Greetings and welcome to the Sunoco LP Third Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now turn the conference over to Mr. Scott Grischow, Director of Treasury and Investor Relations. Thank you, sir. You may now begin.

Thank you. Before we begin our prepared remarks, I have a few of the usual items to cover. A reminder that today’s call will contain forward-looking statements, these statements are based on management’s beliefs, expectations and assumptions and may include comments regarding the company’s objectives, targets, plans, strategies, costs and anticipated capital expenditures. They are subject to the risks and uncertainties that could cause the actual results to differ materially as described more fully in the company’s filings with the SEC. During today’s call, we will also discuss certain non-GAAP financial measures including adjusted EBITDA and distributable cash flow. Please refer to yesterday’s news release for a reconciliation of each financial measure. Also, a reminder that information reported on this call speaks only to the company’s view as of today, November 5, 2015, so time-sensitive information may no longer be accurate at the time of any replay. You’ll find information on the replay in yesterday’s news release. On the call with me this morning are Bob Owens, Sunoco LP’s Chief Executive Officer; and Jamie Welch, Energy Transfer Equity Group CFO and Head of Business Development. I would now like to turn the call over to Bob.

Thanks, Scott. Good morning, everyone, thanks very much for joining us. This morning we'll review results of the third quarter along with our recent accomplishments and our growth plans. Let me start up by saying that Sunoco LP delivered a very strong result in the third quarter. We benefited from strong retail margins due in part to declining oil prices during the quarter and solid net merchandise margins. I am also pleased to report that total fuel volumes increased to 1.9 billion gallons on a consolidated basis for the three months ended September 30, [1915] further merchandise sales were $430 million. Our exposure to retail fuel margins and the retail merchandise business increased substantially with the drop down in late July of Susser Holdings Corp or SHC the owner of the Stripes convenience store chain from energy transfer partners. With strong market conditions in both fuel and merchandise markets this quarter we are certainly pleased to be able to capitalize this within Sunoco LP. To quickly recap that transaction Sunoco LP acquired SHC for about $1.9 billion. The entities main assets included the chain of 679 mainly Stripes branded convenience store in Texas, New Mexico and Oklahoma. Also included fuel volumes sold on a consignment basis to approximately 85 dealers plus fuel transportation operations. The transaction was effective as of August 1, and was a solid start and given the actual performance of the business in a months of August and September. We expect this acquisition to be accretive in 2015 and beyond. Stripes is an outstanding asset from the standpoint of its geographic market position, its continued execution and operation and its organic growth strategy year-after-year. We are pleased to have this brand in our portfolio and it will be a strong platform for future growth both organically and…

Thanks Bob and let me tell you what a pleasure it is to be to participate in this call this morning. I do want to focus on the core foundations of the business this past quarter but I also want to make some broader remarks about ETE’s view of Sunoco and how it fits the overall story of the group. I also wanted to say how disappointed we are of Clare's departure. She was a very talented and wonderful person to work with and worked tirelessly in this job. She will be very much missed. Bob mentioned Sunoco LP had a tremendous third quarter. The asset drop down and acquisitions made over the past year accounted for most of the big year-over-year jumps in EBITDA distributable cash flow, and other key metrics. But SUN also benefited from the very strong fuel margins in quarter three along with solid volume growth in its existing fuel businesses and same-store sales growth in its merchandise business. I will come back to this in more detail in a moment. I would like first to mention a couple of items related to the Stripes acquisition that I think will help you navigate SUN's financial statements for the third quarter. First I wanted to remind you that the Stripe assets replace into SUN's captive [C-corp] subsidiary or PropCo. While most of the income from the Susser operations both retail fuel sales and merchandize sales will be non-qualifying for income tax purposes. SUN expects very minimal cash taxes at the PropCo level in the foreseeable future. Second I wanted to highlight the Stripes operation in the financial statements. Although, SUN closed the drop down of Stripes from ETP to SUN on July 31. The results that you see in the financials for the third quarter of 2015…

Thank you. [Operator Instructions] Our first question is from Andrew Burd of JPMorgan. Please go ahead.

Hi good morning and congratulations on the strong quarter and also congratulations to Clare on the new opportunity and thanks for the hard work over the last year communicating the complex story. First question is obligatory drop down question I mean given that ETP has committed to such a short time line and also needs a pretty large cash component to fund its own growth how do you plan to structure the drop down given that equity evaluation of SUN's unit are bouncing around lows and the MLP capital markets don’t seem that supportive. Is ETP willing to drop and lower multiple particularly given that a re-rating in SUN units could theoretically have a larger impact on ETP’s SUN common unit holdings more so than a couple of extra dollars on the drop down?

