Chevron Corporation (NYSE: CVX) recently announced that it is planning to make asset sales in Hawaii to Island Energy Services, which is a subsidiary of One Rock Capital Partners LP. The financial terms of this deal have not yet been revealed.
If the company obtains regulatory approval, the deal might not be accomplished during the final 6 months of 2016. After the sale, all of the stations of Chevron will be rebranded as Texaco stations. The equity firm stated that it “plans to build on the successful and solid foundation that Chevron has developed over the years and will work to create a stand-alone business, focused solely on Hawaii.”
Based on Chevron’s statement, the possible sale would include the Kapolei refinery, which has the capacity to generate 58,000 barrels per day, supplying fuels for jets primarily for the US military and airlines that travel to the Hawaiian islands. In addition, One Rock Capital would hold the ownership of 58 retail service stations, as well as a network of distribution terminals in Kauai, Oahu, Hawaii Island, and Maui.
The news of the asset sale comes in the wake of depressed crude prices. The crisis in the oil market, which has adversely affected the global scenario since the month of June in 2014, took a significant detrimental toll on firms in the oil and gas segment. The prices of oil were floating close to the $60 about a year ago, reaching a high of $115 per barrel in the middle of 2014.
There are approximately 300 workers assigned by the oil giant to work across Hawaii. It is still not clear if all these workers would still be employed after Chevron’s asset divestments. Yet, clients would still have access to their Chevron credit card. The present Safeway-Chevron loyalty program will be changed into Safeway-Texaco loyalty program after the sale of the assets.
The energy giant has collaborated with Deutsche Bank with regards to the sales of the Hawaiian assets. The CEO of Chevron Corporation Mr. John Watson indicated its interest in the refinery assets in March 015. After the possible sales, the oil major’s stations would resume its operations as normal. On the assets wherein construction is already ongoing, such as the Hokulei Village on Kauai, would resume according to plan.
The two parties did not give any comments regarding the value of the deal. However, based on the estimates of industry experts, this potential deal would come in within the range of $75 million and $300 million. This development is not the first time that a refinery in the state is being divested. Approximately 3 years ago, another Hawaiian refinery which is owned by Tesoro was sold at about $325 million. This refinery included a number of gasoline stations, and a plant that has a capacity to generate an output of 94,000 barrels per day.
Hawaiian gasoline customers pay considerably high prices for gasoline. The reason behind this is that the transportation expenses to supply oil for processing in the refinery are soaring, since Hawaii is a remote location.