Greetings and welcome to the Sunoco LP Third Quarter 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, Mr. Scott Grischow, Senior Director, Investor Relations and Treasury. Thank you Mr. Grischow, you may 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. They 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 this quarter’s news release for a reconciliation of each financial measure. Also, a reminder that the information reported on this call speaks only to the company’s view as of today, November 10, 2016. So, time-sensitive information may no longer be accurate at the time of any replay. You will find information on the replay in this quarter’s news release. On the call with me this morning are Bob Owens, Sunoco LP’s President and Chief Executive Officer; Tom Miller, Chief Financial Officer and other members of the management team. I’d now like to turn the call over to Bob.

Thanks Scott. Good morning everyone and thank you for joining us. This morning we will review the financial and operating results of the third quarter along with other recent accomplishments. I’d like to begin with a few words on our quarterly distribution, which we announced in late October would remain unchanged from the second quarter at $0.8255 per unit. This distribution was 10.7% higher than the third quarter of 2015 distribution and resulted in a 1.25 times coverage ratio for the third quarter and 1.09 times coverage ratio on a trailing 12 months basis. We will continue to target an average coverage ratio of at least 1.1 times over the long term and we believe that the stability of our business will help us achieve our coverage target. Let's move now to third quarter operating performance. The partnership generated net income of $44.6 million during the third quarter compared to $34.7 million a year ago. Total adjusted EBITDA decreased approximately $65 million year over year to $188.9 million. Distributable cash flow attributable to the partners was $124.1 million compared to $112.4 million in the third quarter of 2015. Now Tom will cover the financial results in greater detail later in the call. Continuing with performance, total fuel volumes increased by 3.8% to 2.02 billion gallons reflecting modest growth in both the retail and wholesale gallons primarily from growth in the legacy Sunoco businesses on the East Coast and from acquisition activity over the past 12 months. Retail gallons increased by 11.6 million gallons year over year or 1.8% to 651.4 million gallons due largely to third party acquisitions and due to industry locations opened during the last 12 months. Wholesale gallons increased 4.8% to 1.4 billion gallons as a result of acquisitions and third-party wholesale contracts acquired over the last…

Thanks Bob, and good morning everyone. Looking first at some key financial results and trends for the third quarter. Revenue at SUN decreased from $4.9 billion in the third quarter 2015 to $4.1 billion this quarter, which was a result of a $0.47 per gallon decrease in the average selling price of fuel. With a slight offset coming from an increase in merchandize sales. Gross profits increased by $52.6 million or 10% to $577 million reflecting an increase in wholesale motor fuel gross profit along with the modestly higher contribution from merchandise sales margin. This was partially offset by a decrease in retail motor fuel gross profit. Other operating expenses increased by 3.6% to $276 million compared to last year. This reflect having more retail stores in the portfolio through both acquisition and the new build program and the associated increases in store employee salaries, licenses and permits, property taxes and maintenance expense. G&A cost also increased on a year over year basis by $21.3 million to $82.8 million. Two thirds of this increase or $13.7 million is related to relocation costs and associated expense incurred with the opening of our corporate office in Dallas. For the full-year 2016, we expect these relocation costs to be between $15 million and $20 million. Net income in the quarter was $44.6 million versus $34.7 million a year ago, driven by an increase in gross profit and partially offset by higher operating expenses and higher interest expense. As Bob noted at the beginning of the call, adjusted EBITDA for the third quarter decreased 25.5% from a year ago to $188.9 million. This decrease reflects lower retail and wholesale cents per gallon margins partially offset by an increase in merchandise margin. Looking next at our retail segment operation, adjusted EBITDA after my retail segment…

[Operator Instructions] Our first question comes from the line of Andrew Burd with JP Morgan. Please proceed with your question.

Hi. First question on SG&A, do you expect any of the temporary SG&A items flow in to next year in 2017 and on OpEx, is there any opportunity heading into next year to whittle down that number as well?

Good morning, Andy. We're thinking that the relocation expense will be done this quarter and in terms of OpEx, we think we're in around sort of in the 270, 280 range, where we currently are right now. That will creep up as we bring on the new NTIs that we talked about, which I think is twenty one. And that's like 400,000 a site.

Great. That's helpful. And on those 21 that are under construction, if my count is correct, I think you've completed 13 year-to-date and you still guide to 25 stores this year. So does that imply 12 are entering service in the fourth quarter?

I'm sorry, we have 21 under -- 22 under construction as of the beginning of the quarter and 14 done.

So, but for the full year, you expect to place in service 25 stores, I guess the question is how many stores?

35, Andy.

35, it’s going to be. So how many do you expect to place in service in the fourth quarter?

The remaining, what is it, Scott? 21.

