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Goodyear to Sell Oil Pipeline Unit to Plains for $420 Million

March 24, 1998| From Bloomberg News

Independent energy producer Plains Resources Inc. of Houston agreed Monday to buy Goodyear Tire & Rubber Co.'s oil pipeline unit for $420 million in cash, boosting its ability to move oil from California to its trading operations in Oklahoma.

Plains said it will buy Goodyear's All American Pipeline System, a 1,233-mile pipeline that connects oil fields in California with West Texas, as well as Goodyear's Celeron Gathering Corp. and Celeron Trading & Transportation Co. units.

The transaction will give Plains control over the main pipeline for transporting oil from California's San Joaquin Valley to refineries in Texas and the largest U.S. crude-oil trading hub in Cushing, Okla.

"They'll be the only independent that can transport crude all the way to Cushing," said Van Levy, an analyst with Jefferies & Co.

For Goodyear, the agreement closes an unsuccessful attempt at diversification. The largest North American tire maker spent $1.6 billion building the All American Pipeline in 1983 and will report a $35-million loss on the sale.

Plains shares rose $2.13 to close at $17.81 on the American Stock Exchange; shares of Akron, Ohio-based Goodyear fell 94 cents to $73.56 on the New York Stock Exchange.

The pipeline provides an outlet for oil producers in California's San Joaquin Valley, which produces about 700,000 barrels a day, or 15% of continental U.S. production. Most of that is delivered to refineries in San Francisco and Los Angeles.

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