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Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Sunoco and Sunoco Corp Q2 2026 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. To ask a question, simply press star one on your telephone keypad. To withdraw your question, press star one again. We do ask that you limit questions to one and one follow-up. It is now my pleasure to turn the call over to Scott Grischow, Senior Vice President of Finance. Please go ahead.

Thank you. Good morning, everyone. On the call with me this morning are Joe Kim, President and Chief Executive Officer, Karl Fails, Chief Operating Officer, Austin Harkness, Chief Commercial Officer, Brian Hand, Chief Sales Officer, and Dylan Bramhall, Chief Financial Officer. Today's call will contain forward-looking statements that include expectations and assumptions regarding Sunoco LP's future operations and financial performance. Actual results could differ materially, and we undertake no obligation to update these statements based on subsequent events. Please refer to our earnings release as well as our filings with the SEC for a list of these factors. During today's call, we will also discuss our non-GAAP financial measures, including adjusted EBITDA and Distributable Cash Flow as adjusted. Please refer to the Sunoco LP website for reconciliation of each financial measure.

The partnership continued the strong momentum in 2026 with second quarter adjusted EBITDA of $996 million, excluding approximately $14 million of one-time transaction expenses. Based on our first-half results and our confidence in the outlook for the second half of the year, we raised our adjusted EBITDA guidance range to be between $3.5 billion and $3.7 billion, an increase of $400 million from our original guidance range. Joe will provide more detail in his remarks, but this increase reflects the strength of our portfolio in realizing the value of recent acquisitions. Second-quarter Distributable Cash Flow as adjusted was $608 million. On July 27th, we declared a distribution of just over $1 per common unit for both Sunoco LP common units and Sunoco Corp shares. This represents a quarterly increase of 1.25% from the prior quarter and over 10% versus the second quarter of 2025.

Our business continues to generate strong cash flows, resulting in a trailing 12-month coverage ratio of 2.1x. Our balance sheet and liquidity position remain strong. We had $2.3 billion in availability under our revolving credit facility at the end of the quarter, and leverage was approximately 3.7x below our long-term target. Finally, we spent $125 million on growth capital and $77 million on maintenance capital. I want to wrap up my comments by stating that our financial position is stronger than ever. Our balance sheet is below our long-term target, and our distribution is comfortably on pace to meet our multi-year growth rate of at least 5%.

Our proven history of executing on highly accretive acquisitions, both larger transactions and bolt-on opportunities, combined with our quick-spend, quick-return organic growth projects, will continue to create a positive feedback loop, resulting in increased cash flows to be redeployed across our capital allocation strategy. We are confident this will provide top-tier returns for our investors in the coming years. With that, I'll turn it over to Karl to walk through some additional thoughts on our second quarter performance.

Thanks, Scott. Good morning, everyone. In his remarks on our first-quarter call, Joe highlighted that we are both a defensive play, as we distinguish ourselves in challenging environments, and a proven growth play. Both are on full display in our second-quarter results. Let me walk through our segment performance for the quarter and how each segment contributed to the outstanding overall result. In addition, each segment remains well-positioned to contribute meaningfully toward achieving our increased 2026 EBITDA guidance. Starting with our Fuel Distribution segment. Adjusted EBITDA was $516 million, excluding $12 million of transaction expenses. This compares to $538 million last quarter and $214 million in the second-quarter of 2025, both excluding transaction expenses. Remember that our first-quarter results included the 7-Eleven makeup payment and a $92 million one-time benefit of inventory reduction.

The very strong performance this quarter demonstrates the strength in our much larger and diverse Fuel Distribution portfolio and the successful execution of our ongoing gross profit optimization and growth strategies. We distributed 4.1 billion gallons, up 9% versus last quarter and up 89% versus the second quarter of last year. We continue to deliver volume increases and outperform industry benchmarks as a result of the effective use of capital, both organic and roll-up acquisitions. In addition, during periods of market uncertainty like the second quarter, our commercial teams find opportunities to supply additional customers as we grow our reputation as a reliable fuel supplier in the markets in which we operate. Reported margin for the quarter was $0.171 per gallon compared to $0.17 per gallon last quarter and $0.105 per gallon for the second quarter of 2025.

We saw a return of significant market volatility during the quarter, with periods of sharp increases in price followed by declining prices near the end of the quarter. As we have mentioned many times, this volatility, coupled with the continued presence of higher break-even margins, provides a strong foundation for our Fuel Distribution business. Once you add on our proven track record of growth, you can see why we remain very excited about this part of our business. In our Pipeline Systems segment, adjusted EBITDA for the second quarter was $190 million, compared to $179 million last quarter and $177 million in the second quarter of 2025. On the volume side, we reported 1.3 million barrels per day of throughput, up 4% from last quarter and up 9% from the same quarter last year.

This segment continues to optimize the use of our assets to provide steady and stable income. Moving on to our Terminals segment. Adjusted EBITDA for the second quarter was $115 million, excluding $2 million of transaction expenses. This compares to $107 million last quarter and $73 million in the second quarter of last year, excluding transaction expenses. We reported 1.1 million barrels per day of throughput, up 5% from last quarter and 52% from the same quarter last year. Growth in both earnings and volumes in this segment were supported by a full quarter of the TanQuid acquisition. This segment continues to deliver stable results that predictably and accretively grow as we add to the portfolio. Turning to our Refinery segment. Adjusted EBITDA for the second quarter was $175 million, compared to $43 million last quarter.

Refinery throughput was 57,000 barrels per day, compared to 22,000 barrels per day last quarter, which was reduced as a result of our planned turnaround. With refining margin for the quarter over $40 per barrel and operating expenses under $10 per barrel, the contribution from this segment was very strong. While the continued outperformance of the Refinery segment has contributed to our increase in full-year guidance, it is only one component of an outstanding first-half, and what will be another outstanding full-year. Before I wrap up, I wanted to highlight our continued growth. Contributions and synergies from our Parkland acquisition are ahead of schedule. Our bolt-on acquisition strategy continues to demonstrate our track record of buying businesses and getting more out of them than the previous ownership. We continue to focus on quick-hitting, high-return organic capital projects. All of these contribute to DCF for LP unit growth.

