August 3, 2006 at 11:59 pm #4170
August 2, 2006
Lyondell Chemical Co. has reached an agreement to buy the minority shareholding of Citgo Petroleum Corp in a refinery located in Houston, official sources reported Wednesday. The subsidiary of state-run oil holding Petróleos de Venezuela (Pdvsa) based in the United States and Lyondell shared ownership of the facilities.
Lyondell expects to announce officially over the next few days the agreement that makes it the only owner of the refinery of 270,000 bpd. The facilities are near Houston navigation channel, the officials added, as quoted by Reuters.
August 4, 2006 at 12:13 am #7566
Looks like Citgo decided to sell out its share at the top after all.
I had just seen a UBS review last week that said both Lyondell & Citgo were happy at the refinery earnings and decided not to sell – and that bids they did see were along the markets estimated $20,000/BBL range (~$5.4 Billion).
August 4, 2006 at 1:54 pm #7564
Does Citgo selling its refinery holdings in Houston have anything to due with the Chavez and his dislike of American policies and the ill health of Castro?
August 7, 2006 at 12:38 pm #7563
Probably not. Citgo still operates it’s own refineries in the US, i.e., Citgo in Lake Charles.
August 15, 2006 at 7:52 pm #7559
No – this is business. Lyondel has a very cheap crude contract & it has teeth, Chavez does not like the fact that this PDVSA/Citgo joint venture partner gets crude below market price, but the real issue is that during the last strike in Venezuela, PDVSA had to buy crude at market prices and supply it to Lyondel-Citgo refinery. A sale triggers an opening of the crude supply agreement (not sure what happens when one partners buys the other one & it was logical that Lyondell be one buy 30% of Citgo interest).
But one thing for sure – it would mean that if Chaves decides to take an 80% ownership of the Upgraders from its american partners before the end of the year & its not more posturing for better deal……then it will be good for a strong contract not to be in place.
August 17, 2006 at 9:40 am #7557
Is this correct? I thought that under the current supply contract the Lyondell refinery actually paid PDVSA $5/barrel above market prices for crude?
August 18, 2006 at 5:26 am #7556
Lyondell Acquires Partner’s Interest in Houston Refinery
HOUSTON (Aug. 16, 2006) – Lyondell Chemical Company (NYSE: LYO) today announced that it has acquired CITGO’s 41.25 percent ownership interest in Lyondell-Citgo Refining LP (LCR) in a transaction valued at approximately $2.1 billion, including CITGO’s portion of the refinery’s debt. Concurrently, Lyondell has negotiated a new five-year, 230,000-barrel-per-day crude oil contract with a subsidiary of Petróleos de Venezuela, S.A for the refinery. The new contract is based on market prices, which in recent years have been lower than those under the previous crude supply agreement.
The transaction, which will be immediately accretive, was financed using the proceeds of a seven-year Lyondell term loan.
Had Lyondell owned 100 percent of the refinery for the first six months of 2006, and had the new crude oil contract been in place, the company’s unaudited pro forma financial statements indicate that pro forma net income would have increased from $450 million to $640 million, or $1.74 to $2.47 per share on a fully diluted basis. Corresponding data for full year 2005 indicate that pro forma net income would have increased from $531 million to $772 million, or $2.04 to $2.97 per share. Lyondell will file the unaudited pro forma financial statements with the U.S. Securities and Exchange Commission (SEC) today.
“This acquisition, coupled with a new market-based crude oil contract, unlocks the true value of this unique asset and contributes significantly to shareholder value,” said Dan F. Smith, president and CEO of Lyondell. “We now will benefit fully from today’s strong refining market conditions that we believe will continue into the foreseeable future.”
The acquisition gives Lyondell sole ownership of the 268,000-barrel-per-day Houston refinery, which is strategically located on the U.S. Gulf Coast with access to interstate pipelines and the Port of Houston. The facility refines very heavy high-sulfur crude oil into clean fuels including reformulated gasoline and low-sulfur diesel, as well as other high-value products such as jet fuel and aromatics. It was one of the original Lyondell assets at the company’s formation and, in 1993, became part of a joint venture between Lyondell and CITGO Petroleum Corporation.
“The refinery generates significant cash,” said Smith. “In combination with the cash generated by our global chemical businesses, this will enable significant near-term debt reduction.” Prior to this transaction, Lyondell had paid down more than $2.1 billion of debt since September 2004.
With the completion of the transaction, the refining operation will become a wholly owned subsidiary of Lyondell, joining Equistar Chemicals, LP and Millennium Chemicals Inc.; however, each will remain a separate legal entity.
August 19, 2006 at 1:01 am #7555
Still you doubt me “Grashopper”? Perhaps this exert from one of the other coverages will help convince you:
The sale would be worth US$2.17bn, although PDVSA would net US$1.31bn because of debt and taxes.
Lyondell, which owns 58.75% of the plant, recommended the net price, which matches a standing offer from US independent Marathon Oil (NYSE: MRO) for PDVSA’s stake, Ramírez said.
The sale could be finalized “in days,” he added.
PDVSA wanted to sell the stake in Houston in order to rescind a 25-year contract through which it supplied crude at a discount of US$2 a barrel. The contract had 17 years remaining.
The Venezuelan company still will supply crude to the refinery, which has capacity to produce 265,000 barrels a day.
“The contract has been replaced with a new five-year one ,” the official said.
Regards Charlie Randall
August 22, 2006 at 11:51 am #7554
Both technically seem right.
Citgo puts refinery stake up for sale
By Tom Fowler
2006 Houston Chronicle
In filings with the Securities and Exchange Commission, Lyondell reported that from 2000 to 2004 the supply agreement was actually advantageous to the refinery because the price was below market prices. Since the fourth quarter of 2004 and throughout 2005, however, the agreement put its oil costs above market prices.
In a news release Tuesday, PDVSA said it provided oil at a price about $2.09 below market prices between 1994 and 2004, leading to losses of up to $705 million.
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