UPDATE: Holly Agrees To Buy Sunoco's Tulsa Refinery For $65 Million
16 Avril 2009 - 4:47PM
Dow Jones News
Sunoco Inc. (SUN) has agreed to sell its Tulsa, Okla., oil
refinery to Holly Corp. (HOC) for $65 million, a price tag that
represents a steep decline in asset values amid an industry
slump.
Sunoco put the 85,000-barrel-a-day refinery up for sale in 2008
and in December disclosed that it would convert the facility into
an oil product terminal if it couldn't find a buyer.
Last year's skyrocketing crude oil prices - refiners' biggest
cost - and weakening demand for useful products such as gasoline
and diesel hit the sector's earnings after several years of
historically high earnings. Notional values of refining assets had
plummeted, but buyers and sellers were having difficulty agreeing
on prices. Thursday's announcement shows that a consensus is
emerging, which may open the door to more transactions this
year.
"If I was to pick who I thought did better, Holly didn't pay a
lot for it," said Phil Weiss, an analyst with Argus Research. "They
saw it as an opportunity to expand their business in a time when
assets are cheap."
Under the deal, which is expected to close June 1, Dallas-based
Holly agreed to invest in upgrades necessary to meet environmental
protection requirements, including installing a distillate treating
system and sulfur-recovery unit. The divestiture also includes
inventories of petroleum products, which will be priced at market
value at closing.
Holly said constructing the unit that would produce ultra low
sulfur diesel would cost $150 million. Philadelphia-based Sunoco
had estimated upgrades to the refinery would cost more than twice
as much.
Holly said it will pay for the refinery as well as the upgrades
using a $300 million credit facility it recently secured.
Holly has a history of being able to find lower-cost ways to
upgrade refineries, analyst Jacques Rousseau with Back Bay
Research, wrote in a note to clients Thursday morning.
The refinery, which started production in 1913, became part of
Sunoco's portfolio through a merger with Sunray DX in 1968. Unlike
the situation at many U.S. refineries, employees of the Tulsa plant
aren't represented by the United Steel Workers union, which was
successful in bargaining for higher pay this year despite the
recession.
Sunoco shares recently traded 1.9% lower at $27.25. Holly's
stock traded 0.8% lower at $20.83.
-By Susan Daker, Dow Jones Newswires; 713-547-9206;
susan.daker@dowjones.com
(Kerry E. Grace contributed to this article.)