Marathon will fund the acquisition from cash on hand and expects the deal to close early next year. BP had identified the refinery as one of the assets it planned to sell as it beefed up its cash position.
In 2005, the Texas City refinery suffered an explosion that killed 15 workers and cost BP $21 million in fines for safety violations, another $63 million for failing to correct some of the original safety violations, and more than $2 billion in compensation to families of dead and injured workers. BP also spent another $1.5 billion on safety enhancements and other improvements at the Texas City plant.
Marathon expects the Texas City plant, the third largest in the United States, to be immediately accretive to revenues. The acquisition includes an electricity co-generation plant at the refinery, three intrastate natural gas liquids pipelines, shipper contracts for 50,000 barrels a day on the Colonial pipeline and three light product terminals in the southeastern U.S.
Crude prices, which have been falling faster than gasoline pump prices, have made the past quarter or so a good time to be a refiner. But the refining business is extremely cyclical and can swing wildly on relatively small movements in crude prices.
Today, though, Marathon looks to have gotten a bargain. Building a refiner of the size and complexity of Texas City would likely cost four times what Marathon paid today.
Shares of Marathon are up 8.3% in the first half hour of trading today, at $59.40, a new 52-week high. The prior 52-week range was $30.24 to $58.27.
Paul Ausick
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