Sunoco LP: Form 10-Q for the period ended Sep 30, 2024

(Tabular dollar amounts, except per gallon data, are in millions)

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and notes to consolidated financial statements included elsewhere in this report. Additional discussion and analysis related to the Partnership is contained in our Annual Report on Form 10-K 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, including the audited consolidated financial statements for the fiscal year ended December 31, 2023 included therein.

Adjusted EBITDA is a non-GAAP financial measure of performance that has limitations and should not be considered as a substitute for net income or other GAAP measures. Please see “Key Measures Used to Evaluate and Assess Our Business” below for a discussion of our use of Adjusted EBITDA in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and a reconciliation to net income for the periods presented.

Cautionary Statement Regarding Forward-Looking Statements

Some of the information in this Quarterly Report on Form 10-Q may contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of historical fact included in this Quarterly Report on Form 10-Q, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. Statements using words such as “believe,” “plan,” “expect,” “anticipate,” “intend,” “forecast,” “assume,” “estimate,” “continue,” “position,” “predict,” “project,” “goal,” “strategy,” “budget,” “potential,” “will” and other similar words or phrases are used to help identify forward-looking statements, although not all forward-looking statements contain such identifying words. Descriptions of our objectives, goals, targets, plans, strategies, costs, anticipated capital expenditures, expected cost savings and benefits are also forward-looking statements. These forward-looking statements are based on our current plans and expectations and involve a number of risks and uncertainties that could cause actual results and events to vary materially from the results and events anticipated or implied by such forward-looking statements, including:

• our ability to make, complete and integrate acquisitions from affiliates or third-parties;
• business strategy and operations of Energy Transfer LP ("Energy Transfer") and its conflicts of interest with us;
• changes in the price of and demand for the motor fuel that we distribute and our ability to appropriately hedge any motor fuel we hold in inventory;
• our dependence on limited principal suppliers;
• competition in the wholesale motor fuel distribution and retail store industry;
• changing customer preferences for alternate fuel sources or improvement in fuel efficiency;
• volatility of fuel prices or a prolonged period of low fuel prices and the effects of actions by, or disputes among or between, oil producing countries with respect to matters related to the price or production of oil;
• any acceleration of the domestic and/or international transition to a low carbon economy as a result of the Inflation Reduction Act of 2022 or otherwise;
• the possibility of cyber and malware attacks;
• changes in our credit rating, as assigned by rating agencies;
• a deterioration in the credit and/or capital markets, including as a result of recent increases in cost of capital resulting from Federal Reserve policies and changes in financial institutions’ policies or practices concerning businesses linked to fossil fuels;
• general economic conditions, including sustained periods of inflation, supply chain disruptions and associated central bank monetary policies;
• environmental, tax and other federal, state and local laws and regulations;
• the fact that we are not fully insured against all risks incident to our business;
• dangers inherent in the storage and transportation of motor fuel;
• our ability to manage growth and/or control costs;
• our reliance on senior management, supplier trade credit and information technology; and
• our partnership structure, which may create conflicts of interest between us and Sunoco GP LLC (our “General Partner”), and its affiliates, and limits the fiduciary duties of our General Partner and its affiliates.

All forward-looking statements, express or implied, are expressly qualified in their entirety by the foregoing cautionary statements.

Many of the foregoing risks and uncertainties are, and will be, heightened by any further worsening of the global business and economic environment. New factors that could impact forward-looking statements emerge from time to time, and it is not possible for us to predict all such factors. Should one or more of the risks or uncertainties described or referenced in this Quarterly Report on Form 10-Q, our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 16, 2024 or our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 filed with the SEC on May 9, 2024 occur, or should underlying assumptions prove incorrect, actual results and plans could differ materially from those expressed in any forward-looking statements.

You should not put undue reliance on any forward-looking statements. When considering forward-looking statements, please review the risks described or referenced under the heading “Item 1A. Risk Factors” herein, including the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 16, 2024 or from the risk factors set forth in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 filed with the SEC on May 9, 2024. The list of factors that could affect future performance and the accuracy of forward-looking statements is illustrative but by no means exhaustive. Accordingly, all forward-looking statements should be evaluated with the understanding of their inherent uncertainty. The forward-looking statements included in this report are based on, and include, our estimates as of the filing of this report. We anticipate that subsequent events and market developments will cause our estimates to change. However, we specifically disclaim any obligation to update any forward-looking statements after the date of this Quarterly Report on Form 10-Q, except as required by law, even if new information becomes available in the future.

