Erik Mielke – Merrill Lynch Neil McMahon - Sanford Bernstein Jeff Dietert - Simmons & Company Paul Sankey - Deutsche Bank Paul Cheng - Barclays Capital Blake Fernandez - Howard Weil Mark Gilman - The Benchmark Company Faisel Khan - Citigroup

Good afternoon. My name is Felecia, and I will be your conference operator today. At this time, I would like to welcome everyone to the Sunoco Fourth Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. (Operator Instructions) Thank you I would now like to turn the call over to Ms. Lynn Elsenhans, Chairman and Chief Executive Officer, Ms. Elsenhans you may begin.

Thank you and good afternoon. Welcome to Sunoco quarterly conference call, where we will be discussing the company's fourth quarter earnings and that were reported last evening. With me today are representatives from each of our businesses, Vince Kelly from refining and supplies, Bob Owens from retail and marketing, Bruce Rubins from chemicals and Mike Thomson from SunCoke Energy. Also with me is Terry Delaney, our Interim CFO, Tom Harr Manager of Investor Relations. I am going to start off with a few introductory comments and then I am going to have each of the businesses briefly address their results. Terry will give us a wrap up with some of the comments on the overall financial position. As part of today's call, I would like direct you to our website www.sunocoinc.com, where we have posted a number of presentation slides. I will be making reference as we progress through out remarks. One bit of housekeeping for purposes of facilitating a good discussion today, I would like to refer you to the Safe Harbor statement. Its referenced on slide 23 which is the last one in the slide tack that was included in last night's earnings release. In the course of our remarks and the subsequent question-and-answer session, we may be making some forward-looking statements. While we feel that the assumptions underlying these statements are reasonable. Our company and our businesses are subject to a variety of risks and uncertainties, which are highlighted in the Safe Harbor language. So let's begin. Sunoco last night reported their quarterly net income of $204 million which included $109 million of net unfavorable special items which are detailed in our earnings slides and on slide 13. Excluding these special items Sunoco's income was $313 million $2.68 a share each of our businesses will address their…

Thanks Lynn. Refining and Supply earned $182 million in the fourth quarter of 2008, the strongest fourth quarter results since the fourth quarter of 2005. Earnings were weighted towards the beginning of the quarter as industry supply constraints coming out of the September Gulf Coast hurricanes kept the market relatively tight in October and falling crude oil prices aided margins realization throughout our system. In addition, fourth quarter 2008 results included a $28 million after tax LIFO loss due to a reduction in inventories mainly for refined products which were valued at higher costs from prior years. Of generating an accounting loss this reduction was the right thing to do from an operational standpoint and had a positive cash generation implication. Operationally crude unit utilization across the systems in fourth quarter 2008 was 86% optimizing our refineries for the most economic mix of crude oil feedstocks and product output. In the Northeast our fourth quarter '08 margin realization again benefited from the five day lag impact that held our Northeast crude purchases price versus the calendar they benchmarked. We also continued to limit our purchases of higher premium Nigerian crude buying only 75,000 barrels a day in the fourth quarter of 2008 compared to about 385,000 barrels a day in the fourth quarter of 2007. Our crude selection proceedings are often made about eight weeks in advance and are based on a full economic assessment of crude price differentials, operating costs and expected product yield. We will continue to adopt our crude optimization precisions based on the changing market. But in the environment experienced through most of 2008 and into the first quarter of 2009, its operating mode has proved to be the best economic decision. In the Midcontinent the underlying market environment was relatively weak during the fourth quarter of 2008. Particularly for gasoline where wholesale prices averaged lower than crude cost for the quarter. However as shown on slide 6, our realized margin on products was much stronger than a simple 3-2-1 crack spread would have indicated for two main reasons. First the rapid decline in crude oil prices benefited those products whose pricing does not directly follow crude like lubricants, resid and propane. Second the 3-2-1 benchmark assigns two-thirds of the yield to gasoline which overstated the negative impact of the weak gasoline market versus our actual gasoline yield. As we look at the outlook for first quarter 2009 we expect gasoline and diesel demand to continue to be impacted by economic weakness. In January we operated at 76% crude unit utilization and our operating plans for the rest of the quarter will continue to reflect our expectations of underlying market demand. Now let me turn it over to Bob Owens in retail marketing.

