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September 1, 2006 at 3:02 am #4155
Sunoco: Some Project Capex Higher Than Anticipated
Thursday August 3rd, 2006
NEW YORK -(Dow Jones)- Acknowledging tighter market conditions for refinery engineering and construction, Sunoco Inc. (SUN) said Thursday that the cost of some of its capital projects will be higher than anticipated and will likely lead to changes in their timing.
Specifically, a $300 million project to expand the capacity of its CatCracker at its flagship oil refinery in Philadelphia is now projected to cost $400 million, company spokesman Terry Delaney told analysts in a post-earnings conference call.
“The product returns are still compelling,” Delaney said, adding that the addition of 15,000 barrels a day of processing capacity to the fluid catalytic cracker will allow the company to broaden the range of crude oils run at the plant and increase its yield of high-value fuels. The project is due to conclude in early 2007.
The cost of the first phase of another project underway, at the Toledo, Ohio, refinery, is not expected to change, Delaney said. Phase 1 of the Toledo project, also due to be completed in early 2007, is estimated to come in at $40 million as originally planned.
The Toledo project, estimated to cost a total of $365 million, will expand the refinery’s crude processing capacity by 40,000 barrels a day and its conversion capacity by 24,000 barrels a day by 2008, allowing for the production of more jet fuel and motor diesel.
The company doesn’t expect to change capital spending targets, Delaney said. Annual capital expenditure is seen at about $600 million to $700 million. But Sunoco is reviewing project estimates and timelines on a number of other plans and may change them going forward.
The 10Q filing to the Securities and Exchange Commission on Thursday also discussed higher capital costs and the effect they would have on future projects.
“The pressures on project scope, costs and timing are also likely to result in the extension of project completion dates and the deferral of some lower-return projects,” the report said. Sunoco may elect to cancel or reduce the scope of projects that don’t meet investment-return criteria, it added.
Sunoco reported second-quarter profits of $426 million, or $3.22 a share, from $242 million, or $1.75 a share, a year ago, largely the result of strong refining margins for ethanol-blended gasoline and low-sulfur diesel products.
Analysts polled by Thomson First Call had expected a per-share result of $2.70.
Sunoco shares closed $3.02, or 4.25%, higher at $74.13.
-By Beth Heinsohn, Dow Jones Newswires; 201-938-4435; firstname.lastname@example.org
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