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Imperial Oil to convert Dartmouth refinery into terminal at a cost of up to $280 mln

Published: 08:59 19 Jun 2013 EDT

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After being unable to attract a buyer to continue operations, Imperial Oil (TSE:IMO) (NYSE:IMO) is to convert its Dartmouth refinery into a terminal, the company announced Wednesday, a decision set to come with a pricetag of at least $260 million.

The Calgary-based crude oil and natural gas producer was unable to attract a buyer to continue operating the refinery, which has a throughput capacity of approximately 88,000 barrels per day. 

As a result, a non-recurring after-tax charge of between $260 million and $280 million is expected to be included in Imperial Oil's second quarter financial results.

The initial start-up of the converted facilities is planned for later in 2013 depending on progress with facility modifications in the coming months. Decommissioning surplus facilities is a process that is set to take place over several years.

The company announced plans to market the refinery and its related supply terminals to prospective buyers in May last year, with the option to convert the refinery into a terminal listed among the other alternatives.

At the time, the company said in a statement that despite efforts to turn a profit, the refinery had not met expected financial returns, a consequence of dwindling demand for refined products in the Atlantic Basin – which is open to significant global competition.

The related terminals operating at Dartmouth, Nova Scotia, Sydney, Nova Scotia, Corner Brook, Newfound Land, Sept-Iles, Quebec and Cap aux Meules in the Magdalen Islands are to be subject to “minimal changes,” according to a company statement released with the announcement Wednesday.

"The results of the marketing effort illustrate the challenges of operating a refinery of Dartmouth's scale in the competitive conditions of the Atlantic Basin market," said chairman and CEO Rich Kruger. "We recognize that closing the refinery is a difficult decision for our employees and the local community. We will make every reasonable effort to minimize the impact."

"Our focus in the near term will be on continued safe and environmentally sound operations while making facility modifications that will support ongoing supply of competitively priced petroleum products to the market."

Imperial Oil is one of Canada's largest corporations and leading member of the country's petroleum industry. The company is a major producer of crude oil and natural gas, Canada largest petroleum refiner, a key petrochemical producer and a marketer with coast-to-coast supply and retail service station networks. 

Stock in Imperial Oil was trading up on the day immediately prior to the announcement, closing at $40.52 per share 35 cents up on the previous close, for a gain of almost one per cent.

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