Holly will also receive as part of the acquisition an assignment of the Sunoco specialty lubricant product trademarks in North America and a license to use the same in Central and South America.
The transaction is subject to normal conditions, such as regulatory and other approvals, and is expected to close on June 1, 2009.
In November 2008, Sunoco had announced that it would not proceed with a capital improvement project to upgrade the Tulsa refinery. Instead, Sunoco said it would continue to pursue a sale of the facility or convert it into a terminal by the end of 2009 if a buyer could not be found.
"This sale demonstrates our continuing efforts to realign our portfolio of assets and represents another step toward improving our performance and competitiveness," said Sunoco chairman and CEO Lynn Elsenhans. "It also keeps the refinery operating, provides for necessary upgrades to ensure the long-term viability of the facility and protects approximately 400 jobs. We are grateful to the talented and dedicated employees at the facility who made it successful for so many years. In addition, we thank the public officials who supported our efforts to sell the refinery. We appreciate their work on behalf of the company, the employees at the facility and the greater Tulsa community."
Matt Clifton, chairman and CEO of Dallas-based Holly, said, "In addition to a very attractive price, the Tulsa acquisition provides Holly with added asset, geographic and product diversity. The Tulsa refinery produces an industry-recognized portfolio of specialty lube oils, process oils and waxes, as well as transportation fuels.... The facility's proximity to and direct pipeline connection from the Cushing, Okla., crude oil hub combined with its ability to deliver directly into Burlington Northern's Tulsa railroad yard and Magellan's pipeline system, allows the facility to competitively supply transportation fuels to a number of attractive mid-continent markets."
He added, "Holly plans to construct a new diesel desulfurizer and associated equipment at the Tulsa refinery by the end of 2011. This addition will allow the facility to produce all of its diesel fuel as ultra low sulfur diesel. We estimate the cost of the project, which will be expended primarily in 2010 and 2011, to be approximately $150 million. By replicating similar projects just completed at Holly's two existing refineries, we are confident that we can execute this project in a very cost-effective and efficient manner. We view this acquisition as an attractive addition to Holly's facilities in New Mexico and Utah, increasing Holly's overall refining capacity by over 60% to 216,000 bpd while adding the Mid-continent to our existing Rocky Mountain and Southwest markets. The Tulsa acquisition, at its attractive purchase price, adds a significant potential income producing contributor to our profitable and recently upgraded refineries while maintaining our strong balance sheet."
Holly said it anticipates that the transaction, the purchase of inventory and associated future capital spending will be funded from cash on hand, cash generated from operations and from the company's recently expanded $300 million revolving credit facility.
The Tulsa refinery, which began production in 1913, became a part of Sunoco's refining system through a merger with Sunray DX in 1968.
Holly is an independent petroleum refiner and marketer that produces light products such as gasoline, diesel fuel and jet fuel. It operates through its subsidiaries a 100,000-bpd refinery located in Artesia, N.M., and a 31,000-bpd refinery in Woods Cross, Utah. Holly also owns a 46% interest (including the general partner interest) in Holly Energy Partners LP.
Philadelphia-based Sunoco is a leading manufacturer and marketer of petroleum and petrochemical products. Its Refining & Supply business manufactures refined products (primarily gasoline, diesel, jet fuel and residual fuels) and commodity petrochemicals. The business consists of Northeast Refining (comprised of the Philadelphia and Marcus Hook, Pa., refineries and the Eagle Point refinery in Westville, N.J.) and MidContinent Refining (comprised of the Toledo, Ohio, and Tulsa refineries). With 910,000 bpd of refining capacity, approximately 4,700 retail sites selling gasoline and convenience items, approximately 6,000 miles of crude oil and refined product owned and operated pipelines and 43 product terminals, Sunoco is one of the largest independent refiner-marketers in the United States.
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