We expect to maintain this strong momentum into the second half of the year and into 2027. I will now turn it over to Joe to share his final thoughts. Joe?

Thanks, Karl. Good morning, everyone. We're more than halfway through 2026, and as expected, our business continues to perform well. Scott and Karl discussed the key details related to the second-quarter results. Let me provide some additional comments about our business as a whole. Our combined results for the first and second quarters have been outstanding. As I mentioned on the last earnings call, we have proven that we can distinguish ourselves across various macroeconomic environments. For the full year 2026, we expect to materially exceed our initial adjusted EBITDA guidance and deliver our eighth consecutive year of EBITDA growth. All four business segments are performing at a high level. First, as Karl noted, the industry fundamentals for our Fuel Distribution remain strong. Our ability to optimize acquired assets is paying off. We're confident this will continue for many years to come.

Specifically for 2026, we expect our Fuel Distribution segment to perform just as well in the back half of this year as it did our outstanding first half. Second, within our Pipeline and Terminals segments, the team has done a great job of maintaining the reliability and stability of these assets. Finally, our Refinery segment obviously delivered a very strong quarter. We have managed the portfolio so that when refining crack spreads are strong, it enhances our overall upside. When they're not as strong, we can still have a very good year given the diversity of our portfolio. As far as the balance sheet, leverage is below our target of 4x. This puts us in a very good position to both increase distributions over a multi-year period and deliver on accretive growth. Let me wrap up with some final thoughts. We've had tremendous growth.

We've done this while keeping our unitholders in mind. We have delivered eight consecutive years of DCF for common unit growth, and 2026 will be our ninth. We've also delivered for our debt holders with multiple credit rating upgrades and a stronger balance sheet. The past is noteworthy, but the future is more important. Let me be clear. We expect continued growth. As a result of the NuStar, Parkland, and TanQuid acquisitions, we have a vast canvas to deploy capital across numerous geographies and segments. Our multi-year guidance of at least $500 million a year of bolt-on acquisitions is a modest bar. We expect to surpass this in 2026 and in future years. This is on top of our organic growth opportunities.

Bottom line, our growing cash flows puts us in a strong position to continue to grow distributions, deliver accretive growth, and maintain a strong balance sheet. Operator, that concludes our prepared remarks. You may open the line for questions.

As a reminder, to ask a question, press star one on your telephone keypad. Please remember, we do ask that you limit questions to one and one follow-up. Your first question comes from the line of Justin Jenkins with Raymond James. Please go ahead.

Great. Thanks. Morning, everyone. I guess I want to start where you just ended. Obviously, we've had a positive operating backdrop, and you've shown really strong execution against that. In that context, Karl and Joe, you both mentioned this a bit in your remarks, but how is progress against your bolt-on M&A targets? Are you seeing any incremental opportunities there or also for more incremental organic growth in this macro, especially in light of the balance sheet capacity you mentioned?

Hey, Justin. It's Joe. Hey, I'll repeat a little bit of what I just said is, I think the takeaway is, I think I purposely chose the word that $500 million a year is a modest bar. Let me give you some insights to why. If you look at our three last three bigger acquisitions, NuStar, Parkland, and TanQuid, these are big financial wins for us. Obviously, we've delivered on synergies and we're going to continue to deliver on synergies. Beyond the base business, these acquisitions open up a far broader universe for us to invest in. We have geographic opportunities in the U.S., Canada, the Caribbean, and Europe. Within these geographies, we can do deals both in Fuel Distribution sector as well as the midstream sector.

When you couple this expanded landscape with our proven ability to deliver on synergy, it makes that $500 million to be a very modest bar. We're at different stages with different targets, and we absolutely expect to exceed the $500 million in 2026. Beyond that, we think the 2027 beyond, it sets up well for us to continue to be a highly attractive growth story on a continued basis.

Justin, on the organic side, just to build on what Joe said, the same is true on organic projects, so that larger canvas and footprint gives us increased opportunities to invest. As I mentioned in my remarks, and I've said many times, we focus right now on these quick-hitting, good return capital projects. They're not as big as maybe some of our other midstream peers, but in that $600 million+, we have some $20 million-$30 million projects. Just to give you some examples, in our Fuel Distribution segment, we're signing up a lot of new customers, and then in some of our geographies, we're finding opportunities to build new tanks in our terminals, whether that's in South America, whether that's in the Caribbean, whether that's in Europe. Many of those tank builds also facilitate our Fuel Distribution business.

In our Pipeline Systems, we've made new connections to bring new customers on our pipe. You add that portfolio up. Plus, as Joe said, we continue to grow into new geographies. These kind of roll-up acquisitions coupled with the organic really can power a lot of additional growth.

Awesome. That's great color. Second question is just on the updated guide. What should we think about for the drivers that you've assumed in the new range for the back half of this year relative to obviously the strong first half you've already put up here?

Hey, Justin, it's Joe again. Here's some key insights that I think you should take away from our revised guidance. First and foremost, all four of our business segments are performing very well. It's not just one driving the beat. More importantly, we think this is going to continue for all four segments. As far as the range, that's really driven by our Refinery segments. Our ability to project the Fuel Distribution segment and the midstream segment, we're really good at that. When it comes to projecting the Refinery segment, that's definitely not an exact science. What we did is we used the forward curve for refining cracks as a starting point. All of us know that using the forward curve and how it plays out with actual results, that typically doesn't happen. It's just a starting point for us. That's why we provided a range.

As far as an upside, the simple answer is yes, there's upside. I think we've shown, year-after-year, when the market gives us the opportunity, we're really good on capturing the upside. When the market doesn't, and we have market headwinds, well, I think we've also shown year after year that we can minimize that. I think the takeaway for all of this is there's multiple ways this is going to play out, but in every scenario that we looked at, we think it's going to be an outstanding year for 2026.

