Page 8 - NorthAmOil Week 31 2021

NorthAmOil INVESTMENT NorthAmOil

Callon buying Primexx in Delaware boost

TEXAS CALLON Petroleum announced this week that Callon cited Primexx’s strong well results and
it had agreed to acquire all of the leasehold inter- established infrastructure, saying that its two-
ests and associated oil, gas and infrastructure rig programme could be seamlessly integrated
assets of Primexx Energy Partners and its affil- into its own multi-year development plans. The
iates for $788mn. assets include roughly 300 identified core net
The cash and stock transaction represents a locations, about two-thirds of which are 2-mile
purchase price of around $43,800 per barrel of (3-km) laterals. Callon said this would support
oil equivalent per day, Callon said. This is based its continued shift to larger, more capital efficient
on Primexx’s production in the second quarter of development projects in the Delaware Basin.
this year, which was estimated at around 18,000 The acquisition will also increase the propor-
boepd, with oil accounting for 61%. Callon will tion of oil in Callon’s Delaware Basin production
pay $440mn in cash and issue about 9.2mn of its mix.
shares to Primexx. The company noted that private equity firm
Privately owned, Blackstone Group-backed Kimmeridge had agreed to convert its remaining
Primexx operates in the Permian Basin’s Del- portion of Callon second lien senior notes that
aware sub-basin, with a contiguous footprint were issued in 2020 into common shares after
of 35,000 net acres (142 square km) in Texas’ the Primexx transaction closes. This will accel-
Reeves County. erate Callon’s deleveraging timetable and will
“The acquisition represents a significant step save nearly $20mn per year in interest costs, the
forward in Callon’s strategy to deliver long-term company said.
value to shareholders through the application of Analysts at Cowen commented that the
its scaled, life-of-field development model while acquisition will add Delaware Basin scale at an
also strengthening its financial position,” said attractive price, but that questions over the qual-
Callon in an August 4 statement. “Callon’s proven ity of the acreage could persist.
ability to integrate and further optimise assets Separately, Callon reported a second-quarter
in its core operating areas represents untapped net loss of $11.7mn, or $0.25 per share, improv-
upside to the already attractive pro forma accre- ing on a loss of $1.6bn, or $39.41 per share, a
tion to all key per share financial metrics.” year earlier.™

HollyFrontier to buy Sinclair Oil in $2.6bn deal

US REFINER HollyFrontier announced this week approximately 4.5mn barrels of operated stor-
that it had agreed to acquire fellow Rocky Moun- age. Holly Energy will also acquire Sinclair’s
tain region refiner Sinclair Oil from the Sinclair interests in three pipeline joint ventures – 32.5%
Cos. As part of the transaction, HollyFrontier’s in the Powder Flats pipeline, 49.9% in the Pio-
master limited partnership (MLP), Holly Energy neer pipeline and 25% in the UNEV pipeline.
Partners, will acquire Sinclair Transportation, Holly Energy operates the UNEV pipeline and
which owns Sinclair’s oil pipelines and terminal owns the remaining 75% interest in that project.
assets. The pipelines and terminals transaction will
The transaction will involve the formation consist of an equity issuance of 21mn Holly
of a new parent company, named HF Sinclair, Energy common units and the payment of
which will replace HollyFrontier as the pub- $325mn of cash. Based on the closing price of
lic company trading on the New York Stock Holly Energy stock on July 30, this represents a
Exchange (NYSE). transaction value of around $758mn, bringing
At the transaction’s close, HollyFrontier the total value of both transactions to $2.6bn.
shares will automatically be converted on a one- The deal will add two refineries, a renewable
for-one basis into shares of common stock of HF diesel plant and access to a branded marketing
Sinclair. The new company will issue roughly network to HollyFrontier’s holdings. It is antic-
60.2mn shares of common stock to the Sinclair ipated to help the company grow its renewables
Cos., representing 26.75% of the pro forma business.
equity of HF Sinclair with a transaction value of “This is exceptionally transformative for us
around $1.8bn. This is based on HollyFrontier’s and differentiates us from other downstream
closing stock price on July 30. businesses,” HollyFrontier’s CEO, Mike Jen-
Meanwhile, Holly Energy take over Sin- nings, said on a conference call this week.
clair’s integrated crude and refined products The transaction comes after HollyFrontier
pipelines and terminal assets, including around agreed to buy Royal Dutch Shell’s Puget Sound
1,200 miles (1,931 km) of pipelines, eight prod- refinery in Anacortes, Washington, for about
uct terminals and two crude terminals with $500mn in May.™

P8 www. NEWSBASE .com Week 31 05•August•2021