Good afternoon. My name is Amanda and I will be yourconference operator today. At this time, I would like to welcome everyone tothe third quarter 2007 earnings release teleconference. (Operator Instructions)Mr. Terry Delaney, you may begin your conference.

Thank youand good afternoon. Welcome to Sunoco's quarterly conference call where we willbe discussing the company’s third quarter earnings that were reported lastevening. With me today are Tom Hofmann, our SeniorVice President and Chief Financial Officer; and Tom Harr, Manager of InvestorRelations. As part of today’s call, I woulddirect you to our website where we have posted a number of presentation slides.I will be making reference to a number of them today to help highlight andsupplement some of the commentary and statistics that were included in ourrelease, so if you haven’t already done so, I would suggest that you go therenow and be ready to refer to them as I progress through my remarks. To start, for purposes offacilitating a good discussion, I would refer you to the Safe Harbor statementreferenced in slide 2 and as included in last night’s earnings release. In thecourse of our remarks and in the subsequent Q&A, we may be making someforward-looking statements. While we feel that the assumptions underlying thesestatements are reasonable, our company and our businesses are subject to avariety of risks and uncertainties, which are highlighted here in slide 2. I will also note again that in our remarksand in our financial and operating statistics, we refer to various externalmarket indicators for our businesses. Let me remind you that these indicatorsexperience significant volatility and are not to be taken as future projectionson our behalf. While they can be helpful in considering market changes, thecorrelation of our actual results with these external benchmarks can and doesvary from quarter to quarter due to a variety of factors. With that said, let me make a fewcomments on our third quarter results before taking your questions. As shown inslide 3, we reported third quarter net income of $216 million, or $1.81 ashare. Earnings in our refining…

Yes, sir.

The WTI time structure has moved into backwardation,resulting in a higher price for crude purchase than the industry markers wouldsuggest. So far in the fourth quarter, the continued rise in crude oil priceshas further pressured refining margins and exacerbated normal seasonalweakness. Near term, margin recovery is likely dependent on either somecrude price relief or the onset of increased winter demand. Longer term, webelieve a constructive fundamental outlook for refining remains intact. Lastly, I would like to note that we are currently planningto host a meeting for security analysts and investors on Wednesday, December12th here in Philadelphia. At that time, we will discuss the strategic outlookfrom each of our businesses, including an update on some of the specifics ofour capital spending plan for 2008. Details regarding the meeting, which willbe webcast on our Internet site for the public, will be forwarded shortly. So with that, I will ask Amanda to open up the lines for anyquestions folks may have.

(Operator Instructions) Your first question comes from DougLeggate with Citigroup.

Thank you. Good afternoon, Terry. Terry, a couple of thingsfrom me; first of all, a non-refining question -- can you update us on whereyou are on Coke negotiations in terms of incremental new projects expected overthe next year or two?

Was that a question on the Brazil project, Doug, or --

Incremental projects beyond the existing assets. Myunderstanding is that you’ve got about six different opportunities that you’vebeen pursuing, so maybe just an update as to how you think things are goingthere, what the likelihood is that we can get to that $150 million run-rate onthis business down the line?

I think at this point, Doug, I would say discussionscontinue on those projects and other, but until we are able to have signedcontracts and have something concrete to announce, I don’t think I have much toproject. I would say that by the end of the year, we should concludeour negotiations on the final structure of our Brazil contract. We’ll completeHaverhill 2 next year and those two things and the change in contract pricingat Jewel, as I referenced, will bring next year’s earnings to the $80 millionto $85 million range, but I have nothing beyond that to announce at this time.Perhaps we’ll talk a little bit more about that in December but again, I thinkwe feel optimistic in the prospects for that, but our ability to deliver $150million by 2009, I’m not so sure about because any project will take at least18 months from when we announce it to get concluded.

The only other one I have is back to Philadelphia and theupgrade project there. If you look at your residual fuel yields, they’ve beenkind of flat at around 9% through the first nine months of this year, despitethe start-up of the Philadelphia upgrade -- can you just help us understandwhat’s going on there?

The primary reason for that, Doug, is that we’ve kind ofheavied up, if you will, the crude slate that we use and that’s allowing --that’s bringing with it more bottoms. We are destroying more through the unit,as evidenced by the rates I talked to you about. But we had a -- we used over73,000 barrels a day of the high acid crudes during the quarter and we’veintroduced some other crudes instead of some of the West African grade,super-sweet grade that we normally use. That crude slate would have normally,under pre-project specifications, brought us over 80,000 barrels a day or so ofresidual fuel, but we were able to destroy more of it through the units. It’s achange in the crude mix more than anything.

That’s perfectly clear. Thanks very much indeed, Terry.

Your next question comes from Paul Cheng with LehmanBrothers.

Good afternoon. Terry, Tom, and Tom, do you have a numberfor 2008 capital spending? Any revised number on that?

2008 -- no, that will be something we’ll update in December,Paul.

