August 30, 2018 / 4:00 PM / a month ago

Par Pacific shares jump on acquisition, plans to expand

HOUSTON (Reuters) - Par Pacific Holdings Inc (PARR.N) shares jumped 17 percent on Thursday after the refiner said it would acquire assets from its rival in Hawaii and expand its fuels production.

The Houston-based company’s shares were at $21.12 in mid-morning trading, up $3.18 from the previous day’s close after rival Island Energy Services on Wednesday disclosed it would halt its refining operations on the island.

“This is clearly good news for Hawaii’s only other refinery,” analysts at investment firm Tudor, Pickering, Holt said in a note on Thursday.

Par said in a conference call on Thursday it would pay $45 million in cash and stock to buy assets from Island Energy. The acquisition will allow Par to expand processing capacity at its Kapolei, Hawaii, refinery by about 28 percent to 120,000 barrels per day (bpd).

Par will add Island Energy’s atmospheric and vacuum crude distillation units to its Kapolei refinery, which has a current capacity of 93,500 bpd.

The company said it would spend $30 million from cash on hand and $15 million in shares to finance the purchase, which is expected to close in the fourth quarter.

Par also will spend between $8 million and $10 million to integrate pipelines.

“We will be able to run those units the day we close,” Par Pacific Holdings Chief Executive William Pate said on Thursday’s conference call.

Par also plans to lease terminals and pipelines from Island Energy, which will shift its focus to storage and logistics. Island owns refined products distribution pipelines around terminals near Hilo, Honolulu, Kahului and Port Allen, Hawaii.

Because Par is not adding gasoline-producing units, its product mix will continue to be 50 percent diesel and will have less need to import motor fuels to Hawaii.

Par will spend $10 million for an overhaul of the Hawaii refinery in 2019, the company said.

The addition of the Island Energy units will better position Par to take advantage of the switch to lower sulfur marine fuels in 2020 mandated by the International Maritime Organization, a move that is expected to boost margins.

Atmospheric crude distillation units do the primary refining of crude oil and provide feedstock for all other units. They operate at atmospheric pressure.

Vacuum distillation units refine residual crude from atmospheric distillation units and increase the yield of motor fuel feedstock obtained from a barrel of oil.

Reporting by Erwin Seba; Editing by Chizu Nomiyama and Meredith Mazzilli

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