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RE: Update-Completed Valero K.Springs Refinery sale Alon

Home Forums Refining Community Refinery News Valero to Sell Krotz Refinery Alon $333MM RE: Update-Completed Valero K.Springs Refinery sale Alon

#6737

Charles Randall
Participant

 <Here is update on completion Valero Krotz Springs Refinery sale to Alon and continued plans to also sell Ardmore, Memphis and Aruba refineries. – CER Comments>
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Valero sells its Louisiana sweet crude refinery
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Web Posted: 07/07/2008 09:19 PM CDT

[size=-1]By Vicki Vaughan
Express-News

Valero Energy Corp. said Monday it has completed the sale of its Krotz Springs, La., refinery to Dallas-based independent refiner Alon USA Energy Inc. The transaction is effective for financial reporting purposes on July 1.
San Antonio-based Valero received $333 million, plus $143 million as part of an initial payment toward working capital, which will be settled with a final payment within 90 days of closing.
Valero also will receive about $200 million to complete processing of some fuels from the Krotz Springs plant at Valero’s St. Charles, La., refinery.  Alon Executive Chairman David Wiessman said the acquisition “is another step in our business plan to methodically grow our operations and expand our refining capacity.”
The Krotz Springs refinery will boost Alon’s crude refining capacity by 50 percent, to about 250,000 barrels a day. And Alon CEO Jeff Morris said the plant “ranks among the most reliable U.S. refineries.”
Analysts said the closing of the deal was expected, as Valero said earlier this year that it would explore “strategic alternatives” for the refinery as part of a plan that CEO Bill Klesse set in motion last year to concentrate on the company’s core refineries.
“This is, by far, the smallest of their operations, said analyst Fadel Gheit of Oppenheimer & Co. in New York, “and they were obviously glad to get it off the block. There are some big ones still waiting.”
Valero has said it may sell three other plants — in Memphis, Tenn.; Ardmore, Okla.; and Aruba in the Caribbean. Last year, it sold its Lima, Ohio, refinery to Husky Energy Inc. of Canada for $1.9 billion.
Should three more plants be sold, Valero will be left with 13 refineries, including some big, highly complex plants that can process heavy crude, which is cheaper to acquire than light, sweet crude.
Krotz Springs “is a sweet crude refinery, it’s fairly small and it’s inland,” Valero spokesman Bill Day said. “We’re concentrating on large, heavy, sour crude refineries that are complex and on the water.”
Earlier this year, the Valero board approved the company’s biggest capital investment ever, a $2.4 billion expansion of its Port Arthur refinery on the Gulf Coast about 100 miles east of Houston. The expansion will take the plant’s capacity from 325,000 barrels a day to 415,000 barrels a day by mid-2011. And last year, Valero said it would spend $1.4 billion to expand its 250,000-barrel-a-day St. Charles refinery near New Orleans.
Capital investment at the Port Arthur and St. Charles plants will enable Valero to process more ultra-low sulfur diesel, which is one of the highest-profit items today for refineries, analysts say.
“You want to invest where future growth is coming from,” analyst Gheit said, “and demand for ultra-low sulfur diesel is significant. It’s growing much faster than any other product.
“Bill Klesse is doing what the company needs under current circumstances,” Gheit added. “Sell the marginal assets and plow it back into the core business — and make sure you’re the best, the most efficient, in the class.”
Valero’s stock closed at $36.79 a share, down 30 cents, in New York Stock Exchange trading Monday.
 

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