January 29, 2013 [OPIS] - Hess Corporation said on Monday that it will shut its 70,000-b/d Port Reading, N.J., refinery in February due to poor economics and will pursue the sale of its terminal network in the United States.
However, it plans to keep its retail assets in the latest downstream restructuring move.
Hess also announced that it will complete its exit from the refining business by closing its Port Reading refinery.
The terminal network is located along the U.S. East Coast and has a total of 28 million bbl of storage capacity in 19 terminals, 12 of which have deep-water access.
The terminals previously served as the primary outlet for Hess’ share of production from its HOVENSA joint venture refinery, most of which was used to supply Hess’ retail and energy marketing businesses.
With the closure of the HOVENSA refinery in 2012 as well as Hess’ ability to access refined products from third parties to supply these marketing businesses, the terminal system is no longer core to the company’s operations.
The company’s St. Lucia oil storage terminal in the Caribbean with 10 million bbl of capacity will also be included in the package for divestiture.
In addition to the proceeds from the sale of the terminal network, the transaction should also release approximately $1 billion of working capital for redeployment to fund Hess’ future growth opportunities.
Hess will continue its long-term commitment to the Retail and Energy Marketing businesses and take all the necessary steps to ensure supply security, competitive prices and high quality service for its customers.
The Port Reading refinery, which will be closed by the end of February, is comprised solely of a fluid catalytic cracking unit and it primarily manufactures gasoline and components used for blending heating oil.
The refinery incurred losses in two of the past three years.
The financial outlook for the facility is expected to remain challenged due to the requirement for future expenditures to comply with environmental regulations for low-sulfur heating oil and the weak forecast for gasoline refining margins.
“By closing the Port Reading refinery and selling our terminal network, Hess will complete its transformation from an integrated oil and gas company to one that is predominantly an exploration and production company and be able to redeploy substantial additional capital to fund its future growth opportunities,” said John Hess, chairman and CEO.
Hess has retained Goldman, Sachs & Company as its financial advisor for the divestiture of the terminal network.
