BP Caps U.S. Fuels Shift With Completion of Tesoro Deal

U.S. business now anchored by three northern refineries

Published in CSP Daily News

HOUSTON & SAN ANTONIO -- As the final part of its plan to reshape its U.S. fuels business, BP has completed the sale of its Carson, Calif., refinery and related logistics and marketing assets in the region to Tesoro Corp. for approximately $2.425 billion. Tesoro's acquisition of BP's fully integrated Southern California refining and marketing (R&M) business includes the Carson refinery and more than 800 dealer-operated retail gas stations.

Cash proceeds from the sale include approximately $1.075 billion for assets and an estimated $1.35 billion primarily for inventory at market value and other working capital.

"With the completion of this divestment the strategic refocusing of our U.S. fuels portfolio is essentially complete" said Iain Conn, CEO of BP's global refining and marketing business. "BP's U.S. fuels business is now anchored around three highly sophisticated northern refineries, which are crude feedstock-advantaged, and tied to strong marketing businesses."

BP will continue to maintain a number of business interests in California, including a large ARCO retail and logistics presence that includes approximately 270 retail sites in the northern part of the state. BP will also continue the distribution and marketing of lubricants through its Castrol brand and remain active in the California natural gas and power sector.

"California remains an important state for us and we remain committed to supplying our customers in Northern California and the rest of the Pacific Northwest with the quality fuels they depend on," said Jeff Pitzer, BP's Northwest fuels value chain president. "We've recently upgraded our Cherry Point, Wash., refinery to produce cleaner-burning diesel fuel and are building a new rail terminal at the plant to take advantage of growing supplies of domestically produced crude oil."

With the transaction's closing on June 1, Tesoro took ownership of the 266,000-barrel-per-day (bpd) refinery near Los Angeles as well as the associated logistics network of pipelines and storage terminals and the ARCO-branded retail marketing network in Southern California, Arizona and Nevada.

While the sale included BP's ARCO retail brand rights, BP has exclusively licensed those rights from Tesoro for Northern California, Oregon and Washington.

BP retains ownership of the ampm convenience store brand and has franchised it to Tesoro for use in the Southwest.

The Carson Refinery, opened in 1938, is one of the largest on the U.S. West Coast. It became part of BP through the 2000 acquisition of ARCO.

BP announced plans to divest its Carson, Calif., and Texas City, Texas, refineries in February 2011 as part of a strategic refocusing of the company's global refining portfolio. BP completed the sale of Texas City to Marathon Petroleum Corp. on February 1.

BP is completing a number of major investments in its other U.S. refineries.

Additionally, Tesoro and Tesoro Logistics LP have announced that TLLP closed the acquisition of the first portion of the integrated Carson logistics assets for total consideration of $640 million. These assets include six marketing and storage terminal facilities with a total combined throughput capacity of about 225,000 bpd and approximately 6.4 million barrels of total storage capacity. The transaction price included cash of $544 million and Tesoro Logistics equity valued at $96 million.

The remaining Carson logistics assets, consisting of dedicated storage capacity, pipelines and marine terminals, are expected to be offered to TLLP within 12 months, and have an expected market value of between $450 and $550 million.

The company funded the transaction with about $550 million of cash, $544 million of cash proceeds from the acquisition of logistics assets by TLLP, $500 million in term loan borrowings and about $700 million in borrowings under Tesoro Corp.'s revolving credit facility, which was recently expanded to $3.0 billion.

"We are pleased to have closed this transformational acquisition," said Greg Goff, president and CEO of San Antonio-based Tesoro. "This transaction is a unique opportunity for Tesoro to combine the best aspects of two West Coast refining, marketing and logistics businesses resulting in a more efficient world-scale integrated refining, marketing and logistics system."

Tesoro is an independent refiner and marketer of petroleum products. Through its subsidiaries, Tesoro operates six refineries in the western United States with a combined capacity of approximately 845,000 barrels per day. Tesoro's retail-marketing system includes more than 2,200 retail stations under the Tesoro, Shell, ARCO and USA Gasoline brands, of which 595 are company operated.

BP--with U.S. operations based in Chicago, Houston and Blaine, Wash.--markets more than 15 billion gallons of gasoline every year United States to consumers through more than 11,000 branded retail outlets and supplies more than four billion gallons of fuel annually to fleets, industrial users, auto and truck manufacturers, railroads and utilities. With headquarters in London, BP is the single, global brand formed by the combination of the former British Petroleum, Amoco, Atlantic Richfield (ARCO) and Burmah Castrol.

Keywords: 
petroleum