The talks, described by the company earlier in November as “very advanced,” are important to Western’s plan to sell the terminal and its 5 million bbl of storage capacity. “Getting these customers committed will bring value to any buyer,” Stevens told attendees of the Bank of America Merrill Lynch 2010 Credit Conference. “To get the full value of the asset, we need to get customers to sign up.”
Western’s idea of the “right value” for the terminal in any discussion of its sale is at the level of a master limited partnership (MLP). “This asset as a stand-alone has the value of an MLP, so we’re looking for a 9-11 multiple,” Stevens said.
He touted the terminal as “a very unique asset,” which, when Western announced its plans for terminal conversion, piqued the interest of more than 50 parties. The location has no direct competition from pipeline markets, can receive products both from the water and via pipeline and has access to one million bbl of leased storage in addition to its own 5 million bbl of capacity.
Western is spending $5 million to link the terminal to the Colonial Pipeline.
Stevens didn’t talk about the timing of a sale on Thursday but closely associated the sale of the terminal with Western’s attempts to pay down its debt in the next two years. In an early November conference call with Wall Street analysts he said only that a sale was unlikely in the fourth quarter of this year.
Western is currently operating the terminal and marketing refined products locally after completing the shutdown of the 70,000-b/d refinery on site in early September. Asked whether any longterm terminalling agreements or sale of the terminal would affect an eventual restart of the refinery, Stevens reiterated his position that the company would preserve the option of resuming refining operations in any of its terminal deals.
The company is interested in identifying and pursuing assets in the Southwest that would complement its refining and marketing operations in West Texas, New Mexico and Arizona (including refineries), but acting on any finds would have to follow its deleveraging program. “We need to take care of our balance sheet in the next two years,” Stevens said.