Sunoco Revises Fourth Quarter Results

PHILADELPHIA, Jan. 28 /PRNewswire-FirstCall/ -- Sunoco, Inc. today announced that it was reducing its previously published 2004 fourth quarter and full year earnings by $10 million. As adjusted, net income for the fourth quarter is $178 million ($2.48 per share diluted) and $605 million ($8.08 per share diluted) for the year. The adjustment had no impact on the Company's cash flow.

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Subsequent to releasing its fourth quarter earnings on January 20, 2005, Sunoco was informed by its independent auditors that the major public accounting firms were reevaluating the appropriateness of the accounting by many companies, including Sunoco, for certain insurance policies issued through an energy industry mutual insurance consortium. After completing its own review and discussions with its independent auditors, the Company has concluded that current and future premiums under these insurance policies reflect the impact of past claims experience and, therefore, should be accounted for as retrospective premiums. Accordingly, a correction of the prior accounting treatment utilized by Sunoco was deemed appropriate. Sunoco recorded a $10 million after-tax charge in the 2004 fourth quarter for the estimated liability attributable to retrospective premiums. Sunoco has not yet filed its Annual Report on Form 10-K for the year ended December 31, 2004. Sunoco's financial statements in the Annual Report will reflect the revised accounting treatment. No restatement of prior periods was required as the impact on such periods would not have been material.

Sunoco, Inc., headquartered in Philadelphia, PA, is a leading manufacturer and marketer of petroleum and petrochemical products. With 890,000 barrels per day of refining capacity, over 4,800 retail sites selling gasoline and convenience items, over 4,500 miles of crude oil and refined product owned and operated pipelines and 38 product terminals, Sunoco is one of the largest independent refiner-marketers in the United States. Sunoco is a significant manufacturer of petrochemicals with annual sales of approximately five billion pounds, largely chemical intermediates used to make fibers, plastics, film and resins. Utilizing a unique, patented technology, Sunoco also manufactures approximately two million tons annually of high-quality metallurgical-grade coke for use in the steel industry.

Those statements made in this release that are not historical facts are forward-looking statements intended to be covered by the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although Sunoco believes that the assumptions underlying these statements are reasonable, investors are cautioned that such forward-looking statements are inherently uncertain and necessarily involve risks that may affect Sunoco's business prospects and performance causing actual results to differ from those discussed in the foregoing release. Such risks and uncertainties include, by way of example and not of limitation: general business and economic conditions; competitive products and pricing; effects of weather conditions and natural disasters on product supply and demand; changes in refining, chemical and other product margins; variation in petroleum-based commodity prices and availability of crude oil supply or transportation; effects of transportation disruptions; changes in the price differentials between light-sweet and heavy-sour crude oils; fluctuations in supply of feedstocks and demand for products manufactured; changes in product specifications; availability and pricing of oxygenates; phase-outs or restrictions on the use of MTBE; changes in operating conditions and costs; changes in the expected level of environmental capital, operating or remediation expenditures; age of, and changes in, the reliability and efficiency of the Company's or a third party's operating facilities; potential equipment malfunction; potential labor relations problems; the legislative and regulatory environment; ability to identify acquisitions under favorable terms and integrate them into the Company's existing businesses; ability to enter into joint ventures and other arrangements with favorable terms; plant construction/repair delays; nonperformance by major customers, suppliers or other business partners; changes in financial markets impacting pension expense and funding requirements; political and economic conditions, including the impact of potential terrorist acts and international hostilities; and changes in the status of, or initiation of new, litigation. These and other applicable risks and uncertainties have been described more fully in Sunoco's Third Quarter 2004 Form 10-Q filed with the Securities and Exchange Commission on November 4, 2004 and in other periodic reports filed with the Securities and Exchange Commission. Sunoco undertakes no obligation to update any forward-looking statements in this release, whether as a result of new information or future events.

