• HollyFrontier Acquires Sinclair Oil; Adds Two Refineries, Marketing Network

  • HollyFrontier Acquires Sinclair Oil; Adds Two Refineries, Marketing Network

    Dallas-based HollyFrontier Corp. said that it has entered into an agreement to
    acquire Sinclair Oil and Sinclair Transportation Company and will form a new
    parent company, HF Sinclair Corporation.

    The all-stock transaction has a value of $1.8 billion based on HollyFrontier's
    closing stock price on July 30. The deal is expected to close in mid-2022. OPIS
    previously reported that Sinclair was being shopped and had long been an
    acquisition target, but talk had died down last year due to COVID-19.

    HollyFrontier executives expect the U.S. Federal Trade Commission to take a
    hard look at the transaction but do not expect that it will be viewed as a
    reduction in competition.

    There are multiple key pieces of the transaction that enhance HollyFrontier's
    refining position in the Rockies, add a branded marketing network and enhance
    its profile in renewable diesel.

    The Sinclair brand is already iconic in the Rockies with its popular dinosaur
    logo "Dino," and Sinclair had plans for a massive expansion of its retail
    network, OPIS previously reported. The combined company will have the
    opportunity to grow across multiple geographies and products. HollyFrontier
    will have a footprint of over 300 distributors and 1,500 branded locations
    across 30 states with more than 2 billion gallons of annual branded fuel sales,
    the company said.

    In a conference call with analysts, HollyFrontier executives noted the stable
    margins that come with a branded licensing network as well as credit card
    transactions. In addition, the combined company through Sinclair's distribution
    network will have enhanced Renewable Identification Number (RIN) generation.

    During the analyst call, HollyFrontier executives noted that because of its
    marketing and distribution network, Sinclair oil is long on RINs and more
    specifically balanced on the D6 ethanol RIN and long on D4 biodiesel RINs. Once
    the transaction is completed, HF Sinclair will be balanced on RIN requirements
    based on a short D6 and long D4 basis.

    There are also synergies in the renewable diesel space where Sinclair's
    renewable diesel unit at its Sinclair, Wyoming, refinery processes soybean oil
    and tallow to produce renewable diesel to sell into the California
    market.HollyFrontier a little more than a year ago announced it would convert
    its Cheyenne refinery to produce renewable diesel. Once completed, the combined
    renewable diesel business will be able to produce 380 million gallons of
    renewable diesel in the U.S., making it one of the largest producers in the
    country.

    Sinclair is in the process of building a pretreatment unit at its Sinclair
    facility which will give the company feedstock flexibility. The feedstock
    flexibility will allow the facilities to process lower carbon intensity
    feedstocks.

    The renewable diesel segment of Sinclair's business was described as a "key
    part of the transaction," according to Holly Frontier executives.

    The acquisition would also add the Sinclair and Casper refineries to
    HollyFrontier's existing network. HollyFrontier notes that the existing
    Sinclair refineries are similar to HollyFrontier's in that it has access to
    advantaged crude oil feedstocks from the Rocky Mountains and Canada.

    The company will have seven refineries in its network in the Rockies,
    Midcontinent, Southwest and Pacific Northwest and boasts 678,000 barrels per
    stream day.

    HollyFrontier Energy Partners (HEP), the corporation's limited partner
    logistics arm, will be acquiring Sinclair's crude oil and refined products
    pipeline and terminal networks. The pipeline is approximately 1,200 miles with
    eight product terminals and two crude terminals. Overall, there is about 4.5
    million bbl of storage in the network, the company said. HEP will be acquiring
    Sinclair's interests in three pipeline joint ventures, including the Powder
    Flats Pipeline and Pioneer Pipeline. The acquisition also gives HEP 100%
    control of the UNEV pipeline, which it had previously owned 75%.

    --Reporting by Denton Cinquegrana, dcinquegrana@opisnet.com; Editing by Michael
    Kelly, michael.kelly3@ihsmarkit.com




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