Great color. Thanks, guys.

Your next question comes from the line of Theresa Chen with Barclays. Please go ahead.

Morning. Back on the refining topic, now that Burnaby has been part of your portfolio for a bit of time, how are you thinking about the long-term earnings power of this segment and your general outlook for West Coast refining margins? Given Burnaby's advantaged position both from an infrastructure perspective and its ability to serve the broader Pacific markets as well as local Canadian markets, how do you view the strategic value of this asset and its integration into your broader infrastructure and distribution footprint?

Yeah, Theresa, this is Karl. Burnaby's done a really good job. I don't think any of us anticipated that we'd have the refinery cracks that we've had this shortly after ownership. Again, I'll remind everyone, we did the Parkland acquisition and looked at those economics on a mid-cycle basis, and clearly we've had the benefit of the cash generation. The team there has done a good job on focusing on the two areas that we think are most important, which is increasing the reliability and decreasing our operating expenses on a per-barrel basis. That's where our focus has been.

When Parkland made that acquisition back in 2018, I think the refinery was a headline, but our perspective is it's really the integrated business, and we have a wonderful fuel distribution business there. The team there is doing a great job, and we have a very good market position there with a very good brand partner. Burnaby is a component of that. It's not the only piece. Right now, it, by far, is the best way to supply those markets. The great thing, you know our strategy is as markets evolve and they tend to be efficient. If in some future state, there are other potential opportunities, we'll look at that, and we'll supply our market differently.

Right now, as you said, some of the other refiners that have reported have made some arguments that maybe mid-cycle refining cracks are increasing, and I think their arguments are reasonable. As we go forward, we'll focus on what we can control, and hopefully the market will provide some tailwinds.

Thank you. On the fuel distribution side of things, I want to ask about your outlook for both margins and volumes near term. Given the volatility in commodity prices that has persisted on the front end of the curve, which has traditionally benefited your fuel distribution assets, can you provide color on what you're seeing in terms of the trend of fuel distribution CPG margins so far in the third quarter? On the volume side, many headlines abound on elevated prices potentially impacting the consumer. What are you seeing as far as demand across your footprint as it translates to the end users?

Yeah. Hey, Theresa. This is Austin. Happy to walk you through kind of what we're seeing on the demand and margin side of things, given our expanded portfolio. Sort of take those in reverse order. Just looking at the demand picture. Overall, throughout so far this year, the consumer has been, I'd say, surprisingly resilient. Right? Starting in the U.S., despite the flat price volatility that we've seen, EIA would suggest refined product demand is roughly flat year-over-year, despite the volatility that we've seen. Typically in situations like this, when we're looking to see what the impact of flat price is going to be on consumer demand, one, it tends to be a function of how high flat price goes and for how long it remains volatile.

Two, the things that we typically will see from a consumer behavior standpoint will be either spend rationalization, so same number of trips, but buy fewer gallons per trip, or octane rationalization, where consumers will trade down. Like I said, we haven't seen much of that in the U.S. In Canada, the demand picture is a touch softer with gasoline demand off low to mid-single digits year-over-year in Canada and roughly flat for ULSD. In the Caribbean, as I've shared, people think of it as this monolithic region, but we are onshore in 24 different markets there, each of which have their own demand profile. But I would say as a region overall, it's up low to mid-single-digits.

With all of that, obviously our volumes have exceeded that in each of these geographies, just given our deployment of growth capital and organic capital, the scale and diversity we're able to bring as we're capturing synergies over the first, call it seven months of the year. On the margin side of things, as we shared in the past, as a result of the acquisition, it's reasonable to expect our margin profile has evolved higher. To what extent and where the specific CPG margin print is going to be going forward, I think it's hard to say, because there's going to be quarter-to-quarter volatility. Frankly, Theresa, you know us well enough. We don't spend a whole lot of time trying to analyze what the CPG margin number is going to be or volume, but rather solve for fuel profit and EBITDA growth overall.

Overall, I think the second quarter is a reflection of the team's strong execution to leverage our scale and supply chain optionality against the backdrop that Karl mentioned, which has been at times challenging, but at times favorable. Right now it looks like flat price is back on the rise. That creates a headwind to the margin picture. If demand does come off, obviously that paints a fairly bullish picture for margin. I think, as Joe shared, we're well-positioned with our diversity, our scale, and our geographic exposure to perform well and close out the year very strong, regardless of what the macroeconomic environment looks like.

Thank you very much.

Your next question comes from the line of Gabe Moreen with Mizuho. Please go ahead.

Hey. Good morning, everyone. If I could just follow up one more on Burnaby. I'm just curious how you kind of look at the cash flow from being thrown off that asset, whether that's something that is at all supporting the distribution, or is it something where, hey, you get high crack spreads, you can reinvest that in the business. I'm just wondering if really there's any distribution capacity off of that asset?

Hey, Gabe, it's Joe. I'm not sure if I said it this call or the previous call, is that when you look at Burnaby, our refining exposure on our overall portfolio, it is something where whenever we have upside by crack, it's just going to help us in the quarter for the year. When the cracks aren't as good, we're still going to have a really good year. We're obviously getting upside this year, and it's creating more Distributable Cash Flow for us. It just puts us in a better position where we're well on our way, and we feel incredibly confident we're going to increase distributions over a multi-year period.

If the refinery performs at an elevated level for an extended period of time, I think that puts us in a position where we can either increase distributions more, manage our balance sheet even better, or allocate that to more accretive growth projects. I think the answer is going to be all three of the above.

Thanks, Joe. I think there's been some news flow about certain large refined products assets potentially being on the market. While I'm not specifically asking about any specific pipeline, I'm just wondering if the game plan to acquire, I guess, North American pipelines considers to be sort of within your purview of M&A and the extent to which you think you can bring value to those assets, even if maybe your own wholesale distribution footprint doesn't overlap 100% with those assets at the moment.