Thanks Vince. So Good afternoon retail marketing earned $103 million during the fourth quarter of '08 which was a quarter record for the corporation. But as wholesale prices declined sharply we accrued in October, November and as a result retail margins expanded. As a point of reference if you look at RBOB on the Merc gasoline on September 30th was trading for $2.48 a gallon. And if you take that same measure on December 31st a $1 a gallon that's a $0.148 or $1.48 decline. And as a result of that decline despite the significant decline also seen in street prices Sunoco's average retail gasoline margin during the fourth quarter for all channels of business was $0.23 a gallon during the fourth quarter. Partially offsetting the strength in margin, lower sales volumes versus the same period. Previously our results, those declines are consistent with the trends reported by DOE statistics. The quarterly results cap also a record year for retail marketing where we earned $201 million and did that in the midst of really significant economic and price volatility. As we move in to the first quarter of '09, crude prices and wholesale prices remained extremely volatile, but on average, they have started to creep back up from the end of December levels. And as expected and as a result, retail margins have narrowed considerably at this point in the quarter. Lastly, you should have noted in our announcement last night that we have added approximately 150 company owned or leased sites to our retail portfolio management program. What you are used to us referring to as our RPM program. This is a continuation of our ongoing efforts over a number of years to high grade de-allocation of invested capital and high grade our chain throughout the retail network. As a point of reference from '06 to '08, we generated $133 million of divestment proceeds from the sale of 181 sites and we did that, while largely maintaining, almost completely maintaining our market presence in keeping the sites branded Sunoco, either as dealers or distributor sites. Combined with other sites remaining in the program and assuming successful execution, we would expect the sales of these newly added locations generate about $180 million and we expect to accomplish this over the next two years. With that I would like turn things over to Bruce Rubin who will walk us through chemicals.

Thanks Bob, in chemicals we reported a loss of $4 million from the fourth quarter of 2008. As noted in the earnings release the loss includes a $12 million after tax provision to write-down chemicals polymers inventory to market value. As the falling commodity prices resulted in December replacement costs, there were lower than our LIFO book inventory values. Excluding this item however, results were sharply lower than third quarter '08 levels despite falling feedstock prices, as demand continued to weaken both in our polymers and phenol businesses. Despite a propylene feedstock cost decline of $0.35 to $0.40 a pound our overall realized margins decline from third quarter '08 levels as the weakness in the economy, let to an extremely soft market. Sunoco's propylene volumes held up relatively well but margins were weak as overall industry statistic showed continued declines in underlying demand for polypropylene. And volumes in our phenol segment were down significantly versus prior periods as we ideal capacity due to sharply declining demand for durable products in auto and housing sectors. Current market conditions in both polymers and phenol remain week as declining economy stifles consumer volume. Margins in the first quarter of 2009 remain at very low levels and we will continue to manage our operating plans to market conditions. And finally, in January, we announced our intention to permanently close our Bayport polypropylene facility by April 30. After an extensive review of the financial viability of the plan, we concluded that we would be able to more competitively and cost effectively meet expected consumer demand from to more than 2.1 billion pounds of annual production at our other three polypropylene. In conjunction with this decision Sunoco reported a $35 million after tax charge to write down the Bayport plant in the fourth quarter of 2008. Now, let's turn it over to Mike Thomson to discuss our Coke business.

