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Venezuela seeks buyer for Citgo refining unit in US

07.31.2014  | 

PDVSA, the state-owned oil company, “is currently seeking to monetize its ownership interest in us,” Citgo said in a July 29 bond prospectus document. “There can be no assurance as to whether a transaction will occur or as to the nature or timing of any potential transaction.”

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By JIM POLSON
Bloomberg

Petroleos de Venezuela SA is seeking a buyer for Citgo Petroleum,  its US refining and marketing company, in a deal that may be worth as much as $15 billion.

PDVSA, the state-owned oil company, “is currently seeking to monetize its ownership interest in us,” Citgo said in a July 29 bond prospectus document. “There can be no assurance as to whether a transaction will occur or as to the nature or timing of any potential transaction.”

Citgo owns three refineries capable of handling about 749,000 bpd in Louisiana, Texas and Illinois. The company sells gasoline through 5,600 branded stations. It could fetch $15 billion because its midstream storage terminals and docks are eligible for tax advantages, said Sam Margolin, a New York-based analyst for Cowen & Co.

By creating a master-limited partnership for those assets and getting better-than-expected returns from the refineries, a buyer could get “a return on that price,” Margolin said in a telephone interview. “Nobody should have a problem getting financing even up to that $15 billion level.”

Potential buyers include Gulf Coast refiners looking to capitalize on the region’s rising crude supply, and those operators seeking entry, Margolin said.

Citgo had sales of $42.3 billion last year and earnings before interest, taxes, depreciation and amortization of $1.8 billion. A call and e-mail to Citgo’s Houston office weren’t immediately returned.

Master-limited partnerships have proliferated because of demand from investors for cash payouts that beat debt yields. A buyer could reduce Citgo’s tax burden because partnerships don’t pay federal income tax.

The sale is in its early stages, the Wall Street Journal reported, citing people familiar with the situation. Argus Media reported July 24 the company had received three offers of $10 billion to $15 billion.



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