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New OPIS Study Crowns Chevron as Most Powerful Brand for the Third Straight Year, According to OPIS

For Immediate Release

Wall, NJ, February 13, 2007 – Oil Price Information Service (OPIS), the leading authority on wholesale and retail gas prices in the U.S., has put together the most comprehensive scorecard on the entire retail petroleum landscape. The OPIS Retail Year in Review and 2007 Profit Outlook is a must-have 125 page almanac for anyone involved in the downstream petroleum industry.

The report includes the annual OPIS Brand Power results, a ranking system based on how much of a premium one brand is able to extract against its direct competition at the pump.

On a national basis Chevron proved to be king for the 3rd straight year. The average Chevron station was able to charge 2.15cts/gal more than its competition. Shell was second followed by Lukoil, BP, Texaco, Fina, Mobil, Exxon, 76 and Pure.

At the opposite end of the spectrum was Arco which priced its pumps nearly 10cts/gal below its competitors. The Arco discount was more substantial than Costco, Sam’s and BJ’s, the three largest wholesale clubs in the country. Most of Arco’s business is company operated or dealer tankwagon, but if measured against local racks, Arco sites fetched very low implied margins.

On a regional basis, top honors continued to go to major flags except one region.

• New England: Texaco was the most powerful player with the average station pricing 3.1cts/gal above its competitors. Shell was next followed by Mobil, Exxon and Sunoco.
  Hess was the most aggressive in the region, even more aggressive than supermarket chain Stop & Shop.
  
• Mid-Atlantic: Shell, Mobil, Lukoil, and Exxon were in the top four, while Wawa, Xtra Fuel, Delta Sonic, Royal Farms and Kroger were in the bottom five.
  
• Southeast: Chevron was also a regional winner in the Southeast. The more aggressive stations in the region included Flying J, Costco, Liberty , Sam’s and Sheetz which recently opened some sites in North Carolina.
  
• Great Lakes : It was independent brands in this region that took the top 2 spots. Gas City and Fast Stop were best in the region which were comprised of Wisconsin, Michigan, Illinois, Indiana and Ohio. Flying J, Meijer, Wal-Mart, Murphy USA, Thornton Oil, and Kroger were ranked as some of the chains with the lowest pump prices.
  
• Midwest : BP took the top spot in the Midwest which also saw Valero and Fina crack the Top five. The top 5 most aggressive brands included Murphy USA, Quik Trip, Kwik Shop, Mirastar and 7-Eleven.
  
• Southwest: The 76 flag was tops in the Southwest. The most aggressive supermarket in the region was Kroger followed by Albertsons, HEB and Safeway. The data also indicates that Costco priced more aggressively than Sam’s by about 3 cts/gal.
  
• Rockies: Chevron once again obtained a regional championship and Conoco cracked a regional top-five for the first time this year. Sam’s Costco, Mirastar, King Soopers, Flying J, and Maverik were the most aggressive sites in the region.
  
• West Coast: Texaco was number one in the West Coast followed by Chevron. Costco and Arco were the two cheapest pricing brands on the Pacific.

More than 90 brands were ranked in this year's OPIS Brand Power Rankings including Mobil, Exxon, Stewarts, Marathon Ashland, Citgo, Cenex, Sunoco, Rotten Robbie, BJ’s, USA Petroleum, Safeway, Phillips 66, Sinclair, Kum & Go, Aloha, RaceTrac, Admiral, Home Depot, Caseys, Speedway, Kwik Trip, PDQ, Irving, Tesoro, Rutters, Gas America, Gate, Mapco, Getty, Gulf, Circle K, Weigel and many more.

In addition, the report takes an in-depth look at profit margins on a national, regional and market-by-market basis. It reveals the six annual trends in the market, (the winter high, winter sell-off, Petronoia rally, Petronoia ebb-tide, demand/storm rally and the autumnal collapse) and examines how each market in the 8 key regions of the country reacted to those trends.

