PhillyInc: Price not right for ETP to sell still-profitable Sunoco stations

Posted: February 23, 2013

Just because Sunoco Inc. is gone as an independent company doesn't mean that the screen has gone dark on how its gas-station and convenience-store business is doing.

Energy Transfer Partners L.P. is the Dallas company that bought Sunoco for $4.9 billion last October. The energy pipeline and storage company broke out its lines of business in the latest earnings report.

ETP's retail marketing division consists entirely of the 4,988 locations where Sunoco gasoline is sold. The company said the division generated $5.93 billion in revenue and $109 million in adjusted earnings before interest, taxes, depreciation, and amortization for the fourth quarter. (Comparative results weren't provided.)

Martin Salinas Jr., ETP's chief financial officer, described performance by Sunoco retail as "very strong" during a conference call with analysts.

However, ETP is a pipeline company and the question that keeps coming up is: When will it sell the Sunoco gas station business?

Ross Payne, a fixed-income analyst with Wells Fargo Securities L.L.C., asked it most recently during that conference call Thursday, wondering whether ETP was thinking of "potentially jettisoning that."

Kelcy L. Warren, chairman and CEO, repeated what ETP has said from the beginning. He likes the Center City-based retail business and its current management team. "It's a business that we believe is extremely well-run and a sustainable business for creating distributable cash flow," he said.

But he also said the gas stations would be hard to sell because "the fundamental arithmetic does not work to exit that business." In other words, the price is not right now.

"So we have no plans for that at all," Warren said.

PBF's refined profits

For those who remember reading Sunoco income statements and wonder why the company could never seem to turn a profit on its refining operations, take a look at the quarterly results for PBF Energy Inc.

That's the Parsippany, N.J., company that operates refineries in Paulsboro and in Toledo, Ohio - which it bought from Sunoco - and Delaware City, Del.

In its first quarterly report since going public in December, PBF reported operating income for the last three months of 2012 compared with an operating loss for the same period in 2011.

Here are the numbers: Operating income of $284.9 million on revenues of $4.95 billion compared with a loss of $165.6 million on revenues of $4.78 billion.

I'd love to provide clean, bottom-line numbers for net income, but the company didn't provide them. It released an "adjusted pro forma net income" figure of $166 million, or $1.70 per share, vs. a net loss of $112 million, or $1.15 per share.

On a conference call with analysts Thursday, PBF chief executive Thomas J. Nimbley said the two East Coast refineries were profitable for all of 2012, even after "having had a bad, truly bad" first half of the year when they lost money.

In recent years, nearly every quarter was bad, truly bad for Sunoco's refinery operations. It bears watching to see whether PBF and Delta Airlines and the Carlyle Group - both of which bought Philadelphia-area refineries in 2012 - are able to make money with their East Coast refineries during 2013.

Shares of PBF closed at $38.17, down 8 cents. The stock remains 47 percent above its IPO price of $26.

Contact Mike Armstrong

at 215-854-2980 or, or @PhillyInc on Twitter. Read his blog, "PhillyInc," at

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