Oil refiner and marketer
) entered into a partnership with Washington-based
The Carlyle Group L.P.
) in an attempt to save the Philadelphia refinery from closing. The
deal, pending customary approvals and regulations, is expected to
be closed in the third quarter of 2012.
The oldest and largest East Coast refinery, which was struggling
to generate profits amidst the rising crude oil price scenario, was
slated for closure in August. Three months back, in April, Sunoco
announced its decision to enter into talks with the Carlyle Group
regarding the refinery.
Per the terms of the newly signed joint venture - Philadelphia
Energy Solutions - Carlyle will put in an undisclosed amount of
money in the refinery that has a processing capacity of 330,000
barrels of oil per day. Carlyle will control the majority stake of
the partnership and will take care of the daily operations of the
refinery. On the other hand, Sunoco will hold a non-operating
minority interest by contributing its Philadelphia refinery assets
to the partnership.
This joint venture will not only retain the current 850 jobs,
but will also open doors to almost 100-200 new, permanent
employment opportunities. The partnership will also work toward
capturing other major projects capitalizing on the ample supply of
natural gas in the Marcellus Shale.
To tap the high-quality, low-sulfur crude oil of the Bakken
formation in North Dakota, Carlyle plans to set up a
train-unloading terminal at the refinery that could process 140,000
barrels of oil per day.
This partnership comes as a positive move for Sunoco, which was
facing heavy losses from the Philadelphia refinery along with the
other minor and now-shuttered Marcus Hook facility.
The Philadelphia refinery plays an important role for the energy
center in the Northeast and is expected to serve the adjoining
regional markets via its new developed business infrastructure and
renovated crude oil sourcing network.
Of late, Sunoco has undertaken a number of strategic initiatives
to improve its profitability, including its decision to exit its
refining business and the impending merger with
Energy Transfer Partners L.P.
We believe that apart from providing a hefty premium to Sunoco's
shareholders, the merger will also broaden the scale and geographic
reach of the company's logistics and retail businesses.
Sunoco currently retains a Zacks #3 Rank, which translates into
a short-term Hold rating.
CARLYLE GROUP (CG): Free Stock Analysis Report
ENERGY TRAN PTR (ETP): Free Stock Analysis
SUNOCO INC (SUN): Free Stock Analysis Report
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