owned by Energy Transfer Partners, L.P.
(NYSE: ETP). For more information, visit the Sunoco Logistics Partners L.P.
web site at www.sunocologistics.com.

This release is intended to be a qualified notice under Treasury Regulation
Section 1.1446-4(b). Brokers and nominees should treat one hundred percent
(100%) of distributions by Sunoco Logistics Partners L.P. to non-U.S.
investors as being attributable to income that is effectively connected with a
United States trade or business. Accordingly, distributions by Sunoco
Logistics Partners L.P. to non-U.S. investors are subject to federal income
tax withholding at the highest applicable effective tax rate.

Portions of this document constitute forward-looking statements as defined by
federal law. Although Sunoco Logistics Partners L.P. believes that the
assumptions underlying these statements are reasonable, investors are
cautioned that such forward-looking statements are inherently uncertain and
necessarily involve risks that may affect the Partnership’s business prospects
and performance causing actual results to differ from those discussed in the
foregoing release. Such risks and uncertainties include, by way of example and
not of limitation: whether or not the transactions described in the foregoing
news release will be cash flow accretive; increased competition; changes in
demand for crude oil and refined products that we store and distribute;
changes in operating conditions and costs; changes in the level of
environmental remediation spending; potential equipment malfunction; potential
labor issues; the legislative or regulatory environment; plant
construction/repair delays; nonperformance by major customers or suppliers;
and political and economic conditions, including the impact of potential
terrorist acts and international hostilities. These and other applicable risks
and uncertainties have been described more fully in the Partnership’s Annual
Report on Form 10-K filed with the Securities and Exchange Commission on
February 24, 2012, and in the Partnership’s subsequent Form 10-Q and Form 8-K
filings. The Partnership undertakes no obligation to update any
forward-looking statements in this release, whether as a result of new
information or future events.

 
Sunoco Logistics Partners L.P.

Financial Highlights

(unaudited)
                             
                               
                              Three Months Ended
                              December 31,
                              2012 ^(1)          2011               Variance
                              (in millions, except units and per unit amounts)
Income Statement:
Sales and other operating     $  3,189           $  3,376           $  (187  )
revenue
Other income                     5                  4                  1      
Total revenues                   3,194              3,380              (186  )
Cost of products sold and        2,933              3,178              (245  )
operating expenses
Depreciation and                 63                 25                 38
amortization expense
Impairment charge and            -                  42                 (42   )
related matters
Selling, general and             34                 23                 11     
administrative expenses
Total costs and expenses         3,030              3,268              (238  )
                                                                              
Operating Income                 164                112                52
Interest cost and debt           18                 28                 (10   )
expense
Capitalized interest             (4     )           (2     )           (2    )
Income Before Provision          150                86                 64
for Income Taxes
                                                                              
Provision for income             8                  7                  1      
taxes
Net Income                       142                79                 63
Less: Net Income
attributable to                  3                  3                  -      
noncontrolling interests
Net Income attributable       $  139             $  76              $  63     
to Partners
                                                                              
Calculation of Limited
Partners' interest:
Net Income attributable       $  139             $  76              $  63
to Partners
Less: General Partner's          (24    )           (14    )           (10   )
interest
Limited Partners'
interest in Net Income        $  115             $  62              $  53     
^(2)
                                                                              
Net Income per Limited
Partner unit:
Basic                         $  1.11            $  0.60    
                                                                              
Diluted                       $  1.10            $  0.60    
                                                                              
Weighted Average Limited
Partners' units
outstanding:
Basic                            103.8              103.3   
                                                                              
Diluted                          104.1              103.8   
                                                                              

 
^(1) During the fourth quarter of 2012, Sunoco was acquired by Energy
Transfer. Prior to this transaction, Sunoco (through its wholly-owned
subsidiary Sunoco Partners LLC) served as the Partnership's general partner
and owned a two-percent general partner interest, all of the incentive
distribution rights and a 32.4 percent limited partner interest in the
Partnership. The Partnership has elected to apply "push-down" accounting as a
result of this change which required the Partnership's assets and liabilities
to be adjusted to fair value on the closing date of the transaction, October
5, 2012. Operating results for the fourth quarter 2012 have been adjusted
accordingly to reflect the new basis of accounting.
 
