Dallas-based Holly Corp. announced today it will purchase Sinclair Oil Corp.’s Tulsa refinery.
The total purchase price is $128.5 million, which includes $54.5 million in cash and $74 million in Holly common stock. The deal includes Sinclair’s 75,000 barrel per day refinery and approximately 2.3 million barrels of storage. Holly also will purchase about 500,000 barrels of inventory at the time of closing.
Holly plans to integrate the Sinclair facility with its own existing 85,000-barrel per day refinery in Tulsa. Holly bought its refinery from Sunoco about a year ago.
Purchasing the Sinclair refinery will save Holly approximately $125 million in expected capital costs needed at its own Tulsa plant.
“This acquisition effectively increases Holly’s overall crude capacity by 40,000 BPD, eliminates a net amount of approximately $125 million of required near term capital expenditures, and dramatically raises the complexity and flexibility of our Tulsa operation, while providing us with the opportunity to increase capacity at the combined Tulsa refinery through relatively modest capital expenditures if future market conditions and economics warrant," said Matt Clifton, chairman and CEO of Holly, in a prepared statement.
Sinclair has spent more than $300 million over the past five years at its Tulsa refinery to meet EPA standards and to produce 100 percent Ultra Low Sulfur Diesel (“ULSD”). Sinclair also if completing other required emission reduction projects. Holly estimates that it will be required to make an additional investment of approximately $16 million for these projects, according to a company statement.
Holly also might build new pipelines to link the two refineries, which are about two miles apart. That will allow Holly to create an integrated facility, which will enable it to refine various products at either plant as needed.
"The integrated facility, like Holly’s other two refineries in the Southwest and Rocky Mountain markets, will be a tier one competitor in the Midcontinent markets it serves. We are confident that this is an outstanding transaction for Holly stockholders,” Clifton said.
The transaction is subject to customary closing conditions as well as certain regulatory conditions. The transaction has already completed the required Federal Trade Commission review process.