The oldest refinery on the US East Coast will not be closing in August. The refinery’s owner, Sunoco Inc. (NYSE: SUN) today announced that it would form a joint venture with The Carlyle Group (NASDAQ: CG) to keep the 330,000 barrel/day Philadelphia refinery in operation and save 850 existing jobs.
In a deal similar to the one struck by Delta Air Lines Inc. (NYSE: DAL) for the ConocoPhillips (NYSE: COP) refinery near Trainor, Pennsylvania, Sunoco will contribute the refinery assets to the joint venture and Carlyle will invest funds for future capital projects, working capital, and further refinery upgrades. JPMorgan Chase & Co. (NYSE: JPM), in a role similar to the role it played in the Delta/Conoco deal, will provide interim working capital to the joint venture, which is to be called Philadelphia Energy Solutions. Sunoco will own a minority interest in the refinery and Carlyle will be the majority owner. Financial details were not disclosed.
Refiners have faced hard times lately with high prices for crude oil cutting margins severely. Falling crude prices should help some, but refiners like Valero Energy Corp. (NYSE: VLO), Marathon Petroleum Corp. (NYSE: MPC), Tesoro Corp. (NYSE: TSO), and HollyFrontier Corp. (NYSE: HFC) have seen margins tumble and share prices have only begun to recover from late-2011 lows. Phillips 66 (NYSE: PSX), a recent spin-off from Conoco, has risen about 5% since its IPO, and Western Refining Inc. (NYSE: WNR) is up about 21% in the past 12 months based on its access to lower-priced domestic crude.
Sunoco, which is being acquired by Energy Transfer Partners LP (NYSE: ETP), had retained ownership of its refining operations, which it planned to divest separately. The company closed its Marcus Hook refinery in December after failing to find a buyer for the plant.
The new joint venture plans to upgrade the refinery’s catalytic cracking unit, creating more than 1,000 construction jobs, build a new high-speed rail unloading facility to boost quantities of crude from the Bakken shale play in North Dakota, and to build a new hydrocracker and hydrogen plant. The company is also seeking ways of taking advantage of the booming natural gas and natural gas liquids production in the Marcellus shale play.
The transaction is expected to close in the third quarter.
Sunoco’s shares are up about 0.7%, while Carlyle Group stock is up more than 2% at $22.90 after posting a new post-IPO high of $23.00.
Paul Ausick
The Average American Has No Idea How Much Money You Can Make Today (Sponsor)
The last few years made people forget how much banks and CD’s can pay. Meanwhile, interest rates have spiked and many can afford to pay you much more, but most are keeping yields low and hoping you won’t notice.
But there is good news. To win qualified customers, some accounts are paying almost 10x the national average! That’s an incredible way to keep your money safe and earn more at the same time. Our top pick for high yield savings accounts includes other benefits as well. You can earn up to 3.80% with a Checking & Savings Account today Sign up and get up to $300 with direct deposit. No account fees. FDIC Insured.
Click here to see how much more you could be earning on your savings today. It takes just a few minutes to open an account to make your money work for you.
Our top pick for high yield savings accounts includes other benefits as well. You can earn up to 4.00% with a Checking & Savings Account from Sofi. Sign up and get up to $300 with direct deposit. No account fees. FDIC Insured.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
Our expert who first called NVIDIA in 2009 is predicting 2025 will see a historic AI breakthrough.
You can follow him investing $500,000 of his own money on our top AI stocks for free.