Sunoco - Earnings Call - Q3 2025

Executive Summary

• Q3 2025 revenue of $6.032B and Adjusted EBITDA ex-transaction costs of $496M; revenue beat consensus while EPS missed. Revenue came in above S&P Global consensus ($6.032B actual vs $5.748B estimate), while Primary EPS trailed consensus (1.150 vs 1.347), and diluted EPS was $0.64.
• Distribution increased 1.25% to $0.9202 per unit, marking the fourth consecutive quarterly raise; leverage improved to 3.9x with trailing 12-month coverage at 1.8x.
• Parkland acquisition closed Oct 31; management set a synergy floor “over $250M” by 2028 and accelerated the leverage target to 4.0x within 12 months; free cash flow expected to exceed $1B annually near-term.
• Near-term stock reaction catalysts: revenue beat, Parkland-close and synergy ramp, accelerated deleveraging, and sustained distribution growth.

What Went Well and What Went Wrong

What Went Well

• Scale and strategic positioning: “We are now the largest fuel distributor in the Americas,” with >7B gallons contracted in the Atlantic Basin and a leading terminal footprint; FCF expected “over $1 billion a year in the near future”.
• Midstream strength: Pipeline Systems Adjusted EBITDA rose to $182M (vs $147M ex-transactions YoY) on stronger throughput and lower costs; Terminals Adjusted EBITDA rose to $75M with favorable transmix margins and Portland terminal contribution.
• Capital return: Distribution increased for the fourth straight quarter to $0.9202 and management reiterated the annual growth target of at least 5% for 2025; coverage ratio remained strong at 1.8x.

What Went Wrong

• Fuel Distribution pressure: Segment Adjusted EBITDA fell to $232M from $253M YoY, driven by lower profit per gallon and higher expenses tied to acquisitions; margin moderated to 10.7¢/gal vs 12.8¢/gal YoY.
• EPS miss vs consensus: Primary EPS lagged S&P Global consensus for Q3 2025 (1.150 vs 1.347), reflecting softer fuel-margin volatility compared to elevated levels last year.
• Lower terminal volumes: Terminals throughput declined to 656 kbpd (694 kbpd YoY), reflecting lower trading activity and customer transitions.

Transcript

Operator (participant)

Welcome to Sunoco's third quarter 2025 earnings conference call. At this time, all participants are on a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. 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 (Treasurer and Senior VP of Finance)

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 Operating Officer; Austin Harkness, Chief Commercial Officer; Brian Han, Chief Sales Officer; and Dylan Bramhall, Chief Financial Officer. Today's call will contain forward-looking statements. Please refer to our earnings release and SEC filings for risk factors and reconciliations of non-GAAP financial measures, including adjusted EBITDA and distributable cash flow as adjusted. It has been another busy quarter for Sunoco, and I'd like to begin my remarks by providing a brief recap. Last week, we successfully completed the acquisition of Parkland Corporation in a transaction valued at approximately $9 billion. This transaction has created the largest independent fuel distributor in the Americas and a leading operator of energy infrastructure. We are confident it will provide compelling financial benefits for our unit holders.

As our asset portfolio has evolved over the past several years, we have significantly improved the stability of our income while also strengthening our financial position and scale. Over the past 12 months, Sunoco and Parkland, on a combined basis, generated over $3 billion in pro forma adjusted EBITDA across our fuel distribution business and our midstream operations. The Parkland acquisition will be immediately accretive to distributable cash flow per common unit, and we expect over $250 million in synergies by 2028, which will result in greater than 10% accretion. Additionally, our highly successful financing transactions executed in September outperformed our expectations and will deliver approximately $40 million of additional annual cash savings. This transaction, combined with our proven track record of disciplined capital allocation, will create greater financial flexibility for ongoing distribution growth, solid free cash flow, and a strengthened credit profile.

