Discontinued Operations

9 Months Ended

Sep. 30, 2011

Discontinued Operations

Note D – Discontinued Operations

In July 2010, the Company announced that its Board of Directors had approved plans to exit the U.S. refining and U.K. refining and marketing businesses. Following the 2010 announcement the Company actively marketed its Meraux, Louisiana and Superior, Wisconsin refineries and certain associated product terminals to interested parties. The Company has also offered for sale its U.K. refinery at Milford Haven, Wales, and all U.K. product terminals and motor fuel stations. On July 25, 2011, the Company announced that it had entered into an agreement to sell the Superior, Wisconsin refinery and related assets for $214 million, plus certain capital expenditures between July 25 and the date of closing and the fair value of all associated hydrocarbon inventories at these locations. The sale of the Superior refinery assets was completed on September 30, 2011. On September 1, 2011, the Company announced that it had entered into an agreement to sell its Meraux, Louisiana refinery and related assets for $325 million, plus the fair value of associated hydrocarbon inventories. The sale of the Meraux assets was completed on October 1, 2011. The Company began to account for the Superior, Wisconsin and Meraux, Louisiana refineries and associated marketing assets as discontinued operations beginning in the third quarter 2011. All prior periods presented have been reclassified to conform to this presentation of the Superior and Meraux operating results as discontinued operations. The after-tax gain from disposal of the two refineries netted to $16.9 million, made up of a gain on the Superior refinery (including associated inventories) of $91.1 million and a loss on the Meraux refinery (including associated inventories) estimated at $74.2 million. The gain on disposal was based on refinery selling prices, plus the sales of all associated inventories at fair value, which was significantly above the last-in, first-out carrying value of the inventories sold. A loss on the sale of Meraux has been recorded in the third quarter 2011 because the Meraux business unit qualified for accounting purposes as an asset held for sale, which requires losses to be recorded when they can be estimated based on net realizable sales proceeds. Assets and liabilities associated with the Meraux refinery are presented as held for sale in the Company’s Consolidated Balance Sheet as of September 30, 2011. The sale process for the U.K. refining and marketing assets continues. Based on current market conditions, it is possible that the Company could incur a loss on future sales of the U.K. downstream assets.

Assets and liabilities presented in the September 30, 2011 Consolidated Balance Sheet as held for sale related to the Meraux refinery and associated assets were as follows:

(Thousands of dollars)
Current Assets:
Accounts receivable	$	1,243
Liquid inventories		51,268
Materials and supplies inventories		23,076
Other		3,092
		78,679
Noncurrent Assets:
Property, plant and equipment – net, at realizable value	$	428,804
Other		37,543
		466,347

The results of operations associated with these discontinued operations were as follows:

	Three Months Ended September 30				Nine Months Ended September 30
(Thousands of dollars)	2011		2010		2011		2010
Revenues	$	1,315,229		863,449		3,700,789		2,230,231
Income (loss) before income taxes, including gain on sale of $15,959 in the three-month and nine-month periods in 2011		107,215		7,285		203,601		(11,366	)
Income tax expense (benefit)		36,842		1,890		71,170		(5,301	)