Sunoco 2010 Annual Report Download - page 52

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Logistics
The Logistics business operates refined product and crude oil pipelines and terminals and conducts crude oil
and refined product acquisition and marketing activities primarily in the Northeast, Midwest and Southwest
regions of the United States. In addition, the Logistics business has an ownership interest in several refined
product pipeline joint ventures. Substantially all logistics operations are conducted through Sunoco Logistics
Partners L.P. (the “Partnership”), a consolidated master limited partnership. Sunoco has a 31 percent interest in
Sunoco Logistics Partners L.P., which includes its 2 percent general partnership interest (see “Capital Resources
and Liquidity—Other Cash Flow Information” below).
2010 2009 2008
Income (millions of dollars) ........................................... $86 $97 $85
Pipeline and terminal throughput (thousands of barrels daily)*:
Unaffiliated customers ............................................. 2,040 1,436 1,221
Affiliated customers ............................................... 1,274 1,449 1,587
3,314 2,885 2,808
*Excludes joint-venture operations which are not consolidated.
Logistics segment income decreased $11 million in 2010 primarily due to lower lease crude acquisition
results related to decreased contango profits and lower throughputs associated with the shutdown of the Eagle
Point refinery. Further contributing to the decrease was a lower ownership percentage resulting from the issuance
of units by the Partnership, the sale of a portion of Sunoco’s ownership and the modification of its incentive
distribution rights (see “Capital Resources and Liquidity—Other Cash Flow Information” below). Partially
offsetting these factors were higher income contributions from acquisitions and internal growth projects.
Logistics segment income increased $12 million in 2009 due to record earnings from Sunoco Logistics
Partners L.P. resulting from higher lease crude acquisition results, increased crude oil pipeline and storage
revenues, and earnings from a refined products pipeline and terminal system acquired in November 2008 (see
below).
In July 2010, Sunoco Logistics Partners L.P. acquired a butane blending business from Texon L.P. for $152
million including inventory. The acquisition includes patented technology for blending butane into gasoline,
contracts with customers currently utilizing the patented technology, butane inventories and other related assets.
The Partnership also increased its ownership interest in a pipeline joint venture for $6 million in July 2010. This
interest continues to be accounted for as an equity method investment.
The Partnership also exercised its rights to acquire additional ownership interests in Mid-Valley Pipeline
Company (“Mid-Valley”) and West Texas Gulf Pipe Line Company (“WTG”) for a total of $85 million during
the third quarter of 2010, increasing its ownership interests in Mid-Valley and WTG to 91 and 60 percent,
respectively. As the Partnership now has a controlling financial interest in both Mid-Valley and WTG, the joint
ventures are now both reflected as consolidated subsidiaries of Sunoco from the dates of their respective
acquisitions. In connection with these acquisitions, Sunoco recognized a $37 million after-tax gain attributable to
Sunoco shareholders from the remeasurement of the pre-acquisition equity interests in Mid-Valley and WTG to
fair value upon consolidation. These gains are shown separately in Corporate and Other in the Earnings Profile of
Sunoco Businesses (see Note 2 to the Consolidated Financial Statements under Item 8).
In the third quarter of 2009, the Partnership acquired Excel Pipeline LLC, the owner of a crude oil pipeline
which services Gary Williams’ Wynnewood, OK refinery and a refined products terminal in Romulus, MI for a
total of $50 million. During 2009, the Partnership also completed the construction of new crude oil storage tanks,
four of which were placed into service in 2007, three in 2008 and four in 2009. In November 2008, the
Partnership purchased a refined products pipeline system, refined products terminal facilities and certain other
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