Editor's Note: This is a defeat for Abercrombie who did everything he could to kill the refinery.
Par Petroleum Corporation Agrees to Purchase Tesoro Hawaii, LLC
- Purchase price of $75 million plus net working capital and contingent earn-out
- $200 million common stock issuance upon closing priced at $1.39 per share
- Credit facilities arranged to fund working capital.
- Tesoro Hawaii reported 2012 gross refining margin of $174 million.
News Release from Par Petroleum June 17, 2013
HOUSTON -- Par Petroleum Corporation (OTCBB:PARR) announced today that it has reached a definitive agreement for the acquisition of Tesoro Hawaii, LLC from Tesoro Corporation. Tesoro Hawaii, LLC is an owner of refining, retail and distribution assets located in Hawaii. Following the closing, the retail stations will remain under the Tesoro brand.
Under the terms of the agreement, Par Petroleum, through a wholly-owned subsidiary, will purchase all outstanding membership interests of Tesoro Hawaii, LLC for $75 million in cash, plus net working capital and the market value of inventory at closing. Also included in the purchase price is an earn-out arrangement of up to $40 million payable over three years contingent on certain performance metrics. The transaction has been unanimously approved by the board of directors of Par Petroleum. The acquisition is subject to certain closing conditions, including the successful restart of the refinery and the receipt of required governmental approvals. The transaction is currently expected to be completed in the third quarter of 2013.
“This is a great fit for Par Petroleum, and we are pleased to make a long-term investment in Hawaii’s economy,” said Will Monteleone, Chairman of the Board of Directors and Chief Executive Officer of Par Petroleum. “We have found in Tesoro Hawaii a great company with outstanding assets and a superb management team and employee base. We aim to serve customers through operational excellence and enhance value for the communities we serve with a focus on safety, environmental stewardship and employee commitment.”
The acquisition is expected to be financed by the issuance of $200 million of common stock; an ABL revolving credit facility of up to $125 million led by Deutsche Bank; a crude supply and inventory intermediation facility provided by Barclays; and a term loan and revolving credit facility secured by certain retail assets led by the Bank of Hawaii. Par has reached agreement with a group of equity investors to purchase all of the common stock to be issued at closing at a share price of $1.39. The equity investor group is led by existing shareholders Zell Credit Opportunities Fund and Whitebox Advisors.
For the full year 2012, Tesoro Hawaii reported gross refining margin of $174 million on throughput of 68,000 barrels of crude per day. First quarter 2013 gross refining margin was $28 million on throughput of 67,000 barrels of crude per day.
The new refining subsidiary will operate as a separate wholly-owned subsidiary of Par Petroleum and will be headquartered in Houston, Texas.
Par Petroleum intends to appoint William Haywood as President of its new refining subsidiary. Mr. Haywood has more than 30 years of experience in domestic and international energy, and was most recently Senior Vice President of Refining for Tesoro. Also in conjunction with the Tesoro Hawaii transaction, Par Petroleum has named Peter Coxon as Par Petroleum's Chief Operating Officer. Mr. Coxon has nearly 30 years of experience in the transportation and energy industries. He currently serves as President of Texadian Energy, a wholly-owned subsidiary of Par Petroleum. He most recently served as Vice President of SEACOR Holdings and served on a number of related boards of directors.
Tesoro Hawaii, LLC
Headquartered in Honolulu, Hawaii, Tesoro Hawaii is an integrated refined productions business serving Hawaii and its population of approximately 1.4 million residents and 8 million annual visitors. The refinery has approximately 94,000 barrels per day of throughput capacity, 2.4 million barrels of crude oil and feedstock storage and 2.5 million barrels of refined products storage. The refinery produces ultra-low sulfur diesel, gasoline, jet fuel, marine fuel and other associated refined products. Tesoro Hawaii’s logistics assets include five refined products terminals, 27 miles of pipelines, a single point mooring terminal and other associated logistics assets. In addition, Tesoro Hawaii owns 31 retail outlets located across the islands of Oahu, Maui and Hawaii.
Par Petroleum Corporation
Par Petroleum is a Houston-based company that manages and maintains interests in a wide variety of energy-related assets, including natural gas assets located in the Piceance Basin, and a crude oil sourcing, marketing, transportation and logistics business headquartered in Houston, Texas through its wholly-owned subsidiary, Texadian Energy, Inc.
Par Petroleum’s primary oil and gas asset is a 33.34% minority ownership interest in a joint venture entity called Piceance Energy, LLC. The remaining ownership interest is held by Laramie Energy II, LLC, who manages the day-to-day operations of the joint venture. Piceance Energy, LLC was formed and capitalized in August of 2012 when the Company and Laramie Energy II, LLC contributed their respective oil and natural gas assets, surface real estate, and other related assets located in the Piceance Basin geologic province of Colorado to the joint venture entity. These assets are more specifically located within Mesa and Garfield Counties of Colorado and are within an approximate 10-mile radius of the heart of the Piceance Basin.
