Oil refiner and marketer
) and Washington-based
The Carlyle Group L.P.
) have completed the formation of their joint venture (JV),
Philadelphia Energy Solutions. The newly-formed unit will operate
the Philadelphia Refinery.
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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Per the terms of the deal, 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 of 33% by contributing its
Philadelphia refinery assets to the partnership.
This partnership comes as a positive move for Sunoco, which was
suffering heavy losses at the Philadelphia refinery.
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.
We remain positive on the outlook for the new Sunoco - without
refining - as it holds the promise of unlocking significant value
from its non-refining businesses. We are also bullish on Sunoco's
retail marketing segment, which gives superior return and has
attractive growth prospects.
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 also 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 #2 Rank, which translates into a
short-term Buy rating.