Sunoco Reports Third Quarter 2011 Results

Sunoco, Inc. (NYSE: SUN) today reported a net loss attributable to Sunoco shareholders of $1,096 million ($9.62 per share diluted) for the third quarter of 2011 versus net income attributable to Sunoco shareholders of $65 million ($0.54 per share diluted) for the third quarter of 2010. Third quarter results included a previously disclosed noncash provision of $1,959 million ($1,175 million after tax) to write down refining assets to their estimated fair values in connection with Sunoco’s decision to exit the refining business. Excluding special items, Sunoco had income of $65 million ($0.57 per share diluted) for the third quarter of 2011 versus income of $27 million ($0.22 per share diluted) for the third quarter of 2010. Key third quarter details include:

• Retail and Logistics contributed pretax income of $101 million
• Refining and Supply reported a pretax loss of $17 million
• Logistics completed acquisitions totaling $295 million during the third quarter
• Completed the exit from the Chemicals business with the closing of the sale of the Haverhill facility in late October

"A second straight quarter of record earnings at Sunoco Logistics Partners L.P. and good results in retail were the primary drivers of Sunoco’s profitability from operations in the third quarter. These segments contributed $53 million and $48 million in pretax income, respectively,” said Lynn L. Elsenhans, Sunoco’s chairman and chief executive officer. "Market conditions continue to pose challenges for our refining and supply segment and, while the refineries’ operational performance improved during the third quarter with crude utilization averaging 90 percent, the segment reported another loss. We remain focused on running our assets safely and reliably at economic utilization rates.”

Commenting on the company’s commitment to delivering value to shareholders, Elsenhans said, "Creating value for shareholders and positioning Sunoco for future success continue to be top priorities. We recently completed the previously announced $500 million share repurchase at an average price of $34.69 per share, and successfully completed the initial public offering of SunCoke Energy. We also continue to make progress on our strategic review of the company with a focus on exiting the refining business, determining the optimal allocation of our capital resources and maximizing the potential for our retail and logistics businesses.”

DETAILS OF THIRD QUARTER RESULTS

Refining and Supply

Refining and Supply had a pretax loss of $17 million in the current quarter versus $70 million in the third quarter of 2010. The $53 million improvement in results was primarily due to higher realized margins and lower expenses. Partially offsetting these positive factors were lower production volumes. The overall crude utilization rate was 90 percent for the quarter, up from 84 percent in the second quarter of 2011.

Retail Marketing

Retail Marketing earned $48 million pretax in the current quarter versus $68 million in the third quarter of 2010. The decrease in earnings was largely attributable to higher expenses resulting primarily from litigation charges and higher credit card fees. Lower gains on asset sales also contributed to the decline.

Logistics

Logistics earned $53 million pretax in the third quarter of 2011 versus $40 million in the third quarter of 2010. The increase in earnings was primarily due to higher crude oil volumes and margins as a result of continuing strong demand for crude oil in West Texas. Higher earnings attributable to recent acquisitions and organic growth projects also contributed to the improved results.

Coke

Coke earned $24 million pretax in the third quarter of 2011 versus $44 million in the third quarter of 2010. The decrease in earnings was attributable to lower coke sales revenues as a result of the Jewell contract restructuring with ArcelorMittal in January 2011 and higher general and administrative costs largely associated with the relocation of SunCoke Energy’s corporate offices and additional staffing costs related to becoming a public company. Somewhat offsetting these factors were improved results from the company’s coal mining operations.

Discontinued Chemicals Operations

In late October 2011, Sunoco completed the sale of its phenol manufacturing facility in Haverhill, OH and related inventory to an affiliate of Goradia Capital LLC and received total cash proceeds of $100 million which is subject to a working capital adjustment subsequent to closing. This transaction, along with the sale of the Frankford chemicals facility which was completed in July 2011, represents the completion of Sunoco’s exit from the chemicals business. The results of operations of Sunoco’s chemicals operations, including related charges for asset write-downs and other matters and gains (losses) recognized in connection with their divestment are now classified as discontinued operations for all periods presented.

