DALLAS -- Alon USA Energy Inc. executed two separate agreements to purchase Paramount Petroleum Corp., excluding certain real estate assets, and the assets of Edgington Oil Co.
Following its initial public offering of stock a year ago, Alon was pegged as a company ripe for growth by industry watchers. That growth began in late March with the company's purchase of 55 stores from El Paso, Texas-based Good Time Stores Inc. This week's acquisition sets the stage for further retail growth as the company expands in its refining assets.
Our IPO in July 2005 was designed to place the company on a growth path in order to achieve the further integration of our business, said David Wiessman, executive chairman of the board for Alon USA, Dallas. These two acquisitions will more than double our refining capacity, improve our risk profile as a single refiner and allow us to expand into higher value-added asphalt business. We will continue to pursue well-thought-out growth in the Southwest.
The Paramount transaction includes:
Paramount's 54,000 barrels per day (bpd) refinery in Paramount, Calif. Paramount's 12,000 bpd heavy-crude refinery in Portland, Ore. Paramount's seven asphalt terminals located in Seattle, Elk Grove and Mojave, Calif., Reno, Nevada, and Phoenix, Fredonia and Flagstaff, Ariz. Paramount's 50% interest in Wright Asphalt Products Co., which specializes in patented tire rubber modified asphalt products that are provided in six terminals.The Paramount refinery services the Los Angeles/southern California market. The historical refined product mix from the Paramount refinery consists of approximately 16% light fuels, 26% middle distillates, 25% gas oils and 30% asphalt. The purchase price of the Paramount transaction consists of $307 million in cash and the assumption of approximately $100 million of net debt. The transaction is expected to close during the latter portion of the second quarter or early during third-quarter 2006, following regulatory approvals.
Meanwhile, Edgington Oil is a heavy-crude refining company located in Long Beach, Calif. Alon purchased it for a total consideration of approximately $52 million in cash plus an amount to be determined for the value of inventory.
The Edgington refinery is a topping refinery with a nameplate crude capacity of approximately 40,000 bpd. Using heavy crudes, the refinery can produce up to 24,000 bpd. The refinery is linked to other local refineries and pipeline systems, as well as to a pipeline to the Long Beach dock, which provides additional flexibility for sourcing crude outside California.
Merging the Paramount refinery with Edgington into one refinery (78,000 bpd) coupled with the Portland refinery (12,000 bpd) will add 90,000 bpd of refined capacity to Alon's existing 70,000-bpd sour-crude refinery in Big Spring, Texas. This transaction is expected to close before the end of second-quarter 2006 and is subject to the normal approval process, including regulatory approval.
These two acquisitions provide significant growth opportunities for Alon. The advantages of heavy crude processing and upgrade of the bottoms via high-valued asphalt sales fit our core strategy and our business model well, said Jeff Morris, Alon's president and CEO. In addition, Paramount's refinery in the Los Angeles area has recently been upgraded to produce Carb Diesel and Carbob Gasoline. We believe our fuels experience and operational capabilities will provide significant future opportunities. Also, the geographic coverage fits us perfectly.
Alon USA Energy is an independent refiner and marketer of petroleum products, operating primarily in the southwestern and southcentral regions of the United States. The company owns and operates a sophisticated sour-crude oil refinery in Big Spring, which has a crude oil throughput capacity of 70,000 bpd. Alon USA markets gasoline and diesel products under the FINA brand name and is a leading producer of asphalt in Texas. The company also operates convenience stores in West Texas and New Mexico under the 7-Eleven and FINA brand names and supplies motor fuels to these stores from its Big Spring refinery.
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