Texas based refiner and distributor of petroleum products, HollyFrontier Corp. (HFC), has entered into an agreement with Royal Dutch Shell Plc to acquire Shell’s Puget Sound refinery which has the capacity of 145,000 bpd (barrels per day).
HollyFrontier has paid a cash amount of USD 350 million along with the value of its hydrocarbon inventory, which is estimated to be around USD 150-180 million.The refinery is located in Anacortes, Washington and as per US Energy Information Administration (EIA), the refinery has 25,300 bpd of delayed coking capacity and around 60,000 of fluid catalytic cracking capacity.
In order to complete the purchase, as authorized by HollyFrontier’s Board of Directors, the company will suspend its one-year dividend. The acquisition is expected to complete in the fourth quarter this year, as permitted by the standard regulatory procedures.
Mike Jennings, CEO of HollyFrontier said, "We believe that the Puget Sound refinery will complement our existing refining business, with sales into premium product markets and advantaged access to Canadian crude".
HollyFrontier is also in process to transform its Cheyenne Wyoming refinery into a renewable diesel facility. Puget Sound refinery will be the first refinery of HollyFrontier on the US west coast and adding it to its mid-continent quartet of refineries and elevating its total crude throughput to 611,630 bpd, as per the statistics of US EIA.
After the announcement, some analysts were bewildered as they were interested in finding a viable objective behind this deal to buy a hydrocarbon refinery in times where the focus is shifting towards renewable fuels. The deal also comes against the backdrop of a successful passage of low carbon fuel standard bill by state of Washington, following the state of California, which will come in effect in January 2023. The Puget Sound refinery, in a year struck by pandemic where crude demand plummeted showed profitability in 2020 and refinery also has a yield of over 50% in past few years which might have tipped HollyFrontier further into acquiring the refinery.