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Valero to Sell Krotz Refinery Alon $333MM

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This topic contains 4 replies, has 2 voices, and was last updated by  Charles Randall 12 years, 4 months ago.

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  • #3642

    Charles Randall
    Participant

    Valero to sell Louisiana refinery to Alon for $333 million

    Thursday May 8, 10:05 am ET
    Valero to sell Louisiana refinery to Alon USA Energy for $333 million plus performance bonuses
    SAN ANTONIO (AP) — Valero Energy Corp., one of the world’s largest oil refiners, said Thursday it has agreed to sell its refinery in Krotz Springs, La., to Dallas-based Alon USA Energy Inc. for $333 million plus performance bonuses.
    The deal includes an earnout currently valued at more than $100 million, plus other possible income from the refinery. The total value of these provisions will be determined when the deal closes, Valero said. The Louisiana refinery produces about 85,000 barrels of oil per day.
    Valero said the sale is part of a plan to focus on its core refineries, where it expects higher returns. The company said it is also exploring options, including the possible sale, for its refineries in Aruba, Memphis, Tenn.; and Ardmore, Okla.
    The sale has been approved by both companies’ boards and is expected to close in July, pending regulatory approvals. JPMorgan Securities Inc. acted as Valero’s adviser in the deal. Valero shares fell 50 cents to $47.11 in morning trading. Alon shares fell 24 cents to $13.02.
     

  • #6870

    Charles Randall
    Participant

    Here is update on Valero Refinery sales – Krotz Refinery goes to Alon. First one of the 5+ refineries Valero has on sale block (Aruba, Memphis, Paulsboro, Krotz Springs, and Houston). The Three Rivers, Ardmore & Delaware Refineries have also been discussed as potentials as well.  Valero has already sold its Lima refinery.  So it’s size (17 refineries) and number of refineries could be greatly reduced over the next year or so.
    Regards
    Charlie Randall

  • #6869

    Charles Randall
    Participant

    Krotz Refinery Sale Update items: Several details, addtional news items and leads have come to light with news swapping with my contacts and rather than post all of them here is some recap items:
     
    -Valero is rumored to sell Memphis to Alon also (makes sense because Krotz & Memphis share logistics & material management and both sales are being handled by JP Morgan) – likely 2 are separate to allow quicker completion of Krotz spring sale.
    – Valero sale price of $333MM reflects about 40% replacement value on Krotz 85 MBD refinery (~$3950/Bbl crude capacity or $850/Bbl complexity) which is at lower end refining values (below Valero Sale Lima to Husky & Tesoro purchase Shell Calif Refineries).
    – Valero has deal with Petrobras for purchase of Aruba after May 9 board approval and Petrobras plans to “Sync” Pasadena with Aruba. <Makes no sense to me since Pasadena is only 8.4 complexity & when it starts bringing in Brazil offshore crude coker & Fcc will need expansions. Also likely Petrobas will replace either Aruba’s 100MB Maya heavy oil or remaining other crude’s with some of its own Brazil offshore from big recent finds Tupri & New field – both require more FCC & Coker capacity than today’s and outside Pasadena’s small “Sync” range.
    -The sale of Krotz, Aruba & Memphis (and others on block of course) will drop size/number refineries of Valero so that COP becomes No 1 US Refiner.
    -The $100MM 3 year “earnout” (and 5 year offtake) reflects a view towards a declining refinery margin/market for Valero to propose / agree with this option.
    -Petrobras is going add +14,000 jobs upstream = Engineers/Geologists/Oil Rig Workers and Drillers within 3 yers (all Brazil workers have first placement) as it develops the new field finds & $112 B that will allow it overtake output of all OPEC producers except Saudi Arabia.

  • #6749

    Anonymous

    Along with the purchase, the on-site inventory (another 50 to 100 million) and the profit sharing, Alon will also have to upgrade some of the Crude/Vac units for the ULSD it plans to produce along with a Benzene Saturation Unit.  Do you really believe that it will be able to raise the funds to purchase Memphis too?  I understand that Valero wanted to sell the two as a package deal.  That profit sharing deal must be good, else I just can’t see why they would have parted for 4.1 thousand a barrel.  I’ve heard locally that Alon believes it will have about a 3 year ROI.  We’ll see.
     
    I would bet on Harvest and PetroPlus looking seriously at Memphis or even Ardmore.  Delek was a name bantied about locally, but I can’t confirm that they came to the refinery for a look-see. 
     
    Who do you beleive would be interested in Paulsboro?

  • #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>
    ——–
    Valero sells its Louisiana sweet crude refinery
    [size=-1]
    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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