Greetings, and welcome to Sunoco First Quarter 2019 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I'd now like to turn the conference over to your host, Scott Grischow, Vice President of Investor Relations and Treasury.

Thank you. Before we begin our prepared remarks, I have a few of the usual items to cover. 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 as adjusted. Please refer to this quarter's news release for reconciliation of each financial measure. A reminder that the information reported on this call speaks only to the company's view as of today, May 9, 2019. The 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 earnings release. On the call with me this morning are Joe Kim, Sunoco LP's President and Chief Executive Officer; Tom Miller, Chief Financial Officer; Karl Fails, Chief Operations Officer; and other members of the management team. I will now turn the call over to Tom, who will cover this quarter's financial and operating results. Tom?

Thanks, Scott, and good morning, everyone. We delivered quality results again in the first quarter. For the quarter, the partnership recorded net income of $109 million, which includes a $47 million noncash write-down on assets held for sale and $93 million noncash inventory adjustment. As a reminder, these types of adjustment do not affect adjusted EBITDA, DCF or cents per gallon. Comparing 2019 to 2018. First quarter 2019 adjusted EBITDA of $153 million exceeds first quarter 2018 adjusted EBITDA of $109 million. The stronger quarter results in March 31st leverage, as defined by our credit agreement, of 4.24x. First quarter distributable cash flow, as adjusted, increased over last year's by $14 million to $99 million. Our trailing 12-month coverage ratio of 1.36 exceeds last year's of 1.22. As a reminder, because of its lower seasonal fuel demand and fewer calendar days, Q1 tends to be our weakest quarter. On April 25, we declared a distribution of $0.8255 per unit, the same as last quarter. On March 14, we closed on a $600 million of 6% 8-year senior unsecured notes. We used the proceeds to repay a portion of the outstanding borrowings under our revolving credit facility, leaving us with $1.3 billion in capacity. Looking at our operational performance. Fuel in the first quarter totaled nearly 2 billion gallons. That's up 4.6% from a year ago, driven by the contribution from 2018 acquisitions and organic growth. Even with rising gasoline prices, we remain within our annual guidance range with a Q1 margin of $0.099 per gallon. As we've discussed the last several quarters, we managed gallons and margin together to produce the highest possible long-term gross profit and encourage you to not think of them as independent variables. We continue to focus on controlling G&A and other operating expenses. Meeting our…

Thanks, Tom. Good morning, everyone. Our current first quarter performance along with the fourth quarter of last year demonstrates a resilience of our earnings power in different commodity environment. In the fourth quarter of last year, commodity prices drop materially providing fuel margin tailwinds in the first quarter of this year, we saw the opposite. WTI futures rose 32% from the beginning of the quarter, to the end of the quarter, while RBOB futures went up 43% which is the highest percentage increase in any quarter in over a decade. Even with this material increase in costs our results were solid. Quarter-after-quarter, we continue to demonstrate the strength of our underlying business. Looking forward, we believe the rest of 2019 will remain strong. As per growth, we will continue to prudently pursue opportunities, last year we demonstrated our ability to accretively grow in the field distribution sector. Our pipeline continues to remain strong however, we will be very selective. In addition, we have shifted a portion of our growth resources towards more fee-based midstream assets. The J.C. Nolan Pipeline is a prime example. This attractive opportunity capitalizes on the long-term demand for diesel in West Texas. The joint venture was a natural fit combining our fuel distribution abilities with Energy Transfers pipeline capabilities. Overall, we will continue to pursue opportunities in both the traditional midstream sector as well as the fuel distribution sector. Let me close by saying that we have established a track record of delivering on our targets, we remain confident that we will continue to deliver in 2019 and beyond. Operator, that concludes our prepared remarks, you may open the line for questions.

[Operator Instructions] Our first question is from Theresa Chen from Barclays. Please go ahead.

So couple questions related to your announced diesel pipeline JV with your parent for your cash spend of $50 million what kind of EBITDA multiple, are you expecting to generate?

Hi, Theresa good morning, this is Karl. I think we're still finalizing the details with Energy Transfer I'd say the return that we anticipate is a good one it's a different earnings profile than among our fuel distribution acquisitions that we've made. So I'd say probably the multiples can be a little higher than our fuel distribution acquisitions got it.

And Karl, can you provide some more color about how this synergistically can create value with other parts of your business referring back to Joe's comments about your West Texas distribution footprint. And how you can utilize this infrastructure to either save money or create more business opportunities versus the current option you have?

