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HollyFrontier (HFC) to Purchase Shell's US Refinery for $350M

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HollyFrontier Corporation entered a definitive agreement with Royal Dutch Shell Plc to purchase the latter’s Puget Sound Refinery in the United States.

Equilon Enterprises LLC, which operates as Shell Oil Products U.S., is a subsidiary of Shell that owns the Puget Sound refinery, located near Anacortes, WA.

The deal was made as part of Shell's plans to reduce its global refinery footprint to core sites. The company has been planning to reduce its refining and chemical portfolio as it witnessed low economic activities, affecting profit margins in those segments. Hence, Shell put the refinery up for sale over a year ago.

Puget Sound is a top-quality and complex refinery with catalytic cracking and delayed coking units. The facility has a processing capacity of 149,000 barrels of crude oil per day. Notably, it is geographically well-placed and was intended to source advantaged Canadian and Alaskan North Slope crudes.

HollyFrontier will acquire the Puget Sound refinery, the on-site cogeneration facility and associated logistics assets for $350 million in cash along with the value of its hydrocarbon inventory, which is likely to be valued once the deal closes. Notably, the current value is estimated to be $150-$180 million.

Additionally, the deal involves a deep-water marine dock, a light product loading rack, a rail terminal and storage tanks, with total crude, product and other hydrocarbon storage capacity of 5.8 million barrels. Also, it includes product offtake agreements, which uphold the existing retail marketing business of Shell in the Pacific Northwest. However, it excludes Shell’s off-site logistics assets.

HollyFrontier believes that the Puget Sound Refinery will enhance its existing refining business, with sales into premium product markets. Notably, the transaction is expected to close in late 2021 in accordance with regulatory clearance and other customary closing conditions.

Company Profile & Price Performance

Headquartered in Dallas, TX, HollyFrontier is one of the largest independent refiners and marketers of petroleum products in the United States.

Shares of the company have outperformed the industry in the past six months. Its stock has gained 56.6% compared with the industry’s 52.8% growth.

 

 

Zacks Rank & Stocks to Consider

HollyFrontier currently carries a Zacks Rank #3 (Hold).

Some better-ranked players in the energy space are Tullow Oil PLC (TUWOY - Free Report) and Ring Energy, Inc. (REI - Free Report) , each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1(Strong Buy) Rank stocks here.

Tullow’s earnings for 2021 are expected to rise 22.2% year over year.

Ring Energy’s earnings for 2021 are expected to increase 40.7% year over year.

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