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ENERGY

ConocoPhillips unhooks from gas station business

The agreement with PetroSun allows the big oil firm to focus on its other operations.

August 28, 2008|Martin Zimmerman | Times Staff Writer

Houston-based ConocoPhillips became the latest big oil company to get out of the filling station business, agreeing Wednesday to sell its last 600 U.S. gasoline stations to PetroSun Fuel of Seattle.

The purchase price wasn't disclosed, but published estimates of $800 million were considered close to the mark.

The stations, largely on the West Coast, operate under the Conoco, Phillips 66 and 76 brands.

PetroSun, which has been accumulating stations, said it planned major upgrades in product offerings to focus on the more profitable convenience store side of the business. The company will emulate upscale and Asian convenience store chains such as Famima that focus on high-quality fresh foods sold in clean, stylish surroundings.

"Convenience stores in the United States only cater to a certain portion of the public," PetroSun Chief Executive Sam Hirbod said. "They don't cater to professionals or to soccer moms.

"We're going into the new phase of what convenience stores are and what they offer. We might have a product mix that you might find in a Whole Foods, not a 7-Eleven."

Hirbod likened the concept to a small grocery store that sells gasoline rather than a gasoline station that sells food and other items. He said he expected gasoline to account for no more than 40% to 45% of total sales compared with 75% for the typical convenience store-gas station.

The deal would expand PetroSun's stable of stations to 720. The deal includes some prime locations in Los Angeles and other major metropolitan areas, Hirbod said, such as the 76 station on Century Boulevard near Los Angeles International Airport.

ConocoPhillips and other big oil companies such as Exxon Mobil Corp. and Chevron Corp. have been selling retail gas stations to focus on more profitable exploration, production and refining operations.

Running gas stations and convenience stores "is not an area that oil companies excel in," industry consultant Andrew Lipow said. As a result, the number of gas stations has been declining for years.

This year's surge in oil and gas prices, while profitable for producers, was hard on retailers, which in most cases couldn't raise pump prices fast enough to keep up with what they were paying for gas at the wholesale level.

The ConocoPhillips stations will be owned by a newly formed PetroSun affiliate called Pacific Convenience & Fuel. Under the deal, Torrance-based gasoline wholesaler Tower Energy Group will supply dealer sites in California.

Petroleum industry consultant Tim Hamilton questioned whether the entrepreneurs who run many of the stations being sold to PetroSun will go along with the deal.

Laws in California and Washington state, where many of the stations are located, give dealers the right of first refusal to buy their stations if they are put up for sale, Hamilton said.

Hamilton estimated that as many as two-thirds of the stations may be run by independent operators but owned by ConocoPhillips.

Rick Perez, a Bay Area attorney who has represented service station owners in lawsuits against oil companies, said operators of stations owned by ConocoPhillips had been contacting him even before Wednesday's deal was announced. "They're very concerned that their station was going to be sold," Perez said. "It can be very difficult for a dealer to take on a major oil company."

Although it's extremely unlikely that dealer opposition could scuttle the sale to PetroSun, he said, some disgruntled operators could end up going their own way as independents.

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martin.zimmerman @latimes.com

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