EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

 

LOGO    News Release

Sunoco, Inc.

1735 Market Street

Philadelphia, Pa. 19103-7583

 

For further information contact    For release: IMMEDIATELY
    Jerry Davis (media) 215-977-6298   
    Tom Harr (investors) 215-977-6764   

No. 9-06

SUNOCO REPORTS FIRST QUARTER RESULTS

PHILADELPHIA, MAY 3, 2006 — Sunoco, Inc. (NYSE: SUN) today reported net income of $79 million ($.59 per share diluted) for the first quarter of 2006 versus $116 million ($.83 per share diluted) for the first quarter of 2005. there were no special items in either quarter.

“First-quarter earnings were impacted by a high level of refinery maintenance and rising crude oil prices during the quarter,” said John G. Drosdick, Sunoco Chairman and Chief Executive Officer. “High beginning-of-the-year refined product inventories and unseasonably warm winter weather in the northeastern United States negatively impacted refining margins while rising crude oil prices squeezed retail gasoline and chemical margins during the quarter.”

Drosdick continued, “Utilization at our refining facilities was limited to 93 percent for the quarter due to maintenance ahead of this year’s driving season. We recently completed a turnaround at our Toledo refinery and are now positioned to run at capacity levels during the peak summer demand months. We are also near completion of the necessary capital investments to ready our refining system for the upcoming diesel fuel specification changes. Still, the current roll-out of ethanol-blended gasoline and the transition to ultra-low-sulfur diesel fuel present significant manufacturing and logistical challenges for the industry. We will direct our best efforts to being a reliable supplier through these transitions.

“We will continue to invest significant capital in our refining facilities. We have spent approximately $700 million to comply with the new low-sulfur gasoline and on-road diesel requirements. Looking ahead, over the next three years, we plan to spend approximately $2 billion to increase production and further improve and maintain our refining system.”

 

- more -

SUNOCO 1Q06 EARNINGS, PAGE 2

DETAILS OF FIRST QUARTER RESULTS

REFINING AND SUPPLY

Refining and Supply earned $73 million in the first quarter versus $108 million in the first quarter of 2005. The decrease in earnings was due to lower production volumes in Northeast Refining and higher expenses. The lower volumes were mainly a result of a previously announced scheduled maintenance turnaround at the Philadelphia refinery in late February and early March, and the Toledo refinery maintenance turnaround at the end of March and the beginning of April. Higher expenses in the quarter were mainly the result of higher purchased fuel costs and expenses associated with maintenance activity. Also contributing to the increase in expenses were operating costs to produce low-sulfur gasoline.

Realized margins for Refining and Supply in the first quarter were slightly higher than the year-ago period with lower margins in Northeast Refining being offset by higher margins in MidContinent Refining.

RETAIL MARKETING

Retail Marketing posted break-even results in the first quarter of 2006 versus an $8 million loss in the first quarter of 2005. While retail gasoline margins were poor during most of the current quarter, they were slightly higher than the year-ago period. Monthly gasoline and diesel throughput per company owned or leased outlet was approximately the same versus the first quarter of 2005.

CHEMICALS

Chemicals earned $14 million in the first quarter of 2006 versus $33 million in the prior-year period. The decrease in earnings was due primarily to lower margins for both phenol and polypropylene and higher expenses, due in part to higher fuel and utility costs.

LOGISTICS

Earnings for the Logistics segment were $6 million in the first quarter versus $3 million in the first quarter of 2005. Earnings in last year’s first quarter were impacted by a $3 million after-tax charge associated with a Mid-Valley pipeline spill and a $2 million unfavorable tax adjustment.

 

- more -

SUNOCO 1Q06 EARNINGS, PAGE 3

COKE

The Coke business earned $14 million in the first quarter of 2006 versus $10 million in the first quarter of 2005. The increase is mainly attributable to the addition of the Haverhill Coke Plant which began operations in March 2005.

CORPORATE AND OTHER

Corporate administrative expenses were $16 million after tax in both the first quarter of 2006 and the first quarter of 2005.

