BP said it will cut its U.S. refining capacity in half by selling its troubled Texas City refinery and another near Los Angeles as part of a new strategy.
The Texas City refinery, the third largest in the country with a capacity of 475,000 barrel per day, became part of BP with the 1998 merger with Amoco.
It was the site of a deadly blast in 2005 that killed 15 and injured more than 100. A handful of workers also have been killed or injured in accidents there in recent years. The company has spent more than $1 billion modernizing the facility, which employs as many as 4,000 workers.
The announcement came as part of BP’s fourth quarter earnings report. The oil giant said it had net income of $5.5 billion, or $1.47 per share, which was below analysts’ expectations.
For all of 2010 the company reported a loss of $3.7 billion, due largely to a $40.9 billion charge for the Gulf of Mexico oil spill, which was increased by $1 billion from prior estimates. That’s the company’s first loss since 1992.
The company also said it would resume paying a dividend of 7 cents per share, half the level it was before it stopped paying the dividend after the spill.
“2010 will rightly be remembered for the tragic accident and oil spill in the Gulf of Mexico and it is clear that as a result BP is a company in transition,” BP group CEO Bob Dudley said in a statement. “2011 will be a year of recovery and consolidation as we implement the changes we have identified to reduce operational risk and meet our commitments arising from the spill.”
BP’s clean replacement cost of supplies, a closely-watched metric that takes out gains or losses from inventories and other non-operating items, was $4.36 billion for the quarter. It’s a slight improvement from the same quarter of 2009, but below expectations due to energy trading losses and a higher effective tax rate.
The Texas City divestment is based on the refiner not being well integrated with BP’s overall marketing business, said BP’s head of refining and marketing, Iain Conn in a morning conference call.
The facility does not have as much storage capacity as BP would like and to do so would require a significant physical expansion.
Texas City continues to improve its profitability, however, Conn said, adding $2.5 billion in annual profits over the past three years.
“We have a number of inquiries from competent operators,” Conn said.