"While market conditions during the second quarter remained challenging, our refining business was profitable for the first time since the first quarter of 2009. [image-nocss] This is a clear indication that our decisive actions are beginning to show results. By improving margin capture, reducing costs and optimizing the performance of our refineries, we achieved solid results during a period of continued economic weakness and excess supply of petroleum and chemical products," said Lynn L. Elsenhans, chairman and CEO.
"Sunoco's nonrefining businesses are providing steady earnings and our balance sheet is very strong," said Elsenhans. "We remain focused on the fundamentals: running our refineries safely and reliably at optimal capacity utilization, lowering our breakeven cost per barrel and furthering the progress we have made in capturing available margin."
Sunoco significantly improved its cash position, ending the quarter with $1.5 billion of cash, with the increase largely driven by strong operating cash flows and the receipt of proceeds from the sale of the polypropylene business which closed in the first quarter of 2010.
"Our recently announced intent to separate SunCoke Energy from the rest of Sunoco in the first half of 2011 is part of a strategy to unlock shareholder value and maximize the future success of both entities," Elsenhans continued. "The fuels and coke units are distinct businesses with different models, different sets of customers and no significant integration or synergies."
With a dedicated management team and direct access to capital markets, SunCoke Energy should be better able to achieve the scale needed to pursue domestic and international growth opportunities. Similarly, through a more focused strategic plan, Sunoco's streamlined fuels business should be better positioned to take advantage of growth opportunities and become a leading provider of transportation fuels in its markets, the company said.
"We see potential opportunities to grow inside and outside Sunoco's traditional footprint both in retail and through Sunoco Logistics, as recently announced logistics acquisitions and projects demonstrate," said Elsenhans.
Refining and supply had income from continuing operations of $86 million in second-quarter 2010 versus a loss of $77 million in second-quarter 2009. The increase in results was due to higher realized margins and lower expenses, partially offset by lower production volumes which were largely attributable to the closure of the Eagle Point refinery in fourth-quarter 2009.
Discontinued Tulsa refining operations, which were divested on June 1, 2009, had a loss of $6 million in second-quarter 2009.
Retail marketing earned $45 million in the current quarter versus $10 million in second-quarter 2009. The increase in earnings was due to higher average retail gasoline margins driven by falling wholesale prices and lower expenses.
Sunoco also recently reached agreement with IBM to outsource some backoffice processes, including information technology, finance and accounting transaction processing and indirect procurement. This arrangement marks another important step in Sunoco's continued expense reduction program, which it said is critical to improving the company's competitiveness.
Philadelphia-based Sunoco is a leading transportation fuel provider, with operations located primarily in the East Coast and Midwest regions of the United States. The company operates more than 4,700 branded retail locations that market transportation fuels and convenience store merchandise in 23 states. This retail network is principally supplied by Sunoco-owned refineries with a combined crude oil processing capacity of 675,000 barrels per day.
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