BP Sheds More Keystone State Sites

Details on EZ Energy's purchase of 15 stations, 5 contracts from BP in Pa.

Greg Lindenberg, Editor, CSP

PETERSBURG, Pa. -- EZ Energy Ltd. subsidiary EZ Energy USA Inc. is buying 15 gas stations and convenience stores and five fuel supply contracts from BP Products North America Inc. for $3.2 million, according to a report by Globes Online cited by a CSP Daily News Flash yesterday and confirmed by BP. The properties are BP's last stations in the area of Petersburg in central Pennsylvania. If the transaction is closed, EZ Energy will own 50 stations and c-stores in Pennsylvania and Ohio, with an estimated annual revenue of more than $350 million.

Ramat Gan, Israel-based EZ Energy said that [image-nocss] fuel deliveries by the acquired properties totaled 33.1 million gallons in 2007, and that the convenience stores' aggregate revenue was $6.3 million.

The five fuel supply contracts cover 37 gas stations in the area for a 20-year period. As a jobber, EZ Energy will deliver more than 72 million gallons of fuel a year, worth an estimated $280 million annually.

Mansfield, Ohio-based EZ Energy USA has also signed an memorandum of understanding (MOU) for the sale of up to five gas stations and c-stores to a real-estate investment trust (REIT) for $7 million, which EZ Energy will lease back for 15 years at $630,000 rent a year, giving a return on investment of 9%, said the report. The return on investment is normal for sale and leaseback deals of this kind last year, the report added. The company did not disclose the name of the REIT.

EZ Energy's board also approved a deal to sell the rights to four gas stations and convenience stores in Petersburg to chairman Eli Zahavi for $5 million. The company will lease back these properties for 20 years at $453,000 annual rent, giving a return on investment of 9%t. The company's shareholders must approve this parties at interest deal.

"EZ Energy is implementing its strategic plan, while simultaneously continuing to acquire gas stations and convenience stores in quality locations. We are also selling the gas stations real estate in our possession in order to implement our business model for financing the company's future expansion," Zahavi told Globes.

BP's U.S. Convenience Retail unit announced in March that 146 retail sites are for sale in the Columbus, Cleveland and Pittsburgh metropolitan areas. The offering is part of a plan announced by BP in November 2007 to sell its approximately 700 company-owned and -operated retail sites over a two-year period. BP is marketing these sites predominately as franchise-operated sites, both dealer- and jobber-owned. It will also market some sites as dealer and jobber fuel-only sites. This approach is in line with BP's strategic plans to expand and grow the ampm brand to reach more consumers with its products and services.

This new EZ Energy deal "reflects our strategy of converting company-owned sites to jobber-supplied am/pm franchises," BP spokesperson Scott Dean told CSP Daily News.

In 2007, EZ Energy 's deal to purchase Harper Oil Co. and its 26 On the Ways stores in Springfield, Ill., fell through for unspecified reasons. Zahavi said at the time the company was still very intent on carving a c-store network here in the United States. "We do believe in the long-term viability of the U.S. market,” he said then. “We can give added value specifically by picking above-average locations that would be here even in times of recession."

EZ Energy acquired 14 c-stores from BP in the Atlanta market in November 2007.

BP markets more than 15 billion gallons of gasoline every year to U.S. consumers through 13,000 retail outlets. The company is the single, global brand formed by the combination of the former British Petroleum, Amoco, Atlantic Richfield (ARCO) and Burmah Castrol. The ampm brand was founded in 1978 in Southern California by ARCO. The brand became part of BP when it acquired ARCO in 2000.