ISSUES....
Inside,
confidential, off the record
For
Sale: Caribbean beachfront property
Valero
Energy Corp.'s Caribbean vacation may soon be over.
The San Antonio, Texas-based company, which is North America's
biggest refiner, said Tuesday that it has hired an adviser (UBS
Investment Bank) to explore the sale of its oil refinery in Aruba,
which would mark a relatively quick exit from the Caribbean nation.
Valero only bought the facility in 2004, paying $365-million, plus
$100-million for related operations on the island and $162-million
for working capital. It has a capacity of 275,000 barrels a day
- which is down from 315,000 b/d when Valero bought the facility.
The move would be another step in Valero's efforts to shed underperforming
assets. Four months ago, it sold its Lima, Ohio refinery to Calgary's
Husky Energy Inc. for $1.9-billion.
Who might be interested in buying the Aruba refinery? You can
probably cross El Paso Corp. off the list, since it sold the facility
to Valero in the first place. The Caribbean refining industry has
few private players; most of the refineries in the region are owned
by state oil companies. Hess Corp. does own half of a refinery
in St. Croix, U.S. Virgin Islands, in a joint venture with PDVSA,
Venezuela's state-owned oil company.
PDVSA itself might be a potential buyer; Aruba is just 30 kilometres
from the Venezuelan coast, the refinery relies on Venezuela for
its crude oil feedstocks, and PDVSA already has a refinery in nearby
Curacao. Given the hostile environment the Venezuelan government
has fostered toward private investment in its oil industry, there
might not be many companies besides PDVSA interested in increasing
their exposure to the region.
Valero announced the potential sale in its third-quarter financial
report, which, as expected, showed the scars from a very rough
quarter for U.S. refining margins. But despite a 40-per-cent decline
compared with a year earlier, Valero's share profit from continuing
operations, after one-time items, of $1.40 was actually at the
high end of company guidance and beat analysts' consensus expectations.
The beat was enough to give Valero's stock an impressive pop -
the shares were up $2.21 or 3.2 per cent at $71.63 in New York
Tuesday morning - even though Valero's outlook for the fourth quarter
was cautious, at best.
"So far in the fourth quarter, the margin environment has
been difficult, as prices for refined products have failed to keep
pace with the increase in feedstock costs," said Bill Klesse,
Valero's chairman and chief executive. "In particular, the
seasonal supply and demand patterns and higher feedstock prices
have squeezed gasoline margins.
"However, industry fundamentals are intact, with gasoline
inventories near five-year lows and diesel stocks considerably
below last year's levels," he said.
David Parkinson, 11
06 07/ Inside Energy blog / Globe & Mail
Petroleumworld
11 06 07
ISSUES....
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