Thank you, Bruce, and good afternoon. Coke earned $28 million in the fourth quarter of last year which concluded a record year for the business. Income was slightly lower than prior guidance mainly due to third party coal sales in the fourth quarter and some weather related operating problems that Haverhill facility in the month of December. Our full year earnings of $105 million in 2008 represent significant improvement from the $29 million recorded in 2007 and serves as a new base for expected earnings growth in 2009. As we look at 2009, we are mindful of the impact of the current recession on the steel industry. The rapid deterioration in the steel market over the last four months as you listed at a quick and disciplined reaction from producers. Reducing steel production capacity to foreign capital projects and pursuing efforts to preserve cash. Longer-term though we believe steel industry fundamentals and growth prospects remain attractive. And as market conditions recover SunCoke's value proposition providing a secure stable and economic supply of coke and energy to our customers. Will continue to generate opportunities for future growth. Our previously stated guidance for 2009 earnings from Coke is approximately $200 million. We do not expect any significant change in the income contribution from our Coke making plants in 2009. Since the cost of coal is passed along to our customers through our take or pay contracts. However, there could be some variability and potential downside from the earnings at our Jewel facilities where we operate a coal mine in our leveraged the changes in the price of coal. The current weakness in the steel market continues to delay settlement of industry metallurgical coal supply contracts in 2009. Actual transactions for metallurgical coal continue to remain scarce but as negotiations process we currently expect contract prices will drop from the recent highs of 2008 and be more reflective of lower steel and commodity prices that are currently represented in the market. Allowing for discontinuing market uncertainty, we are currently placing a range on 2009 earnings for the coke business of $175 million to $200 million. In addition we currently expect quarter one 2009 earnings to be at a lower levels then last few quarters owing to lower coal prices and lower third party coal selling. Lastly let me give a quick update on our two announced development projects, we are preceding with the construction of the Granite City facility and expect completion and start up in the fourth quarter of this year. At Middletown, we have permit approval from both state of Ohio and US EPA and have begun limited construction work. There are on going challenges to the permit and therefore the precise timing for project completion remains variable. Once we have final resolution on our permit, we would expect to remain in construction and take about 15 to 18 months which could extend as past in the end of 2010. Now I will turn it over to Terry Delaney.

Thanks Mike and I think from our earnings release last night and from the comments that preceded here you have got a pretty good summary of each of our businesses. Let me make a few concluding comments about our financial position at year end and to help in that regard I direct you to slide 8 and 9. From a balance sheet perspective we ended the year with a net debt to capital ratio of 37%, and $1.9 billion of net debt. I would note that of that net debt approximately $750 million of that debt is attributable to Sunoco Logistics partner, our separate publicly traded MLP. From a liquidity standpoint we had $240 million of cash on the balance sheet at December 31 and $1.4 billion of available committed borrowing capacity, which also includes approximately $200 million available to Sunoco Logistics. In addition, I note that Sunoco Logistics completed on Tuesday, $175 million, five year debt offering to further enhance their financing position. From the funds flow perspective the cash draw and increase in our debt level we experienced in 2008 and particularly in the fourth quarter of the year. We are filling large parts to the affect of following crude oil prices on our net crude payable position. As we have noted previously we normally have about 15 million barrel more of crude payables and we do refine and chemical product receivables that are also price on crude more or less. So that significant changes in the crude oil price can be material for us. With crude prices starting 2009 at about $40 a barrel, we would feel there is a much less downside than last year related to working capital changes. Additionally, we have only $146 million of debt maturing in 2009, so overall from a financing and liquidity standpoint we feel we are well positioned in that regard as we entered the year. Our announced 2009 capital program of $1.25 billion includes approximately $515 million of growth spending largely in our Coke business. While we are not revising the overall guidance at this point, I will say we plan to continue to be disciplined in our spending as we look to maintain our financial strength throughout the year. So with that as a closing remark, I’ll ask Felecia to open up the lines for any questions you may have.

(Operator Instructions) Your first question comes from the line of Erik Mielke with Merrill Lynch. Erik Mielke – Merrill Lynch: Yeah. Good afternoon, my first question will be for Mike, I guess on the coke business and Mike in your new guidance of $175 million to $200 million for 2009, can you help us understand what would be the difference between the $200 million and $175 million, is that purely on the volumes we have price risk for using operating risk factor for the distance we have more of a cost pass-through arrangement?

