SemGroup set to acquire Houston Fuel Oil Terminal Company

SemGroup set to acquire Houston Fuel Oil Terminal Company

The SemGroup Corporation has executed a definitive agreement to acquire Houston Fuel Oil Terminal Company (HFOTCO), one of the largest oil terminals in the US, from investment funds managed by Alinda Capital Partners.

The 16.8-million-barrel terminal is located on the US Gulf Coast with pipeline connectivity to the local refining complex, deep water marine access and inbound pipeline and rail & truck receipt capabilities from all major producing basins. The assets are located on 330 acres on the Houston Ship Channel, one of the most active trading centres for residual fuel oil and crude oil in the world.

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The business is fully supported by take-or-pay contracts that have been in place for an average of 15 years. HFOTCO is currently executing on contractually supported growth projects, including a new ship dock, a new pipeline and connections, as well as an additional 1.45 million barrels of crude oil storage, expected to be in service mid-2018.

SemGroup President and CEO, Carlin Conner said: “This is a transformational acquisition that adds tremendous stability to our business and provides a dynamic platform for growth. Consistent with our strategy to diversify our portfolio and become more refinery facing, HFOTCO brings a well-established base of high-quality, long-tenured customers. At the same time, the terminal’s premier location on the Houston Ship Channel provides deep water access and is well positioned to capture increasing export volumes. With the addition of HFOTCO, SemGroup will be uniquely positioned to capture the future trends in exporting crude oil and refined products resulting from the near and long-term anticipated growth in U.S. shale production.”

The total purchase cost consists of two payments. The first payment will be $1.5bn, including an estimated $785 million of existing HFOTCO debt. The second payment will consist of an additional $600m in cash before the end of 2018.

Managing Partner of Alinda Capital Partners, Chris Beale said: “The HFOTCO management team has done an excellent job of growing and diversifying a world-class terminal business. We believe that adding this asset to SemGroup’s portfolio is a great way to leverage customer relationships, strengthen both businesses and create additional shareholder value.”

The acquisition is expected to close in the third quarter of 2017.

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11th June 2017

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