DOW JONES NEWSWIRES
Sunoco Inc. (SUN) cut its dividend in half and said it would
shut a New Jersey refinery indefinitely, shifting its production to
two nearby sites.
Both actions, taken because "the operating environment continues
to be very poor," are expected to save the big oil refiner a total
of $320 million a year.
Sunoco, the second-largest U.S. independent oil refiner by
volume after Valero Energy Corp. (VLO), has been cutting costs and
is trying to sell its chemicals operations as the recession cuts
demand.
About 400 workers will be furloughed while the Eagle Point
refinery in Westville is closed, but they may return to work if it
reopens and Sunoco will continue to pay its contribution to medical
benefits as well as offer job placement assistance and
retraining.
Closing the plant will boost utilization at the two nearby ones
and save the company about $250 million a year. Sunoco is expected
to post a charge of $475 million to $550 million related to an
asset impairment and the costs of idling the plant. Most of the
charge will be taken in the third quarter.
The quarterly dividend will be lowered to 15 cents starting in
the first quarter to preserve capital, add flexibility and brings
Sunoco's yield more in line with its peers. The cut is expected to
save the company $70.1 million a year.
Sunoco said the plant closure would not affect its ability to
meet lower customer demand and it may reopen the plant if the
market improves. The company also said it would consider using the
idled plant to produce alternative fuels.
"Given weak industry dynamics, we are confident we are taking
the right actions to improve our overall competitiveness, set the
stage for investing in our strong regional brand, explore
opportunities in biofuels, and provide customers with a broader
choice of transportation fuel options," said Chairman and Chief
Executive Lynn Elsenhans.
In the second quarter, Sunoco swung to a loss as higher prices
for crude oil and weak demand ate into margins and revenue.
Sunoco's shares fell 2.8% to $27.10 in after-hours trading. The
stock has lost more than a third of its value this year but is flat
with a year ago.
-By Kathy Shwiff, Dow Jones Newswires; 212-416-2357;
Kathy.Shwiff@dowjones.com