BP Exits California Refining Business, World Markets Cautious

Bikram Pandey
13 Aug, 2012
New York City

U.S. indexes declined on weak volume after Japan reported a slowdown. BP Plc decided to exit California refining business and sold its refinery to Tesoro and sold natural gas assets to raise for $2.75 billion. Google attempted to restart its local content effort with the purchase of Frommer''s.

[R]4:25 PM New York – U.S. indexes struggled on weak volume after Japan reported a slowdown. UK based BP Plc decided to exit California refining business and sold its refinery to Tesoro and sold other natural gas assets to raise for $2.75 billion. Google tries one more time to restart its local content efforts with the purchase of Frommer’s.[/R]

U.S. indexes traded sideways after Japan reported a sharp economic slowdown in the second quarter.

On the merger front, Google plans to acquire travel content brand Frommer’s from John Wiley & Sons Inc. The terms of the deal were not revealed buy two companies.

The deal is expected to help Google to strengthen its travel and local search offerings as focused and independent sites like Yelp Inc ((YELP)) and TripAdvisor Inc ((TRIP)) have successfully anchored their businesses in these niches. Nearly a year ago, Google acquired the restaurant review site Zagat for an undisclosed amount.

After the deal announcement, Yelp declined 7.7% and TripAdvisor fell as much as 6%.

Separately, Google ((GOOG)) said it plans to slash 20% workforce and shutter one third of offices at Motorola Mobility, the struggling mobile phone maker.

BP ((BP)) agreed to sell its Carson refinery located in Southern California to Tesoro Corp ((TSO)) for $2.5 billion. BP will still operate its refinery in Washington State to serve markets on the West Coast but decided to exit from the California market.

Tesoro agreed to pay for the Carson City refinery with a capacity of 266,000 barrels a day capacity and associated marketing network and inventories. After the deal, Tesoro will be the largest refiner on the West Coast with a combined refining capacity at its existing Wilmington refinery and Golden Eagle plant in Martinez of 533,000 barrels a day.

Tesoro also purchased 800 ARCO branded gas stations in California, Arizona and Nevada from BP. Tesoro plans to sell the pipeline infrastructure and storage facilities to a master-limited partnership it controls and said excluding the fuel cost of the refinery will be about $175 million.

Tesoro surged 9.5% to $38.87 at close in New York trading.

BP also agreed to sell its Texas panhandle midstream gas assets for $227.5 million to Eagle Rock Energy Partners LP. The assets to be sold include two natural gas processing plants Monroe County and Hemphill County with a combined capacity of 220 million cubic feet of gas and 2,500 miles of associated pipelines and other infrastructure.

The deals are part of the oil giant’s efforts to sell $38 billion of assets to repay in parts the cost of Gulf of Mexico oil spill and since the announcement of the divestiture program in 2010 the company has sold $26.5 billion of assets.

Bank of America ((BAC)) plans to sell its international wealth management businesses to Switzerland based Julius Baer.

The European indexes pared losses. Italy raised €8 billion in a bond auction today. German wholesale price inflation rose in July and the Greek economy contracted in the second quarter. Julius Baer agreed to acquire Merrill Lynch’s International Wealth Management business for Sfr860 million.

Japan reported a sharp decline in economic growth in the second quarter as consumer spending growth eased. Stocks were nearly flat on the hopes of additional stimulus measures. Taiheiyo Cement Co dropped 5% after quarterly profit was lower than expected.

Australian stocks closed higher after a string of earnings reports. But worries linked to China trimmed the market advance. BlueScope agreed to form a joint venture with Nippon Steel for its coated products unit. Newcrest Mining said annual profit increased 23%. JB Hi-Fi guided higher sales.

Commodities, Bonds and Currencies

The yield on 10-year bond traded lower to 1.65% and on 30-year bond edged lower to 2.74%.

The U.S. dollar traded lower to $1.233 to a euro and increased against the Japanese yen to 78.36 yen.

Immediate delivery futures of Texas crude oil decreased 15 cents to $92.72 a barrel and Brent crude added 65 cents to $113.65, futures of natural gas decreased 3 cent to $2.74 per mbtu and gasoline price decreased 1.12 cents to 299.28 cents a gallon.

In metals trading, copper decreased 4.1 cents to $3.35 per pound, gold fell $9.60 to $1,612.20 per ounce and silver fell 30 cent to $27.96.