^(2) Includes interest in net income attributable to Class A units, which were
converted to common units in July 2012.
 

 
Sunoco Logistics Partners L.P.

Financial Highlights

(unaudited)
                             
                               
                              Twelve Months Ended
                              December 31,
                              2012^(1)            2011               Variance
                              (in millions, except units and per unit amounts)
Income Statement:
Sales and other operating     $  13,110           $  10,905          $ 2,205
revenue
Other income                     23                  13                10
Gain on divestments and          11                  -                 11     
related matters
Total revenues                   13,144              10,918            2,226
Cost of products sold and        12,244              10,264            1,980
operating expenses
Depreciation and                 139                 86                53
amortization expense
Impairment charge and            (1      )           42                (43   )
related matters
Selling, general and             120                 90                30     
administrative expenses
Total costs and expenses         12,502              10,482            2,020
                                                                              
Operating Income                 642                 436               206
Interest cost and debt           91                  96                (5    )
expense
Capitalized interest             (12     )           (7      )         (5    )
Income Before Provision          563                 347               216
for Income Taxes
                                                                              
Provision for income             32                  25                7      
taxes
Net Income                       531                 322               209
Less: Net Income
attributable to                  11                  9                 2      
noncontrolling interests
Net Income attributable       $  520              $  313             $ 207    
to Partners
                                                                              
Calculation of Limited
Partners' interest:
Net Income attributable       $  520              $  313             $ 207
to Partners
Less: General Partner's          (79     )           (54     )         (25   )
interest
Limited Partners'
interest in Net Income        $  441              $  259             $ 182    
^(2)
                                                                              
Net Income per Limited
Partner unit:
Basic                         $  4.26             $  2.56     
                                                                              
Diluted                       $  4.24             $  2.54     
                                                                              
Weighted Average Limited
Partners' units
outstanding:
Basic                            103.6               101.3    
                                                                              
Diluted                          103.9               101.8    
                                                                              

 
^(1) During the fourth quarter of 2012, Sunoco was acquired by Energy
Transfer. Prior to this transaction, Sunoco (through its wholly-owned
subsidiary Sunoco Partners LLC) served as the Partnership's general partner
and owned a two-percent general partner interest, all of the incentive
distribution rights and a 32.4 percent limited partner interest in the
Partnership. The Partnership has elected to apply "push-down" accounting as a
result of this change which required the Partnership's assets and liabilities
to be adjusted to fair value on the closing date of the transaction, October
5, 2012. Operating results for the fourth quarter 2012 have been adjusted
accordingly to reflect the new basis of accounting.
 
^(2) Includes interest in net income attributable to Class A units, which were
converted to common units in July 2012.
 

 
Sunoco Logistics Partners L.P.

Financial Highlights

(unaudited)
                                                                 
                                                                     
                                                      December 31,
                                                      2012        2011
                                                      (in millions)
Balance Sheet Data:
                                                                     
Cash and cash equivalents                             $ 3         $ 5
                                                                     
Revolving credit facilities ^(1)                      $ 139       $ -
Senior Notes, net                                       1,450       1,698
Unamortized fair value adjustments, net ^(2)            143         -
Total Debt                                            $ 1,732     $ 1,698
                                                                     
Sunoco Logistics Partners L.P. Partners' equity       $ 6,072     $ 1,096
Noncontrolling interests                                123         98
Total Equity ^(3)                                     $ 6,195     $ 1,194
                                                                     
Debt to Adjusted EBITDA Ratio:
Total Debt                                            $ 1,732
Less: Unamortized fair value adjustments, net^(2)       143
                                                      $ 1,589
                                                                     
Adjusted EBITDA (Full Year 2012)                      $ 810
Debt to Adjusted EBITDA Ratio                           2.0
                                                                     

 
^(1) As of December 31, 2012, the Partnership had available borrowing capacity
of $446 million under its revolving credit facilities, which includes $15
million of available borrowing capacity from West Texas Gulf's revolving
credit facility.
 
