Thoughts on Exxon’s decision to exit the retail gasoline station business. Courtesy of Michael Steinberg, at Click Broker.
Exxon Mobil: The Tiger is Leaving the Tank
The Wall Street Journal “Out of Gas: Exxon to Exit Low-Profit Retail Pumps” reports that the major integrated oil companies have either exited or are about to exit the retail gasoline station business. Exxon Mobil (XOM) plans to sell all of its 2,220 stations over the next few years. Exxon had already sold 27.6% of its company owned stations since 2003. BP PLC (BP) will be out of retailing by 2009 and ConocoPhillips (COP) has very few company owned stations left.
The companies no longer want to tie up capital and management resources in a low margin business. Garfield Miller (Aegis Energy Advisors) estimates the stations are worth between $500K and $2M each. The Journal expects a good one-time payday for the companies.
The Journal cites competition from Costco Wholesale (COST), Wal-Mart Stores (WMT) and Home Depot (HD) as the game changer. Small and medium size chains have sought bankruptcy.
I have trouble taking both the margin and competition arguments at face value. I believe with the move toward electric vehicles, filling stations are becoming a depreciating asset. It is a sell them while they can attitude. Despite its rhetoric, even Exxon knows the landscape for transportation fuels is rapidly changing.
No Disclosures.
Michael Steinberg is a professional IT financial systems consultant and a non-professional investor.
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