In addition to risks and uncertainties in the ordinary course of business that are common to all businesses, important factors that are specific to our structure as a limited partnership, our industry and our company could materially impact our future performance and results of operations.

Overview

As used in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, the terms “Partnership,” “we,” “us,” “our” or "SUN" should be understood to refer to Sunoco LP and its consolidated subsidiaries, unless the context clearly indicates otherwise.

We are a Delaware master limited partnership with operations in over 40 U.S. states, Puerto Rico, Europe and Mexico. We are the largest independent distributor of motor fuel in North America and a leading operator of critical midstream energy infrastructure. Our midstream operations include an extensive network of approximately 14,000 miles of pipeline and over 100 terminals. This critical infrastructure complements our fuel distribution operations, which serve approximately 7,400 Sunoco and partner branded locations and additional independent dealers and commercial customers.

Recent Developments

Acquisitions

NuStar

On May 3, 2024, we completed the previously announced acquisition 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. 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 and assumed preferred units with a fair value of approximately $800 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.

Zenith European Terminals

On March 13, 2024, we completed the previously announced acquisition of liquid fuels terminals in Amsterdam, Netherlands and Bantry Bay, Ireland from Zenith Energy for €170 million ($185 million), including working capital.

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 previously announced 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. 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

Permian Joint Venture

On July 16, 2024, SUN and Energy Transfer announced the formation of a joint venture combining their respective crude oil and produced water gathering assets in the Permian Basin. Pursuant to the contribution agreement by and among Sunoco LP, SUN Pipeline Holdings LLC, NuStar Permian Transportation and Storage LLC, NuStar Permian Crude Logistics LLC, NuStar Permian Holdings LLC, NuStar Logistics, L.P., ET-S Permian Holdings Company LP, ET-S Permian Pipeline Company LLC, ET-S Permian Marketing Company LLC, Energy Transfer LP, and Energy Transfer Crude Marketing, LLC dated July 14, 2024 in a cashless transaction, SUN contributed all of its Permian crude oil gathering assets and operations to the joint venture. Additionally, Energy Transfer contributed its Permian crude oil and produced water gathering assets and operations to the joint venture. 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 the joint venture.

The joint venture 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 the joint venture.

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.

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:

• Adjusted EBITDA. Adjusted EBITDA, as used throughout this document, is defined as earnings before net interest expense, income taxes, depreciation, amortization and accretion expense, non-cash unit-based compensation expense, gains and losses on disposal of assets, non-cash impairment charges, losses on extinguishment of debt, unrealized gains and losses on commodity derivatives, inventory valuation adjustments, and certain other operating expenses reflected in net income that we do not believe are indicative of ongoing core operations. Inventory valuation adjustments that are excluded from the calculation of Adjusted EBITDA 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.

Adjusted EBITDA is a non-GAAP financial measure. For a reconciliation of Adjusted EBITDA to net income, which is the most directly comparable financial measure calculated and presented in accordance with GAAP, read “Key Operating Metrics and Results of Operations” below.

We believe Adjusted EBITDA is useful to investors in evaluating our operating performance because:

• Adjusted EBITDA is used as a performance measure under our Credit Facility;
• securities analysts and other interested parties use Adjusted EBITDA as a measure of financial performance; and
• our management uses Adjusted EBITDA for internal planning purposes, including aspects of our consolidated operating budget and capital expenditures.

Adjusted EBITDA is not a recognized term under GAAP and does not purport to be an alternative to net income as a measure of operating performance. Adjusted EBITDA has limitations as an analytical tool, and one should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. 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.

Adjusted EBITDA reflects amounts for the 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. Although these amounts are excluded from Adjusted EBITDA related to unconsolidated affiliates, such exclusion should not be understood to imply that we have control over the operations and resulting revenues and expenses of such affiliates. We do not control our unconsolidated affiliates; therefore, we do not control the earnings or cash flows of such affiliates. The use of Adjusted EBITDA or Adjusted EBITDA related to unconsolidated affiliates as an analytical tool should be limited accordingly.

Results of Operations

Consolidated Results

Net Income. For the three months ended September 30, 2024 compared to the same period last year, net income decreased primarily due to inventory valuation adjustments (see below for explanation of inventory adjustments), as well as increases in depreciation, amortization and accretion and interest expense. These decreases were partially offset by favorable results from our operations, as reflected in the increases in Segment Adjusted EBITDA. These changes are discussed in more detail below. For the nine months ended September 30, 2024 compared to the same period last year, net income increased primarily due to a $598 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. These increases were partially offset by unfavorable inventory valuation adjustments and increases in depreciation, amortization and accretion, as well as 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 (consolidated). For the three and nine months ended September 30, 2024 compared to the same periods last year, Adjusted EBITDA increased primarily due to increases in profit of $235 million and $469 million, respectively, 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 $83 million and $246 million, respectively, primarily related to the acquisitions of NuStar and Zenith European terminals.

