Integrated energy giant Chevron Corp. (CVX) has signed an agreement with Valero Energy Corporation (VLO) for the sale of its U.K. subsidiary Chevron Limited, comprising Welsh refinery Pembroke and marketing and logistics assets. Chevron will receive a total cash consideration of $730 million for the 220,000 barrels per day capacity refinery and approximately $1 billion for inventories and other related assets.
Chevron will also dispose 1,000 Texaco-branded retail service stations in the U.K. and Ireland, a commercial and industrial fuels business along with seven equity-owned terminals, shareholdings in four pipelines, eight aviation facilities as well as related support and trading operations. However, the company will continue to own its upstream business in Europe, including its aviation operations in Sweden, Greece and the Benelux.
With this deal, which is expected to be closed in the second half of 2011, major U.S. oil refiner, Valero will establish its foothold on the European soil for the first time. Valero remains optimistic about the latest addition to its refinery portfolio and expects the purchase to enhance growth opportunities and be accretive to 2011 earnings per share.
On the other hand, this transaction is a part of Chevron’s initiatives to trim down its less lucrative refining operations and concentrate on high profit generating exploration and production business. In this regard, the company is already in the process to sell various downstream properties in more than 20 counties, including Spain, Caribbean and southern Africa.
Chevron also aims to streamline its refining asset portfolio in Central America, while continuing to operate downstream activities in the stronger North American and the Asia-Pacific markets.
Chevron currently retains a Zacks #3 Rank, which translates into a short-term Hold rating, while Valero has a Zacks #2 Rank (short-term Buy recommendation).
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