Sunoco blames quarterly loss on crude prices, outages

Beleaguered motorists are suffering from high oil prices, but they may be surprised to learn that Sunoco Inc., the region's biggest fuel refiner and marketer, shares their pain.

The Philadelphia refiner on Thursday reported a $101 million first-quarter loss that it blamed on rising crude-oil prices and unplanned outages at its Philadelphia and Marcus Hook refineries.

While many big oil producers are raking in huge profits from high crude prices, refiners that convert the oil to motor fuel do not necessarily share in the bonanza.

Crude prices "created very challenging market conditions in the first quarter," Lynn L. Elsenhans, Sunoco's chief executive officer, said in a statement.

Sunoco suffered a double whammy during the quarter when its Delaware River refineries shut down for sustained outages from mechanical failures. The Philadelphia refinery reportedly suffered two fires in March.

"Clearly this situation is not acceptable, and we have taken a number of steps," Elsenhans said during a conference call. She said that the outages had concluded in April, and that the refineries were up and running.

Sunoco's loss amounted to 84 cents a share, compared with a 53-cent-per-share loss during the first quarter of 2010. Excluding special items, Sunoco had a loss of $122 million, or $1.01 a share, for the quarter vs. first-quarter 2010 income of $17 million, or 14 cents a share.

Sunoco reported its earnings after markets closed, and the losses were greater than most analysts anticipated. The company's refining and supply unit reported a pretax loss of $138 million.

Company shares had closed down 47 cents, or 1.16 percent, at $40.06, and fell further in after-hours trading.

The tough business climate at the refineries seems to reinforce Elsenhans' strategy to make Sunoco less dependent on the low-margin refining business and more reliant on profits from retailing, convenience stores, and logistics.

Sunoco is handicapped because its refineries depend on supplies of West African sweet crude, which costs as much as $16 a barrel more than high-sulfur West Texas crude. Since Sunoco competes with companies that can import refined fuel from overseas or by pipeline from the Gulf Coast, its margins are under pressure.

Elsenhans said that some management changes had occurred in response to the outages, but that the company did not plan to shut the refineries and convert them into fuel terminals.

"Right now we believe that continuing to run them is the best option," she said.

Sunoco has been selling assets, such as its chemicals unit and its refinery in Toledo, Ohio, to focus on its retail and logistics businesses, which earned $43 million in the quarter.

"We finished the quarter with approximately $1.5 billion in cash, which gives us strategic flexibility to further pursue our growth plans," Elsenhans said.

The SunCoke Energy subsidiary, which is being spun off as a separate company whose stock will be largely controlled by Sunoco, earned pretax income of $9 million.

The company also reported $57 million in one-time gains from the sale of its Toledo refinery.