British energy giant BP plc (BP: Quote,BP.L) agreed Monday to sell its Texas City refinery and certain terminals and marketing assets in the Southeast U.S. to Marathon Petroleum Corp. (MPC: Quote) for $2.5 billion. The deal is expected to close by early 2013.
The consideration includes $600 million of cash at closing, an estimated value of $1.2 billion for hydrocarbon inventories and a $700 million six year earn-out arrangement based on future margins and refinery throughput.
"Today's announcement is the second major milestone in the strategic refocusing of our U.S. fuels business. Together with the sale of our Carson, California refinery, announced in August, the divestment of Texas City will allow us to focus BP's U.S. fuels investments on our three northern refineries, which are crude feedstock advantaged, and their associated marketing businesses," said Iain Conn, CEO of BP's global refining and marketing business.
The deal will see Marathon acquire the 475,000 barrel per day Texas City refinery, along with three associated natural gas liquids pipelines, and four marketing terminals. The refinery employs about 2,150 BP staff and contractor numbers vary between 1,000 and 3,000 each day. BP said it will work closely with Marathon Petroleum to make the transition as smooth as possible.
"Marathon Petroleum is a highly respected refiner and marketer. Their ability to take on the responsibilities of this large and complex refinery will be good for the long-term future of the business and its employees," Conn added.
BP announced plans to divest its Carson and Texas City refineries in February 2011 as part of a major strategic refocusing of the company's global refining portfolio. It is selling two of its five refineries in the U.S. as it refocuses its refining business to process crude from new North American oil basins.
The Texas facility sale process was delayed a bit due to final settlements on meeting safety milestones related to a 2005 accident that killed 15 workers.
BP also noted that it is in the process of a multi-billion dollar modernization and upgradation at the remaining three of its northern U.S. refineries.
It is modernizing the Whiting Refinery in Northwest Indiana, upgrading the BP Cherry Point Refinery in Washington to produce cleaner-burning diesel fuel and improving the gasoline making capabilities at the Toledo, Ohio-based refinery, which is a 50:50 joint venture with partner Husky Energy, Inc. (HUSKF, HSE.TO).
The company had said earlier that "the sale of these mature assets will allow us to concentrate our efforts on our strong core positions in the U.S. and globally." BP is selling assets to reinvest in higher growth areas such as adding refining capacity in Asia to target the largest consumer market, particularly in China and India, to sell refined products.
The company is selling assets and interests as it seeks to reach its asset sales program target of $45 billion by the end of 2013. BP had raised this target by another $15 billion from $30 billion in October 2011.
Including the current deal, BP has now agreed to sell assets totaling more than $35 billion since the beginning of 2010. BP had said earlier that it expects to divest assets with a total value of $38 billion between 2010 and 2013.
The company initially went on an asset sale spree in the wake of Deepwater Horizon disaster in 2010. The well explosion at the BP-leased Deepwater Horizon rig on April 20, 2010 had killed eleven and seriously injured many of the 126 workers on the rig, which eventually sank in about 5,000 feet of water. It caused the biggest environmental disaster in U.S. history.
In Monday's regular trading session, BP is currently trading at $41.94, down $0.22 or 0.51% on a volume of 0.22 million shares, while MPC is trading at $59.07, up $4.20 or 7.69% on a volume of 1.70 million shares.
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by RTT Staff Writer
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