Consolidation continues apace in the U.S. refining/marketing sector.
Tesoro Petroleum Corp., San Antonio, has agreed to pay $275 million to acquire BHP Petroleum Americas Refining Inc. and related operating assets in Hawaii. A unit of Broken Hill Pty. Co. Ltd., Melbourne, the Hawaiian operations include a 95,000 b/d crude oil refinery about 20 miles west of Honolulu and 32 retail gasoline stations on the islands of Oahu, Maui, and Hawaii.
In addition, Tesoro and BHP will enter into a 2-year supply agreement to provide crude oil feedstock for the refinery. Tesoro recently expanded its contract to buy royalty crude from Alaska, where it operates a 72,000 b/d refinery at Kenai. Tesoro also owns marketing operations in the U.S. Pacific Northwest.
Bruce A. Smith, Tesoro's chairman, said, "We believe the combined assets of Hawaii, Alaska, and the Pacific Northwest will create new shareholder value, since the transaction is meaningfully accretive to earnings. This is a first step, and we will continue to pursue other opportunities that are operationally and geographically complementary with our new asset base."
Tesoro expects to save $10 million/year in costs as a result of having two refineries in markets with similar product requirements. BHP's Hawaiian refining and marketing operation generated about $45-50 million/year in cash flow from operations during the last 4 years. The transaction is expected to close in May.
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