Sunoco Logistics Partners L.P. Reports Record Results in the Third Quarter 2007 and Declares Third Quarter Distribution

PHILADELPHIA, Oct. 22 /PRNewswire-FirstCall/ -- Sunoco Logistics Partners L.P. today announced record net income for the third quarter ended September 30, 2007 of $37.5 million, or $0.97 per limited partner unit on a diluted basis, compared with $17.7 million, or $0.59 per limited partner unit on a diluted basis, for the third quarter ended September 30, 2006. Operating income for the third quarter ended September 30, 2007 increased by $21.3 million or 86 percent from the prior year third quarter primarily due to strong demand across our operating segments as well as solid performance in our lease acquisition business. Net income increased $19.8 million on the strength of higher operating income, partially offset by increased interest expense of $1.5 million attributable to the Partnership's organic growth program, 2006 acquisitions and the 2007 acquisition of a 50 percent interest in a refined products terminal in Syracuse, New York.

For the nine months ended September 30, 2007, net income increased by $22.7 million to $85.1 million compared to $62.4 million for the nine months ended September 30, 2006. Operating income for the nine months ended September 30, 2007 increased by $29.4 million or 36 percent to $111.6 million compared to $82.2 million for the prior year period. The primary drivers for the increase were strong performance in our Terminal Facilities and Western Pipeline segments, the August 2006 acquisition of an equity interest in the Mid-Valley Pipeline Company, and the March 2006 acquisitions of the Kilgore and Millennium pipelines. Net income increased $22.7 million as a result of higher operating income partially offset by higher interest expense related to the Partnership's organic growth program and 2006 and 2007 acquisitions.

Sunoco Partners LLC, the general partner of Sunoco Logistics Partners L.P., declared a cash distribution for the third quarter of 2007 of $0.85 per common partnership unit ($3.40 annualized) payable November 14, 2007 to unit holders of record on November 7, 2007.

"We are exceptionally pleased with our record performance for the quarter," said Deborah M. Fretz, President and Chief Executive Officer. "Our focus has been on maximizing our asset base by taking advantage of market opportunities. Strong volume across the system for the quarter is evidence of the success of our efforts. As a result, we increased the distribution to our unit holders by $0.05 from $3.35 per unit to $3.40 per unit, which represents the seventeenth distribution increase in the past eighteen quarters, a 7.9 percent increase over the third quarter of 2006."

Segmented Third Quarter Results Eastern Pipeline System

Operating income for the Eastern Pipeline System increased $3.1 million to $14.7 million for the third quarter ended September 30, 2007 compared to $11.6 million for the third quarter ended September 30, 2006. Sales and other operating revenue increased from $26.8 million for the third quarter of 2006 to $31.0 million for the third quarter of 2007 due to an increase in total shipments on the Marysville, Michigan to Toledo, Ohio crude pipeline which was expanded in the fourth quarter of 2006 and, in the aggregate, higher revenue across our refined products pipelines attributed to increased volume and fees. Other income increased $0.7 million compared to the prior year's quarter due primarily to an increase in equity income associated with the Partnership's joint venture interests. Operating expenses increased from $12.0 million in the third quarter of 2006 to $13.5 million in the third quarter of 2007 due mainly to additional utility expense resulting from higher volume and environmental charges related to third party contractor pipeline damage, partially offset by an increase in product operating gains.

Terminal Facilities

Operating income for the Terminal Facilities segment increased $2.9 million to $12.6 million for the third quarter ended September 30, 2007 compared to $9.7 million for the third quarter ended September 30, 2006. The $4.2 million increase in revenue from the prior year's third quarter to $35.9 million was driven by increased throughput at our Nederland crude terminal and our refined product terminals as well as higher refined product additive fees. Operating expenses increased $0.6 million for the third quarter of 2007 to $14.9 million primarily due to increased maintenance activity and costs associated with the purchase of product additives. Selling, general and administrative expenses increased $0.6 million for the third quarter of 2007 largely due to higher employee costs.

Western Pipeline System

Operating income for the Western Pipeline System increased $15.2 million to $18.6 million for the third quarter of 2007 compared to $3.4 million for the prior year quarter due to improved asset utilization and strong lease acquisition performance as we were able to take advantage of a contango market structure. Our Mid-Valley Pipeline Company equity interest also contributed to increased profitability.

