Philadelphia-based Sunoco posts Q2 net loss of US$125M, compared with net income of US$145 a year ago, on US$174 million after-tax provision to write down chemical assets, lower refining margins, production volumes; revenues grow 25% to US$12.02B

PHILADELPHIA , August 4, 2011 (press release) – Sunoco, Inc. (NYSE: SUN) today reported a net loss attributable to Sunoco shareholders of $125 million ($1.03 per share diluted) for the second quarter of 2011 versus net income attributable to Sunoco shareholders of $145 million ($1.20 per share diluted) for the second quarter of 2010. Excluding special items, Sunoco had income of $49 million ($0.40 per share diluted) for the second quarter of 2011 versus income of $158 million ($1.31 per share diluted) for the second quarter of 2010. Key second quarter details include:

Retail and Logistics contributed pretax income of $123 million
Refining and Supply reported a pretax loss of $44 million
Sunoco Logistics Partners L.P. (NYSE: SXL) acquired a controlling financial interest during the second quarter in Inland Corporation, the owner of a 350-mile refined products pipeline and announced the third quarter acquisitions of the East Boston refined products terminal and the Eagle Point tank farm from Sunoco
Recorded a $292 million pretax provision to write down assets primarily in the Chemicals business

"The company's operations excluding special items were profitable on the strength of our logistics and retail segments. Sunoco Logistics Partners, L.P. had its best quarter ever and our logistics segment contributed $54 million to Sunoco's earnings. Likewise, our retail segment also contributed strong earnings that approached a record for second quarter results. In Refining and Supply, our ability to take advantage of margin improvement was limited by low utilization that continued into April from the first quarter's operational events. With the reliability issues addressed, Refining and Supply was profitable in May and June," said Lynn L. Elsenhans, Sunoco's Chairman and Chief Executive Officer. "We continue to adjust our portfolio of assets to deliver value to shareholders. In our logistics segment, Sunoco Logistics Partners has announced more than $450 million in acquisitions this year, including the July announcement of the acquisition of Texon's lease crude business."

Commenting on the coke business, Elsenhans said, "SunCoke Energy's successful initial public offering marks the culmination of more than a year's worth of planning. Sunoco currently retains an 81-percent ownership of SunCoke and expects to distribute its common stock holdings to Sunoco shareholders within a year. We remain focused on delivering value to shareholders."

DETAILS OF SECOND QUARTER RESULTS

FUELS BUSINESS RESULTS

Refining and Supply

Refining and Supply had a pretax loss of $44 million in the current quarter versus income of $138 million in the second quarter of 2010. The $182 million decrease in results was primarily due to lower realized margins and production volumes, partially offset by lower expenses. The overall crude utilization rate was 84 percent for the quarter, up from 74 percent in the first quarter of 2011.

Retail Marketing

Retail Marketing earned $69 million pretax in the current quarter versus $73 million in the second quarter of 2010. The decrease in earnings was primarily due to higher expenses which were largely the result of higher credit card fees at company-operated locations as a result of increased retail prices and the absence of a favorable litigation settlement in 2010. The higher expenses were partially offset by higher average retail gasoline and distillate margins.

Logistics

Logistics earned $54 million pretax in the second quarter of 2011 versus $30 million in the second quarter of 2010. The improvement in results was primarily due to expanded crude oil volumes and margins which benefited from market-related opportunities and higher earnings attributable to recent acquisitions and organic growth projects.

In May 2011, Sunoco Logistics Partners L.P. obtained an 84-percent interest in Inland Corporation through a series of transactions involving Sunoco and a third party. Sunoco exercised its rights to acquire additional ownership interests and the Partnership purchased additional ownership interests from third parties for a total of $86 million.

In June 2011, the Partnership announced that it had signed a definitive agreement to purchase a refined products terminal located in East Boston, MA from ConocoPhillips for $56 million plus the fair value of inventory. The transaction is expected to be completed in the third quarter of 2011.

In July 2011, the Partnership issued 1.3 million deferred distribution units valued at $98 million and paid $2 million in cash to Sunoco in exchange for the tank farm and related assets located at the Eagle Point refinery.

In August 2011, the Partnership acquired a crude oil purchasing and marketing business from Texon L.P. for $205 million plus the fair value of inventory.

Chemicals - Continuing Operations

Chemicals earned $6 million pretax in the second quarter of 2011 versus $7 million in the second quarter of 2010.

In July 2011, Sunoco completed the sale of its phenol and acetone chemicals manufacturing facility in Philadelphia, PA ("Frankford Facility") and related inventory to an affiliate of Honeywell International Inc. Sunoco received total cash proceeds of $87 million which is subject to an inventory adjustment subsequent to closing. In connection with this agreement, Sunoco recorded a $118 million pretax provision to write down the Frankford Facility assets to their estimated fair values during the second quarter of 2011 which has been treated as a special item.

COKE BUSINESS RESULTS

Coke earned $20 million pretax in the second quarter of 2011 versus $56 million in the second quarter of 2010. The decrease in earnings was attributable to lower coke sales revenues as a result of the Jewell contract restructuring with ArcelorMittal in January 2011 and 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.

