Sunoco to exit refining, seek sale of two US units
Sunoco plans to exit the refining business and has begun a process to sell its refineries located in Philadelphia and Marcus Hook, Penn., the company said on Tuesday.
Sunoco also said it would conduct a comprehensive strategic review to determine the best way to deliver value to shareholders, including how best to utilize the company’s strong cash position and maximize potential for Sunoco’s logistics and retail businesses.
Sunoco will pursue all options to sell its refineries, but if a suitable transaction cannot be implemented, the company intends to idle the main processing units at the facilities in July 2012.
“We have made progress in increasing the efficiency of our refineries over the last several years, but given the unacceptable financial performance of these assets, it is clear that it is in the best interests of shareholders to exit this business and focus on our profitable retail and logistics businesses which have higher returns, growth potential, and provide steady, ratable cash flow,” said Lynn L. Elsenhans, Sunoco’s CEO.
If not sold, the refineries could be converted to ethylene plants or terminals, the company said.
Together with the separation of SunCoke Energy and the sale of the chemicals business, Sunoco’s decision to exit refining marks a fundamental shift away from manufacturing that will re-position the company, it said.
In connection with the decision to exit refining, the company expects to record a pretax noncash charge of between $1.9 billion and $2.2 billion in the third quarter of 2011 related to impairment of the plant and equipment in the refineries.
In the event the processing units are idled, additional pretax charges of up to $500 million, primarily related to contract terminations, staffing costs and severance, may be incurred. Most of these costs would be paid over a period of approximately one year.
Additionally, upon the sale of the refineries or idling of the main processing units, the company expects to record a pretax gain related to the liquidation of all of its crude oil and a significant portion of its refined product inventories totaling approximately $2 billion at current market prices.
The actual amount of this pretax gain will depend upon the market value of crude and refined products and the volumes on hand at the time of liquidation.
Sunoco has not set a timetable for completing the strategic review process, and will provide updates as appropriate, the company said.
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