Finally, I'm pleased to remind investors that tomorrow, Thursday, November 6th, Sunoco Corp will begin trading on the New York Stock Exchange under the ticker SUNC. This new C Corp tracker broadens investment options. As a reminder, SUNC is taxed as a corporation and issues a Form 1099, making it an attractive option for investors outside of the United States, domestic institutional investors, and personal retirement accounts. Now turning to our financial and operating results, the third quarter continued Sunoco's strong financial and operational performance throughout 2025. The partnership delivered a record third quarter with adjusted EBITDA of $496 million. Compared to $470 million a year ago, both excluding one-time transaction-related expenses. Distributable cash flow, as adjusted, came in at $326 million for the third quarter. In the third quarter, we spent approximately $115 million on growth capital and $42 million on maintenance capital.

This includes the partnership's proportionate share of capital expenditures related to our two joint ventures with Energy Transfer of $16 million for growth capital and $4 million for maintenance capital. Turning to the balance sheet, as of the end of the third quarter, a $1.5 billion revolving credit facility had no outstanding borrowings. Leverage at the end of the quarter was approximately 3.9 times. Following the closing of the Parkland transaction, our credit facility was increased by $1 billion to $2.5 billion, which will provide greater liquidity for the partnership moving forward. As of today, our credit facility is currently undrawn. On October 20th, we declared a distribution for the third quarter of $0.9202 per common unit, or approximately $3.68 on an annualized basis. This represents an increase of 1.25% compared with the previous quarter and resulted in a trailing 12-month coverage ratio of 1.8 times.

This marks the fourth consecutive quarterly increase in Sunoco's distribution and is consistent with an annual distribution growth rate of at least 5%. I would like to conclude my remarks by stating that our financial position continues to be stronger than at any time in Sunoco's history. Our legacy business remains strong, as exhibited by our record third quarter adjusted EBITDA. Prior to closing the Parkland acquisition last week, we were on a path to achieve our 2025 adjusted EBITDA guidance and intend to provide formal 2026 guidance for the combined company early next year. With that, I will turn the call over to Karl to discuss our operational results.

Karl Fails (COO)

Thanks, Scott. Good morning, everyone. As Scott walked through, our teams have been very busy this quarter, and the operational and financial results highlight the strength of our business and the benefits that come from accretive growth. We delivered strong results across all three segments, so let me walk through some of those details. Starting with our fuel distribution segment, adjusted EBITDA came in at $238 million. Excluding $6 million of transaction-related expenses, compared to $214 million in the second quarter and $253 million in the third quarter of last year. Volumes came in at 2.3 billion gallons during the quarter, up 5% from last quarter and up 7% compared to the third quarter of last year. This volume growth far outpaces total U.S. volume growth for both gasoline and diesel, showcasing that our investments are yielding tangible results in both our growth capital program and fuel distribution bolt-on transactions.

Reported margin for the second quarter was 10.7 cents per gallon compared to 10.5 cents per gallon in the second quarter and 12.8 cents per gallon in the third quarter of 2024. When we look at margins across our system, there are a few perspectives worth pointing out. First, we believe that break-even margins continue to be supported by many of the same factors that we have discussed over the past few years, including inflation resulting in higher costs, limited overall volume growth across the industry, and higher interest rates. Second, we have seen some tempering of market volatility, which has not produced an outsized fuel profit quarter like we saw during the second and third quarters of last year. Even with that headwind, however, this has been a great year in our fuel distribution business.

Once you normalize for the sale of our West Texas retail business in 2024 at a very attractive multiple, we expect that in 2025 we will have grown segment EBITDA for the seventh year in a row. The business continues to deliver very strong results. In our pipeline system segment, adjusted EBITDA for the quarter was $182 million. Compared to $177 million for the second quarter and $147 million for the third quarter of last year, all excluding transaction-related expenses. Segment throughput was 1.3 million barrels per day compared to 1.2 million barrels per day in the second quarter and 1.2 million barrels per day in the third quarter of last year. During the quarter, we saw strong performance across all our pipeline systems on both volumes and gross profit. Turning to our terminal segment, we delivered adjusted EBITDA of $76 million, excluding $1 million of transaction-related expenses.

