With Retail Spinoff Complete, Valero Considers Midstream MLP

SAN ANTONIO – Valero Energy Corp. may not be done restructuring its company.

Although Valero officially spun off 80 percent of its retail division as CST Brands Inc. today, Chairman and CEO Bill Klesse acknowledged the company will now consider spinning off its midstream assets into a master limited partnership (MLP).

"We will definitely look into that," he said during Valero’s first-quarter earnings call yesterday.

Klesse did not expand on which exact assets would be spun off. If what competitors have done is any indication, pipelines, terminals and transportation assets all could be among the assets in the new company, which would need to be approved by the U.S. Securities and Exchange Commission.

Phillips 66 and Marathon Petroleum Corp. – parent of Speedway LLC – are among the convenience store-related companies that have already announced they will spin off midstream assets into an MLP. Marathon Petroleum already completed the transaction in October, and named the new company MPLX LP.

Meanwhile, Phillips 66 Chairman and CEO Greg Garland announced in January the company would create a midstream MLP in the second half of this year.

To qualify for MLP status, a partnership must generate at least 90 percent of its income from what the Internal Revenue Service deems "qualifying" sources. Those qualifying sources include activities related to the production, processing or transportation of oil, natural gas and coal.

San Antonio-based CST Brands will first trade on the New York Stock Exchange tomorrow, May 2, under the ticker symbol CST. It will operate 1,033 U.S. convenience stores and gas stations that carry the Valero Corner Store banner.