Back to top

Analyst Blog

As a part of its restructuring initiatives to reduce losses and boost profitability, Sunoco, Inc. announced plans to put up its Philadelphia and Marcus Hook refineries for sale. The company also plans to conduct an extensive strategic appraisal of its liquidity position as well as the prospects of its logistics and retail businesses.

Sunoco will look for potential buyers for the Pennsylvania-based refineries. In the absence of a profitable disposition deal, the company plans to idle the main processing units at the facilities in July 2012.

The leading independent refiner and marketer of petroleum products, Sunoco, expects a pre-tax non-cash charge of $1.9 billion to $2.2 billion in the third quarter of 2011 related to impairment of the plant and equipment in the refineries.

Following the separation of the downstream business assets, Sunoco will be transformed into a gasoline retailer with 4,900 fueling stations across the East Coast and Midwest. The company will also retain its logistics business comprising refined products and oil pipelines and terminals that are operated by Sunoco Logistics Partners (SXL - Analyst Report).

In April 2010, Sunoco disposed its polypropylene subsidiary Sunoco Chemicals Inc. to Brazil-based petrochemical and resin producer Braskem S.A. (BAK - Snapshot Report) for approximately $350 million in cash. Early this year, Sunoco’s metallurgical coke manufacturing business, SunCoke Energy, was separated from the parent company to create an independent entity.

Under the review plan, management intends to analyze Sunoco’s remodeling actions as well as explore more lucrative investment opportunities in the field of retail and logistics with the target of generating higher shareholder value.

In a separate development, Sunoco announced that it has completed the buyback of $500 million of its common stock that was announced on August 9, 2011. The company’s available cash reserves were utilized for the repurchase program under which 13,140,586 shares were bought back at an average price of $34.74 per share. As of September 6, 2011, the company had approximately 108 million shares of common stock outstanding.

Sunoco currently retains a Zacks #3 Rank, which translates into short-term Hold rating.

Please login to Zacks.com or register to post a comment.