LONDON -- In a Tuesday morning call with analysts, BP CEO Bob Dudley said 2011 "is a year of consolidation for BP," a time for the company "to get back on its feet." In the crosshairs for divestment: U.S. downstream assets.
On Tuesday, as reported in a Morgan Keegan/CSP Daily News Flash, BP announced plans to restructure its U.S. refining and marketing business and put two of its five refineries--Texas City, Texas, and Carson, Calif.--up for sale. The Carson refinery, located near Los Angeles, along with its associated integrated marketing business in southern California, Arizona [image-nocss] and Nevada, have all been put on the block.
As part of this, BP plans to sell the ARCO gas station/convenience store brand, although it will keep brand rights in northern California, Oregon and Washington. "BP will lease the name back in the northern California and northwest retail markets," Scott Dean, BP spokesperson, told CSP Daily News.
ARCO, the cash-only, low-price fuel brand, currently has 1,350 branded sites in five states west of the Rockies, also including Arizona and Nevada. BP will hold on to ownership and license of its premium ampm c-store brand.
ARCO-branded ampm stores are currently found in California, Nevada, Oregon, Washington and Arizona. The ampm brand is the national convenience store brand for BP, which spans the West in California, Nevada, Arizona, Oregon and Washington as well the Midwest and East in Illinois, Indiana, Pennsylvania, Ohio, Georgia and Florida. The ampm brand was founded in 1978 in Southern California by ARCO. BP-branded ampm stores are located in Chicago, Indianapolis, Pittsburgh, Orlando, Columbus, Cleveland, Cincinnati and Atlanta.
The Carson refinery, which BP gained as part of its acquisition of ARCO in 2000, has a 265,000 barrels-per-day capacity and supplies one-quarter of gasoline demand in Los Angeles. The refinery's associated assets--BP's interests in a cogeneration plant at the refinery, terminals and also marketing interests--are also up for sale.
BP had acquired the Texas City refinery when it merged with Amoco in 1998. The 475,000-bpd facility is said to be the third largest refinery in the United States, churning out 3% of U.S. gasoline production, the company said.
BP hopes to close the sales by the end of 2012, it said.
"Perhaps the biggest implications over the announced moves will be simply that BP will be the smallest refiner of the traditional super majors, with just under 2 million [bpd] of capacity," said Iain Conn, chief of refining and marketing at BP. "And the proportion of BP's capacity in the U.S. market will fall from 50% of the portfolio today to just over one-third."
In response to an analyst's question whether the poor state of business in California may have encouraged the sale of the Carson refinery, Dudley noted that the assets' maturity and lack of longer-term growth prospects made them attractive divestment targets, in addition to their added complexity because of the their size.
This action would cut its U.S. refining capacity by one-half, leaving it focus on its refineries in Whiting, Ind., and Cherry Point, Wash., as well as a 50% interest in the Toledo, Ohio refinery. "These refineries have greater flexibility to refine a range of crude oils including heavy grades, and on average are more diesel-capable than BP's current portfolio," the company said in a statement. "They are also well-integrated with BP's marketing operations and benefit from advantaged and focused logistics infrastructure."
"I hope you see that BP is a changing company as a result of what happened in 2010; I believe that the changes will be for the better," said Dudley. "We will meet our commitments, we are investing for the future." He singled out greater investment in safety and risk management, emerging economies, exploration, new projects, strategic partnerships and "drivers of long-term value."
"And yet, at the same time, we're not afraid to divest nonstrategic assets, both upstream and downstream, if that's the best path," he said, repeating the company's focus on value before volume. "We believe we can prudently restore a dividend stream to our shareholders. We're a company building on its strengths and addressing its weaknesses. It's a safer BP, an agile BP, a stronger BP--a company that's committed to rebuilding value and trust for long term and doing it well."
London-based BP, with U.S. headquarters in the Chicago area, markets more than 15 billion gallons of gasoline every year to U.S. consumers through more than 10,000 BP and ARCO retail outlets and supplies more than four billion gallons of fuel annually to fleets, industrial users, auto and truck manufacturers, railroads and utilities. BP is the single, global brand formed by the combination of the former British Petroleum, Amoco, Atlantic Richfield (ARCO) and Burmah Castrol. BP is a global producer, manufacturer and marketer of oil, gas, chemicals and renewable energy sources.
(Click here for details on BP's group results for fourth-quarter and full-year 2010.)
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