SemGroup has entered into an agreement to acquire Houston Fuel Oil Terminal (HFOTCO) from investment funds managed by Alinda Capital Partners for about $2.1bn.

Strategically located on the US Gulf Coast, the 16.8 million barrel terminal has pipeline connectivity to the local refining complex, deep water marine access and inbound pipeline, rail and truck receipt capabilities from all major producing basins.

The acquisition is expected to strengthen SemGroup’s position in the premier energy market, the Houston Ship Channel.

Currently, SemGroup operates 7.6 million barrels of crude oil storage in Cushing and another 8.7 million barrels of multi-product storage in Milford Haven, UK.

SemGroup president and CEO Carlin Conner said: “Consistent with our strategy to diversify our portfolio and become more refinery facing, HFOTCO brings a well-established base of high-quality, long-tenured customers.

“At the same time, the terminal’s premier location on the Houston Ship Channel provides deep water access and is well positioned to capture increasing export volumes.

“With the addition of HFOTCO, SemGroup will be uniquely positioned to capture the future trends in exporting crude oil and refined products resulting from the near and long-term anticipated growth in U.S. shale production.”

After the completion of the transaction, the Houston-based terminal company’s approximately 125 employees will join Tulsa, Oklahoma-based SemGroup.

The acquisition is expected to be completed in the third quarter of 2017. It is subject to the receipt of certain governmental approvals and the satisfaction of other customary closing conditions.

The purchase price to be paid by SemGroup to acquire HFOTCO will consist of two payments. The first tranche invovles a payment $1.5bn at closing of the transaction, including the assumption of an estimated $785m of existing HFOTCO debt, and issuance of common shares worth between $300m to $400m to Alinda.

While Credit Suisse Securities (USA) LLC served as SemGroup’s exclusive financial advisor on the transaction, Vinson & Elkins LLP and Gibson, Dunn & Crutcher served as its legal advisors.

Image: SemGroup to acquire key assets on Houston Ship Channel. Photo courtesy of SemGroup Corporation.