Additional Analysis of the HOC Tulsa Refinery Acquisitions

Here is some detail on what appears to have been really a pretty good deal.

In April of 2009 the Sunoco deal was done. The product line included their line of lubricants and specialty materials, and the 85,000 bpd refinery was sold for $157 million, which is a bit more than $2000 per BOD capacity.

In October of 2009, the Sinclair deal was done, the additional 75,000 BOD of capacity was bought for $183 million, a rate of $2444 per BOD capacity...

By the time the rationalization and product line conversions are done, the project will have 135,000 BPD of capacity, which they bought for a total of just under $3000 per barrel, not including the cost of some of the conversion that they will have to do.

The company did have to incur some debt, $400M of notes that come due in 2017. They were able to raise another couple hundred million by the sales of their interest in a pipeline, and the issuance of stock. They also chipped in $54M in cash on the deal.

Keep in mind that per our earlier analysis, WNR paid $19000 per BOD of capacity in 2007, right before the big increase in margins, and there is an excellent chance that part or all of the company will have to be sold because the deal was so bad. Keep in mind also that this incremental capacity is valued at much lower than Valero's current capacity.

So this appears on the surface to be a much better deal despite the fact that it happened during a time when the company is going to have to take some lumps because of low utilization and poor margins. However, this doubled the size of the company, made them roughly the same size as WNR, and positioned themselves to take advantage of the upturn, if and when it comes.