Sunoco Reports Fourth Quarter 2010 Results

Sunoco “finished the year with $1.5 billion in cash, achieved growth in our retail and logistics businesses and improved the competitiveness of our refineries,” says CEO.

Sunoco Inc. has reported its fourth quarter results for 2010, including net income attributable to Sunoco shareholders of $87 million ($0.72 per share diluted) compared to the net income attributable to Sunoco shareholders of $26 million ($0.22 per share diluted) for the fourth quarter of 2009.

Excluding special items, Sunoco had income of $13 million ($0.11 per share diluted) for the fourth quarter of 2010 versus a 2009 fourth quarter loss of $31 million ($.27 per share diluted).

Key fourth quarter details include: Retail and Logistics contributed income of $26 million; SunCoke Energy earned income of $21 million; Refining and Supply reported a loss of $8 million; Special items include a $100 million after-tax gain from the liquidation of crude oil and refined product LIFO inventories; and Sunoco’s branded retail network grew through acquisition, new distributors and toll road agreements.

For full year 2010, Sunoco reported net income attributable to Sunoco shareholders of $234 million ($1.95 per share diluted) compared to a net loss attributable to Sunoco shareholders of $329 million ($2.81 per share diluted) for the full year 2009.

“Market conditions have shown some improvement year-over-year, but challenges remain. U.S. demand growth is modest, refining capacity continues to be added around the world, and product inventories are high,” said Lynn Elsenhans, Sunoco’s chairman and CEO. “While it is clear we continue to face headwinds and have also experienced some recent operational reliability issues that must be addressed, we are pleased to have made progress during the quarter toward our strategic goals of growing our retail network and separating our coke business.”

Elsenhans added, “Overall, Sunoco made excellent progress during 2010. We finished the year with $1.5 billion in cash, achieved growth in our retail and logistics businesses and improved the competitiveness of our refineries. We also made significant progress in preparing to separate our coke business, a step designed to unlock shareholder value and maximize the future success of both Sunoco and SunCoke Energy.  Looking ahead to 2011, we will continue to execute a strategy that positions Sunoco to become the premier provider of transportation fuels in its markets. This strategy includes pursuing growth in retail and logistics, where potential returns are highest, while continuing to run our manufacturing facilities efficiently, reliably and safely.”

SunCoke Energy Update

As previously announced, SunCoke Energy and ArcelorMittal have reached a settlement that resolves the lawsuit concerning coke pricing for the Jewell facility. The settlement agreement is effective retroactively to Jan. 1, 2011. Sunoco intends to move forward with the planned separation of SunCoke Energy.

Details of Q4 Results

Refining and Supply had a loss from continuing operations of $8 million in the fourth quarter of 2010 versus a loss of $135 million in the fourth quarter of 2009. The improved results were primarily due to higher realized margins and lower expenses, partially offset by lower production volumes. The overall crude utilization rate was 85% for the quarter, down from 94% in the third quarter of 2010 primarily as a result of unplanned maintenance. Lower expenses were largely the result of cost reductions related to ongoing business improvement initiatives and the closure of the Eagle Point refinery in the fourth quarter of 2009.

Retail Marketing earned $3 million in the current quarter versus $21 million in the fourth quarter of 2009. The decrease in earnings was largely due to lower average retail gasoline and distillate margins, which were impacted by the increase in crude prices during the quarter, partially offset by higher sales volumes.

Logistics earned $23 million in the fourth quarter of 2010 versus $22 million in the fourth quarter of 2009. The improvement in results was primarily driven by higher lease acquisition results due to higher contango profits.

Chemicals reported income from continuing operations of $4 million in the fourth quarters of 2010 and 2009 as the impact of higher sales volumes was offset by higher expenses and lower margins. Discontinued polypropylene operations, which were divested on March 31, 2010, had income of $2 million in the fourth quarter of 2009.

Corporate administrative expenses were $13 million after tax in the fourth quarter of 2010 versus $6 million after tax in the fourth quarter of 2009. Corporate expenses increased primarily due to higher incentive compensation expenses and start-up costs associated with outsourcing and other corporate initiatives. Net financing expenses and other were $17 million after tax in the fourth quarters of 2010 and 2009.

During the fourth quarter of 2010, Sunoco recognized a $100 million after-tax gain from the liquidation of crude oil and refined product LIFO inventories primarily resulting from the permanent shutdown of the Eagle Point Refinery in the fourth quarter of 2009; recorded a $14 million after-tax provision primarily for additional asset write-downs attributable to a decline in the fair market value of certain assets of the Eagle Point refinery; and recorded a $12 million after-tax provision for pension settlement losses and accruals for employee terminations and related costs in connection with ongoing business improvement initiatives. The total net impact of special items during the fourth quarter of 2010 was income of $74 million after tax.

During the fourth quarter of 2009, Sunoco recorded a $21 million after-tax favorable adjustment to the gain related to the divestment of the discontinued Tulsa operations; recorded a $55 million after-tax gain from the liquidation of refined product LIFO inventories in connection with the shutdown of the Eagle Point refinery; and recorded a $19 million after-tax provision for costs associated with MTBE litigation as well as additional charges associated with the Eagle Point shutdown and the business improvement initiative. The total net impact of special items during the fourth quarter of 2009 was income of $57 million after tax.

Sunoco is a transportation fuel provider, with operations located primarily in the East Coast and Midwest regions of the U.S. The Company operates more than 4,900 branded retail locations that market transportation fuels and convenience store merchandise in 23 states.

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