UPDATE 2-Sunoco names new CEO in latest shake-up

Fri Feb 3, 2012 12:43am GMT

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* Elsenhans to step down as CEO, MacDonald to take over

* Sunoco says some buying interest for Phila refinery

(Adds details regarding Elsenhans, retirees pension fund, and refinery status and operations)

By Braden Reddall

Feb 2 (Reuters) - Sunoco Inc (SUN.N) took another step in its running effort to turn the business around by replacing the chief executive who oversaw a dramatic shake-up of what was once the major independent refiner in the Northeastern United States.

The Philadelphia-based retail and logistics company also increased its dividend and announced a share buyback as part of a new strategic effort to restore its fortunes after seeing the value of its shares cut in half in the past six years.

Under the restructuring effort, the quarterly dividend will rise by a third to 20 cents per share and the company will buy back 19.9 percent of its shares over the next 12 to 18 months. About $80 million will be paid into its pension fund, and about $200 million will go toward retiree medical liabilities.

Chief Financial Officer Brian MacDonald was named Chief Executive Officer replacing Lynn Elsenhans, who will remain as chairman.

Since joining in 2008, Elsenhans has sold Sunoco`s heating oil and chemical units, spun off SunCoke Energy (SXC.N), and sought to move out of refining altogether -- representing two-thirds of the company`s assets.

Elsenhans, who formerly worked at Shell Oil, will also continue as the chairman of Sunoco Logistics (SXL.N), the pipeline and terminalling company spun off from Sunoco Inc., until the shareholders' meeting in May 2012 when MacDonald will take over the reins.

Sunoco also reported that for the fourth quarter its lucrative logistics and retail arm contributed pre-tax income of $106 million, but its refining and supply division had a pre-tax loss of $117 million.

As part of the restructuring, Sunoco will also eliminate future retiree medical expense by restructuring retiree medical liability and contributing approximately $200 million pre-tax to a dedicated trust.

The company recorded a fourth-quarter non-cash provision of $387 million to write down the assets of its Philadelphia and Marcus Hook refineries. Marcus Hook will no longer operate as a refinery, it said, while it is still seeking a buyer for the other one.

Elsenhans said the company conducted a "vigorous" search for buyers for the two Philadelphia-area refineries on the sales block, with more than 150 prospects expressing some interest in the 335,000-barrel-per-day Philadelphia refinery, which is still operating. Elsenhans said the company does not expect its idled Marcus Hook, Pennsylvania, refinery, about 12 miles away, to be restarted as a refinery. The Philadelphia refinery will be shut down at the end at the second quarter if a buyer is not found. Both refineries, along with other Atlantic Basin refineries, are the victim of high costs for light, sweet crude feedstock and poor demand for gasoline, which has eaten into profit margins, putting Sunoco's profits in the red for more than a year.

Sunoco is not alone in trying to mitigate its exposure to the poor profit margins in the Atlantic Basin refining space.

ConocoPhillips (COP.N) put its Trainer, Pennsylvania, refinery on the sales block, before idling it late last year.

Hess shut down its 350,000 bpd Hovensa refinery in Virgin Islands earlier this year. The refinery supplied gasoline and diesel to the U.S. Northeast as well.

(Additional reporting by Janet McGurty in New York)

(Reporting by Braden Reddall in San Francisco; editing by Carol Bishopric and Bob Burgdorfer)

((braden.reddall@thomsonreuters.com)(+1 415 677 2543)(Reuters Messaging: braden.reddall.thomsonreuters.com@reuters.net)) Keywords: SUNOCO EARNINGS

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