The report includes revealing heat maps which allow you to quickly identify the best spots and those areas that you’ll want to avoid. In addition, you get supply and demand statistics, NYMEX trends and keen insight from the industry’s top experts, plus much more.

SPECIAL REPORT: ACTIVE CONSOLIDATION LIKELY FOR REFINING IN 2007

For Immediate Release

Wall, NJ, February 7, 2007 - It’s just the beginning of 2007 and it’s already clear that this is going to be a particularly active year for refinery deals. The 2001-2006 “land grab” is over, and some operators of mature refinery “roll-ups” may soon be more active as sellers than buyers. Meanwhile, new and equally active domestic and foreign investors from upstream oil, existing refining, or private equity firms are eager to put money into what they believe will be a long term renaissance for downstream profits.

Last week, Valero confirmed what OPIS first reported on January 29, 2007; namely, that it would seek a buyer for its 170,000 b/d Lima, Ohio refinery. Valero did not indicate that Lima was the first of several planned sales, but sources tell OPIS that is clearly the plan. Analysts stress that the company hasn’t “soured” on refinery prospects; it’s just reached a stage where it needs to cull assets. Management prefers large coastal complex refineries for the huge sums of capital investment needed to maintain efficient operations.

The other fertile ground for the future refinery sales comes in the traditional major oil territory. OPIS exclusively reported a day before Shell announced its deal to sell its complex Wilmington, California refinery to Tesoro is part of a broader global review that could see more than a half dozen sales. On February 1, ConocoPhillips quietly put its Irish refinery on the block, but the company only acknowledged the sale when queried first by OPIS on January 18. There was no press release and ConPhil noted that it “continually evaluates all assets and their place within the long-term goals and strategies of the company.”

The rationale for multinational sales differs from the Valero strategy in that majors have numerous high return prospects, but they are long term projects, and are most common in the capital-intensive exploration and production segment.

So, it’s a perfect environment for plenty of deals. There are motivated sellers who realize that this is an opportune time to move properties at two, three, or even ten times the price those assets would have fetched five years ago. There are equally motivated buyers who sense that they can be creative with assets that have been ignored by majors or large independents thanks to management focus on other income streams.

And raising the money necessary to buy a $1-billion refinery doesn’t represent a formidable obstacle, at least not yet. There is at least a two or three year window where U.S. demand is expected to far outstrip domestic production capability. And most of the refineries in play have one thing in common - - they either sit on North American soil or they are situated in areas where barrels can take advantage of U.S., European, and Central American trading dynamics.

So, the money pipeline is not a problem. With that in mind, here’s a look at the confirmed and potential participants on both sides of the refinery sales’ process:

THE ROSTER OF BUYERS

• Alon - - The Dallas based company, owned principally by Israeli interests, has been a niche buyer, and doesn’t eschew asphalt like some other players. It has done well since its public offering, but may take a while to digest the 2006 Edgington and Paramount transactions on the West Coast.
  
• Astra – The trading arm of the huge European holding company hit homeruns this decade with purchases of Crown’s 100,000 b/d Pasadena, Texas refinery as well as the U.S. Oil plant in Tacoma, Washington. But both of those deals were bargain basement compared to the $1-billion plus that it might take to close on some of the likely major sales.
  
• Coffeyville Resources – this 50/50 joint venture between Goldman Sachs and private equity firm Kelso came close to deals on a number of U.S. and Canadian properties in 2006. Watch for them to make at least one substantial purchase this year, if not more.
  
• Delek. Another newcomer to the public sector. Since buying the LaGloria Tyler, Texas refinery, this company has focused more on retail acquisitions. But they can’t be ruled out as a buyer of plants not too distant from assets in northeast Texas and the Southeast.
  
• EnCana. The western oil sands producer already has a venture with ConocoPhillips, but it may not stop there, and could buy U.S. refineries outright.
  
• Husky. Another western Canadian producer that clearly wants to buy U.S. refineries. Husky was a finalist on the Citgo/Lyondell sale even though that Houston refinery was a great distance from the oil sands. It needs a home as Alberta production ramps higher.
  
