UPDATE: Holly Frontier in the Lead for PetroCanada

[Solarent]

Reuters Link

It appears Holly Frontier is the leading suitor for PetroCanada's Lubricant's business. This is really interesting to me because they weren't even on my radar as a potential buyer. However Holly is among the largest Group I manufacturer in North America (behind XOM and PBF - Paulsboro). Adding in PC's group II capacity will complement their base oil offering nicely by adding Group II and Group III base oils - albeit at low capacities compared to Chevron and Motiva.

What will this mean for the PetroCanada finished lubricants? Does this mean HF plans on entering the finished lubricant business like Chevron, XOM and Shell who are all backwards integrated into their base oil supply? Is this the end of the of the PC brand or the birth of a new major?

 

[Solarent]

I also read a report that SK - who makes Yubase base oils is also looking to expand their finished lubricant offering. (although mostly in the Asian market). Interesting that it seems base oil suppliers are looking for ways to retain margin in higher value products - this could be an upset the the merchant market for base oils.

 

[OVERKILL]

Thanks for the info!

 

[userfriendly]

"Crack spreads"?

 

[Nyogtha]

The difference between price of the products and the price of the raw materials (based on cracking some of the large molecules into smaller more useful molecules) There's 3-2-1, 4-2-1-1, 6-3-2-1

https://en.m.wikipedia.org/wiki/Crack_spread

 

[Flying_A]

The rumor mill has TOTAL the most likely suitor... Since they've been making strides in trying to capture market share in NA, it would makes sense for them.

 

[Garak]

In Canada, at least, Petro Canada synthetics aren't terribly expensive at the gas station. It might be a good inroad for Total, in that regard, at least a start. Petro Canada's service fill business can't be too shabby, either.

 

[4WD]

After Total paid a $398 million FCPA fine - not sure they like us as much ...

 

[userfriendly]

This acquisition would make perfect sense for Total and compliment their existing lubricant portfolio and distribution network.
The PC label could be phased out.
Suncor elected to keep the PC brand and changed the eastern Canadian gas stations from Sunoco to PC.

 

[4WD]

Suncor as in Terra Nova

 

[Solarent]

Holly and PC announced officially an agreement yesterday:

Holly Fontier Buys PetroCanada for $1.125B
This makes HF the 4th largest base oil supplier in North America, with the only Group III/III+ production in NA. It also will allow them an outlet for finished lubricants when base oil markets are tough.

In addition, the PetroCanada brand remains intact with an exclusive use to the PC trademark for lubricants and the sale and distribution agreements that were in place with Suncor carry over to the new company. This makes sense because those contracts were with PCLI which was technically a separate legal entity from Suncor anyways. This essentially puts Holly Frontier in a place to compete with Chevron and XOM, and is the only one in the base oil world that has North American domestic production of all core base oil groups. If you are a blender today, you are more likely to buy Yubase, Ultra-S or Nexbase for your group III. Now that may change. Hopefully Holly will expand their coverage with the Addco's and get better credentials because that's the biggest complaint I hear about PC's stocks - great product, terrible support on product claims/official licensing for ILMA's.

I predict that Holly will likely move to expand base oil production in the coming years being as they have several US refineries that can provide feedstock to the base oil plant, especially in Group III production.

 

[4WD]

They are all doing some of this - the only thing the EPA lets anyone do in a reasonable amount of time (or money) is a "plant expansion" ... Building a new one in the US is a whole new animal ...
Shell of course wanted to set up near one of the largest gas fields in the world - whereas XOM sends that NG to S. Korea for energy uses ...

 

[userfriendly]

Also here www.theglobeandmail.com hollyfrontier

 

[SuperSalad]

HFC is feeling confident now.

Holly Frontier Corp Announces Quarterly Dividend

 

[userfriendly]

Warren Buffett sold the last of his Suncor