Compared to $73 million in the second quarter and $70 million in the third quarter of last year, both excluding transaction-related expenses. Segment throughput was 656,000 barrels per day, down from 692,000 barrels per day in the second quarter and 694,000 barrels per day in the third quarter of last year. Our transmix business continues to have a strong year, supported by good performance in our terminals' assets across all our regions. We expect to finish the year strong in our two midstream segments, highlighting the stability of the underlying assets and the work that our teams have done to optimize the expense structure with a focus on reliability and providing flexibility to our customers.

Our third quarter results highlight our strong fuel distribution growth driven by our capital deployment strategy, with a good mix of signing up new customers and bolt-on M&A, which continues to deliver market share gains and stable earnings. This strategy is complemented by our midstream operations. With the Parkland transaction now closed, our confidence in its highly accretive value has grown steadily over the past several months. It is another opportunity for us to deliver on our strengths. Maintaining reliable operations, disciplined expense management, optimizing gross profit, and effectively and accretively deploying capital. I will now turn the call over to Joe to provide his overall perspective. Joe.

Joe Kim (CEO)

Thanks, Karl. Good morning, everyone. We delivered a very strong third quarter. Although 2025 is not quite over, I want to share some perspectives on this year as a whole. On the last earnings call, we stated that the back half of this year will outperform a good first half, with the third quarter results in the books playing out as we stated and will deliver another record year. All three business segments are performing well. Our fuel distribution business continues to grow and provide stable earnings. Our pipeline and terminal segments also continue to perform at a high level. Last year's NuStar acquisition is proving to be outstanding. We have reduced expenses by 25% while improving gross profit and maintaining reliability. As for the Parkland acquisition, let me start off by publicly welcoming the Parkland employees to the Sunoco team.

With the closing complete, we posted a new investor presentation earlier this week. I want to highlight some key insights. Both Legacy Sunoco and Legacy Parkland are performing as expected. As I said earlier, Sunoco will have another record year. As for Parkland, the 2025 year-to-date results have materially outperformed 2024. When you combine the two businesses together, our diversified portfolio spans across the U.S., Canada, the Greater Caribbean, and Europe. We will deliver over 15 billion gallons of refined products. Scale is vital in our business, and we are now the largest fuel distributor in the Americas. Specifically within our midstream and fuel distribution portfolio, the Parkland addition greatly enhanced our position in the Atlantic Basin. We have over 7 billion gallons of contracted fuel demand from Eastern Canada to the U.S. East Coast to the Caribbean to South America.

Throughout this footprint, we also have a leading position of terminals and the expertise to manage waterborne and other sourcing options. Bottom line, scale plus key assets equals a leading supply cost advantage. Moving forward, our immediate top two priorities are number one, integrating Parkland, and number two, getting our balance sheet back to four times leverage. Just like we did with the NuStar acquisition, we'll quickly make key decisions to integrate the two companies to achieve synergies as soon as possible. We expect more than $250 million in synergies. We're digging deep into every part of the acquired business. We will provide more precision and timing when we complete the process. As for the balance sheet, we expect to be back to our long-term target leverage of four times within 12 months. This is faster than the timeline that we gave back in May. Let me wrap up.

As Scott mentioned earlier, the Parkland transaction is highly attractive with a greater than 10% accretion. Going forward, we expect free cash flow to be over $1 billion a year in the near future. The over 50% increase versus our standalone case puts us in a better position to execute on our capital allocation strategy, which is accretive investments, distribution growth, and a strong balance sheet. Operator, that concludes our prepared remarks. You may open the line for questions.

