MONTREAL/NEW YORK (Reuters) - Irving Oil said on Wednesday it agreed to buy Ireland’s only refinery from Phillips 66 PSX.N, scooping it up at a discount in a deal that will extend the Canadian company’s reach across the Atlantic.
The value of the deal, expected to close by the end of the third quarter, was not disclosed in a news release from Irving, which operates Canada’s largest refinery in the province of New Brunswick. Irving did not respond to a request for comment, but two people familiar with the transaction said the refinery had sold for less than $90 million.
The closely held Canadian company, controlled by the billionaire Irving family, will take full ownership of the Whitegate refinery near Cork, Ireland. Irving said it will maintain Whitegate’s existing work force, which includes 160 employees as well as many contract workers.
“It gives them a product terminal asset that could be valuable: Ireland still has need for refined product, whether it’s produced locally or imported,“ said John Auers, executive vice president of Turner, Mason & Co, a consultancy in Dallas. ”It gives them some assets across the Atlantic in a market where they’re already present and export diesel already.”
The east coasts of the U.S. and Canada and parts of Western Europe and the UK form a single Atlantic-basin refining market.
Decreased refining capacity in the region, as other plants have shuttered or cut operations, may allow Irving to operate the refinery more profitably in the long-run, according to refining experts.
Phillips 66 had made repeated attempts to sell the refinery since it first put it up for sale in 2013, but poor refining margins had dampened interest.
Previous attempts to divest the plant in 2003 and 2007 were unsuccessful, despite interested bidders during the high refining margins seen in 2007.
Phillips shares closed up 3.3 percent on Wednesday at $78.66 on the New York Stock Exchange.
Irving said Whitegate can process up to 75,000 barrels of crude oil per day and produces transportation and heating fuels such as gasoline, diesel and kerosene. Its gasoline production is 15,000 barrels a day, and it makes 30,000 barrels a day of refined fuel, Phillips 66 spokesman Dennis Nuss said.
The refinery is not a sophisticated plant, and scores 4.2 on the Nelson complexity scale, a metric for evaluating refineries’ ability to process crude into gasoline. That is significantly below the average 11.4 complexity of the Phillips system in total.
Reporting By Allison Lampert and Jessica Resnick-Ault; Editing by W Simon and Tom Brown