Sure, as Joe mentioned earlier, I mean, our goal is to become a more diversified ratable MLP. And this is definitely an opportunity to go and add direction. We have the ratable earnings from the pipeline and terminal, but also as part of this JV, something that we bring is we've committed to be an anchor shipper on the pipeline. And we already have a large customer base in West Texas and expertise marketing diesel we bring knowledge to the market, understanding of refined products and how they flow. Obviously the Permian is an area where there's a lot of demand growth as drilling and crude production increases diesel demand will increase. And so our ability to sell and market that diesel and expand into higher sales volumes and more customers is something that we bring to the table.

And given that this will tie up some capital and other resources. How does this balanced against your historical I guess M&A approach to growth?

Theresa it’s Joe. Let me kind of give some perspective on the M&A side. If you look back at 2018, we focused heavily on fuel distribution acquisitions. I think a good way to look at 2019 is we’ll shift more of our efforts towards on the fuel distribution side to organic growth. As we've been filling up that organic growth pipeline and, a lot of our efforts will also be shifted over to more traditional fee-based midstream. I think the J.C. Nolan and the two terminals that we acquired late last year are good examples. And Karl stated earlier, but our goal is to become a larger, more diversified ever increasing stability of income MLP. So we're going to show financial discipline and part of showing financial discipline is being very selective on opportunities that come our way. And I will say, our pipeline for fuel distribution still remains very strong, but we're going to be highly, highly selective and make sure that we balance off our overall income portfolio.

And lastly, related to the spending. So your portion is $50 million on a 100% basis, do you have a breakdown of how much between the pipe and the newly built terminal, given that you're be utilizing existing ET pipe?

Yes, we don't have that breakdown yet as we said, we're still finalizing the details with Energy Transfer. And I'd say it's our cash investment is in that $50 million range. Once we finalize we'll probably be able to share a little more around that, and that also includes some working capital that we're going to have to take on right to be able to run that diesel business as well.

Our next question is from Sharon Lui from Wells Fargo. Please go ahead.

Just following up on the pipeline JV I am just wondering what type of contracts are in place, I believe that the pipeline had open season last year. And if you can maybe talk about financing that investment, whether you think you would need to draw on the ATM?

Yes, I'd say, I'd say this fits within and Tom can add some flavor on the financing piece, but this fits within our leverage coverage guidance. We’re not seeing any changes to that as we look this year and then Tom can talk about financing.

Yes, at this point, just to reiterate what we said last quarter and J.C. Nolan doesn't change it. We do not see the need for opening the ATM. We are issuing equity at this point based on our current plans.

And the contracts in place. Is it committed volumes already?

Yes I'd say in the wholesale fuels business, we have different kind of profile of contracts. So I'd say we made progress in that and sometimes you have contracts that are maybe shorter duration, but you have experience where you might have the same customer for 10 to 15 years, but that's not necessarily under a 10-year contract, it might be under shorter contracts that we knew. We're very comfortable with our ability to sell the diesel based on the demand in that market.

As then also for your non-motor fuel gross profit this quarter, just wondering, I guess what's the drivers for that segment and whether the $16 million is a good fund rate going forward?

That includes our terminal business merchandise would probably be the two largest items in the - and that if you look at in credit cards, I guess is the other one that takes a fair amount of that the, if you were to look at the quarters over the last, say four quarters, 50s not far off, it's a good number. It will move around.

Our next question here is from Spiro Dounis from Credit Suisse. Please go ahead.

Just a question on M&A in your core business. Joe, you mentioned the pipeline being pretty full again which is good to hear and I know it's hard to predict and we're early in the year here but as you think about it relative to 2018 you have a sense for 2019 M&A activity so far, is it outpacing 2018 and when you look at valuations is there any pressure one way or the other yet?

As far as I kind of breakdowns of curious as far as the fuel distribution side, we're seeing similar types of opportunities that we saw in 2018.It’s really the filter that we're putting it through or its just a stronger filter. Tom, mentioned that our current plan said that we're not going to issue at equity. So we have to be very diligent in determining and picking from - pick up the little type of approach and that's where I think the valuations that we're seeing is very similar to 2018. Our filter has just become tighter as we're starting to uncover more organic opportunities in the fuel distribution is really a buyer build, right and as we look to more traditional midstream, we just have more options than we did when we first right after 7/11 transactions, so the market still, we are seeing similar values. The only difference is that we have more opportunities to choose from and we're being far more selective.