An initial public offering ("IPO") of 13.34 million shares (after exercise of the underwriters' over-allotment option) of the outstanding common stock of SunCoke Energy, Inc. at a price of $16 per share was completed on July 26, 2011. Sunoco retains ownership of 81 percent of the outstanding shares of SunCoke Energy common stock. Sunoco intends to complete the separation of SunCoke Energy from Sunoco by distributing its remaining shares of SunCoke Energy common stock to Sunoco shareholders by means of a spin-off that is intended to qualify as a tax-free transaction. The spin-off is expected to occur no later than one year after the IPO.

OTHER

Corporate administrative expenses were $18 million pretax in the current quarter versus $30 million in the second quarter of 2010. The decrease was largely driven by lower one-time project costs as well as lower accruals for performance-related incentive compensation.

Net financing expenses and other were $16 million pretax in the second quarter of 2011 compared to $27 million in the second quarter of 2010. The decrease was primarily driven by higher interest income and capitalized interest as well as lower interest expense.

INCOME TAXES

Excluding the impact of special items, the effective tax rates on pretax income attributable to Sunoco, Inc. shareholders for the second quarter of 2011 and 2010 were 31 and 36 percent, respectively. The effective tax rates for each quarter were determined based upon the expected full year tax rates at the end of each quarter. The reduction in the effective rate in 2011 is largely attributable to the estimated impact of nonconventional fuel tax credits on lower expected pretax earnings.

SPECIAL ITEMS

During the second quarter of 2011, Sunoco recorded a $292 million provision ($174 million after tax) to write down assets primarily in the chemicals business to their estimated fair values; recorded a $2 million provision ($1 million after tax) for pension settlement losses in connection with business improvement initiatives; recognized pension settlement losses of $9 million ($5 million after tax) attributable to the divestment of its Toledo refinery; and recognized a $9 million gain ($6 million after tax) from the remeasurement of its pre-acquisition equity interests in Inland to fair value upon consolidation. The total net impact of special items during the second quarter of 2011 was a provision of $294 million ($174 million after tax).

During the second quarter of 2010, Sunoco recorded a $22 million provision ($13 million after tax) primarily for pension settlement losses and employee terminations and related costs in connection with business improvement initiatives.

Sunoco is a leading transportation fuel provider, with operations located primarily in the East Coast and Midwest regions of the United States. The Company sells transportation fuels through more than 4,900 branded retail locations in 24 states. APlus convenience stores are operated by the Company or independent dealers in more than 600 retail locations. The retail network in the Northeast is principally supplied by Sunoco-owned refineries with a combined crude oil processing capacity of 505,000 barrels per day. Sunoco is also the General Partner and has a 34-percent interest in Sunoco Logistics Partners L.P., a publicly traded master limited partnership which owns and operates 7,900 miles of refined product and crude oil pipelines and approximately 40 active product terminals. Sunoco has an 81-percent ownership interest in SunCoke Energy, Inc., a publicly traded company which makes high-quality metallurgical-grade coke for major steel manufacturers. SunCoke Energy has facilities in the U.S. which have the capacity to manufacture approximately 3.7 million tons of metallurgical-grade coke annually and is the operator of, and has an equity interest in, a 1.7 million tons-per-year cokemaking facility in Vitória, Brazil.

Anyone interested in obtaining further insights into the second quarter's results can monitor the Company's quarterly teleconference call, which is scheduled for 5:00 p.m. ET on August 4, 2011. It can be accessed through Sunoco's website - http://www.SunocoInc.com. It is suggested that you visit the site prior to the teleconference to ensure that you have downloaded any necessary software.

Those statements made in this release that are not historical facts are forward-looking statements intended to be covered by the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are based upon assumptions by the Company concerning future conditions, any or all of which ultimately may prove to be inaccurate, and upon the current knowledge, beliefs and expectations of Company management. These forward-looking statements are not guarantees of future performance. The reader should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company expressly disclaims any obligation to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.

 

           
SUNOCO, INC.
2011 SECOND QUARTER AND SIX-MONTH FINANCIAL SUMMARY

(Millions of Dollars, Except Per-Share Amounts)

(Unaudited)

           

Second Quarter

  2011     2010
Revenues   $ 12,023       $ 9,586
           
Net income (loss)   $ (71 )     $ 176
Less: Net income attributable to noncontrolling interests     54         31
Net income (loss) attributable to Sunoco, Inc. shareholders   $ (125 )     $ 145
           

Net income (loss) attributable to Sunoco, Inc. shareholders per share of common stock:

         
Basic   $ (1.03 )     $ 1.20
Diluted   $ (1.03 )

*

  $ 1.20
Weighted-average number of shares outstanding (in millions):          
Basic     121.1         120.6
Diluted     121.1  

*

    120.7
           

Six-Months

         
Revenues   $ 22,661       $ 17,778
           
Net income (loss)   $ (151 )     $ 138
Less: Net income attributable to noncontrolling interests     75         56
Net income (loss) attributable to Sunoco, Inc. shareholders   $ (226 )     $ 82
           

Net income (loss) attributable to Sunoco, Inc. shareholders per share of common stock:

         
Basic   $ (1.87 )     $ 0.69
Diluted   $ (1.87 )

*

  $ 0.69
Weighted-average number of shares outstanding (in millions):          
Basic     121.0         119.7
Diluted     121.0  

*

    119.7
           

* Since the assumed issuance of common stock incentive awards would not have been dilutive, the diluted per share amounts are equal to the basic per share amounts.

 
             
 

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