Net financing expenses were $12 million after tax in the first quarter of 2006 versus $14 million in the first quarter of 2005. The decline was primarily due to higher interest income, partially offset by a decrease in capitalized interest.

Sunoco, Inc., headquartered in Philadelphia, PA, is a leading manufacturer and marketer of petroleum and petrochemical products. With 900,000 barrels per day of refining capacity, over 4,700 retail sites selling gasoline and convenience items, approximately 5,400 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. Sunoco is a significant manufacturer of petrochemicals with annual sales of approximately five billion pounds, largely chemical intermediates used to make fibers, plastics, film and resins. Utilizing a unique, patented technology, Sunoco also has the capacity to manufacture over 2.5 million tons annually of high-quality metallurgical-grade coke for use in the steel industry.

Anyone interested in obtaining further insights into the first quarter’s results can monitor the Company’s quarterly teleconference call, which is scheduled for 3:00 p.m. ET on May 4, 2006. It can be accessed through Sunoco’s Web site—www.SunocoInc.com. It is suggested that you visit the site prior to the teleconference to ensure that you have downloaded any necessary software.

Those statements made in this release that are not historical facts are forward-looking statements intended to be covered by the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although Sunoco believes that the assumptions underlying these statements are reasonable, investors are cautioned that such forward-looking statements are inherently uncertain and necessarily involve risks that may affect Sunoco’s business prospects and performance causing actual results to differ from those discussed in the foregoing release. Such risks and uncertainties include, by way of example and not of limitation: general economic, financial and business conditions; competitive products and pricing; effects of weather conditions and natural disasters on the Company’s operating facilities and on product supply and demand; changes in refined product and chemical margins; variation in petroleum-based commodity

 

- more -

SUNOCO 1Q06 EARNINGS, PAGE 4

prices and availability of crude oil and feedstock supply or transportation; effects of transportation disruptions; changes in the price differentials between light-sweet and heavy-sour crude oils; fluctuations in supply of feedstocks and demand for products manufactured; changes in product specifications; availability and pricing of ethanol; changes in operating conditions and costs; changes in the expected level of environmental capital, operating or remediation expenditures; age of, and changes in the reliability and efficiency of, the Company’s or a third party’s operating facilities; potential equipment malfunction; potential labor relations problems; the legislative and regulatory environment; ability to identify acquisitions, execute them under favorable terms and integrate them into the Company’s existing businesses; ability to enter into joint ventures and other similar arrangements under favorable terms; delays and/or costs related to construction, improvements and/or repairs of facilities; nonperformance by or disputes with major customers, suppliers, dealers, distributors or other business partners; changes in financial markets impacting pension expense and funding requirements; political and economic conditions, including the impact of potential terrorist acts and international hostilities; and changes in the status of, or initiation of new, litigation, arbitration or other proceedings. These and other applicable risks and uncertainties have been described more fully in Sunoco’s 2005 Form 10-K filed with the Securities and Exchange Commission on March 3, 2006 and in other periodic reports filed with the Securities and Exchange Commission. Sunoco undertakes no obligation to update any forward-looking statements in this release, whether as a result of new information or future events.

-END OF TEXT, CHARTS FOLLOW-

 

- more -

SUNOCO 1Q06 EARNINGS, PAGE 5

Sunoco, Inc.

2006 First Quarter Financial Summary

(Unaudited)

 

First Quarter

    2006    2005

Revenues

    $ 8,593,000,000    $ 7,209,000,000

Net Income

    $ 79,000,000    $ 116,000,000

Net Income Per Share of Common Stock:

      

Basic

    $ .59    $ .84

Diluted

    $ .59    $ .83

Weighted-Average Number of Shares Outstanding (In Millions):

      

Basic

      132.9      138.2

Diluted

      133.6      139.1

 

- more -

SUNOCO 1Q06 EARNINGS, PAGE 6

Sunoco, Inc.

