Sunoco Reports First Quarter Results

Sunoco, Inc. (NYSE:SUN) today reported a net loss attributable to Sunoco shareholders of $63 million ($0.53 per share diluted) for the first quarter of 2010 compared to net income attributable to Sunoco shareholders of $12 million ($0.10 per share diluted) for the first quarter of 2009. Excluding special items, Sunoco had income for the 2010 first quarter of $17 million ($0.14 per share diluted) compared to 2009 first quarter income of $59 million ($0.50 per share diluted).

”While first quarter results reflect the continued challenges caused by ongoing economic weakness and excess global supply of petroleum and chemical products, our non-refining businesses continue to generate steady earnings,” said Lynn L. Elsenhans, Chairman and Chief Executive Officer. Sunoco’s earnings contribution from its Retail Marketing, Logistics and Coke businesses totaled $75 million, up from $61 million in the first quarter of 2009.

"Although the market remains challenging, Sunoco is well prepared,” said Elsenhans. "The early, proactive steps we took during this cycle have made us stronger, leaner and more competitive. We continue to drive toward a sustainably lower cost structure, and our recent actions to strengthen our balance sheet have enabled us to maintain our financial flexibility and position us to take advantage of attractive growth opportunities in our Logistics, Coke and Retail Marketing businesses.”

"To build a better future for Sunoco, we remain focused on the fundamentals: running our refineries safely and reliably at optimal capacity utilization, lowering our breakeven cost per barrel, and improving margin capture, all of which are designed to increase our cash generation through operations,” Elsenhans said. "Going forward, we will maintain our focus on delivering value to shareholders and achieving our aspiration of becoming the preferred provider of transportation fuels in our markets.”

DETAILS OF FIRST QUARTER RESULTS

REFINING AND SUPPLY- Continuing Operations

Refining and Supply had a loss from continuing operations of $42 million in the first quarter of 2010 versus income of $14 million in the first quarter of 2009. The decrease in results was due to lower realized margins and production volumes, partially offset by lower expenses. Planned turnaround activities in March at the Marcus Hook and Toledo refineries resulted in reduced production and reduced realized margins due largely to lower yield gains and the cost of reserving for refined product inventory draws at higher quarter-end prices. The overall crude utilization rate was 79 percent for the quarter, down from 85 percent in the fourth quarter of 2009. Lower expenses were largely the result of lower costs for purchased fuel and utilities as well as cost reductions related to the business improvement initiative carried out during the last three quarters of 2009 and the closure of the Eagle Point refinery in the fourth quarter of 2009.

REFINING AND SUPPLY- Discontinued Operations

Discontinued Tulsa refining operations, which were divested on June 1, 2009, had income of $9 million in the first quarter of 2009.

RETAIL MARKETING

Retail Marketing earned $21 million in the current quarter versus $6 million in the first quarter of 2009. The increase in earnings was due to higher average retail gasoline margins and lower expenses, partially offset by lower distillate margins and lower gasoline and distillate sales volumes.

CHEMICALS- Continuing Operations

Chemicals reported income from continuing operations of $3 million in the first quarter of 2010 versus a loss of $12 million in the first quarter of 2009. The improvement in results was primarily due to higher margins, higher sales volumes and lower expenses.

CHEMICALS- Discontinued Operations

Discontinued polypropylene operations, which were divested on March 31, 2010, had income of $21 million in the first quarter of 2010 versus $8 million in the first quarter of 2009. The increase in earnings was primarily due to higher margins and lower expenses, partially offset by lower sales volumes and the absence of a favorable inventory adjustment that was recorded in the first quarter of 2009. Margins in 2010 include $6 million of after-tax benefits attributable to LIFO inventory profits.

LOGISTICS

Logistics earned $17 million in the first quarter of 2010 versus $30 million in the first quarter of 2009. The decrease in earnings was due primarily to lower results from crude marketing activities.

COKE

Coke earned $37 million in the first quarter of 2010, compared to $25 million in the first quarter of 2009. The increase in earnings was due primarily to improved results from Jewell operations largely associated with higher price realizations from coke production.

CORPORATE AND OTHER

Corporate Expenses – Corporate administrative expenses were $23 million after tax in the first quarter of 2010 versus $11 million after tax in the first quarter of 2009. Corporate expenses increased primarily due to $8 million of unfavorable income tax adjustments in 2010 and higher accruals for performance-related incentive compensation.

Net Financing Expenses and Other – Net financing expenses and other were $17 million after tax in the first quarter of 2010 versus $10 million after tax in the first quarter of 2009. The increase was primarily due to higher interest expense and lower capitalized interest. The increased interest expense was largely driven by new borrowings of Sunoco Logistics Partners L.P. (NYSE:SXL).

SPECIAL ITEMS

During the first quarter of 2010, Sunoco recorded a $44 million net after-tax loss related to the divestment of the discontinued polypropylene operations; recorded a $20 million after-tax provision primarily related to contract losses in connection with excess barge capacity resulting from the shutdown of the Eagle Point refining operations; established a $7 million after-tax accrual primarily for pension settlement losses in connection with the business improvement initiative; and recorded a $9 million unfavorable adjustment to deferred state income taxes attributable to its continuing phenol chemical operations.

During the first quarter of 2009, Sunoco established a $34 million after-tax accrual for employee terminations and related costs in connection with the business improvement initiative; recorded a $9 million after-tax provision to write down to estimated fair value certain assets primarily in the Refining and Supply business; and established a $4 million after-tax accrual for a contract loss, employee terminations and other exit costs in connection with the shutdown of the Bayport, TX polypropylene plant.

Sunoco, Inc., headquartered in Philadelphia, PA, is a leading manufacturer and marketer of petroleum and petrochemical products. With 675 thousand barrels per day of refining capacity, approximately 4,700 retail sites selling gasoline and convenience items, and an ownership interest in approximately 6,000 miles of crude oil and refined product pipelines and 41 product terminals, Sunoco is one of the largest independent refiner-marketers in the United States. Utilizing a technology with several proprietary features, Sunoco’s cokemaking facilities in the United States have the nominal capacity to manufacture approximately 3.67 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.

Anyone interested in obtaining further insights into the first quarter's results can monitor the Company's quarterly teleconference call, which is scheduled for 5:30 p.m. ET on April 29, 2010. It can be accessed through Sunoco's website - www.SunocoInc.com. It is suggested that you visit the site prior to the teleconference to ensure that you have downloaded any necessary software.

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, 2009 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.

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