Sunoco Inc. (SUN), the U.S.'s second-largest independent refiner by volume, continued to streamline its operations by agreeing Wednesday to sell its retail heating oil and propane-distribution business to Canada's Superior Plus Corp. (SUUIF).

The $82.5 million cash transaction is expected to close by the end of the month, after it is vetted by regulators.

"In general, those assets are less profitable" compared to Sunoco's other businesses, said Phil Weiss, senior analyst at Argus Research. The size of the deal is relatively small, "but in general it's a positive" as a way to shore up the balance sheet," he added.

Sunoco sold the Pennsylvania-based retail operations to focus more on its refining and retail gasoline businesses.

A number of refiners and integrated oil companies have been making similar moves to shed businesses with little to no growth. This creates an attractive opportunity for Superior. Wednesday's deal is part of a broad effort to snap upunwanted assets of U.S. refiners and integrated oil companies to consolidate a fragmented market.

"Superior intends to pursue additional acquisition and consolidation opportunities in the industry," to enhance the Sunoco acquisition and build on the company's Canadian assets, said Grant Billing, chairman and chief executive officer of Superior Plus, in a press release.

Sunoco, which was selling the heating oil and propane it produced directly to customers in the northeast, has an agreement to supply those products to Superior Plus. In 2008, Sunoco delivered about 160 million gallons of heating oil, gasoline, diesel fuel, kerosene, and propane to 97,000 residential and commercial customers, municipalities and schools. Included in the sale is a fleet of 356 delivery and service vehicles.

Selling heating oil will be a new business for Superior Plus. The company sells propane in Canada, but its diversified operations also include specialty chemicals and building products.

Heating oil is seen as a relatively stable, but small, market centered in the northeast. The long-term demand for the fuel used to heat homes in the winter has been declining as residents switch to natural gas, said Ann Kohler, a managing director at Caris & Co.

Divesting the heating oil and propane operations should help reduce Sunoco's costs. Sunoco spokesman Thomas Golembeski said, "We don't think there will be a material impact on our earnings from this." The company didn't disclose what it plans to do with the cash.

The company continues to evaluate opportunities for other divestitures under a plan initiated by Lynn L. Elsenhans, who was appointed as Sunoco's chairwoman and chief executive officer in late 2008.

A few months ago, Sunoco announced that it "would be selling a number of retail gas stations as part of an ongoing portfolio-management program," Golembeski said.The company has a network of 4,700 gas stations and convenience stores stretching from Maine to Florida and as far as Indiana, of which about 500 to 550 are stations with gas and convenience-store service.

Sunoco continues to focus on its gas-station business at a time when major oil companies such as Exxon Mobil Corp. (XOM), BP PLC (BP) and Chevron Corp. (CVX) have been scaling back, according to Argus's Weiss. That's because "as we move down the food chain, that's the least profitable business for them" compared to their other upstream and refining operations, Weiss said.

As part of the review process, Sunoco sold a refinery in Tulsa and purchased an ethanol plant in New York. The big announcement that the market and investors are watching out for, though, is whether Sunoco will pursue pricey investments to process heavy, sour crude oil. Sunoco refineries process the more expensive light sweet crude so it hasn't been able to take advantage of the sharp discount heavy crude normally trades at. That differential has narrowed in this recession but could widen again in a recovery as demand increases. Earlier this year, Sunoco said it would be interested in partnerships to upgrade refineries in Toledo and the northeast to process heavy crude from the Canadian oil sands.

Sunoco shares were recently up 3 cents, or 0.12%, at $25.57. The stock is down 41% this year.

-By Naureen S. Malik, Dow Jones Newswires; 212-416-4210; naureen.malik@dowjones.com