Earnings Profile of Sunoco Businesses (after tax)

(Millions of Dollars, Except Per-Share Amounts)

(Unaudited)

 

     Three
Months Ended
March 31		        
     2006     2005     Variance  

Refining and Supply

    $ 73     $ 108     $ (35 )

Retail Marketing

      —         (8 )     8  

Chemicals

      14       33       (19 )

Logistics

      6       3       3  

Coke

      14       10       4  

Corporate and Other:

       

Corporate expenses

      (16 )     (16 )     —    

Net financing expenses and other

      (12 )     (14 )     2  
                        

Consolidated net income

    $ 79     $ 116     $ (37 )
                        

Net income per share of common stock (diluted)

    $ .59     $ .83     $ (.24 )
                        

 

- more -

SUNOCO 1Q06 EARNINGS, PAGE 7

Sunoco, Inc.

Financial and Operating Statistics (Unaudited)

 

     For the
Three Months
Ended March 31
     2006    2005

TOTAL REFINING AND SUPPLY

      

Income (Millions of Dollars)

    $ 73    $ 108

Realized Wholesale Margin* (Per Barrel of Production Available for Sale)

    $ 6.13    $ 5.93

Crude Inputs as Percent of Crude Unit Rated Capacity

      93      97

Throughputs (Thousand Barrels Daily):

      

Crude Oil

      835.3      875.0

Other Feedstocks

      68.8      52.7
             

Total Throughputs

      904.1      927.7
             

Products Manufactured (Thousand Barrels Daily):

      

Gasoline

      427.6      442.9

Middle Distillates

      308.1      304.3

Residual Fuel

      70.8      77.3

Petrochemicals

      35.8      38.6

Lubricants

      13.2      12.6

Other

      85.4      89.5
             

Total Production

      940.9      965.2

Less: Production Used as Fuel in Refinery Operations

      44.3      46.7
             

Total Production Available for Sale

      896.6      918.5
             

 

* Wholesale sales revenue less related cost of crude oil, other feedstocks, product purchases and terminalling and transportation divided by production available for sale.

 

- more -

SUNOCO 1Q06 EARNINGS, PAGE 8

Sunoco, Inc.

Financial and Operating Statistics (Unaudited)

 

     For the
Three Months
Ended March 31
     2006    2005

Northeast Refining*

      

Realized Wholesale Margin (Per Barrel of Production Available for Sale)

    $ 5.35    $ 6.11

Market Benchmark 6-3-2-1 (Per Barrel)

    $ 4.49    $ 4.51

Crude Inputs as Percent of Crude Unit Rated Capacity

      93      99

Throughputs (Thousand Barrels Daily):

      

Crude Oil

      610.1      646.2

Other Feedstocks

      60.2      46.7
             

Total Throughputs

      670.3      692.9
             

Products Manufactured (Thousand Barrels Daily):

      

Gasoline

      319.2      328.6

Middle Distillates

      230.2      230.7

Residual Fuel

      66.4      73.2

Petrochemicals

      28.9      30.1

Other

      51.6      57.8
             

Total Production

      696.3      720.4

Less: Production Used as Fuel in Refinery Operations

      32.5      35.5
             

Total Production Available for Sale

      663.8      684.9
             

*  Comprised of the Marcus Hook, Philadelphia and Eagle Point refineries.

      
MidContinent Refining*      

Realized Wholesale Margin (Per Barrel of Production Available for Sale)

    $ 8.38    $ 5.42

Market Benchmark 3-2-1 (Per Barrel)

    $ 7.92    $ 6.24

Crude Inputs as Percent of Crude Unit Rated Capacity

      92      93

Throughputs (Thousand Barrels Daily):

      

Crude Oil

      225.2      228.8

Other Feedstocks

      8.6      6.0
             

Total Throughputs

      233.8      234.8
             

 

* Comprised of the Toledo and Tulsa refineries.

 

- more -

SUNOCO 1Q06 EARNINGS, PAGE 9

Sunoco, Inc.