Higher crude prices were a key driver of the increase in total revenue, cost of products sold and operating expenses from the prior year's quarter which was partially offset by lower volume. The average price of West Texas Intermediate crude oil at Cushing, Oklahoma increased to $75.33 per barrel for the third quarter 2007 from $70.55 per barrel for the third quarter of 2006. Selling, general and administrative expenses decreased $0.9 million for the third quarter of 2007 primarily due to an increase in the capitalized engineering costs related to the Partnership's organic growth program.

Segmented Nine Month Results Eastern Pipeline System

Operating income for the Eastern Pipeline System increased $2.4 million to $35.2 million for the nine months ended September 30, 2007 compared to $32.8 million for the nine months ended September 30, 2006. Sales and other operating revenue increased from $77.3 million for the nine months ended September 30, 2006 to $85.9 million for the nine months ended September 30, 2007 due to increased shipments on the expanded Marysville crude line, and in the aggregate, higher revenue across our refined products pipelines attributable to increased volume and fees. A $2.2 million increase in other income was related to an increase in equity income associated with the Partnership's joint venture interests. Operating expenses increased by $6.9 million due to the timing of maintenance activity, additional utility expense related to higher throughput, environmental charges due to third party contractor pipeline damage, and a reduction in product operating gains. A $2.2 million increase in selling, general and administrative expenses was largely associated with a decrease in capitalized engineering costs. Depreciation and amortization expense decreased $0.6 million to $6.8 million as certain assets reached the end of their depreciable life during the third quarter of 2006.

Terminal Facilities

Operating income for the Terminal Facilities segment increased by $11.4 million to $40.3 million for the nine months ended September 30, 2007 compared to $28.9 million for the nine months ended September 30, 2006. Total revenue increased $12.9 million to $104.0 million for the nine months ended September 30, 2007 due primarily to increased throughput at the Partnership's Nederland crude terminal and refined product terminals as well as higher refined product additive fees. Operating expenses increased $0.6 million for the nine months ended September 30, 2007 to $40.2 million primarily due to increased maintenance activity and costs associated with the purchase of product additives. The increase in selling, general and administrative expense of $0.9 million was largely due to higher employee costs and was partially offset by an insurance recovery related to the 2005 hurricane loss.

Western Pipeline System

Operating income for the Western Pipeline System increased $15.5 million to $36.0 million for the nine months ended September 30, 2007 compared to $20.5 million for the nine months ended September 30, 2006. The increase resulted from higher lease acquisition results and higher crude oil pipeline volume from the 2006 acquisitions previously mentioned. Total revenue, cost of products sold and operating expenses increased compared with the nine months ended September 30, 2006 due principally to higher bulk purchase and sale activity. A decrease in crude prices partially offset the volume impact on revenue with the average price of West Texas Intermediate crude oil at Cushing, Oklahoma, decreasing to $66.26 per barrel for the nine months ended September 30, 2007 from $68.29 per barrel for the comparable period in 2006. Operating expenses were higher as a result of increased costs associated with operating the assets acquired in 2006. Selling, general and administrative expenses decreased $2.5 million due primarily to the Western Area office relocation which was completed during the first quarter of 2006 and an increase in the capitalization of certain engineering costs associated with the Partnership's organic growth program, partially offset by higher employee costs. Depreciation and amortization expense increased $1.2 million during the nine months ended September 30, 2007 to $9.7 million as a result of 2006 acquisitions.

Other Analysis Financing Costs

Net interest expense increased $6.7 million for the nine months ended September 30, 2007, compared to the prior year period. The increase was due primarily to financing the Partnership's organic growth program as well as inventory adjustments and the previously mentioned acquisitions. At September 30, 2007, the Partnership had total debt outstanding of $576.4 million, which consisted of $424.1 million of Senior Notes and $152.3 million of borrowings under the Partnership's credit facility.

Capital Expenditures

Maintenance capital expenditures for the nine months ended September 30, 2007 were $14.3 million compared to $16.9 million for the nine months ended September 30, 2006. Management anticipates maintenance capital expenditures of approximately $25.0 million for the year ended December 31, 2007, which is in line with spending for 2006.

Expansion capital expenditures decreased by $116.7 million to $71.4 million for the nine months ended September 30, 2007. Expansion capital for 2006 included the acquisition of the Millennium and Kilgore pipelines, the Amdel pipeline and the equity interest in Mid-Valley for approximately $121.4 million. Expansion capital for 2007 includes the construction in progress of three crude oil storage tanks and a crude oil pipeline from the Nederland Terminal to Motiva's Port Arthur, Texas refinery. Expansion capital also included continued construction at Nederland of seven new crude oil storage tanks with a total capacity of approximately 4.2 million shell barrels, additional pipeline connections in the Western Pipeline System, and the second quarter of 2007 acquisition of a 50 percent interest in the Syracuse, New York refined products terminal.

