The U.K. energy giant
) plans to offload its Texas City refinery as well as other
properties to Ohio-based
Marathon Petroleum Corp.
). This move is integral to BP's efforts to realign its downstream
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Per the deal, along with this 475,000 barrel per day refinery, BP
will shed a portion of its retail and logistics network in the
Southeast U.S. The sale of this refinery, the third largest in the
U.S., could fetch up to $2.5 billion for BP. This includes a base
purchase price of $598 million, plus approximately $1.2 billion for
inventories and an additional $700 million over six years subject
to certain conditions.
This latest sale − which is expected to close by early 2013 − is in
sync with BP's strategy to trim its U.S. refining capacity to half
by the end of this year through the divestiture of the Carson
refinery in Southern California and the Texas City refinery. BP has
already disposed the Carson refinery in California to
) for $2.25 billion in August. However, the company intends to
retain three core U.S. sites, Whiting in Indiana, Cherry Point in
Washington and Toledo in Ohio.
Even before the Macondo accident, this Texas City facility
witnessed a deadly explosion in March 2005. The incident took the
lives of 15 workers and injured as many as 170, raising a safety
alarm across BP's U.S. operations. Following this, the company shut
down the refinery for about two years and incurred $1 billion in
compensations to restore the unit. Again, in 2007, BP announced it
spent $1.6 billion to recompense the sufferers.
Again, the present stream of negotiations is in line with BP's
divestment program that sees the British major getting rid of its
mature, non-core assets to create a portfolio with strong growth
potential operating from a smaller base. The company is set to
divest around $38 billion worth of assets by 2013, of which it has
already announced disposals of more than $35 billion.
In recent times, BP has divested a number of non-strategic assets
that include Gulf of Mexico (GoM) oil and gas assets to
Plains Exploration & Production Co.
) for $5.55 billion as well as its Canadian natural gas liquids
business to Houston's
Plains All American Pipeline LP
) for $1.67 billion.
BP carries a Zacks #3 Rank, which is equivalent to a Hold rating
for a period of one to three months. We also maintain our long-term
Neutral recommendation on the company.