Texadian Energy sources, markets, transports and distributes crude petroleum-based energy products. With significant logistics capability in historical pipeline shipping status, a rail car fleet, and expertise in contracted chartering of tows and barges, Texadian has a long term competitive advantage in moving crude oil from land locked locations in the Western U.S. and Canada to the refining hubs in the Midwest, the Gulf Coast, and the East Coast. This comprehensive ability to efficiently handle crude oil transport will be a major advantage in the expanded energy product marketing and distribution activity that the company undertakes as Texadian Energy. http://www.par-petro.com/
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Tesoro Corporation Announces the Sale of the Hawaii Operations
News Release from Tesoro June 17, 2013
SAN ANTONIO--Tesoro Corporation (NYSE: TSO) announced today that it has signed an agreement with a wholly owned subsidiary of Par Petroleum Corporation to sell all of its interest in Tesoro Hawaii, LLC, which operates the 94,000 barrel per day Kapolei refinery, retail stations and associated logistical assets. As part of the agreement, Par Petroleum intends to operate the assets as an integrated refining, logistics and retail system.
The sales price of the Hawaii operations is $75 million, plus the market value of net working capital, which is expected to be approximately $225 million to $275 million. Also included is an earn-out arrangement payable over three years up to $40 million based on consolidated gross margins. Tesoro anticipates completing the sale in the third quarter 2013, subject to regulatory approval. Aegis Energy Advisors Corp. and Norton Rose Fulbright advised Tesoro in this transaction.
"We are pleased to have reached this positive outcome for the Company," said Greg Goff, President and CEO. "While the Hawaii operations do not align with our strategic focus, we believe they offer a great opportunity for Par Petroleum."
Tesoro Corporation, a Fortune 100 company, is an independent refiner and marketer of petroleum products. Tesoro, through its subsidiaries, operates six refineries in the western United States with a combined capacity of over 845,000 barrels per day. Tesoro's retail-marketing system includes over 2,200 retail stations under the Tesoro®, Shell®, ARCO® and USA Gasoline(TM) brands, of which 595 are company operated.
This press release contains certain statements that are "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements include statements concerning the expected completion of the transaction and expected proceeds from the transaction. For more information concerning factors that could affect these statements see our annual report on Form 10-K and quarterly reports on Form 10-Q, filed with the Securities and Exchange Commission. We undertake no obligation to publicly release the result of any revisions to any such forward-looking statements that may be made to reflect events or circumstances that occur, or which we become aware of, after the date hereof.
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Steelworkers: Our union made this sale possible
News Release from United Steelworkers Union, Pittsburgh, PA, June 18, 2013
The United Steelworkers (USW) Union applauded the sale of Tesoro's Kapolei, Hawaii, refinery, logistics and retail system to Par Petroleum Corporation.
"This is wonderful news for our members, their families and the State of Hawaii," said USW International President Leo W. Gerard. "Now our members don't have to leave their family and friends in Hawaii to look for family-supporting jobs on the mainland. Their future in Hawaii bodes well for the state's economy as well.
"Our members and our union made this sale possible, but I want to also thank Hawaii Governor Neil Abercrombie (D), his staff and the Hawaii legislature for their support."
Per the successorship clause in the existing collective bargaining agreement, Par Petroleum will honor the existing three-year contract through its expiration date on January 31, 2015. None of the 119 production, maintenance and lab workers represented by Local 12-591 were laid off, and they all can continue their employment.
"We look forward to establishing a new relationship with Par Petroleum," said USW International Vice President Gary Beevers, who heads the union's oil sector. "Buying the refinery was a smart business decision. This is a great opportunity for the company to be profitable and fulfill Hawaii residents' and businesses' need for reasonably priced fuel."
Local 12-591 members played a key role in saving the refinery by writing letters to elected officials and lobbying them in Washington, D.C. to request help in making the conditions favorable for a new owner. They also garnered thousands of signatures from Hawaii's residents in petitions to Governor Abercrombie and other elected officials.
"If it weren't for our members' hard work, persistence and solidarity this refinery sale would not have happened and Tesoro would have quietly turned the facility into an import terminal," said USW District 12 Director Bob LaVenture. "Everybody wins in this deal—our members, Hawaii citizens, the state and Par Petroleum."
This is the fourth refinery that the USW has helped to save. The other three were PBS Energy in Delaware City, Del., Monroe Energy LLC in Trainer, Pa., and Philadelphia Energy Solutions in Philadelphia, Pa.
"We are grateful for this sale of the refinery," said Pat Koge, Local 12-591 unit chair of the Tesoro group. "My members and I are excited about our future now. We thank everyone who has helped us along the way. We look forward to working with Par Petroleum."
The USW is the largest industrial union in North America and has 850,000 members in the U.S., Canada and the Caribbean. The union represents workers employed in metals, rubber, chemicals, paper and forestry, oil refining, atomic energy and the public and service sector.
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