Yeah, Gabe, obviously I won't comment on any specific asset, but I think the general theme that you're talking about, and which I agree with, is if there's anything on the refined product sector, be it a pipeline or terminals or fuel distribution assets, I think from a strategic standpoint, we're in just as good or a better position as anybody to bring synergies to the table. Whenever you bring material synergies to the table, we're always going to be highly competitive.

Thanks, Joe. If I could just ask one last annoying question around book and cash tax rates. Should we assume the current cash and book tax rates are about where you'll be going forward? Or will that kind of depend on earnings mix going forward?

Hey, Gabe. I think, we've certainly had a step up in the cash tax expense this year. A lot of that has to do with the performance of the business, right? It's been a strong start to the year, specifically in the legacy Parkland operations, the refinery operations, that creates a greater cash tax expense. That was all included in our economics for the Parkland acquisition and all the statements we make around accretion and EBITDA growth. I think for the full year 2026, you should expect for the back half of the year, something under what you saw for the first half of the year in terms of the cash tax expense.

Got it. Thanks, Karl.

Your next question comes from the line of Spiro Dounis with Citigroup. Please go ahead.

Hi, this is Chad on for Spiro. Just one quick one from me. Now that we're further into this volatile commodity environment and the Middle East conflict, I'm just curious, have you seen any supply chain impacts that could be longer-lasting across your footprint, either on the volume or margin side across your different segments?

Hey, Chad. The short answer is no, we haven't seen anything that suggests there's going to be some long-term lasting impact from the disruption in product. We are seeing continued disruption, albeit slightly less volatile levels than we saw maybe earlier in the second quarter. That said, we're still leveraging our scale and our newfound geography and commercial capabilities as a result of the acquisition to leverage and take advantage and create value in this environment, right? Some things I shared, I believe, on the last call are things that we continue to do, whether it's railing diesel out of the Midwest to our Mid-Atlantic markets, that wouldn't have been an option for us prior to our acquisition of rail assets with the Parkland transaction. We continue to supply our Hawaii short out of the Burnaby Refinery. Those are two small examples.

There's dozens of others that happen every day where we're responding to dislocations in the market, but nothing that suggests there's any long-term impairment to the business or our opportunity set. In fact, quite the opposite. We continue to take what the market gives us.

Okay, got it. Thanks for the time.

Your next question comes from the line of Jeremy Tonet with JP Morgan.

Hey, good morning. This is Eli on for Jeremy. Just want to think geographically about some of the opportunities in your M&A pipeline. If we compare the opportunity set across Europe versus North America and the Caribbean, where do you see the most attractive returns, and how should we think about the international strategy more broadly across your segments? Might you go further downstream in Europe? Any color there would be great.

Hey, Eli, this is Joe. Here's the way we look at it. We like the fact, and I think I've emphasized it multiple times, that it wasn't that long ago that we were predominantly a Northeast Mid-Atlantic U.S. fuel-distribution-centric business. That kind of limited our ability to grow further out because having critical mass, Austin's talked about it three separate times today, about scale matters. Now that we have all these different geographies in North America, even touching down in South America and Europe, the way that we're looking at it is that we just have that same type of optionality where whatever emerges in the market, where we bring the most synergies, where the valuation's right, that's the direction we're going to go. With that said, I think there's going to be opportunities in all those places.

I don't think right now what we're seeing is we see opportunities in Fuel Distribution, we see opportunities in the midstream sector. We see opportunities in Europe, and we see opportunities in North America. How all that plays out and seeing what the valuations end up is going to help dictate where we're going to grow. At the end of the day, I think where you're going to see us grow in all the above.

Got it. Then, maybe just thinking about the broader capital allocation philosophy at this point, you obviously have been clear that there's a really strong pipeline for the roll-ups and you're going to continue to do growth both organically and inorganically. How should we think about what the inorganic opportunity set looks like and the return thresholds that you need to make those larger, chunkier acquisitions versus maybe just continuing to hike the distribution at this clip? Obviously, we've seen a pretty big hike this year and you've given some guidance for the medium term, just thinking about weighing those two competing capital allocation priorities.

Okay. Yeah. As far as when it comes to inorganic growth on the M&A roll-up, we've said in the past that synergized, we're talking mid-single-digit type of synergized multiples. Those opportunities, and you understand our financial model, those are highly accretive to us. That's the way, along with big and small acquisitions, that's how we've increased Distributable Cash Flow per unit for eight consecutive years, and this year will be ninth, and I anticipate next year will be tenth. As we continue to do these mid-single-digit type of roll-ups, these are highly attractive, and it gives Austin and team the ability with more scale to create more optionality that plays really well into volatile environments. We're going to continue to do that. That's going to get our attention. We think that's going to be for a long period of time.

With that said, you can expect us to allocate a material portion of our free cash flow towards inorganic growth. At the same time, we still have plenty left over for distribution growth. These two work together, and I think the word that Scott has used, and Karl's used, it's almost like a flywheel. The more and more we do these accretive acquisitions, it creates more free cash flow that we can redeploy back into more either additional growth and/or distribution increases.

Great. I'll leave it there. Thanks, guys.

Once again, to ask a question, simply press star 1 on your telephone keypad. Your next question comes from the line of Ned Baramov with Wells Fargo. Please go ahead.

Hi. Good morning. Just a quick question from me on the Burnaby facility. Again, it seems the refinery ran above nameplate capacity in the second quarter. Can you maybe talk about how sustainable this rate is over multiple quarters?

Ned, this is Karl. I said, the refineries team there has done a great job. We came out a major turnaround. Given the market dynamics, it made sense to run full. Exactly what that balance means, we co-process low-carbon feedstocks at that facility as well, right? The nameplate of 55 was really set a while ago based on running crude and exactly what crude you run and what your low-carbon feedstock is will dictate. We were a little bit over that on a combined basis, and the hope is that we can continue that. Inevitably, I've been in the refining business for a long time, and there are always, whether they're minor maintenance issues that come up, whether you deal with, or whether it's our planned turnarounds.

