Tuesday, April 26, 2005

Valero Acquisition may make firm North America's largest oil refiner

Article Published: Tuesday, April 26, 2005
Valero becomes oil player

Acquisition may make firm North America's largest oil refiner

By GREG MOBERLY, Times-Herald staff writer

BENICIA - Valero Energy Corp. announced Monday that it plans to acquire Connecticut-based Premcor Inc. in an $8 billion transaction, making the Texas-based company North America's largest oil refiner.

Once completed, the deal could be beneficial to motorists paying high prices at the pump, said Valero Energy Corp. President Greg King. But prices are more driven by the price of crude oil, he added.

In announcing merger terms, King said Valero intends to keep all four Premcor refineries, make improvements adding refining capacity and potentially increase the number of refinery employees.

"That's our history," King said.

Valero bought the Benicia refinery from Exxon in 2000, and grew its operation a few years ago when it bought Ultramar Diamond Shamrock.

King said Valero has increased its operations by 380,000 barrels per day since 1997.
The Premcor merger means Valero will have 19 refineries in North America, including refineries in Canada and the Caribbean.

Valero's total refining capacity will be beefed up to 3.3 million barrels per day.
"Size means something in our business," King said. He said the pending Premcor deal will allow Valero to enter the Midwest refining market.

Premcor's refineries are in Port Arthur, Texas, Delaware City, Del., Memphis, Tenn. and Lima, Ohio.

Investors seem agreeable to the pending merger.

Both Valero and Premcor stocks, traded on the New York Stock Exchange, closed for the day with Premcor posting a $10.70 gain, ending the day at $69.70 a share.

Premcor is a "like-minded company" in its interest in taking in cheaper sour crude oil, King said. Valero and Premcor have refineries capable of processing the heavier, cheaper crude, he said.
The Federal Trade Commission must first approve the deal.

Both companies hope to complete the transaction by the end of the year. No changes will be made to Valero's senior management, according to a Valero press release.
A Premcor official did not return a call for comment.

The pending deal would put Valero ahead of Exxon-Mobil and Conoco Phillips in refining capacity.

Valero has more than 4,700 retail and wholesale branded stores in the United States, Canada and the Caribbean. Store names include Diamond Shamrock, Shamrock, Ultramar, Valero and Beacon.

Premcor does not operate any stores, but it does supply unbranded transportation fuels heating oil, petrochemical feedstocks, petroleum coke and other petroleum products.

- E-mail Greg Moberly at GMoberly@thnewsnet.com or call 553-6833.

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