Financial and Operating Statistics (Unaudited)

 

     For the
Three Months
Ended March 31		  
     2006     2005  

MidContinent Refining (continued)

     

Products Manufactured (Thousand Barrels Daily):

     

Gasoline

      108.4       114.3  

Middle Distillates

      77.9       73.6  

Residual Fuel

      4.4       4.1  

Petrochemicals

      6.9       8.5  

Lubricants

      13.2       12.6  

Other

      33.8       31.7  
                

Total Production

      244.6       244.8  

Less: Production Used as Fuel in Refinery Operations

      11.8       11.2  
                

Total Production Available for Sale

      232.8       233.6  
                

RETAIL MARKETING

     

Loss (Millions of Dollars)

    $ —       $ (8 )

Retail Margin* (Per Barrel):

     

Gasoline

    $ 2.85     $ 2.37  

Middle Distillates

    $ 5.02     $ 5.06  

Sales of Petroleum Products (Thousand Barrels Daily):

     

Gasoline

      287.5       289.8  

Middle Distillates

      46.5       49.4  
                
     334.0       339.2  
                

Total Retail Gasoline Outlets, End of Period

      4,737       4,805  

Gasoline and Diesel Throughput per Company Owned or Leased Outlet (M Gal/Site/Month)

      132       132  

Convenience Stores:

     

Total Stores, End of Period

      739       735  

Merchandise Sales (M$/Store/Month)

    $ 71     $ 71  

Merchandise Margin (Company Operated) (% of Sales)

      28 %     28 %

 

* Retail sales price less related wholesale price and terminalling and transportation costs per barrel. The retail sales price is the weighted-average price received through the various branded marketing distribution channels.

 

- more -

SUNOCO 1Q06 EARNINGS, PAGE 10

Sunoco, Inc.

Financial and Operating Statistics (Unaudited)

 

     For the
Three Months
Ended March 31
     2006*    2005

CHEMICALS

      

Income (Millions of Dollars)

    $ 14    $ 33

Margin** (Cents per Pound):

      

All Products***

      10.9      12.6

Phenol and Related Products

      9.1      11.0

Polypropylene***

      13.2      15.4

Sales (Millions of Pounds):

      

Phenol and Related Products

      633      681

Polypropylene

      562      533

Other

      21      33
             
     1,216      1,247
             

 

* The income and margin data reflect a new pricing formula for 2006 sales of phenol to Honeywell International Inc. based upon unfavorable arbitration decisions in the third quarter of 2005 and first quarter of 2006. The new pricing formula remains in effect until another arbitration establishes the price for 2005 and beyond.

 

** Wholesale sales revenue less cost of feedstocks, product purchases and related terminalling and transportation divided by sales volumes.

 

*** The polypropylene and all products margins include the impact of a long-term supply contract with Equistar Chemicals, L.P. which is priced on a cost-based formula that includes a fixed discount.

 

LOGISTICS*

      

Income (Millions of Dollars)

    $ 6    $ 3

Pipeline and Terminal Throughput (Thousand Barrels Daily)*:

      

Unaffiliated Customers

      1,038      833

Affiliated Customers

      1,619      1,650
             
     2,657      2,483
             

 

* Excludes joint-venture operations.

 

COKE*

      

Income (Millions of Dollars)

    $ 14    $ 10

Coke Production (Thousands of Tons)

      631      503

Coke Sales (Thousands of Tons)

      647      497

 

* Includes amounts attributable to the Haverhill facility, which commenced operations in March 2005.

 

- more -

SUNOCO 1Q06 EARNINGS, PAGE 11

Sunoco, Inc.

Financial and Operating Statistics (Unaudited)

 

     For the
Three Months
Ended March 31
     2006     2005

CAPITAL EXPENDITURES (Millions of Dollars)

     

Refining and Supply

    $ 130     $ 149

Retail Marketing

      12       11

Chemicals

      11       18

Logistics

      16 *     8

Coke

      3       22
              
   $ 172     $ 208
              

 

* Excludes the acquisition of two separate crude oil pipeline systems and related storage facilities located in Texas, one from Alon USA Energy, Inc. for $68 million and the other from Black Hills Energy, Inc. for $41 million.

