The Company, through its subsidiaries, is a petroleum refiner and marketer and chemicals manufacturer with interests in logistics and cokemaking; petroleum refining and marketing operations include the manufacturing and marketing of petroleum products.
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It’s bumpy, but stable ride ahead for Sunoco. The company’s Toledo debottleneck project to expand crude capacity by 20,000 barrels a day is well on track and expected to contribute to earnings in second half of 2007. In addition, company’s FCC expansion at Philadelphia refinery for upgrading low value residual fuel and widening crude, looks attractive even after spending higher than expected capital spending of $500.0 million. The project is expected to be online in early second quarter of 2007 and will further boost margins expansion.
Rising oil demand, tepid non-OPEC supply growth, and OPEC production cuts have resulted in a drawdown in oil inventories and would result in a tight summer oil markets. The U.S. petroleum consumption is projected to increase by an average 1.5% and 1.3% per year in 2007 and 2008, respectively. Whereas, the average U.S. domestic crude oil production is expected to decrease 0.6% in 2007 and would eventually rise 4.3% in 2008.
As a result, U.S. will meet its crude demand from OPEC, as well as non-OPEC countries.
United States motor gasoline consumption growth is projected to average 1.2% per year, reflecting continuing economic growth; distillate (diesel fuel and heating oil) consumption is to increase 2.1% in 2007 and 1.6% in 2008; and demand for jet fuel is to increase by an average of 2.7% and 1.9% in 2007 and 2008, respectively. Residual fuel oil, following last year’s decline in consumption of 239,000 bbl/d (26%), is expected to grow by 67,000 bbl/d in 2007 and 26,000 bbl/d in 2008. As a result, Sunoco will benefit from increase in customers demand and would thus result in stable earnings.
Sunoco continues to adopt its cost cutting, two-folded strategy i.e. focusing both its refining and marketing operations in Northeastern and Midwestern U.S. and thus reducing transportation costs, and selling products through its retail outlets at competitive prices. Further, the company has delayed some of its capital-intensive, long-hour projects to avoid cost overruns due to currently higher construction and engineering costs. With capacity expansion projects, positive industry synergies, cost-cutting strategies and highest dividend payer among independent refiners, Sunoco to remain attractive.