Holly Energy Partners and Holly Corporation Announce Definitive Agreement for Acquisition of Pipeline and Tankage Assets
26 Février 2008 - 11:27PM
PR Newswire (US)
DALLAS, Feb. 26 /PRNewswire-FirstCall/ -- Holly Energy Partners,
L.P. (NYSE:HEP) and Holly Corporation (NYSE:HOC) today announced a
definitive agreement for the acquisition by Holly Energy from Holly
of certain pipeline and tankage assets for approximately $180
million. The purchase price of $180 million consists of
approximately $171 million in cash and Holly Energy common units
valued at approximately $9 million. It is anticipated that this
transaction will close on February 29, 2008, and will become
effective March 1, 2008. Completion of the transaction is subject
to certain closing conditions. Holly Energy expects the assets
being acquired will result in approximately $20 million of
incremental EBITDA (earnings before interest, taxes, depreciation
and amortization) to HEP. The estimated annual maintenance capital
required for these assets is approximately $1.5 million. In
connection with the closing of the proposed transaction, Holly and
Holly Energy will enter into a 15-year pipelines and tankage
agreement containing minimum annual revenue commitments from Holly.
The initial minimum annual revenue guarantee is set at $25.3
million, and will increase annually based on a formula using the
Producer Price Index (PPI). Holly Energy has arranged to finance
the $171 million cash portion of the acquisition through the
Partnership's revolving credit facility. This facility has been
increased from $100 million to $300 million pursuant to an
amendment to the credit facility which was signed yesterday. Union
Bank of California is administrative agent for this facility. This
facility terminates in August 2011. Additionally, Holly Energy
anticipates entering into floating-to-fixed rate interest rate
swaps for all or a portion of the $171 million borrowed under the
revolving credit facility. This transaction has been approved by
the Boards of Directors for both Holly Energy and Holly after
approvals by the Conflicts Committee for Holly Energy, which is
comprised solely of independent outside directors for Holly Energy,
and the Holly Audit Committee, which is composed solely of outside
directors of Holly. The Boards of Directors for both companies have
obtained fairness opinions from financial advisory firms in
connection with this proposed transaction. These assets being
acquired consist of: -- The Navajo Refinery crude oil delivery
system -- Approximately 136 miles of crude oil trunk lines
delivering crude to the Navajo refining facility in Southeast New
Mexico. -- Western Permian Basin crude gathering lines plus lease
connection lines -- Approximately 725 miles of gathering and
connection pipelines located in West Texas and New Mexico. These
lines primarily connect to the acquired crude oil refinery delivery
system. -- Refinery on-site crude tankage located within the Navajo
and Woods Cross refinery complexes, with approximately 600,000
barrels per day of storage capacity. -- Artesia to Roswell, New
Mexico jet fuel products pipeline and terminal (terminal leased
through September 2011). -- Woods Cross Refinery
pipelines-Approximately 10 miles of crude oil and product
pipelines. "As we noted when we originally announced this
transaction in November, 2007, this acquisition fits well into
Holly Energy's strategy of disciplined growth through the addition
or expansion of steady income generating assets. As with all of
Holly Energy's existing assets, this acquisition consists of assets
generating 100% fee based transportation and terminal revenues. We
expect this transaction will be immediately positive for Holly
Energy's distributable cashflow. These assets, coupled with Holly
Energy's current set of organic projects, should allow Holly Energy
to continue with its strong track record of providing growth to its
limited partners. We're especially pleased to be able to finance
this transaction with our bank credit facility and anticipate being
able to secure a very favorable fixed interest rate with the
addition of the interest rate swap", said Matt Clifton, Chairman
and CEO of Holly and Holly Energy. About Holly Energy Partners
L.P.: Holly Energy Partners, L.P., headquartered in Dallas, Texas,
provides petroleum product transportation and terminal services to
the petroleum industry, including Holly Corporation, which
currently owns a 45% interest in the Partnership. The Partnership
owns and operates product pipelines and terminals primarily in
Texas, New Mexico, Oklahoma, Arizona, Washington, Idaho and Utah.
In addition, the Partnership owns a 70% interest in Rio Grande
Pipeline Company, a transporter of LPGs from West Texas to Northern
Mexico. About Holly Corporation: Holly Corporation, headquartered
in Dallas, Texas, is an independent petroleum refiner and marketer
that produces high value light products such as gasoline, diesel
fuel and jet fuel. Holly operates through its subsidiaries an
85,000 barrels per stream day ("bpsd") refinery located in Artesia,
New Mexico and a 26,000 bpsd refinery in Woods Cross, Utah. Holly
also currently owns a 45% interest (including the general partner
interest) in Holly Energy Partners, L.P. The following is a "safe
harbor" statement under the Private Securities Litigation Reform
Act of 1995: The statements in this press release relating to
matters that are not historical facts are "forward-looking
statements" within the meaning of the federal securities laws.
These statements are based on management's beliefs and assumptions
using currently available information and expectations as of the
date hereof, are not guarantees of future performance and involve
certain risks and uncertainties. Although we believe that the
expectations reflected in these forward-looking statements are
reasonable, we cannot assure you that our expectations will prove
correct. Therefore, actual outcomes and results could differ
materially from what is expressed, implied or forecast in these
statements. Any differences could be caused by a number of factors,
including, but not limited to: -- Risks and uncertainties with
respect to the actual quantities of refined petroleum products
shipped on our pipelines and/or terminalled in our terminals; --
The economic viability of Holly Corporation, Alon USA, Inc. and
Holly Energy's other customers; -- The demand for refined petroleum
products in markets we serve; -- The ability of Holly Energy to
complete this acquisition from Holly Corporation as well as
previously announced pending or contemplated acquisitions; -- The
availability and cost of financing; -- The possibility of
reductions in production or shutdowns at refineries utilizing Holly
Energy pipeline and terminal facilities; -- The effects of current
and future government regulations and policies; -- Our operational
efficiency in carrying out routine operations and capital
construction projects; -- The possibility of terrorist attacks and
the consequences of any such attacks; -- General economic
conditions; and -- Other financial, operations and legal risks and
uncertainties detailed from time to time in our Securities and
Exchange Commission filings. The forward-looking statements speak
only as of the date made and, other than as required by law, we
undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. DATASOURCE: Holly Energy Partners,
L.P.; Holly Corporation CONTACT: Bruce R. Shaw, Senior Vice
President and Chief Financial Officer, or M. Neale Hickerson, Vice
President-Investor Relations, both of Holly Corporation - Holly
Energy Partners, +1-214-871-3555 Web site:
http://www.hollycorp.com/
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