This is really about coal pricing. Again, we have two sources of the income sensitivity to change in coal prices. So first area is changes the price and volume with respect to our third-party sales. A metallurgical coal from our joule coal mine has relative small recent history that's been 200,000 tons plus or minus in any one year. The second area of our variability due to coal prices is the transfer price for joule coal production and is utilized to produce the requirements behind our joule coke contract. In this case, we utilize a basket of coals at the Haverhill 1 operation, which serves as the surrogate for the market price of that coal flowing through the joule operation into the coke contract. And what's uncertain at this point in time is that basket of coals is yet to be finalized with respect to determining price. Last December if you remember in the analyst report, we were talking about estimates for metallurgical coal and a $150 to $160 per ton range. If you look at current forecast out there, they seem to be projecting the possibility of $120 to a $150, and we have used that basis to just calibrate this range. Erik Mielke – Merrill Lynch: Thank you. So the $175 we should think of as the almost more like a base case and would I be right to understand you therefore are comfortable then you take-or-pay contracts there isn't any material risk?

Yeah. We are still standing behind our take-or-pay contracts, and they remain firm. And if you remember the sensitivity we talked about in December about $25 per ton of change in coal prices equates to this $20 million to $25 million. Yeah. Erik Mielke – Merrill Lynch: Can I also, I am not sure who will be the right person to ask this question. In the commentary on both the Refining and Supply segment and the Retail Marketing segments, you indicated that the margin benefited from the very significant drop in crude and wholesale prices during the quarter. I know it's an impossible question to give an exact answer. But can you help us understand just how significant that was as part of the overall increase, the overall margin that you earned in those two segments.

Erik, this is Terry. I think you got to answer the question for yourself. It is really impossible to isolate that. Obviously on the retail side of things there is always lag, a lag on the way up that certainly hurt our business and a lag on the way down that helped us and all the dealers and distributors. I think on the refining side the element that I would say, we might be able to isolate it. The one that we talked about in the five day lag, if you will, of our crude pricing whereas versus the calendar day benchmark we have five days about 2 to 3 million barrels that are priced in our fourth quarter results top of early January prices as opposed to early October. And those prices were about $45 different. So in that respect, I would say that's an unusual effect on our refining business. Erik Mielke – Merrill Lynch: Thank you.

Your next question comes from the line of Neil McMahon with Sanford Bernstein.

Hi, I've got a few questions. The first is on Tulsa. Could you tell us what sort of utilization is running at the minute. I am just thinking in terms this refinery through the year and forward modeling. As it's got the situation where you are thinking of having it as a terminal if you can't sell it, what should we be thinking in terms of its utilization for this year during current margins? And I got some follow-ups.

Neil this is Vince Kelly. For January you ran about a 75% utilization.

Okay. So it’s not a death store yet as it's running at utilizations at that level. Why have you then made the comment that you might downgraded to your terminal rather than continue to run at this sort of level.

Typically, Neil we are still running with the assumption that the sale is still under negotiation, and that's our assumptions at this point.

Yeah the reason, Neil that we are really looking at what the future of that location is for Sunoco is that we were faced with a fairly large capital projects there to do a distillate hydrotreater. We actually just felt we had much better opportunities to invest that capital in other parts of the business. And without that particular project, we really can't continue to run in a full refining configuration, so started look in opportunities to either change that configuration or sell the location to someone who was willing to make that investment, because it made sense for their strategy. And so, we're still pursuing that. But what we've said is, if that doesn’t come along to a resolution rather quickly that we will be in a position to turn the location into a terminal by year end.

And will it be in middle of the year or at the year-end decision for that, or this dependent on any potential deals going through?

I'd say, we would make the decision before year-end. We have some requirements with our customers in terms of notice of supply and so forth, and we would want to be in compliance with those agreements, which we would require us to make that decision prior to year-end.

Okay. I am just trying to get a handle on. I don't know if you were listening to Petroplus earlier today. They are potentially in the same situation with the Teesside refinery in the UK. I'm just trying to get an idea of the Atlantic Basin, what the current margins are actually doing for refinery potential shutdowns?

I would say that Teesside issue versus Tulsa are really quite different.

Right. I'm picking that up from you. Just one further question really on the on the logistics business maybe it's not something you want to comment on, but turning to showdowns in terms of actual oil production, especially in marginal areas of the US. To what extent do you think that earnings from the logistics company could be hedged if we see wide scale impact of shutdown and high decline rates for oil volumes that are expected through the middle of the year, I was wondering if you could sort guage, the potential impact on the logistics business?

