W) Update on SUN
Rated a WATCH
Rev 1526.0M to 1927.0M to 2210.0M to 4226.0M to 2779.0M to 3,634.0M Jun00 per daily charts
EPS 0.21 to 0.28 to 0.15 to 0.42 to 0.87 to 2.44 Jun00 per daily charts
EPS 0.11a to 0.14a to 0.18a to 0.75a to 1.50a per briefing.com
Next quarter est is 0.99 per Zacks.
"Our strong second-quarter results are reflective of excellent operations during a period of exceptionally high refining margins," said John G. Drosdick, Chairman and Chief Executive Officer. "Low industry-wide inventories, new, more complex gasoline specification requirements and continued strong product demand combined to tighten the supply of refined products. While our margins were up versus 1999 record low levels, the overriding factor in the higher prices paid by consumers was clearly the increasing cost for crude oil, which by the end of the second quarter was over 40 cents per gallon higher than last year. Sunoco's refineries operated at over 98 percent of capacity to help meet the growing product demand and provide the new specification gasoline without interruption. While refining results were exceptionally good, retail profitability declined as rising crude oil and wholesale gasoline price increases were not passed on to the street at the same pace. Results from our Chemicals and Lubricants businesses, while up versus last year's depressed levels, were also adversely impacted by rising crude oil and natural gas feedstock costs."
"We also continued our share repurchase program during the quarter, repurchasing 1.4 million shares of our common stock at a total cost of $44 million. We have now repurchased over 2.8 million shares (3% of total outstanding) this year and have share repurchase authorization of $55 million remaining.
Sun Northeast Refining earned $63 million in the second quarter of 2000
versus a loss of $11 million in the second quarter of 1999. The improvement
was due to significantly higher refining margins, which were up almost
$3.00 per barrel from 1999 second quarter levels. Despite much higher crude
and transportation costs, realized refining margins averaged over $5.00 per
barrel for the quarter as margins for gasoline, particularly reformulated
gasoline, were up sharply from 1999 levels.
Sunoco Northeast Marketing earned $4 million in the current quarter versus $18 million in the second quarter of 1999. The decrease was primarily due to lower retail gasoline margins, which decreased approximately 2.4 cents per gallon versus second quarter 1999 levels
Sunoco Chemicals earned $20 million in the quarter versus $7 million in the 1999 second quarter. The increase was primarily due to higher margins for propylene and phenol and increased production of most products, particularly phenol and cumene.
Sunoco's Lubricants business, which includes results from both fuels and lubricants production at its Tulsa and Puerto Rico refineries, recorded a loss of $2 million in the 2000 second quarter versus a loss of $9 million in the second quarter of 1999. The improvement was due largely to higher fuels margins, particularly for gasoline and distillates produced at the Tulsa refinery. Improved base oil margins were largely offset by lower margins for specialty oils, where product price increases continued to lag rising crude oil costs.
Sunoco MidAmerica Marketing & Refining operations earned $38 million in the current quarter versus a loss of $1 million in the 1999 second quarter. The increase in results was primarily due to considerably higher wholesale fuels margins, as various industry-wide product inventory, operating and distribution issues and the introduction of new RFG II gasoline specifications limited gasoline supply in the region. After completing major turnaround work in mid-April, crude runs at the Toledo refinery were excellent and included record production in the month of June. Also contributing to the increase in earnings was a seven percent increase in retail gasoline sales. Partially offsetting these improvements were higher operating expenses and lower petrochemical margins, as feedstock price increases squeezed margins for aromatics and oligomers produced at the Toledo refinery.
Net income was $14 million in both second-quarter periods. Higher throughput revenue was offset by an increase in expenses and lower income from joint venture pipeline operations.
Corporate administrative expenses totaled $6 million in both second quarter periods.
7/27/00 CC notes other than aboves
- Exceptional refining in NE and Midamerican system - 99% in NE, 100% after toledo turnaround
- Chemical phenol and propylene were best since 1997
- Bottom of barrel products such as lubricant suffered as crude prices increased
- purchase fuel from third party, high natural gas and crude price hurt earnings
- NE was strong on distillate margin in first quarter and high gasoline margin in second quarter
- Midamerica had 40 day turnaround and still 38M in net income
- feel better than peers but not exciting investors yet.
- 460M in EBIDTA, trading at 4x half year ebidta
- feel tops in independent refiners
- continued to buyback shares 87.1M outstanding, bought 4.4M shares. Bought 11M since 1997.
- Tax settlement 79M gain, from IRS.
- NE refining 6-3-2-1 margin. July to date is off a bit but well above average. Sales were slightly down, but margin up.
- April was best month due natural prices rising
- Motor oil margin is 15-20 cents than gasoline
- Sell non RFG gasoline in OH (not chicago) from Toledo
Q&A
- 933M in long term debt, 1.8B in total liabilty
- Expect margin similar to first quarter
- $25 is the profitable level for lube.
- Four refining acquisitions this year
- Not successful in acquisitions, but looking.
- As crude prices go up, get higher margins
- Retail prices up 4 cents a gallon
- Fuel costs up 15M more in the NE refining
- Base oil margin are 50 cent a gallon
- RFG premium was 4 cent now, MTBE is expensive.
- priceline.com - no impact, slow rollout started in June. Looking to trade off adverting expenses for volume.
- BPA settlement with four other refiniers - EPA. Sure will be talking to them, but not a 10Q.
/Web site: sunocoinc.com
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I see the quarter as a disappointment. April was the best month and story should be similar to first quarter. With gasoline going down, margins for that also will be affected. I am out on Monday. Dividend is 5% so net was a push the last few months.
Jack |
