PHILADELPHIA -- Sunoco Inc. has reported a net loss of $59 million for first-quarter 2008 versus net income of $175 million for first-quarter 2007. "The first-quarter market environment was clearly a challenging one for Sunoco and the refining industry," said John G. Drosdick, Sunoco chairman and CEO. "While earnings from our nonrefining businesses were significantly improved from prior periods, our Refining & Supply business lost $123 million. The loss in Refining and Supply was primarily the result of weakness in refined product margins, especially for gasoline, which were compressed by [image-nocss] the combination of higher crude oil costs and lower product demand."
Sunoco's nonrefining business units earned $84 million in the first quarter, with the largest contributions coming from Retail Marketing among other sources. Retail Marketing earned $26 million, benefiting from expanded retail gasoline margins despite lower gasoline sales volumes versus a year ago.
Commenting on the outlook for the second quarter, Drosdick said, "Recent declines in U.S. gasoline inventories and continued low refinery utilization rates have led to some improvement in refining market fundamentals as we enter the spring and summer driving seasons. While higher crude oil costs and lower gasoline demand continued to challenge refiners in April, margins for distillate products remain very strong and gasoline margins are beginning to improve as we progress through the quarter. Due to maintenance activity and some rate reductions related to the market environment, we expect crude runs and production levels in the second quarter to approximate 90% to 95% of capacity."
Refining & Supply had a loss of $123 million in first-quarter 2008 versus income of $76 million in first-quarter 2007. The decrease in earnings was due to lower realized margins and higher expenses, partially offset by higher production volumes. The lower margins reflect the negative impact of much higher average crude oil costs and lower product demand than a year ago, while the higher expenses were largely the result of increased prices for purchased fuel. Production volumes increased in first-quarter 2008 compared to the year-ago period, although planned and unplanned maintenance work reduced production by approximately 11 million barrels throughout the refining system versus the record level of production in fourth-quarter of 2007. Production in first-quarter 2007 was negatively impacted by major turnaround and expansion work at the Philadelphia refinery as well as downtime at the Tulsa and Marcus Hook refineries.
Retail Marketing earned $26 million in first-quarter 2008 versus $7 million in first-quarter 2007. The increase in earnings was primarily due to higher average retail gasoline margins and lower expenses, partially offset by lower gasoline and distillate sales volumes.
Philadelphia-based Sunoco is a leading manufacturer and marketer of petroleum and petrochemical products. With 910 thousand barrels per day of refining capacity, nearly 4,700 retail sites selling gasoline and convenience items, approximately 5,500 miles of crude oil and refined product owned and operated pipelines and 38 product terminals, Sunoco is one of the largest independent refiner-marketers in the United States.Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.