Greetings, and welcome to the Sunoco LP's First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Scott Grischow, Senior Vice President, Finance and Treasurer. Thank you, sir. You may begin.

Thank you, and good morning, everyone. On the call with me this morning are Joe Kim, Sunoco LP's President and Chief Executive Officer; Karl Fails, Chief Operating Officer; Austin Harkness, Chief Commercial Officer; and Dylan Bramhall, Chief Financial Officer. Today's call will contain forward-looking statements that include expectations and assumptions regarding the partnership's future operations and financial performance. Actual results could differ materially, and the partnership undertakes 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. Before I begin my remarks on the first quarter results, I want to start with the announcement we made yesterday that Sunoco will be acquiring Parkland Corporation in a cash and equity transaction valued at approximately $9.1 billion. We expect to close in the second half of 2025, subject to customary closing conditions and other regulatory clearance. On today's call, we would like to focus on our first quarter results and our European acquisition. We would refer you to what was disclosed in the news release, subsequent 8-K filings, investor presentation, and joint conference call we held on May 5th for details on the Parkland acquisition, so please keep that in mind as we enter the Q&A portion in a few minutes. 2025 is off to a good start following our first quarter performance. We remain on track to achieve our full-year financial guidance. Our balance sheet and liquidity are strong, and we are well positioned to continue our growth objectives. I'd like to start with a brief review…

Thanks, Scott. Good morning, everyone. We have had a solid start to 2025 with good performance across all three segments. Let me walk through segment results and then add some perspective on our exciting growth announcements this week. Starting with Fuel Distribution. Adjusted EBITDA was $220 million compared to $192 million in the fourth quarter and $218 million for the first quarter of 2024. Volumes came in at 2.1 billion gallons, down 3% from last quarter and flat to the first quarter of last year. Finally, reported margin was $0.1105 per gallon compared to $0.1006 per gallon in the fourth quarter and $0.1009 per gallon in the first quarter of 2024. Our results in the first quarter included the benefit of $32 million from the 7-Eleven makeup payment. As we've said before, our strategy is to capture what the market provides. The efficient use of capital continues to support our volumes, which can be seen by our volumes being flat compared to the first quarter of last year even with the sale of our West Texas marketing assets. And this volume growth continues to beat industry benchmarks. On the margin side, elevated break evens and commodity market volatility continue to provide support to our fuel profit as our teams deliver on profit optimization strategies in various market environments. Moving to the Pipeline Systems segment. We reported $172 million of adjusted EBITDA compared to $188 million for the fourth quarter. Throughput on the system was approximately 1.3 million barrels per day compared to 1.4 million barrels per day in the fourth quarter. Overall, the system performed well even in light of some headwinds as a result of a few reliability challenges at refineries that feed our system. When we step back and look at full year performance, we remain very happy…

Good morning, everyone. As Scott and Karl both mentioned, we talked about the Parkland acquisition yesterday. Thus for my comments today, I'll focus on our current business. Year after year, we continue to raise the standard for Sunoco. Embracing higher expectations, we delivered a solid first quarter. Given our results today and our projections going forward, we remain confident in our full year 2025 guidance. Each year presents a new set of challenges but it also presents opportunities. Persistent inflation and possible recession would obviously be problematic for the United States and the world. And of course, we would like to see inflation subside, and we all want economic growth. However, we have proven year after year and crisis after crisis that we can distinguish ourselves in challenging environments. During COVID, when volumes fell, we still grew EBITDA. During peak inflation, we held expenses flat while others saw significant increases. As we look towards the future, which always includes various challenges, we're well positioned to continue to grow and create value. Our confidence is supported by the following: first, our business model performs well in volatile environments. Why? We're anchored by our pipeline and terminal assets, critical infrastructure that provide long-term stable income. As for our Fuel Distribution business, it's anchored by our 7-Eleven take-or-pay contract and our real estate income. Furthermore, volatility creates margin capture opportunities. We are positioned to gain market share and optimize fuel profit in these environments, given our scale, our supply expertise and our strong balance sheet. Second, we continue to effectively manage expenses. Even within the current environment where inflation persists, we're proactively managing our expenses to be below the operating expense guidance that we provided in December. And finally, our investments both organic and acquisitions continue to meet or exceed our expectations. This will drive our EBITDA growth, our DCF per common unit growth, and our distribution growth while maintaining a strong balance sheet. Bottom line, we're uniquely positioned to be both an offensive and defensive play. We fully expect to deliver another record year and continued distribution growth for our unitholders. Operator, that concludes our prepared remarks. You may open the line for questions.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions]. Our first question comes from Spiro Dounis with Citi. Please proceed with your question.

Hi, this is Chad on for Spiro. Starting off, how do you think about future capital allocation among your regions post-Parkland close? Are some regions delivering more attractive returns than others?

Chad, this is Karl. I think if you think about our overall growth capital program and how we look at it and that might include even some of the roll-up M&A that we've done, we don't have a particular target per region. We do look at it in totality across all the segments and across all the geographies. And it really is kind of best projects win. And the kind of projects that we have in our growth capital plan, generally, we try to focus on items that have a shorter time frame between when we spend the cash and when they deliver. And then clearly, we look for opportunities that might benefit multiple segments, right? We might have a Fuel Distribution project that increases utilization in our -- some of our midstream assets, or we might spend money in the midstream assets that enables additional fuel distribution opportunities. So we don't start the year with particular targets. We also have flexibility as the year shapes up or as we have opportunities in M&A or other growth opportunities to either flex that down or up depending on the circumstances.

Okay, that makes sense. And just a second question. In '24, you added more conventional midstream assets to the portfolio, and Parkland is a heavy shift back to fuel distributions. What do you see as the right mix between the two assets for your business longer term? And how should we think about adding more conventional midstream assets from here, following the large investment in Fuel Distribution?

Chad, this is Joe. We're going to continue to execute our capital allocation strategy and ensuring that our portfolio becomes stronger and stronger over the long run. At different points in time, the portfolio may not be perfectly balanced at 50-50, but directionally, we want to diversify the portfolio. And Parkland gave us an opportunity. You don't get too many opportunities where you have this powerful industrial logic and excellent financial benefits. And so we took advantage of that, and we're going to take opportunities to get more accretion, keep our balance sheet strong. And this happens to be on the Fuel Distribution side, but over the long run, we want to have a very balanced portfolio.

Got it. Makes sense. Thanks for the time.

Thank you.

[Operator Instructions]. There are no further questions at this time. I would now like to turn the floor back over to Scott Grischow for closing comments.

Well, thanks everyone for joining us on the call this morning. As always, if you have any follow-ups, feel free to reach out. Thanks and have a great day.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.