Exxon Mobil Corporation (NYSE: XOM) is reportedly planning to sell its interest in the Montana refinery as the depressed global commodity market has adversely affected its financial position. The plan of the energy company to sell its interest in the mentioned refinery is currently in its early stages and a deal has not yet been reached. Analysts anticipate the asset sale to produce approximately $500 million to $700 million for Exxon Mobil.
The Montana refinery only produces gasoline products and diesel, and is one of the energy firm’s plants that is not integrated with its chemical business.
During the past few months, refinery margins have slumped. With this, the plants that only generate diesel and gasoline, and do not have any chemical units are the primary targets for energy giants to sell-off as these refineries have low profit margins.
Additionally, the Montana refinery can be considered as one of the assets with the highest quality in the area. The mentioned refinery processes crude oil from Canada or Wyoming into gasoline products. As the Wyoming oil and gas fields are near the refinery, the Montana plant is regarded as “particularly desirable.”
As downbeat prices of crude oil and gas have lowered the value of energy assets, a number of firms are taking advantage of the opportunity to purchase new assets. While several energy companies are shedding their assets, those that can afford it are acquiring smaller firms in order to survive the downturn.
According to reliable sources, potential buyers such as PBF Energy visited the refinery in the summer of 2016 in order to review the plant’s operations. Just recently, the independent refiner acquired the Torrance refinery of Exxon. Last year, the company also acquired a stake in the Louisiana refinery from Exxon Mobil and Petroleos de Venezuela.
The sources anticipate that other independent oil and gas refiners will also be interested in the Montana refinery. Furthermore, they also think that energy firms in Canada, which are seeking to expand can also show their interest in the plant.
Exxon stated that it will resume its Montana refinery operations as it has been since the past 40 years.
During the past couple of months, energy corporations such as Exxon Mobil, Royal Dutch Shell, and Chevron have begun to divest assets in their downstream assets. Refinery margins stay low, even with a slight rebound in the prices of crude oil. Yet, this has not dissuaded firms from acquiring assets in the mentioned division. In addition, it is challenging for energy companies to sell their interest in the oil and gas exploration and production segment, in comparison to the refining and marketing division.
Energy corporations are feeling the heat as their revenues took a blow from the prolonged decline in the commodity market. Having said that, reducing costs and asset divestment have become crucial for energy firms to survive the downturn. As the prices of crude oil is not likely to rebound to the levels seen during the middle of 2014 anytime soon, we can anticipate oil giants to shed more downstream assets.