Andy its Jamie thanks for question. Look I would say let’s put aside the multiple we recognize that there needs to be a constructive solution on both the ETP side and SUN side. It’s not so much as much the multiple as it is the form of the consideration and I think that there is a sweet spot in there that allows both ETP and SUN to realize a transaction is accreted to unit holders, avoid having issues public units certainly in any price that resembles today. And at the same time gives ETP the requisite cash that it would like so it can avoid issuing its own units to complete its capital program. And I think look that conversation continues we have received inbounds from people as far as level of interest and from private standpoint on the equity side there I think we have multiple options available to us certainly on the SUN side to be able to allow us to in fact undertake the transaction whether it’s a comprehensive completion of the overall exit of Sunoco income at 68.4% of Sunoco LLC and do it we think in a highly accretive fashion for SUN and SUN investors.

Okay thanks for helpful commentary on that and can you remind us the primary reason that ETP in prior drop down took back units, was it down to taxes or is that more to do with the market capacity to take public issuance?

I think it was a combination of both when we first started just over a year ago [indiscernible] it was then called before it immediately became SUN with a much smaller entity and obviously taking back the units was helpful. As we did the size of the drop particularly in the context of SHC we wanted something. If you look at SHC just on a standalone basis and we said this at the time. The drop per se didn’t require any external equity other than the equity being given to ETP. Now ETP has no intentions of selling its SUN’s stake. It’s obviously very supportive of SUN and has no need to basically look to go and monetize anything on those units, but I think it was just a case of we looked to try to do it so that we structured it for taxes in mind the available capacity in the market to allow us to do equity and the same point in time allowing to continue to do the drop downs in a very orderly prescriptive fashion.

Great thank you and then in terms of the leverage and the debt leverage quarter end clearly helped from the excess coverage but does the covenant complying calculation do anything to normalize for strong margins that we saw last fall and then for the third quarter?

As far as the overall coverage, as far as the overall covenant per say there is no real normalization. It's just takes aggregate EBITDA you obviously will so that it will calibrate quarter to quarter depending upon the overall margins that you have but there is no reset if you will or sort of formula that says yes, you take excess, you take in excess fuel margin or stronger EBITDA growth and you calibrate it back to allow for normalization that doesn't exist in the credit agreement.

Okay. So I mean theoretically the current coverage ration if one assumes that fourth quarter of last year and third quarter of this year were abnormally high that covenant leverage ratio maybe somewhat understated, is that fair?

Understated, no I think like 4.4x recognizing it's hard to say it's understated -- the best way to look at it Andy because you have got suddenly moving pieces you have got drop down of pieces overtime, your EBITDA mix is going to change dramatically. So I think, look the easiest way to say is this way 4.4 is where we are on a credit basis for the third quarter. Our plan is between effectively 4.5 to 5 to sort of that range that we committed to with the double B rating in the agencies. We have got that flexibility. We continue to see ourselves in that sweet spot and that's how we sort of -- that's how we think people should be looking at it as well.

Great. And then, last question is on Texas have you seen any activity slow in the state over the last year just given the broader commodity price environment and is that kind of -- is there differences between culture of the coast line versus out in West Texas or something like that and do you see it impacting potentially or are you just seeing operations or is it merely just a reduction of growth opportunity?

Yes, Andy this is Bob. Absolutely we have seen an impact as we pointed out in the remarks earlier. Today if we look at our business in Texas about 22% of our business is in primarily two areas that have been impacted both the Permian and Eagle Ford geographies. We see that continuing for now. Our reaction to it has been to put some new bills that we had charted on wheels. We still believe long term that there will be good opportunities but we have other green field sites that we are building out in the short run. I think as you look at the numbers while we have been impacted one of the benefits of the diversification across our entire business geographically from main to Hawaii comes through. And then, our diversification relative to the lines of business that we are in, so when we look at the oil impacted areas the biggest step we have taken has been in diesel sales. Much less of an impact in gasoline, less yet in terms of merchandise sales and even less yet in terms of restaurants sales. So the sites remain profitable as it result including those units in those oil affected areas because of the multiple business lines that we have. We think that's an advance for us. As we look at continuing to build out in Texas there is a lot of other geography that continues to be really attractive where we are seeing strong growth. I mentioned some of those Huston, Austin, some of the quarter there.

