Valero Finishes Delaware Deal
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| Symbol | Price | Change |
|---|---|---|
| VLO | 17.50 | -0.06 |
, On Wednesday June 2, 2010, 8:47 am EDT
A crude oil refining and marketing company, Valero Energy Corp. (NYSE: VLO - News) announced that it has closed the deal to sell its Delaware City refinery and its pipeline assets to PBF Energy Partners L.P. for $220 million. The decision is reflective of the company’s struggles associated with high costs and falling demand for fuel.
In November 2009, Valero decided to permanently close and discontinue its refinery operations citing losses of as much as $1 million a day. Profit margins of the refinery slumped as the recession cut demand for gasoline, diesel and other fuels. In April 2010, Valero announced the sale of the assets, which PBF Energy agreed to purchase with plans for a few bends that would return the plant to profitability. The purchased assets include an idle 190,000 barrel per day refinery, associated terminal and pipeline, and a 218 megawatt power plant complex.
Valero will continue to supply its customers by entering into a terminaling agreement with the new owner. Management believes the deal will create incremental cash flow for the company.
Among all the independent refiners, Valero offers the most diversified refinery base with a footprint in all major regions of the US. Valero is currently exploring strategic options for its refineries in Paulsboro, New Jersey, and Aruba.
Although we remain optimistic about the company’s business in the coming quarters on the back of improving U.S. and global economies, we expect refining margins to remain constrained due to an abundance of spare refining capacity in the U.S., Western Europe, and Japan.
We appreciate the company’s continued focus on reducing costs and improving operating efficiency that will significantly improve its competitive position. Even if industry fundamentals remain weak in 2010, Valero is expected to remain profitable in the year owing to idling money-losing refineries and continued cost reduction.
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