CALGARY, Alberta -- Harvest Energy Trust said it has entered into an agreement to acquire North Atlantic Refining Ltd. and related marketing businesses from Vitol Refining Group B.V. for approximately $1.6 billion (Canadian; $1.44 billion U.S.), plus certain working capital and other adjustments.
In conjunction with this transaction, Harvest has expanded its credit facilities to $2.2 billion (Canadian; $1.98 billion U.S.), including bridge financing, to initially fund the purchase.
Closing of the transaction is anticipated by [image-nocss] mid-October, subject to regulatory and other approvals.
The principal asset of North Atlantic is a medium gravity, sour-crude hydrocracking refinery located in Come by Chance, Newfoundland, with current crude capacity of 115,000 barrels per stream day (bpsd). The refinery's gasoline, ultra-low-sulfur diesel and jet fuel meet the most stringent specifications and the majority of products are sold into premium markets in the United States.
The acquisition also includes a marketing division in Newfoundland with 69 gas stations, a home heating oil business that services 20,000 residential and commercial customers, the supply of refined products to commercial and wholesale customers and the bunkering of refined petroleum products.
In the first half of 2006, North Atlantic and the related businesses reported operating cash flow of $214 million (Canadian; $192.3 million U.S.).
This transaction positions Harvest as the only integrated Canadian energy royalty trust and offers vertical integration and extending the value chain. Harvest's upstream expertise is complemented by North Atlantic's downstream capabilities resulting in a diversification of the business and asset base.
The North Atlantic refinery is a medium gravity, sour crude hydrocracking refinery that is configured to produce gasoline and diesel fuel. It is strategically located on the main shipping routes from western Europe to the northeastern United States, as well as being close to the major importing markets for refined petroleum products, including the New England and New York areas.
As such, North Atlantic enjoys significant transportation cost advantages relative to similar Gulf Coast refineries. Refined products are primarily sold into premium markets on the U.S. East Coast but can also be transported to other higher value markets such as California or Europe. Up to 90% of production is exported, primarily to the United States, where pursuant to the North American Free Trade Agreement (NAFTA), products are delivered without import duties.
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