Citgo Petroleum Corp. wants to sell both its finished lubricants and its base oils businesses — preferably together, according to a Goldman, Sachs & Co. memorandum obtained by Lube Report. Citgo retained Goldman Sachs as financial advisor in connection with the potential sale.
Citgo expects the sales process to be a two-phase auction. During phase one of the auction process, interested parties will get an opportunity to conduct an initial review of the finished lubricants and the base oils/waxes businesses. During phase two, Goldman Sachs, at Citgo’s direction, will invite selected parties to attend a management presentation and will provide them with access to a “virtual dataroom.”
While the company intends to sell both the finished lubricants business and the base oils/waxes business, the memorandum states, Citgo reserves the right to sell them to separate buyers.
Citgo’s finished lubricants business sells products under the Citgo, Mystik, Clarion and MileMaster brand names. According to the memorandum, Citgo sold more than 85 million gallons of finished lubricants in 2007, ranking sixth in overall U.S. lubricant sales and having 4 percent of the total U.S. volumes. The finished lubricants business also was responsible for selling base oils, amounting to 12 percent of U.S. API Group I base oil production in 2007.
Citgo’s three lube blending plants and terminals are in Cicero, Ill., Oklahoma City, Okla., and Atlanta. It also uses a network of plants that provide contract blending and packaging of the lubricant products. The finished lubricants business has a 315-member sales, technical, manufacturing and customer service work force. It has a sales and distribution network of more than 262 branded contract distributors.
Also under consideration as part of the sale is a leased Tulsa, Okla. facility that provides analytical testing services and product development support.
Earlier this year Citgo initiated plans to cease production at its Lake Charles, La., lubricants and waxes refinery during the second and third quarters of this year, and said it would look into selling the facility. The plant, which employed 195 people as of June, has 9,500 barrels per day of API Group I base oil capacity and about 2,000 b/d of wax capacity.
Citgo’s Lake Charles plant includes 166 storage tanks with total capacity of 2.1 million barrels, a steam generation plant, a waste water treatment facility and three pipelines for finished lubricating oils. It is configured as a two-train plant with two vacuum distillation units, a furfural extraction unit, a Duo-Sol unit and two methyl ethyl ketone dewaxing units.
The base oil plant can use multiple grades of distilled crude oils to produce Group I base oils and products. It can process at least 60 different types of feedstock. When operational, the plant was one of three fully refined wax producers in North America, the Goldman Sachs document stated, accounting for 18 percent of total North American production.
Citgo management has identified multiple capital projects to enhance the Lake Charles plant’s operating capabilities. Potential projects cited include construction of a fuels refinery unit or conversion of the plant to a blending/liquids storage terminaling facility. In addition, refining assets can be upgraded to process more complex feedstock. The Lake Charles plant could also function as a hybrid hydro-processing/solvent plant, the memorandum suggested, which would give the base oils and waxes business the ability to produce Group II+ base oils while preserving its ability to produce bright stock.
Citgo and Goldman Sachs did not respond to Lube Report’s requests for comment.