Sunoco Logistics Partners L.P. Financial Highlights (in thousands, except units and per unit amounts) (unaudited) Three Months Ended Nine Months Ended September 30, September 30, Income Statement 2007 2006 2007 2006 Sales and other operating revenue $ 1,936,215 $ 1,603,642 $ 5,116,065 $ 4,356,109 Other income 8,388 5,281 21,125 11,544 Total Revenue 1,944,603 1,608,923 5,137,190 4,367,653 Cost of products sold and operating expenses 1,875,714 1,561,819 4,955,302 4,216,279 Depreciation and amortization 9,556 9,079 27,867 27,236 Selling, general and administrative expenses 13,411 13,391 42,417 41,916 Total costs and expenses 1,898,681 1,584,289 5,025,586 4,285,431 Operating income 45,922 24,634 111,604 82,222 Interest cost and debt expense, net 9,360 7,678 28,979 22,267 Capitalized interest (952) (720 (2,450) (2,465) Net Income $37,514 $17,676 $85,075 $62,420 Calculation of Limited Partners' interest: Net Income $ 37,514 $ 17,676 $ 85,075 $ 62,420 Less: General Partner's interest (9,682) (819) (15,313) (6,264) Limited Partners' interest in Net Income $ 27,832 $ 16,857 $ 69,762 $ 56,156 Net Income per Limited Partner unit Basic $ 0.97 $ 0.59 $ 2.44 $ 2.06 Diluted $ 0.97 $ 0.59 $ 2.43 $ 2.05 Weighted average Limited Partners' units outstanding: Basic 28,586,280 28,535,870 28,579,263 27,296,067 Diluted 28,733,472 28,663,319 28,720,106 27,421,581 Capital Expenditure Data: Maintenance capital expenditures $ 6,804 $ 6,585 $ 14,345 $ 16,882 Expansion capital expenditures 15,170 37,944 $ 71,445 188,113 Total $ 21,974 $ 44,529 $ 85,790 $ 204,995 Sept. 30, Dec. 31, 2006 2007 Balance Sheet Data (at period end): Cash and cash equivalents $ 1,997 $ 9,412 Total Debt 576,375 491,910 Total Partners' Capital 584,621 582,911 Sunoco Logistics Partners L.P. Earnings Contribution by Business Segment (in thousands, unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2007 2006 2007 2006 Eastern Pipeline System: Sales and other operating revenue $ 30,984 $ 26,766 $ 85,874 $ 77,265 Other income 4,116 3,387 10,448 8,218 Total Revenue 35,100 30,153 96,322 85,483 Operating expenses 13,491 11,975 39,074 32,207 Depreciation and amortization 2,259 2,199 6,815 7,417 Selling, general and administrative expenses 4,626 4,377 15,206 13,049 Operating Income $ 14,724 $ 11,602 $ 35,227 $ 32,810 Terminal Facilities: Total Revenue $ 35,874 $ 31,657 $ 104,033 $ 91,154 Operating expenses 14,883 14,269 40,161 39,565 Depreciation and amortization 3,878 3,797 11,368 11,377 Selling, general and administrative expenses 4,550 3,914 12,158 11,270 Operating Income $ 12,563 $ 9,677 $ 40,346 $ 28,942 Western Pipeline System: Sales and other operating revenue $1,869,366 $1,545,219 $ 4,926,152 $ 4,187,697 Other income 4,263 1,894 10,683 3,319 Total Revenue 1,873,629 1,547,113 4,936,835 4,191,016 Cost of products sold and operating expenses 1,847,340 1,535,575 4,876,067 4,144,507 Depreciation and amortization 3,419 3,083 9,684 8,442 Selling, general and administrative expenses 4,235 5,100 15,053 17,597 Operating Income $ 18,635 $ 3,355 $ 36,031 $ 20,470 Sunoco Logistics Partners L.P. Operating Highlights (unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2007 2006 2007 2006 Eastern Pipeline System: (1) Total shipments (barrel miles per day) (2) 67,671,264 61,320,475 64,820,837 60,254,723 Revenue per barrel mile (cents) 0.498 0.474 0.485 0.470 Terminal Facilities: Terminal throughput (bpd): Refined product terminals (3) 442,054 393,304 432,685 388,996 Nederland terminal 490,272 480,609 521,147 473,117 Refinery terminals (4) 727,870 658,957 686,033 688,553 Western Pipeline System: (1)(5) Crude oil pipeline throughput (bpd) 528,407 565,639 532,656 523,780 Crude oil purchases at wellhead (bpd) 177,025 192,175 180,826 191,894 Gross margin per barrel of pipeline throughput (cents) (6) 38.3 12.6 27.8 24.3 (1) Excludes amounts attributable to equity ownership interests in corporate joint ventures. (2) Represents total average daily pipeline throughput multiplied by the number of miles of pipeline through which each barrel has been shipped. (3) Includes results from the Partnership's purchase of a 50% undivided interest in a refined products terminal in Syracuse, New York. (4) Consists of the Partnership's Fort Mifflin Terminal Complex, the Marcus Hook Tank Farm and the Eagle Point Dock. (5) Includes results from the Partnership's purchases of an undivided joint interest in the Mesa Pipe Line system, the Corsicana to Wichita Falls, Texas pipeline system, the Millennium and Kilgore pipeline system and the Amdel pipeline system from acquisition dates. (6) Represents total segment sales and other operating revenue minus cost of products sold and operating expenses and depreciation and amortization divided by crude oil pipeline throughput.

