By: Zacks Equity Research
April 09, 2010 |
Valero Energy Corporation (VLO - Analyst Report) has finally found a potential buyer for its Delaware City refinery. The company reached an agreement with PBF Energy Partners L.P. to sell this refinery for $220 million. In November last year, Valero permanently closed this refinery after failing to reach a consensus with any buyer. The transaction is expected to be closed in the second quarter.
Post-closure, Valero will continue to supply its customers by entering into a terminaling agreement with the new owner. This deal will make incremental cash flow for the company, management said.
Valero’s continued focus on reducing costs and improving operating efficiency will significantly improve the company’s competitive position. While we believe that the industry fundamentals remain weak, we expect Valero to be profitable this year as a result of idling/selling loss-making refineries and continued cost-control initiatives.
In the fourth quarter, we noticed a sequential improvement in the Gulf Coast and the Northeast regions from the closure of the non-core Aruba and Delaware refineries. In addition, Valero has a number of major projects that will come online this year. It is refurbishing its catalytic cracker in the Memphis refinery for $200 million. Upon completion, the company expects its operating income to increase by $100 million per year.
We appreciate the company’s tangible initiatives towards developing earnings and returns via idling/selling loss-making refineries, acquiring ethanol plants and preserving capital through trimming down its capital budget and dividend cut.
Post-closure, Valero will continue to supply its customers by entering into a terminaling agreement with the new owner. This deal will make incremental cash flow for the company, management said.
Valero’s continued focus on reducing costs and improving operating efficiency will significantly improve the company’s competitive position. While we believe that the industry fundamentals remain weak, we expect Valero to be profitable this year as a result of idling/selling loss-making refineries and continued cost-control initiatives.
In the fourth quarter, we noticed a sequential improvement in the Gulf Coast and the Northeast regions from the closure of the non-core Aruba and Delaware refineries. In addition, Valero has a number of major projects that will come online this year. It is refurbishing its catalytic cracker in the Memphis refinery for $200 million. Upon completion, the company expects its operating income to increase by $100 million per year.
We appreciate the company’s tangible initiatives towards developing earnings and returns via idling/selling loss-making refineries, acquiring ethanol plants and preserving capital through trimming down its capital budget and dividend cut.
Source: http://www.zacks.com/stock/news/32717/Valero+Sells+Refinery
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