Okay. So 21 new stores in service this quarter?

Yeah.

Okay. Great. And then final question, the conversations continue with ETE in terms evading [ph] Sunoco’s cost of capital and leverage situation?

Yes, I would say that, Andy, this is Bob. For those of you that were on the call this morning, cost of capital is a conversation throughout the family. We have nothing to announce right now.

Okay, great. Thanks for taking my question.

Thank you. Our next question comes from the line of Ben Bienvenu with Stephens Inc. Please proceed with your question.

Yeah, thanks. Good morning. You closed the quarter with your leverage metric around six times, you talked about in the wake of acquisitions, the subsequent quarters sort of hovering around that level. I'm curious with the ATM in place and you’re just maintaining your distribution, should we think about the composition of your leverage profile and all the pieces, maintaining leverage around this level for now continuing to be opportunistic with acquisitions, perhaps utilizing the ATM and maintaining your distribution level or how should we think about all those pieces communicating with one another?

Yeah. Ben, this is Bob. I would tell you that it remains one of our objectives to reduce leverage. So as we said in the prepared remarks, our view is through continued earnings growth, the ATM program and in addition to that, as we mentioned, some reduction in capital spend for next year. We think that combination serves us best. As we look at acquisitions today, the bar is higher than it's been in the past and as we look it historically, a target of 50-50 debt equity given our leverage today, those ratios are different than they've been in the past.

Okay. Thanks. And then I'd be curious to get your impression of the health of your underlying consumer, excluding sort of looking through the noise of the oil patch and Deep South Texas regions across your geography, we've been hearing from the other store operators in the space talking about trading down in the [indiscernible] category from premium to lower gram products, cartons to packs, I would be curious if you're seeing the same sorts of activity and how you feel about your underlying customer?

Well, again, this is Bob. What we're observing is regionally kind of specific, we are seeing, you asked me to kind of exclude Texas, but I would tell you in Texas, we see sales tax receipts down. We see restaurant sales comps down across the state and the geography associated with both the border areas and the oil patch. More so we feel from a competitive standpoint, we're doing okay in those areas, but challenging environment. Moving outside that area, we see continued good strength, up and down the kind of mid-Atlantic to Charleston area, Hawaii, you saw very strong performance there. So it varies regionally, but exclusive of Texas, I would say for our operations, we've not seen any marked decline.

Thank you. Our next question comes from the line of Theresa Chen with Barclays. Please proceed with your question.

Good morning. Following up on Ben's question about the weakness in those areas, can you just tell us what percentage of your business consists of the border markets sort of say, so the oil patch area is 10% and in addition to that, what percentage of your stores consist of the other weaker areas?

Hi, Theresa. This is Bob again. I think if you add another 10%, we've got a good market share in total, the area we call the valley -- the Rio Grande Valley, we've got a couple of hundred units down there, but obviously as you move Inland, as you move Inland from the border, the impact is muted. This peso dollar issue has gotten much more pronounced here recently. We're increasing our focus on it. Scratching our head a little bit in terms of how we're going to try to mitigate it. And so I would think about it today where we're most impacted about another 10% of our locations.

Got it. Okay. So 20% total of your locations between commodity price volatility and also FX challenges?

Yes.

Okay, great. And Tom, I appreciate your comments about the long-term cents per gallon expectations for wholesale. Obviously, this category has outperformed that 68 cent range for quite a while now and I understand some of it is related to short term aberrations, but can just tell us about what your outlook in the near term is for that. Not long term and also, are there certain short-term aberrations that you can call out that we can possibly think about and put into our models as time goes on?

This is Bob. I’ll take that. I think that we try to be thoughtful in the guidance that we give people and we take a look at kind of long term trends, the advantages that we have given our scale and diversity and the scale of this group has served us well this year. I think as we think about it, the guidance that we're giving is still consistent with kind of a five year historical average and as the mix changes between dealer and branded wholesale and sales to our own accounts, that’s been shifted a little bit, but what I would say is we would be most comfortable sticking with the guidance that we've given today, the range and we will think about as we look back at all of ’15 and ’16 whether it would be appropriate to adjust that.

Okay. Understood. For the Emerge business, appreciate all the comments on what you're doing to revitalize earnings there. After these improvements, are you now more or less at like a 20 million annual EBITDA run rate, how should we think about that?

Well, that's not a bad number, I would say. I’ll be disappointed if, for 2017, it comes in that low.

Understood. And lastly on your comments around CapEx, so I understand that 2017, you expect to spend less for NTIs, can you just remind us for the 360 to 380 range in 2016, how much of that was attributed for NTIs this year?

We had 35 to 40 units in the NTIs for the year is where we started and that would be roughly half, so, call it, 200 million.