Additional discussion on the changes impacting net income and comprehensive income and Adjusted EBITDA for the three and nine months ended September 30, 2024 compared to the same periods last year is available below and in “Segment Operating Results.”

Depreciation, Depletion and Amortization. For the three and nine months ended September 30, 2024 compared to the same periods last year, depreciation, depletion and amortization increased primarily due to additional depreciation and amortization from assets recently placed in service and from recent acquisitions.

Interest Expense, net. For the three months ended September 30, 2024 compared to the same period last year, interest expense increased primarily due to an increase in average total long-term debt.

Loss (Gain) on Disposal of Assets and Impairment Charges. For the nine months ended September 30, 2024, loss on disposal of assets and impairment charges primarily relates to the termination of a lease in June 2024.

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 is impacted by the notional amounts and commodity price changes on our commodity derivatives. Additional information on commodity derivatives is included in “Item 3. 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 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 the three months ended September 30, 2024, the Partnership's cost of sales included unfavorable inventory valuation adjustments of $197 million, which decreased net income; and for the three months ended September 30, 2023, the Partnership's cost of sales included favorable inventory valuation adjustments of $141 million, which increased net income. For the nine months ended September 30, 2024, the Partnership's cost of sales included an unfavorable inventory valuation adjustments of $99 million, which decreased net income; and for the nine months ended September 30, 2023, the Partnership's cost of sales included favorable inventory valuation adjustments of $113 million, which increased net income.

Adjusted EBITDA Related to Unconsolidated Affiliates and Equity in Earnings of Unconsolidated Affiliates. For the three and nine months ended September 30, 2024, the increase in the amounts reported related to unconsolidated affiliates was primarily due to the formation of the Permian joint venture effective July 1, 2024.

Gain on West Texas Sale. The gain on West Texas Sale relates to the gain recognized by SUN upon completion of the sale of convenience stores to 7-Eleven Inc. in April 2024.

Income Tax Expense. For the three and nine months ended September 30, 2024 compared to the same periods last year, income tax expense increased primarily due to the taxable gain recognized by a corporate subsidiary on the West Texas Sale.

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.

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. Adjusted EBITDA related to unconsolidated affiliates excludes the same items with respect to the unconsolidated affiliate as those excluded from the calculation of Segment Adjusted EBITDA, such as interest, taxes, depreciation, depletion, amortization and other non-cash items. Although these amounts are excluded from Adjusted EBITDA related to unconsolidated affiliates, such exclusion should not be understood to imply that we have control over the operations and resulting revenues and expenses of such affiliates. We do not control our unconsolidated affiliates; therefore, we do not control the earnings or cash flows of such affiliates.

The following analysis of segment operating results includes a measure of segment profit. Segment profit is a non-GAAP financial measure and is presented herein to assist in the analysis of segment operating results and particularly to facilitate an understanding of the impacts that changes in sales revenues have on the segment performance measure of Segment Adjusted EBITDA. Segment profit is similar to the GAAP measure of gross profit, except that segment profit excludes charges for depreciation, depletion and amortization. The most directly comparable measure to segment profit is gross profit. The following table presents a reconciliation of segment profit to gross profit.

In addition, for the Fuel Distribution segment, the following sections include information on the components of segment profit by sales type, which components are included in order to provide additional disaggregated information to facilitate the analysis of segment profit and Segment Adjusted EBITDA. These components of segment profit are calculated consistent with the calculation of segment profit; therefore, these components also exclude charges for depreciation, depletion and amortization.

Fuel Distribution

Volumes. For the three and nine months ended September 30, 2024 compared to the same periods last year, volumes increased primarily due to growth from investments and profit optimization strategies.

Segment Adjusted EBITDA. For the three months ended September 30, 2024 compared to the same period last year, Segment Adjusted EBITDA related to our Fuel Distribution segment increased due to the net impact of the following:

• an increase of $13 million related to a 1% increase in gallons sold and an increase in profit per gallon; and
• a decrease of $19 million in expenses primarily due to the West Texas Sale in April 2024 and lower allocated overhead; partially offset by
• a decrease of $10 million in lease profit due to the West Texas Sale in April 2024.

