Sunoco Announces Strategic Actions to Strengthen Competitive Position; Idles Eagle Point Refinery, Reduces Quarterly Dividend to $0.15 Per Share
Tue Oct 6, 2009 4:01pm EDT
PHILADELPHIA--(Business Wire)--
Sunoco, Inc. (NYSE:SUN) announced today it is indefinitely idling all process
units at its Eagle Point refinery located in Westville, New Jersey in an effort
to reduce losses in its refining business at a time when a recessionary economy,
weak demand for refined products, and increased global refining capacity have
created margin pressure on the entire refining industry. Sunoco will shift
current Eagle Point production to its two nearby refineries in Marcus Hook and
Philadelphia, Pennsylvania, which will now operate at higher capacity
utilization. The company will be able to produce essentially the same amount of
refined products in two facilities that it currently produces in three while
continuing to meet customer demand.
Sunoco also announced today that its Board of Directors authorized a plan to
reduce the quarterly dividend paid to shareholders to $0.15 from $0.30 per
outstanding share of the company`s common stock, effective beginning in the
first quarter of 2010. Reducing the dividend preserves additional capital, gives
the company greater flexibility to pursue its business strategy, and brings its
yield more in line with its peers.
"We anticipated a downturn in the refining industry and took steps earlier this
year to lower costs and enhance our competitive position. However, the operating
environment continues to be very poor, requiring us to take further decisive
action to effectively manage through the current downturn, while positioning
Sunoco for profitable growth in future market conditions," said Lynn Elsenhans,
Sunoco`s Chairman and Chief Executive Officer. "Idling Eagle Point, the asset
least interconnected with our other operations, will enable us to significantly
improve utilization rates at our two other local refineries and reduce our
break-even costs to more competitive levels."
The company intends to idle Eagle Point until market conditions improve and will
evaluate this decision and other options on an ongoing basis, including the
feasibility of using the facility to produce alternative fuels in the future.
Idling Eagle Point, the most recent addition to Sunoco`s refining system,
minimizes disruption to the rest of the company`s operations. While Marcus Hook
and Philadelphia serve as distribution hubs that feed refined products directly
into Sunoco`s branded retail network, Eagle Point is not as directly linked.
Although the production units at Eagle Point will be idled, refined product
storage and handling operations will continue. The products rack at Eagle Point
owned by Sunoco Logistics Partners L.P. will remain open.
Approximately 400 employees will be furloughed during the idling of the
facility. These employees will have the option to return to work in the event
production resumes. During the furlough, the company will continue to pay its
contribution to medical benefits for employees and dependents covered at the
time of the idling for the duration of the furlough. In addition, the company
will offer a voluntary severance program to affected employees, which includes
job placement assistance and retraining.
Ms. Elsenhans said, "The decision to idle Eagle Point did not come easily.
Actions that impact the lives of employees, their families and the communities
they live in are always very difficult. Sunoco appreciates the hard work and
dedication of our employees and is committed to treating them with respect."
The company expects to reduce its pretax expense base by approximately $250
million per year from the idling of Eagle Point. These savings are in addition
to its previously announced target of $300 million in annualized Business
Improvement Initiative savings by the end of 2009. The company is expected to
incur pretax charges, the majority of which are non-cash, of approximately
$475-$550 million related primarily to asset impairment as well as idling costs.
The majority of the charges will occur in the third quarter of 2009 with some
impact in the fourth quarter of 2009 and first quarter of 2010. The company also
expects to realize approximately $70 million in annualized cash savings as a
result of reducing the dividend.
Ms. Elsenhans said, "We are making the tough decisions needed to deal with
current market realities and position Sunoco for the future. Given weak industry
dynamics, we are confident we are taking the right actions to improve our
overall competitiveness, set the stage for investing in our strong regional
brand, explore opportunities in biofuels, and provide customers with a broader
choice of transportation fuel options."
Sunoco also announced today the following changes to its senior leadership team:
Anne-Marie Ainsworth will rejoin the company as Senior Vice President, Refining,
effective November 2, 2009. An industry veteran with 31 years experience in
operations, business and engineering, Ms. Ainsworth, 53, previously spent 19
years at Sunoco and was most recently at Motiva Enterprises LLC, where she was
General Manager of the Motiva Norco Refinery in Norco, Louisiana.
Vincent J. Kelley, currently Senior Vice President, Refining and Engineering
Services, will assume the new role of Senior Vice President, Engineering and
Technology. In his new role, Mr. Kelley will oversee technology strategy and the
development of technical talent at the company. He will retain responsibility
for executing capital projects across all of Sunoco`s business units. Mr. Kelley
will also lead the company`s efforts to idle the Eagle Point refinery.