^(2) In accordance with purchase accounting guidance, the Partnership's Senior
Notes were adjusted to fair value upon the closing of Energy Transfer's
acquisition of the Partnership's general partner. At December 31, 2012, there
was $143 million of unamortized fair value adjustments, which is net of $6
million of amortization recognized as a reduction of interest expense during
the fourth quarter 2012.
 
^(3) In accordance with purchase accounting guidance, the components of the
Partnership's consolidated equity balance were adjusted to fair value and
resulted in an increase in consolidated equity of $4.8 billion upon the
closing of Energy Transfer's acquisition of the Partnership's general partner.
 

                                                                   
Sunoco Logistics Partners L.P.

Financial and Operating Statistics

(unaudited)
                                                                              
                                                                              
                         Three Months Ended          Twelve Months Ended
                         December 31,                December 31,
                         2012          2011          2012           2011
                         (in millions)
Sales and other
operating revenue
                                                                              
Crude Oil Pipelines      $ 110         $ 86          $ 398          $ 319
Crude Oil
Acquisition and            2,888         3,135         12,146         10,163
Marketing
Terminal Facilities        206           156           612            435
Refined Products           35            37            131            130
Pipelines
Intersegment               (50   )       (38   )       (177   )       (142   )
eliminations
Total sales and
other operating          $ 3,189       $ 3,376       $ 13,110       $ 10,905  
revenue
                                                                              
                                                      
                         Three Months Ended          Twelve Months Ended
                         December 31,                December 31,
                         2012          2011          2012           2011
                         (in millions)
Adjusted EBITDA
                                                                              
Crude Oil Pipelines      $ 72          $ 58          $ 275          $ 207
Crude Oil
Acquisition and            81            68            239            148
Marketing
Terminal Facilities        52            36            225            149
Refined Products           14            17            71             69      
Pipelines
Total Adjusted           $ 219         $ 179         $ 810          $ 573     
EBITDA
                                                                              
                                                      
                         Three Months Ended          Twelve Months Ended
                         December 31,                December 31,
                         2012          2011          2012           2011
Operating Highlights
                                                                              
Crude Oil Pipelines:
Pipeline throughput        1,584         1,577         1,556          1,587
(thousands of bpd)
Pipeline revenue per       75.6          58.9          69.9           55.0
barrel (cents)
                                                                              
Crude Oil
Acquisition and
Marketing: ^(1)
Crude oil purchases        669           690           673            663
(thousands of bpd)
Gross margin per
barrel purchased           138.0         111.8         104.1          66.0
(cents) ^(2)
Average crude oil        $ 88.20       $ 94.02       $ 94.19        $ 95.14
price (per barrel)
                                                                              
Terminal
Facilities:^(3)
Terminal throughput
(thousands of bpd):
Refined products           451           514           487            492
terminals
Nederland terminal         787           692           724            757
Refinery terminals         411           505           380            443
                                                                              
Refined Products
Pipelines:^(4)(5)
Pipeline throughput        601           599           582            522
(thousands of bpd)
Pipeline revenue per       63.0          67.5          61.6           68.3
barrel (cents)
                                                                              

 
Sunoco Logistics Partners L.P.

Financial and Operating Statistics Notes

(unaudited)
      
        
       In August 2011, the Partnership acquired a crude oil acquisition and
^(1)   marketing business from Texon L.P. Results from the acquisition are
       included from the acquisition date.
        