Neil, this is Terry again. And I think, I direct you to logistics guidance themselves that they gave earlier last year, we are not immune to some volume declines, their overall ability to continue to grow their distribution growth, which is most critical to them, remained strong and they reaffirmed their guidance of being able to increase that in the 8% to 10% range, I believe in 2009.

Okay. Thanks.

Your next question comes from the line of Jeff Dietert with Simmons. Jeff Dietert - Simmons & Company: Jeff Dietert with Simmons & Company, can you hear me okay?

I got you Jeff. Jeff Dietert - Simmons & Company: All right. I appreciate the information on the refinery utilization 76% in January. There have been some reports that have said that you got a crude unit down in the Northeast and plans to take also down in February due to poor economics in February. Are those reports accurate, and if so, would that mean February utilization would actually be lower than January?

This is Vince. Jeff, we do not have a crude unit down in Northeast. We do have some maintenance in Tulsa for February.

In general, Jeff we were purposely avoiding given forward-looking guidance on our run-rate. Jeff Dietert - Simmons & Company: Okay, okay. Another question for Vince, if you were to convert Tulsa to a terminal from a refinery operation, how much cash operating cost would you expect to save on an annual basis?

That would be in the neighborhood of $90 million to a $100 million. Jeff Dietert - Simmons & Company: Okay, nice. Good and you talked about reducing you Nigerian crudes in the fourth quarter, and in the first quarter. What were delta volumes for the fourth quarter, and what other crudes types are you using as a replacement for the Nigerian barrels?

In the fourth quarter of the Nigerian crude volumes were around 55,000 to 60,000 barrels a day. We do have some maintenance work on our vacuum distillation unit at Eagle Point where we operated some metallurgy and that’s behind this. What was the second part of your question? Jeff Dietert - Simmons & Company: What crudes where you replacing the Nigerian barrels with, what types of crudes?

Similar to what we have said in the past crudes from capacity and some more West African crudes. Jeff Dietert - Simmons & Company: Are those crudes primarily priced up of brand rather than WTI? Okay. Thank you for your time.

Welcome, Jeff.

Thanks, Jeff.

Our next question comes from the line of Paul Sankey with Deutsche Bank.

Hi, guys a specific one and a more strategic one if I could. Firstly on marketing you mentioned there has been a significant step down from $0.23 a gallon that you met in Q4, could you give us more of a specific idea of where that was just in January?

No, we don’t report that during the quarter.

Why?

I think if you look at publicly available information, you can get a sense of the kind of delta as normal market.

Absolutely, could talk a bit about the demand side of the sales, same-store sales side of equation?

Yeah, Sure. Again, if you look at kind of what happened last year, DOE I think is still revising their numbers, but by all kind of measure it's looking like we had demand destruction in the neighborhood of 4% to 5%. My own gut is that it may get revised of anything a little higher. We have been tracking through the year and actually we are doing a little better during the first quarter, but through the fourth quarter we were down 3% to 4% in terms of our overall volumes, you would have seen reported. And if we look at separate measures like NPD and things where we are actually seeing some market share growth, so while we have seen demand destruction, we feel we have not ceded any market share, and arguably, we have grown a little in our market area.

Could you just talk a little bit about sub products, and we have heard other guys talking about gasoline and diesel have been down around the same now and others also talking to the extent which you haven't exposed this market about jet fuel being super weak?

Yeah. On the distillate side, we have seen similar kinds of numbers from a demand standpoint. For us that's, both in our retail sides as well as our home heating oil business, margins has been good also in home eating oil as prices have come down and the Jet question I would refer to, Vince.

Yes. What we seen some demand disruption on a jet side.

Is that what you want to say?

Basically, we've been matching some of out production to meet our contract needs, and as you know, you could put some of that.

Okay. Then a strategy question, we heard other refiners saying. They might be interested in buying some assets or even a major acquisition might be out there. People are chattering. I'm wondering what's your appetite potentially for a zig when people are expecting you to zag.?

I am not sure what do you mean by that?

Well, could you talk a bit about your appetite for acquisition either on asset or on company basis?

Yes, one of the things that I have always said is like we will look at opportunities that crate value for the Sunoco shareholder, and we will take each of those opportunity as they come. Now having said that, the priorities that we put forward in December for our portfolio are ones that we are actively pursuing.

