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Sunoco's Refining Profit Doubles: The Company's Refineries Ran at 99% of Capacity for the Quarter, and Its Wholesale Earnings Per Barrel Rose 55

Posted on: Thursday, 2 February 2006, 12:00 CST

By Harold Brubaker, The Philadelphia Inquirer

Feb. 2--Sunoco Inc.'s refineries ran all-out at the end of last year, more than doubling their profit in the fourth quarter, which has seen record results for the oil industry.

The Philadelphia company said yesterday after the stock market closed that its five refineries earned $286 million in the quarter, up from $135 million a year earlier, as tight refining capacity nationwide drove up Sunoco's average wholesale profit per barrel by 55 percent.

Sunoco's overall net income was $287 million, or $2.12 a share, as the company's much smaller retail gasoline and chemical operations failed to keep pace. Net income in the fourth quarter of 2004 was $178 million, or $1.24 a share.

Fourth-quarter revenue climbed 25 percent, to $9.27 billion from $7.43 billion.

For all of 2005, Sunoco reported $974 million in net income, or $7.08 a share, on sales of $33.75 billion. Profit in 2004 was $605 million, or $4.04 a share, on sales of $25.51 billion.

Sunoco's shares, which have more than doubled over the last 12 months, closed yesterday at $92.66, down $2.54, or 2.67 percent, before the report. Since 2002, right before refiners became stock-market favorites, Sunoco's market value has quintupled to $12.6 billion from $2.5 billion.

John G. Drosdick, Sunoco's chairman and chief executive officer, said yesterday that the company had its best quarter ever operationally, with crude-processing units running at the extremely high rate of 99 percent of capacity, and that conditions remained good.

"Despite some recent downward pressure on refining margins caused by the unseasonably warm weather in the Northeast, we believe the longer-term market fundamentals are still very good for our refining business," Drosdick said in a news release.

In anticipation of continuing strength in refining, Sunoco said in December that it would spend $775 million through 2008 to boost the profitability of its refineries even further.

Gasoline prices are well off their post-Katrina peaks, but they remain about 25 percent higher than a year ago. AAA Mid-Atlantic reported yesterday that the average price for regular gasoline in Philadelphia and its Pennsylvania suburbs was $2.45, up 30 cents from early December. In South Jersey, the average was $2.22, up from $1.90.

Despite the high prices, gasoline demand is up 1 percent so far this year, according to executives with Valero Energy Corp., the nation's largest refiner, which also reported blockbuster earnings this week.

And come March or earlier, prices could take off again because of numerous supply constraints, including a high level of maintenance activity at U.S. refineries and the switch to summer gasoline without the help of an additive that is being phased out for environmental reasons.

Contact staff writer Harold Brubaker at 215-854-4651 or hbrubaker@phillynews.com.

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Copyright (c) 2006, The Philadelphia Inquirer

Distributed by Knight Ridder/Tribune Business News.

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NYSE:SUN, NYSE:VLO,

Source: The Philadelphia Inquirer

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