Suburban Propane Partners, L.P. operates as a nationwide marketer and distributor of a diverse array of products meeting the energy needs of its customers.
The company specializes in the distribution of propane, renewable propane, renewable natural gas (‘RNG’), fuel oil, and refined fuels, as well as the marketing of natural gas and electricity in deregulated markets, and the production of and investment in low-carbon fuel alternatives. In support of the company's core marketing and distributio...
Suburban Propane Partners, L.P. operates as a nationwide marketer and distributor of a diverse array of products meeting the energy needs of its customers.
The company specializes in the distribution of propane, renewable propane, renewable natural gas (‘RNG’), fuel oil, and refined fuels, as well as the marketing of natural gas and electricity in deregulated markets, and the production of and investment in low-carbon fuel alternatives. In support of the company's core marketing and distribution operations, it installs and services a variety of home comfort equipment, particularly in the areas of heating and ventilation. Together with its predecessor companies, the company has been continuously engaged in the retail propane business.
The company conducts its business principally through Suburban Propane, L.P., a Delaware limited partnership, which operates the company's propane business and assets (the ‘Operating Partnership’), and its direct and indirect subsidiaries.
Direct and indirect subsidiaries of the Operating Partnership include Suburban Heating Oil Partners, LLC, which owns and operates the assets of the company's fuel oil and refined fuels business; Agway Energy Services, LLC, which owns and operates the assets of the company's natural gas and electricity business; Suburban Sales and Service, Inc., which conducts a portion of the company's service work and appliance and parts business; and Suburban Renewable Energy, LLC (‘Suburban Renewable Energy’), which serves as the platform for the company's investments in innovative renewable energy technologies and businesses. The company's fuel oil and refined fuels, natural gas and electricity, services, and renewable energy businesses are structured as either limited liability companies that are treated as corporations or corporate entities (collectively referred to as ‘Corporate Entities’) and, as such, are subject to corporate level income tax.
On December 28, 2022, Suburban Renewable Energy acquired a platform of RNG production assets (the ‘RNG Acquisition’) from Equilibrium Capital Group (‘Equilibrium’), a leading sustainability-driven asset management firm.
During fiscal 2022, Suburban Renewable Energy acquired a 25% equity interest in Independence Hydrogen, Inc. (‘IH’), a veteran-owned and operated, privately held company developing a gaseous hydrogen ecosystem to deliver locally sourced hydrogen to local markets, with a primary focus on material handling and backup power applications. Also in fiscal 2022, Suburban Renewable Energy entered into an agreement to construct, own, and operate a new biodigester system with Adirondack Farms, a family dairy farm located in Clinton County, New York (‘Adirondack Farms’) for the production of RNG.
During fiscal 2020, the Operating Partnership acquired a 38% equity interest in Oberon Fuels, Inc. (‘Oberon’), which is a development-stage producer of low carbon renewable dimethyl ether (‘rDME’) transportation fuel.
Strategy
The key elements of the company's strategy are to make strategic investments in the continued build out of its renewable energy platform; grow its customer base by improving customer retention and acquiring new customers; make selective acquisitions of complementary businesses or assets; maintain an internal focus on driving operating efficiencies, right-sizing its cost structure, and enhancing its customer mix; and engage in the selective disposition of non-strategic assets.
Segments
The company manages and evaluates its operations in four operating segments, three of which are reportable segments: Propane, Fuel Oil and Refined Fuels, and Natural Gas and Electricity.
Propane
Propane is a by-product of natural gas processing and petroleum refining. It is a clean-burning energy source recognized for its transportability and ease of use relative to alternative forms of stand-alone energy sources. Propane use falls into three broad categories, such as residential, commercial, and government applications; industrial applications; and agricultural uses.
In the residential, commercial, and government markets, propane is used primarily for space heating, water heating, clothes drying, and cooking. Industrial customers use propane generally as a motor fuel to power over-the-road vehicles, forklifts, and stationary engines, to fire furnaces, as a cutting gas, and in other process applications. In the agricultural market, propane is primarily used for tobacco curing, crop drying, poultry brooding, and weed control.
Propane is extracted from natural gas or oil wellhead gas at processing plants or separated from crude oil during the refining process. It is normally transported and stored in a liquid state under moderate pressure or refrigeration for ease of handling in shipping and distribution. When the pressure is released or the temperature is increased, propane becomes a flammable gas that is colorless and odorless, although an odorant is added to allow its detection. Propane is non-toxic, clean-burning, and, when consumed, produces virtually no particulate matter. In addition, the company's equity investment in Oberon is included within the propane segment.