Great. That's great commentary. Thanks a lot Bob and thanks Jamie that's all I have.

Thank you. The next question is from [Sharon Lou] of Wells Fargo. Please go ahead.

Hi, good morning. Just the question around the drop downs, so given market conditions have there been a change in terms of the timing or pace of when you want to complete the drop down size. You also mentioned potential financing options without public capital markets. Maybe if you can provide some details what are those options?

I would say that Sharon, we said that we would do the drop downs by the end of 2016. I think given where we are and we see sort of this jocks the position for both SUN and ETP. SUN is being held hostage because there is the fear of effectively an equity overhang. ETP is being held hostage because there is a concern they can't execute the drop downs and therefore there will be need for more equity or other means of funding for their capital plans. So, we are a little bit dammed if we do and dammed if we done. We just feel dammed. So with all that being said we are looking at okay what makes the most manner sense and that's the conversation [Tom Long] has just joined us right now. It's a conversation that's actively going on between Bob, Tom Long, myself and [Kelsey] and John [indiscernible] and other senior management here about what we should do. On the equity side let me just say this, which is we recognized that there are a number of levers within the Sunoco mix as far as I said, we have been approached by people that would like to basically buy stakes and chunks and put money to work which we think can be in a very constructive manner, constructive from both a credit standpoint and from distributable cash flow and not impairing the growth profile that we have set up now for Sunoco. So, we have had a lot of [indiscernible] bars actually more than we ever possibly could have anticipated from investors saying look we would like to do there are ways we could be constructive. So that is helpful. There are other means I think if Bob has within his own business that allows us to think about alternatives. Well that will allow us to focus on leverage within the Sunoco business that would actually create more equity content. That will again would avoid the need for a large public capital raising in the capital markets that obviously thus far has been fraught with challenges let’s say over the course of the last 12 months as we have gone to market a few times.

Okay.

And I think at the end of it Sharon the last thing I told the market was it was our plan to complete the dropdowns by the end of 2016 and that has not changed.

Okay, great, thank you.

Thank you. The next question is from Ray Fu of Bank of America. Please go ahead.

Good morning just two quick questions. The first on the comment that SUN may potentially diversify into other businesses and having a line of sight to that. Would that be potentially something that someone would look to do after the current dropdown strategy sort of ends towards the year end 2016 and is it safe to assume that MNA will play a big part in that?

Ray yes this is Bob I think what I would tell you is that we have never looked at MNA activity and the dropdowns as mutually exclusive alternatives. We are always trying to drive for the best unitholder distribution growth that we can find. As you think about diversification, if you take a look at what we have done to-date since we were acquired by the energy transfer family in October of 2012. We have diversified geographically, significantly expanding from Maine to Hawaii. We have diversified significantly the lines of business that we are in by significantly growing our merchandize sales on the convenient store side of the business. We diversified by adding a restaurant, a sizeable restaurant chain with the SHC acquisition and the Laredo Taco Company that came with it and we diversified further in line to business at the Aloha petroleum acquisition when we got into the term line business in the Island of Hawaii. In each of those cases the common denominator was that we bound things that both added growth and had synergistic opportunities with our existing business. Across the energy transfer family it's a mandate each of the companies to be well diversified and not held hostage to single business kind of markers that can harm your results. We are included in that. We are looking for additional diversification as has been mentioned. The boxes we need to tick are that it makes good financial sense and ideally has synergistic benefits with our existing business.

Okay. got it. That's helpful and then second quick question on the land bank as we look to build go through very robust 2016 organic growth program, will it be safe to assume that we are going to see a net diminish in the land bank or are you comfortable replenishing that throughout the year?

Yes we are, I think our current plans are to continue to replenish. We have good opportunities in front of us. They are really financially attractive to repopulate that as we build out the sites. So we are not slowing that down.

Got it. Okay that's it from me. Thank you.

Thank you. The next question is from [indiscernible] please go ahead.

Yes thanks. Good morning. Nice quarter. Just looking at the private market and potential third party acquisitions there what is that landscape looks like? How competitive is that has been multiple range changed as of late given the stronger fuel margin environment sort of what you are seeing there?

