Sunoco's new leader has a challenging road ahead as she leaves her Houston-based position running global refining for Royal Dutch Shell, an analyst said Friday. Lynn Laverty Elsenhans faces a company with refineries capable of processing only the easiest crude to refine. The refining industry also is grappling with low refining margins amid record oil prices.
Elsenhans will step into her new job as president and CEO of the Philadelphia-based independent refiner Aug. 8. Fadel Gheit, an Oppenheimer & Co. analyst, said she'll likely address the company's need to revamp some of its refineries so they can process dirty, heavy crude.
He said Sunoco currently can only process light, sweet crude, or that without impurities. Competitors also have the ability to handle heavy, sour crude, like that from Canada's oil sands or Venezuela. Heavy sour is harder to refine because impurities like sulfur must be removed during processing.
Other companies have launched pricey refinery upgrades to increase the ability to process heavy crude, including BP's $3.8 billion makeover at its Whiting, Ind., refinery and Marathon Oil's $4 billion upgrade to its Garyville, La., plant.
"For Sunoco to change its makeup, an extreme makeover if you will, is very costly," he said. "We're talking $10 billion of upgrading investment over five years. I don't think any company has the appetite for that."
Other challenges
That's not the only looming challenge. Like other independent refiners — and oil majors with significant refining operations — the current environment of high oil prices has siphoned refining profits.
While last year's second-quarter refining margins were lofty, this year record crude prices amid falling U.S. gasoline demand put them in a squeeze. Share prices have suffered, too. On Friday, Sunoco's stock closed at $36.70, at the low end of its trading range of $31.68 to $80.37 in the last year.
Sunoco didn't unveil the company's direction under Elsenhans' leadership, though Jack Ratcliffe, chairman of the board's governance committee, said in a statement that the company is confident she "will further develop the strategy we have followed for the last decade."
Sunoco spokesman Thomas Golembeski said Friday that Elsenhans is granting no interviews until after she starts the job.
"It remains to be seen what her game plan will be," Gheit said. "I don't see any quick fix to the refining problem they have."
She's got the skills
Elsenhans, who will be the only woman to hold the top spot among oil industry companies in the Fortune 500, brings plenty of refining experience with her. A Harvard MBA who earned her bachelor's in mathematics from Rice University, Elsenhans, 52, was president of Shell Oil Co., Royal Dutch Shell's U.S. arm, from 2003 to 2005.
During that stretch she also served as president and CEO of the U.S. arm's refining and marketing division, overseeing financial and operational performance.
In 2005 she was promoted to executive vice president of global manufacturing for the Netherlands-based company, overseeing its global refining and chemical manufacturing operations, which included more than 40 plants and 17,000 employees.
At Sunoco, Elsenhans will oversee more than 14,000 employees, five refineries that can process a combined 910,000 barrels of crude per day, more than 5,400 miles of pipelines, 38 products terminals, and a lubricant and chemical division. Sunoco also has nearly 4,700 retail outlets on the East Coast and in the Midwest.
Replaces Drosdick
She is replacing John Drosdick, 64, who is retiring. Golembeski said the announcement this week wrapped a lengthy succession planning process started about a year ago when Drosdick began discussing his retirement with the board.
Her background, Gheit noted, is similar to one of the other 12 women CEOs of Fortune 500 companies — Patricia Woertz at Archer Daniels Midland.
Before Woertz took the helm of the Illinois grain giant in 2006, she spent about 20 years with Gulf Oil and then Chevron Corp. Woertz worked her way up to executive vice president in 2001, running Chevron's worldwide refining, marketing, lubricant, supply and trading businesses.
Sunoco ranks 56 on the Fortune 500, a little below Archer Daniels Midland, ranked 52.
The only other female CEO in Fortune's top 1,000 companies in the U.S. oil and gas industry is Cindy Taylor of Houston-based Oil States International. At 872 on the list of 1,000 companies, the oil services company provides land drilling, well site services and builds worker accommodations.
Elsenhans will step into her new job as president and CEO of the Philadelphia-based independent refiner Aug. 8. Fadel Gheit, an Oppenheimer & Co. analyst, said she'll likely address the company's need to revamp some of its refineries so they can process dirty, heavy crude.
He said Sunoco currently can only process light, sweet crude, or that without impurities. Competitors also have the ability to handle heavy, sour crude, like that from Canada's oil sands or Venezuela. Heavy sour is harder to refine because impurities like sulfur must be removed during processing.
Other companies have launched pricey refinery upgrades to increase the ability to process heavy crude, including BP's $3.8 billion makeover at its Whiting, Ind., refinery and Marathon Oil's $4 billion upgrade to its Garyville, La., plant.
"For Sunoco to change its makeup, an extreme makeover if you will, is very costly," he said. "We're talking $10 billion of upgrading investment over five years. I don't think any company has the appetite for that."
Other challenges
That's not the only looming challenge. Like other independent refiners — and oil majors with significant refining operations — the current environment of high oil prices has siphoned refining profits.
While last year's second-quarter refining margins were lofty, this year record crude prices amid falling U.S. gasoline demand put them in a squeeze. Share prices have suffered, too. On Friday, Sunoco's stock closed at $36.70, at the low end of its trading range of $31.68 to $80.37 in the last year.
Sunoco didn't unveil the company's direction under Elsenhans' leadership, though Jack Ratcliffe, chairman of the board's governance committee, said in a statement that the company is confident she "will further develop the strategy we have followed for the last decade."
Sunoco spokesman Thomas Golembeski said Friday that Elsenhans is granting no interviews until after she starts the job.
"It remains to be seen what her game plan will be," Gheit said. "I don't see any quick fix to the refining problem they have."
She's got the skills
Elsenhans, who will be the only woman to hold the top spot among oil industry companies in the Fortune 500, brings plenty of refining experience with her. A Harvard MBA who earned her bachelor's in mathematics from Rice University, Elsenhans, 52, was president of Shell Oil Co., Royal Dutch Shell's U.S. arm, from 2003 to 2005.
During that stretch she also served as president and CEO of the U.S. arm's refining and marketing division, overseeing financial and operational performance.
In 2005 she was promoted to executive vice president of global manufacturing for the Netherlands-based company, overseeing its global refining and chemical manufacturing operations, which included more than 40 plants and 17,000 employees.
At Sunoco, Elsenhans will oversee more than 14,000 employees, five refineries that can process a combined 910,000 barrels of crude per day, more than 5,400 miles of pipelines, 38 products terminals, and a lubricant and chemical division. Sunoco also has nearly 4,700 retail outlets on the East Coast and in the Midwest.
Replaces Drosdick
She is replacing John Drosdick, 64, who is retiring. Golembeski said the announcement this week wrapped a lengthy succession planning process started about a year ago when Drosdick began discussing his retirement with the board.
Her background, Gheit noted, is similar to one of the other 12 women CEOs of Fortune 500 companies — Patricia Woertz at Archer Daniels Midland.
Before Woertz took the helm of the Illinois grain giant in 2006, she spent about 20 years with Gulf Oil and then Chevron Corp. Woertz worked her way up to executive vice president in 2001, running Chevron's worldwide refining, marketing, lubricant, supply and trading businesses.
Sunoco ranks 56 on the Fortune 500, a little below Archer Daniels Midland, ranked 52.
The only other female CEO in Fortune's top 1,000 companies in the U.S. oil and gas industry is Cindy Taylor of Houston-based Oil States International. At 872 on the list of 1,000 companies, the oil services company provides land drilling, well site services and builds worker accommodations.
Source: Houston Chronicle |By KRISTEN HAYS
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