       Represents total segment sales and other operating revenue less cost of
^(2)   products sold and operating expenses divided by total crude oil
       purchases.
        
       In July and August 2011, the Partnership acquired the Eagle Point tank
       farm and related assets and a refined products terminal located in East
^(3)   Boston, Massachusetts, respectively. Volumes and revenues associated
       with the acquisitions are included from their respective acquisition
       dates.
        
^(4)   Excludes amounts attributable to equity interests which are not
       consolidated.
        
       In May 2011, the Partnership acquired a controlling financial interest
       in the Inland refined products pipeline. As a result of the
^(5)   acquisition, Inland became a consolidated subsidiary of the
       Partnership. Volumes and revenues associated with the acquisition are
       included from the acquisition date.
        

                                                                      
Sunoco Logistics Partners L.P.

Non-GAAP Financial Measures

(unaudited)
                                                                              
                                                                              
                                   Three Months Ended      Twelve Months Ended
                                   December 31,            December 31,
                                   2012        2011        2012        2011
                                   (in millions)
Net Income                         $ 142       $ 79        $ 531       $ 322
Interest expense, net                14          26          79          89
Depreciation and amortization        63          25          139         86
expense
Impairment charge^(1)(2)             -           31          9           31
Provision for income taxes           8           7           32          25
Non-cash compensation expense        2           1           8           6
Unrealized losses/(gains) on
commodity risk management            (3  )       6           3           (2  )
activities
Proportionate share of
unconsolidated affiliates'           5           4           21          16
interest, depreciation and
provision for income taxes
Adjustments to commodity
hedges resulting from                (12 )       -           (12 )       -    
"push-down" accounting
Adjusted EBITDA^(3)                  219         179         810         573
Interest expense, net                (14 )       (26 )       (79 )       (89 )
Provision for income taxes           (8  )       (7  )       (32 )       (25 )
Amortization of fair value           (6  )       -           (6  )       -
adjustments on long-term debt
Distributions versus Adjusted
EBITDA of unconsolidated             (3  )       (4  )       (28 )       (17 )
affiliates
Maintenance capital                  (21 )       (22 )       (50 )       (42 )
expenditures
Distributable Cash Flow
attributable to noncontrolling       (2  )       (2  )       (11 )       (10 )
interests
Distributable cash flow^(3)        $ 165       $ 118       $ 604       $ 390  
                                                                              

      
       In the first quarter 2012, the Partnership recognized a non-cash
^(1)   impairment charge related to a cancelled software project for the crude
       oil acquisition and marketing business and a refined products pipeline
       project in Texas.
        
       In the fourth quarter 2011, the Partnership recognized a $42 million
       charge for certain crude oil terminal assets expected to be negatively
       impacted if Sunoco’s Philadelphia refinery was permanently idled. This
       charge included $11 million for certain regulatory obligations. In the
       second quarter 2012, the Partnership recognized a $10 million gain on
^(2)   the reversal of certain regulatory obligations. Such expenses were no
       longer expected to be incurred as the Philadelphia refinery will
       continue to operate in connection with Sunoco’s joint venture with The
       Carlyle Group. The gain was included in the Partnership’s Adjusted
       EBITDA which is consistent with prior period presentation when the
       obligation was recognized.
        
       Management of the Partnership believes Adjusted EBITDA and
       Distributable cash flow information enhances an investor's
       understanding of a business’ ability to generate cash for payment of
       distributions and other purposes. Adjusted EBITDA and Distributable
^(3)   cash flow do not represent and should not be considered an alternative
       to net income or cash flows from operating activities as determined
       under United States GAAP and may not be comparable to other similarly
       titled measures of other businesses. Historical amounts presented have
       been recast to conform to current period presentation.
        

Contact:

Sunoco Logistics Partners L.P.
Joseph McGinn (media) 215-977-3237
or
Peter Gvazdauskas (investors) 215-977-6322
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