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Sunoco 'well positioned' for 2009 slowdown: report

Sunoco 'well positioned' for 2009 slowdown: report

"Sunoco is well-prepared to tackle challenging market conditions in 2009, by reducing utilization levels, controlling costs, and benefiting from its diversified businesses.  We expect the company to be free cash flow neutral" and that its debt is properly priced, halfway between rivals Valero (lower) and Tesoro (higher)," writes bond analyst Brian Gibbons of CreditSights Inc.

For the fourth quarter, Sunoco earnings of $313 million, or $2.68/share, beat "consensus of $2.17/share, largely driven by record 4Q Retail, Logistics and Coke results. Refining and Supply earned $182 million in 4Q08 versus $43 million in the seasonally comparable 4Q07 period, driven by the strongest 4Q realized margins since 2005.

"Retail earnings were a record $103 million driven by meaningfully higher retail gasoline and distillate margins that resulted from a sharp drop in wholesale gasoline prices... Logistics earned $29 million in 4Q08 versus $12 million a year earlier while coke earned $28 million versus a loss of $2 million last year."

But "credit metrics deteriorated on the quarter and versus a year earlier, as debt levels increased $431 million on the quarter to $2.2 billion, contributing to an increase in debt/capital to 43% from 37% at end-3Q08 and 41% at end-2007." Still, "liquidity remains high with $240 million in cash and $1.4 billion in available revolver capacity".