Segment Adjusted EBITDA. For the nine months ended September 30, 2024 compared to the same period last year, Segment Adjusted EBITDA related to our Fuel Distribution segment increased due to the net impact of the following:

• an increase of $36 million related to a 5% increase in gallons sold, partially offset by a decrease in profit per gallon primarily as a result of the West Texas Sale; and
• a decrease of $47 million in expenses primarily due to the West Texas sale in April 2024 and lower allocated overhead; partially offset by
• a decrease of $16 million in lease profit due to the West Texas Sale in April 2024.

Pipeline Systems

Volumes. For the three and nine months ended September 30, 2024 compared to the same periods last year, volumes increased due to recently acquired assets.

Segment Adjusted EBITDA. For the three and nine months ended September 30, 2024 compared to the same periods last year, Segment Adjusted EBITDA related to our Pipeline Systems segment increased due to the acquisition of NuStar on May 3, 2024 and the formation of the Permian joint venture on July 1, 2024.

Terminals

Volumes. For the three and nine months ended September 30, 2024 compared to the same periods last year, volumes increased due to recently acquired assets.

Segment Adjusted EBITDA. For the three and nine months ended September 30, 2024 compared to the same periods last year, Segment Adjusted EBITDA related to our Terminals segment increased primarily due to the recent acquisitions of NuStar, Zenith European terminals and Zenith Energy terminals located across the East Coast and Midwest.

Liquidity and Capital Resources

Liquidity

Our principal liquidity requirements are to finance current operations, to fund capital expenditures, including acquisitions from time to time, to service our debt and to make distributions. 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.

Our ability to meet our debt service obligations and other capital requirements, including capital expenditures and acquisitions, will depend on our future operating performance which, in turn, will be subject to general economic, financial, business, competitive, legislative, regulatory and other conditions, many of which are beyond our control. As a normal part of our business, depending on market conditions, we will from time to time consider opportunities to repay, redeem, repurchase or refinance our indebtedness. Changes in our operating plans, lower than anticipated sales, increased expenses, acquisitions or other events may cause us to seek additional debt or equity financing in future periods. 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 risks described or referenced under the heading “Item 1A. Risk Factors” herein, including the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2023 may also significantly impact our liquidity.

As of September 30, 2024, we had $116 million of cash and cash equivalents on hand and borrowing capacity of $1.42 billion on our Credit Facility. The Partnership was in compliance with all financial covenants at September 30, 2024. Based on our current estimates, we expect to utilize capacity under the Credit Facility, along with cash from operations, to fund our announced growth capital expenditures and working capital needs for 2024; however, we may issue debt or equity securities prior to that time as we deem prudent to provide liquidity for new capital projects or other partnership purposes.

Cash Flows

Our cash flows may change in the future due to a number of factors, some of which we cannot control. These factors include regulatory changes, the price of products and services, the demand for such products and services, margin requirements resulting from significant changes in commodity prices, operational risks, the successful integration of our acquisitions and other factors.

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). 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. 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.

Nine months ended September 30, 2024 compared to nine months ended September 30, 2023. Net cash provided by operating activities during 2024 was $426 million compared to $416 million for 2023, and net income was $733 million for 2024 and $500 million for 2023. The difference between net income and net cash provided by operating activities for the nine months ended September 30, 2024 primarily consisted of net changes in operating assets and liabilities (net of effects of acquisitions and divestitures) of $65 million and non-cash items totaling $242 million.

The non-cash activity in 2024 and 2023 consisted primarily of depreciation, amortization and accretion of $216 million and $141 million, respectively, non-cash unit-based compensation expense of $12 million and $13 million, respectively, unfavorable inventory valuation adjustments of $99 million and favorable inventory valuation adjustments of $113 million, respectively, loss on disposal of assets and impairment charges of $52 million and a gain on disposal of assets of $8 million, respectively, amortization of deferred financing fees of $20 million and $6 million, respectively, and deferred income tax benefit of $14 million and deferred income tax expense of $8 million, respectively.

Net income also included equity in earnings of unconsolidated affiliates of $35 million and $4 million in 2024 and 2023, respectively, as well as a $598 million gain from the West Texas Sale in 2024.

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 the 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 construction and expansion projects.

