Valero Energy Corp. (VLO) plans to offload Paulsboro, New Jersey, refinery to PBF Energy Company LLC for $360 million. This announcement follows the sale of Valero’s 182,200 barrel-per-day (BPD) Delaware City refinery in June.
The purchase consideration will be paid by PBF Energy equally in cash and debt. PBF Energy also will be responsible for paying the value of net working capital and inventories at the refinery, currently estimated at about $275 million. The deal is expected to close in the fourth quarter.
The 185,000 BPD Paulsboro refinery is situated on the Delaware River’s bank about 10 miles from Philadelphia. To focus on other business opportunities, the largest independent refiner intends to exit from its refining business on the East Coast.
PBF Energy is owned by the Blackstone Group, First Reserve Corp. and Petroplus Holdings AG, Europe’s largest independent refiner. This deal with PBF Energy is not the first as Valero had sold its terminal operations and idle refining assets in Delaware to the same company earlier this year.
Valero is consistently reviewing its refining portfolio and upgrading its asset base by selling refinery assets that do not fit the business mix. The company’s 235,000 BPD Aruba refinery is undergoing extensive maintenance and is expected to come online in mid-October.
We appreciate the company’s continued focus on reducing costs and improving operating efficiency, which will significantly improve its competitive position. The company recently announced its plan to build two hydrocracker units to boost diesel production at a total cost of $2.9 billion.
Valero remains our favored stock in the refining space for its sound balance sheet, better liquidity and solid assets base. We maintain our Hold recommendation for Valero with the Zacks #3 Rank (Hold).
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