In their Q3 quarterly earnings report, Hess Corporation announced today their retail fuels volumes for the quarter were 2.5% lower than the same period last year.
Total c-store revenues were down 6% for the same quarter year over year.
For the nine months ending September 30, 2012, total retail fuels volumes are down 1.5% compared to the same nine months last year.
Congratulations to Parker’s on the successful opening of their 28th store. Parker’s uses PriceAdvantage as their cloud solution to manage fuels prices and monitor company-wide fuels performance down to the store level.
According to a WTOC Channel 11 interview with Greg Parker, president and CEO of Parker’s, now is the right time to expand in the c-store industry. “We are hoping to open a new store every two months for the foreseeable future. We think it is the right time to be growing. Land costs are coming down and construction costs are down. Unemployment is up. There are a lot of good people out there looking for jobs. Money is cheap. This is a great time to be growing,” said Parker. The channel 11 interview may be found < a href="http://www.wtoc.com/story/19357405/new-parkers-convenience-store-to-open-in-rincon" target="_blank">here.
The PriceAdvantage team is proud to have Parker’s as a PriceAdvantage fuel price management customer and to contribute to their continued success.
Analyst Peter Sklar of BMO Capital Markets has written in a report that Couche-Tard would only be able to acquire the Valero retail business if Valero decided to split the retail business into a set of smaller, regional units. The report estimates Valero’s entire 1030 store retail network is worth between $3.5 billion and $4 billion, which is in line with the $3.5 billion estimate reported by Reuters. Sklar reported that Couche-Tard would not be able to raise enough new debt to acquire the entire network at that price.
Of course, it is still unknown if Valero will sell off their retail operations at all, given the tax advantages to shareholders of spinning off the retail unit vs. selling it.
That’s exactly what Statoil, Exxon, and Royal Dutch Shell have done over the past five years. Couche-Tard is the company who ultimately acquired the Statoil retail stores, and who now operates 3585 stores.
In their third quarter 2012 investor news letter, hedge fund manager Third Point, LLC urged Murphy Oil to spin off their retail fuel business. In the letter, Third Point says spinning off the retail fuel business would result in a share price increase of about 60%.
In the letter, Third Point used Alimentation Couche-Tard, Casey’s General Stores, and Susser Holdings as a reference to suggest the Murphy 1100 store retail fuel business would be worth $2.3 billion to $2.8 billion if it were a standalone public company.
This makes for an interesting comparison to the recent Valero announcement of a pending course of action for their retail fuel business, including a possible spin off. Valero has a 1027 store network comparable in size to Murphy. Reuters and others have estimated the value of a Valero spin off to be $3.5 billion. There have been some reports that Valero is looking to sell their retail units, but Valero sees < ahref="https://www.priceadvantage.com/staging/8772/blog/2012/10/01/297-fuel-price-management-blog-valero-sees-advantages-to-spinning-off-their-retail-fuel-division-" target="_blank">advantages to a spin off vs. a sale.
The Third Point letter may be found here.
Gasoline wholesale prices in the Los Angeles area have gone up $0.70 per gallon this week, reaching wholesale fuel prices not seen since November 2007. Sources blame the Exxon Torrance refinery loss of power on Monday, as well as Chevron’s Kettleman-Los Medanos pipeline which was shut down Monday due to the detection of elevated levels of organic chloride in the oil. Maintenance work at the Phillips 66 plants in Rodeo and Arroyo Grande further reduces California state supplies.
Some c-stores are choosing to sell premium fuel at regular unleaded prices, or to shut down pumps altogether, rather than buy at these inflated costs or to sell at margins that aren’t worth it.
All this speaks to the ongoing volatility of the retail fuels market, and the ever increasing need for the robust features included in our PriceAdvantage fuel pricing software. PriceAdvantage makes it easier to navigate these rough market conditions in multiple ways:
Ever since Valero reported in their most recent quarterly earnings that they would like to divest their retail stores, there has been all kinds of speculation around what that divestiture might look like. Recently Reuters released a story that several large c-store chains were lining up as buyers.
But in an interview with the San Antonio Business Journal, Valero spokesman Bill Day explained the company is still reviewing different types of transactions. He explained that the tax bill for a spinoff would be less than the tax bill for selling the stores. “There are certain tax advantages to Valero to do a spinoff to our shareholders rather than a sale to an outside entity. So that tax advantage would have to be surmounted if another company were to come and make an offer.”
The Valero retail division operates 1027 company owned stores, all of which use PriceAdvantage for their fuel price management software. In the latest quarter, the retail division set a new record for their operating income, with retail fuel margins of $0.303 per gallon and increased fuel volumes from the same period last year.