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Multiple buyers look at Williams refinery Company says sale of $500 million Alaska assets likely by end of year Allen Baker Petroleum News Contributing Writer
Williams Cos. now has multiple buyers looking at its North Pole refinery, which has been on the market since last June along with the company’s other Alaska assets.
“At this time, there is more than one potential buyer,” said Jeff Cook, Williams Alaska’s vice president for external affairs. Arctic Slope Regional Corp., owner of the Petro-Star refinery next door to Williams as well as another small operation in Valdez, has been rumored as a potential buyer. Cook wouldn’t confirm that Arctic Slope was one of the bidders, and he didn’t indicate just how many companies were showing serious interest. Royalty deal a complication The sale process has complicated negotiations with the state over Williams’ contracts for buying royalty oil; an issue that could be important for a potential buyer looking for a dependable supply of crude.
“There’s some legitimate concern by the administration that if there’s going to be a new owner, they should be part of the negotiations,” Cook said. “If we don’t get a buyer soon, we’ll have to go ahead” on the negotiations for a royalty oil contract. Williams wants to buy about 70,000 barrels of state oil a day.
“It just happened that all of our contracts expire at the end of 2003,” Cook said.
The state has to give North Slope producers six months advance notice of how much of its royalty oil it wants as oil and how much as cash, so the matter probably has to be resolved by the end of June.
Cook said the Murkowski administration is cooperating with Williams and the lease issue has not been a stumbling block for the sale process.
“Williams had some other assets that were more pressing to sell and got busy with that,” he said. As for the timing of the Alaska refinery sale, “the best the company is saying now is by the end of the year.” Other sales providing needed cash For now, other sales are providing the cash Williams has needed to repay loans coming due this year and even to buy back some preferred stock. The company said assets sales expected to close in May and June will yield about $2 billion to help pay down Williams’ long-term debt, which stood at $10.5 billion at the end of the first quarter.
Estimates of the value of the Alaska assets are in the $500 million range.
In addition to the refinery, Williams has a tank farm in Anchorage and a network of convenience stores in the state. A part ownership in an air cargo venture at the Anchorage airport is likely to go to Williams’ partner there.
The company may be fortunate that the sale didn’t go through earlier, when refineries were going through a period of squeezed margins. Alaska shows profit For much of last year, refining operations at major oil companies were showing losses. Independent refiners such as Williams’ major Alaska competitor, Tesoro, were showing major amounts of red ink. But the market turned in the first quarter, which was quite profitable for the Williams operations in Alaska.
Williams’ petroleum services unit, which now consists of the Alaska operations and the company’s interest in a couple of liquids pipelines, showed a profit of $22.1 million for the quarter. That was nearly even with the $22.6 million earned in the same quarter a year ago despite an $8 million impairment charge the company took to write down the value of the Alaska properties.
And jet fuel sales at the Anchorage airport continue to be strong, despite the downturn in the world economy and the concerns about SARS in Asia. That’s good news for Williams, which has about 60 percent of that market.
“Last year was a record year for sales and production,” Cook said. Jet fuel sales in Anchorage grew 12 percent overall and Williams’ sales there grew 9 percent, he said.
In 2002, Cook said, the Anchorage airport went through 51,967 barrels of jet fuel each day, or nearly 2.2 million gallons.
That was up from 46,254 barrels a day in 2001. A strike that idled West Coast seaports provided a little spurt last fall.
But even after that strike was settled and on into this year, he said, jet fuel sales have been holding up.
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