A deal that would have prevented the closure of Murphy Oil Corp.'s refinery in the United Kingdom fell through this week after conditions needed for the sale of the refinery were not met, the El Dorado company said.
Murphy Oil's subsidiary, Murco Petroleum Ltd., had agreed earlier this year to sell its Milford Haven refinery and terminal assets to Klesch Refining Ltd.
"The parties are not engaged in further discussions," said a statement by Murco Petroleum.
An email to Klesch Refining requesting comment was not returned Wednesday.
Murco Petroleum said it will now operate the site as a petroleum storage and distribution terminal.
"The refinery is currently in a period of shut-down and will be decommissioned while the company seeks a buyer for the terminal facility along with the three inland terminals," the Murco Petroleum statement said.
Murphy Oil said in July that the Wales refinery, which has a capacity of 135,000 barrels of oil per day, employs 370 full-time workers. Murphy Oil announced the collapse of the deal in a news release early Wednesday.
Reuters news agency reported Wednesday that more than 300 of 450 employees at the refinery would be laid off, with the remaining employees operating the terminal.
When asked what will happen to the employees at the facility, a spokesman for Murphy Oil told the Arkansas Democrat-Gazette on Wednesday that there will be a "significant number of redundancies."
The deal to sell the refinery was supposed to close by the end of October, but Reuters reported Monday that the negotiations had been been postponed until later this week.
A source familiar with the matter previously told Reuters that the sale was delayed in part because of concerns that a proposed $160 million loan guarantee from the Welsh government could violate European Union state aid rules.
The company completed the sale of its retail gasoline assets in the United Kingdom to Motor Fuel Group last month for an undisclosed amount.
Murphy Oil Chief Executive Officer Roger Jenkins has previously said the company hoped to transfer about $550 million back to the United States after the sale of its U.K. assets, including the refinery and terminal assets.
Murphy Oil has been trying to shed its refining and retail assets in the U.K. for more than two years in an effort to exit the market.
"To be sure, this is not the first time this has happened. There have been several 'close but no cigar' moments over the past year when the Milford Haven sale fell through at the last moment," said a note Wednesday by analysts with Raymond James and Associates.
"Reasons for why the sale failed were not given, but we wouldn't be surprised if Klesch, a relatively obscure, privately held company, simply couldn't get the financing in place," the note said, adding that analysts aren't "too optimistic" about Murphy Oil finding another potential buyer.
Murphy Oil has struggled to divest its U.K. assets because of the challenging refining industry in Europe where margins have hit multiyear lows, according to analysts.
"The UK refinery market has been downright abysmal," said Carlos Newall, an equity research associate with Raymond James and Associates.
The collapse of the deal with Klesch Refining will not have a huge effect on Murphy Oil, Newall said.
"This is one of the smallest refineries in the U.K.; it's not necessarily a huge asset," he said.
Murphy Oil Corp. shares rose almost 2 percent to close Wednesday at $52.25 on the New York Stock Exchange.
Business on 11/06/2014