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RE: Western may sell Yorktown Coking Refinery to reduce $1.5 B debt

Home Forums Coking News: DCU, Upgrader 1.Coker (registered users only) Western may sell Yorktown Coking Refinery to reduce $1.5 B debt RE: Western may sell Yorktown Coking Refinery to reduce $1.5 B debt

#6662

Charles Randall
Participant

Here is update on Western Refining & appears they may have to sell Yorktown Coking Refinery to pay down debt that has been dragging them down for months. They are in bad position with the timing on refinery margins, demand, & the economy all down. The target debt level $1.5 B and low liquidity level for mergers/acquisitions may override goal of not “giving the refinery away”.
 
The Yorktown Refinery has been making a low sulfur petcoke for the calcining industry and has been at risk of becoming fuel grade since 2005 (like all sweet crude refineries they need improve economics by expanding ability process heavy sour crudes). The refinery currently does process a lot of heavy sweet crudes, however.
 
As stated in the news item Western purchased Giant for a total $1.4 B in 2007 (which matches with debt level they want to retire). The capacity of 3 refineries was 106.5MBD (Yorktown 62.5, Bloomfield 18.5 & Ciniza/Gallup 26 MBD) would make the average purchase rate of ~$13,145/BD capacity relative low by todays replacement rates of $24k/BD (~56%). But then Giant originally purchased Yorktown from BP in 2002 for $170 Million (~$127.5+$42) which would only be $2720/BD capacity.
 
Before Yorktown was sold Giant was looking at an expansion there to run Canadian OS crude in 2005 but with cost doubling ended up selling its only coking refinery to Western (initial agreement was in Aug 2006 & ammended price/agreement for fires at Ciniza Mid 2006 & Yorktown Feb 2007).
 
Anyway you look at it this refinery located on US East Coast will be a good buy either as JV or purchase given price ranges it is likely to sell for – the only drawback will be that (like all refineries below 150 MBD it becomes a shutdown candidate) unless it can be expanded for both size, complexity and ability to purchase some Heavy Sour crudes. And expansions like that in today’s high labor & materials cost push value back to level of replacement cost…..given the long and often blocked progress that two US grassroots refineries have had the last 3 years, that is still the only way to get new capacity on the ground in the US.
 
The EPA & Environmentalist for some reason are still able to escape blame for each supply crisis by blaming big oil …… but their creditability has taken a lot of hits as more people in industry get the truth out to the public and past politicians & liberal press funnels.
 
Regards

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