The only other comment I'll make, Ned, is we do look at running our assets on a sustained long-term basis and not sacrificing that long-term reliability just for a little bit of short-term quarterly gain. That philosophy, you should read that into how we operate it as well.

Thanks, Karl. That's all I had.

Thanks, Ned.

With no further questions in queue, I will hand the call back over to Scott Grischow for closing remarks.

Thank you for joining us on the call today and your continued interest in Sunoco. As always, reach out if you have any questions, and we appreciate the support. Thanks, and have a great day.

Thank you again for joining us today. This does conclude today's call. You may now disconnect.

Hello. Thank you for standing by. Welcome to Sunoco LP at SunocoCorp LLC Q1 2026 earnings conference call. At this time, all participants are on listen only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. I will now like to hand the conference over to Scott Grischow. You may begin.

Thank you. Good morning, everyone. On the call with me this morning are Joseph Kim, President and Chief Executive Officer, Karl Fails, Chief Operating Officer, Austin Harkness, Chief Commercial Officer, Brian Hand, Chief Sales Officer, and Dylan Bramhall, Chief Financial Officer. Today's call will contain forward-looking statements that include expectations and assumptions regarding Sunoco LP's future operations and financial performance. Actual results could differ materially, and we undertake no obligation to update these statements based on subsequent events. Please refer to our earnings release as well as our filings with the SEC for a list of these factors. During today's call, we will also discuss certain non-GAAP financial measures, including Adjusted EBITDA and Distributable Cash Flow as adjusted. Please refer to the Sunoco LP website for a reconciliation of each financial measure.

The partnership started off 2026 with a strong quarter, delivering Adjusted EBITDA of $867 million, excluding approximately $9 million of one-time transaction expenses. The first quarter benefited from a one-time gain on the sale of inventory of approximately $102 million. With the acquisition of Parkland Corporation last year and the elevated commodity price environment in the first quarter, we proactively optimized our inventory levels, which resulted in this one-time gain. Karl will provide more detail on the impact from these inventory reduction efforts and discuss segment performance in his remarks. We continued our growth efforts in the first quarter with the closing of the TanQuid acquisition on January 16th. Following the acquisition, Sunoco is Germany's largest independent terminal operator with a network of 16 assets across Germany and Poland.

We expect this acquisition to be immediately accretive to distributable cash flow per common unit in 2026. During the quarter, we spent $106 million on growth capital and $93 million on maintenance capital. First quarter distributable cash flow as adjusted was $535 million. On April 21st, we declared a distribution of $0.9899 per common unit for both Sunoco LP common units and SunocoCorp LLC shares. This 6.25% increase represents a one-time step up of 5% and a quarterly increase of 1.25%. This distribution represents an increase of over 10% versus the first quarter of 2025 and is the result of Sunoco's continued financial stability, execution of highly accretive acquisitions and growth projects, and confidence in future distribution increases.

Our trailing twelve-month coverage ratio was 1.9 times. We continue to target a multi-year distribution growth rate of at least 5%. Our balance sheet and liquidity position remains strong. We had $2.2 billion in availability under our revolving credit facility at the end of the quarter. Leverage at the end of the quarter was approximately 4 times, in line with our long-term target. In summary, our financial position continues to strengthen, which will provide us with continued flexibility to pursue high return growth opportunities while maintaining a healthy balance sheet and a secure and growing distribution for our unitholders. With that, I'll now turn it over to Karl to walk through some additional thoughts on our first quarter performance.

Thanks, Scott. Good morning, everyone. Our results this quarter continue the trend of accretive and sustainable growth for Sunoco as we benefited from a full quarter of operations from Parkland and the closing of our TanQuid acquisition in Europe. Each of our segments delivered strong performance in the first quarter. They are all well-positioned to contribute meaningfully toward achieving our 2026 EBITDA guidance. Starting with our fuel distribution segment, Adjusted EBITDA was $538 million, excluding $9 million of transaction expenses. This compares to $391 million last quarter, excluding transaction expenses, and $220 million in the first quarter of 2025. This growth reflects continued strength in our legacy Sunoco operations, coupled with a full quarter of operations from Parkland.

It is also supported by our ongoing gross profit optimization and growth strategies, both through roll-up acquisitions and growth capital. As Scott mentioned in his remarks, these results also include a one-time benefit of inventory reduction. The level of fuel inventory we hold is always a trade-off between holding more to provide reliable supply and carrying less to deliver better returns on capital. This is especially true as we grow our fuel distribution business. Naturally, our inventory also grows, but we frequently look to optimize our inventory levels to ensure we are delivering on our target returns. This quarter, as a result of inventory reductions, we delivered a $92 million benefit in this segment, unlocking additional cash to reinvest in future growth.

While the size of the benefit was clearly impacted by market prices during the quarter, this was a result of active management of our inventory to a level that is sustainable on an ongoing basis. We distributed 3.8 billion gallons, up 15% versus last quarter and up 82% versus the first quarter of last year. We continue to see volume growth in our legacy Sunoco business with an increase of almost 6% over prior year compared to a relatively flat U.S. demand profile. This growth is a result of effectively deployed capital via our growth capital plan and roll-up M&A transactions. We continue to work on optimizing our volumes in the legacy Parkland assets as we implement our gross profit optimization approach that we've evolved over the years.

Reported margin for the quarter was $0.17 per gallon, compared to $0.177 per gallon last quarter, and $0.115 per gallon for the first quarter of 2025. There were many factors influencing our margin this quarter with the 7-Eleven makeup payment, the gain on inventory reduction, and the return of market volatility compensating for the margin compression experienced with dramatic increases in commodity prices during the quarter. For reference, RBOB futures increased over $1.60 a gallon during the quarter, with diesel futures increasing over $2 a gallon. In our Pipeline System Segment, Adjusted EBITDA for the first quarter was $179 million, compared to $187 million last quarter and $172 million in the first quarter of 2025.

