Phillips 66 (PSX.N) said on Tuesday it will acquire the remaining 50% stake in WRB Refining from Cenovus Energy (CVE.TO) for $1.4 billion, giving it full ownership of two major U.S. refineries.
Shares of the U.S. refiner were up 2.7% while Cenovus was up 3.3%
WRB includes the Wood River refinery in Illinois and the Borger refinery in Texas, which have a combined crude throughput capacity of 495,000 barrels per day (bpd).
The refineries — which add about 250,000 bpd to Phillips 66’s refining capacity — can produce a high percentage of transportation fuels and process heavy and medium sour crudes as well as light sweet crudes.
Phillips 66 has been streamlining its operations to focus on refinery business, following a long-drawn proxy battle with activist investor Elliott Investment Management.
Earlier this year, Phillips 66 sold its 65% stake in a German and Austrian fuel retail business, after Elliott pushed for a sale or spinoff of the midstream business.
"With full ownership of the Wood River and Borger refineries, we are strengthening our integrated business and expanding our position in a region where we lead the industry," Phillips 66 CEO Mark Lashier said.
The deal comes at a very appealing valuation for Phillips 66 and upgrades the refiner's portfolio by adding higher margin capacity to its mix, TPH & Co analyst Matthew Blair said.
Meanwhile, the Canadian shale producer has reported underperformance at some of its U.S. refineries. Cenovus said the WRB sale will simplify its downstream business and sharpen its focus on assets tied to heavy oil operations.
The companies expect the transaction to close between the end of the third and fourth quarters. After closing, Cenovus’ refining business will include plants in Lloydminster, Lima, Toledo and Superior, with total throughput capacity of 472,800 bpd.
Cenovus said it would use the proceeds to reduce net debt and accelerate shareholder returns by boosting share repurchases.
