ExxonMobil Looking for Buyers for Montana Refinery

Reuters, August 31, 2016

ExxonMobil Corp is in the first stages of seeking a potential buyer for its Billings, Montana, refinery, one of the company's only U.S. plants that is not integrated with its chemical operations, according to people familiar with the plans. At least one potential bidder has already visited the 60,000 barrel-per-day (bpd) plant, according to two people, who spoke on the condition of anonymity. The refinery could fetch $500 million to $700 million, according to a person familiar with refinery valuations.

Exxon said it did not comment on rumors or speculation, adding it "regularly evaluates its global portfolio of businesses and opportunities for growth, restructuring or divestment, in accordance with the company’s overall strategic business objectives." They added that the company "remains committed to conducting business in Montana, as it has for more than 40 years."

Majors, including Chevron Corp and Exxon, have been shedding smaller refineries that are not integrated with their production or chemicals systems. The Billings refinery does not have chemical units, but processes oil into products such as gasoline and diesel. It is one of Exxon's two remaining U.S. refineries that does not have an adjacent chemical facility.

As refining margins have narrowed, plants that do not produce chemicals may have a less predictable profit stream, making them candidates for majors to sell off. Exxon sold its Torrance, California, refinery to PBF Energy last month. Last year, PBF bought the Chalmette, Louisiana refinery from ExxonMobil and Petroleos de Venezuela, which had owned it jointly.

Chemicals can provide another revenue stream when refining margins narrow, according to Jeff Quigley, director of energy markets at Stratas Advisors. "The thinking has always been that integration gives more value chain flexibility," he said. "Gasoline margins won't be doing much for them for awhile because the market is heavily oversupplied," he said. "Refineries integrated with chemical plants can produce very light fuels, known as lighter-ends, to support more profitable petrochemical facilities," he added.

Potential buyers including PBF Energy Inc have visited the plant to review it this summer, according to people familiar with the process. PBF did not reply to telephone calls or emails. The plant could also attract interest from other independent refiners, as well as Canadian oil producers who want additional processing capacity, according to people familiar with refining deals. Exxon does not usually negotiate directly with a single bidder for an asset, but prefers to run an auction process, according to people familiar with past deals.

The refinery is one of the highest quality plants in the Rocky Mountains, with a fluidized coking unit for refining heavy oil, according to people familiar with the region's infrastructure. The plant primarily processes crude either imported from Canada or transported from nearby Wyoming. The proximity to Wyoming's discounted crude makes it particularly desirable, people said. It, along with Chevron Corp's Salt Lake City, Utah, refinery, is viewed as a top asset in the Rocky Mountains, according to Matthew Blair, an equity researcher at Tudor, Pickering, Holt & Co.

"Every inland refiner would be interested," Blair said. "They're small for the majors, but the rate of return on them is going to be good."


(Reporting by Jessica Resnick-Ault; Editing by Alan Crosby)

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