Arco to Sell Refinery, 576 Gas Stations : Oil Trader’s Firm Will Pay $420 Million for East Coast Assets
Atlantic Richfield said Tuesday that it has agreed to sell its assets in New York and Pennsylvania, including a network of 576 gas stations and a refinery in Philadelphia, to Atlantic Petroleum, a newly formed company controlled by Dutch oil trader John Deuss.
Arco said it would receive $420 million for the sale, which is scheduled to close Aug. 30. Analysts said Arco would probably use the money to finance its $4-billion stock repurchase program. Arco has already bought back $1 billion of its stock on the open market.
This is the third major announcement in less than a week by Los Angeles-based Arco. Three days ago, the company surprised Wall Street with news that its president and chief executive, William F. Kieschnick, would retire in October.
Last Friday, the company said it had agreed to sell 400 East Coast gas stations in eight states to Shell Oil, a unit of Royal Dutch-Shell. The price wasn’t disclosed. The only East Coast assets left for sale are 150 gas stations in Chicago and some terminals scattered through the Eastern states.
Part of Reorganization
Deuss’ company will sell gasoline under the Atlantic trademark, which was used in the East by Arco’s predecessor, Atlantic Refining, for 70 years. Arco was formed by the merger of Atlantic and Richfield Oil of Los Angeles in 1966.
The sale of Arco’s East Coast assets was a major part of the company’s reorganization, the largest ever undertaken by an oil company. Two months ago, Arco said that it was discontinuing its barely profitable East Coast marketing and refining so that it could concentrate on the West Coast. Arco also said it plans to cut back on oil exploration and reduce its work force by 5,000. It also said it will take a $1.2-billion charge against earnings to cover the cost of discontinuing the operations.
Deuss, 42, is owner of Transworld Ltd., a large Bermuda-based oil trading company. He also owns a related business, TW Oil Houston, an oil trading company based in Houston. A spokesman for Deuss in Philadelphia said Transworld trades more than 1 million barrels of crude a day and is also one of the largest traders of jet fuels. The spokesman said he didn’t know if Atlantic Petroleum was Deuss’ first venture into gasoline refining and marketing in this country.
Arco said its 130,000-barrel-a-day refinery would be able to supply all of Deuss’ gas stations. Deuss also acquired 27 terminals and a pipeline system in New York and Pennsylvania. In a statement, a spokesman for Deuss said that he will offer supply contracts to Arco’s wholesalers, dealers and industrial customers. Deuss will also offer jobs to “a number” of current Arco employees, the spokesman said.
Joel D. Fischer, an oil analyst with Drexel Burnham Lambert in New York, called the sale price “plausible.” He speculated that “an important part of the value is the inventory of gasoline” and that the stations themselves were worth relatively little.
He said the most remarkable thing about the sale was its speed. Several companies have been trying to sell unwanted refineries for years, but Arco was able to sell its facility in two months, he said.
In a statement, Arco Chairman Robert O. Anderson said the Shell and Transworld transactions, if completed, wouldn’t significantly affect earnings this year.