Sunoco, Inc. 2004 Fourth Quarter and Twelve-Month Financial Summary (Unaudited) Fourth Quarter 2004 2003 Revenues $7,429,000,000 $4,596,000,000* Net Income $178,000,000 $36,000,000 Net Income Per Share of Common Stock: Basic $2.50 $.47 Diluted $2.48 $.47 Weighted Average Number of Shares Outstanding (In Millions): Basic 71.2 76.3 Diluted 71.8 77.2 Twelve Months Revenues $25,508,000,000 $18,016,000,000* Net Income $605,000,000 $312,000,000 Net Income Per Share of Common Stock: Basic $8.16 $4.07 Diluted $8.08 $4.03 Weighted Average Number of Shares Outstanding (In Millions): Basic 74.1 76.7 Diluted 74.9 77.5 * Restated to reflect the consolidation of the Epsilon Products Company, LLC polypropylene joint venture, effective January 1, 2003, in connection with the adoption of FASB Interpretation No. 46, "Consolidation of Variable Interest Entities," in the first quarter of 2004. Sunoco, Inc. Earnings Profile of Sunoco Businesses (after tax) (Millions of Dollars) (Unaudited) Three Months Ended December 31 2004 2003 Variance Refining and Supply $135 $20 $115 Retail Marketing 30 25 5 Chemicals 40 26 14 Logistics 5 (3) 8 Coke 10 11 (1) Corporate and Other: Corporate expenses (27) (11) (16) Net financing expenses and other (15) (24) 9 178 44 134 Special items -- (8) 8 Consolidated net income $178 $36 $142 Earnings (loss) per share of common stock (diluted): Income before special items $2.48 $.57 $1.91 Special items -- (.10) .10 Net income $2.48 $.47 $2.01 Sunoco, Inc. Earnings Profile of Sunoco Businesses (after tax) (Millions of Dollars) (Unaudited) Twelve Months Ended December 31 2004 2003 Variance Refining and Supply $541 $261 $280 Retail Marketing 68 91 (23) Chemicals 94 53 41 Logistics 31 26 5 Coke 40 43 (3) Corporate and Other: Corporate expenses (67) (40) (27) Net financing expenses and other (78) (99) 21 629 335 294 Special items (24) (23) (1) Consolidated net income $605 $312 $293 Earnings (loss) per share of common stock (diluted): Income before special items $8.40 $4.32 $4.08 Special items (.32) (.29) (.03) Net income $8.08 $4.03 $4.05 Sunoco, Inc. Financial and Operating Statistics (Unaudited)

Commencing in the first quarter of 2004, certain revisions have been made to Sunoco's Financial and Operating Statistics presented below. In Refining and Supply, operating data is now provided for MidContinent Refining (previously, separate data had been provided for the Toledo and Tulsa refineries). Also, the Chemicals margin and volume data as well as certain other financial information reflect the impact of consolidating the Epsilon Products Company, LLC polypropylene joint venture in connection with the adoption of FASB Interpretation No. 46. The polypropylene margin information also now includes the impact of a long-term supply contract entered into on March 31, 2003 with Equistar Chemicals, L.P. and the cost of additives. Prior-period amounts have been restated to conform to the 2004 presentation.

For the Three For the Twelve Months Ended Months Ended December 31 December 31 2004 2003 2004 2003 TOTAL REFINING AND SUPPLY Income (Millions of Dollars) $135 $20 $541 $261 Realized Wholesale Margin* (Per Barrel of Production Available for Sale) $6.42 $4.01 $6.30 $4.76 Crude Inputs as Percent of Crude Unit Rated Capacity** 99 93 97 97 Throughputs*** (Thousand Barrels Daily): Crude Oil 883.6 678.4 855.7 708.1 Other Feedstocks 55.2 54.0 58.8 53.2 Total Throughputs 938.8 732.4 914.5 761.3 Products Manufactured*** (Thousand Barrels Daily): Gasoline 447.9 379.4 442.0 375.6 Middle Distillates 320.9 232.6 300.3 236.7 Residual Fuel 73.6 50.5 73.0 59.8 Petrochemicals 40.9 27.2 38.1 27.9 Lubricants 12.3 13.5 13.6 13.6 Other 78.7 59.3 82.0 77.6 Total Production 974.3 762.5 949.0 791.2 Less: Production Used as Fuel in Refinery Operations 46.0 34.7 46.2 37.1 Total Production Available for Sale 928.3 727.8 902.8 754.1 * Wholesale sales revenue less related cost of crude oil, other feedstocks, product purchases and terminalling and transportation divided by production available for sale. ** In January 2004, crude unit capacity increased