Small refinery could be sold
Kern Oil & Refining Co., which owns California’s smallest gasoline-making refinery, is putting the plant up for sale, according to an industry report Friday. A change of ownership could benefit consumers by opening the way for facility upgrades and more production, experts said.
Amid what has been a multiyear boom for refinery profits and acquisitions, both in California and nationwide, the privately owned Bakersfield company has hired an investment banking firm to entertain offers, said the Oil Price Information Service, citing unnamed sources.
If sold, the small inland refinery would represent the latest in a string of deals that have shuffled the ownership mix in California. In each of the last few sales, new owners have embarked on major upgrades to improve reliability or boost gasoline and diesel production.
No new refineries have been built in California in several decades. With the state’s 13 fuel-making refineries unable to keep up with demand, and supplies so tight, even the smallest refineries have become crucial players.
“It’s a sellers’ market these days,” said Gregg Haggquist, an industry consultant based in Los Angeles. He thinks smaller refiners such as Alon USA Energy Inc., Flying J. Inc. and Astra Oil are possible buyers for Kern Oil’s facility, but added, “These days there’s always a wild card out there because there’s so much money from private equity chasing assets.”
Since California has for several years been the nation’s most lucrative refining market, experts say any buyer is likely to invest in equipment that would boost fuel output.
Officials at Kern Oil either did not return phone calls or declined to discuss the company or to identify its owners. Several Bakersfield sources said they believed Larry D. Delpit Sr. was the owner or majority owner, but Delpit did not return a message seeking comment. Kern Oil’s state incorporation papers do not name the owner, but Larry Delpit Jr. is listed as a director, along with President Jacob Belin Jr. and Chief Financial Officer Steven Christovich.
The Kern Oil refinery, built in 1934, can process an estimated 25,000 barrels of crude oil a day and can produce about 295,000 gallons each of gasoline and diesel. It has 110 employees.
Profit figures are not readily available for any of California’s refineries, but consultant Muse Stancil & Co. publishes estimates. Their figures show that West Coast refiners enjoyed average profits of 74 cents a gallon in May, compared with an average of 28 cents in 2004. The higher profits have helped push up prices for refineries.
The largest of the recent California deals came earlier this year, when San Antonio-based Tesoro Corp. purchased Shell Oil Co.’s Wilmington refinery as part of a $1.76-billion sale that also included a Shell distribution terminal, petroleum inventories and 278 Shell gas stations in Southern California.
Two other small refineries -- Edgington Oil Co. of Long Beach and Paramount Petroleum Corp. -- were purchased late last year by Alon for $52 million and $407 million in cash and debt, respectively.
In March 2005, Shell sold its Bakersfield refinery to truck-stop operator Flying J for an estimated $130 million. Shell, which planned to shut down the plant rather than offer it for sale, agreed to sell it to the Ogden, Utah-based company after the state attorney general threatened to intervene on behalf of California motorists.
