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USA: Valero Sells Refinery to Alon

Print E-mail
Monday, 12 May 2008
Valero has announced it is selling its refinery in Krotz Springs to Alon USA Energy of Dallas in a deal valued at up to $433 million.

 

According to a statement from Valero, the sale is expected to close in July and the boards of directors of both companies have approved the transaction.

The Krotz Springs refinery is a good fit for Alon, and this transaction is a good deal for Valero's stockholders," said Bill Klesse, Valero's chairman and chief executive officer. "Alon is a high-quality company that will benefit the great group of dedicated employees at this refinery as well as the community of Krotz Springs."

In a phone interview Friday, Jeff Morris, Alon's president and chief executive officer, said the jobs of the plant's 220 employees are secure.

"Their jobs, their salaries and benefits will stay the same. We want to make this transition as transparent as possible," Morris said. "Our local employees won't notice any difference between us and Valero."

Morris said Alon also plans to keep the refinery's current management team in place to help smooth the transition.

"We are very pleased to have joined ranks with a strong management team and group of employees that have achieved one of the best track records in the industry." Morris said.

As for the community, Morris said Valero set a high standard in terms of corporate giving, a standard Alon plans to maintain. "We want to be a good neighbor," Morris said.

In the deal announced to shareholders last Thursday (8th May), Valero Energy said it has agreed to sell the refinery for $333 million in cash plus a five-year "earn-out provision" - a performance-based provision that is estimated to be worth more than $100 million.

Alon is an independent refiner and marketer of petroleum products, operating primarily in the south central, southwestern and western regions of the United States.

The company currently owns and operates four refineries in Texas, California and Oregon, with an aggregate crude oil throughput capacity of about 170,000 barrels per day.

Alon markets gasoline and diesel products under the FINA brand name and is also a leading producer of asphalt. Alon currently operates more than 300 convenience stores in West Texas and New Mexico, primarily under the 7-Eleven and FINA brand names. In addition, Alon supplies gasoline to 800 additional FINA branded locations.

David Wiessman, chairman of the board for Alon USA, said the deal is very attractive to his company.

"The Krotz Springs refinery, which is being acquired at an attractive price, increases our refining capacity by 50 percent, reduces our risk profile and enhances our strategic objective to grow the company," Wiessman said.

Morris praised the local plant, pointing out the Krotz Springs refinery ranks among both the lowest operation costs and lowest maintenance costs among American refineries.

"We believe we can further improve operations at the refinery with minimal costs and we plan to upgrade the refinery to produce low-sulfur diesel and to process a Mars-like crude slate," Morris said.

He said these changes will not change the plant's capacity, merely refocus its production. "We are making it more competitive. It is a good plant. These changes will make it even better," Morris said.

Valero acquired the Krotz Spring refinery in 1997 when it purchased Basis Petroleum from Salomon Inc.

The most recent sale is at least the fourth time the plant has changed hands in its history. Over the years, it has variously been known as Hill Petroleum and Phibro.

Valero, which underwent a major expansion in 2005 to become North America's largest oil refining company, had announced earlier this year that it would explore strategic alternatives for the Krotz Springs refinery.

In a statement to investors, Valero this week said it is also exploring options for its refineries in Aruba; Memphis, Tenn.; and Ardmore, Okla.

Klesse said the sale of the Krotz Springs plant is part of Valero's efforts to concentrate on it core refineries where it expects to see higher returns.

At present, Valero owns 17 refineries throughout the United States, Canada and the Caribbean with a combined throughput capacity of approximately 3.1 million barrels per day.

Valero is also one of the nation's largest retail operators with more than 5,800 service stations in the United States, Canada and the Caribbean under various brand names including Valero, Diamond Shamrock, Shamrock, Ultramar and Beacon.

As for the fate of the local Valero service stations, Morris said he couldn't speak to that.

"I can tell you that we have agreed to sell them 5,000 barrels a day worth of gasoline for the next five years, which I presume they can use to supply these stores," Morris said.

PetrolWorld 110508 

 
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