Hopes of new Ampol takeover bid fall

AFR – Friday, 15 Jan 2021

Fuels supplier Ampol has posted a smaller than expected fourth-quarter loss at its oil refinery in Brisbane but the news was offset by dented hopes for a renewed takeover tilt by Alimentation Couche-Tard as the Canadian giant turned its attentions to France’s Carrefour SA.

Couche-Tard , which walked away from a $8.8 billion takeover proposal for the then Caltex Australia in April, offered a friendly €20 per share for the French supermarket chain, valuing it at about €16.2 billion ($25.4 billion). Analysts said the size of the proposed deal could mean it was less likely to approach Ampol again.

‘‘ We think the sheer size of the offer by Couche-Tard for Carrefour could be interpreted by the Australian market as a potential pushback on a possible Ampol bid revisit,’’ said RBC Capital Markets analyst Gordon Ramsay.

Mr Ramsay said that should the offer be rejected by the French government – which has voiced reservations about the takeover – then the Ampol-Couche-Tard story could regain momentum, particularly if Ampol were to decide to close down its refinery .

Ampol’s main draw for Couche-Tard was its convenience retailing arm, with the Canadian firm having little track record in processing and refining oil.

The Lytton refinery posted a $4 million loss for Ampol in the December quarter, taking the full-year deficit at the plant to $145 million.

The scale of the loss signals the plant could still be closed despite federal government subsidies on offer for the sector.

Still, the full-year loss at Lytton is some $20 million smaller than market consensus, Ampol said. It reiterated that economic conditions this year ‘‘ remain uncertain as a result of continued COVID-19 impacts on international and domestic demand, further depressing already soft refining margins’’ .

Shares in Ampol closed up 0.11 per cent at $28.58 yesterday.

The Morrison government has offered a production subsidy to domestic oil refineries in a bid to head off further closures and preserve security of supply. But the interim subsidy, which kicked in on January 1, has not been taken up by Ampol, which is already reviewing the future of the Lytton plant, with the possibility it may be closed and converted into an import terminal.

Ampol reiterated yesterday that the review ‘‘ is considering all options’ ’ and will be completed this June half.

So far, only Viva Energy has accepted the subsidy, for its Geelong refinery , with ExxonMobil confirming last week it is still evaluating the government’s package of measures for its Altona plant. A condition of the ‘‘ refinery production payment’ ’ is that owners commit to keeping their refinery in operation.

The pandemic decimated demand for aviation fuel and hit production margins for all refiners . BP has already controversially elected to close its Kwinana refinery in Western Australia.

The refining margin at Lytton was $US5.13 per barrel, down from $US9.08 a barrel in the first half of 2020 and well below the historical average.

The quarterly margin was actually above the Singapore average margin of $US4.73 a barrel because of very low costs of importing crude in the quarter.

The Lytton plant, which resumed output in September after an extended maintenance outage, produced 1.369 billion litres in the quarter, taking production for 2020 to 3.496 billion litres.