BOSTON – Gulf Oil LP has always packed tremendous growth potential.
As a part of Cumberland Farms Inc. (CFI) for the past decade, it shared resources with the company’s 560-store retail business, which was writing a growth story of its own, expanding into Florida and fortifying its convenience-store offer. But with its recent acquisition by Boston-based ArcLight Capital Partners LLC, Gulf Oil will get the capital infusion needed to reach its potential as a premier fuel wholesaler and terminal operator, its new management team said.
Gulf owns and operates 12 terminals, has access to the Buckeye and Laurel pipelines and has barge access to bring in product from major refining markets in the United States, Canada, Europe and the Caribbean. It also marketed 3.3 billion gallons of branded and unbranded fuel in 2014.
Jerry Ashcroft, president and CEO, said that the combination of Gulf’s assets with an earlier ArcLight midstream acquisition, Pyramid LLC, formerly Petroleum Products Corp. (PPC), is a winning one. PPC brings 12 Pennsylvania terminals representing nine million barrels of storage for gasoline, diesel, heating oil and biofuels.
“PPC is a great terminal company; they have fantastic facilities and the ability to do ethanol and bio by rail at many facilities, which means a cheaper cost of goods,” said Ashcroft, adding that this allows Gulf to be more competitive in the Pennsylvania market. Gulf will also be adopting some of PPC’s best practices around technology, while PPC will learn from Gulf’s backoffice, branding and operations excellence.
The PPC-Gulf integration should be completed by end of the first quarter.
Gulf now has 15 million barrels of storage, Ashcroft said, which in the current inventory-tight environment is a nice position to be in.
“The market that we had been in was called backwardation—it was costing us to store product,” he said. “Now it doesn’t cost us to store product, and we can compete on street and make it better for the end user.”
And Gulf now has the infrastructure to provide that competitive pricing.
“With us purchasing facilities with rail and dock access, it allows you to land the product at a cheaper price and be more competitive in the market. You will see us continue to enhance the current facilities, look to grow into other facilities and continue to build the terminal portfolio,” said Ashcroft.
“Gulf is unique in that we are singularly focused on branded services and distribution with no refining or [exploration and production] distractions,” Joe Petrowski, chairman of Gulf, told CSP Daily News. Oil at $30 a barrel has proven a balance-sheet problem for competitors that maintain an upstream business. Meanwhile, Gulf’s investment in its terminal facilities, flexibility on transportation fuels along with a strong IT base will give it a key competitive advantage, he said. (A master limited partnership [MLP] could also be in its future, although no timeline has been set.)
Retail Opportunities
What does new ownership at Gulf mean to the convenience-store channel?
Gulf plans to first take care of its “back yard,” a stretch that runs from Pittsburgh to Maine. Then it will tackle “part two” of its growth story: the Southeast. “That’s a market that’s growing, with more people retiring, populations are getting bigger, and we feel as if we have advantages to grow in that market,” said Ashcroft.
Both unbranded and branded are growing at faster rates than the market in general, executives said, effectively taking share from the competition.
For each region, Gulf will emphasize either strength. In the Northeast, where consumers value brand, the Gulf flag will lead the charge. The branded business also fits well with Gulf’s terminal network, said Ron Sabia, chief strategy officer at Gulf Oil and its former president and COO when it was part of CFI. The long-term supply contracts offered through its proprietary terminals makes for a highly desirable combination.
In the Southeast, where unbranded is valued, Gulf sees potential in its supply and trading capabilities.
“Unbranded requires you to be nimble and adjust to market dynamics, so your strategy can change on daily and hourly basis,” Sabia said. “For us, being a company with a lot of business but limited in size, it gives us the ability to see the whole market.”
Gulf has supply agreements with national accounts and regional players, from convenience-store chains to hypermarkets.
Sabia said Gulf’s own c-store package for branded customers—Gulf Express—“has always been a sideline for us,” and said the company currently has no plans for a new store offer.
As for CFI, the chain has transformed from Gulf’s owner to its largest customer, and “hopefully for many years to come,” said Sabia.
CFI CEO Ari Haseotes declined to comment for this article. Gulf officials declined to elaborate on details of its agreement with CFI, other than describing it as a supply contract.
Sabia noted that Gulf is built around the terminal network that Cumberland acquired in the mid-1980s from the former Gulf Oil Corp., “and so their natural fit is for them to stay in the assets they are in today.”
“We’ve got a great relationship,” said Ashcroft, noting that Gulf execs are still working out of CFI’s Framingham, Mass., offices until they are able to move to new headquarters in nearby Wellesley this spring.
“We know everyone in their back office and their top management,” he said. “It’s easier to make sure we can meet their needs as customer now, not just as an owner; and so we’re very lucky to have those relationships ahead of time.”
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