An investor call with management regarding our third-quarter results is scheduled for Tuesday morning, October 23 at 9:00 am EDT. Those wishing to listen can access the call by dialing (USA toll free) 1-877-297-3442; International (USA toll) 1-706-643-1335 and request "Sunoco Logistics Partners Earnings Call, Conference Code 20640294". This event may also be accessed by a webcast, which will be available at http://www.sunocologistics.com/. A number of presentation slides will accompany the audio portion of the call and will be available to be viewed and printed shortly before the call begins. Individuals wishing to listen to the call on the Partnership's web site will need Windows Media Player, which can be downloaded free of charge from Microsoft or from Sunoco Logistics Partners' conference call page. Please allow at least fifteen minutes to complete the download.

Audio replays of the conference call will be available for two weeks after the conference call beginning approximately two hours following the completion of the call. To access the replay, dial 1-800-642-1687. International callers should dial 1-706-645-9291. Please enter Conference ID #20640294.

Sunoco Logistics Partners L.P. , headquartered in Philadelphia, is a master limited partnership formed to acquire, own and operate refined product and crude oil pipelines and terminal facilities. The Eastern Pipeline System consists of approximately 1,800 miles of primarily refined product pipelines and interests in four refined products pipelines, consisting of a 9.4 percent interest in Explorer Pipeline Company, a 31.5 percent interest in Wolverine Pipe Line Company, a 12.3 percent interest in West Shore Pipe Line Company and a 14.0 percent interest in Yellowstone Pipe Line Company. The Terminal Facilities consist of 9.2 million shell barrels of refined product terminal capacity and 20.4 million shell barrels of crude oil terminal capacity (including 13.5 million shell barrels of capacity at the Texas Gulf Coast Nederland Terminal). The Western Pipeline System consists of approximately 3,700 miles of crude oil pipelines, located principally in Oklahoma and Texas, a 55.3 percent interest in Mid-Valley Pipeline Company, a 43.8 percent interest in the West Texas Gulf Pipe Line Company and a 37.0 percent interest in the Mesa Pipe Line System. For additional information visit Sunoco Logistics' web site at http://www.sunocologistics.com/.

Although Sunoco Logistics Partners L.P. (the "Partnership") believes that the assumptions underlying these statements are reasonable, investors are cautioned that such forward-looking statements are inherently uncertain and necessarily involve risks that may affect the Partnership's business prospects and performance causing actual results to differ from those discussed in the foregoing release. Such risks and uncertainties include, by way of example and not of limitation: whether or not the transactions described in the foregoing news release will be cash flow accretive; increased competition; changes in demand for crude oil and refined products that we store and distribute; changes in operating conditions and costs; changes in the level of environmental remediation spending; potential equipment malfunction; potential labor issues; the legislative or regulatory environment; plant construction/repair delays; nonperformance by major customers or suppliers; and political and economic conditions, including the impact of potential terrorist acts and international hostilities. These and other applicable risks and uncertainties have been described more fully in the Partnership's Form 10-Q filed with the Securities and Exchange Commission on July 31, 2007. The Partnership undertakes no obligation to update any forward-looking statements in this release, whether as a result of new information or future events.