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    First Quarter Income Jump for The Pantry

    Net and operating income rise on gas price declines, yet merchandise and gas sales decline. Meanwhile, Marathon and BP suffer profit declines on refining margin slump in the fourth quarter of 2008.

    NEW YORK -- The Pantry Inc., operator of more than 1,600 convenience stores headquartered in Sanford, N.C., saw its first quarter 2009 profit rise on higher gas margins, although merchandise and gas sales fell.

    Operating income was up sharply to $84.8 million from $26.7 million seen in the first quarter of 2008, ended Dec. 25, 2008. Net income for the quarter reached $39.4 million from $3.2 million in last year’s first quarter, on first quarter revenue of $1.63 billion, and $1.97 billion, respectively.

    "These strong results primarily reflect the exceptional declines during the quarter in oil and gasoline prices, which enhanced our gasoline gross margin," Chairman and CEO Peter J. Sodini said in a statement. "We are pleased to have generated significant cash flow for the quarter, which enabled us to further strengthen our liquidity position."

    While profits rose for the convenience chain, store-level performance fell by several measures. Comparable store merchandise sales fell 3 percent compared to the comparable quarter, and comparable store gas gallons fell 7.2 percent from the first quarter of 2008. Merchandise gross margin dropped to 35.5 percent, compared with 37 percent a year ago.

    Meanwhile, total gasoline revenues fell 21.5 percent, due to the sharp decline in average retail gas prices. Total gasoline gross profit for the first quarter jumped to $130.1 million from $56.2 million a year ago, on retail gross margins of 25.8 cents per gallon and 10.6 cents per gallon respectively.

    "The current retail environment remains very challenging and we are taking action in a variety of areas to further reduce operating expenses and to strengthen our merchandise gross margins," Sodini said. "The declines in our comparable store merchandise sales and gas gallons this quarter were partly due to gasoline shortages early in the quarter. We believe our comparable store merchandise sales and gasoline gallons will improve somewhat as our gasoline gallon comparisons get easier over the remainder of fiscal 2009."

    In other earnings news, Houston-based Marathon Oil Corp. reported a fourth quarter 2008 net loss of $41 million, compared to net income of $668 million in the fourth quarter of 2007, due to a non-cash $1.4 billion impairment of intangible assets related to the Oil Sands Mining segment, the company stated. On an adjusted basis, excluding the special item, net income was $1.025 billion.

    For fiscal 2008, Marathon reported 2008 net income of $3.528 billion, down from the $3.956 billion generated in 2007.

    "2008 was a year of extreme market volatility with record high crude prices at midyear, followed by a rapid and steep decline in crude prices," Clarence P. Cazalot, Jr., Marathon president and CEO, said in a statement. "We were again able to capture solid operational profitability for the fourth quarter and full year through our fully integrated downstream system … In particular, our results benefited from significant transportation operations and strong retail margins in this period of extreme commodity price volatility."

    Due to the volatile markets and economic uncertainty, Marathon has opted not to separate the business into two separate companies, a plan that was previously announced and was under evaluation by the company's board.

    "We have evaluated the potential separation of Marathon into two separate companies, one focused on Marathon's upstream, integrated gas and oil sands mining businesses, and the other focused on our downstream business," Cazalot said. "During our evaluation, the overall business environment has witnessed a period of unprecedented financial and commodity market uncertainty. Given this environment, we have concluded it is in the best interest of our shareholders to remain a fully integrated energy company."

    Marathon's Speedway SuperAmerica (SSA) division saw gasoline and distillate gross margin per gallon increase to 18.21 cents during the fourth quarter of 2008, compared to the 11.31 cents in the fourth quarter of 2007, the company stated. SSA same-store merchandise sales also increased 5 percent during the fourth quarter and 2 percent for the full year 2008 over comparable time periods.

    In other earnings news, BP posted its first quarterly loss in seven years, thanks to the plunge in crude oil prices, Bloomberg News reported. The $3.3 billion loss compares with net income of $4.4 billion in the comparable quarter. One-time items totaled $900 million for the quarter, the company reported.

    "We have established very strong momentum in 2008 in our drive to strip out overhead costs and to make BP simpler and more efficient," BP chief Tony Hayward said in a statement. "There will be no let-up in that momentum which gives me great confidence that we are well positioned for the challenge of the next few years."

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