Venezuela Seeks Buyer for Citgo Petroleum Refinery

Source: Bloomberg 7/31/2014, Location: North America

Petroleos de Venezuela SA is seeking a buyer for Citgo Petroleum Corp., its U.S. refining and marketing company, in a deal that may be worth as much as $15 billion.

PDVSA, as the state-owned oil company is known, “is currently seeking to monetize its ownership interest in us,” Citgo said in a July 29 bond prospectus document. “There can be no assurance as to whether a transaction will occur or as to the nature or timing of any potential transaction.”

Citgo owns three refineries capable of handling about 749,000 barrels a day in Louisiana, Texas and Illinois. The company sells gasoline through 5,600 branded stations. It could fetch $15 billion because its midstream storage terminals and docks are eligible for tax advantages, said Sam Margolin, a New York-based analyst for Cowen & Co.

By creating a master-limited partnership for those assets and getting better-than-expected returns from the refineries, a buyer could get “a return on that price,” Margolin said today in a telephone interview. “Nobody should have a problem getting financing even up to that $15 billion level.”

Potential buyers include Gulf Coast refiners looking to capitalize on the region’s rising crude supply, and those operators seeking entry, Margolin said.

Citgo had sales of $42.3 billion last year and earnings before interest, taxes, depreciation and amortization of $1.8 billion. A call and e-mail to Citgo’s Houston office weren’t immediately returned.

Weighing Options

Master-limited partnerships have proliferated because of demand from investors for cash payouts that beat debt yields. A buyer could reduce Citgo’s tax burden because partnerships don’t pay federal income tax.

“We have been evaluating possibilities to sell the Citgo assets for five or more years and continue to view possibilities as always,” PDVSA said in a July 25 e-mailed response to questions. “We have previously sent messages to the market about these possibilities and continue to evaluate any opportunities.”

Argus Media reported July 24 that the company had received three offers of $10 billion to $15 billion for Citgo.

PDVSA is also considering the sale of its stake in a refinery run with Exxon Mobil Corp. (XOM), the Wall Street Journal reported yesterday, citing people familiar with the matter. A PDVSA official, who isn’t authorized to speak publicly, declined to comment when asked if the company plans to sell its 50 percent stake in the Chalmette refinery in Louisiana.

Legal Risk

The government of President Nicolas Maduro probably is looking to sell offshore refineries to boost hydrocarbons exports to China, raise cash and reduce the risk of having assets seized as part of PDVSA lawsuits abroad, GlobalSource Partners’ Ruth de Krivoy and Tamara Herrera said today in an e-mailed report to clients.

The sale of U.S. assets “would put PDVSA in a better position to negotiate settlements should adverse decisions be handed down in pending international arbitration cases,” they wrote.

Contract disputes and expropriations have been filed at the International Centre for Settlement of Investment Disputes and the International Chamber of Commerce’s Court of Arbitration by mining and oil companies that operated in the country including Gold Reserve Inc., Phillips 66 and ConocoPhillips.

The extra yield, or spread, investors demand to buy Venezuela’s benchmark bonds due in 2027 instead of U.S. Treasuries fell three basis points to 895 basis points at 11 a.m. in New York today. The price rose to 84.1 cents on the dollar.


United States >>  5/17/2022 - Helix Energy Solutions Group, Inc. has entered into a definitive agreement to acquire 100% of the equity interests of the Alliance group of companies ...
Japan >>  5/16/2022 - First Solar, Inc. has entered into definitive agreements with funds managed by PAG Real Assets (“PAG”), pursuant to which PAG will acquire from First ...

Brazil >>  5/13/2022 - Petrobras, following up on the release disclosed on 07/20/2018, informs that it has decided to conclude the current competitive process, which was in ...
Russia >>  5/12/2022 - Shell Overseas Investments B.V. and B.V. Dordtsche Petroleum Maatschappij – subsidiaries of Shell plc – have signed an agreement to sell Shell Neft LL...

United Kingdom >>  5/12/2022 - JERA Americas, the Houston-based subsidiary of global energy leader JERA, has entered into an agreement to acquire a 1,633 megawatt (MW) thermal power...
Australia >>  5/11/2022 - NeuRizer - (formerly Leigh Creek Energy) wholly owned subsidiary Leigh Creek Oil and Gas (LCOG) has announced that Santos will farm-in and take operat...

Related Categories: Accounting, Statistics  Acquisitions and Divestitures  Asset Portfolio Management  Economics/Financial Analysis  General  Industrial Development  Insurance  Investment  Mergers and Acquisitions  Risk Management 

Related Articles: Accounting, Statistics  Acquisitions and Divestitures  Asset Portfolio Management  Economics/Financial Analysis  General  Industrial Development  Insurance  Investment  Mergers and Acquisitions  Risk Management 


Gulf Oil and Gas
Copyright © 2021 Universal Solutions All rights reserved. - Terms of Service - Privacy Policy.