Unocal to transfer downstream assets to 76 Products Company subsidiary
El Segundo, Calif., Oct. 29, 1996 -- Unocal Corporation today said it plans to establish its 76 Products Company as a wholly owned subsidiary and transfer its West Coast downstream refining, marketing and transportation assets to the subsidiary at the end of 1996.
"This transfer of the assets to the 76 Products Company subsidiary is the next step in the process that could lead to the separation of 76 Products from Unocal in the future," said Roger C. Beach, Unocal chairman and chief executive officer.
"When we formed the 76 Products Company business unit in 1994, we indicated that we expected to separate these operations from Unocal's core once the unit became consistently profitable," Beach said. "Since then, we have restructured the operations and 76 Products has introduced new initiatives to strengthen this downstream business."
The company has said it would look at various options for establishing 76 Products Company as an independent company. These options could include an initial public offering (IPO), a joint venture, or an outright sale.
"The timing for implementing one of these options depends upon 76 Products' continued progress in developing sustainable earnings and cash flow that would allow the unit to compete successfully as a stand-alone business while carrying its share of Unocal's consolidated debt and other liabilities," Beach said.
Based in Costa Mesa, Calif., the 76 Products Company subsidiary will have approximately 3,100 employees and about $2.7 billion in assets. The company's assets will include three refineries in California, which have a combined crude oil input capacity of 251,000 barrels per day, and 1,200 service station sites (leased or owned in fee) in six western states. In addition, 76 Products will have various interests in bulk plants and terminals, West Coast pipelines and a marine fleet consisting of one crude oil tanker and two refined product tankers.
For the first nine months of 1996, the 76 Products Company business unit reported pretax income of $128 million on revenues of $3.6 billion. Petroleum product sales averaged 291,000 barrels per day.
"We have created a market-driven organization that is building on the strengths of Unocal's strong retail network and efficient refining and transportation system," said Lawrence M. Higby, president of 76 Products Company. "This team is ready to move forward."
Higby noted that 76 Products has revamped its service offerings by combining multiple franchise business formats with the traditional retail gasoline sales and automotive services.
The new formats include FastBreak convenience stores, including some with franchise fast food restaurants, and ProWash car washes. In addition, 76 Products has an agreement with Circle K convenience stores to sell Unocal 76 branded gasoline at Circle K sites in Arizona and Nevada and co-develop new gasoline/convenience store sites in Nevada.
In refining, the company has completed major modifications to manufacture reformulated gasoline for the California market and increase overall production of light oil products (gasoline, diesel and jet fuel). For the first nine months of 1996, 76 Products manufactured approximately 197,000 barrels per day of light oil products, up 15 percent from 171,000 barrels per day in 1994 when the unit was formed.
Updated: October 1996