("Sunoco Deal Indicates Tough Refiner Selling Market," published at 12:17 p.m. EDT, incorrectly stated the name of Western Refining. The corrected version follows.)

 
   DOW JONES NEWSWIRES

Sunoco Inc.'s (SUN) agreement to sell its Tulsa, Okla., oil refinery to Holly Corp. (HOC) for $65 million won't affect its investment-grade credit ratings, Fitch Ratings said, but the low price indicates refineries will face a tough environment to sell sites.

Fitch's comments came a day after Sunoco's deal was announced, and the credit rater said sellers of brownfield refineries are facing a depressed economic environment, especially for sellers of smaller facilities with limited conversion capacity and significant capital expenditure requirements.

Sunoco put the 85,000-barrel-a-day refinery up for sale in 2008 and in December disclosed that it would convert the facility into an oil product terminal if it couldn't find a buyer. The agreed upon price tag represents a steep decline in asset values amid an industry slump.

Skyrocketing crude oil prices, which are refiners' biggest cost, and weakening demand for products such as gasoline and diesel hit the sector's earnings after several years of high returns.

The $65 million transaction equates to a sales price of just $745 a barrel of refining capacity, according to Fitch. This is sharply lower than recent refinery sales, including the $3,920-a-barrel sale of Valero Energy Corp.'s (VLO) 85,000-barrel-a-day Krotz Springs, La., refinery sold to Alon USA Energy Inc. (ALJ) last July and the $11,875-a-barrel sale of the 160,000-barrel-a-day Lima, Ohio, refinery sold to Husky Energy Inc. (HUSKF).

Fitch on Friday affirmed its issuer default and senior unsecured credit ratings on Sunoco at BBB, or two notches above junk territory.

A key motivation for the sale of the Tulsa refinery was Sunoco's desire to avoid $400 million in capital costs required to bring the site into compliance with the Environmental Protection Agency's off-road diesel requirements.

But finding a buyer was tough in the recession, as a steep drop in share prices across the energy sector has also diluted the value of stock as a deal currency for now, further limiting the ability of would-be buyers to finance purchases.

The low price of the Tulsa sale doesn't bode well for independent refiners or integrated oil companies looking to the sale of marginal refineries as a source of cash, Fitch said. Other refineries that are on the block or are expected to be put out for sale in the near term include Valero's refinery in Aruba and Western Refining Inc.'s (WNR) Yorktown, Va., refinery.

But those deals are also showing signs of trouble. Western Refining said last month it doesn't expect to find a buyer for its Virginia refinery in the near future and last week, Russian oil company OAO Lukoil Holdings (LKOH.RS) said it didn't have any immediate interest in buying Valero's Aruba refinery, which has been on the block for 17 months.

Sunoco's shares were down 0.8% to $28.10 in recent trading. The company's stock is off 43% from September.

-By John Kell, Dow Jones Newswires, 201-938-5285, john.kell@dowjones.com