Sunoco 2011 Annual Report Download - page 47

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Logistics pretax segment income decreased $20 million in 2010 primarily due to a lower ownership
percentage resulting from the issuance of units by the Partnership, the sale of a portion of Sunoco’s ownership
interest 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.
In May 2011, the Partnership obtained a controlling financial interest in Inland Corporation (“Inland”)
through a series of transactions involving Sunoco and a third party. Sunoco exercised its rights to acquire
additional ownership interests in Inland for $56 million, net of cash received, and the Partnership purchased
additional ownership interests from a third party for $30 million. The Partnership’s total ownership interest in
Inland increased to 84 percent after it purchased all of Sunoco’s interests. As a result of these transactions, Inland
became a consolidated subsidiary of Sunoco and, in connection therewith, Sunoco recognized a $9 million gain
($6 million after tax) from the remeasurement of its pre-acquisition equity interests in Inland to fair value upon
consolidation. This gain is reported separately in Corporate and Other in the Earnings Profile of Sunoco
Businesses.
In July 2011, the Partnership issued 3.94 million deferred distribution units valued at $98 million and paid
$2 million in cash to Sunoco in exchange for the tank farm and related assets located at the Eagle Point refinery.
These units will not participate in Partnership distributions until they convert into common units on the one-year
anniversary of their issuance. Upon completion of this transaction, Sunoco’s interest in the Partnership’s limited
partner units increased to the current 32 percent.
In August 2011, the Partnership acquired a crude oil purchasing and marketing business from Texon L.P.
(“Texon”) for $222 million including $17 million attributable to the fair value of crude oil inventory. The
purchase consists of a lease crude business and gathering assets in 16 states, primarily in the western United
States. The current crude oil volume of the business is approximately 75 thousand barrels per day at the
wellhead.
Also in August 2011, the Partnership acquired a refined products terminal located in East Boston, MA from
affiliates of ConocoPhillips for $73 million including $17 million attributable to the fair value of inventory. The
terminal is the sole service provider of Logan International Airport under a long-term contract.
In July 2010, the Partnership acquired a butane blending business from Texon 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 obtained a controlling financial interest in both Mid-Valley and WTG, the joint
ventures were both reflected as consolidated subsidiaries of Sunoco from the dates of their respective
acquisitions. In connection with these acquisitions, Sunoco recognized a $59 million pretax gain attributable to
Sunoco shareholders ($37 million after tax) from the remeasurement of the pre-acquisition equity interests in
Mid-Valley and WTG to fair value upon consolidation. This gain is shown separately in Corporate and Other in
the Earnings Profile of Sunoco Businesses.
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. The Partnership intends to take advantage of additional growth opportunities in the future,
both within its current system and with third-party acquisitions.
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