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Local Firms Snatch Up More Gas Stations as Big Oil Moves On

washingtonpost.com

Washington Post Staff Writer
Monday, July 20, 2009

It’s been 83 years since two road engineers, Jim Wills and Harold Swann, started Southern Maryland Oil to sell customers heating oil, kerosene and gasoline. Today, their firm has grown into one of the region’s biggest fuel wholesale businesses.

Last week, SMO’s parent company, the Wills Group, boosted its already large stake in Maryland’s motor fuel market by buying a half interest in 73 Shell-branded gasoline stations.

The agreement to form a joint venture with Shell’s marketing arm, Motiva, raises to more than 300 the number of gasoline stations supplied and largely managed by the Wills Group, giving it more than a 10 percent share of Maryland’s motor fuel market.

The newly acquired stations will continue to sell gasoline under the Shell brand and will get $3 million worth of equipment upgrades, Wills said.

The new joint venture agreement between LaPlata-based Wills, now run by Lock Wills, the founder’s grandson, and Shell, the U.S. affiliate of Royal Dutch Shell, is part of a nationwide trend. Giant oil companies are slowly getting out of the competitive, low-margin retail gasoline business, turning over their branded stations to local companies familiar with the markets and willing to squeeze profits from the pumps.

“It’s a tight business,” said Mel Strine, executive vice president of retail marketing at the Wills Group. “It’s one where you’ve got to be really efficient, because if you’re not, you lose in a hurry.”

Shell joins a list of other companies focusing more on oil and gas exploration, production and refining activities. In 2007 and 2008, ConocoPhillips sold all of its U.S. company-owned and dealer-operated outlets. In June 2008, Exxon Mobil said it would sell all of its 820 company-operated outlets. Exxon also sold its “On the Run” convenience stores to a Canadian firm, Couche-Tard.

Shell has made such moves before. In 2007, it sold 276 retail outlets to Tesoro, an independent refiner and marketer.

“It’s a trend,” said Fadel Gheit, oil analyst at Oppenheimer & Sons. “The companies that are expanding in the retail side of the business are the Lukoils of the world and the private franchises and the big-box stores” such as Costco. Lukoil, a Russian firm, bought Getty stations to establish a U.S. foothold.

Gheit said that Royal Dutch Shell’s chief executive Peter Voser, the company’s former chief financial officer, plans to improve the oil giant’s cost structure. That makes gasoline stations, with high volumes of sales and low profit margins, candidates for divestment.

“The major oil companies are exiting the marketing portion of what they call the downstream,” said Strine. “They are looking for key wholesalers who have the wherewithal to not only purchase but service these locations and enhance the brand.”

The Wills Group’s SMO pushes gasoline sales with promotions. On Thursdays, it gives 5 cents off motor fuels. Customers with Shell MasterCards get an additional 5 percent savings.

Half of the new stations have repair bays.

The Wills Group bought Shell stations in Baltimore and southern Maryland in 2000 and other Shell stations in the Richmond and Tidewater areas in 2004. It sells Shell gasoline at its Dash In stations.

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