Okay, the second one, if WTI stays where we are for theremainder of the year, what’s the incremental phase-out of the alternative fueltax credit in the fourth quarter, in addition to what you did already in thethird quarter?

If we stay over $90 the rest of the year?

Yes, sir.

We could probably phase out another $12 million to $15million or so in the fourth quarter.

Pre-tax?

After tax.

Twelve to $15 million after tax?

Yes, so of the overall 30 that we would have, we would haveended up getting to take maybe 10 or so.

I see, and a last one on the share buy-back, I assume thestrategy would be using just the free cash flow and not going to borrow money?

Yeah, Paul, it’s our consistentstrategy of doing just what you said and maintaining our debt-to-capital rightin that 40% range.

I see. And Terry, on the Toledo, talking about the foulingissue, can you elaborate a little bit more what those relate to?

I’m sorry, what was that, Paul?

In your earlier comment, you were saying that Toledois currently limited to 165,000 to 170,000 barrels per day, related to someissue and it’s unlikely going to be fixed until next year when you get a chanceto go into with your major plant turnaround. Can you elaborate a little bitmore what are those issues that we are talking about?

I’ll try the best I can, Paul. One of the issues related to-- we have two crude units out there and one of the crude units is experiencingfouling at the top of the unit when we push the rates up to its maximum limits.So they are either going to have to do a surgical strike sometime next year ortry something during a planned maintenance turnaround to increase the limitsthere. Also again, this debottleneck project was work around thecrude units and work downstream. That’s working but when we want to push thisone crude unit to its limit and one of our hydro crackers has been limited bysome hydraulics, we are not able to get the facility up to the 175 to 180 thatthe project should enable. So the net result of it is at this time, instead of having afacility that before the project generally ran at limits of 155 to 160 a day, we are able to get up to 165to 170 but not get the full 20,000 barrel a day, 15,000 to 20,000 barrels a dayincrease on the project that w want. But we think that next year, we should beable to do some things to achieve its full benefit.

And what’s the incremental cost?

The incremental cost will be small dollars, Paul. Theoverall project prior to that was about a $50 million project, so the economicsare still nice but we need to do a little bit more work, not big dollars to getthe full benefit.

Very good. Thank you.

Your next question comes from Chi Chow with TristoneCapital.

Good afternoon, guys. I have a couple of questions onchemicals, and maybe there’s a question more for the analyst meeting, but doyou have an update on your strategic study for the unit, the chemicals unit?

We don’t really have anything new totell you. Obviously it’s what we’ve been talking about for a while and wecontinue to look at our strategic alternatives, but at this point, we don’thave anything more to say about it.

Okay, and then on polypropylene,with the record sales levels, what was the cause of that? Was it an increase indemand or production capacity? What’s the dynamic there?

It wasn’t production capacity. Itwas more demand and there were some export opportunities during the quarterthat opened up, so that was the main thing.

And are those continuing here in thefourth quarter?

But the volume part of the storyremains favorable, but the margin part of the story does not. Again, as youwould expect, with crude running up the way it has, it’s dragged alongpropylene prices, so the chemical business in the fourth quarter will bechallenged further by rising feedstock costs. But for now, the demand story,not bad and should be at least similar to the fourth quarter of last year.

And one final question, down atTulsa, what’s the dynamic on your [lubes] margin, given the current high crudeprice environment?

Lubes margin?

Yes, lubes margins, right.

Again, generally there what willhappen as crude prices go up, the lubes margin will trail and so margins willlag until prices can catch up, so fourth quarter lubes margin will not beexpected to be at third quarter levels. Again, we do about a million barrelsa quarter of lubes, but it’s been a pretty good market this year, even in theface of pretty high crude prices, but relative to the third quarter, I wouldn’texpect it to be as good.

So it’s going to decline in marginsfourth quarter versus third?

That’s what I would expect, yes.

Okay, thanks a lot.

Your next question comes from Mark Gilman with Benchmark.

That’s what I indicated. There weresome in the gasoline but a little bit more went into the distillate pool.

Isn’t that a little odd in terms ofcatcracker being primarily a gasoline unit? I’m just wondering why?

Well, part of what we got for theconversion coming out of it was some light cycle oil that we blended with --blended into the distillate pool. We [did have to increase] gasoline productionas well but the light cycle was a little bit more than that. And the distillatemargins favored that during most of the third quarter.

Was that the original intent, Terry?

Well, the intent was to provide uswith flexibility, Mark, either to go into the distillate pool or to havegasoline conversion.

I think you also made a comment regarding the impact of theshift to backwardation in terms of crude for the mid-continent unit beingpriced at above the benchmark. What in fact were you getting at there?

Our benchmark is a one-month out price market for themid-continent, so when it shifted from contango to backwardation, in realityrelative to that one-month out price, we are paying a higher price than we wereearlier in the year. That’s all.

I see, okay, but versus a spot price?

Right.

That was probably not a factor?

