BP (NYSE:BP) continues with its asset sale program with the sale of its refinery facility in California for $2.5 billion.  The sale marks another step forward in the company’s plans to sell $38 billion in assets to cover the costs of the Gulf of Mexico spill and to invest in high return upstream projects. The refinery based in Carson, California, is one of the two American refineries that BP has put up for sale as it aims to streamline its downstream portfolio.
We have a $50 price estimate for BP, which is at a 20% premium to its current market price.
BP has been pursuing talks to sell its refineries in California and Texas to reduce its footprint in the downstream sector in the U.S. Refining margins have fallen over the past few years because of high prices of crude oil and falling demand for gasoline and end user products in developed countries. The Carson refinery had a throughput of about 266,000 barrels per day and also includes about 800 dealer operated retail sites.  According to the deal, the purchaser Tesoro, will pay about $1.18 billion for the assets and and the cost of the inventory at the closure of the deal.
The refinery sale marks a broad pullback form the downstream business by BP and other vertically integrated Energy majors. In April, ConocoPhillips spun off its downstream assets as a separate company and other majors have also announced downstream asset sales over the past few months. We expect BP’s refining throughput to fall continuously over the next few years as it sells low returns assets in the business.Notes:
- BP sells California refinery to Tesoro, BizJournals [↩]
- BP to Sell Its Carson, California, Refinery to Tesoro for $2.5 Billion, Fox Business [↩]