Yes, so, basically, it's same message that you sent in December? Okay. I will leave it there. Thanks.

Your next question comes from the line of Paul Cheng with Barclays Capital.

Hi, good afternoon. A number of a hopefully a quick question, on the coke business. I think you previously in your guidance a tax credit there are 63 million. When does that start to in, is in the first quarter or is in the subsequent quarter, and if it twin where it throughout of the year?

Paul, I think you are .referring to the tax credit at the Granite City project, the one-time tax credit.

Right.

Is that correct? That’s around the completion of the project once it's up and running. It’s not time-sensitive except where you have to be in operation, so it doesn’t have a sunset date. It’s just whenever we complete the project and we expect that to be in the fourth quarter.

And also you look at entire $63 million that ones that has complete?

Yeah, we get it on that.

Okay

That’s about $40 million of the $63 million, Paul, The rest of the credits are owned as production is made and sold. So they are ratably over the year, they are related to.

Okay so that they were consume up only fourth quarter we will see that extra $40 million jumped out.

Yeah.

Okay, that’s good. I think this must be for Vince, in the Toledo, I think that you guys are not buying the WTI and a lot of local crude on a historically that will price base of the WTI. With the WTI you have a pretty severe dislocation with the rest of the world crude comeback, have you guys seen any dramatics shifted into defense or that you have to pay over there?

Yeah. They have been informed reduction in the WTI prices.

Vince can you speak up I can't hear you.

We've been benefiting from the dislocation of the WTI versus the brand. And as you recall about 50% of our crude run in Toledo is Canadian sands crude and the other 50% is also oil based differentials with WTI but the, but they are kind of WTI look alike.

Right, but that’s my question. I mean have you seen any significant shift in the defense or to WTI given that WTI has been so disconnected?

I think Paul if anything for the first quarter of '09, because of the contango market structure and again our market is based upon a 15 day price our price, and we are buying prompt, cheap, WTI crude for everything other than our Canadian Purchases. Our average crude costs are going to be lower in the mid continent that they were in the fourth quarter.

And Terry, based on 15-day pump, so contango market actually would benefit you right?

That’s correct.

Okay. And Terry, can you tell me what is your marketing value of your inventory in excess of the book value at the end of the year?

I could, but I can't. But what I tell you Paul, as I go back to the September where we were little bit over $4 billion of excess market value over our book value. Of course that was at a time when crude was 95 to 100. You can calibrate off of that $40 to $45 kind of levels at year end.

And what is your year end of number of barrel, is it 30 million, 31 million?

It's generally around 40 million barrels.

40 million barrels? Okay. And I think the last question is probably on Lynn. Lynn I think that you guys are just looking at different ways to do with chemical, but it looked pretty clear that at least for the next 12 to 18 months even if you want to, you probably cannot sell that operation. Is there anything you may do differently as we saw on the chemical unit or that you were just try to run this not efficient as you could bringing to market condition improving for you, really going to do anything?

I think you covered it pretty well there. Paul, we would acknowledge that in this environment in the capital market and in mechanical markets that we may be challenged in the sale. We are so actively working it. And as I said in December, this is not something that we feel we have to do at any cost. We would only do this if we got a price that was adequate for our shareholders. And in the meantime, we will continue to run the business in a safe, reliable and look to everyway we can to optimize the business.

If I could have just one last question on the logistic. Lynn, from standpoint after joined the company several months now. Do you believe that or you really need to have a controllership even that a controllership or would that can you have a totally clean from the logistics with how meaningful the impact coal competitiveness of your other business.

The way I look at the logistics business is, that it is a very nice part of our portfolio. It provides a stable growing and material cash flow like the Sunoco, Inc. It has some synergy with the rest of our operation, I would say we flipped it on the SXL side. They now have grown their business and broaden their business in a way that they are less and less dependant on the earnings streams that they get from the refining part of Sunoco. So they could standalone, we could standalone without them. We just right now we would say this is a very attractive part of our portfolio.

Thank you.

Your next question comes from the line of Chi Chow with Tristone Capital.

Thanks, good afternoon. Question back on coke, Mike, what's the average, could you remind us what the average duration is of your existing coke contracts?