Discontinued chemicals operations had pretax income of $1 million in the third quarter of 2011 versus $5 million in the third quarter of 2010. The decrease in results was driven by lower margins and sales volumes which were partially offset by lower expenses.

OTHER

Corporate administrative expenses were $23 million pretax in the current quarter versus $28 million in the third quarter of 2010. The decrease was largely driven by lower staffing and stock compensation costs.

Net financing expenses and other were $29 million pretax in the third quarter of 2011 compared to $28 million in the third quarter of 2010. Increased interest expense attributable to new borrowings of Sunoco Logistics Partners L.P. and SunCoke Energy, Inc. was largely offset by higher interest income and capitalized interest.

INCOME TAXES

Excluding the impact of special items, the effective tax rates on pretax income attributable to Sunoco, Inc. shareholders for the third quarter of 2011 and 2010 were (14) and 13 percent, respectively. Income taxes for each quarter reflect the adjustment of the year-to-date amounts to the amounts computed using the expected full year tax rates at the end of each quarter and recognition of any discrete tax items. The income tax benefit for the third quarter of 2011 is a result of applying a significantly higher effective tax rate to the year-to-date loss before special items at June 30, 2011. This impact is partially offset by applying this rate to third quarter income before special items.

SPECIAL ITEMS

During the third quarter of 2011, Sunoco recorded a $1,959 million noncash provision ($1,175 million after tax) to write down assets at the Philadelphia and Marcus Hook refineries to their estimated fair values in connection with Sunoco’s decision to exit its refining business; recorded a $5 million provision ($3 million after tax) for pension settlement and curtailment losses and employee terminations and related costs in connection with business improvement initiatives; recognized a $2 million pretax loss ($2 million after tax) largely related to pension settlement losses attributable to the divestment of its Toledo refinery; recognized a $14 million gain ($8 million after tax) related to the divestment of the discontinued Frankford chemicals facility; and recorded an $18 million gain ($11 million after tax) attributable to a partial settlement of a low sulfur diesel credit liability related to the Company’s discontinued Tulsa refining operations. The total net impact of special items during the third quarter of 2011 was a provision of $1,934 million ($1,161 million after tax).

During the third quarter of 2010, Sunoco recorded a $13 million provision ($8 million after tax) primarily for pension settlement losses and employee terminations and related costs in connection with business improvement initiatives; recognized a $16 million gain ($9 million after tax) on an insurance settlement related to MTBE coverage; and recognized a $59 million gain attributable to Sunoco shareholders ($37 million after tax) from the remeasurement of its pre-acquisition equity interests to fair value upon consolidation. The total net impact of special items during the third quarter of 2010 was a gain of $62 million ($38 million after tax).

Sunoco is a leading transportation fuel provider, with operations located primarily in the East Coast and Midwest regions of the United States. The Company sells transportation fuels through more than 4,900 branded retail locations in 24 states. APlus convenience stores are operated by the Company or independent dealers in more than 600 retail locations. The retail network in the Northeast is principally supplied by Sunoco-owned refineries with a combined crude oil processing capacity of 505,000 barrels per day. Sunoco is also the General Partner and has a 34-percent interest in Sunoco Logistics Partners L.P., a publicly traded master limited partnership which owns and operates 7,900 miles of refined product and crude oil pipelines and approximately 40 active product terminals. Sunoco has an 81-percent ownership interest in SunCoke Energy, Inc., a publicly traded company which makes high-quality metallurgical-grade coke for major steel manufacturers. Sunoco intends to complete its fundamental shift away from manufacturing through the sale or idling of its two remaining refineries and the spin-off of its cokemaking business to Sunoco shareholders by no later than the end of July 2012.

Anyone interested in obtaining further insights into the third quarter's results can monitor the Company's quarterly teleconference call, which is scheduled for 4:30 p.m. ET on November 3, 2011. 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, 2010 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.