Product Distribution and Marketing
The company distributes propane and renewable propane through a nationwide retail distribution network consisting of approximately 700 locations in 42 states as of September 28, 2024. The company's operations are principally concentrated in the east and west coast regions of the United States, as well as portions of the midwest region of the United States and Alaska. As of September 28, 2024, the company serviced approximately 950,000 propane customers. Typically, the company's customer service centers are located in suburban and rural areas where natural gas is not readily available. Generally, these customer service centers consist of an office, appliance showroom, warehouse, and service facilities, with one or more 18,000 to 30,000-gallon storage tanks on the premises. Approximately 60% of the company's residential customers receive their propane supply through an automatic delivery system. These deliveries are scheduled through proprietary technology, based upon each customer’s historical consumption patterns and prevailing weather conditions. Additionally, the company offers its customers a budget payment plan whereby the customer’s estimated annual propane purchases and service contracts are paid for in a series of estimated equal monthly payments over a twelve-month period. From the customer service centers, the company also sells, installs, and services heating and cooking appliances to customers who purchase propane from it and, at some locations, sells propane fuel systems for motor vehicles.
The company sells propane primarily to seven customer markets: residential, commercial, industrial (including engine fuel), government, agricultural, other retail users, and wholesale. Approximately 96% of the company's propane gallons sold in fiscal 2024 were to retail customers: 42% of those propane gallons to residential customers, 39% to commercial customers, 9% to industrial customers, 6% to government customers, and 4% to agricultural customers. The balance of approximately 4% of the company's propane gallons sold in fiscal 2024 were for risk management activities and wholesale customers.
Retail deliveries of propane are usually made to customers by means of bobtail and rack trucks. Propane is pumped from bobtail trucks, which have capacities typically ranging from 2,400 gallons to 3,500 gallons of propane, into a stationary storage tank on the customers’ premises. The capacity of these storage tanks ranges from approximately 100 gallons to approximately 1,200 gallons, with a typical tank having a capacity of 300 to 400 gallons. As is common in the propane industry, the company owns a significant portion of the storage tanks located on its customers’ premises. The company also delivers propane to retail customers in portable cylinders, which typically have a capacity of 5 to 35 gallons. When these cylinders are delivered to customers, empty cylinders are refilled in place or transported for replenishment at the company's distribution locations. The company also delivers propane to certain other bulk end users in larger trucks known as transports, which have an average capacity of approximately 9,000 gallons.
Supply
The company's propane supply is purchased from approximately 40 wholesalers at approximately 135 supply points located throughout the United States and Canada. The company makes purchases primarily under one-year agreements that are subject to annual renewal, and also purchases propane on the spot market. Propane is generally transported from refineries, pipeline terminals, storage facilities (including the company's storage facility in Elk Grove, California), and coastal terminals to the customer service centers by a combination of common carriers, owner-operators, and railroad tank cars.
During fiscal 2024, Energy Transfer LP (‘ET’), which acquired Crestwood Equity Partners L.P., and Targa Liquids Marketing and Trade LLC (‘Targa’) provided approximately 30% and 15% of the company's total propane purchases, respectively. The availability of the company's propane supply is dependent on several factors, including the severity of winter weather, the magnitude of competing demands for available supply (e.g., crop drying and exports), the availability of transportation and storage infrastructure, and the price and availability of competing fuels, such as natural gas and fuel oil. Approximately 82% of the company's total propane purchases were from domestic suppliers and 100% came from North America in fiscal 2024.
The company owns and operates a large propane storage facility in Elk Grove, California. It also operates smaller storage facilities in other locations throughout the United States and has rights to use storage facilities in additional locations. As of September 28, 2024, the storage capacity at the company's facility in Elk Grove, California was leased to third parties.
Fuel Oil and Refined Fuels
Product Distribution and Marketing
The company markets and distributes fuel oil, kerosene, diesel fuel, and gasoline to approximately 27,000 residential and commercial customers primarily in the northeast region of the United States. Sales of fuel oil and refined fuels for fiscal 2024 amounted to 16.9 million gallons. Approximately 63% of the fuel oil and refined fuels gallons sold by the company in fiscal 2024 were to residential customers, principally for home heating, 7% were to commercial customers, and 9% to other users. Sales of diesel and gasoline accounted for the remaining 21% of total volumes sold in this segment during fiscal 2024. Fuel oil has a more limited use, compared to propane, and is used almost exclusively for space and water heating in residential and commercial buildings. The company sells diesel fuel and gasoline to commercial and industrial customers for use primarily to operate motor vehicles.
Approximately 50% of the company's fuel oil customers receive their fuel oil under an automatic delivery system. From its customer service centers, the company also sells, installs, and services heating equipment to customers who purchase fuel oil from it.
Deliveries of fuel oil are usually made to customers by means of tankwagon trucks, which have capacities ranging from 2,500 gallons to 3,000 gallons. Fuel oil is pumped from the tankwagon truck into a stationary storage tank that is located on the customer’s premises, which is owned by the customer. The capacity of customer storage tanks ranges from approximately 275 gallons to approximately 1,000 gallons.
Supply
The company obtains fuel oil and other refined fuels in pipeline, truckload, or tankwagon quantities, and has contracts with certain pipeline and terminal operators for the right to temporarily store fuel oil at 13 terminal facilities that it does not own. The company has arrangements with certain suppliers of fuel oil, which provide open access to fuel oil at specific terminals throughout the northeast. It purchases fuel oil from approximately 20 suppliers at approximately 45 supply points.