They are 15-year contracts, Chi, the ones we have in place. And the first one up for renewal is in 2012, Chi.

Okay.

That was one that we initiated in 1997, after we built that plan.

Okay, and are you seeing any customers asking for a renegotiation on any of the terms of your contracts?

I think the way to answer that is our contracts are very well constructed and I think our customers realized that well. The intensities take-or-pay, and that’s fully comprehended by them. If there is any way we can work with them constructively to help them when in their cash needs, we will, but we're not going to compromise, one take-or-pay features in these contracts that are in the underlying economic. So, that's our position. That’s where we are at.

Okay. Thanks. And at Granite City, do you know the status of the US Steel plant, is that still shut at this point?

I believe they is still down, Chi. I don’t know what US Steel plans are for a returned.

So they haven’t communicating anything on restart later this year?

Not to me.

Okay. But you're still planning on a 4Q startup?

Absolutely. And in fact with the mill being down, it actually helps us in the construction with the interfaces issues with the mill and the power plant the US Steel is building. So, it's actually, from a construction standpoint the silver lining is it helps us.

One question back on Tulsa, maybe this because that Jeff’s question. You have taken the write-down, but are there any additional expenses or incurred costs, involved in the venue convert that facility to terminal?

Not in any material way, Chi.

Okay, one more thing. Could you remind me your CapEx budget, the Tulsa project is not in that that number, is that correct?

That’s correct.

Okay, thanks a lot.

Sure.

Your next question comes from the line of Blake Fernandez with Howard Weil.

Good afternoon, my question is on the CapEx, Terry, you mentioned that the $1.2 billion CapEx for '09 remains intact. It looks like the bulk of the growth capital would be in the Logistics and coke business. And I am wondering, if at some point during the year, if you do determine to reduce the CapEx further, is it reasonable to assume that that would come from the coke business. And if so, does that potentially impact the guidance of 175 to 200 or is that more of an, say 2010, 11 impact?

All right. Well, the capital spending for coke in 2009 does not at all affect the earnings that we will generator guidance that we talked about. The capital spending, growth capital in cokes is really around two projects to Granite City project, that you just heard Mike talk about. That is still on target to be completed in the fourth quarter of '09, and we have every intention of proceeding all that timeframe. So that those dollars will be spent. Mike also alluded to the second project, you will see one in Middletown, Ohio for AK Steel, and the timing of that spending will be dependant upon other things of the permitting process, which is starting at a little bit, which is currently a bit delayed from where we thought, when we put together our budget in the fall of last year. So the timing in that may naturally be deferred into 2010. I think Logistics growth is committed growth spending for project down and to connect into their Nederland terminal. That will continue Sunoco logistic themselves will form that. I think the area for us scrub a little bit further is our base spending in the rest of our businesses. We did that when we put the budget together, but I would just say that historically and you can look at our '08, '07, '06. Historically, we spend less than we say we are going to spend in that area and we are going to be probably looking at that more closely this year then even in prior years.

Okay. Great, thanks. And one follow-up if I could, it's really on the cost cutting initiatives. Lynn mentioned that you guys were targeting top quartile on the cost side of the equation in '09, and I see a nice downtick in the fourth quarter. Just wondering if you can give us any feel for how is that progressing in any order of magnitude on reductions in '09?

It's progressing well. It's a little premature for us to comment on any of the specifics, but I can I give you, just have any similarity with just Solomon benchmark average to first quartile. That’s what we are looking to do, is kind of move from an average position to first quart's opposition top position the improvement will be meaningful.

Okay. And those specifics own percentage deceline, or anything like that?

No.

Okay, thanks a lot.

Your next question comes from the line of Mark Gilman with Benchmark Company.

Folks, good afternoon. Good afternoon, Lynn.

Hi Mark.

A couple of things if I could, if on the Coke side you were to have to enroll the take-or-pay on one or more your contracts. I assume that that would jeopardize the earnings guidance. And if you wouldn't report earnings associated with such payments, is that accurate?

I think it might, may be I am not understand your question, you mean is oil getting guarantees, I mean these are take or pay contracts. Our customers are obligated to take this coke.

