Imperial Oil to sell Esso brand gas stations to Canadian distributors

By Staff Writer

Mar 09, 2016 07:15 AM EST

Imperial Oil Ltd, a Canada-based petroleum company, said it has entered into an agreement to sell its 497 Esso retail fuel stations for about C$2.8 billion. The company said it will sell its gas stations to five Canadian fuel distributors. This transaction reflects the company's aim to widen its refining and oil sands businesses.

With regard to this transaction, Alimentation Couche-Tard, a distributor based in Canada, will buy stations in Quebec and Ontario, while 7-Eleven Canada will acquire gas stations in British Columbia and Alberta. In addition, Wilson Fuel will purchase stations in Newfoundland and Nova Scotia, while Parkland Fuel will buy sites in Manitoba and Saskatchewan. Harnois Groupe petrolier will acquire stations in Quebec.

Energy firms across the globe are seeking to disperse their assets in order to sustain the poor oil market. The ongoing slump in oil market has led many oil companies to a miserable condition. Experts attributes this slump in oil prices to over supply from OPEC countries and arrival of Iran to the international oil market. But, there is steep fall in demand from oil consuming countries like China.

This transaction will enable Esso brand stations to have a robust presence in the country and also ensure continuous development to benefit its shareholders and consumers, according to Rich Kruger, chief executive officer of Imperial. Currently, Imperial Oil operates over 1700 Esso brand stations in Canada.

Imperial Oil has been considering the sale of its fuel sites from January, 2015. The company will continue to provide fuel to its gas stations even after the sale. Brian Hannasch, CEO of Courche-Tard, said that the acquisition property will help the company to widen its business network and extend its customer base. As part of the sale deal, Couche-Tard will acquire Imperial's 279 stations in Quebec and Ontario for nearly $1.7 billion.

In February, Imperial Oil reduced its budget for 2016 to C$1.8 billion, down from 2015 spending of nearly C$3.6 billion. In addition, the company reported earnings of C$102 million during the final three-month period of 2015, down 85% from the previous year period, as reported by THE GLOBE AND MAIL.

The transaction, which is subject to governing approvals, is anticipated to close within the end of 2016. The company noted that Parkland Fuel will manage the operations at the On the Run/Marche Express inside the Esso network. Moreover, loyalty and other marketing programs in Esso brand stations will remain unaltered after the completion of the transaction.

Micheal Kay, Bloomberg Intelligence researcher, said that Imperial Oil is curbing its investments due to weak oil-sands prices and that mere cost reduction strategy does not help in the long run to withstand the falling energy prices. Imperial Oil manages three oil refineries in Canada.

The sale deal will help Imperial Oil to concentrate on its main refining business. The company believes to boost its business portfolio with this sale proceeds.

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