Operator (participant)

Thank you. At this time, we'll be conducting a question-and-answer session. If you'd like to ask a question, please press Star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press Star 2 if you'd like to remove your question from the queue. For participants with speaker equipment, it may be necessary to pick up your handset before pressing the Star keys. One moment, please, while we poll for questions. Our first question comes from Spiro Dounis with Citi. Please proceed with your question.

Spiro Dounis (Director)

Thanks, Operator. Good morning, team. First question, Joe, maybe just to pick up on some of those closing comments around synergies. Looking like the floor now is sort of firmly around over $250 million here. I know you're a few days into this merger, but I also know you've been busy in the background getting ready for this integration. Curious if you have a sense for just maybe how much above that $250 million we should have in mind. Are these more commercial or cost in nature? Maybe how are you thinking about the cadence of realizing those over the next three years?

Karl Fails (COO)

Hey, Spiro, this is Karl. Good morning. Yeah, really, to build on Joe's comments and his prepared remarks, there were really two updates that we provided in the release and in the investor deck earlier. One was the floor on the synergy number, and then the second was tightening our timeframe on getting back to the four times leverage to within 12 months. That comes because of the confidence we have based on the work we've done in the last six months. There are material synergies on both the expense and commercial sides. I think the best way to think about the expense side of things, whenever you put two large companies together, you get to leverage a scale to find efficiencies. We've spent the integration planning period planning that, and I'd say already a lot of those plans.

Were started to be executed this weekend after we closed. You layer on that we have a very strong track record of good expense discipline, and we feel there's a lot of opportunity there. On the commercial side, our scale helps us as well. The teams have begun putting together plans. Most of those are on the supply side. There are also going to be some opportunities on how we go to market that should yield results. As far as your question on the cadence, you should expect that when we issue guidance early next year, we'll give more details on what that ramp looks like through year three, where the 250-plus should be able to be delivered. As far as your question on what the ultimate upside looks like, here's how we think about it.

The two primary measures on this acquisition that we're going to be focused on, and both of them are very visible to the street, are first that we meet our commitment on getting leverage back to 4.0 times within 12 months, and second that we're going to show a double-digit accretion on a DCF per LP unit basis. Synergies clearly are the strongest lever we have to hit those metrics, but at some point in the future, those are going to merge with just improvements and growth in the base business that we've acquired. Bottom line is we feel very confident, and we're going to hit on those metrics as we've laid out.

Spiro Dounis (Director)

Great. Thanks, Karl. Second one, maybe just going to Sunoco Corp's dividend equivalency. Looks like the latest update points to minimal taxes for at least five years. Just curious, can you put a finer point on what that means for Sun's dividend equivalency over that period, and what's within your control to maybe push that out even further?

Scott Grischow (Treasurer and Senior VP of Finance)

Yeah, Spiro, this is Scott. Look, there was no change to our two-year dividend equivalency that we announced with the transaction in May. This was a feature that we granted as part of the Parkland transaction. Our intention is to keep the Sunoco distribution very similar to Sunoco LP's past this time period, and having minimal corporate income taxes is the foundation for achieving that. As we laid out in our investor materials, we expect this to be the case for at least five years. I will continue to pursue opportunities and strategies that allow us to minimize corporate taxes at Sunoco on an ongoing basis, namely by deploying capital on organic CapEx and acquisitions, things of that nature, and we will update investors when appropriate on the outlook past the five-year period.

Spiro Dounis (Director)

Great. I'll leave it there. Thank you, gentlemen.

Operator (participant)

Our next question comes from Justin Jenkins with Raymond James. Please proceed with your question.

Justin Jenkins (Managing Director and Senior Equity Analyst)

Great. Thanks. I guess I'd like to start on the distribution side of things. Obviously growing at a nice 5% clip, but obviously a much bigger business and more stable business with a lot of free cash flow with Parkland. Does that give you the potential to eventually maybe push that growth target up over time beyond the at least 5% window that you've looked at here recently?

