Newspaper article THE JOURNAL RECORD

Southland Considers Options for Citgo Profits

Newspaper article THE JOURNAL RECORD

Southland Considers Options for Citgo Profits

Article excerpt

DALLAS - In an effort to maximize on Citgo Petroleum Corp. profits, Southland Corp. said Monday it is considering several options, not exclusive to a sale of its half the company.

Citgo, based in Tulsa, recorded its best year ever in 1988 with a 93 percent hike in after-tax earnings to $165.6 million on revenues of $4.1 billion. For the first quarter 1989, it reported a net income of $36.6 million, down 12.6 percent from the same period last year.

For its 50 percent interest, Dallas-based Southland reported $17.3 million as its equity in the after-tax earnings of Citgo for the first quarter, and in January 1989 received a $20 million cash dividend from Citgo for 1988.

Options to derive additional benefits from Citgo, Southland company officials said, include the sale of Southland's 50 percent, joint ventures and leverage recapitalization among others.

No changes are contemplated in company management, nor any disruption or change in its direction, operations, or existing relationships with suppliers, customers and employees, said Jere W. Thompson, president and chief executive officer of Southland.

Citgo, engaged in the manufacturing, transportation and marketing of fuels and lubricants, is jointly owned by Southland and an affiliate of Petroleos de Venezuela, the state-owned oil company of Venezuela.

Citgo employees and Petroleos de Venezuela have been advised of Southland's plans, Thompson said, and the foreign country has confirmed its decision to retain its 50 percent ownership.

Of Citgo's 3,000 employees, about 125 are in Tulsa. There are about 8,500 branded Citgo stations, and another 1,200 are planned to open this year. About 274 existing stores are located in Oklahoma.

"Regardless of any option we might choose to pursue, Southland has every intention of continuing its product supply contract with Citgo, which is beneficial to both companies," Thompson said.

In addition, Southland is investigating whether a joint venture, other financing options or a sale would produce a greater economic return from its five distribution centers and six food processing centers than their current substantial contribution to Southland's cash flow. …

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