Sunoco Reports Preliminary Q4 2011 Pretax Results

Retail Marketing earned $40 million pretax in the current quarter versus $1 million in the fourth quarter of 2010.

Sunoco Inc. has reported a net pretax loss attributable to Sunoco shareholders of $660 million for the fourth quarter of 2011 versus pretax income attributable to Sunoco shareholders of $119 million for the fourth quarter of 2010.

Excluding special items, Sunoco had a pretax loss of $48 million for the fourth quarter of 2011 versus a pretax loss of $4 million for the fourth quarter of 2010.

These results are preliminary and shown on a pretax basis due to income tax amounts that have yet to be finalized. The company expects to report after-tax financial results, including accompanying financial information, during the week of Feb. 6, 2012. Sunoco does not expect material changes to pretax results as reported. Sunoco has also announced strategic initiatives and management changes.

Key fourth quarter details include:
    • Logistics and Retail contributed pretax income of $106 million

    • Refining and Supply reported a pretax loss of $117 million

    • Completed the separation of SunCoke Energy, Inc. in January 2012

    • Recognized a $630 million pretax provision for additional asset write-downs and idling expenses at the Philadelphia and Marcus Hook refineries

“Our high-return logistics and retail segments continue to deliver excellent results. Sunoco Logistics Partners L.P. had record earnings in the fourth quarter and contributed $66 million in pretax income to Sunoco. Similarly, our retail segment earned $40 million pretax,” said Lynn Elsenhans, Sunoco’s chairman and CEO. “In contrast, our refining and supply segment reported a pretax loss of $117 million, which reflects the very difficult market conditions that led to the early idling of the Marcus Hook refinery.”

“We recently completed the separation of SunCoke Energy from Sunoco through a special stock dividend that took place on Jan. 17,” added Elsenhans. This action marks the end of Sunoco’s ownership of SunCoke Energy and represents the culmination of nearly two years of work on behalf of shareholders. With that work complete, we will continue to look for ways to build value for shareholders and will take the steps necessary to ensure that is accomplished.”

Logistics
Logistics earned $66 million pretax in the fourth quarter of 2011 versus $35 million in the fourth quarter of 2010. The increase in earnings was primarily due to higher crude oil sales volumes and margins, which benefitted from market-related opportunities. Pipeline earnings benefitted from continued strong demand for crude oil in West Texas. Higher earnings attributable to recent acquisitions and organic growth projects also contributed to the improved results.

Retail Marketing
Retail Marketing earned $40 million pretax in the current quarter versus $1 million in the fourth quarter of 2010. The increase in earnings was primarily attributable to higher retail gasoline and distillate margins, partially offset by lower gasoline sales volumes.

Refining and Supply
Refining and Supply had a pretax loss of $117 million in the current quarter versus a $17 million pretax loss in the fourth quarter of 2010. The decrease in earnings was primarily the result of lower realized margins and production volumes. These negative factors were partially offset by lower expenses. Margins deteriorated throughout the fourth quarter during which market margins for gasoline were frequently negative. Margins were also impacted by high premiums for crude oil versus the Dated Brent crude oil benchmark. Production volumes were impacted by the idling of the Marcus Hook facility during the fourth quarter. The overall crude utilization rate was 81% for the quarter, down from 90% in the third quarter of 2011.

Coke
Coke earned $9 million pretax in the fourth quarter of 2011 versus $25 million in the fourth quarter of 2010. The decrease in earnings was largely attributable to lower coke sales revenues as a result of the Jewell contract restructuring with ArcelorMittal in January 2011, higher general and administrative costs largely associated with the relocation of SunCoke Energy’s corporate offices and additional staffing costs related to becoming a public company and Sunoco’s reduced ownership interest in SunCoke Energy.

Discontinued Chemicals Operations
Discontinued chemicals operations had pretax income of $3 million in the fourth quarter of 2011 versus $6 million in the fourth quarter of 2010.

Other
Corporate administrative expenses were $17 million pretax in the current quarter versus $27 million in the fourth quarter of 2010. The decrease was largely driven by lower staffing and incentive compensation costs.

Net financing expenses and other were $32 million pretax in the fourth quarter of 2011 compared to $27 million in the fourth quarter of 2010. Increased interest expense attributable to new borrowings of Sunoco Logistics Partners L.P. and SunCoke Energy Inc. was partially offset by higher interest income.

Special Items
During the fourth quarter of 2011, Sunoco recorded a $387 million pretax noncash provision to write down assets at the Philadelphia and Marcus Hook refineries to their estimated fair values and recorded provisions for severance, contract terminations and idling expenses of $243 million pretax; recognized a $21 million pretax gain largely attributable to the liquidation of a portion of the refined product LIFO inventories related to the idling of the Marcus Hook refinery; and recorded a $3 million net pretax loss primarily related to prior divestments of its Toledo refinery and discontinued chemicals operations. The total net impact of special items during the fourth quarter of 2011 was a pretax charge of $612 million.

During the fourth quarter of 2010, Sunoco recognized a $168 million pretax 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 $24 million pretax 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 $21 million pretax 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 pretax income of $123 million.

Sunoco also has a network of approximately 4,900 retail locations in 23 states.

 

 

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