On the volume side, we reported 1.3 million barrels per day of throughput, slightly down from the seasonally strong throughput last quarter and slightly up from the same quarter last year. This segment continues to provide steady and stable income. Moving on to our terminal segment, Adjusted EBITDA for the first quarter was $107 million. This compares to $87 million last quarter and $66 million in the first quarter of last year. We reported around 1 million barrels per day of throughput, which is up from both last quarter and the first quarter of last year. Growth in both earnings and volumes in this segment were supported by the inclusion of TanQuid and a full quarter of legacy Parkland operations. This segment continues to deliver stable results that predictably and accretively grow as we add to the portfolio.

Turning to our refining segment. Adjusted EBITDA for the first quarter was $43 million compared to $41 million last quarter. There was a $10 million benefit in this segment from our inventory reduction efforts that I discussed earlier. Refinery throughput was 22,000 barrels per day compared to 50,000 barrels per day last quarter. As we shared previously, throughput was down as a result of a planned 50-day maintenance turnaround that began at the end of January, which was completed on time and on budget. During the turnaround, we continued to meet regional demand by sourcing supply through our refinery tank farm. The refining margin was strong during the periods of refinery operation and that continues into the second quarter.

To provide more clarity to the market on our refinery performance, we posted an updated indicator crack on our website yesterday and expect to post updates at the beginning of each month. This calculation is intended to be an indicator of general profitability for the refinery using market prices. Before I wrap up, I wanted to make a few comments on the integration of the recent Parkland acquisition. The balance sheet has returned to our long-term target. We are already delivering on synergies, both expense and commercial, which puts us well on track to deliver on 10-plus % accretion before our year 3 commitment. In summary, we continue to build on the strong momentum of the past few years. Each of our segments is delivering, and we will continue to remain focused on safe and reliable operations, expense discipline, and accretive growth.

I will now turn it over to Joe to share his final thoughts. Joe?

Thanks, Karl. Good morning, everyone. Every quarter presents a new set of challenges. This first quarter provided more than most. Obviously, the events in the Middle East created a volatile market. Costs and prices rose dramatically, and at times fell and went back up. Furthermore, normal supply patterns were disrupted. Specifically within Sunoco, we completed a turnaround at our Burnaby refinery and made significant progress on the Parkland integration. Despite all these events, we still delivered an outstanding first quarter. More importantly, we're confident that we'll deliver on our full-year EBITDA guidance, even without the one-time gain from optimizing our inventory. Operationally, our refining team completed the turnaround on budget. Our fuel distribution and midstream teams maintained reliable supply for our customers. Finally, we're on track to deliver 10% plus accretion from the Parkland acquisition.

We have proven year after year in crisis after crisis that we can distinguish ourselves in challenging environments, and thus we have gained a reputation as a strong defensive play. However, we are also a proven growth play. Already this year, we closed on the TanQuid acquisition in Europe, a multi-island acquisition in the Caribbean, and various smaller fuel distribution bolt-on acquisitions in the U.S. We are on track to complete over $500 million of bolt-on acquisitions in 2026. Separately and in totality, these are immediately accretive while maintaining our balance sheet target. When you combine our ongoing accretive growth with a resilient base business, we are stronger than any point since the establishment of Sunoco LP. As a result, we are able to announce a meaningful increase in our quarterly distribution two weeks ago.

The decision to materially increase the distribution had to meet the following criteria. Maintain a strong coverage ratio, protect our balance sheet, remain a growth company, and finally, provide a clear path to increase distributions quarter after quarter over a multiyear timeframe. We're confident the answer is yes on all these factors. Operator, that concludes our prepared remarks. You may open the line for questions.

Thank you. Ladies and gentlemen, as a reminder to ask the question, please press star one one on your telephone, then wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Justin Jenkins with Raymond James. Your line is open.

Great. Thanks. Good morning, everyone. I guess, I mean, just to start on a housekeeping item here, the inventory gain. You gave us a lot of detail on the impact here in the quarter. I think, Karl, you suggested you're at an overall level you're comfortable with. Does that inventory level fluctuate with where commodity prices sit? How should we think about the moving pieces going forward here?

Yeah. Thanks, Justin. This is Karl. Yeah, as I talked on my prepared remarks, inventory decisions are really a trade-off between supply reliability and return on capital. As part of that inventory management, we use derivatives to hedge inventory in the normal course of business. As you mentioned, based on market conditions, we actively manage those inventory positions. In periods of high prices and steep backwardation like we've had in the past few months, we'll typically draw, and then in the less frequent periods of contango, we would build, and our hedging practices are set up accordingly to make sure we can optimize that.

I think if you looked at what we're reporting in the first quarter, that's just a larger step we took as a result of a lot of the growth that we've done over the last 6 to 9 months, you know, including the recent Parkland acquisition. The level that we reduce our inventory to, we feel is responsible, and we can stay there for a long time. Some of those minor optimizations that I talked about based on market conditions, yeah, we'll continue to do regularly. This $100 million was sized and impacted by the higher prices, but it's something that we would have done regardless to manage our business.

It does differ from some of the other companies that have reported so far in the quarter that were talking about, you know, timing-related inventory impacts. Like I said, we're confident we can operate at this level going forward, and there is no symmetric risk if and when prices fall that this gain is reversed.

That's helpful. Second question here on the distribution. Certainly the step up in the quarter, very well received. I guess, how does this play into your overall views on capital allocation for the long term? Then maybe for 2026, more specifically. Joseph Kim, you hinted at this, but presumably this shows a very high degree of confidence in your outlook for the year, even if it might be just a little too soon to update the guide. Is that right?

Yeah. Hey, Justin, this is Joe. Hey, just to build off on Karl's, and I'll take your first question, first. On the inventory optimization, that was just a result of good stewardship and good timing. With that said, the recent 5% step up, we would have done with or without the inventory optimization. As far as kind of giving you some better background as to our step up and our capital allocation, I think maybe kind of talking through how we made this decision would be helpful. You know, our past investments have paid off, especially the NuStar acquisition we did 2 years ago and the Parkland acquisition we did last year. Just as importantly, our base business has proven to be year after year, very resilient.

