Unocal Corp. could double the yearly pretax cash flow from its U.S. West Coast downstream operations by 1997, says Lawrence M. Higby, president of Unocal's 76 Products Co.
Higby told New York security analysts pretax cash flow from 76 Products operations could increase to $270-330 million/year by 1997, up from $150 million in 1994.
The advance could result from more efficient refining operations, increased light product yield, increased retail sales, and new marketing format initiatives, Higby said. Increased margins for reformulated gasoline (RFG) sold under California Air Resources Board (CARB) rules could further bolster cash flow.
With a cost cutting program in place since 1993, 76 Products has reduced refining unit costs 40/bbl through improved maintenance and procurement programs and lower energy consumption.
The company reduced the cost of its accounting, information services, and credit card functions $15 million/year. Overall, about 450 jobs have been eliminated. Cost reductions will continue during the next 2 years.
"With CARB REG capital expenditures almost completed, our total refining capital requirements will be down significantly-from more than $300 million in 1995 to an estimated $80 million next year," Higby said.
"Going forward, the focus for our refining operations will be on low capital, high return projects that will further enhance light product yields, reduce operating expenses, and improve operational efficiency."
RETAIL MARKETING
76 Products' retail marketing strategy focuses on boosting operating margins and return on assets. The reorganized unit aims to achieve top performance from dealers with a target of raising the average throughput of its stations by 20% from the current 97,000 gal/month.
Through 1997, marketing outlays will focus on upgrading 300 sites and completing 210 station reformats.
"We plan to spend more than $250 million for marketing projects over 3 years," Higby said. "This includes $190 million for new formats-FastBreak convenience stores, 76 CarCare preventive auto maintenance, and ProWash car washes-as well as pump island modifications."
To enhance its market position in Arizona and Nevada, 76 Products and Circle K Corp. signed a preliminary branding/licensing agreement for more than 400 Circle K sites in the Phoenix and Tucson markets.
76 Products also will brand and supply 20 current Circle K sites in the Las Vegas market. And 76 Products and Circle K will form a joint venture that will codevelop eight additional service station/convenience store sites in the Las Vegas area.
Copyright 1995 Oil & Gas Journal. All Rights Reserved.