Yes, I would say Ben that I have been in this business a while. I have never seen the lack for competitors. So I would say that competition will certainly continue. I think we saw the combination of low interest rates, good margins and company's competing. We saw expansion in terms of multiples that we are being paid in the 2014 time period. My observation in 2015 is it's a bit early to conclude anything but it seems to be moderating a bit. We will just have to watch it. From our perspective we look at a lot more things and we pull the trigger on, we are extremely disciplined. I have told the market there three boxes that have to get checked, assets have to be attractive from a base business standpoint and attractive market areas for us and attractive business line. It has to include specific assets that we would purchase that we feel will be competitive long term and the last box that has to get ticked is we have to be able to buy it at a price that is attractive and even accretive for our unit holders. If we can't check all three of those boxes we will pass. And some of the deals you have seen done I can't think of any that we haven't taken a pretty hard look at.

Okay thanks. That's helpful color. Looking at the fixed margin that you have charged the Susser business on that transfer price it was $3.03 per gallon it looks it's moved up to $0.04 per gallon if I am not mistaken. How do you see that trending overtime? Are we seeing that settle out for $0.04? Is there room for it to move higher? What leverage do you have to pull there?

Yes, I think that what you have seen was a combination of blending of margins in that business as well as on the captive side. We do a careful analysis using outside companies to document for purposes of tax compliance of that we are charging the equivalent of an arms length transaction for the services that we provide. So as that marketplace moves overtime notionally you could see some adjustments but there is not anything that we have planned in the immediate future right now. But we will continue to look at it.

Okay thanks. And just one last housekeeping question. You highlighted the Susser same-store gallon decline a 1.9% I would suspect that a year ago gallon growth was pretty strong. Do you have that compare handy that you could share and then what the comparison on the same-store basis would be on the gallon for the fourth quarter as well?

Well, I do not have it for the fourth quarter. We will be talking to you on the next earnings call with that in terms of the same for last year. Scott do you have that or?

Not at my -- I can follow-up with it.

We will follow-up with you on that. I think one of the things to -- since you brought that up though I think I would point out to people that while total fuel sales were down we were actually from a diesel gallonage standpoint down 23% in those oil affected areas and down significantly less than that on the gasoline side to average out the number that you saw. So what we are seeing is a shift in customer mix and in fact we are seeing new customers that before we had some of these sites that we were so busy with oil fuel workers that there were long lines out the door for the Laredo Taco and for the Stripes Convenience store and we are actually seeing a lot of new faces and while as a measurement that 23% is pretty good indicator of the impact of the slowdown in oil and gas sector the fact that the traffic is up substantially less than that is encouraging to us.

Great, thanks. Best of luck going forward.

Thank you. [Operator Instructions] And the next question is from John Edwards of Credit Suisse, please go ahead.

Yes good morning everybody and thanks for taking my question. So you indicated pretty, your checklist that you follow for in terms of businesses that you are looking at I am just wondering if you could give us little more narrative on say the types of businesses you are thinking of diversifying into and if there are additional criteria such as and how it fits into your existing asset base and so on? That would be helpful.

John this is Bob. I think I would say this I don't think we will shock anybody we are not going to go out and buy women's clothing line certainly it will be, we are looking for businesses that make good sense within the family and good sense when combined with the current assets that we have in Sunoco LP. And I think if you look at maybe Aloha petroleum the purchase and of that entity and the makeup and the synergies that come with having all those lines of businesses that would give you an idea of kind of the way we are thinking about things going forward.

Okay that's helpful. Thanks. That's all I had.

Great. Thanks John.

Thank you. The next question is from Theresa Chen of Barclays. Please go ahead.

Good morning. In relation to your comments Jamie about the fourth quarter margins is actually going to be down from the out-performance in third quarter what do you think a normalized margin looks like for the business as it is today on a volume weighted basis?

On a wholesale or retail, Theresa?

Both.

Yes, this is Bob. I have to think about that from the standpoint of the assets that we have in SUN LP today. Scott you have those number you want to get back.

I can follow-up with Theresa -- going to determine be dependent upon the business line whether SUN LP or Max or Aloha.

Why don’t we have Scott circle back with you Theresa.

And last part Theresa because different markets had different what we will call different norms right? Why is it going to be a different norms and what we see in the south and the north is going to be different again. So I think we can probably give you a better sense on a geography basis. So why don’t have when we follow-up?

Sure yes I was just curious what the delta you thought would be from third quarter to fourth quarter what the magnitude would look like but I am happy to follow up afterwards. In terms of the current pace of distribution growth what do you see as your long term distribution growth target post -- once all of these growth have been digested?