from 730 to 890 thousands of barrels daily. This change reflects the acquisition of the 150 thousand barrels-per-day Eagle Point refinery effective January 13, 2004 and a 10 thousand barrels-per-day adjustment at the Toledo refinery reflecting the increased reliability and enhanced operations at this facility in recent years. The calculation of the crude inputs as a percent of crude unit rated capacity for the twelve months ended December 31, 2004 includes the Eagle Point refinery, effective January 13, 2004. *** Data pertaining to the Eagle Point refinery for the twelve months ended December 31, 2004 are included based on the amounts attributable to the 354-day ownership period (January 13, 2004 - December 31, 2004) divided by 366 days. Sunoco, Inc. Financial and Operating Statistics (Unaudited) For the Three For the Twelve Months Ended Months Ended December 31 December 31 2004 2003 2004 2003 Northeast Refining* Realized Wholesale Margin (Per Barrel of Production Available for Sale) $7.08 $3.56 $6.36 $4.63 Market Benchmark 6-3-2-1 (Per Barrel) $6.21 $4.52 $6.40 $5.63 Crude Inputs as Percent of Crude Unit Rated Capacity** 99 89 97 95 Throughputs*** (Thousand Barrels Daily): Crude Oil 645.5 447.0 633.3 481.7 Other Feedstocks 49.2 47.9 52.9 46.8 Total Throughputs 694.7 494.9 686.2 528.5 Products Manufactured*** (Thousand Barrels Daily): Gasoline 331.5 258.1 327.8 261.2 Middle Distillates 242.0 161.2 231.5 169.1 Residual Fuel 69.7 46.2 69.2 55.7 Petrochemicals 32.2 20.6 31.0 20.8 Other 45.0 28.8 51.7 42.1 Total Production 720.4 514.9 711.2 548.9 Less: Production Used as Fuel in Refinery Operations 34.7 24.4 35.6 26.3 Total Production Available for Sale 685.7 490.5 675.6 522.6 * Comprised of the Marcus Hook, Philadelphia and Eagle Point refineries. ** On January 13, 2004, crude unit capacity increased from 505 to 655 thousands of barrels daily as a result of the Eagle Point refinery acquisition. The calculation of the crude inputs as a percent of crude unit rated capacity for the twelve months ended December 31, 2004 includes the Eagle Point refinery, effective January 13, 2004. *** Data pertaining to the Eagle Point refinery for the twelve months ended December 31, 2004 are included based on the amounts attributable to the 354-day period subsequent to the acquisition date divided by 366 days. MidContinent Refining* Realized Wholesale Margin (Per Barrel of Production Available for Sale) $4.53 $4.93 $6.12 $5.05 Market Benchmark 3-2-1 (Per Barrel) $4.52 $3.89 $7.04 $5.80 Crude Inputs as Percent of Crude Unit Rated Capacity** 101 103 95 101 Throughputs (Thousand Barrels Daily): Crude Oil 238.1 231.4 222.4 226.4 Other Feedstocks 6.0 6.1 5.9 6.4 Total Throughputs 244.1 237.5 228.3 232.8 * Comprised of the Toledo and Tulsa refineries. ** Effective January 1, 2004, crude unit capacity increased from 225 to 235 thousands of barrels daily as a result of a 10 thousand barrels-per-day adjustment at the Toledo refinery. Sunoco, Inc. Financial and Operating Statistics (Unaudited) For the Three For the Twelve Months Ended Months Ended December 31 December 31 2004 2003 2004 2003 MidContinent Refining (continued) Products Manufactured (Thousand Barrels Daily): Gasoline 116.4 121.3 114.2 114.4 Middle Distillates 78.9 71.4 68.8 67.6 Residual Fuel 3.9 4.3 3.8 4.1 Petrochemicals 8.7 6.6 7.1 7.1 Lubricants 12.3 13.5 13.6 13.6 Other 33.7 30.5 30.3 35.5 Total Production 253.9 247.6 237.8 242.3 Less: Production Used as Fuel in Refinery Operations 11.3 10.3 10.6 10.8 Total Production Available for Sale 242.6 237.3 227.2 231.5 RETAIL MARKETING Income (Millions of Dollars) $30 $25 $68 $91 Retail Margin* (Per Barrel): Gasoline $4.99 $4.71 $4.13 $4.34 Middle Distillates $4.71 $4.42 $4.40 $4.73 Sales of Petroleum Products (Thousand Barrels Daily): Gasoline 296.0 280.8 296.3 276.5 Middle Distillates 45.9 41.6 42.7 40.3 341.9 322.4 339.0 316.8 Total Retail Gasoline Outlets, End of Period 4,804 4,528 4,804 4,528 Gasoline and Diesel Throughput per Company Owned or Leased Outlet (M Gal/Site/Month) 136 126 133 124 Convenience Stores: Total Stores, End