Running on fumes

Crown Central Petroleum Corp. is nearly out of gas. Crown once boasted more than 330 gas stations and convenience stores to go with its shipping terminals and two Texas oil refineries. This month it sold nearly all of its stations and stores in Maryland and Virginia for an undisclosed price, and it hopes to sell its remaining assets by the end of the year.

Gas stations could continue using the Crown name under licensing agreements, but the company built over decades and run by a prominent Baltimore family will disappear.

Crown, which traces its roots in Baltimore to 1930, began marching toward liquidation three years ago after its owners bought all of Crown’s outstanding stock and folded the firm into a privately held holding company.

“They don’t have a long-term desire to be in the business anymore,” said Ray Ory, an oil refinery industry consultant in Katy, Texas.

Crown officials say they are liquidating, because it is the only way to generate enough money to pay $125 million in debt coming due in February.

Crown is controlled by Henry A. Rosenberg Jr. and his family through Rosemore Inc., a holding company run by the Rosenberg family. Mr. Rosenberg is the grandson of Louis Blaustein, who led a group of investors that bought Crown in 1930. The company was started in 1917.

Mr. Blaustein built his fortune by starting American Oil Co. in 1910. In 1923, it became a partially owned subsidiary of the Standard Oil Trust. Mr. Blaustein’s descendants kept stock in Amoco, which merged with British Petroleum in 1998 to create BP Amoco PLC.

Crown is tiny by comparison; but in 2000, the company had $1.9 billion in revenue and employed more than 2,600 workers. It also had a net loss of $8.2 million that year and accrued millions in losses during its last six years as a public company.

Mr. Rosenberg devised a plan to stop the hemorrhaging by selling Crown’s refineries, keeping its retail outlets and operating as a private company. The plan failed when the company couldn’t find a buyer for the refineries after the September 11, 2001, terrorist attacks, said Malcolm Turner, a Dallas oil-industry consultant who tried to sell the refineries on behalf of Crown.

Crown announced its decision to sell all its assets last year.

“It’s a sad story and an unfortunate outcome. It is now self-evident that the company would have made a lot of money if they had been better funded and better managed,” Mr. Turner said.

Crown owns two refineries in Texas capable of producing a combined 152,000 barrels a day. That is small by industry standards, and as a small oil refiner, Crown doesn’t have oil reserves and is subject to crude oil’s volatile price swings.

In addition, federal clean-air requirements will force refinery operators to make cleaner, low-sulphur gas.

The new standards take effect for most refineries in 2006, and meeting them could require an average investment of $61.5 million at each refinery, according to the National Petrochemical and Refiners Association, a trade group.

“The clean-air requirements were definitely a factor” in the decision to sell the refineries, said Andrew Lapayowker, Crown’s vice president and general counsel.

Crown also found it more difficult to compete in the retail market as competitors got larger through mergers that created giants such as ExxonMobil Corp.

Crown’s revenue from sales of gasoline fell from $881.1 million in 1996 to $732.6 million in 1999 before increasing to $1.1 billion in 2000, thanks to a 66 percent increase in gas prices that year.

But few of Crown’s gas stations are on major highways, so the company can’t take advantage of the surge in demand that occurs in summer, for example, when Americans hit the road.

That didn’t prevent Crown from finding a buyer, however. The Petroleum Marketing Investment Group bought 150 Crown stations last week. Crown has continued to sell its stations piecemeal and owns fewer than 10 of them now. It is negotiating to sell those, too.

At its height, Crown had more than 330 gas stations and retail outlets. That should have given Crown the leverage to market itself broadly to motorists, said Betsi Lueth, president of Meridian Associates Inc. and a Texas consultant for gasoline marketers.

“Size should have brought them an economic advantage, and the refineries should have brought them an economic advantage. Something slipped,” she said.

Many gas station owners have bailed out of the business. Margins have slipped to as little as a penny per gallon as consumers demand lower fuel prices and station owners rely on the sale of everything from tobacco to beer to generate revenue, Miss Lueth said.

Analysts aren’t in agreement about the cause of Crown’s demise. Mr. Ory said Crown wasn’t big enough.

“In this industry, smaller companies, especially those that have chosen not to engage in aggressive expansion, find themselves unable to create something that can be competitive,” he said.