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RE: Sunoco Dumps Refineries to Chase short term P/L profits & will miss long term profits

Home Forums Refining Community Refinery News Sunoco Dumps Refineries to Chase short term P/L profits & will miss long term profits RE: Sunoco Dumps Refineries to Chase short term P/L profits & will miss long term profits

#5355

Charles Randall
Participant

Here is good overview of the coming consequences of Sunoco’s CEO’s short term thinking and strategy which caused them to dump 3 of its 5 refineries and shift to more stable pipeline and terminal operations. Unfortunately it is one time bump that has a refinery company (who may not own any refineries at end day) locked into flat earning strategy as rest industry heads into up/growth cycle.
 
Sunoco like other independent refineries Valero, Tesoro & Western moved to sell assets and reduce operations in light of losing 2009 market. Previously all the independents had grown and improved earnings from picking up refineries that were sold as result of larger oil companies merging or consolidating & rationalizing old assets. Now they are headed in wrong direction and dumping, idling or shutting down assets that are more costly in the end than if they were doing right full cost operating analyst on plant operations.
 
You can easily chart what will be happening to Sunoco stock value and life expectancy of CEO Lynn Elsenhans – typically the exec’s in refining company that pull this move do so just before taking a new slot somewhere else to capture the short term bragging rights and dump the disaster on incoming replacement.
 
There are basically only 3 types of companies in Refining industry : Growers, Harvesters and Undertakers. Growers believe there is long term strategy and that company needs to grow to get there, the Harvesters believe that the best period has past and that the strategy is to reap as much earnings with remaining assets before exiting the business, and Undertakers believe the strategy is to exit as fast as the company can before the market becomes even worse.  Really there are only two because a Harvester is just slow moving Undertaker. 
 
Clearly Sunoco is unfortunately being steered by an Undertaker who thinks she is a Harvester – neither one good for the company or stock.
Regards

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