CITGO for Sale?
Venezuela would sell U.S. refiner if price is right, petroleum minister says
Published in CSP Daily News
CARACAS, Venezuela -- Venezuelan state oil company Petróleos de Venezuela SA (PDVSA) will sell North American unit CITGO Petroleum Corp. if it receives a good offer, Petroleum Minister Rafael Ramirez told reporters on Tuesday, reported Reuters.
CITGO has three U.S. refineries with combined capacity of approximately 750,000 barrels per day. They are in Lemont, Ill., Lake Charles, La., and Corpus Christi, Texas.
"As soon as we receive a proposal that serves our interests, we will exit CITGO," Ramirez said during a celebration of the 100th anniversary of Venezuela's oil production. "This is not something simple like deciding to take off a jacket, this is an issue that we're working on."
As reported in a 21st Century Smoke/CSP Daily News Flash, CITGO-branded marketers sell motor fuels through approximately 6,000 gas stations in nearly 30 states.
It may be difficult to find a single buyer for all of CITGO's assets as two of the refineries are geared to run heavy crudes from Venezuela and U.S. refining companies are trying to maximize profits by buying cheap domestic light crudes, refinery experts told the news agency.
Analysts added that Lemont, the only CITGO refinery that does not process Venezuelan heavy crudes, may be the easiest to sell because of its location in proximity to inexpensive Canadian crudes.
CITGO also owns a network of terminals and pipelines that would be highly attractive as demand for energy infrastructure rises on surging output of domestic crudes.
Ramirez said oil deliveries to the United States would be unaffected.
"We are not a refining company, we are a business that produces oil," he said. "We will always maintain supply contracts, we are not going to pull out of our markets."
He also denied PDVSA is looking to raise cash.
"It's not that we're looking for fiscal revenue, as some analysts say. We are fine with our fiscal revenue from oil. What we need is to stop wasting fuel," he said.
CITGO was founded in 1910 when pioneer oilman Henry L. Doherty created the Cities Service Co. By 1965, Doherty decided that the company needed to change its marketing brand, so Cities Service Co. became CITGO. Occidental Petroleum bought the company in 1982, and CITGO became a wholly owned subsidiary handling refining, marketing and transportation. In 1983, the company was sold once again to Southland Corp. as a way to provide a constant supply of gasoline to Southland's 7-Eleven convenience stores. In 1986, Southland sold a 50% interest in CITGO to PDVSA, the national oil company of the Bolivarian Republic of Venezuela, with the company acquiring the remaining half in 1990.
CITGO Petroleum president and CEO Nelson Martinez also announced on Tuesday that the company has successfully completed a refinancing of its debt under highly favorable conditions that have enabled it to reduce interest rate payments and extend its debt maturities to 2019-2022.
"The culmination of this process was possible through a very large team effort and the results speak for themselves," Martinez said. "CITGO is now in a much stronger position to continue to move forward for the benefit of our customers and business partners, our employees and our shareholder."
The refinancing involved a $900 million senior secured revolving line of credit maturing in 2019, a $650 million senior secured term loan facility maturing in 2021, and $650 million in senior secured notes maturing in 2022.
Under the newly negotiated terms, CITGO will be able to reduce its interest expense by approximately $20 million per year. The company also negotiated improved flexibility in its debt covenants to allow additional financial and operational strength, while still maintaining its existing credit ratings.
As a result of CITGO's strong performance and financial strength, the company's debt offerings were very well received by the market with strong participation by a large number of institutions, resulting in a significant oversubscription, the company said.
Based in Houston, CITGO Petroleum is a refiner, transporter and marketer of transportation fuels, lubricants, petrochemicals and other industrial products. The company is owned by PDV America Inc., an indirect wholly owned subsidiary of PDVSA.