"After an extremely challenging market environment in the first half of 2008, very strong margins in our Refining & Supply and Retail Marketing businesses led to a record result in the third quarter," said [image-nocss] Lynn Elsenhans, Sunoco's CEO and president. "Refining & Supply earned $424 million as falling crude oil prices and reduced industry production related to the Gulf Coast hurricane activity led to significantly improved margins.... We continued to optimize our product yields to maximize distillate production early in the quarter when gasoline margins were weak and then increased gasoline production during September as market demand for gasoline increased."
She added, "Demonstrating the diversity of our earnings base, Sunoco's nonrefining businesses earned $140 million during the third quarter, their highest quarterly contribution ever. Retail Marketing earned $72 million despite lower year-over-year sales volumes as falling wholesale gasoline prices through most of the quarter led to expanded retail margins."
Refining & Supply earned $424 million in the third quarter of 2008 versus $171 million in third-quarter 2007. The increase in earnings was primarily due to higher realized margins, partially offset by higher expenses and lower production volumes. The higher margins primarily resulted from tighter product markets following storms in the U.S. Gulf Coast region.
Retail Marketing earned $72 million in third-quarter 2008 versus $31 million in third-quarter 2007. The increase in earnings was primarily due to higher average retail gasoline and distillate margins, partially offset by lower retail gasoline sales volumes and lower divestment gains. Results for the quarter included a $5 million after-tax charge related to asset impairment losses and associated costs in conjunction with the company's Retail Portfolio Management (RPM) program. The company anticipates that the future gains to be recognized from the divestment of sites under the RPM program will exceed the impairment losses and associated costs recognized during the quarter.
Sunoco earned $572 million, or $4.88 per share of common stock on a diluted basis, for the first nine months of 2008 versus $900 million, or $7.46 per share, in the comparable 2007 period. The decrease was primarily due to lower margins in Sunoco's Refining & Supply business. Also contributing to the decline were the absence of a $90 million after-tax gain related to the prior issuance of SXL limited partnership units, higher expenses, lower production of refined products, lower gains on asset divestments, lower retail gasoline and distillate sales volumes and the provision for asset writedowns associated with the canceled capital project at the Tulsa refinery. Partially offsetting these negative factors were higher average retail gasoline and distillate margins.
Philadelphia-based Sunoco is a leading manufacturer and marketer of petroleum and petrochemical products. With 910 thousand barrels per day of refining capacity, approximately 4,700 retail sites selling gasoline and convenience items, approximately 5,500 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.
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