British energy giant BP Plc (BP - Free Report) has sealed the $2.4 billion deal with Marathon Petroleum Corporation (MPC - Free Report) relating to the sale of its refinery in the Texas City, Texas.
The sold refinery has a 475,000 barrel per day capacity. In addition, it comprises a 1,040 megawatt cogeneration facility, four marketing terminals situated in the Southeast, retail marketing contract assignments for about 1,200 branded sites representing around 61,000 barrels per day (bpd) of gasoline sales, three operating intrastate natural gas liquids pipelines starting at the refinery and a 50,000 bpd share of BP's Colonial Pipeline Company shipper history.
The payment consists of $0.6 billion in cash, while the hydrocarbon inventory is valued at $1.1 billion and an earn-out arrangement of $0.7 billion is payable over six years, based on certain conditions. The refinery has been renamed as the Galveston Bay refinery by the buyer.
Even before the Macondo accident, the disposed facility witnessed a deadly explosion in March 2005. The incident took the lives of 15 workers and injured as many as 170, raising a safety alarm across BP's U.S. operations. Following this, the company shut down the refinery for about two years and incurred $1 billion in compensations to restore the unit. Again in 2007, BP announced that it spent $1.6 billion to recompense the sufferers.
In recent times, BP has divested a number of non-strategic assets that include the Gulf of Mexico (GoM) oil and gas assets to Plains Exploration & Production Co. for $5.55 billion. It has also disposed the Carson refinery in California to Tesoro Corporation (TSO - Free Report) for $2.25 billion. This divestiture is expected to close this year. However, the company intends to retain three core U.S. sites – Whiting in Indiana, Cherry Point in Washington and Toledo in Ohio.
These negotiations are in sync with BP’s $38 billion divestment program that sees the British major getting rid of its mature, non-core upstream assets to create a portfolio with strong growth potential operating from a smaller base by 2013. The divestitures also help the company to refocus on its U.S. fuels portfolio.
BP holds a Zacks Rank #3, which is equivalent to a short-term Hold rating.