Commenting on the leadership changes, Ms. Elsenhans said: "Anne-Marie has the
qualifications, record of performance, and hands-on knowledge of our refineries
to contribute to Sunoco`s success from the start. We are very pleased that she
will be rejoining the company. I also congratulate Vince on his important new
role. He remains a key member of the senior leadership team, and we look forward
to continuing to benefit from his invaluable insights and knowledge."
Ms. Ainsworth began her career in 1978 as a process engineer at Sunoco`s
refinery in Toledo, Ohio. During her 19 years with Sunoco, she held a variety of
leadership positions at the Philadelphia and Marcus Hook refineries, including
production manager at Marcus Hook. In addition to her experience at Sunoco,
Shell, and Motiva, she was a Vice President for Lyondell-Citgo Refining, L.P.
from 1997 to 2000.
Ms. Ainsworth earned a Bachelor of Science in Chemical Engineering from the
University of Toledo in 1978 and a Masters in Business Administration from Rice
University in 2000.
The company will hold a conference call for securities analysts and investors on
Tuesday, October 6, 2009 at 5:30 p.m. ET to discuss these developments. Those
wishing to listen can access the call through Sunoco`s website at
www.SunocoInc.com. A replay will be available beginning approximately two hours
following the completion of the call.
Individuals wishing to listen to the call on the company`s website will need
Windows Media Player, which can be downloaded free of charge from Microsoft or
from Sunoco`s Conference Call page.
Sunoco, Inc., headquartered in Philadelphia, PA, is a leading manufacturer and
marketer of petroleum and petrochemical products. With 825,000 barrels per day
of refining capacity, approximately 4,700 retail sites selling gasoline and
convenience items, approximately 6,000 miles of crude oil and refined product
owned and operated pipelines and 43 product terminals, Sunoco is one of the
largest independent refiner-marketers in the United States. Sunoco is a
significant manufacturer of petrochemicals with an annual production capacity of
approximately five billion pounds, largely chemical intermediates used to make
fibers, plastics, film and resins. Utilizing a unique, patented technology,
Sunoco's cokemaking facilities in the United States have the capacity to
manufacture approximately 3.0 million tons annually of high-quality
metallurgical-grade coke for use in the steel industry. Sunoco also is the
operator of, and has an equity interest in, a 1.7 million tons-per-year
cokemaking facility in Vitória, Brazil.
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. These forward-looking statements are based upon
assumptions by the company concerning future conditions, any or all of which
ultimately may prove to be inaccurate, and upon the current knowledge, beliefs
and expectations of company management. These forward-looking statements are not
guarantees of future performance. The reader should not place undue reliance on
these forward-looking statements, which speak only as of the date of this press
release. The company expressly disclaims any obligation to update or alter its
forward-looking statements, whether as a result of new information, future
events or otherwise.
Forward-looking statements are inherently uncertain and involve significant
known and unknown risks and uncertainties (many of which are beyond the control
of the company) that could cause actual results to differ materially from those
discussed in this release.
Such risks and uncertainties include economic, business, competitive and/or
regulatory factors affecting the company`s business, as well as uncertainties
related to the outcomes of pending or future litigation, legislation, or
regulatory actions. Among such risks are changes in crude oil or natural gas
prices, refining, marketing and chemicals margins, or other market conditions
affecting the oil and gas industry; higher-than-expected costs of, or delays in,
planned development or completion of repair projects, capital projects,
acquisitions, or dispositions; operational interruptions, unforeseen technical
difficulties and/or changes in technical or operating conditions; general
domestic and international economic and political conditions, wars and acts of
terrorism or sabotage; the outcome of commercial negotiations; the actions of
competitors or regulators; the competitiveness of alternate-energy sources or
product substitutes; technological developments; liability resulting from
pending or future litigation; significant investment or product changes and/or
liability for remedial actions or assessments under existing or future
environmental regulations; gains and losses related to the acquisition,
disposition or impairment of assets; recapitalizations; access to, or
significantly higher costs of, capital; the effects of changes in accounting
rules applicable to the company; and changes in tax, environmental and other
laws and regulations applicable to the company`s businesses. Unpredictable or
unknown factors not discussed in this release also could have material adverse
effects on forward-looking statements.
In accordance with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, the company has included in its Annual Report on
Form 10-K for the year ended December 31, 2008 and in its subsequent Form 10-Q
and Form 8-K filings, cautionary language identifying other important factors
(though not necessarily all such factors) that could cause future outcomes to
differ materially from those set forth in the forward-looking statements. For
more information concerning these factors, see the company`s Securities and
Exchange Commission filings, available on the company`s website at
www.SunocoInc.com.
http://www.reuters.com/article/pressRelease/idUS180134+06-Oct-2009+BW200...