Our GCAP per common unit has grown materially, and we believe a step up followed by continued quarterly distribution increases would be highly valued by our unit holders. The step up, we wanted that step up to be material, but at the same time, we didn't want to affect our ability to increase distributions over a multiyear period, nor affect our ability to continue growing. We think that the actions that we've taken recently have put us in a very good position to achieve these goals. I think, Justin, if I understand you correctly, the second part of the question was really more about guidance. Is that how I should read it?

Yep. Yeah.

You know, the one key message that I hope that you and the rest of the people on this call take away from today is that we're gonna have an outstanding year and deliver on guidance. That's even after you take out the one-time inventory optimization. Our established practice is not to give guidance after the first quarter unless there's a major acquisition. You know, is the question, is there upside? Of course. However, the amount is still to be determined, and our history shows that we're good at capturing the upside as well as protecting the downside.

Awesome. Thanks, guys. I'll leave it there.

Thank you. Our next question comes from the line of Spiro Dounis with Citigroup. Your line is open.

Hi. This is Chad on for Spiro. Just starting off, could you provide an update on how the conflict in the Middle East is impacting your business and trends today? Have you started to see any demand impacts from the higher prices yet?

Yeah. Hey, Chad. Yeah, I'll answer your question kind of in order there in terms of impact to our operations given the current market volatility. I can touch on margins and demand separately. You know, if you take a step back, given our scale, supply chain optionality and logistics capabilities. It's really, you know, the business really shines during these types of periods of extreme market volatility. Just to give you one example, you know, we normally supply our Hawaii business out of South Korea. What we're finding though right now is it's actually economical to load vessels out of the U.S. Gulf Coast and supply the business via the Panama Canal. I share that because that's really only a move that's available if you have our scale and logistics capabilities.

There's literally, you know, countless other examples of how our operations have been impacted by some of the global disruption of product flows, but that's not always a bad thing. In fact, in our world, a lot of times that can mean value creation. You know, just quickly touching on, you know, on margins. You know, we've always talked about flat price volatility being bullish for margins in the long run. But the way that you get there is margins compress as flat price is on the way up, but then it widens disproportionately on the way down. That's how you get an overall kind of net bullish margin environment.

If you were to pull an RBOB or ULSD chart for year-to-date, I think what you'd find is we've been on a pretty sharp grind up to up and to the right, for essentially through the first 4 and a half months or 4 months and a week of the year. You know, despite that, we just closed out a really strong first quarter for the segment. The second quarter is off to a great start. We haven't even gotten to the part of the story where flat price comes off and margins widen. We feel really good about where we're positioned there. Then I think, you know, you mentioned the question around, you know, impact to consumer demand. You know, we haven't seen any evidence of demand destruction yet.

I say that because it's kind of a function of how high flat prices go and for how long they remain there. That said, I think those of you who follow our story know that if we do encounter a scenario where there's demand destruction, that creates a really strong margin environment as retailers are forced to respond to rising breakevens by taking price. You know, all that said, we're out of the gate really strong to start the year and we feel really good about both the second quarter and delivering on our announced ending 2026.

Okay, got it. That's very helpful. Just wanted to get your thoughts on kind of your M&A outlook with the current macro environment and 2 quarters of sort of the pro forma business. It sounds like you're tracking to $500 million of annual M&A cadence this year, but has there been any changes in the way that you view M&A as a cadence or a scale standpoint from your business yet?

Hey, Chad, this is Joe. The simple answer is no. We view it exactly the way that we outlined it late last year and early this year. Just to kind of give you an update. If you take a step back and you look at all the recent acquisitions that we've done, we've greatly expanded our scale and our geographic footprint. It wasn't too long ago that we were a U.S.-only business, predominantly on the East Coast and in the South. Now we have investment opportunities in the U.S., Canada, Latin America, Greater Caribbean, and Europe. To give you an example, already this year, we have almost $200 million of bolt-on M&A that are either closed or signed or gonna be closed in the very near future.

This doesn't include the $500 million plus TanQuid acquisition that we started the year with. The $500 million a year plus, you know, bolt-on acquisition is very reasonable for us. Bottom line, we're in a good position to deliver on an attractive long-term growth story.

Yeah, very helpful. Thanks for the time today.

Thank you. Our next question comes from the line of Theresa Chen with Barclays. Your line is open.

Morning. Thank you for taking my questions. First question is related to the Burnaby Refinery. Post your planned turnaround, how are operations trending at this point? Given the significant disruption to the liquids markets, over the past two months plus, following the Middle East conflict, can you talk about your ability to capture these elevated margins, not only on the West Coast of North America, but broadly across the Pacific Basin, into Asia and Australia, given your fleet of assets from an infrastructure perspective as well as the refining facility at Burnaby?

Yeah, Theresa. Thanks for the question. This is Karl. As Joe and I mentioned in our prepared remarks, the team in the refinery did a great job delivering on the turnaround on time and on budget, and that really allowed us to restart the refinery in the back part of the quarter into the higher cracks that were in the market. You know, our we've used this phrase a lot, but our crystal ball isn't perfect as far as how long those refining margins will last. I think the possibility of a period of longer cracks is reasonable and would be a tailwind for overall results.

If, if you look at that, the refinery business, it really is a foundational piece of our overall business in British Columbia, and most of the refinery production goes into that market in British Columbia. I think that's a tailwind for that overall business that we'll be able to see the results as we go through the year. Now, clearly, so far into the year, the refinery is outperforming assumptions we made for the Parkland acquisition or even the midpoint of our guidance, as Joe talked about. The refinery is an important part of the portfolio. It's not a large part of the portfolio. You know, it's our smallest segment, but it fits well into our overall business.

When there are big price movements and we have the higher cracks, that can help offset some of the margin compression that Austin talked about in our fuel distribution business. The opposite is also true. As far as your broader question for the rest of the Pacific, I think, you know, Austin has continued to do a great job of looking at what the market is giving us and supplying, you know, his example of how we supply Hawaii, of choosing the options we have to supply our base business in the most economical way possible, and then finding additional opportunities to supply fuel to new customers. Yeah, I think there's gonna be opportunity.