Joe Kim (CEO)

Hey, Justin, it's Joe. Obviously, I think I've said it like a broken record. Quarter after quarter, the foundation of our cap allocation is having a stable, reliable, and growing distribution. I think the foundation of that is we continue to grow cash flow. I think we've stated a few times that for the eighth consecutive year, we've grown DCF per common unit. We expect that to continue for the future. Our coverage is hovering around 1.8. Our balance sheet is in a good position. When we said, I think last year, that we expected a multi-year distribution increase, we said that pre-Parkland. You add in Parkland with double-digit accretion. We were in a good place before Parkland. We're in a better place after Parkland.

As far as an exact amount for 2026 and above, we will provide that as part of our kind of overall guidance early next year. I think what you can take away is that we are in a better position than we were even last year for meaningful distribution growth on a multi-year path.

Justin Jenkins (Managing Director and Senior Equity Analyst)

Great. Appreciate that, Joe. Second question's on Hurricane Melissa impacts. Certainly, you've had some presence in the Caribbean over time, and Parkland is a bigger business in the Caribbean. Anything that you want to highlight here in terms of impact from the hurricane itself on the broader Caribbean portfolio for the fourth quarter and into 2026?

Austin Harkness (Chief Commercial Officer and Senior VP)

Yeah. Hey, Justin, this is Austin. First, I'd just start with on the human side of things, our thoughts are with the people in the region. The loss of life and property associated with the storm, this was a powerful storm. From a business standpoint specifically, the impact to our portfolio was largely limited to the Jamaica business. Fortunately, all employees in the region have been accounted for. I think this is a credit to the team. We've got a fantastic team down there. From the work they did, including their meticulous preparation in advance of the storm, making sure that the area was as prepared as possible to the swift recovery or swift response, I should say, bringing necessary people, supplies, resources into the island to assist with recovery efforts.

Just to put the business impact into a little bit more perspective, Jamaica is one of 25 jurisdictions and markets that we serve in the Caribbean region. Overall, we do not expect there to be any material impact to our fourth quarter results for the segment or 2026 and beyond. That is in no way intended to minimize, obviously, the human impact and devastation to some of the folks that were impacted in the region.

Justin Jenkins (Managing Director and Senior Equity Analyst)

Thanks, guys.

Operator (participant)

Our next question comes from Theresa Chen with Barclays Bank. Please proceed with your question.

Theresa Chen (Senior Analyst)

Good morning, everyone. Looking at your comprehensive asset base at this point, could you share your perspective on potential opportunities for your West Coast terminaling assets, as well as any incremental profitability upside for the Burnaby refinery in light of ongoing California refinery closures?

Karl Fails (COO)

Yeah, Teresa, good morning. This is Karl. I think here's what I'd say. I'll start with the refinery. One is we're thankful, and you see the results that the refinery team has delivered this year on improved reliability. That's really been our focus and will be our focus going forward on the refinery operation. Clearly, California, there have been plenty of refinery shutdowns and different things in the news. Our strong asset base on the West Coast, while it's not as big as on the East Coast, is growing. I think there's going to be opportunities. While I don't know exactly how the markets are going to shape out over the next two or three or four years, I think our track record shows that when product flows shift, we have the scale and expertise to be able to take advantage of them.

The refinery really is the platform for our fuel distribution business in Western Canada. We have key assets down through the Pacific Northwest and into California. If refinery shutdowns continue and the West Coast of the U.S. and Canada become import markets, we should have opportunity to supply from our refinery in Canada, or we should have facilities that should enable imports coming in from outside the U.S. I think we're well positioned to be able to take advantage of wherever the markets shake out.

Theresa Chen (Senior Analyst)

Got it. Thank you. What are your expectations regarding how the recently announced refined product pipeline projects could impact or create opportunities for your own Gulf Coast to Mid-Continent refined product pipeline infrastructure, as well as your fuel distribution assets in pads two and five?

