Is Hollyfrontier’s acquisition of US refinery better than NNPC’s deal with Dangote?

A viral message on Twitter is claiming the decision of Dallas-based Hollyfrontier to acquire a 97-year-old refinery from Sinclair Oil for $2.6 billion is a much better deal compared to Nigerian National Petroleum Corporation (NNPC’s) choice to acquire 20 percent stake in Dangote Refinery for $2.7 billion.

According to a tweet from a verified Twitter handle, @Uwagbale_ with over 4,000 followers, “Hollyfrontier Corp will pay $2.6billion for Sinclair Oil’s assets compromising 7 complex refineries with a crude oil processing capacity of 678,000 barrels/day in the US. NNPC will pay $2.76billion for a 20% stake in Dangote’s 650,000 barrels/day capacity oil refinery”.

Most of the comments in the tweet argued that if HollyFrontier could buy the 678,000 barrels per day facility for $2.6 billion, there was no business sense in NNPC acquiring 20 percent of Dangote refinery 650, 000 for $2.7 billion.

Findings

Dallas-based HollyFrontier Corp. and an affiliate struck a $2.6 billion deal to acquire almost all of privately held Sinclair Oil’s assets on August 4, adding new refining, pipeline, and storage facilities in the US’s Rocky Mountain region.

Publicly traded petroleum refiner HollyFrontier, affiliate Holly Energy Partners and Wyoming-based Sinclair will combine to form a new parent company named HF Sinclair Corporation to replace HollyFrontier on the New York Stock Exchange.

Read also: NNPC reshuffles senior executives ahead of PIB implementation

The acquisition is expected to expand HollyFrontier’s renewable capabilities and Sinclair’s refinery and logistics assets.

According to Reuters, Holly Energy Partners and HollyFrontier’s transportation business will buy Sinclair’s 1,200 miles of pipeline assets and storage terminals with around 4.5 million barrels of capacity.

The pipeline and storage businesses are estimated to be worth around $758 million in cash and stock while Sinclair stockholders will own about 16.6percent of Holly Energy Partners after the deal closes.

When the deal closes, HollyFrontier’s shares will convert one-to-one for HF Sinclair. The company will issue more than 60 million common stock shares — representing about $1.8 billion based on the company’s analysis. The deal, approved unanimously by HollyFrontier and Holly Energy Partner’s boards is expected to close in mid-2022.

The deal does not include exploration and production assets owned by Sinclair Oil & Gas, the companies said.

NNPC’s deal with Dangote Refineries

Early this month, Nigeria gave its state oil firm the green light to acquire a 20 percent stake in Dangote’s oil refinery for $2.76 billion.

The Dangote Refinery is a 650,000 barrels per day integrated refinery project under construction in the Lekki Free Zone, Lagos. It is expected to be Africa’s biggest oil refinery and the world’s biggest single-train facility, upon completion.

Checks by BusinessDay revealed HollyFrontier already has a 563,000 bpd refinery while Sinclair has two refineries with capacities of 85,000bpd, which was built in 1924 and 30,000 bpd, built-in 1992.

This means HollyFrontier bought Sinclair’s the combined capacity of 115,000 bpd refinery with logistics, green, and marketing assets for $2.6 billion which is lower compared to the 20 percent stake NNPC bought from Dangote for $2.76 billion is for 130,000 bpd.

Verdict: The post is misleading.