NTR Acquisition Co. said Monday that it had agreed to buy Bakersfield-based Kern Oil & Refining Co. for $286.5 million and that it planned to expand the operations over the next few years to increase the state's fuel supplies.
Kern Oil, which runs the state's smallest gasoline-making refinery in its headquarters city, is owned by Casey & Co., a privately held company led by President Larry Delpit.
The refinery has been for sale since at least July, and the deal with NTR makes it the fifth California refinery to change hands in less than three years.
The cash acquisition, which includes an investment from Occidental Petroleum Corp., is the first for NTR, a Danbury, Conn., public company that was formed to purchase refineries and other energy assets. NTR would also pay an estimated $35 million for on-hand inventory when the purchase is completed.
"This is pretty exciting for us," NTR Chief Executive Mario E. Rodriguez said. "We have an opportunity to enter into the market at a reasonably attractive price . . . and it makes compelling sense for NTR to capitalize on the opportunity."
NTR, which plans to change its name to NTR Energy Co., said it expected to complete the Kern Oil acquisition in early 2008. The company's shares rose 5 cents to $9.67. The deal requires approval from NTR shareholders and clearance from federal regulators.
Rodriguez said his group had sketched out four projects that would help the refinery process the inland region's cheaper San Joaquin heavy crude oil as well as produce more gasoline and diesel from each barrel of oil. The projects would take three years to complete and would cost an estimated $540 million, he said.
"They clearly have more ambition, and you can see that the new owners are planning to really invest in the place," industry consultant David Hackett said of the Kern Oil sale. "Refining still is a pretty good business . . . but the price strikes me as an awful lot of money."
Kern Oil, built in 1934, has 110 employees and is one of 14 refineries in California that can make the state's special blends of gasoline and diesel to meet air pollution standards in the state.
The plant can process an estimated 27,000 barrels of crude oil a day. Its average daily output is an estimated 370,000 gallons of gasoline and about 357,000 gallons of diesel, as well as fuel oil, gas oil and solvents for the paint and coatings industries, according to NTR. Operating profit averaged $57 million from 2004 through 2006.
NTR raised much of the money for the Kern Oil deal through a public offering completed less than nine months ago. Occidental Petroleum, a major oil producer and a supplier to the Kern Oil refinery, added to NTR's coffers by investing $35 million in the company through a preferred stock transaction.
Occidental spokesman Richard Kline said the Westwood-based oil company had invested in companies through preferred stock before. Occidental made a similar investment in refiner Premcor Inc., and cashed out with a gain of $463 million in late 2005 when Premcor was sold to Valero Energy Corp.
Although Occidental expects to make a profit on its investment in NTR, Kline said, "This is really about finding a home for our oil." Kern Oil has oil suppliers in addition to Occidental, but it would need more of the heavy variety produced by Occidental if the Kern projects go as planned.
The most recent refinery deal in California came this year when San Antonio-based Tesoro Corp. purchased Shell Oil Co.'s Wilmington refinery as part of a $1.76-billion sale that also included a Shell distribution terminal, petroleum inventories and 278 Shell gas stations in Southern California.
Late last year, Alon USA Energy Inc. bought two small California refineries, -- Edgington Oil Co. of Long Beach and Paramount Petroleum Corp. -- for $52 million and $407 million in cash and debt, respectively. In March 2005, Shell sold its Bakersfield refinery to truck-stop operator Flying J Inc. of Ogden, Utah, for an estimated $130 million.