Once considered a close friend of the late Sir John Compton and Saint Lucia, in that order, Leon Hess’ Hess Corporation is about to cease operations here, at least under its old name. On Thursday, a release from the company’s office in New York indicated Hess Corporation had “entered into an agreement with Buckeye Partners, L.P. to sell its US East Coast and Saint Lucia terminal network for a total consideration of US$850 million in cash.”
As a result of this sale Hess is expected separately to release approximately US$900 million of working capital, with another US$100 million continuing to be retained by the retail business as part of its ongoing operations.
The announcement has certainly not allayed the fears of local employees who have been raising questions over the status of Hess since the closure of its St Croix refinery in January of 2012. Hundreds of jobs were lost, resulting in a crippling impact on the economy.
Back in August, Hess sources told the STAR that many of the employees here were uneasy about the lack of information regarding the sale of the crude oil, refined products and storage terminal at Cul de Sac.
According to the Saint Lucian Prime Minister Kenny Anthony in response to the information at the time: “If the sale does go through, and one does not know (that it will), because in the discussion that followed the disclosure, Hess Oil Corporation did indicate that if they do not get a sale in accordance with the terms, they have every intention to remain here. So we shall see. But they have indicated they prefer to focus on oil exploration instead of the buying and selling or distribution of fuel.”
According to an insider at the time: “Efforts to find out about the status of the sale have been stonewalled.”
Employees were reportedly told that although a potential buyer had been secured, negotiations were not yet complete. Added to the frustrations of the employees were unresolved questions about their future once the company is sold. Still unsettled is the issue of employees not yet compensated for working on public holidays.
Our own investigations revealed negotiations between the employees and management of Hess had hit a roadblock, with the company refusing to budge. When contacted this week, employees told the STAR they were informed of the final sale only on Wednesday.
Under the new purchasing agreement the Houston-based Buckeye Partners noted that the acquisition of the marine terminals located on the East Coast of the United States and Saint Lucia will expand its footprint into several key, high growth markets in the Southeast, including Florida. The terminal in Saint Lucia has storage capacity for about 10 million barrels of crude oil and refined petroleum products, as well as deep-water access.
Clark Smith, President and Chief Executive Officer of Buckeye Partners, said: “This acquisition is a tremendous opportunity for Buckeye to create value by overlaying our commercial operating model on a premier platform of complementary assets. We have a proven track record of value creation through executing on opportunities to apply the Buckeye model to terminals previously operated primarily on a proprietary basis such as these.”
Buckeye expects to close the deal before year’s end. The acquisition, which includes a multi-year storage and throughput commitment by Hess, will be immediately accretive to Buckeye Partners’ distributable cash flow per unit, excluding first year transition-related expenses. The company also expects the deal will provide long-term support for further distribution growth. Hess noted that the sale of the terminal network, along with the sales of four upstream producing assets completed earlier this year, and the announced sale of the Energy Marketing business, brings its total year-to-date divestitures to $5.4 billion. Hess has announced that significant asset divestitures are part of its transformation to a pure exploration and production company.
One employee told the STAR that while he and his fellow workers may be guaranteed a job until year end, they are uncertain about the future. With the unemployment figures growing steadily worse (2,000 job losses were announced last week for the third quarter of 2013), the fourth quarter and new year prospects seem dismal. With no new capital projects on the horizon and the future of several businesses in the balance, the nation’s future appears particularly bleak.
Hopefully the labour minister Robert Lewis will soon issue a reassuring statement!