Yes Theresa we do not give guidance forward on distribution growth. What we have said is that we anticipate strong earnings growth and with that will come additional earnings per unit. We are looking to have a 1.1 coverage ratio and you put those two things together and we believe that we will continue to be an outperformer in the area of distribution growth increases per MLP participants.

Fair enough I mean I think the thought process is just that once the assets come down the distribution growth is going to have to decelerate just by the math alone and I am guessing that after the dropdowns are completed it did make primary source of distribution growth will be third party acquisitions and I guess the NTIs and just comparative to what you are doing today can you give us a sense of what kind of magnitude you think at that point distribution growth is going to look like without getting into specific numbers?

Well, I am not sure how to deal without getting into end numbers I would say this, the levers we have to pull in addition to the dropdowns which will -- Jamie has already said will look getting at doing on an accretive basis. We have the organic growth program which we stated for people we have given parameters on what that will look like for 2016. Significant growth there and on top of that M&A activity which we said we will only do if it's on accretive basis. So I think again the combination of those three we believe will result in us having the ability to continue to increase our distribution.

And I would -- but it would be fair to say, it will be, I mean certainly it's going to be 7.5% for the quarter that is as you appreciate to reset, that is impossible but I think you can have still a very attractive distribution growth rate given what you have got as far as the base business the organic growth which is relatively run multiple which is really the NTI’s acquisition that you keep feeding on and I think just further refinements in the overall business because I think as this business continues to come together we get better and better and the ability to actually get more cash flow out of it through more channels increases.

Okay and Jamie on the ETP side what is ETP's long term plan for the SUN unit it currently holds in may possibly accumulate further or later on. After the drop down time frame how long do you think ETP is willing to hold on to the before monetizing them as ever?

I think actually Theresa, I think people overlook the value embedded in those units not only just because of the increase from distributions and obviously value. But also strategically, I would point out to you Theresa that for now for three years ETP has owned 67.1 million SXL’s unit, it hasn't sold one. And that's the [indiscernible] and that's now -- SXL was just part of the group part of the family much like SUN is part of the family. I think we look at units much more on the offensive side than the defensive side. As we said in the earlier call with ETP our equity needs expire at the end of next year based on our current plans. Obviously but as we look forward and depending upon what Bob does there are always and very interesting opportunities. You should probably take your role model and your cue from what ETP has done with each units or the ETP overtime which has used them as actually exchanges for assets and other things that would make sense because Bob may end up merging with somebody and ending up with a big asset packets that actually made better suit partly ETP. And Bob would be happy to take back some of these units from ETP and exchange for those assets so we really look at that much more constructively than just saying oh yes, we will just go monetize them. Our experience and Mr. Warren is sitting here is when we sold the cash units that level of taxes was pretty -- it was just -- it was brutal. It’s not something we would like to repeat again and so I think our simple view point we will hold on to them, had no need to divest them. It’s core part. Is ETP still going to be very much looking as a big brother over Sunoco and I think will continue to help Sunoco grow and will utilize those units more strategically in an advantageous way for both Sunoco and for ETP.

Fair enough. Thank you very much.

Thanks Theresa.

Thank you. We have no further questions at this time. I would now like to turn the conference back over to Mr. Owens for any closing comments.

Okay thanks very much. In closing I would like to reiterate what I think Sunoco LP is not just one of the best values in the MLP space today, but also why it represents one of the best opportunities for continued accretive growth even in healthier market environments in the future. We are committed to expanding our retail footprint in the near term through ongoing organic growth with Stripes and Sunoco in Texas and other regions and with more new store builds in 2016. Also do tuck in acquisitions like the ones I mentioned in south Texas, in north east and in Hawaii. There are many opportunities to further consolidate the very fragmented convenient store industry and we intend to be a player in that process. Also through larger acquisitions structure to avoid further pressure on our units and finally through the additional dropdowns from ETP. We have the opportunity in addition to expand the wholesale fuel business and our existing markets as well as in new markets. We remain committed to growing unitholder value as we demonstrated with our consistent record of distribution growth underpinned by strong DCF coverage. Across our asset portfolio we are best in class players and virtually every market in which we compete. Thank you very much for joining us this morning and we appreciate your continued support. We look forward to seeing you in person in the next several weeks at our various conference appearances. This concludes our call this morning.

Thank you ladies and gentlemen, this does concludes today’s teleconference. You may disconnect your line at this time and thank you for your participation.