Right, versus spot price, not a factor. More of a versus thebenchmark explanation.

Okay, and just one final one, if I could. Any derivativerelated factors that you might want to cite that contributed to margin pressurewithin the quarter?

No, not really, Mark.

Nothing ethanol related or otherwise?

No, no. Anything we do ethanol derivatives is matched to thephysical, so no.

Okay, guys. Thanks.

Your next question comes from Daniel Vetter with J.P.Morgan.

Good afternoon. You mentioned that in the Northeast refiningsystem, you ran 73,000 barrels per day of high-acid crude, as well as someother low quality crudes. Can you just elaborate on volumes and discounts toWTI the crudes you run, other than the high-acid crude?

I don’t have specifics at hand, Dan, but again, I wouldn’tcall them low quality crudes. It’s all relative. It’s relative to the supersweet West African that we might have previously run but [inaudible] from theCaspian Sea, we’ve been doing more of that. We’ve been doing some things fromNorth Africa, some things from Eastern Canada. So it’s all relative to what wewere before.

Okay, and one more if I may; could you just give us anupdate on the proposed Philly hydrocracker conversion project? Is that stillmoving forward?

Yes, it is, Dan. I think that will be one of the items thatwe most definitely will highlight in December, so why don’t I just hold off alittle bit more for that and we’ll let our refining guys direct some attentionto that next month, okay?

All right. Thank you.

At this time, there are no further questions in queue.Excuse me, you do have a question from Neil Monahan with Sanford Bart.

I’ll help you. It’s Neil McMahon with Sanford Bernstein. Iwas queuing up, I don’t know why it didn’t go through. Just a few very quickquestions; on your press release, you indicated higher refinery expenses andI’m interested to know what drove those higher refinery expenses up, and was itrelated to the new capacity you brought on? And I’ve got another question aswell.

Well, that’s certainly a portion of it, Neil. As we bring onnew units, whether they be sulfur recovery units, expanded catcracker units,low sulfur gasoline units, they bring with it catalyst, maintenance,depreciation charges, so that’s part of it. Obviously we also had some highervariable costs, given the high utilization rate, particularly in the Northeastduring the quarter. And we were incented to buy as much fuel as we could, giventhe low relative natural gas prices versus using our own produced fuel? Sothose three things kind of brought that along but I think where we were in thethird quarter is probably a good spot to model for the fourth quarter as wellthough, with respect to expenses.

And just finally, given, as you mentioned with various othercomments, the change in the shape of the forward curve throughout the quarter,were you making any money on potential storage opportunities prior to thisquarter? And if so, how much did that go down as you went through the thirdquarter?

Not of any significant amount, Neil, so

So it would be under 1% of your earnings sort of thing?

Yeah, I would think so.

Okay, thanks.

Okay.

Your next question comes from Nicki Decker with BearStearns.

Hey, Terry. I’m wondering if you could talk a little bitabout marketing margins in the fourth quarter to date. Have they continued tobe squeezed?

Well, particularly over the last 10 days to two weeks, yes.October was probably about $0.03 a gallon or so less than the third quarteraverage, but point in time, they are not very strong.

Okay, and secondly, Terry, maybe could you comment on theheating oil supply situation in the Northeast? It’s hard to tell if supply istight, but as a Northeast producer, do you have any insights in whether perhapsyou’ve changed your yields to accommodate any supply shortfalls?

I think with respect to the supply, not a whole lot moreinsight than the data you look at and what you see. As you said, I think it’smodestly below the normal averages at this point in time. Our ability torespond to that is an advantage. If we get an early winter being here in theNortheast, we do have some -- we have an ability to swing a lot of ourdistillate production to that market if that’s what it calls for, but we’llhave to wait and see what the weather brings for us.

Thanks, Terry.

Your next question -- excuse me, you do have a follow-upquestion from Mark Gilman with Benchmark.

Terry or Tom, it looked to me, and maybe it’s just me, thatthe interest income and interest expense numbers in the quarter were a littleunusual, relative to the underlying level of debt as it relates to expense andthe underlying level of cash on average, relating to income. Anything inparticular influencing those two numbers?

No, not particularly. I mean, over time, our Cokeamortization expense diminishes. A little bit of rounding of one, but there isnothing in particular in the third quarter, Mark.

I mean, the debt averaged about the second quarter level andthe expense number was, gross interest expense down quite a bit, the cashnumber was about on average equal to the second quarter, but the income numberwas up quite a bit.

Well, the big thing was, Mark, it was the timing during thequarter. We generated a lot of cash and made most of our money in the firsthalf of the quarter. We did most of the share repurchase and had negative cashflow in the second half of the quarter, so I think if you lined out theaverages versus the actual months of the third quarter versus the second, itwould explain more of the change.

Okay. Thanks, Terry.

At this time, there are no further questions in queue.

Okay. Appreciate your interest and any other questions,please feel free to call Tom Harr.

This concludes today’s conference call. You may nowdisconnect.