Valero to buy refinery, inventory in Louisiana for $625 mln
Leading independent refiner Valero Energy Corp will buy Murphy Oil Corp's 125,000 barrel per day (bpd) refinery in Meraux, Louisiana, associated logistics and inventory for about $625 million, the companies said on Thursday, Reuters reports. For Valero, the deal adds a sixth Gulf Coast refinery to its lineup, increasing the company's ability to serve thirsty refined products export markets in Latin America, South America and Europe.
Valero plans to fund the purchase with available cash and hopes to complete it in the fourth quarter pending regulatory approval.
The deal lets Valero recoup some of the U.S. refining capacity it had shed when it sold two East Coast refineries to privately-owned PBF Energy last year.
"It does increase Valero's refinery position on the U.S. Gulf Coast, where it has greater access to crude oil from the region, unlike the East Coast where it was reliant on imported crude and faced competition from imported gasoline," said Andrew Lipow, president of Houston-based consulting firm Lipow Oil Associates LLC.
The Meraux refinery appealed to Valero because it can refine medium sour crude oil into premium products, Valero Chairman and CEO Bill Klesse said in a statement.
"It's the right hardware in the right place," Klesse said.
For Murphy, the deal brings the company closer to its goal to jettison refining altogether and focus solely on exploration and production.
Other integrated companies have made or plan to make the same split. Marathon Oil Corp (MRO.N) this year spun off its refining arm into Marathon Petroleum Corp (MPC.N).
ConocoPhillips (COP.N) announced in mid-July that it would do the same next year, creating the largest separate pure-play refining and exploration and production companies.
San Antonio-based Valero agreed to pay $325 million for Murphy's refinery and logistics assets including a 3.2 percent ownership stake in the Louisiana Offshore Oil Port (LOOP), the nation's only offshore oil port.
The company will also pay for inventory on hand. The current value of the inventory is about $300 million, but the price will be set when the deal closes, Valero said.
Valero plans to integrate the Meraux refinery east of New Orleans with its 205,000 bpd St. Charles refinery in Norco, Louisiana, west of New Orleans.
The two refineries are located 40 miles apart along the Mississippi River.
Lipow said the St. Charles refinery will be able to unlock value from products produced by the Meraux refinery.
"The unfinished oils that the Meraux refinery produces can now be processed at Valero's St. Charles refinery," he said.
Murphy announced last year it would sell its three refineries to focus on exploration and production. In July the company announced in July it would sell the smallest of the three, a 34,300 bpd plant in Superior, Wisconsin, to Calumet Specialty Products Partners, <LP CLMT.O> a specialty products refiner.
Still waiting for a buyer is Murphy's 130,000 bpd plant in Milford Haven, Wales.
"The announcement of the sale of Meraux is another execution step in our repositioning strategy to exit the refining business," David Wood, Murphy's chief executive officer, said in a statement on Thursday.
Fadel Gheit, an analyst with Oppenheimer & Co, said Murphy had invested heavily to upgrade and refurbish the Meraux refinery after Hurricanes Katrina damaged it in 2005.
"Valero repeatedly said it will never make an acquisition unless it is accretive to earnings, and I believe that will be the case here," Gheit said.
As part of the transaction, Valero will also acquire a refined products terminal adjacent to the refinery and gain a 20 percent equity interest in the Collins Products Pipeline.
Valero plans to fund the purchase with available cash and hopes to complete it in the fourth quarter pending regulatory approval.
The deal lets Valero recoup some of the U.S. refining capacity it had shed when it sold two East Coast refineries to privately-owned PBF Energy last year.
"It does increase Valero's refinery position on the U.S. Gulf Coast, where it has greater access to crude oil from the region, unlike the East Coast where it was reliant on imported crude and faced competition from imported gasoline," said Andrew Lipow, president of Houston-based consulting firm Lipow Oil Associates LLC.
The Meraux refinery appealed to Valero because it can refine medium sour crude oil into premium products, Valero Chairman and CEO Bill Klesse said in a statement.
"It's the right hardware in the right place," Klesse said.
For Murphy, the deal brings the company closer to its goal to jettison refining altogether and focus solely on exploration and production.
Other integrated companies have made or plan to make the same split. Marathon Oil Corp (MRO.N) this year spun off its refining arm into Marathon Petroleum Corp (MPC.N).
ConocoPhillips (COP.N) announced in mid-July that it would do the same next year, creating the largest separate pure-play refining and exploration and production companies.
San Antonio-based Valero agreed to pay $325 million for Murphy's refinery and logistics assets including a 3.2 percent ownership stake in the Louisiana Offshore Oil Port (LOOP), the nation's only offshore oil port.
The company will also pay for inventory on hand. The current value of the inventory is about $300 million, but the price will be set when the deal closes, Valero said.
Valero plans to integrate the Meraux refinery east of New Orleans with its 205,000 bpd St. Charles refinery in Norco, Louisiana, west of New Orleans.
The two refineries are located 40 miles apart along the Mississippi River.
Lipow said the St. Charles refinery will be able to unlock value from products produced by the Meraux refinery.
"The unfinished oils that the Meraux refinery produces can now be processed at Valero's St. Charles refinery," he said.
Murphy announced last year it would sell its three refineries to focus on exploration and production. In July the company announced in July it would sell the smallest of the three, a 34,300 bpd plant in Superior, Wisconsin, to Calumet Specialty Products Partners, <LP CLMT.O> a specialty products refiner.
Still waiting for a buyer is Murphy's 130,000 bpd plant in Milford Haven, Wales.
"The announcement of the sale of Meraux is another execution step in our repositioning strategy to exit the refining business," David Wood, Murphy's chief executive officer, said in a statement on Thursday.
Fadel Gheit, an analyst with Oppenheimer & Co, said Murphy had invested heavily to upgrade and refurbish the Meraux refinery after Hurricanes Katrina damaged it in 2005.
"Valero repeatedly said it will never make an acquisition unless it is accretive to earnings, and I believe that will be the case here," Gheit said.
As part of the transaction, Valero will also acquire a refined products terminal adjacent to the refinery and gain a 20 percent equity interest in the Collins Products Pipeline.