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Independent oil and gas company InterOil Corporation (IOC - Snapshot Report) announced that it has sold its downstream business to Puma Energy Group Pte, a midstream and downstream oil company. The transaction is valued at $525.6 million.  

The deal includes sale of InterOil’s oil refinery in Papua New Guinea and its petroleum products distribution businesses. The Napa Napa refinery, located in Port Moresby, has a capacity to process approximately 28,000 barrels of oil per day. The other downstream assets under sale include 52 service stations, 30 fuel depots, terminals and aviation sites.

Management at InterOil said that this sale is a strategic move to increase focus on its high-return Upstream and Liquefied Natural Gas (LNG) business, which has become a core component in the company’s growth profile. Given InterOil’s success in exploring and monetizing gas, the company believes that it is an ideal time to focus on this business. The company added that the proceeds from the sale of its downstream operations would be used to develop the upstream and LNG business.

InterOil mentioned that the transition would take place immediately but Puma Energy may use the company’s downstream brand for one year.

Puma Energy is a distributor of petroleum products in over 40 countries. InterOil believes that the takeover of its downstream business by Puma Energy should increase the long-term growth potential of these assets.

Based in Singapore, InterOil works primarily in Papua New Guinea and the area around it. The company currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can consider better-ranked players from the broader energy sector such as Energy Transfer Partners, L.P. (ETP - Analyst Report), Statoil ASA (STO - Analyst Report) and QEP Resources, Inc. (QEP - Analyst Report). All these stocks sport a Zacks Rank #1 (Strong Buy).

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