Wide range of players eye oil assets

Any sale of shares in Marsden Pt owner NZ Refining is likely to be at a discount to its current price, researchers say. Photo / Michael Cunningham

Analysis of the looming shakeup in the fuel sector finds a wide range of possible outcomes as big oil companies review their position.

Shell and ExxonMobil are undertaking a review of their stake in New Zealand Refining's Marsden Pt oil refinery and their downstream operations, including over 400 petrol stations.

McDouall Stuart researchers say there is a wide spectrum of scenarios and that any sale of the oil majors' refinery shares would be at a discount to recent share price spikes.

"Refining fundamentals continue to weaken. Small-time speculation lies behind the already overcooked NZR share price," the researchers say. McDouall Stuart values its shares at $5.85 - yesterday it closed steady at $7.25.

"A sale process is more likely than not to attract bids that represent a discount - rather than a premium - to the current share price."

The researchers believe that complete ownership control would be needed to bring change to the refining company's operating model and the control premium would be late in coming, if at all.

While Mobil has not confirmed it is looking to quit its downstream presence here (it would retain a stake in Great South Basin exploration), Shell has publicly stated it is looking for buyers, although it would also retain exploration interests in Taranaki and its valuable stake in Fulton Hogan.

McDouall Stuart says other investors in NZ Refining were also likely to be continuing to consider their options.

"We do not consider any of the other cornerstones to be particularly tight holders of their New Zealand downstream positions."

This could see a complete change in the share register.

The researchers, citing media reports, say there was a good list of indicative interest. Among those potentially interested in Shell and Mobil's assets are India's Hindustan Petroleum, Valero Energy (the largest independent refiner in the United States), Progressive, Foodstuffs and The Warehouse.

"We consider there to be potentially a number of other parties that may also show an indicative interest in the two stakes."

In mature markets the oil majors are pulling out of service stations to concentrate on growth markets such as China and India and putting more resources into looking for oil and gas.

The Automobile Association says it is reasonable to assume supermarkets may want greater control of the fuel retail sector, especially as their buying power would give them an advantage in the consumables side of the business, where margins are relatively high.

AA senior policy analyst Mark Stockdale said it was understandable that international oil companies were looking to quit, given the country was well supplied by the four majors, it was strongly competitive and there was not much room for growth.

"It may be an opportunity for another oil company not well represented in New Zealand to get a foothold here or a company like Gull to expand if that's an option."

Stockdale said the association would be concerned if the sale of those service stations was to an existing supplier resulting in a reduction of competition.

"That's something the Commerce Commission would need to look at although we're not hearing there is interest from other companies."

Stockdale said the entry of supermarket chains into petrol retailing a decade ago had been bad for motorists in Britain. Fuel discounts from spending over a set amount on groceries had reduced over the years, although he said he did not know if that was matched by bigger savings in supermarkets themselves.

WHO OWNS IT

NZ Refining:
* BP - 24 per cent
* Mobil - 19 per cent
* Shell - 17 per cent
* Chevron - 17 per cent
* Emerald - 13 per cent
* Public - 10 per cent