ETP Will Not Sell Off Sunoco's Retail Division

DALLAS – Energy Transfer Partners LP (ETP) will not sell off the approximately 4,900 convenience stores and gas stations obtained in its Sunoco Inc. acquisition on Oct. 5, ETP CEO Kelcy Warren stressed during the company's earnings call today.

Following ETP's $2.6 billion acquisition of Sunoco, several Wall Street analysts recommended that the master limited partnership (MLP) oil pipeline company divest the newly acquired retail division because it does not fit into its core holdings, the company does not have the proper expertise to run such a business and it will be unfavorable to keep the retail division for tax reasons.

Warren, however, said today that no such sale will occur for the foreseeable future. "We are a long-term holder of the retail gasoline assets," he said on the earnings call. "One of the key things we acquired with Sunoco is expertise. Admittedly, we are not knowledgeable as far as retail goes. But we acquired it [in the transaction]."

Since ETP is keeping Sunoco's retail division, one analyst asked Warren during the conference call if he would follow Susser Holdings Corp.'s approach, which would mean spinning off Sunoco's wholesale fuels segment into another MLP. Warren responded that he would not comment about that at this time, but would discuss the possibility with members of upper management.

As for the Sunoco acquisition itself, ETP management conveyed that the transition has gone smoothly thus far and the company will begin to realize cost savings from the deal beginning in 2013.

Warren added that Sunoco will be fully incorporated under ETP sometime in 2014.

Regarding its fiscal third-quarter performance, ETP companywide earned distributable cash flow of $189.2 million for the quarter, which ended Sept. 30. That is an increase of $62.9 million compared to the same quarter in 2011. As a MLP, distributable cash flow is often used to measure success instead of net profits.

Sunoco's profits were not calculated as part of ETP's Q3 earnings since the acquisition was completed after the quarter ended. ETP did not report on Sunoco's separate third-quarter earnings.

Looking ahead, Sunoco CEO Brian MacDonald noted during the conference call that although Superstorm Sandy had some affect on its business, he expects there will be "no material financial impact" in the fiscal fourth quarter due to the storm.

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