Sunoco 2009 Annual Report Download - page 4

We will continue to operate our refineries, but with the new goal of selling as much production as
possible through our own retail network. To do this, operational reliability and consistent product quality are
even more vital.
Building on our purchase of an ethanol plant last year in upstate New York, we will also explore
additional opportunities in biofuels. While our first priority is bringing this facility into production by the
middle of 2010, we will also continue to evaluate the potential of using the Eagle Point site as a center for
biofuels manufacturing. However, we expect it to be some time before market conditions would support the
large investment this decision would require.
The recent startup of our new cokemaking facility in Granite City, Illinois demonstrates the bright
future of SunCoke Energy. We continue to pursue the construction of a cokemaking facility in Middletown,
Ohio, which is expected to be completed in the second half of 2011 as well as the evaluation of other growth
opportunities in the U.S. and abroad.
The short term: four areas of focus
Although the future holds promise, the disappointing results for 2009 show that we still face
considerable challenges. The work we began last year will serve us well in 2010. By continuing to lower
costs, maximize margin capture, exercise financial discipline, and operate in a safe, reliable, and
environmentally sound manner, we can ensure Sunoco is ready to capitalize on opportunities when they arise.
In early 2010, we took several actions to strengthen our balance sheet and liquidity. The Company
modified the incentive distribution rights that entitle Sunoco to receive cash in excess of its general partner’s
interest from Sunoco Logistics Partners L.P. This transaction provided Sunoco with $201 million of cash in
exchange for a portion of future cash flows from these rights while also improving the cost of capital for
SXL and enhancing its long-term growth potential. Sunoco also strengthened its liquidity position through
the sale of 2.2 million of its limited partnership units in SXL for net cash proceeds of approximately $145
million. Lastly, we bolstered the funded status of our pension plan with a contribution of $230 million,
consisting of $140 million of cash and $90 million of Sunoco common stock. The pension contribution will
generate a cash tax benefit for the Company in the first half of 2010, with minimal dilutive impact to
existing Sunoco shareholders, and is expected to eliminate the need for any legally required minimum
pension contributions until 2012.
As 2010 continues to take shape, we must focus our efforts on what we can control:
•Operational Excellence—Safe, reliable, and environmentally sound operations is a defining part
of Sunoco’s culture and outstanding performance in these areas remains a core value and top
priority. Our work to place greater emphasis on Process Safety Management must continue across
the Company.
•Talent Management—For Sunoco to succeed in the long term, we have to invest in our people,
broaden their skills, and expand their areas of expertise. In this spirit, we will be implementing
changes in how we evaluate performance and reward employees.
•Cost Reduction—We have made significant progress in improving the cost position of the
Company in 2009, but we must stay vigilant and continue to lower costs and exercise greater
financial discipline. Our operating budget for 2010 contains additional stretch targets for cost
savings through improved procurement and other efficiencies.
•Margin Capture—We believe we can do a better job of realizing the full margin opportunity for
the refined products we produce and bring to market. We will make decisions that focus on
benefiting the whole enterprise, not just individual business units.
With the U.S. economy slowly emerging from the recession and the refining industry continuing to
weather a deep and extended down cycle, we will likely see ongoing volatility in oil markets, weak demand
for refined products, and significant pressure on refining margins for the foreseeable future. However, with
a strong financial position heading into 2010, along with the business strategy outlined above and an
outstanding and committed workforce, I am confident that we are prepared to face the challenges that the
market will present to us.
LYNN L. ELSENHANS
Chairman, Chief Executive
Officer and President