Equilon Enterprises LLC d/b/a Shell Oil Products US has completed the sale of its Chemical LP Refinery in Mobile, Alabama, to specialty refiner Vertex Energy for $75 million in cash, plus approximately $25 million related to specified capital expenditures and other closing adjustments.
At closing, Vertex acquired approximately $165 million in hydrocarbon inventory from Shell that was financed through an intermediation agreement arranged by Vertex.
“The acquisition of the Mobile refinery represents a transformative moment in the history of Vertex, one that positions us to become a leading regional supplier of both renewable and conventional products,” said Benjamin P. Cowart, president and CEO of Vertex.
“As previously disclosed, we intend to complete the planned conversion of the Mobile refinery’s hydrocracking unit by year-end 2022, positioning us to commence production of renewable diesel fuel at the site beginning in the first quarter 2023.”
“As we look out to the remainder of 2022, we expect refined product margins on conventional fuels production at the Mobile refinery to remain at elevated levels, given strong regional demand conditions, while our legacy assets continue to benefit from favorable product spreads,” continued Cowart. “Entering 2023, we intend to layer on the financial benefit of renewable diesel fuel production which, given current commodity prices and credit values, will position us to deliver significant value to our shareholders.”
“On behalf of the entire Vertex team, we want to express our gratitude to Shell, our advisors, partners and employees for their tireless collaboration throughout this process,” stated Alvaro Ruiz, EVP of Corporate Development at Vertex. “We are excited to welcome the more than 200 Mobile refinery employees and contractors to the Vertex family, a talented group whose collective commitment to safety, reliability and operational excellence will position Mobile to win in the markets we serve, while creating a new platform for profitable growth within our business.”
In conjunction with the financing of the transaction, Vertex closed on a previously announced $125 million senior secured term loan with a syndicate of lenders. To help manage the inventory and working capital requirements of the transaction, Vertex secured a physical crude oil, feedstock and products Supply and Offtake Agreement (SOA) with Macquarie Commodities and Global Markets, concurrent with the closing of the transaction. In addition to providing working capital support for conventional crude oil-based feedstocks and products, the SOA will also provide the ability for Macquarie to include the renewable feedstocks and products at the Mobile refinery following the completion of the hydrocracking unit modification, beginning in the first quarter 2023.
Further, all remaining net cash proceeds raised in the $155 million convertible senior notes offering completed in the fourth quarter 2021 that were previously held in escrow prior to the closing of the Mobile refinery transaction have been released to the Company and used to pay a portion of the refinery acquisition cost.
The 91,000 barrel-per-day Mobile refinery is strategically located on the U.S. Gulf Coast and is capable of sourcing a flexible mix of cost-advantaged light-sweet domestic and international feedstocks. Approximately 70% of the refinery's current annual production is distillate, gasoline, and jet fuel, with the remainder being vacuum gas oil, liquefied petroleum gas, and other products. The facility distributes its finished product across the southeastern United States through a high-capacity truck rack, together with deep and shallow water distribution points capable of supplying waterborne vessels. As part of the transaction, Vertex has acquired approximately 3.2 million barrels of product storage, inventory, logistics and distribution assets, more than 860 acres of developed and undeveloped land, together with the Blakeley Island Crude and Products Terminal.
Vertex was represented by Donovan Ventures and Oppenheimer as investment banking counsel; Stroock, Stroock & Lavan LLP and The Loev Law Firm, PC served as legal counsel; and Vallum Advisors served as financial communications counsel on this transaction.
