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By Jessica Resnick-Ault and Laura Sanicola
NEW YORK, Jan 10 (Reuters) - From coast to coast, U.S.
refineries are available for the taking, but nobody is buying.
With the news that Royal Dutch Shell Plc is looking
to unload its Anacortes, Washington, facility, there are seven
different U.S. refineries on the block now, accounting for about
5% of U.S. crude oil processing capacity, according to data
compiled by Reuters.
U.S. energy production is at an all-time record, but there
are concerns that refineries that don't attract buyers could
suffer from lack of investment and maintenance that could lead
to accidents down the road.
These properties, from Washington state to Pennsylvania, are
having trouble finding bidders because of unfavorable locales,
worries about falling margins, and the coming restart of nearby
facilities in the Caribbean that will add to competition,
bankers and analysts said.
Just one U.S. refinery transaction closed last year: Chevron
Corp's purchase of a Houston-area plant from Petrobras.
Prior to that, a flurry of corporate mergers saw independent
refiners Alon, Western and Tesoro acquired by rivals. The
consolidation left some acquirers, like Marathon Petroleum, with
limited appetite or ability to consolidate the sector further.
“When some of your really big companies have stopped buying
refineries, that really slows things down,” said Matthew Blair,
head of refiners equity research at Tudor Pickering Holt & Co.
In addition, new international shipping fuel regulations,
known as IMO 2020, and the U.S. renewable fuels standard that
requires refineries to blend biofuels into their gasoline pool,
have proved a deterrent, as both are seen as potentially
detrimental for refining margins.
Last week, Exxon Mobil Corp said fourth-quarter
results would decline from the year-earlier period, citing weak
margins in refining and chemicals.
"Refiners don’t want to get overleveraged if they're on the
downside of the cycle where margins are eroding," said Matt
Flanagan, downstream energy practice partner at Opportune, based
in Houston.
PBF Energy Inc announced plans to buy a San
Francisco-area refinery from Shell in June, but that transaction
has still not closed as expected. The company was not
immediately available to comment.
CVR Energy Inc, which operates two refineries, said
in an October conference call that it failed to find a buyer for
the company due to valuation disagreements.
Valuations for refineries vary greatly - Blair suggests
Shell's Anacortes refinery could fetch $500 million to $800
million, putting it significantly below the $1 billion price tag
for the Martinez refinery.
East Coast assets have proven particularly tough to unload,
as they lack both the scale of U.S. Gulf facilities and access
to U.S. crude production. They also face competition from two
shuttered Caribbean plants due to restart in coming months that
have easier access to overseas crude and more flexible fuel
distribution systems.
Philadelphia Energy Solutions put its 335,000-bpd refinery
up for sale as part of a bankruptcy proceeding, and is expected
to review bids in an auction next week. However, only one bidder
has said it plans to revive refinery operations at the site,
which shut last year after a fire.
Delta Airlines retained bankers to help sell its
Trainer, Pennsylvania refinery almost a year ago, but has not
found a buyer.
Exxon Mobil's Billings, Montana, refinery, which has access
to local crude and logistics systems, may not sell if a buyer is
unwilling to pay a premium for the plant, people familiar with
the process said.
Beyond market risk, potential buyers must contend with
environmental risk due to liability, and the possibility of
high-profile disasters like last year’s blaze at Philadelphia
Energy Solutions.
"Refiners don't want to overpay for an asset with
environmental liabilities that might require unknown capital
expenditure to meet future requirements," Flanagan said.
(Reporting by Jessica Resnick-Ault and Laura Sanicola; Editing
by Lisa Shumaker and Nick Macfie)
