Sunoco continues to restructure, sees profit

By OGJ editors
HOUSTON, June 16
-- Sunoco Inc., Philadelphia, is taking another restructuring step and expects its refining business to report a profit for the quarter ending June 30.

The company plans to separate SunCoke Energy Inc. in a transaction, still under study, that might include a tax-free spinoff to Sunoco shareholders.

SunCoke Energy has capacity to make 3.67 million tons/year of metallurgical coke from coal in plants in Virginia, Indiana, Ohio, Illinois, and Brazil.

“The fuels and coke units are distinct businesses with different business models, said Lynn L. Elsenhans, chairman and chief executive officer.

Sunoco last year shut its 150,000-b/d refinery at Eagle Point, NJ, and sold an 85,000-b/d refinery in Tulsa to a unit of Holly Corp., focusing operations on refineries in Philadelphia and Marcus Hook, Pa., and Toledo, Ohio. It also sold its polypropylene business, Sunoco Chemicals Inc., to Braskem SA, and shut down a PP plant in Texas.

Along with poor processing economics facing all refiners, Sunoco faces extra problems, says a report by Deutsche Bank Research.

“Sunoco is a light sweet refinery in a coastal market that is subject to external supply pressure both from Gulf Coast refineries linked to the East Coast by pipelines and imports from European refiners that have excess capacity, excess gasoline production, sufficient diesel margin to keep running,” Deutsche Bank says. “Sunoco’s crude diet, relatively limited to lighter crudes, over half of which is sources from potentially volatile West Africa, typically prices at a premium, directly reducing margin.”

In addition to shedding physical assets, Sunoco has aggressively cut costs and staff.

“We are beginning to see the results of our business improvement initiatives positively impact our performance,” Elsenhans said. “The actions we’ve taken, coupled with a slight improvement in market conditions, have brightened our immediate outlook for Sunoco’s refining and supply business. Nevertheless, business conditions remain difficult, requiring our continued focus on operating excellence and achieving a sustainable, lower cost structure.”

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