ConocoPhillips (COP) has signed an asset sale agreement with Sunoco Logistics Partners LP (SXL) for its refined products terminal in East Boston, Massachusetts. Houston-based ConocoPhillips agreed to sell the terminal for $56 million in addition to the fair value of inventory.
The facility can store up to 1.2 million barrels of oil. It enjoys exclusive rights as a sole service provider to Logan International Airport under a long-term contract. Local markets are served by the terminal’s rack services.
The sale is likely to be completed in the third quarter and is subject to customary closing conditions.
Sunoco owns and operates terminals, crude oil and refined product pipelines, and other storage assets associated with its refining and marketing operations, mainly along the East Coast. The recent buy is an effort to expand into the New England market. It plans to finance the deal through its revolving credit facilities.
ConocoPhillips is an integrated energy company with interests around the world. The recent sale is part of the plan to minimize its debt level by divesting various downstream assets and concentrate on the more profitable upstream sector.
ConocoPhillips holds leadership in both natural gas and heavy crude oil in North America, as well as a legacy position in the North Sea and growing exposure to lucrative international regions. Over the long term, the company expects to replace reserves and sustain production growth.
With ethanol and other bio-fuels gaining popularity among the industry players, we believe that demand for petroleum-based refined products will cool off. This will likely dampen margins and earnings of ConocoPhillips’ downstream segment.
ConocoPhillips has a Zacks #3 Rank, which translates into a Hold rating for a period of one to three months. We recommend a Neutral rating for a longer period.
