PHILADELPHIA, October 27, 2008 – Sunoco Logistics Partners L.P. (NYSE: SXL) (the
“Partnership”) today announced quarterly net income for the third quarter ended September 30, 2008 of $50.3
million, or $1.19 per limited partner unit on a diluted basis, compared with $37.5 million, or $0.97 per limited
partner unit on a diluted basis, for the third quarter ended September 30, 2007. Operating income for the third
quarter ended September 30, 2008 increased by $11.9 million, or 26.0 percent, from the prior year’s third
quarter. The improvement was driven by higher margins and fees across all segments, increased volumes
within certain segments of the Western Pipeline system and additional tankage placed into service at the
Nederland terminal. These improvements to operating income were partially offset by lower volumes within
certain terminal facilities and the Eastern Pipeline, as well as a $2.5 million charge associated with property
damages caused by the hurricanes experienced during the quarter. In addition, the Partnership estimates that
approximately $3.0 million of revenue was lost during the quarter as a result of hurricane disruptions.
Decreased interest expense contributed further to the $12.8 million increase in net income.
For the nine months ended September 30, 2008, net income increased to $139.2 million compared to
$85.1 million for the nine months ended September 30, 2007. Operating income for the nine months ended
September 30, 2008 increased $50.8 million, or 45.6 percent, when compared to the prior year period. The
increase was the result of higher margins and fees across all segments, increased volumes within certain
segments of the Western Pipeline system and additional tankage placed into service at the Nederland terminal.
These improvements to operating income were partially offset by lower volumes within certain terminal
facilities and the Eastern Pipeline, a $5.7 million non-cash impairment charge related to a cancelled project and
property damages caused by the hurricanes noted above. Decreased interest expense contributed further to the
$54.1 million increase in net income.
Sunoco Partners LLC, the general partner of Sunoco Logistics Partners L.P., declared a cash
distribution for the third quarter of 2008 of $0.965 per common partnership unit ($3.86 annualized) payable
November 14, 2008 to unit holders of record on November 7, 2008.
“The third quarter results, which were just short of the record set in the last quarter, evidenced the
focus we have on continued sustainable cash flow growth across all business segments. Our Western Crude
Oil system, in particular, had a very strong quarter despite the impact of Hurricanes Ike and Gustav. Margins
in the Lease Acquisition business continue to be strong with higher than normal volumes in Oklahoma, as well
as favorable crude oil market differentials. Pipeline volumes, despite being lower than last year, were
reasonable given the hurricane disruptions. Our businesses benefited from higher pipeline tariffs and terminal
rates as the escalating cost of building new infrastructure has enabled margin expansion from our existing
infrastructure,” said Deborah M. Fretz, President and Chief Executive Officer. “We expect to close the
acquisition of the ExxonMobil MagTex pipeline system in the fourth quarter and, with our strong balance
sheet and a debt to EBITDA ratio of 2.1x, among the lowest in our competitive group, we will debt finance
this transaction. The acquisition will be immediately accretive to the LP unitholders and will provide a refined products platform in the Gulf Coast which will facilitate additional organic investments. Despite the turmoil in
the credit markets, our business model remains solid and transparent and our strong financial position supports
future growth. We announced a cash distribution of $0.965, a 3.2% increase versus last quarter and a 13.5%
increase versus the third quarter 2007. It is the twenty-first distribution increase in the last twenty-two
quarters. As announced last quarter, we expect to increase our 2009 distribution by at least 10% and we
reaffirm this guidance given the investment opportunities we have underway.”
Segmented Third Quarter Results
Eastern Pipeline System
Operating income for the Eastern Pipeline system increased $2.7 million to $17.4 million for the third
quarter ended September 30, 2008 compared to the prior year’s third quarter. Sales and other operating
revenue increased by $0.7 million to $31.7 million due primarily to higher fees across the Partnership’s refined
product and crude oil pipelines, partially offset by decreased volumes. Other income decreased $1.9 million
compared to the prior year’s third quarter due primarily to decreased refined product volumes experienced
during 2008 by the Partnership’s joint venture interests. Operating expenses decreased by $4.5 million to $9.0
million due primarily to the impact of increased crude oil and refined product prices on operating gains and a
decreased level of environmental charges compared to the prior year period.
Terminal Facilities
Operating income for the Terminal Facilities segment increased by $1.2 million to $13.7 million for
the third quarter ended September 30, 2008 compared to the prior year’s third quarter. Sales and other
operating revenue increased by $4.8 million to $40.6 million due primarily to increased terminal fees, the
addition of tankage at the Nederland terminal and increased refined product additive revenues. These increases
were partially offset by decreased throughput within the refinery and refined product terminals. Operating
expenses increased by $3.1 million to $17.9 million for the third quarter of 2008 due primarily to damages
incurred from hurricanes during the third quarter, increased product additive costs and higher utility costs.
These higher costs were partially offset by product overages which were favorably impacted by the increased
price of crude oil.
Western Pipeline System
Operating income for the Western Pipeline system increased $8.1 million to $26.7 million for the third
quarter of 2008 compared to the prior year’s third quarter due primarily to the establishment of a bi-directional
pipeline connection to the Partnership’s Nederland terminal, increased volumes on certain pipeline segments,
increased pipeline fees and higher lease acquisition margins.
