HollyFrontier to buy Shell’s Puget Sound refinery, related assets

Independent refiner HollyFrontier Corp. has reached a deal with Royal Dutch Shell PLC to purchase subsidiary Equilon Enterprises LLC (dba Shell Oil Products US)’s 149,000-b/d Puget Sound refinery and related logistics assets near Anacortes, Wash., about 80 miles north of Seattle (OGJ Online, Mar. 9, 2020).

As part of the definitive agreement signed on May 4, HollyFrontier will purchase the Puget Sound refinery, as well as an on-site cogeneration facility and related logistics assets, for $350 million, plus hydrocarbon inventory to be valued at closing with an estimated current value in the range of $150-180 million, the companies said in separate releases.

HollyFrontier—which will fund the acquisition with cash on hand and a 1-year suspension of its regular quarterly dividend declared for first-quarter 2021—said it expects the transaction to generate about $150-200 million of mid-cycle annual EBITDA and be immediately accretive to the company’s earnings and free cash flow.

In addition to refining assets and the cogeneration plant, the acquisition will include the following logistics infrastructure:

• A deep-water marine dock with two berths ranging from 36-42 ft in draft, accommodating 42,000-125,000 dwt.
• A light-product loading, two-lane truck rack for gasoline and diesel.
• A rail terminal.
• A total of 97 storage tanks with a combined capacity of about 5.8 million bbl for crude, products, and other hydrocarbons.

Shell confirmed that while HollyFrontier also will acquire product offtake agreements in support of Shell’s existing retail marketing business in the Pacific Northwest, Shell’s offsite logistics assets are excluded from the sale.

HollyFrontier also will offer ongoing employment to existing Puget Sound refinery employees, the companies said.

HollyFrontier said purchase of the Puget Sound refining and logistics assets complements its existing refining business given the refinery’s proximity to the Pacific Northwest premium product markets—including Washington, Oregon, and British Columbia—and its access to cost-advantaged Canadian and Alaskan North Slope (ANS) crudes.

For Shell, divestment of the Puget Sound assets forms another part of its broader global program of reducing its global refinery footprint to focus investments on a core set of integrated manufacturing sites more strategically positioned for the transition to a low-carbon future (OGJ Online, Nov. 6, 2020).

Subject to regulatory clearance and other customary closing conditions, the transaction is scheduled to close during fourth-quarter 2021.

Located on 850 acres about 80 miles north of Seattle, Wash. and 90 miles south of Vancouver, BC, the Puget Sound refinery is equipped to process a mix of light, medium, heavy sweet, and sour crudes—including discounted Canadian grades arriving via the Trans Mountain pipeline—to produce multiple a mix of clean products such as gasoline and diesel fuels, as well as fuel oil, propane, jet fuel, butane, petroleum coke, and specialty chemicals nonene and tetramer, which are used in a variety of plastic products.