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SemGroup completes acquisition

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Tanks and Terminals,

SemGroup® Corp. has announced the closing of its acquisition of Houston Fuel Oil Terminal Company (HFOTCO) from investment funds managed by Alinda Capital Partners (Alinda). HFOTCO, one of the largest oil terminals in the US, establishes SemGroup’s position in the premier energy market, the Houston Ship Channel, and provides a strategic platform to refinery-facing growth.

“As planned, this acquisition helps fulfil our long-term strategy to further de-risk our business by adding secure, downstream cash flow to our portfolio mix,” said SemGroup President and CEO Carlin Conner. “In addition to generating stable earnings for SemGroup on day one, this remarkably versatile asset provides an entirely new growth platform to capture opportunities within the Houston Ship Channel’s massive processing, trading and import/export complex. HFOTCO provides strong and consistent cash flows regardless of commodity price fluctuations, which further underscores the timeliness of this acquisition and the long-term value proposition it creates for our shareholders.”

The 16.8 million bbl terminal is strategically located on the US Gulf Coast with crude pipeline delivery connectivity to the local refining complex, deep water marine access and inbound crude receipt pipeline connectivity, as well as rail/truck loading and unloading capabilities from major producing basins. The assets are located on 330 acres on the Houston Ship Channel, one of the world’s most active trading centres for residual fuel oil, clean products, LPGs and crude oil. The business is supported by take-or-pay contracts with primarily investment-grade counterparties that have been customers for an average of 15 years. HFOTCO is currently executing on contractually supported growth projects, including a new ship dock, a new pipeline and connections, as well as an additional 1.45 million bbls of crude oil storage, expected to be in service mid-2018.

In conjunction with the closing of the transaction, SemGroup completed the initial payment, which consisted of a US$301 million cash payment, funded from SemGroup’s revolving credit facility, issuance of 12.4 million common shares to Alinda, at a predetermined price of US$32.30 per share, and the assumption of US$761 million of existing HFOTCO net debt, subject to customary post-closing adjustments. SemGroup will fund the second payment of US$600 million in cash before the end of 2018.

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