Karl Fails (COO)

Yeah, Teresa, I think my answer is pretty similar to the California question. I think, we do not comment specifically on certain competitors' projects. I think those pipeline open seasons and projects that you mentioned really are an indication of some of the changes in U.S. refined product flows as a result of refinery shutdowns in California. I think the same principles are in play. We have a fuel distribution business that we have a track record taking advantage of changes in product flows. We now have an asset portfolio, terminals on the West Coast, some pipeline systems in the Mid-Continent and in Texas, that we can use to invest in to provide services for either our own business or our customers. Obviously, when things change, sometimes there are assets that are impacted negatively, but we will have assets that are impacted positively.

As we look at that all together and our ability to work with our customers, see where we can help meet their strategic objectives, we feel really good about our ability to benefit from these changes.

Theresa Chen (Senior Analyst)

Thank you.

Operator (participant)

As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. One moment, please, while we poll for questions. Our next question comes from Jeremy Tennant with JPMorgan. Please proceed with your question.

Hey, this is Eli on for Jeremy. Just wanted to start on the outlook. I guess what went into the decision not to update the 2025 guide today to include Parkland contributions? Would that be part of the tanked asset closing? Yeah, just thoughts there. Maybe onto 2026 and kind of early thoughts there. I think you said you'd release guidance earlier next year versus maybe December this year. Just what are the kind of key puts and takes, base business and synergies to expect as components to the 2026 guide? Thanks.

Joe Kim (CEO)

Hey, Eli, this is Joe. Let me start with 2025. I think the obvious reason is we just closed on Parkland. One of the statements we made earlier is that we expect to close on Tanqued in the fourth quarter. Trying to put too much precision on when Tanqued is going to happen gave us good reason to be sure about what we're going to provide for guidance for next year instead of just giving an update in 2025. The other thing is that for the reason why we typically have given guidance in December of every year, we pushed it to early next year. We just got all the budgets that Parkland put together for their business. We're going through that with a fine-toothed comb.

We'll look at what the base business is going to perform like, and that'll be a significant part of our guidance for next year. As far as early thoughts on 2026, I can give you a few things I think that might be helpful. First of all, the Parkland business is performing year to date better than 2024. So we're starting with a really good baseline with Parkland. Secondly, for Sunoco legacy business, we continue to grow. We've grown year after year, and 2026 on a standalone basis won't be any different. I think Karl talked in depth about the synergies. We increased, we put at least $250 million in synergies. We think this is going to be an outstanding acquisition for us. We're in the process of going through more precision and exact timing, and all that will come together when we give guidance.

I think the takeaway is that we feel even better about this acquisition than when we announced it in May, and we're well positioned to have another outstanding year in 2026.

Awesome. Maybe just back to the base business, I think you talked about kind of just steady improvement there. Maybe on the fuel distribution side, just thinking about the CPG margins following the integration of PKI assets. How should we think about those margins trending as we move forward? I know you guys are the largest fuel distributor in North America, and you have a lot of economies of scale. Should we see any kind of upward pressure on those margins going forward?

Yeah. Eli, let me give you a couple of thoughts about more on a segment basis. I'll give you the pieces, and then when we give guidance, all this will kind of tie out together. First of all, we'll start with the Parkland US business, their legacy business. I think it's been well documented that they've had some struggles over the last few years. The exact reason, the detail, the insider view. We don't have the exact details yet, but we will. Here's what I think to give you clarity on the US business. We view Parkland's US fuel distribution business just like a bolt-on acquisition we've done over and over again. We're going to channel manage it for income stability. We're going to do gross profit optimization. We're going to cut expenses.

