Wednesday, March 9, 2016

Imperial sells aviation fuel centers for US$135M, including Calgary aviation facility

Imperial Oil Ltd. has struck a deal to sell its aviation fuel business in Canada, including its aviation center at the Calgary International Airport, for US$135 million, to World Fuel Services Corp. of Miami, Fla.

The sale of Imperial assets is part of a US$260-million bargain by its parent, Exxon Mobil Corp., to sell aviation fueling operations at 83 airports in Canada, the United Kingdom, Germany, Italy, Australia and New Zealand operated by its affiliates. World Fuel Services announced the deal last month on Business Wire but no announcement was made by Exxon or Imperial.

Imperial spokeswoman Killeen Kelly confirmed the deal Wednesday, but not the pricetag, and said it includes select operations at 34 airports in Canada, including Calgary, Halifax, Montreal, Ottawa, Toronto International, Winnipeg, Vancouver, Victoria, Regina and Saskatoon.

It also includes 20 general aviation markets in small centers such as Lethbridge, Norman Wells, Sudbury and Toronto City Center.

“World Fuel Service will continue to purchase aviation fuel products from Imperial for resale to sites,” she said, adding the agreement is subject to Competition Bureau approval and change in control is expected in late 2016 to early 2017.

“Imperial’s sales to commercial airlines are not affected by this transaction. We’ll continue to serve commercial airlines at major airports, including Calgary, Edmonton, Winnipeg, Toronto, Halifax, Montreal, Hamilton and others.”

“To put it in context, the majority of operators affected by this transaction will be private, general aviation fliers.”

The news emerged in a report by oil and gas analyst Michael Dunn of FirstEnergy Capital in Calgary who said he spotted the information and the price tag buried in a U.S. regulatory filing made by Imperial Oil a few weeks ago.

In its news release issued Feb. 11, World Fuel Services says the Exxon affiliates’ portfolio serves the business and commercial aviation sectors, adding it will enter a long-term agreement with Imperial Oil to become a wholesale distributor for general aviation fuel in Canada.

“This acquisition represents a strategic expansion of our global aviation network, further embedding us in the supply chain, by acquiring best-in-class aircraft fueling operations in multiple key international markets,” stated Michael Kasbar, chairman and chief executive. 

On Tuesday, Imperial announced it would sell its remaining 497 Esso retail auto fuel stations and convenience stores for $2.8 billion.

It announced deals with five buyers: Alimentation Couche-Tard Inc. for 279 retail stations in Ontario and Quebec; Harnois Groupe petrolier for 36 sites in Quebec; Red Deer-based Parkland Fuel Corp. for 17 sites in Saskatchewan and Manitoba; Wilson Fuel Co. Limited for 17 sites in Nova Scotia and Newfoundland; and 7-Eleven for 148 locations in Alberta and British Columbia.

In a note overnight, analyst Arthur Grayfer of CIBC World Markets said Imperial’s agreement —two or three times the estimate of most analysts — suggests that Suncor Energy Inc.’s chain of 1,500 Petro-Canada gas stations could be worth more than $4 billion.

Dunn, whose estimate for the Esso stations was also much lower than the actual price, said information provided by Alimentation Couche-Tard on Wednesday morning suggests that the stations it bought have been bringing in adjusted annual earnings that were three times the standard analysts were employing.

“Over decades, Imperial sold off all the small town sites and the lower profitability sites and kept ownership of the best ones, the ones in the high-traffic zones, with nice car washes and convenience stores,” he said.

“What remained was the best of the best in Canada.”

He said Suncor won’t get the same return if it sells its stations because they haven’t been high-grading the portfolio. He added he doubts the company will sell the operations because it hasn’t been an asset seller despite low oil prices.

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