Thank you. Our next question comes from the line of Patrick Wang with Robert W. Baird. Please proceed with your question.

Good morning, guys. Have you -- with the rig additions we've been seeing over the last couple of months, have you at all noticed at least early signs, maybe green shoots of inflection and expedite in some of those areas and if not, how long would you expect the typical lag time to be?

This is Bob again, Patrick. We have seen some leading indicators that are encouraging. Our Sunoco services business that provides good tanks and fuel to rigs, we have been signing contracts, both last quarter and in the third quarter. As of last quarter, we had signed some contracts, but hadn't actually made some deliveries during the third quarter. We've actually made some deliveries, so we see some beginning signs of increased activity, but it's very early to declare victory here. So, I think that our view is that the most likely area in the United States to resume activity is probably the Permian Basin. We’ve talked about our locations and where they're the number that are in the oil patch. Well, 75% of that 10% are Permian Basin locations, so we're hopeful as we see crude oil seeming to at least stabilize with some optimism for a little bit of a pickup that we’ll see that reflected in our sales activity, but I can't tell you that we're seeing it yet at the retail level.

Okay. Understood. And then you actually touched on this one, moving over to the Emerge business again, you touched on that in an earlier question, but the 2 million in September contributions, were there any one-offs in that number or are those what you would consider more of the reviewable type of business.

No one-offs there particularly that I would point out.

Thank you. Our next question comes from the line of John Edwards with Credit Suisse. Please proceed with your question.

Yeah. Good morning, everybody. Just following up the last question, you're indicating you're not really seeing green shoots from the pickup in rigs and so I guess my question is what do you think, when do you think it will happen? I mean, because when we think about the total rig count, it’s something like 40%, 50% off the bottom and it looks like that's going to continue. I guess how long or how many more, how long does the current level have to be and do you need more rigs, do you think to get enough activity to see reflected in your retail sales?

Yeah. This is Bob. I don't have a prediction. I don't have a number in mind. I think it's clear that the oil patch has reacted to the lower oil prices by looking for every single opportunity they can to economize. That includes doing more with less, putting pressure on suppliers and as a result, I think headcounts are down, kind of across the entire sector and that impacts the number of customers that we have available and my expectation is that this will not be a quick recovery.

Thank you. Our next question comes from the line of Ben Brownlow with Raymond James. Please proceed with your question.

Good morning. Can you just comment around the NTI productivity that you're seeing kind of southeast, east coast region versus the Texas region and just remind us what that ramp maturity curve looks like?

I’ll take this. Bob again. The second part of the question first, that ramp is about three years, varies location to location, but that's a good average. And in terms of productivity, every site is a little bit different, but what I would tell you generally on the East Coast and Atlantic area, we wind up paying more for real estate and we enjoy better margins. The to-store business, the restaurant businesses are, in both cases, starting off strong and we're pleased with early returns.

[Operator Instructions] Our next question comes from the line Chris Sighinolfi with Jefferies. Please proceed with your question.

Tom, just wanted to touch base, again, I appreciate the color on the leverage cadence here and in particular, the description of sort of what drove the change from 2Q to 3Q, combination of additional debt, but then also the degradation year-on-year in EBITDA for 3Q. So just curious as you look at fourth quarter, thinking about the CapEx that you're planning to spend, if I just think about your guidance and then the payment for Denny and thinking about the comment around the ATM usage, starting at six times and then having at 6.25, I mean are there other things that we should be thinking about, maybe working capital benefits that might be transpiring in the fourth quarter, things of that nature that we need to pay attention to?

Not at this time.

Okay. So if we look at, I guess, my point is if I look at fourth quarter, if I look at just street EBITDA of I think 173, as a means for the fourth quarter. That's obviously down from what's implied on fourth quarter last year based on your nine months. Portion of the release last night and the pro forma number we got for when the deal was done. It would speak to me like we may be bumping up against that 6.25 figure, I was just curious if there's anything else from a planning perspective you know share with us about plans in to year end?

No. We’ll be back in the market with our ATM and that's our plan right now.

Okay. And Bob, you had mentioned in a prior question just conversation around cost of capital and energy transfer, potential support. Is it too premature at this point to talk about what form that might take, I mean is it, that we see in IDR waivers to other members of the family, but we've also seen equity purchases in the family, entities before as well? Is everything on the table or are there things that are maybe more palatable to you and to Kelcy, within the slate of things we've seen transpire from some of the other subs?

I think it would be fair to say that there aren't any alternatives that others have done there outside that have escaped our notice. And as I said, we have nothing to report right now or announce right now.

Thank you. There are no further questions at this time. I would like to turn the call back over to Mr. Owens for any closing remarks.

Thanks very much everyone for taking time to join us this morning. This concludes the call.