Sunoco Inc.
(
SUN
) announced plans to boost the storage capacity of the Eagle Point
Terminal in Westville, New Jersey, in order to ensure a stable
supply of refined products in the region.
The Eagle Point refinery, which has 3 million barrels of active
storage, will have an additional capacity of 2 million barrels in
2012. The unit will still have more storage capacity available to
return to service.
Sunoco also expanded Eagle Point's deep water marine docks to
handle large tankers of 600,000 barrel capacity (AfraMax) and 1
million barrel capacity (SuezMax). The railcar offloading platform
at the facility was also upgraded.
In order to sustain smooth supply to the Northeast markets,
interconnecting pipelines were installed between Eagle Point and
the Colonial Pipeline, Laurel Pipeline and Harbor Pipeline systems.
Management has also laid plans to reverse pipelines that could
transport imports from the New York Harbor down to
Philadelphia.
Sunoco's plans to sell off or idle the Marcus Hook and
Philadelphia refineries and exit the refining business has become a
matter of concern for people regarding short-supply of products in
the Northeast. This initiative of the company assures the retail
network as well as commercial customers of a steadfast delivery of
gasoline, diesel and other products.
We have a long-term Underperform rating on the stock,
considering Sunoco's weak business model, geographically
undiversified asset base and operational hindrances. Our
pessimistic outlook also stems from the company's poorly performing
refining and supply segment, which registered a high loss along
with lower realized prices and throughputs in the fourth quarter of
2011.
Additionally, in mid-January, Sunoco completed the separation of
its metallurgical coke manufacturing business, to
SunCoke Energy Inc.
(
SXC
), a 100% publicly traded company. We believe that the transfer of
SunCoke has made Sunoco a less diversified business model. As a
result, Sunoco is exposed to greater competitive risks than it was
prior to the spin-off.
Hence, we expect Sunoco to perform below the industry, which
gives investors little reason to hold the stock.
STARRETT (LS) A (
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SUNOCO INC (
SUN
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SUNCOKE ENERGY (
SXC
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