• Petrobras. The huge Brazilian company has the wherewithal to purchase just about anything up for sale, and already holds an interest in Astra’s Texas plant. Petrobras execs once tried to buy Aruba, and could make a play for that refinery should it be designated for sale by Valero.
  
• Petroplus. The Tom O’Malley led group bought BP’s Coryton, U.K. refinery last week, and the $1.4-billion price didn’t frighten investors. O’Malley is the leading contender for ConPhil’s Irish refinery, and he would love to buy coastal plants in the U.S.
  
• Suncor. This is another Canadian neighbor that needs to find a channel for heavy crude. The preference would be for Midwestern or Rocky Mountain assets. Valero’s Lima, Ohio refinery is one possible target.
  
• Sunoco. Sun may feel the need to get bigger through an acquisition. Otherwise, it risks being a target rather than an arrow. Sun recently increased their credit line to $1.3-billion but execs have been reluctant to pay the numbers that it takes to close a deal.
  
• Valero Holdings & Valero LP: The corporate names will change this month, but the name at the top- - Bill Greehey— - represents the only person who has rolled up more refining than Petroplus’ Tom O’Malley.
  
• Tesoro. This company has West Coast bragging rights at the moment, but execs have looked at Gulf Coast refineries in the past. They could be active late in 2007 - - it will clearly take time to digest the Shell assets.
  
• Wall Street. The names may not be recognizable but many private equity managers still love refining. The word on the street is that no deal is too big or too ambitious for these New York, Connecticut, and Boston-based companies. The robust performance of U.S. financial markets puts lots of funds in the till.
  
• Western Oil Sands. This is a smaller, lower profile Canadian producer, but one that would like to find a downstream outlet for its crude.

THE ROSTER OF SELLERS

• BP. The major just sold its U.K. refinery to Petroplus and hasn’t shopped or hinted that any U.S. plants could be for sale. But, the focus of the multinational is clearly on exploration, production, alternative fuels, and trading. The last segment could put it at odds with U.S. regulators, where it’s had a stormy few years. Some observers believe the company may eventually look to shed the storied Texas City refinery or even the ARCO assets on the West Coast.
  
• Citgo. PDVSA is currently shopping U.S. asphalt refineries, and has said that it will not look to shed any U.S. light products’ refineries. If it waffles on that stance, its Lemont, Illinois refinery sparkles like a jewel in the eyes of Canadian buyers.
  
• ConocoPhillips. Right now, only the Irish refinery is being shopped, but ConPhil spent billions on Burlington Resources and has been tightening its downstream operations. There is speculation that it could part with the ultra-strategic Bayway refinery for the right price. That might be a reach, but the company will certainly scrutinize each and every U.S. plant.
  
• ExxonMobil. The major could part with European refineries, but is not believed to be looking to shed any U.S. assets. This is another company that has done a lot of business with Petroplus’ Tom O’Malley.
  
• Harvest Energy. This Canadian company took possession of Vitol’s 105,000 b/d Come-By-Chance refinery from Vitol in 2006 and would prefer to invest in and improve the plant. But the Canadian government has changed the rules for “trusts” within that country, so some consolidators have this refinery on a list of possible sales candidates.
  
• Shell. Last week’s sale of the Los Angeles refinery convinces many consolidators that Martinez, California is available at the right price. Shell has acknowledged that a number of refineries are being shopped in Europe and even in the Caribbean.
  
• Valero. They’ve admitted to shopping the Lima, Ohio refinery, but there are numerous other plants in line or on the disposition bubble. Those identified as underperforming or non-core include Ardmore, OK; Krotz Springs, LA; and Houston, TX, as well as Aruba. For the right price, refineries in Memphis or even on the East Coast might be in play.

Final Footnote: Many of the companies listed as buyers could be sellers and vice versa, depending on what happens to margins and valuations as the year progresses.

- Tom Kloza, tkloza@opisnet.com, www.speakingofoil.com