Williams took another big step in its asset sales program Tuesday with the sale of its Memphis, TN, refinery and other related operations to Premcor Inc. for $465 million cash. Premcor will pay $315 million cash for the refinery and related fixed assets at closing and will purchase petroleum inventories estimated at about $150 million.

The agreement also contains an earn-out provision that allows Williams to potentially receive up to an additional $75 million over the next seven years. The earn-out would be paid annually depending on the level of refining margins. Williams said it expects to record an additional pre-tax loss in the fourth quarter of $30-35 million.

“Selling our Memphis refinery represents another critical step in our ongoing restructuring,” said CEO Steve Malcolm. “This is an example of how intently focused we are on reducing debt and improving our liquidity. We’re staying true to our plan for reaching significant transactions, strengthening our finances and meeting the challenges before us.”

The company’s recent restructuring plan has included about $5 billion in asset sales (completed or in progress), including sales of gas gathering and processing assets in South Texas and the Hugoton Basin, the Kern River gas pipeline, the Williams Central pipeline system, several liquids pipelines, producing assets and reserves in several major producing fields, the Cove Point LNG facility, and its share in Northern Border Partners and the Alliance Pipeline. Williams still also plans to sell Western Canadian gas gathering and processing assets as well as some petrochemical, ethanol and soda ash mining operations, which will add another $1-2 billion.

The Memphis assets include a 190,000 b/d refinery, two associated truck-loading racks, three petroleum terminals in West Memphis, AR; Collierville, TN; and Memphis, TN, supporting pipeline infrastructure that transports both crude oil and refined products, and crude oil tankage at St. James, LA. Also included in the transaction is a new 80 MW peaking generation unit adjacent to the refinery. About 375 employees support the Memphis operations.

“While Williams is in the process of exiting the refining business, Premcor recognized the inherent value in our Memphis operations that have routinely handled over a billion gallons of fuel per year,” said Malcolm. “This is the type of transaction that allows us to continue to rebuild our company around finding, producing, gathering, processing and transporting natural gas.”

The parties expect the sale to close before March 31, 2003. Premcor Inc. is based in Old Greenwich, CT, with subsidiaries that operate refineries in Port Arthur, TX, and Lima, OH.

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