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Par Pacific (PARR) to Buy U.S. Oil & Refining for $358M

In a bid to bolster scale and diversify properties, Par Pacific Holdings, Inc. PARR recently inked a deal to acquire privately-held downstream company, U.S. Oil & Refining Company. The transaction is valued at $358 million, plus net working capital. Houston-based Par Pacific is likely to finance the deal via $225-million secured term loan and $150 million of equity financing.  Subject to satisfactory closing conditions and regulatory approvals, the deal is set for closure next January. 
 
Par Pacific — whose operations are concentrated in Hawaii, Pacific Northwest and Rocky Mountains — is set to expand its mainland foothold by acquiring Tacoma, Washington-based U.S. Oil & Refining. The deal will bolster Par Pacific’s refinery capacity to create a diversified integrated downstream network. Notably, it possesses a 94,000-barrel per day (bpd) refinery and 91 retail outlets across Hawaii. The company also owns and operates a refinery in Wyoming, having a processing capacity of 18,000 bpd, as well as 33 retail outlets in the Rockies and Pacific Northwest. 
 
The assets to be acquired by Par Pacific comprise a refinery with a processing capacity of 42,000 barrels per day, along with 2.9 million barrels of refined-product and crude-oil storage. The acquisition also incorporates a marine and fuel terminal, as well as unit train-capable rail-loading terminal.The refineries and logistic facilities serve the Pacific Northeast market.
 
Notably, U.S. Oil & Refining generated an adjusted EBITDA of $86 million in the trailing four quarters ended Sep 30, 2018. The buyout is likely to result in various operational and commercial synergies for Parr Pacific,and also lead to annual cost synergies of around $7.5-$12.5 million.
 
Notably, the deal is well in sync with Parr Pacific’s plans to strengthen downstream operations via smart acquisitions. Notably, in August 2018, the company entered into a $45-million deal to acquire assets from Island Energy, in a bid to expand fuel production.The buyout will bolster Par Pacific’s processing capacity at its refinery in Hawaii by about 28% to 120,000 bpd. Further, the acquisition of the assets will make Par Pacific better positioned to switch to lower sulfur marine fuels, as mandated by IMO 2020.
 
Zacks Rank and Key Picks
 
Par Pacific currently carries a Zacks Rank #3 (Hold).
 
Some better-ranked players in the energy space include Unit Corporation UNT, Ranger Energy Services, Inc. RNGR and Eni SpA E, each sporting a  Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
 
Unit’s earnings are expected to record year-over-year growth of 74.07% in 2018.
 
Ranger Energy’s 2018 earnings are anticipated to increase 136% on a yearly basis.
 
Eni’s earnings for 2018 are projected to grow more than 109% from the 2017 level.
 
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Par Pacific Holdings, Inc. (PARR): Free Stock Analysis Report
 
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Eni SpA (E): Free Stock Analysis Report
 
Ranger Energy Services, Inc. (RNGR): Free Stock Analysis Report
 
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