Thursday, oil refiner Sunoco, Inc. (SUN) reported a net loss for the third quarter, primarily due to a decline in demand for oil as well as an increase in oil prices, with revenues dropping significantly. Earnings for the quarter fell short of analysts' estimates, but revenues came in ahead of expectations.
The Philadelphia, Pennsylvania based company's GAAP net loss attributable to its shareholders for the quarter was $312 million or $2.67 per share, compared with a net income of $549 million or $4.70 per share for the third quarter year-ago.
On an adjusted basis, loss for the period was $34 million or $0.29 per share, compared with an income of $559 million or $4.78 per share in the prior year period.
On average, seventeen analysts polled by Thomson Reuters estimated a loss of 0.10 per share. Analysts' estimates typically exclude special items.
Sunoco recorded a $278 million after-tax provision for the quarter, related to indefinitely idling all process units at the Eagle Point refinery, of which $254 million represents non-cash charges. The refiner also recorded a $14 million after-tax charge in connection with the business improvement initiative, all of which was attributable to a non-cash provision for pension and postretirement settlement losses. The company also recorded a $12 million after-tax non-cash provision to write down to estimated fair value certain other assets in the Refining and Supply business, and recognized a $26 million after-tax gain on divestment of the retail heating oil and propane distribution business.
Sunoco's revenues for the third quarter declined to $8.69 billion from $15.15 billion in the year-ago period. Thirteen analysts' estimated revenues of $7.83 billion for the quarter.
Segment-wise, Refining and Supply incurred a loss from continuing operations totaling $118 million, compared to income of $398 million in the third quarter of 2008. The decline was attributed to lower realized margins and lower production volumes, partially offset by lower expenses. The company said that its realized margins and crude utilization rate were negatively affected by market weakness during the quarter.
Overall crude utilization rate was 74% for the quarter and included the impact of a planned turnaround at the company's Toledo refinery and a planned one-month maintenance outage at a fluid catalytic cracking unit in its Philadelphia refinery. Sunoco continues to idle the Eagle Point refinery.
Sunoco said its Retail Marketing segment earned $49 million in the current quarter, compared with $72 million a year-ago. Reduced earnings were primarily due to lower average retail gasoline margins, partially offset by lower expenses. Sales volumes were relatively flat versus the year-ago quarter. Retail gasoline margins in the third quarter of 2008 benefited from the rapid decrease in wholesale prices during that period.
Chemicals reported a loss of $1 million during the quarter, compared with an income of $19 million a year-ago. The decline was due to lower margins and sales volumes, partially offset by lower expenses.
Logistics earned $19 million in the third quarter, compared with $20 million year-ago. Additional earnings from a refined products pipeline and terminal system acquired in November 2008 were essentially offset by lower lease acquisition results.
The Coke segment earned $35 million during the quarter, compared with $29 million a year-ago. The increase in earnings was mainly due to improved results from Jewell operations largely associated with higher price realizations from coke production.
"During the third quarter, refining and chemicals results continued to be impacted by weak demand, but our other businesses continued to generate steady earnings," said Lynn Elsenhans, Sunoco's chairman and chief executive officer.
Elsenhans said the company continues to expect a challenging market for petroleum and chemical products due to ongoing economic weakness and additional global supply.
During the quarter, other oil giants including Exxon Mobil and Chevron reported a decline in earnings as margins declined due to a decline in demand for oil and falling oil and natural gas prices.
Sunoco recorded a $278 million after-tax provision in connection with its plan to idle indefinitely all process units at the Eagle Point refinery,
Sunoco said effective June 30, pension benefits under its defined benefit pension plans will be frozen for most employees and post retirement medical benefits for the majority of future retirees will be phased out for those employees retiring after July 1. According to the company, these moves will enable it to predict retirement plan costs and cash flow. It said that by freezing benefits, the future financial liabilities and requirements for cash contributions to the pension plans and funding of retiree health care will be substantially reduced.
Year-to-date, Sunoco reported a net loss attributable to Sunoco shareholders of $355 million or $3.04 per share, compared with a net income attributable to Sunoco shareholders of $572 million or $4.88 per share for the first nine months of 2008.
Adjusted loss for the first nine months of the year was $6 million or $0.05 per share, compared with an income of $561 million or $4.79 per share in the prior year period.
Year-to-date revenues declined to $22.33 billion from $42.43 billion in the prior year period.
SUN closed Thursday's trade on the New York Stock Exchange at $31.42, up $0.74 or 2.41%.
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