of Period 757 813 757 813 Merchandise Sales (M$/Store/Month) 72 72 73 72 Merchandise Margin (Company Operated) (% of Sales) 27% 25% 26% 25% * Retail sales price less related wholesale price and terminalling and transportation costs per barrel. The retail sales price is the weighted-average price received through the various branded marketing distribution channels. Sunoco, Inc. Financial and Operating Statistics (Unaudited) For the Three For the Twelve Months Ended Months Ended December 31 December 31 2004 2003 2004 2003 CHEMICALS* Income (Millions of Dollars) $40 $26 $94 $53 Margin** (Cents per Pound): All Products*** 13.7 10.4 11.0 9.5 Phenol and Related Products 12.5 8.9 9.7 8.2 Polypropylene*** 16.2 13.0 13.4 11.5 Sales (Millions of Pounds): Phenol and Related Products 669 695 2,615 2,629 Polypropylene# 556 588 2,239 2,248 Plasticizers## -- 145 28 591 Other 48 50 187 173 1,273 1,478 5,069 5,641 * Prior-period amounts have been restated to reflect the consolidation of the Epsilon joint venture, effective January 1, 2003, in connection with the adoption of FASB Interpretation No. 46 in the first quarter of 2004. ** Wholesale sales revenue less cost of feedstocks, product purchases and related terminalling and transportation divided by sales volumes. *** The polypropylene and all products margins include the impact of a long-term supply contract entered into on March 31, 2003 with Equistar Chemicals, L.P. which is priced on a cost-based formula that includes a fixed discount. # Includes amounts attributable to the Bayport facility subsequent to its purchase, effective March 31, 2003. ## The plasticizer business was divested in January 2004. COKE Income (Millions of Dollars) $10 $11 $40 $43 Coke Production (Thousands of Tons) 486 513 1,965 2,024 Coke Sales (Thousands of Tons) 471 513 1,953 2,024 Sunoco, Inc. Financial and Operating Statistics (Unaudited) For the Three For the Twelve Months Ended Months Ended December 31 December 31 2004 2003 2004 2003 CAPITAL EXPENDITURES (Millions of Dollars) Refining and Supply $160 $82 $463* $245 Retail Marketing 39 45 103** 107*** Chemicals 27 12 56* 31# Logistics 31 15 75* 39 Coke 47 2 135 5 $304 $156 $832 $427 * Excludes $250 million acquisition from El Paso Corporation ("El Paso") of the Eagle Point refinery and related chemical and logistics assets, which includes inventory. The purchase price is comprised of $190, $40 and $20 million attributable to Refining and Supply, Chemicals and Logistics, respectively. ** Excludes $181 million acquisition from ConocoPhillips of 340 retail outlets located primarily in Delaware, Maryland, Virginia and Washington, D.C., which includes inventory. *** Excludes $162 million purchase from a subsidiary of Marathon Ashland Petroleum LLC ("Marathon") of 193 retail gasoline sites located primarily in Florida and South Carolina, which includes inventory. # Excludes $198 million associated with the formation of a propylene partnership with Equistar Chemicals, L.P. ("Equistar") and a related supply contract and the acquisition of Equistar's Bayport polypropylene facility, which includes inventory. DEPRECIATION, DEPLETION AND AMORTIZATION (Millions of Dollars) Refining and Supply $49 $44 $188 $165 Retail Marketing 25 26 106 99 Chemicals 19 18 70 65 Logistics 10 7 32 27 Coke 3 3 13 13 $106 $98 $409 $369 BALANCE SHEET INFORMATION (Millions of Dollars) At At December 31 December 31 2004 2003 Cash and Cash Equivalents $405 $431 Total Borrowings (including Current Portion)* $1,482 $1,601 Shareholders' Equity $1,607 $1,556 * At December 31, 2004 and December 31, 2003, includes $126 and $148 million, respectively, attributable to the Epsilon joint venture, which is now consolidated in connection with the adoption of FASB Interpretation No. 46. CAPITAL EXPENDITURES (Millions of Dollars) 2005 Plan 2004 2003 Refining and Supply $587 $463* $245 Retail Marketing 130 103** 107*** Chemicals 74 56* 31# Logistics 30 75* 39 Coke 25 135 5 $846 $832 $427 * Excludes $250 million acquisition from El Paso of the Eagle Point refinery and related chemical and