The Pembroke refinery will add 26 cents a share to annual profit based on 2010 market prices, San Antonio-based Valero said in a statement today. The purchase is expected to close in the third quarter, subject to regulatory approval. The Welsh refinery is capable of processing 270,000 barrels a day, San Ramon, California-based Chevron said in a separate statement.
Chevron 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. Pembroke exports half its gasoline output to New York and Florida, Valero said.
“After exiting refining in the U.S. East Coast last year, this acquisition provides an opportunity for our company to supply that market more competitively, when it’s economic to do so,” Valero Chief Executive Officer Bill Klesse said in the statement. The refinery, which stayed profitable in 2009 during the recession, is expected to add immediately to earnings, he said.
Pembroke’s cash operating costs are about $1 a barrel less than Valero’s existing plants, making it competitive with other refineries that supply gasoline to the U.S. Atlantic Coast, according to slides Valero posted online today.
“If they are going to move into Europe, this is not a bad asset to do it with,” said Philip Weiss, a New York-based analyst for Argus Research Co. who rates Valero and Chevron shares at buy and owns none.
The plant mainly processes North Sea crude, Valero said. Brent, the benchmark North Sea crude, is selling for about $13.44 a barrel more than the U.S. benchmark, compared with the one-year average of $2.92 a barrel, following unrest in the Middle East and Africa.
Valero rose $1.66, or 6.3 percent, to $27.98 at 4:15 p.m. in New York Stock Exchange composite trading. Chevron gained 85 cents to $99.93.
Valero has expressed interest in acquiring a European refinery for more than six years. It failed in a 2009 bid to buy a stake in Total SA (FP)’s Vlissingen plant in the Netherlands. The Texaco-branded fuel network it’s acquiring is the largest motor- fuel dealer in the U.K. and the second-largest in Ireland, Valero said in today’s slides.
Chevron Asset Sales
Chevron has been seeking a buyer for its only European refinery for almost a year. The purchase includes inventory at the refinery valued at about $1 billion. It also includes 1,000 Texaco-branded retail outlets in the U.K and Ireland, a commercial and industrial fluids business, seven fuel terminals, stakes in four pipelines, eight aviation fueling operations and a trading business.
Chevron has agreed to sell refining and marketing operations in more than 20 countries in the past year, it said in today’s statement. The company is seeking bids for operations in the Caribbean and certain Central American markets.
To contact the editor responsible for this story: Susan Warren at email@example.com