 

DEPRECIATION, DEPLETION AND AMORTIZATION (Millions of Dollars)

      

Refining and Supply

    $ 56    $ 49

Retail Marketing

      25      27

Chemicals

      18      18

Logistics

      9      8

Coke

      4      3
             
   $ 112    $ 105
             

 

- more -

SUNOCO 1Q06 EARNINGS, PAGE 12

Sunoco, Inc.

Earnings Profile of Sunoco Businesses (after tax)

(Millions of Dollars, Except Per-Share Amounts)

(Unaudited)

 

     2005  
     1st     2nd     3rd     4th     Total  

Refining and Supply

    $ 108     $ 212     $ 341     $ 286     $ 947  

Retail Marketing

      (8 )     7       6       25       30  

Chemicals

      33       30       23       8       94  

Logistics

      3       9       7       3       22  

Coke

      10       13       15       10       48  

Corporate and Other:

           

Corporate expenses

      (16 )     (16 )     (25 )     (27 )     (84 )

Net financing expenses and other

      (14 )     (13 )     (10 )     (8 )     (45 )
                                        
     116       242       357       297       1,012  

Special items

      —         —         (28 )     (10 )     (38 )
                                        

Consolidated net income

    $ 116     $ 242     $ 329     $ 287     $ 974  
                                        

Earnings (loss) per share of common stock (diluted):

           

Income before special items

    $ .83     $ 1.75     $ 2.60     $ 2.19     $ 7.36  

Special items

      —         —         (.21 )     (.07 )     (.28 )
                                        

Net income

    $ .83     $ 1.75     $ 2.39     $ 2.12     $ 7.08  
                                        

 

- more -

SUNOCO 1Q06 EARNINGS, PAGE 13

Sunoco, Inc.

Earnings Profile of Sunoco Businesses (after tax)

(Millions of Dollars, Except Per-Share Amounts)

(Unaudited)

 

     2006
First Quarter		  

Refining and Supply

    $ 73  

Retail Marketing

      —    

Chemicals

      14  

Logistics

      6  

Coke

      14  

Corporate and Other:

   

Corporate expenses

      (16 )

Net financing expenses and other

      (12 )
        
     79  

Special items

      —    
        

Consolidated net income

    $ 79  
  

Earnings per share of common stock (diluted):

   

Income before special items

    $ .59  

Special items

      —    
        

Net income

    $ .59  
        

 

- more -

SUNOCO 1Q06 EARNINGS, PAGE 14

Sunoco, Inc.

Consolidated Statements of Income

(Millions of Dollars)

(Unaudited)

 

     2005  
     1st     2nd     3rd     4th     Total  

REVENUES

           

Sales and other operating revenue (including consumer excise taxes)

    $ 7,191     $ 7,970     $ 9,345     $ 9,248     $ 33,754  

Interest income

      3       3       6       11       23  

Other income (loss), net

      15       17       (56 )     11       (13 )
                                        
     7,209       7,990       9,295       9,270       33,764  
                                        

COSTS AND EXPENSES

           

Cost of products sold and operating expenses

      6,059       6,581       7,702       7,686       28,028  

Consumer excise taxes

      585       640       675       688       2,588  

Selling, general and administrative expenses

      209       225       242       270       946  

Depreciation, depletion and amortization

      105       102       109       113       429  

Payroll, property and other taxes

      36       28       33       27       124  

Interest cost and debt expense

      23       23       25       23       94  

Interest capitalized

      (6 )     (6 )     (8 )     (5 )     (25 )
                                        
     7,011       7,593       8,778       8,802       32,184  

Income before income tax expense

      198       397       517       468       1,580  

Income tax expense

      82       155       188       181       606  
                                        

Net income

    $ 116     $ 242     $ 329     $ 287     $ 974  
                                        

 

- more -

SUNOCO 1Q06 EARNINGS, PAGE 15

Sunoco, Inc.