logistics assets, which includes inventory. The purchase price is comprised of $190, $40 and $20 million attributable to Refining and Supply, Chemicals and Logistics, respectively. ** Excludes $181 million acquisition from ConocoPhillips of 340 retail gasoline sites located primarily in Delaware, Maryland, Virginia and Washington, D.C., which includes inventory. *** Excludes $162 million purchase from Marathon of 193 retail gasoline sites located primarily in Florida and South Carolina, which includes inventory. # Excludes $198 million associated with the formation of a propylene partnership with Equistar and a related supply contract and the acquisition of Equistar's Bayport polypropylene facility, which includes inventory. Sunoco, Inc. Earnings Profile of Sunoco Businesses (after tax) (Millions of Dollars) (Unaudited) 2003 1st 2nd 3rd 4th Total Refining and Supply $93 $50 $98 $20 $261 Retail Marketing 10 36 20 25 91 Chemicals (4) 10 21 26 53 Logistics 11 9 9 (3) 26 Coke 10 11 11 11 43 Corporate and Other: Corporate expenses (9) (10) (10) (11) (40) Net financing expenses and other (25) (25) (25) (24) (99) 86 81 124 44 335 Special items -- -- (15) (8) (23) Consolidated net income $86 $81 $109 $36 $312 Earnings (loss) per share of common stock (diluted): Income before special items $1.12 $1.04 $1.59 $.57 $4.32 Special items -- -- (.19) (.10) (.29) Net income $1.12 $1.04 $1.40 $.47 $4.03 Sunoco, Inc. Earnings Profile of Sunoco Businesses (after tax) (Millions of Dollars) (Unaudited) 2004 1st 2nd 3rd 4th Total Refining and Supply $100 $217 $89 $135 $541 Retail Marketing (4) 20 22 30 68 Chemicals 12 12 30 40 94 Logistics 8 9 9 5 31 Coke 9 9 12 10 40 Corporate and Other: Corporate expenses (12) (13) (15) (27) (67) Net financing expenses and other (24) (20) (19) (15) (78) 89 234 128 178 629 Special items -- -- (24) -- (24) Consolidated net income $ 89 $234 $104 $178 $605 Earnings (loss) per share of common stock (diluted): Income before special items $1.17 $3.07 $1.71 $2.48 $8.40 Special items -- -- (.32) -- (.32) Net income $1.17 $3.07 $1.39 $2.48 $8.08 Sunoco, Inc. Consolidated Statements of Income (Millions of Dollars) (Unaudited) 2003* 1st 2nd 3rd 4th Total REVENUES Sales and other operating revenue (including consumer excise taxes) $4,589 $4,189 $4,630 $4,561 $17,969 Interest income 2 2 1 2 7 Other income (loss), net 5 13 (11) 33 40 4,596 4,204 4,620 4,596 18,016 COSTS AND EXPENSES Cost of products sold and operating expenses 3,722 3,261 3,536 3,635 14,154 Consumer excise taxes 437 490 556 516 1,999 Selling, general and administrative expenses 163 180 202 207 752 Depreciation, depletion and amortization 85 92 94 98 369 Payroll, property and other taxes 27 24 30 24 105 Provision for write-down of assets and other matters -- -- -- 28 28 Interest cost and debt expense 29 29 29 30 117 Interest capitalized (1) -- (1) (1) (3) 4,462 4,076 4,446 4,537 17,521 Income before income tax expense 134 128 174 59 495 Income tax expense 48 47 65 23 183 Net income $86 $81 $109 $36 $312 * Restated to reflect the consolidation of the Epsilon joint venture, effective January 1, 2003, in connection with the adoption of FASB Interpretation No. 46 in the first quarter of 2004. Sunoco, Inc. Consolidated Statements of Income (Millions of Dollars) (Unaudited) 2004 1st 2nd 3rd 4th Total REVENUES Sales and other operating revenue (including consumer excise taxes) $5,232 $6,265 $6,575 $7,396 $25,468 Interest income 2 1 4 3 10 Other income (loss), net 11 10 (21) 30 30 5,245 6,276 6,558 7,429 25,508 COSTS AND EXPENSES Cost of products sold and operating expenses 4,254 4,949 5,417 6,114 20,734 Consumer excise taxes 498 571 611 602 2,282 Selling, general and administrative expenses 187 223 203 260 873 Depreciation, depletion and amortization 100 100 103 106 409 Payroll, property and other taxes 33 28 30 27 118 Interest cost and debt expense 29 28 28 23 108 Interest capitalized (1) (2) (3) (5) (11) 5,100 5,897 6,389 7,127 24,513 Income before income tax expense 145 379 169 302 995 Income tax expense 56 145 65 124 390 Net income $89 $234 $104 $178 $605