Nine months ended September 30, 2024 compared to nine months ended September 30, 2023. Net cash provided by investing activities during 2024 was $609 million compared to net cash used in investing activities of $213 million for 2023. Capital expenditures for 2024 were $212 million compared to $132 million for 2023. In 2024, we paid $209 million in cash for the acquisitions of terminals, including working capital, and received $27 million in cash from the NuStar acquisition. In 2023, we paid $111 million in cash for the acquisition of 16 refined product terminals from Zenith Energy, including working capital.

Distributions from unconsolidated affiliates in excess of cumulative earnings were $6 million and $7 million for 2024 and 2023, respectively. Proceeds from disposal of property and equipment were $7 million and $25 million for 2024 and 2023, respectively. Additionally, we received $990 million in cash proceeds from the West Texas Sale.

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.

Nine months ended September 30, 2024 compared to nine months ended September 30, 2023. Net cash used in financing activities was $948 million and $29 million for 2024 and 2023, respectively.

During the nine months ended September 30, 2024, we:

• borrowed $1.50 billion and repaid $415 million in senior notes;
• borrowed $1.87 billion and repaid $2.69 billion under the Credit Facility;
• paid $19 million in loan origination costs;
• redeemed $784 million of preferred units;
• paid $406 million in distributions to our unitholders, of which $165 million was paid to Energy Transfer; and
• paid $8 million in distributions to noncontrolling interests.

During the nine months ended September 30, 2023, we:

• borrowed $2.63 billion and repaid $2.88 billion under the Credit Facility; and
• paid $271 million in distributions to our unitholders, of which $128 million was paid to Energy Transfer.

We intend to pay cash distributions to the holders of our common units and Class C units representing limited partner interests in the Partnership on a quarterly basis, to the extent we have sufficient cash from our operations after establishment of cash reserves and payment of fees and expenses, including payments to our General Partner and its affiliates. Class C unitholders receive distributions at a fixed rate equal to $0.8682 per quarter for each Class C unit outstanding. There is no guarantee that we will pay a distribution on our units. In July 2024, we declared a quarterly distribution of $0.8756 per common unit, which will result in the payment of approximately $119 million to common unitholders and $36 million to the IDR holders. The declared distribution will be paid on August 19, 2024 to unitholders of record on August 9, 2024.

Capital Expenditures

The following is a summary of capital expenditures for the nine months ended September 30, 2024:

For the nine months ended September 30, 2024, total capital expenditures were $212 million, which included $146 million for growth capital and $66 million for maintenance capital.

We currently expect to spend approximately $120 million in maintenance capital expenditures and at least $300 million in growth capital for the full year 2024.

Description of Indebtedness

As of the dates set forth below, our outstanding consolidated indebtedness was as follows:

(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.

April 2024 Notes Offering

On April 30, 2024, the Partnership issued $750 million of 7.000% senior notes due 2029 and $750 million of 7.250% senior notes due 2032 in a private offering. The Partnership used the net proceeds from the offering to (i) repay certain outstanding indebtedness of NuStar, in connection with the merger between the Partnership and NuStar, (ii) fund the redemption of NuStar's preferred units in connection with the merger and (iii) pay offering fees and expenses.

NuStar Acquisition

During the second quarter of 2024, subsequent to the closing of the NuStar acquisition, the Partnership redeemed NuStar's subordinated notes totaling $403 million and repaid and terminated NuStar's credit facility totaling $455 million.

Credit Facility

As of September 30, 2024, the balance on the Credit Facility was $50 million, and $28 million standby letters of credit were outstanding. The unused availability on the Credit Facility at September 30, 2024 was $1.42 billion. The weighted average interest rate on the total amount outstanding at September 30, 2024 was 7.30%. The Partnership was in compliance with all financial covenants at September 30, 2024.

On May 3, 2024, the Partnership amended its credit facility, extending the maturity to May 2029.

Guarantor Summarized Financial Information

The senior notes issued by NuStar Logistics are fully and unconditionally guaranteed by Sunoco LP, Sunoco Finance Corp. and certain of its subsidiaries; the senior notes issued by Sunoco LP and Sunoco Finance Corp. are fully and unconditionally guaranteed by NuStar Logistics and certain other subsidiaries. Each guarantee of the senior notes (i) ranks equally in right of payment with all other existing and future unsecured senior indebtedness of that guarantor, (ii) is structurally subordinated to all existing and any future indebtedness and obligations of any subsidiaries of that guarantor that do not guarantee the notes and (iii) ranks senior to its guarantee of our subordinated indebtedness. See Note 7 of the Notes to Financial Statements in Item 1. “Financial Statements” for a discussion of certain of our debt obligations.

