Valero Said to Buy Chevron’s U.K. Refinery for $2 Billion
Valero Said to Buy Chevron’s U.K.Oil Refinery for $2 Billion
Eddie Seal/Bloomberg
The Valero Energy Corp. refinery operates at the Port of Corpus Christi, Texas, U.S.
The Valero Energy Corp. refinery operates at the Port of Corpus Christi, Texas, U.S. Photographer: Eddie Seal/Bloomberg
Valero Said to Buy Chevron’s U.K. Oil Refinery $2 Billion
Simon Dawson/Bloomberg
Chevron has been seeking a buyer for the Pembroke refinery in Wales, seen here, for almost a year.
Chevron has been seeking a buyer for the Pembroke refinery in Wales, seen here, for almost a year. Photographer: Simon Dawson/Bloomberg
Valero Energy Corp. (VLO), the largest U.S. oil refiner, plans to buy Chevron Corp. (CVX)’s U.K. refinery for about $2 billion, said two people with knowledge of the deal.
An announcement was scheduled for today, and now may come as soon as tomorrow, said one of the people, who declined to be identified because the deal hasn’t been made public. Chevron has been seeking a buyer for the Pembroke refinery in Wales, its last European plant, for almost a year. The offer, expected to be in cash, includes the plant’s inventory of crude oil and refined products, the people said.
“I can say that we’ve been very explicit about our desire to explore our options in Europe,” said Bill Day, a spokesman for San Antonio-based Valero. Day said the company doesn’t comment on speculation about potential purchases.
Chevron, based in San Ramon, California, is among oil companies selling refineries to cut debt and redeploy spending to oil exploration and development in higher growth regions. Valero hasn’t bought a refinery since its 2005 acquisition of Premcor Inc., and has sold four refineries in that time, two on the U.S. East Coast.
Chevron’s view is that “you get better returns upstream than you do downstream,” said Mark Samter, an analyst at CLSA Asia-Pacific Markets in Sydney who covers refiner Caltex Australia Ltd. (CTX), half-owned by Chevron. “Refining is a pretty ugly business. In good cycles, you make a decent return, probably three or maybe four years every decade, and arguably we’re going structurally into a cycle that’s broken.”
Stanlow Sale
The refinery’s almost $2 billion price tag is about twice the amount offered by India’s Essar Group for Royal Dutch Shell Plc (RDSA)’s Stanlow refinery in the U.K., when adjusted for size.
Chevron, the second-largest U.S. oil company, said on March 21, 2010, that it planned to sell Pembroke. The refinery can process 210,000 barrels of crude a day, or about 11 percent of total U.K. capacity, according to Bloomberg data.
Sean Comey, a spokesman for Chevron, declined to comment in an e-mail yesterday.
While margins from turning crude into fuel may improve during the next 12 months to 18 months, countries are adding more refining capacity to increase energy security, “not on an economic rationale,” CLSA Asia-Pacific’s Samter said by phone today.
Valero fell 51 cents, or 1.8 percent, to $27.20 at 8:34 a.m. in New York, before the start of regular trading on U.S. markets. Chevron fell $1.04, or 1 percent, to $101.10 at 8:37 a.m.
Valero Chief Executive Officer Bill Klesse told analysts at a conference last month that Valero would only pay cash for any refineries it purchased. The company ended 2010 with over $3 billion in cash available on hand. Valero has expressed interest in acquiring a European refinery for more than six years, and failed in a bid to buy a stake in Total SA (FP)’s Vlissingen plant in the Netherlands.
To contact the reporters on this story: Jessica Resnick-Ault in New York at jresnickault@bloomberg.net; Jeffrey McCracken in New York at jmccracken3@bloomberg.net
To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net
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