British Petroleum has finally found a buyer for its largest but troubled Texas City refinery and agreed to sell it to Marathon Petroleum Corp for $2.5 billion.
The refinery was the site of a 2005 explosion, one of the worst industrial accidents in the US history. The blast killed 15 workers and injured 180. It cost BP more than $3 billion to settle lawsuits and pay fines.
With this agreement to sell the refinery, the total value of the divestments that BP has agreed since the beginning of 2010 is now over $35 billion. BP expects this total to reach $38 billion by the end of 2013.
Following this strategic buyout, Marathon Petroleum will be the fourth largest US refiner and the deal will give it a potential slice of the market for refined product exports.
Marathon will pay $598 million for the refinery and other nearby pipelines and fuel terminals, plus $ 1.2 billion for the inventory of oil and petroleum products owned by the plant.
It may have to pay another $700 million over 6 years if certain unspecified conditions are met, Marathon said.
Ohio-based Marathon has agreed to buy the 451,000-barrels -per-day refinery, the fifth-largest in the country, as well as the plant's inventory, three intrastate natural gas liquids pipelines, four terminals and other assets.
The Texas City refinery processes 451,000 barrels of oil per day.
The news sent shares in Marathon to a record high of $60.04 on the New York Stock Exchange.
Since the stock began trading in June 2011, it has risen nearly 50%.
"The multiple is cheap, that's why the shares of Marathon are up," said Pavel Molchanov, an analyst with Raymond James.
"Texas City has a rather complicated history and that alone has made the valuation of this deal lower than it would have been otherwise."
This sale will reduce BP's presence in the Southeast US.
"However, BP remains firmly committed to growing and strengthening our BP-branded retail network and the value of the BP brand east of the Rockies in partnership with BP-branded jobbers and dealers," said Doug Sparkman, president of BP's East of Rockies fuels business.
It continues to invest heavily in its three northern US refineries.
The company is in the midst of a multi-billion dollar modernisation effort at its Whiting Refinery in Northwest Indiana.