The following tables present summarized combined balance sheet and income statement information for Sunoco LP, Sunoco Finance Corp. and NuStar Logistics (the “Issuers”), as well as the subsidiaries that guarantee the senior notes issued by those three entities (collectively with the Issuers, the “Guarantor Issuer Group”). Intercompany items among the Guarantor Issuer Group have been eliminated in the summarized combined financial information below, as well as intercompany balances and activity for the Guarantor Issuer Group with non-guarantor subsidiaries, including the Guarantor Issuer Group’s investment balances in non-guarantor subsidiaries. Comparative period information is not included in the tables below, as such information was not required for the prior period. Income statement information included below in the table and related disclosure includes the NuStar subsidiaries for May 3, 2024 (the acquisition date) through September 30, 2024 only.

In connection with the formation of the Permian joint venture, certain guarantor subsidiaries were contributed to the joint venture and deconsolidated by the Partnership effective July 1, 2024. Those contributed subsidiaries were released from their guarantees concurrent with the formation of the joint venture. Accordingly, those former guarantor subsidiaries are excluded from the summarized combined balance sheet information presented below, and the summarized combined income statement information below only includes the results of those former guarantor subsidiaries for the period from the NuStar acquisition date of May 3, 2024 through June 30, 2024.

(a) Excludes $57 million of net intercompany receivable owed from the non-guarantor subsidiaries from the Guarantor Issuer Group.

Long-term assets for the non-guarantor subsidiaries totaled $864 million as of September 30, 2024.

Revenues and net income for the non-guarantor subsidiaries totaled $572 million and $13 million, respectively, for the nine months ended September 30, 2024

Critical Accounting Estimates

The Partnership's critical accounting estimates are described in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 16, 2024. No significant changes have occurred subsequent to the Form 10-K filing.

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 $50 million of outstanding borrowings on the Credit Facility as of September 30, 2024. The annualized effect of a one percentage point change in floating interest rates on our variable rate debt obligations outstanding at September 30, 2024 would be an approximately $1 million change to interest expense. 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.

While we cannot predict or manage our ability to refinance existing debt or the impact interest rate movements will have on our existing debt, management evaluates our financial position on an ongoing basis. From time to time, we may enter into interest rate swaps to reduce the impact of changes in interest rates on our floating rate debt. We had no interest rate swaps in effect during the first nine months of 2024 or 2023.

Commodity Price Risk

Our subsidiaries hold working inventories of refined petroleum products, renewable fuels, gasoline blendstocks and transmix in storage. As of September 30, 2024, we held approximately $801 million of such inventory. While in storage, volatility in the market price of stored motor fuel could adversely impact the price at which we can later sell the motor fuel. However, we may use futures, forwards and other derivative instruments (collectively, "positions") to hedge a variety of price risks relating to deviations in that inventory from a target base operating level established by management. Derivative instruments utilized consist primarily of exchange-traded futures contracts traded on the New York Mercantile Exchange, Chicago Mercantile Exchange and Intercontinental Exchange as well as over-the-counter transactions (including swap agreements) entered into with established financial institutions and other credit-approved energy companies. Our policy is generally to purchase only products for which there is a market and to structure sales contracts so that price fluctuations do not materially affect profit. While these derivative instruments represent economic hedges, they are not designated as hedges for accounting purposes. 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 0.4 million barrels with an aggregate unrealized gain of $0.2 million at September 30, 2024.

Evaluation of Disclosure Controls and Procedures

As required by paragraph (b) of Rule 13a-15 under the Exchange Act, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on such evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, has concluded, as of the end of the period covered by this report, that our disclosure controls and procedures were effective at the reasonable assurance level for which they were designed in that the information required to be disclosed by the Partnership in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission ("SEC") rules and forms and such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

We closed the acquisition of NuStar Energy L.P. on May 3, 2024, and are currently integrating its operations and internal control structure. Certain of NuStar’s internal controls over financial reporting, including disclosure controls and corporate governance procedures, have already been impacted by changes made to conform to the existing controls and procedures of Sunoco LP. None of the changes resulting from the NuStar acquisition and integration were in response to an identified deficiency or material weakness in our internal control over financial reporting.

Other than the changes resulting from the NuStar acquisition and integrations, there have been no changes in our internal control over financial reporting (as defined in Rule 13(a)-15(f) or Rule 15d-15(f) of the Exchange Act) during the three months ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no material changes form the risk factors described in “Part I — Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 16, 2024 and in “Part II - Item 1A. Risk Factors” of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 filed with the SEC on May 9, 2024.