SAN ANTONIO, Texas -- After selling its Golden Eagle refinery to Tesoro Petroleum Corp., and despite regulatory concerns, Valero Energy Corp. is now seeking acquisitions, says a report by Reuters. The Federal Trade Commission required Valero to divest the Golden Eagle facility as part of the company’s recent purchase of Ultramar Diamond Shamrock.
Valero, which owns and operates 12 refineries in the U.S. and Canada, earlier this week increased its access to capital by selling the 168,000-barrel-per-day refinery near San Francisco for about $1 billion.
The company may be looking at El Paso Corp.’s 140,000-bpd Eagle Point refinery, in New Jersey, Bear Stearns analyst Frederick Leuffer told Reuters. El Paso has told analysts and shareholders it intends to sell $2.5 billion in assets as part of a balance sheet enhancement program. Some 60 percent of the transactions will be completed in the first quarter of this year.
Valero could buy back $400 million in stock this year and use the remaining proceeds from Golden Eagle sale to pay down debt, however, said Leuffer. “I think it’s going to be hard for Valero to grow through acquisitions,” he said.
Valero owns the 195,000-bpd Paulsboro, N.J., refinery. It also owns the 215,000-bpd Jean Gaulin refinery in Quebec, Canada, picked up in its Ultramar acquisition. Other than its two remaining California facilities, its other refineries are located in the U.S. Gulf region, north Texas, Oklahoma and Colorado. The company estimates its total refinery system throughput at 2 million bpd, and it also has a 5,000-store retail network.
A Valero spokesperson confirmed for Reuters the fact that the company remains interested in adding to its refining capacity. Valero has basic criteria for refineries for possible purchase, including that capacity be more than 100,000 bpd, that if have easy access to waterborne transport and that the facility has potential for upgrading, Valero’s spokesperson told the news agency. She added that the U.S. Eastern, Midwest and Gulf regions remain of interest.
El Paso does not intend to exit the refining business, which it entered via its Coastal acquisition, Reuters said. Analysts said that Sunoco might also be interested in the Eagle Point refinery, but that its large market share in the region could be a problem. “Sunoco would take a look, but they already are so big in the region the question is would they be allowed to buy it,” said Leuffer.
A new player may be closely held Premcor, which just installed former Tosco Chairman Thomas O’Malley and other members of his former Tosco team, said Reuters. And Marathon Oil Corp. said last month it would spend about $1.8 billion to acquire properties in 2002 and to bolster its investment program, This allocation will cover planned investments of $441 million in refining, marketing and brand related projects, the company said.
