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Williams to sell Memphis refinery to Premcor for $465 million Analyst says since other Alaska refinery is smaller, company probably won’t be able to get $1 billion it wanted for refineries assets Clayton Bellamy Associated Press Business Writer
Williams Cos., which is selling assets to improve its finances, has agreed to sell its Tennessee refinery and petroleum inventories to Premcor Inc. for about $465 million cash, the companies said Nov. 26.
Oil refiner Premcor will pay Williams $315 million for the Memphis refinery and related assets at closing and will buy petroleum inventories worth today about $150 million, the companies said.
The deal comes after another downgrade Nov. 22 of Williams’ roughly $12 billion debt further underlined the importance of cash-generating asset sales for the Tulsa-based energy company.
“Selling our Memphis refinery represents another critical step in our ongoing restructuring,” said Steve Malcolm, Williams chairman, president and chief executive officer. “This is an example of how intently focused we are on reducing debt and improving our liquidity.”
Sale expected to close March 31 The Memphis refinery, which employs about 375 workers, includes three petroleum terminals, supporting pipeline infrastructure and crude oil tankage in St. James, La., Williams said. It has capacity of 190,000 barrels per day, but typically process about 170,000, Premcor said.
The sale, expected to close March 31 after regulatory approval and Premcor completes financing, could also bring Williams another $75 million over the next seven years depending on refining margins, Williams said.
Williams also said it expects to take a pretax loss of $30 million to $35 million in the fourth quarter because of the sale.
Williams has been selling assets to raise cash and reduce debt as it tries to recover from a bust in its once-profitable energy trading business, which has been losing money since Enron Corp. collapsed.
Credit agencies have downgraded Williams’ credit to below investment grade and the company, the nation’s second largest pipeline concern, is refocusing on finding, producing, processing and transporting natural gas.
Spokesman Kelly Swan said the company has sold or agreed to sell just more than $5 billion, or about 13 percent, of its assets this year. The company is still trying to unload its North Pole refinery and all or part of its energy trading unit, for which it is also seeking a partner.
Price called disappointing Williams said in June it hoped to fetch more than $1 billion for the refineries, but the Memphis price casts doubt on Williams’ ability to get that much. The Alaska refinery processes only about 70,000 barrels per day.
“This is a disappointing price, but not surprising when a company that needs cash fast runs into a lukewarm market,” said Tulsa money manager Fred Russell, whose firm sold its 198,000 Williams shares this summer. “If the price is indicative of what might happen in Alaska, it’s not the best news for Williams shareholders.”
Moody’s Investors Service cut Williams’ credit rating deeper below investment grade Nov. 22 with a negative outlook, saying the company couldn’t raise enough cash to meet its debt payments without asset sales.
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