Thank you. Going back to your earlier comments about synergies, post the, you know, acquisitions and the broader, more comprehensive set of assets you have under one portfolio now. Can you speak to the progress made both on the commercial side as well as any existing, you know, cost synergies still to be harvested at this point and what your outlook is for that?

Yeah, I think the outlook is good. As you know us and we've looked backwards on various acquisitions we've done. We start the synergy process even before we close, and that was true in the Parkland acquisition. There were changes that we made, particularly on the expense side, as soon as we took ownership in the fourth quarter, and those are continuing. I think the breadth of the Parkland portfolio means that that runway of getting to the end result on the expense side takes a little longer than some of the other deals we've done, but that work is all going well.

I think on the commercial side, there are significant commercial synergies that we outlined over the last, you know, year since we, since we announced the Parkland deal, and many of those have already been delivered, many are in flight, and there are some still to come. Our guidance was based on $125 million of in-year synergies. To be able to hit that number, we needed to exit the year much higher than that. We're still on pace with that and expect that to continue and us to, you know, the final kind of run rate of $250 million plus, we feel very comfortable with, that should be a floor.

Thank you so much.

You bet.

Thank you. Our next question comes from the line of Gabriel Moreen with Mizuho. Your line is open.

Hey, good morning, everyone. Can I maybe just ask for an update on sort of the midstream side of things and to the extent you're planning to spend any capital there this year? I noticed that your parent announced an expansion of Bayou Bridge going into St. James. Just curious if maybe that would necessitate more storage there, for example.

Gabe, this is Karl again. Clearly our midstream portfolio, we really like, whether it's the pipeline systems assets or our terminal network. You know, Joe talked about we're excited to have TanQuid as part of that portfolio. We spend capital on those, whether it's, you know, maintenance capital to keep our tanks ready to go when market opportunities come or some growth capital. I think our current portfolio is we're always looking for opportunities for larger projects. As we sit here right now, I think our sweet spot is kind of these small to mid-sized projects. We have a portfolio of those and really looking for accretive M&A.

Any projects we do in the midstream space would be to optimize and to help us gain synergies on that M&A. As we sit here today, you know, that could change down the road, but that's our current plan.

Thanks, Karl. I can follow up. I think 7-Eleven is doing a bit of portfolio repositioning in terms of their store base. Can you just talk about whether there's any implications with the 7-Eleven from any of those moves?

Hey, Gabe, it's Joe. We got a great relationship with 7-Eleven. As far as the supply agreement we have with them, nothing changes on that one. That's a rock solid take-or-pay contract with a highly profitable investment-grade company. We feel great on that one. As far as the 7-Eleven doing its portfolio optimization, obviously with our scale and our geographic footprint, anytime there's anything on the market, I think we're a viable partner for a lot of people that are looking to exit. With the synergies we bring to the table, we're always gonna be competitive.

Joe, maybe can I just squeeze one more in on the M&A question from a different angle. Is the current volatile backdrop making it easier to transact in your mind or harder? I'm just curious what your thoughts are on there.

Yeah, harder, easier. I would probably say all things equal, maybe harder overall, maybe more opportunistically better for Sunoco. I think, we have, you know, we know what we're good at and scale and geographic diversity. Given our midstream assets, especially on the terminal level, we're in a good position. I think from that standpoint, it's not gonna affect us. You know, as far as, you know, now that we're more than just a U.S. company and we're in various geographies, as far as opportunities in foreign markets, there's always gonna be some level of tension between countries. The extent of it and the magnitude of it always kind of evolving.

The one thing that we do believe in is that cross-border foreign investment's gonna continue across the world, and we're in a good position to find the right assets wherever it may be. With the synergies that we bring to the table, we're gonna be in a good position to be highly competitive.

Thanks, Trevor.

Thank you. As a reminder, ladies and gentlemen, that's star one one to ask the question. Our next question comes from the line of Ned Baramov with Wells Fargo. Your line is open.

Hey, good morning. Thanks for taking the questions. Could you maybe talk about the interplay between Burnaby, refining margins and the margins on the fuel distribution side in British Columbia? Does the higher crack spread imply lower potential FD margin? Is this market also not seeing any change in demand from higher fuel prices, as you commented earlier?

Yeah, Ned, this is Karl. I'll try to pull it together to answer your question. You know, a couple points that Austin made in his overall answer on margins and then some of the things I talked about at Burnaby. The short answer is, you know, as far as the refinery margin, the fuel distribution margin, as we look at it, we use, you know, internal transfer prices like most people do, and those are based on the market. As most we can run the business while we like having the integrated margin, and we're always making choices to optimize the overall result for Sunoco. As we're looking at those two businesses, we also look at them independently.

I think on the overall margin and consumer demand question, I think Austin hit the nail on the head that those margins will adjust. I would expect that the overall fuel gross profit and the EBITDA that we get in British Columbia should stay the same or grow over time. The refined margin is gonna vary more, right? That's gonna really float based on supply demand going on in the world. Right now we're in a period of higher cracks. While we manage that supply chain as an integrated supply chain, I wouldn't necessarily imply that when refinery cracks are high, that the fuel distribution margins are low. Sometimes they're both higher together. Hopefully that answers your question.

Understood. Yes, very clear. Thank you. Second one on the housekeeping side. Was the Burnaby turnaround spending included in your $93 million of maintenance CapEx for the quarter?

Yes. There was some component of growth CapEx there as well that was included in our reported capital.

Thank you.

You bet.

Thank you. Ladies and gentlemen, I am showing no further questions in the queue. I will now like to turn the call back over to Scott for closing remarks.

Well, thank you for joining us on the call today and for your continued interest in Sunoco. As we said, there's a lot of great things to look forward to in 2026, and we look forward to updating you across the year. Please reach out if you have any questions. Thanks for tuning in and always appreciate your support.

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.