Well no they are obligated if I understand it correctly to take or pay for it?

Right.

But if they opt for operating reasons to pay, you would book that as earnings, would you?

We would book most of that as earnings I am not sure about the tax credits, we would probably have to look at, and before in which.

No, book at as a differed revenue. Wouldn’t you Terry?

Let, Mike.

What I said is they are obligated to take the crude and that spends in our contracts. We have to produce some minimal up to a maximum and they are obligated to take it and pay as more. So as long as we produce it, we are taking advantage.

So Mike that is not a conventional take or pay contract then.

Better I guess, right.

Right, okay and secondly can you quantify the derivative impacts and presumably large gains in the quarter?

Mark there are no significant derivative impact on this again we do hedge accountings that we are matching up any paper additions we have with the physical. I don't know where exactly the paper went but it really is all designed to get us back to a market kind of related pricing.

Okay, can I get back to one other questions previously regarding the Contango. I assumed there what you were talking about vis-à-vis the MidContinent and Toledo is that in an environment of narrow where our first quarter Contangos versus fourth your Toledo crude cost versus benchmark will look lower. Is what I said just that accurate?

Yes.

Okay. The last one, the 76% operating rate in January is that totally a discretionary reduction or were there some plant maintenance as well as may be unplanned effects that we were responsible for that?

That's all the crude we bought.

So, you were planning to run at 76%?

Yes.

Okay. Give me some insight if you could in term of in a environment like we are in, how you actually make decision? I guess my simple line of thinking has always been that at worse you keep conversion units for and 76% would tend to suggest to me that perhaps that's not happening. I mean I know you got reforming capacity down, but can you talk a little bit about exactly how you make that decision without necessarily get into any numbers?

Yes, if you look at our crude economics then you see some of the differentials on slide 6 slightly heavier, slightly traverse, slighter higher in the mix. And the way we run our assets is to would you want call track highest value from them. So again from a conversion unit standpoint particularly in FCC, we are not running incremental crude to just load off and maximize our FCC and churn out more gasoline.

Vince is that still true right now.

Well, when you look at buying your crude in the North East eight week ahead of time, it's not like we can dial them up and dial them down unless we can pick up parcel of crude or we do buy intermediate feedstocks when the pricing dictates economic return and will incrementally load some of those secondary units?

Mark if you about it, if you look at the first quarter of last year, refining and supply, we lost a $123 million as we looked ahead into the first quarter of this year the environment that we were walking into and has been diluted to an exceptionally challenged gasoline environment. Our planning was based on an idea that you begin running at lower rate, you can minimize, and it could be a very, very difficult quarter for us.

Okay so the fact that the gasoline crack has gone to meaningfully positive kind of number. It is essentially irrelevant in terms of what was when we have this discussions three months from now?

We reacted as best we can.

Okay thanks folks.

Your next question comes from the line of Faisel Khan with Citigroup.

Good afternoon guys.

Good afternoon.

Just couple of small questions, in your prepared remarks you talked about how the higher distribution deals the contact helping margins there, you also talked about the lubricant margins. What kind of uplift did you guys get from that and how difficult was it? The margins have been coming off a little bit. I can't recall exactly what they were in the fourth quarter. I don't know if you have that information?

Yeah I think quarter-to-quarter fourth versus third lubricant margins were probably around $35 a barrel. We do about 1 million barrels of loose production in the quarter in order of magnitude.

Got you and then on the logistic side, you guys mentioned in your press release that if there is some higher lease acquisition income that's something that's an ongoing income that you guys get in that business or is that something kind of one time in nature?

Well logistics has benefited from some assets that they require down in that area that they did not have in the prior year the have also benefited from some crude acquisition plays and some storage plays. And they have been able to do on their own, in that region. So it's really, and a reference to both.

Okay got you. I was just curious have you guys looked in any benefit that you might have stimulus package in terms of more depreciation?

I don’t have on hand.

Okay great thanks for your time, guys. I appreciate it.

(Operator Instructions) There are no further questions at this time.

Okay, with that I appreciate people's participation and certainly my self and Tom Harr are available for a follow-up later on. Thank you.

Thank you. This concludes today's conference call. You may now disconnect.