Chevron Corp. (NYSE: CVX) has signed an agreement to sell its Hawaii refinery to private equity firm One Rock Capital Partners, ending a more-than six year quest to sell an asset not considered core to its business.
Terms of the deal were not disclosed, but industry estimates ahead of the sale pegged its value between $75 million and $300 million.
The 58,000 barrel per day (bbl/d) refinery primarily supplies jet fuel to the U.S. military and airlines serving the Hawaiian islands. The deal, which is expected to close by December, also includes 58 gasoline stations spread throughout the archipelago and four storage terminals.
While both sides declined to disclose the price, in 2013 Tesoro Corp. (NYSE: TSO) sold Hawaii's only other refinery to Par Petroleum Inc. (NYSE: PARR). That $325 million deal included the plant, nearly double the Chevron refinery's size at 94,000 bbl/d, and a network of retail gasoline stations.
Hawaii's gasoline customers, living in one of the most-remote parts of the globe, usually pay the highest per-gallon price for gasoline, largely due to cost to transport crude to the islands.
One Rock said in a press release it has a "strategic relationship" with Mitsubishi Corp, which holds stakes in Gulf of Mexico oil wells and is involved in crude trading.
David Hackett, president of Stillwater Associates, an Irvine, Calif.-based consultancy that advised One Rock in the acquisition, said Mitusbishi would play a support role.
"Mitsubishi is an investor in One Rock," Hackett said. "They trade oil. They got a refinery. They're providing support to One Rock on this. They're not running it."
The acquisition of Chevron's downstream assets will mark the first oil refining company in One Rock Capital's portfolio, which includes a holding company for landscape service providers, and companies that manufacturer food, chemicals and urinalysis supplies.
"[One Rock's] plans are to run it," Hackett said. "They've got a track record of fixing up underappreciated businesses."
The sale comes as Chevron plans to slash spending by nearly 40% for each of the next two years as it focuses more on LNG and shale oil projects around the world and also aims to preserve cash for its 90-year-old dividend.
Chevron employs about 300 people in Hawaii at the refinery and product distribution terminals. One Rock said it will offer all current employees a job.
Chevron had worked with Deutsche Bank on the sale. Chevron CEO John Watson told Wall Street in March 2015 that there was "quite a bit of interest" in refinery assets.
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