Sunoco to Exit Refining Business
Sunoco Inc. plans to exit its refining business and launched a review to determine the best way to maximize the potential of its logistics and retail businesses.
The company has begun a process to sell its refineries in Philadelphia and Marcus Hook, Pa., but will idle the facilities' main processing units in July 2012 if a suitable deal cannot be implemented.
"We have made progress in increasing the efficiency of our refineries over the last several years, but given the unacceptable financial performance of these assets, it is clear that it is in the best interests of shareholders to exit this business and focus on our profitable retail and logistics businesses," said Chairman and Chief Executive Lynn L. Elsenhans.
Sunoco will book a third-quarter pretax charge of $1.9 billion to $2.2 billion related to impairment of the plant and equipment in the refineries. If the processing units are idled, additional pretax charges of up to $500 million may be incurred. Once the refineries are sold or idled, the company expects to record a pretax gain from the liquidation of its crude oil and refined product inventories, valued at about $2 billion at current market prices.
The company hired Credit Suisse Securities (USA) LLC to assist in the review process.
Sunoco last month reported a second-quarter loss amid weak refining revenue and a large write-down from the sale of its Philadelphia chemicals plant. For the second quarter in a row, Sunoco became the only U.S. refiner to report a net loss. Most U.S. refiners have posted improving earnings this year as a widening price spread between two types of crude oil helped boost industry margins. Sunoco missed out on the windfall in the first quarter, however, after widespread refinery outages.
Earnings in Sunoco's retail business fell 5.5% absent a favorable litigation settlement from last year, while earnings jumped 80% in the logistics business on expanded crude-oil volumes and revenue from recent acquisitions.
Standard & Poor's Ratings Services, Fitch Ratings and Moody's Investors Service all recently downgraded Sunoco debt a notch into junk territory, saying the refiner's spinoff of steel-coke unit SunCoke Energy Inc. hurt its business diversification.
Sunoco Inc. plans to exit its refining business and launched a review to determine the best way to maximize the potential of its logistics and retail businesses.
The company has begun a process to sell its refineries in Philadelphia and Marcus Hook, Pa., but will idle the facilities' main processing units in July 2012 if a suitable deal cannot be implemented.
"We have made progress in increasing the efficiency of our refineries over the last several years, but given the unacceptable financial performance of these assets, it is clear that it is in the best interests of shareholders to exit this business and focus on our profitable retail and logistics businesses," said Chairman and Chief Executive Lynn L. Elsenhans.
Sunoco will book a third-quarter pretax charge of $1.9 billion to $2.2 billion related to impairment of the plant and equipment in the refineries. If the processing units are idled, additional pretax charges of up to $500 million may be incurred. Once the refineries are sold or idled, the company expects to record a pretax gain from the liquidation of its crude oil and refined product inventories, valued at about $2 billion at current market prices.
The company hired Credit Suisse Securities (USA) LLC to assist in the review process.
Sunoco last month reported a second-quarter loss amid weak refining revenue and a large write-down from the sale of its Philadelphia chemicals plant. For the second quarter in a row, Sunoco became the only U.S. refiner to report a net loss. Most U.S. refiners have posted improving earnings this year as a widening price spread between two types of crude oil helped boost industry margins. Sunoco missed out on the windfall in the first quarter, however, after widespread refinery outages.
Earnings in Sunoco's retail business fell 5.5% absent a favorable litigation settlement from last year, while earnings jumped 80% in the logistics business on expanded crude-oil volumes and revenue from recent acquisitions.
Standard & Poor's Ratings Services, Fitch Ratings and Moody's Investors Service all recently downgraded Sunoco debt a notch into junk territory, saying the refiner's spinoff of steel-coke unit SunCoke Energy Inc. hurt its business diversification.