Higher crude oil prices were a key driver of the overall increase in total revenue, cost of products sold
and operating expenses from the prior year’s quarters. The average price of West Texas Intermediate crude oil
at Cushing, Oklahoma increased to $118.13 per barrel for the third quarter of 2008 from $75.33 per barrel for
the third quarter of 2007.
Segmented Nine Month Results
Eastern Pipeline System
Operating income for the Eastern Pipeline system increased $7.5 million to $42.7 million for the nine
months ended September 30, 2008 compared to the prior year period. Sales and other operating revenue
increased by $3.7 million to $89.6 million due primarily to higher fees across the Partnership’s refined product
and crude oil pipelines, partially offset by decreased volumes. Other income decreased $3.9 million compared
to the prior year period as a result of decreased refined product volumes experienced during 2008 by the
Partnership’s joint venture interests. Operating expenses decreased by $8.1 million to $31.0 million due
primarily to the impact of increased crude oil and refined product prices on operating gains and a decreased
level of environmental charges compared to the prior year. This decrease was partially offset by increased
utility costs throughout the system.
Terminal Facilities
Operating income for the Terminal Facilities segment increased by $2.5 million to $42.9 million for
the nine months ended September 30, 2008 compared to the prior year period. Operating income was reduced
during the first nine months of 2008 due to a $5.7 million non-cash impairment charge related to the
Partnership’s decision to discontinue efforts to expand LPG storage capacity at its Inkster, Michigan facility.
Sales and other operating revenue increased by $15.3 million to $119.3 million due primarily to the addition of
new tankage at the Nederland terminal, higher fees at the Partnership’s Nederland and refined products
terminals, and increased product additive revenues. The increases were partially offset by decreased volumes
in the Partnership’s refinery and refined products terminals. Other income increased $0.8 million from the first
nine months of 2008 as a result of an insurance recovery recorded during the second quarter associated with
hurricane damage sustained in 2005. Operating expenses increased by $5.4 million to $45.5 million for the
period ended September 30, 2008 due primarily to increased product additive costs, damages incurred at the
Partnership’s Nederland terminal from the hurricanes experienced during the third quarter, higher utility costs
and timing of maintenance activity. These higher costs were partially offset by product overages which were
favorably impacted by the increased price of crude oil. Selling, general and administrative expenses increased
by $1.7 million to $13.9 million for the nine months ended September 30, 2008. During 2007, expenses were
reduced by $0.9 million in connection with an insurance recovery.
Western Pipeline System
Operating income for the Western Pipeline system increased $40.9 million to $76.9 million for the first
nine months of 2008 compared to the prior year period due primarily to the establishment of a bi-directional
pipeline connection to the Partnership’s Nederland terminal, increased volumes on certain pipeline segments,
increased pipeline fees and higher lease acquisition margins. Other income also contributed to the increased
profitability due to increased equity income associated with the Partnership’s joint venture interests and the
gain on an insurance recovery discussed above.
Higher crude oil prices were a key driver of the overall increase in total revenue, cost of products sold
and operating expenses from the prior year period. The average price of West Texas Intermediate crude oil at
Cushing, Oklahoma increased to $113.38 per barrel for the first nine months of 2008 from $66.26 per barrel
for the first nine months of 2007.
Other Analysis
Financing Costs
Net interest expense decreased $3.2 million for the nine months ended September 30, 2008, compared
to the prior year period. The decrease was due primarily to decreased borrowings and lower interest rates
related to the Partnership’s revolving credit facility. As of September 30, 2008, the Partnership had total debt
outstanding of $525.2 million, which consisted of $424.2 million of Senior Notes and $101.0 million of
borrowings under the Partnership’s credit facilities as compared to $515.1 million of total debt outstanding at
December 31, 2007. As of September 30, 2008, the Partnership had available borrowing capacity of $399.0
million under its credit facilities and a Debt to EBITDA ratio of 2.1x for the trailing twelve month period.
Capital Expenditures
Maintenance capital expenditures for the nine months ended September 30, 2008 were $15.7 million.
The Partnership expects that maintenance capital spending for 2008 will be approximately $27.0 million for
the full year.
Expansion capital expenditures for the nine months ended September 30, 2008 were $73.4 million
compared to $72.5 million for the first nine months of 2007. Expansion capital for 2007 included the $13.4
million acquisition of a 50 percent interest in a Syracuse, New York refined products terminal. Expansion
capital for 2008 includes construction in progress, in connection with the Partnership’s agreement with Motiva
Enterprises LLC, of three crude oil storage tanks at its Nederland Terminal and a crude oil pipeline from
Nederland to Motiva’s Port Arthur, Texas refinery. Expansion capital also includes construction of five
additional crude oil storage tanks at Nederland, for a total of eight crude oil storage tanks under various levels
of construction at Nederland during 2008. These eight crude oil storage tanks will have a combined shell
capacity of approximately 4.8 million barrels.
Non-GAAP Financial Measures
Management of the Partnership believes EBITDA information enhances an investor's understanding of
a business’ ability to generate cash for payment of distributions and other purposes. EBITDA does not
represent and should not be considered an alternative to net income as determined under United States GAAP
and may not be comparable to other similarly titled measures of other businesses. Reconciliations of this
measure to the comparable GAAP measure are provided in the table accompanying this release.