Troubled oil refiner Petroplus raised the spectre of a permanent shutdown of three of its five refineries, putting one on the market and saying it would consider the future of two others in a European market awash with un-saleable plants. Europe's largest independent refiner by capacity has been teetering since its lenders withdrew credit late last year, a victim of thin refining margins and high debt that was a result of its private equity-backed acquisition-based business model.
It has been forced to cut production at three plants and more than halve output at two others because it is struggling to pay for crude. Swiss-listed Petroplus said on Friday is looking to sell its refinery in Petit-Couronne, France, and related marketing businesses, but would consider "all other options". The company added it was also evaluating strategic alternatives, including a possible sale, for its refineries in Antwerp, Belgium, and Cressier, Switzerland.
An Energy and Industry Ministry spokeswoman said minister Eric Besson will meet with Petroplus's CEO Jean-Paul Vettier later on Friday. He will also meet with union representatives of Petit-Couronne on Tuesday, "with the aim to restart operations at the refinery as soon as possible," the spokeswoman said. Petroplus said it intended to complete these processes in the coming months - a timeline which would make sales a challenge given industry sources said the company has been seeking buyers for months.
Workers at the Petit-Couronne plant were nonetheless upbeat about the prospects for a sale. "We have not been declared bankrupt and that's good news," a member of the CGT Union who works at the plant said. "Several buyers may apparently be interested."
Even so, other refineries in Europe of better quality than the Petroplus plants are already on the market and failing to find buyers. Total is expected to announce soon that it is cancelling the planned sale of its Lyndsey refinery in England due to a failure to attract bid interest. "It could be that in this forced process the company will sell its refineries at any price," said ZKB analyst martin Schreiber said of Petroplus. "In order to sell them it may have to give them away. It's a buyers market."
The three refineries could also be a difficult sell because of a relatively low to middling Nelson complexity, one indicator of profit potential. Petit-Couronne has a complexity of 7.3, Cressier of 6.4 and Antwerp of 4.5, compared to 12 at Coryton and 7.3 at Ingolstadt. Analysts say that the current hostile market makes refineries of a complexity lower than 7 or 8 a difficult sell, although other factors could help make a refinery attractive.
"The margins are correlated to Nelson complexity, as well as to other important factors including fixed costs, transport costs, location, and access to crude and clients," said ZKB's Schreiber. "The Antwerp refinery is not that bad on a profitability level, it had better margin than the more complex Cressier in Q3." Shares of Petroplus, which have fallen 57 percent since lenders blocked its revolving credit facility and more than 90 percent in the last year, were 0.7 percent firmer at 1.49 Swiss francs at 1348 GMT compared to a 1.62 percent fall in the European Oil and Gas index.