Calumet inks deal for sale of Wisconsin refinery, downstream assets

Husky Energy Inc., Calgary, has entered a deal with Calumet Lubricants Co. LP, a unit of Calumet Specialty Products Partners LP, Indianapolis, to buy subsidiary Calumet Superior LLC, which owns and operates 47,500-b/d refinery in Superior, Wis., refinery as well as other downstream assets in the region.

As part of the Aug. 11 definitive agreement, Husky will pay $435 million in cash plus an additional payment for net working capital, inventories, and reimbursement of certain capital spending to be determined at closing, the companies said in separate releases on Aug. 14.

Upon completing the deal, Husky Superior Refining Holding Corp. would assume full ownership of Calumet Superior’s refining business, which alongside the Superior processing plant and a combined 3.6 million bbl of crude-product storage, specifically includes:

• The proprietary pipeline connecting the refinery to the Magellan pipeline system.

• The on-site Superior product terminal and truck-rail racks.

• The off-site Duluth product terminal and truck rack in Proctor, Minn.

• The off-site Crookston and Rhinelander, Wis., asphalt terminals and truck racks.

• The leased Duluth marine terminal.

• Certain crude-gathering assets and line space in North Dakota, including lease-automatic custody transfer stations at Stanley, Beaver Lodge Station and Alexander.

• Certain rail logistics assets.

• A wholesale fuels business that fuels to Calumet-branded gas stations throughout Minnesota, Wisconsin, and Michigan.

In addition to retaining the Superior plant’s current employees, Husky has committed to investing in key capital projects to improve operational efficiency of the refinery, including Calumet’s already planned Superior Flexibility Project (SFP), according to Calumet.

Husky said the refinery acquisition, which will provide direct connectivity with its own pipeline terminal in Hardisty, Alta., via the Enbridge Mainline to allow further margin capture from heavy-light oil differential pricing to West Texas Intermediate, aligns with the company’s strategy of capturing full value from its growing heavy oil production.

Alongside increasing Husky’s existing storage assets in Superior as well as enhancing its US market access, the purchase also provides the company additional asphalt production that, combined with new capacity scheduled to come online 2018, will help accelerate the operator’s plan to capitalize on the growing asphalt demand spurred by increased spending on North American infrastructure projects.

With the proposed acquisition of the Superior refinery now under way, however, Husky said it will postpone an investment decision to expand asphalt capacity in Lloydminster, Sask., for reconsideration until sometime after 2020 as heavy oil output continues to grow.

Pending customary closing adjustments and regulatory approval, the companies said they expect to finalize the transaction by yearend.

SFP

Announced in early 2017, the SFP proposes upgrades to increase the plant’s ability to process a wider variety of crudes to enable improved product yield, recovery, and overall operational performance as well as capture higher margins post the refinery’s scheduled 2018 turnaround, Timothy Go, chief executive officer of Calumet’s general partner Calumet GP LLC, told investors in the quarterly earnings call for first-quarter 2017.

While Calumet confirmed in February it previously approved and filed permit applications for the proposed flexibility project, further details regarding SFP have yet to emerge.

The Superior refinery processes a mix of light and heavy crudes delivered to the plant via the Enbridge pipeline system from North Dakota’s Bakken shale formation and Western Canada, which in 2016, included the following grades: North Dakota Sweet (e.g., Bakken), Superior Canadian Heavy, Canadian Synthetic, and Mixed Sweet Blend.

Contact Robert Brelsford at [email protected].