Natural Gas and Electricity
The company markets natural gas and electricity through its 100%-owned subsidiary, Agway Energy Services, LLC (‘AES’), in the deregulated markets of New York and Pennsylvania, primarily to residential and small commercial customers. In essence, the local utility companies distribute electricity and natural gas on their distribution systems, and the company arranges for the supply of electricity or natural gas to specific delivery points. The business strategy of this segment is to expand its market share by concentrating on growth in the customer base and expansion into other deregulated markets that are considered strategic markets.
The company serves approximately 28,000 natural gas and electricity customers in New York and Pennsylvania. During fiscal 2024, it sold approximately 1.1 million dekatherms of natural gas and 135.7 million kilowatt-hours of electricity through the natural gas and electricity segment. Approximately 88% of the company's customers were residential households, and the remainder were small commercial and industrial customers. The company has arrangements with several local utility companies that provide billing and collection services for a fee.
The company's electricity requirements are purchased through the New York Independent System Operator (‘NYISO’) and PJM Interconnection (‘PJM’).
All Other
The company sells, installs, and services various types of whole-house heating products, air cleaners, humidifiers, and space heaters to the customers of its propane and fuel oil businesses. The company's supply needs are filled through supply arrangements with several large regional equipment manufacturers and distribution companies. Competition in this business is primarily with small, local heating and ventilation providers and contractors, as well as, to a lesser extent, other regional service providers. The focus of the company's ongoing service offerings is in support of the service needs of its existing customer base within its propane and refined fuels business segments. Additionally, the company has entered into arrangements with third-party service providers to complement and, in certain instances, supplement its existing service capabilities. Its platform of RNG businesses and the equity investment in IH are included within ‘all other’.
Seasonality
Historically, approximately two-thirds of the company's retail propane volume is sold during the six-month peak heating season from October through March. The fuel oil business tends to experience greater seasonality given its more limited use for space heating, and approximately three-fourths of the company's fuel oil volumes are sold between October and March. Consequently, sales and operating profits are concentrated in the company's first and second fiscal quarters. Cash flows from operations, therefore, are greatest during the second and third fiscal quarters when customers pay for products purchased during the winter heating season.
Weather conditions have a significant impact on the demand for the company's products, in particular propane, fuel oil, and natural gas, for both heating and agricultural purposes. Many of the company's customers rely on propane, fuel oil, or natural gas primarily as a heating source. Accordingly, the volume sold is directly affected by the severity of the winter weather in the company's service areas.
Trademarks and Tradenames
The company utilizes a variety of trademarks and tradenames owned by it, including ‘Suburban Propane,’ ‘Suburban Renewables,’ and ‘Agway Energy Services,’ and related marks or designs incorporating related logos, such as ‘Agway Energy Guard.’ All of the trademarks and tradenames used by Suburban Propane and Agway Energy Services are registered (or have applications pending and recently allowed for registration) with the U.S. Patent and Trademark Office.
Government Regulation
The company's operations are subject to numerous federal, state, and local environmental, health, and safety laws and regulations. Generally, these laws and regulations impose limitations on the discharge of hazardous materials, pollutants, and contaminants and establish standards for the handling, transportation, distribution, treatment, storage, and disposal of hazardous materials, pollutants, contaminants, and solid and hazardous wastes, which may require the investigation, assessment, cleanup, or monitoring of, or compensation for, environmental impacts, including natural resource damages. Notably, these laws include the federal Comprehensive Environmental Response, Compensation, and Liability Act (‘CERCLA’); Resource Conservation and Recovery Act (‘RCRA’); Clean Air Act; Clean Water Act; and National Environmental Policy Act and their implementing regulations, as well as comparable state laws and regulations.
With respect to the transportation of propane, distillates, and gasoline by truck, the company is subject to laws and regulations that cover the transportation of hazardous materials and are administered, respectively, by the Federal Motor Carrier Safety Administration and the Pipeline and Hazardous Materials Safety Administration of the United States Department of Transportation (‘DOT’), or comparable state agencies.
The company's operations are subject to workplace safety standards under the Federal Occupational Safety and Health Act of 1970 (‘OSHA’) and comparable state laws that regulate the protection of worker health and safety. The company is also subject to laws and regulations governing the security of hazardous materials, including propane, under the Federal Homeland Security Act of 2002, as administered by the Department of Homeland Security (‘DHS’). The DHS promulgated the Chemical Facility Anti-Terrorism Standards (‘CFATS’) to identify and secure chemical facilities that present the greatest security risk using a risk-based tiering structure. The company has a number of facilities registered with the DHS, now referred to as the ‘Cybersecurity and Infrastructure Security Agency’ or ‘CISA.’
History
Suburban Propane Partners, L.P. was founded in 1945. The company was incorporated in 1995.
The Analyst Price Target shows the analysts’ low, high, and average target at a glance.
