BP's Texas City Refinery on the Block (BP, MPC, MRO, VLO, TSO)

Oil supermajor BP PLC (NYSE: BP) has been seeking a buyer for its massive Texas City, Tex., refinery for nearly a year. The sale is part of the company's effort to shed $38 billion in assets to cover the costs BP is likely to face as a result of the explosion of the Deepwater Horizon in April 2010, which killed 11 workers and dumped 5 million barrels of crude into the Gulf of Mexico.

According to a report in the Financial Times, discussions are currently underway with Marathon Petroleum Corp. (NYSE: MPC), a company formed a little more than a year ago from the refining and downstream assets of Marathon Oil Corp. (NYSE: MRO). BP reportedly also has discussed selling the 475,000-barrel a day plant to Valero Energy Corp. (NYSE: VLO), but apparently Valero was not interested.

The refinery is the third-largest in the United States and could fetch about $2.5 billion, which would put BP's total asset sales at near $35 billion so far. Another independent refiner, Tesoro Corp. (NYSE: TSO), bought BP's Carson, Calif., refinery last month for $2.5 billion. The Carson refinery is smaller, with a capacity of 266,000 barrels a day, but the sale price included the oil inventory and BP's ARCO-branded retail outlets.

In 2005, an explosion at the Texas City refinery killed 15 workers, and BP has spent more than $1 billion in upgrades to the plant and paid more than $180 million in fines related to the disaster.

While buying a refinery may not seem like a good idea right now, BP's Texas City plant is well-placed to export fuel as U.S. consumption continues to decline. And $2.5 billion is cheap compared with the time and cost to build a new refinery. If Marathon can figure out a way to finance this deal, it could work out very well for the company over the next few years.

Shares of BP are up about 0.5% in premarket trading at $43.10 in a 52-week range of $33.62 to $48.34.

Shares of Marathon Petroleum are inactive this morning after closing at $52.07 last night in a 52-week range of $26.35 to $56.22.

Paul Ausick


Filed under: 24/7 Wall St. Wire, Commodities, Oil & Gas, Pre-Market Activity Tagged: BP, featured, MPC, MRO, TSO, VLO
Read Full Story

Markets

DJIA 24,700.21 -287.26 -1.15%
NASDAQ 7,725.59 -21.44 -0.28%
NIKKEI 225 22,555.43 276.95 1.24%
HANG SENG 29,696.17 228.02 0.77%
DAX 12,731.18 53.21 0.42%
USD (per EUR) 1.16 0.00 -0.02%
USD (per CHF) 1.00 0.00 0.19%
JPY (per USD) 110.04 -0.03 -0.03%
GBP (per USD) 1.32 0.00 0.09%