Sunoco announced last November that it was cancelling plans to upgrade the Tulsa plant and that it was looking for a buyer. The Tulsa refinery has been in operation for nearly 100 years, and employs about 400 people. Holly plans to upgrade the refinery, adding a new de-sulfurizer which will allow the plant to produce ultra-low sulfur diesel fuel. The upgrade is expected to cost $150 million and to be finished by the end of 2011.
Holly said the addition of the Tulsa refinery will expand its capacity to 216,000 barrels/day, and add a mid-continent market to the company’s existing markets in New Mexico and Utah. Holly expects to fund the acquisition from cash on hand and its $300 million revolving credit facility.
Holly is paying a nearly rock-bottom price for the Tulsa refinery, and the investment the company is making in ultra-low diesel fuel production should pay off in the long run.
Neither Sunoco nor Holly shares have generated any action in pre-market trading. Sunoco shares closed yesterday at $27.77, a modest gain. Holly shares closed with a modest loss yesterday, at $21.10. In the grand scheme of things this is a small transaction, as Sunoco’s market cap is $3.25 billion and Holly’s market cap is $1.06 billion.
Paul Ausick
April 16, 2009
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