Sunoco LP misses on earnings expectations. Reported EPS is $-1.5 EPS, expectations were $1.01. SUN isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Greetings and welcome to Sunoco LP's Fourth Quarter and Full Year 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Scott Grischow. Thank you. You may begin.
Scott Grischow : Thank you, and good morning, everyone. On the call with me this morning are Joe Kim, Sunoco LP's President and Chief Executive Officer; Karl Fails, Chief Operations Officer; Dylan Bramhall, Chief Financial Officer; Austin Harkness, Chief Commercial Officer; and other members of the management team. Today's call will contain forward-looking statements that include expectations and assumptions regarding the partnership's future operations and financial performance. Actual results could differ materially and the partnership undertakes no obligation to update these statements based on subsequent events. Please refer to our earnings release as well as our filings with the SEC for a list of these factors. 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 the Sunoco LP website for a reconciliation of each financial measure. 2023 was a record year for the partnership. The combination of a strong and stable base business, coupled with a proven history of financial discipline has allowed us to yet again deliver on the expectations we lay out each year. I would like to start by looking at some of our fourth quarter and full year 2023 highlights. Adjusted EBITDA for the fourth quarter was $236 million compared to $238 million a year ago. The partnership sold over 2.2 billion gallons in the fourth quarter, up 11% from the fourth quarter last year. Fuel margin for all gallons sold was $0.123 per gallon compared to $0.128 per gallon a year ago. Total fourth quarter operating expenses were $145 million, an increase of $7 million from the same period last year.
During the fourth quarter, we spent $50 million of growth capital and $33 million in maintenance capital. Fourth quarter distributable cash flow as adjusted was $148 million compared to $153 million in the fourth quarter of 2022, yielding a current quarter coverage ratio of 1.6 times. On January 25, we declared an $0.842 per unit distribution, consistent with last quarter. The stability of our business and history of delivering results continues to support a secure and growing distribution for our unitholders. Turning to the balance sheet. At the end of the fourth quarter, we had approximately $400 million outstanding on our revolving credit facility leaving approximately $1.1 billion of liquidity. Leverage at the end of the quarter was 3.7 times, below our long-term target of 4 times.
As I mentioned earlier, 2023 was a record year for the partnership. We met or exceeded expectations in our guidance metrics, further reinforcing our record of delivering on expectations. Full year 2023 adjusted EBITDA was $964 million, a 5% increase versus the prior year. Deal volume was over 8.3 billion gallons, up 8% versus 2022's volume and the largest reported in the partnership's history. Fuel margins continued to remain strong at $0.127 per gallon, flat to 2022 levels. Total operating expenses were $550 million, in line with our revised guidance range. Finally, our full year coverage ratio of 1.8 times and leverage ratio of 3.7 times, support key elements of our capital allocation strategy to maintain a secure distribution and protect our balance sheet.
I'd like to wrap up my comments by briefly reviewing the series of strategic transactions we announced in January. First, the acquisition of two European product terminals from Zenith Energy for €170 million, including working capital. We plan to close this transaction by the end of the first quarter and fund it with availability on our revolving credit facility. We expect the acquisition to be accretive to our unitholders in the first year. Next, the divestiture of our West Texas marketing assets to 7-Eleven for approximately $1 billion. This transaction is expected to close in the second quarter of 2024, and will allow Sunoco to materially reduce leverage, positioning us favorably for future growth. And finally, the acquisition of NuStar Energy, an all-equity transaction valued at $7.3 billion.
We expect this acquisition will close in mid-2024. With that, I will turn the call over to Karl to walk through some additional thoughts on our fourth quarter performance and commentary on our recent announcements.
A truck parked at a gas station, its fuel tank being filled from a pump.
Karl Fails : Thanks, Scott. Good morning, everyone. We delivered another strong quarter, capping off another record year. When you look at both the quarter and the full year, our results were supported by continued margin strength, volume growth, consistent expense discipline and efficient operations. Starting with margins. This quarter continued many of the same themes of the past few years, mainly higher breakeven margins, continued volatility in fuel prices and efficient execution of our gross profit optimization strategies. These have all contributed to expanded margins in the past few years, and we don't see any of those factors changing as we look forward. With respect to volumes, we were up 11% in the fourth quarter versus the fourth quarter of last year and up about 4% from the third quarter of this year.
