$46.00
$81.00
bear $46.00
base $67.60
bull $81.00
margin of safety $40.00
market price* $73.26
Business condition attached to the margin of safety
Second-half 2026 operating cash flow (before working-capital swings) continues at roughly the first-half 2026 pace of about $1.2 billion per half-year, confirming the run rate of the enlarged business after the Parkland purchase.
Sunoco LP is a master limited partnership that distributes motor fuel to roughly 9,200 dealer-operated stations, about 1,300 commission-agent sites, about 330 company-operated convenience stores and more than 13,000 commercial customers across the United States, Canada and the Greater Caribbean, under brands such as Sunoco, Aloha, Ultramar and Pioneer. It also owns pipelines and fuel terminals and, since the October 31, 2025 purchase of Parkland Corporation, a refinery in British Columbia. It is now a very different and much more indebted company than it was two years ago: NuStar (May 2024) and Parkland (October 2025) roughly doubled its size, debt stood at $13.39 billion at year-end 2025, and a further $540 million German and Polish terminal purchase (TanQuid) closed in January 2026. How we measure earnings. We start from cash generated by operations, remove the swings from working capital, and deduct unit-based compensation and the capital spending needed just to keep the business running (spending to grow is treated as optional and is not deducted). Cash interest is already inside operating cash flow, so debt is not subtracted a second time; instead, leverage is reflected in the weaker case. We also deduct the roughly $116 million a year that the 7.875% preferred units require, because those holders are paid before common unitholders. Because 51.5 million Class D units, which receive the same per-unit distributions as common units, were issued in the Parkland deal, we spread earnings over about 188.7 million units (137.2 million common plus the Class D units), not the 137.2 million that the income statement reports. Track record. On this basis the legacy business earned between roughly $4.13 and $6.91 per unit from 2019 to 2023 (median $5.32) on about 84 million units. Cash flow before working capital was steady even in 2020 ($519 million versus $506 million in 2019), which shows how fee-like much of the fuel margin is. 2024 fell to $3.25 per unit as the NuStar purchase added units mid-year and capital spending rose; 2025 was $6.89 per unit but includes only two months of Parkland. Those years describe a smaller company, so we do not use their median as the level. Owner earnings grew far faster in 2025 than any run rate could repeat, because of the acquisitions; our first-year assumption is flat, not growth. The level we use. First-half 2026 operating cash flow was $1,555 million (versus $399 million a year earlier). The quarterly filing implies about $345 million of that was working-capital release, leaving about $1.2 billion before working capital; we could not fully reconcile the individual working-capital lines from the quarterly data, so treat that split as approximate. Doubling that gives about $2.4 billion a year. Separately, first-half 2025 (before Parkland) was about $0.7 billion, and Parkland's first two months are visible in the second half of 2025, which points to a similar figure. We use $2.3 billion, less about $26 million of unit compensation, less $425 million of maintenance capital (the midpoint of the company's own 2026 expectation of $400 million to $450 million), less $116 million of preferred distributions: about $1.73 billion, or $9.18 per unit. Two quarters of the enlarged business is a short record, which is why the cases below spread widely around it. Base case, $67.6 per unit. Earnings hold at $9.18 per unit for ten years. What supports that: long-term dealer contracts (initial terms of about ten years, with roughly five years left on a volume-weighted basis), a take-or-pay fuel supply agreement with 7-Eleven that guarantees a minimum gross profit, and a network of pipelines and terminals whose upkeep is already deducted. We credit no growth. The company buys fuel contracts and terminals every year ($111 million to $318 million a year, 2021-2025) and plans at least $600 million of growth spending in 2026, but the return on that spending is not evidenced well enough to count, and the cash is not deducted either. After year ten we assign no value: the remaining cash flows over the following years roughly equal the $13.4 billion of debt that has to be repaid or refinanced, so nothing demonstrably accrues to unitholders. Bear case, $46.0 per unit. Margins compress as they did in 2024, when the legacy business's earnings fell about 21% from 2023. With interest costs fixed, we take the enlarged business's operating cash flow down to about $1.75 billion, leaving about $6.25 per unit. Refinancing of the Parkland-era notes (including 2026 maturities) at higher rates is part of that. Ten years, then nothing. This case is also where the 7-Eleven contract belongs: it is a 15-year agreement, and 7-Eleven fell from 20% of revenue in 2023 to 13% in 2025; we could not quantify what happens at expiry, so we have not modeled it. Bull case, $81.0 per unit. The first-half 2026 pace holds in full (about $2.4 billion of operating cash flow a year, or $9.82 per unit) for ten years, worth about $72.3 per unit. Cash left after distributions and growth spending pays down debt, so that some value remains after year ten, about $8.7 per unit. We do not credit synergy targets, new markets or price recovery, since none has been demonstrated yet. What could make this wrong. If first-half 2026 proves seasonal or one-off, the level falls toward the bear case. If 2027 to 2029 refinancing costs rise more than assumed, the bear case is understated. The long-term shift to electric vehicles, named in the company's own risk factors, would erode the tail we already value at zero in the base case. On the other side, Parkland's full-year contribution may turn out larger than the two-month sample implies. Owner earnings here are not the company's own adjusted figures, which we did not use.