Imperial Oil to Convert Nova Scotia Refinery

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Imperial Oil (NYSEMKT: IMO  ) , Canada's largest oil refiner, announced last week that it would convert its refinery in Dartmouth, Nova Scotia, into a terminal facility after the company failed to attract a buyer for the plant.

Imperial, which is 69.6% owned by ExxonMobil (NYSE: XOM  ) , spent the past year exploring alternatives for its Dartmouth refinery, which is the company's least profitable because it is unable to process discounted Canadian crudes available to Imperial's three other refineries and instead has to import more expensive seaborne crude.

Though the Dartmouth refinery had initially generated some interest, a more in-depth analysis of its configuration and size led several would-be buyers to determine that the facility could not be operated profitably due to changing market dynamics.

"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 Rich Kruger, Imperial's chairman and CEO, in a statement.

As a result of its decision to convert the facility into a distribution terminal to supply the Atlantic Canadian market,Imperial said it will incur a non-recurring after-tax charge of between $260 million and $280 million, which is expected to be included in its second-quarter financial results.

The Dartmouth refinery has been operating for about 95 years and has throughput capacity of approximately 88,000 barrels per day. It employs roughly 200 employees and 200 contractors. Of the employees, 40% are either eligible for retirement or will receive jobs in the distribution terminal site.

Challenges for Atlantic Basin refiners
Imperial's decision to convert the refinery highlights some of the biggest problems plaguing the Atlantic Basin refining sector – which broadly encompasses refineries in eastern North America, Western Europe, and the Caribbean – such as overcapacity and the high cost of imported crude oil.

Indeed, Dartmouth, which is Nova Scotia's only refinery, is just one of several refineries on both sides of the Atlantic that have been shut down or converted in recent years. For instance, Shell (NYSE: RDS-A  ) shuttered its Montreal refinery back in 2010 after it failed to attract a buyer.

Similarly, in March of last year, Valero (NYSE: VLO  ) decided to halt operations at its at its 235,000 barrel per day Aruba refinery, which it later sought to convert to a refined products terminal after failing to find a buyer. And earlier this year, Hess (NYSE: HES  ) pulled the plug on its Port Reading, N.J., refinery 
due to heavy financial losses in two of the past three years.

If refineries in the Atlantic Basin are to return to profitability, they will need to find a way to access discounted crudes, either from the U.S. mid-continent or from western Canada.

There are many different ways to play the energy sector, and The Motley Fool's analysts have uncovered an under-the-radar company that's dominating its industry. This company is a leading provider of equipment and components used in drilling and production operations, and poised to profit in a big way from it. To get the name and detailed analysis of this company that will prosper for years to come, check out the special free report: "The Only Energy Stock You'll Ever Need." Don't miss out on this limited-time offer and your opportunity to discover this under-the-radar company before the market does. Click here to access your report -- it's totally free.

Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2515906, ~/Articles/ArticleHandler.aspx, 9/24/2016 5:22:52 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 20 hours ago Sponsored by:
DOW 18,261.45 -131.01 -0.71%
S&P 500 2,164.69 -12.49 -0.57%
NASD 5,305.75 -33.78 -0.63%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/23/2016 4:02 PM
IMO $30.10 Down -0.59 -1.92%
Imperial Oil CAPS Rating: *****
XOM $83.45 Down -0.09 -0.11%
ExxonMobil CAPS Rating: ****
HES $46.91 Down -0.87 -1.82%
Hess CAPS Rating: ****
RDS-A $47.97 Down -0.50 -1.03%
Royal Dutch Shell… CAPS Rating: ****
VLO $55.67 Up +0.07 +0.13%
Valero Energy CAPS Rating: ****