Consolidated Statements of Income

(Millions of Dollars)

(Unaudited)

 

     2006
First Quarter		  

REVENUES

   

Sales and other operating revenue (including consumer excise taxes)

    $ 8,569  

Interest income

      10  

Other income, net

      14  
        
     8,593  
        

COSTS AND EXPENSES

   

Cost of products sold and operating expenses

      7,454  

Consumer excise taxes

      628  

Selling, general and administrative expenses

      210  

Depreciation, depletion and amortization

      112  

Payroll, property and other taxes

      34  

Interest cost and debt expense

      26  

Interest capitalized

      (1 )
        
     8,463  

Income before income tax expense

      130  

Income tax expense

      51  
        

Net income

    $ 79  
        

 

- more -

SUNOCO 1Q06 EARNINGS, PAGE 16

Sunoco, Inc.

Consolidated Balance Sheets

(Millions of Dollars)

(Unaudited)

 

     At
March 31
2006		    At
December 31
2005

ASSETS

      

Current Assets

      

Cash and cash equivalents

    $ 361    $ 919

Accounts and notes receivable, net

      1,873      1,754

Inventories

      1,136      799

Deferred income taxes

      216      215
             

Total Current Assets

      3,586      3,687

Investments and long-term receivables

      144      143

Properties, plants and equipment, net

      5,826      5,658

Prepaid retirement costs

      12      12

Deferred charges and other assets

      445      431
             

Total Assets

    $ 10,013    $ 9,931
             

LIABILITIES AND SHAREHOLDERS’ EQUITY

      

Current Liabilities

      

Accounts payable and accrued liabilities

    $ 3,680    $ 3,695

Current portion of long-term debt

      240      177

Taxes payable

      336      338
             

Total Current Liabilities

      4,256      4,210

Long-term debt

      1,284      1,234

Retirement benefit liabilities

      567      563

Deferred income taxes

      844      817

Other deferred credits and liabilities

      400      409

Minority interests

      635      647

Shareholders’ equity

      2,027      2,051
             

Total Liabilities and Shareholders’ Equity

    $ 10,013    $ 9,931
             

 

- more -

SUNOCO 1Q06 EARNINGS, PAGE 17

Sunoco, Inc.

Consolidated Statements of Cash Flows

(Millions of Dollars)

(Unaudited)

 

     For the
Three Months
Ended March 31		  
     2006     2005  

INCREASES (DECREASES) IN CASH AND CASH EQUIVALENTS

     

CASH FLOWS FROM OPERATING ACTIVITIES:

     

Net income

    $ 79     $ 116  

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

     

Depreciation, depletion and amortization

      112       105  

Deferred income tax expense

      17       26  

Proceeds from power contract restructuring

      —         48  

Payments less than (in excess of) expense for retirement plans

      4       (1 )

Changes in working capital pertaining to operating activities, net of effect of acquisitions

      (518 )     (51 )

Other

      (7 )     4  
                

Net cash provided by (used in) operating activities

      (313 )     247  
                

CASH FLOWS FROM INVESTING ACTIVITIES:

     

Capital expenditures

      (172 )     (208 )

Acquisitions

      (109 )     —    

Proceeds from divestments

      12       12  

Other

      (1 )     3  
                

Net cash used in investing activities

      (270 )     (193 )
                

CASH FLOWS FROM FINANCING ACTIVITIES:

     

Net proceeds from issuance of long-term debt

      115       1  

Repayments of long-term debt

      (2 )     (5 )

Cash distributions to investors in cokemaking operations

      (4 )     (11 )

Cash distributions to investors in Sunoco Logistics Partners L.P.

      (10 )     (6 )

Cash dividend payments

      (27 )     (21 )

Purchases of common stock for treasury

      (48 )     (70 )

Proceeds from issuance of common stock under management incentive plans

      1       5  

Other

      —         (6 )
                

Net cash provided by (used in) financing activities

      25       (113 )
                

Net decrease in cash and cash equivalents

      (558 )     (59 )

Cash and cash equivalents at beginning of period

      919       405  
                

Cash and cash equivalents at end of period

    $ 361     $ 346  
                

 

-END OF SUNOCO 1Q06 EARNINGS REPORT-