The continued growth in volume relative to prior years comes primarily from good execution on capital deployed. This quarter marks the highest volume quarter in our history and the third consecutive quarter above 2 billion gallons. As I pointed out on our last call, when compared to overall U.S. gasoline and diesel demand, it is clear we continue to outpace the sector, another sign that our growth is delivering tangible results. Turning to expenses. Consistent discipline in managing our expenses remains one of our core strengths, and our fourth quarter results firmly demonstrate that as they were only slightly up from the third quarter and remain within our guidance for the full year even as we continue to grow. For 2024, we're off to a good start.
Our base business remains strong. 2023 was evidence of this, and we expect 2024 to be a continuation of the same as we expect the same factors that contributed to our overall performance last year to remain in place for this year and beyond. Let me give you some added perspective on a couple of our recent announcements, starting with the acquisition of the Zenith terminals in Europe. These are great assets. They have high-quality, long-term customers and their strategic position in Europe guarantees a long useful life. Additionally, they provide us with increased supply optionality when it comes to our East Coast and Caribbean operations. When you think about our vast network of East Coast locations, roughly 50% of these are supplied by water.
Adding the European terminals gives us additional opportunities to optimize our supply cost and deliver increased value to our customers. Our overall thoughts around this deal were similar to the deal we announced over a year ago in Puerto Rico. The opportunity to create value with the combination of a fuel distribution business with strong midstream assets that also provide a platform for growth. Next, the acquisition of NuStar. NuStar has a high-quality asset portfolio that strengthens and diversifies our company. We laid out our strategic rationale for this acquisition in our investor presentation weeks ago. Sitting here a month later, we cannot be more excited about the opportunity to bring these two companies together. We have a very detailed integration planning process and have begun working with NuStar on getting that in motion.
As we laid out a few weeks ago, this acquisition will open up new opportunities for the company in terms of geography, business lines and operations. And we are looking forward to our expected closing in the second quarter. While these transactions provide a boost to our growth, they are really a continuation of our strategy over the past few years. This is who we are. We complete and integrate acquisitions that deliver attractive returns. We successfully deployed capital in projects that deliver EBITDA growth, and we remain focused on optimizing our gross profit and remain disciplined on expenses. With that, I will turn it over to Joe for closing thoughts.
Joe Kim : Thanks, Karl. Good morning, everyone. We're month and half into 2024, and it's already been a very busy year for SUN. Given our recent announcements, let me take the opportunity to bring it all together and put it into perspective. First and foremost, our current business is strong. We had an outstanding fourth quarter and overall 2023 was another record year for both EBITDA and DCF. Looking forward, we expect this year to be another record year. The 2024 EBITDA guidance that we provided in December remains very appropriate, even after factoring in the announced sale of our West Texas marketing assets and the Zenith Europe acquisition. Bottom line, we're confident in our base business and our financial foundation remains solid.
Thus, we're positioned to announce another distribution increase in April. Moving on to our recent announcement. SUN's strategic focus remains the same, improving stability, enhancing growth and maintaining a strong balance sheet, resulting in a larger and more importantly, a more compelling investment going forward. Our actions speak for themselves. The upcoming addition of the two terminals in Europe is a good example of a tuck-in acquisition at a mid-single-digit synergized multiple. It will provide supply optimization, increased stable income and future growth opportunities. The announced sale of our West Texas marketing assets demonstrates our ability to optimize our portfolio of income streams, position the balance sheet for material growth and provide an accretive transaction for unitholders on a standalone basis.
And finally, the NuStar acquisition will be another big step forward. It diversifies our cash flows, boost our credit profile, improves our trading liquidity and enhances our growth opportunities. Financially, it is highly attractive. We expect a greater than 10% accretion in year three and our balance sheet is expected to be back to our target leverage of 4 times within 12 to 18 months. With all these strategic moves set in motion, it's now time for us to execute. We have a proven history of creating value for our stakeholders. And we have positioned ourselves to build on our record of delivering results. Operator that concludes our prepared remarks. You may open the line for questions.
