The future of Pennzoil-Quaker States stake in Excel Paralubes was a hot topic of private discussions last week at the National Petrochemical and Refiners Association Lubricants and Wax Meetingin Houston. Officials with Shell – which is divesting the stake as a condition of its recent acquisition of Pennzoil-Quaker State – acknowledged fielding a number of inquiries. But they also indicated that they will not rush to sell an asset that they deem valuable.
A joint venture with ConocoPhillips, Excel Paralubes owns the continents second-largest base oil refinery – a Westlake, La., facility with capacity to produce 21,300 barrels per day of Group II stocks. Pennzoil-Quaker State owned a 50-percent interest, but the U.S. Federal Trade Commission told Shell to sell it because it believed that Shell would otherwise control too much of the markets Group II capacity.
At the commissions behest, Shell turned management of its stake over to a hold-separate trustee, California attorney Thomas H. Reilly. Shell has a year from Oct. 1 to sell the stake and has hired Salomon, Smith, Barney to help it do so. Shell officials have said they expect interest from companies in the lubricants industry, as well as financial investors.
According to Daniel J. Bradley, general manager of the hold-separate stake, Shell is preparing a profile of the asset that will be distributed to those who express an interest in it. The company will then invite those interested to submit bids indicative of their interest. From them, Shell will pare down to a list of potential purchasers, who will be given access to additional information. It will then ask for firm bids and pick a bidder with whom to negotiate.
A sale probably wont take place until six months to a year from Oct. 1, Bradley said.
In the meantime, he said, the hold-separate stake is operating much as it did under Pennzoil-Quaker States control, which means selling most of its production to Shells Pennzoil-Quaker State. Although Shell is excluded from any involvement in the business, Bradley explained that the status quo will likely be maintained at least until the sale is completed.
For one thing, we have contracts with customers that are still in place, he said. But besides that, we dont want to do anything that would cause a disruption to the business. Whoever buys this is going to want a sense that its past performance is indicative of what theyre buying.
Posted base oil prices in the United States were unchanged last week.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.
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