Sunoco sells home-heating-oil unit for $82.5M

Sunoco Home Comfort Services pitches itself as the only refiner in America that delivers home-heating oil direct to its customers.

Not anymore.

Sunoco Inc. announced today that it had sold its heating-oil and propane-distribution business to Superior Plus Corp. of Calgary, Alberta, for $82.5 million, giving the Canadian company nearly 100,000 retail customers in Pennsylvania and New York state, including 20,000 in the Philadelphia area.

The Philadelphia oil refiner said it was getting out of the retail heating-oil business to focus on refining and marketing motor fuel.

Sunoco said it would supply heating oil to the new owner of its three retail-distribution companies. But the Philadelphia dealer would no longer advertise the Sunoco brand after the sale is completed Sept. 30.

Superior Plus, which sells fuel, specialty chemicals, and building supplies, described the transaction as an "opportunistic acquisition in the current economic environment" that gives it a foothold in the Northeast home-heating oil market.

Besides Sunoco Home Comfort Services, Sunoco will sell Montour Home Comfort Services, with 49,000 customers in central and northern Pennsylvania, and Mohawk Home Comfort Services, with 29,000 customers in central New York state. The three companies employ 370 people.

Superior said the Sunoco distribution companies were among the top three oil dealers in their markets. About 88 percent of their customers are residential. Fifty-five percent are steady, automatic-delivery customers.

The sale includes 356 delivery trucks, two pipeline-supplied fuel terminals, and 20 million gallons of storage capacity.

Superior says heating-oil distribution offers "geographic expansion opportunities" because the market is highly fragmented among many small dealers. About 43 percent of America's heating oil is consumed in the Mid-Atlantic region, and New York and Pennsylvania have an estimated 3.5 million homes that use heating oil.

Consolidation may be the best avenue to growth because the heating-oil business has been in long-term decline as residential customers switch to other fuels. U.S. sales of home-heating oil have dropped 41 percent since 1989 to 5.1 billion gallons in 2007, according to the U.S. Energy Information Administration.

Superior said Sunoco's retail-heating-oil business sold 160 million gallons and earned Sunoco $14 million in the 12 months ended June 30.

Grant Billing, chief executive officer of Superior, told analysts today that propane sales represented "very good growth potential" compared with heating-oil sales.

Sunoco spokesman Thomas P. Golembeski said the sale would have no material affect on earnings. The heating-oil unit is a small part of Sunoco's retail-marketing division, which was responsible last year for 26 percent of the company's $776 million in net income. Most of Sunoco's earnings come from its refining operations.

The sale of the home-heating-oil unit is the latest divestiture since Lynn Elsenhans was named Sunoco chief executive a year ago and announced plans to evaluate its portfolio with an eye toward improving performance.

Earlier this year, Sunoco announced plans to sell 150 retail outlets over the next two years to generate an estimated $180 million while retaining most of the gasoline sales attributed to the divested sites. From 2006 to 2008, Sunoco sold 181 sites for $133 million.

Superior Plus is partly funding the acquisition with a $45 million stock issue that hit the market today. Its shares closed down 3.97 percent on the Toronto Stock Exchange at $11.37 (Canadian), down 47 cents.

Sunoco shares closed today on the New York Stock Exchange at $25.28, off 36 cents or 1.40 percent.