ARKO Petroleum Corp.

ARKO Petroleum Corp. (APC) is a growth-oriented fuel distribution company and one of the largest wholesale fuel distributors by gallons in North America, supplying customers in approximately 3,500 locations across the District of Columbia and more than 30 states in the U.S. ¹. Formed in July 2025 as a wholly-owned subsidiary of ARKO Corp. (ARKO Parent), APC primarily engages in wholesale fuel distribution, fleet fueling, and the supply of fuel to ARKO Parent's retail convenience stores ². The company completed its initial public offering (IPO) on February 13, 2026, issuing 11,111,111 shares of Class A common stock at $18.00 per share, raising approximately $206.8 million in net proceeds ³. ARKO Parent retains a significant stake, owning 35 million shares of Class B common stock, representing 73.6% of the economic interests and 93.3% of the combined voting power ⁴. The U.S. fuel distribution industry is characterized by intense competition and fragmentation, with approximately 6,500 domestic wholesale fuel distributors as of the end of 2025, and the largest distributor holding only an 8% market share ⁵. APC's competitive advantages include its scale, strong relationships with major fuel suppliers like BP, ExxonMobil, Marathon, Motiva, Shell, and Valero, and its ability to source, integrate, and optimize acquisitions ⁶.

The core business model revolves around three segments: wholesale, fleet fueling, and GPMP. Revenue is primarily generated through fuel sales with fixed mark-ups or profit-sharing arrangements, limiting exposure to commodity price volatility ⁷. The company benefits from its relationship with ARKO Parent, which provides scale advantages, growth opportunities, and a growing customer network, including approximately 2.4 million enrolled members in its fas REWARDS® loyalty program ⁸.

The Wholesale Segment supplies fuel to gas stations operated by third-party dealers, sub-wholesalers, and bulk and spot purchasers on either a cost-plus or consignment basis ⁹. As of December 31, 2025, this segment supplied fuel to 2,099 sites, including 1,801 sites under cost-plus fuel supply contracts with a volume-weighted average remaining term of approximately 5.5 years, and 298 sites under consignment contracts with a volume-weighted average remaining term of approximately 5.0 years ¹⁰. For the year ended December 31, 2025, the wholesale segment sold 989.1 million gallons of fuel, generating revenues of $2.8 billion and fuel contribution of $94.5 million ¹¹. The segment's operating income for 2025 was $89.4 million ¹².

The Fleet Fueling Segment operates proprietary and third-party cardlock locations, selling fuel (primarily diesel) to commercial fleets and municipal entities, and earns commissions from proprietary fuel card sales ¹³. As of December 31, 2025, this segment operated 295 sites ¹⁴. For the year ended December 31, 2025, the fleet fueling segment sold 142.8 million gallons of fuel, generating revenues of approximately $483.8 million and fuel contribution of $65.7 million ¹⁵. The segment's operating income for 2025 was $48.6 million ¹⁶.

The GPMP Segment supplies fuel to substantially all of the ARKO Retail Sites at cost plus a fixed margin (5.0 cents per gallon through December 31, 2025, increasing to 6.0 cents per gallon thereafter) ¹⁷. It also charges a fixed fee to certain ARKO Retail Sites not supplied by APC and includes inter-segment fuel sales to wholesale locations at a fixed margin ¹⁸. As of December 31, 2025, the GPMP segment supplied fuel to 1,095 ARKO Retail Sites ¹⁹. For the year ended December 31, 2025, the GPMP segment sold 864.8 million gallons of fuel to ARKO Retail Sites, generating revenues of $2.3 billion and fuel contribution of $43.2 million ²⁰. The segment's operating income for 2025 was $92.9 million ²¹.

For the fiscal year ended December 31, 2025, ARKO Petroleum Corp. reported total revenues of $5,581,264 thousand ²². Fuel revenue was $3,203,273 thousand ²³, and fuel revenue from related parties was $2,302,547 thousand ²⁴. Other revenues, net, totaled $63,063 thousand ²⁵, with other revenues, net – related party, at $12,381 thousand ²⁶. Total operating expenses were $5,493,973 thousand ²⁷, leading to an operating income of $83,931 thousand ²⁸. Net income for the year was $32,727 thousand ²⁹, and diluted EPS was $0.94 ³⁰. The company generated $79,558 thousand in net cash provided by operating activities ³¹ and reported Discretionary Cash Flow of $88,859 thousand ³². As of December 31, 2025, cash and cash equivalents stood at $15,556 thousand ³³, total debt, net was $392,030 thousand ³⁴, and Net Debt was $526,572 thousand ³⁵. The Ratio of Net Debt to Adjusted EBITDA was 3.7x ³⁶.