In due time, pretty darn quickly, we expect the Parkland US business to struggle to perform in line with what Sunoco has done year after year. We feel very positive about that. As far as the Canadian business, the way that I would probably look at it is they've had strong third-quarter results. I'm not surprised. These assets in Canada and fuel distribution have performed well year after year. The Canadian assets have some key elements that I really like. First of all, they got scale. We got scale. One in five fuel stations is fueled by Parkland. Incredible scale in Canada. Secondly, the Canadian relative to the U.S., they've had a long history of sustained higher margins than the U.S. We don't think this is going to change. Finally, we have channel management opportunities. We've done that with every acquisition we've done.

We've taken the assets and we'll put it into the right channel where we think we can have the most income stability. From a Canadian fuel distribution side, we think this is going to be additive to our overall fuel distribution portfolio. In the Caribbean, we see these are a bunch of niche markets with high margins, and we think this is going to continue. We have history in niche markets like Hawaii and Puerto Rico. Some of these markets also have material GDP growth in some of these areas, so we think we'll share in the upside. If you put it all together, I feel better about our fuel distribution portfolio, and that's the reason why we thought Parkland was a great fit for us.

Great. I'll leave it there. Thanks.

Operator (participant)

Our next question comes from Ned Baramov with Wells Fargo. Please proceed with your question.

Ned Baramov (Senior Analyst)

Hey, good morning. Thanks for taking the questions. I want to stay on the legacy Sunoco US fuel distribution business here. A few factors in play. On the one hand, the ongoing government shutdown and some signs of weaker fuel demand do not seem constructive for volumes. On the other hand, as Karl pointed out, your CapEx program and roll-up transactions year to date add gallons to your system. Either way, you have already demonstrated an ability to protect the overall contribution from this segment across different environments. Just wanted to check if there is a change in how you think about the prospects of the fuel distribution business in the next 6 to 12 months.

Austin Harkness (Chief Commercial Officer and Senior VP)

Yeah, this is Austin. I think you hit it. Overall, I think what we're seeing from a fuel volume standpoint is in the U.S. more broadly, demand for refined products is roughly flat year over year. There has been maybe some softening in recent months, but our legacy business has outperformed the broader segment, right? We're up mid to high single digits for Q3 on volumes. A lot of that, as you pointed out, is owed to our capital allocation strategy and growth capital deployment, including growth CapEx and some of the bolt-on creative M&A that we did in the first half of this year that's yielding benefits in Q3 and beyond. In terms of changes to expectations, we actually see the fundamentals as strong for the segment as they've ever been.

The business is healthy, and with our combined now asset base with the Parkland acquisition, we're well positioned to continue our historical trend of growing EBITDA for the segment creatively year over year going forward.

Ned Antonov Baramov (Analyst)

Great. I guess a quick question on growth capital. Could you talk about the key areas of investment for Sunoco in the third quarter other than the $16 million contribution to the gathering JV? Are you still primarily spending in support of the fuel distribution business, or are there organic opportunities in your pipeline and terminals segments?

Karl Fails (COO)

Yeah, Ned, this is Karl. Our growth capital is spread across all of our segments, but really it is in a best project wins type of mentality. Obviously, we have not done any large projects in our pipeline systems or terminal segments, but there is plenty of what we would call smaller to medium-sized optimization type projects. Some of them unlock more opportunities with our fuel distribution business. Some of them unlock more ratable income from third-party customers. Really, it is fuel distribution, pipelines, and terminals all have growth capital in addition to our parts of the JVs.

Ned Antonov Baramov (Analyst)

Thank you. That's all I had.

Operator (participant)

We have reached the end of the question and answer session. I'd now like to turn the call back over to Scott Grischow for closing comments.

Karl Fails (COO)

Thanks for joining us on the call today. As we said, there are a lot of great things to look forward to in 2025 and beyond for Sunoco, and we look forward to updating you going forward. Please reach out if you have any questions. Thanks for tuning in, and always appreciate your support.

Operator (participant)

This concludes today's teleconference. You may disconnect your lines at this time, and we thank you for your participation.