Second one just around the you know the other opportunities like the one with Energy Transfer, are those opportunities mainly with ET or are you actually actively talking to third-parties about getting more involved in similar pipeline projects ?

I think you know, the size and scope of ET, there's a lot for us to talk about on that side, but I think that is by far our best option and its the most obvious option, but at same time if there is any other opportunities that ET wasn't involved and we definitely look.

Last clean up one from me just on maintenance CapEx, I think it's tracking well below the guidance right now, just curious what's driving that and -- more or less, expect that to re-rate higher over the next three quarters ?

Yes, we started off last year $3 million for the first quarter and were $4 million this quarter, that's just a function of the weather to start the year and we do expect to trend up over the year and where we gave the $45 million guidance and we're sticking with that.

[Operator Instructions] And the next question here is from Vikram Bagri from Jefferies. Please go ahead.

I wanted to follow up on the diesel fuel pipeline that you announced, the release mentioned initial capacity of 30,000 barrels a day. How much can this pipeline be expanded by and is the pipeline scope of the project. I recognize has not been finalized, but could you temper the size of the pipeline to enhance returns?

Yes, this is Karl, I mean I guess we're not going to give a lot of detail right now, but it has a little bit of upside capability as the project is as we said we anticipated to be in service by the end of the year. So there's obviously still a construction activity going on. And since this is kind of a reuse of an idle pipeline, there's still some work being done to test how big that can be. So I'd say there's some moderate upside to that. And if, more to come in the future.

And as a follow-up, you mentioned, it's a reviews of the pipeline and it's a project you're doing with the Bern. Are there any more projects that you can do of this in a similar to this project given that the returns are slightly inferior to your base business, even though you're using an old pipeline and infrastructure. Are there more projects like that?

Yes Vikram, I'll build on what Joe said earlier. As you think about one of the things we bring to the table and why we like this project is it's a midstream project, but it's really a platform for us to grow our fuel distribution business as well. One of the things we bring to the table as we are in the refined products markets across the country and we're constantly looking for opportunities where additional logistics whether it's pipes or terminals or docs or things of that nature can help our business, so we don't have anything to announce today. But I'd say that's a constant process of looking at and trying to identify opportunities and as Joe mentioned the most obvious would be with Energy Transfer. But if there are other opportunities, we look at those as well.

Our next question here is from Dennis Coleman from Bank of America Merrill Lynch. Please go ahead.

Most of mine have been asked, but just to come back to the diesel line for, it's a little bit of a detail question but the buying this open season is non-binding I guess, is there anything we should read into that versus binding and given the short timeframe this thing is set to come online. I guess, I'm just trying to understand why it would be non-binding?

Yes, I'd say, Dennis, the open season for the pipeline is separate from our JV agreement with Energy Transfer, so for the pipeline open season has already occurred and like I said, we're an anchor ship around the pipe. The non-binding piece that we've announced is joint venture agreement and it's just that's the stage in which we're at right now and we're comfortable enough with that that we're announcing it and we're planning in the short order to finalize our agreement close on the JV.

Okay, so the non-binding bid is between you and Energy Transfer?

That's correct.

And then, so maybe you said this, but I just want to make sure. There is pipe there, capacity could maybe be expanded but is the $50 million spend, does Energy Transfer match that or is that the total spend I guess they're donating or contributing the pipe, so that must be some value attributed to that and then is it incremental pipe, is it racks, is it - what is the $50 million spend for?

Yes, I'd say we wanted to size our approximate investment in the pipeline and that's in that $50 million range. I think some of the details of our range with Energy Transfer, we're still finalizing, I'd say there is - this spend is for both capital on the pipe renovations, as well as the building of the new terminal in Midland and then some working capital on our end and then there is additional commercial agreements that we have with Energy Transfer to equalize everything.

And then just again a little bit more detail but CapEx, $22 million for growth versus the 90 target seems pretty ratable across the four quarters, should we think about that cadence of spend for the rest of the year?

Yes, yeah this is Karl, yeah I think that's right. I mean, quarter-to-quarter we will always have a little bit a variation but we, as Joe mentioned earlier, we really ramped up our organic growth prospects and we've also -- I think we've talked about our ability to improve some of our assets and so that that combination that's in the range.

This concludes the question-and-answer session. I'd like to turn the floor back over to Mr. Grischow for any closing comments.

Thanks for joining us on the call today, everyone. As always if you have any follow-up questions, feel free to reach out to me. We'll talk to you soon. Have a great day.

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