Comparing 2025 to 2024, total revenues decreased by $786,475 thousand, or 12.4% ³⁷. Fuel revenue decreased by $148.1 million, or 4.4% ³⁸, primarily due to lower average fuel prices and fewer gallons sold at comparable wholesale and fleet fueling sites, partially offset by conversions of ARKO Retail Sites to dealer locations ³⁹. Fuel revenue from related parties decreased by $661.8 million, or 22.3% ⁴⁰, driven by lower average fuel prices and a 158.7 million, or 15.5%, decrease in gallons sold, reflecting macroeconomic challenges and site conversions ⁴¹. Other revenues, net, increased by $22.9 million, or 56.8% ⁴², mainly due to additional rental income from converted ARKO Retail Sites ⁴³. Total operating expenses decreased by $781.6 million, or 12.5% ⁴⁴. Operating income decreased from $92.0 million in 2024 to $83.9 million in 2025 ⁴⁵, primarily due to lower fuel contribution from comparable wholesale sites and related party sites, and increased depreciation and amortization, partially offset by the benefit from converted ARKO Retail Sites ⁴⁶. Net income attributable to ARKO Petroleum Corp. decreased from $40.2 million in 2024 to $32.7 million in 2025 ⁴⁷. Adjusted EBITDA increased from $139.2 million in 2024 to $143.5 million in 2025 ⁴⁸. Net cash provided by operating activities decreased from $106.8 million in 2024 to $79.6 million in 2025 ⁴⁹.

During the year ended December 31, 2025, APC's wholesale segment grew by 256 sites through the conversion of ARKO Retail Sites to dealer locations as part of ARKO Parent's multi-year transformation plan ⁵⁰. Since mid-2024, a total of 409 ARKO Retail Sites have been converted to dealer locations ⁵¹. The company also purchased six fee properties for $6.5 million in 2025 ⁵².

ARKO Petroleum Corp. intends to maintain and sustainably grow cash flows and increase cash distributions to stockholders over time by increasing gallons sold ⁵³. The company's operating model is designed to be cost- and capital-efficient, requiring a limited number of employees and resulting in relatively low operating costs and a high conversion of gross profit to Adjusted EBITDA ⁵⁴. This model, combined with a low leverage profile and stable cash flow, is expected to enable consistent returns of capital to stockholders through dividends ⁵⁵.

A major growth area is leveraging the relationship with ARKO Parent. This includes increasing fuel distribution volumes by growing sales at both existing and new-to-industry (NTI) ARKO Retail Sites, as ARKO Parent is investing capital in strategic sub-segments and NTI sites to increase traffic and fuel gallons sold ⁵⁶. Additionally, future ARKO Parent acquisitions are anticipated to provide opportunities for APC to capitalize on additional fuel volumes sold through new ARKO Retail Sites ⁵⁷. APC also plans to jointly pursue strategic acquisition opportunities with ARKO Parent, broadening the set of desirable M&A targets to include wholesale and fleet fueling businesses that are part of retail companies acquired by ARKO Parent ⁵⁸. Acquisitions exclusive to ARKO Parent will still offer APC the opportunity to concurrently grow through the purchase of fuel distribution rights ⁵⁹.

Another significant growth vector is the expansion of third-party wholesale distribution and fleet fueling businesses. This involves increasing the wholesale dealer network through recruitment of new dealers, supported by a sales force of approximately 50 dedicated representatives ⁶⁰. The company also plans to grow its high-margin Fleet Fueling segment by investing in targeted equipment upgrades and branding enhancements at existing sites, and through organic growth of existing and new accounts at its cardlocks ⁶¹. Furthermore, APC intends to expand its fleet fueling footprint by building new locations, targeting 20 NTI fleet fueling locations with target openings during 2026, with one already opened in March 2026, and 13 currently advancing ⁶². These NTI locations are expected to positively impact results due to the attractive, durable cash flow profile of the fleet fueling business ⁶³. Historically, most growth in the wholesale segment has been through acquisitions, and APC plans to continue this strategy with strategic and accretive acquisitions of wholesale distribution businesses in existing and new geographic areas ⁶⁴. The company also anticipates continued growth through the conversion of ARKO Retail Sites to dealer locations under ARKO Parent's multi-year transformation plan, with a focus on converting a meaningful number of additional sites throughout 2026 ⁶⁵.

