Investopedia: Sunoco's Radical Reformation

These are strange days in the refining industry, as more and more companies decide that it's time to go big, go independent, or go home. Several major integrated oil companies have started talking about dis-integrating their refining and marketing operations from their oil and gas exploration activities, and Marathon recently did so - splitting itself into Marathon Oil (NYSE: MRO) (an oil and gas exploration company) and Marathon Petroleum (NYSE: MPC) (a refining and marketing company).


Now it's Sunoco's (NYSE:SUN) turn. The company has been quite active already; selling refining facilities in Oklahoma and Ohio, selling its chemicals business, and spinning out its coke operations. Now the company is taking a larger step further - announcing that it intends to sell its two remaining refineries (both in Pennsylvania) and exit the refining business altogether.

A Logical Step Aside
Apart from Sunoco's long history as a refiner, this decision to exit the refining industry makes a lot of sense. This is a tough business all around - environmental worries make new construction difficult, efficiency requires high ongoing capex, and margins are cutthroat. Making matters worse for Sunoco, the company's Pennsylvania refineries use light sweet crude and have high costs all around because of the feedstock it uses and how it is transported to the refineries. With practically no pricing power, Sunoco has been forced to accept years of losses from this business.



To read the full piece, click below:
http://stocks.investopedia.com/stock-analysis/2011/Sunocos-Radical-Reformation-SUN-MRO-MPC-VLO-TSO-XOM-PTRY0907.aspx