The company plans to maintain a conservative capital structure with enhanced financial flexibility ⁶⁶. As of December 31, 2025, APC had liquidity of $434.3 million, consisting of approximately $15.6 million of cash and cash equivalents and approximately $418.7 million of availability under its $800 million Capital One Line of Credit, which can be increased up to $1.0 billion ⁶⁷. The company's liquidity position significantly increased following the IPO, with approximately $184.0 million of proceeds used to repay indebtedness under the Capital One Line of Credit, and an additional $22.7 million repayment from over-allotment option proceeds ⁶⁸. APC currently intends to pay a regular quarterly cash dividend of $0.50 per share, or $2.00 per share on an annualized basis ⁶⁹. The capital spending program will primarily focus on maintaining properties and equipment, renewing supply agreements, pursuing new dealer contracts, acquiring additional dealer and cardlock locations, and expanding the fleet fueling footprint by building new locations ⁷⁰. Capital expenditures for environmental compliance were approximately $2.5 million for 2025 and are not expected to be material for 2026 ⁷¹. For 2025, estimated maintenance capital expenditures were $6.9 million, and growth capital expenditures were $20.6 million ⁷².

ARKO Petroleum Corp. faces several material risks, including intense competition and fragmentation in the wholesale motor fuel distribution and fleet fueling industries, which can lead to narrow margins and potential loss of customers if service quality is not maintained ⁷³. Sustained inflationary pressures on labor, services, and materials, as well as high interest rates, could decrease operating margins and increase working capital requirements ⁷⁴. Volatility in wholesale motor fuel prices, influenced by crude oil prices, refining and transportation costs, and geopolitical events, can impact sales, operations, and customer financial conditions ⁷⁵. Significant changes in demand for fuel-based transportation, driven by the development of fuel-efficient engines, electric vehicles (EVs), and alternative clean power systems, could decrease demand for petroleum-based motor fuel ⁷⁶. Dependence on several principal suppliers for fuel purchases and third-party transportation providers for most motor fuel transportation poses risks of supply disruption or non-renewal of agreements ⁷⁷. A significant portion of revenue is generated under fuel supply agreements with dealers that must be renegotiated periodically, and failure to do so on favorable terms could adversely affect results ⁷⁸. The company's substantial reliance on ARKO Parent, which accounted for approximately 41% of revenue in 2025, means any adverse development affecting ARKO Parent's operations or financial condition could materially impact APC ⁷⁹. Acquisitions, a key growth strategy, carry risks such as diversion of management attention, integration difficulties, and failure to realize anticipated synergies ⁸⁰. Geopolitical conflicts, including the Russia-Ukraine War, Israel-Hamas War, and U.S./Israel-Iran War, as well as instability in Venezuela, could significantly affect the global economy, energy prices, and operating margins ⁸¹. The distribution, transportation, and storage of motor fuels are subject to extensive environmental protection and operational safety laws and regulations, which can lead to significant costs, liabilities, and business interruptions from accidental leaks, spills, or non-compliance ⁸². Changes in U.S. trade policy, including the imposition of tariffs, could increase costs or reduce demand for products ⁸³. As a restricted subsidiary and guarantor under ARKO Parent's Senior Notes, APC is subject to various covenants that may restrict its business and financing activities ⁸⁴. The company's variable rate debt, which constituted all of its debt as of December 31, 2025, exposes it to interest rate fluctuations; a 1% increase in applicable interest rates would increase annual debt service by approximately $4.0 million ⁸⁵.

Management emphasizes a growth-oriented strategy focused on maintaining and sustainably growing cash flows to support increasing cash distributions to stockholders over time, primarily by increasing gallons sold. They highlight the company's cost- and capital-efficient operating model, which is characterized by a limited number of employees, relatively low operating costs, and a high conversion of gross profit to Adjusted EBITDA, enabling consistent and growing cash dividends. Management intends to leverage the strong relationship with ARKO Parent to drive growth, including increasing fuel distribution volumes at existing and new ARKO Retail Sites and capitalizing on future ARKO Parent acquisitions. Strategic priorities include expanding the third-party wholesale distribution and fleet fueling businesses through recruitment of new dealers, investing in equipment upgrades and branding for the fleet fueling segment, and building new-to-industry fleet fueling locations, targeting 20 NTI sites with openings during 2026, one of which opened in March 2026, and 13 currently advancing. The company also plans to continue accretive acquisitions of wholesale distribution businesses and benefit from the ongoing conversion of ARKO Retail Sites to dealer locations, with a focus on converting a meaningful number of additional sites throughout 2026. Management is committed to maintaining a conservative balance sheet with ample liquidity, noting a liquidity position of approximately $434.3 million as of December 31, 2025, and the use of IPO proceeds to repay approximately $184.0 million of indebtedness under the Capital One Line of Credit, with an additional $22.7 million repayment from the over-allotment option. The Board declared a quarterly pro-rated dividend of $0.26 per share to be paid on April 21, 2026, and the company currently intends to pay a regular quarterly cash dividend of $0.50 per share, or $2.00 per share on an annualized basis.