SemGroup has signed a definitive agreement to acquire US-based Houston Fuel Oil Terminal Company (HFOTCO) from investment funds managed by Alinda Capital Partners for $2.1bn.

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

Under the agreement, an initial payment of $1.5bn will be made at closing, which includes an estimated $785m of existing HFOTCO debt and issuance of $300m to $400m in common shares to Alinda at $32.30 a share.

The remaining payment of $600m will be made in cash before the end of next year.

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.

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“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.”

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.

"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."

In addition, the terminal has rail and truck receipt capabilities from all major producing basins. 

HFOTCO is located on 330 acres on the Houston Ship Channel-residual fuel oil and crude oil trading centre and is currently executing projects such as a new ship dock, a new pipeline and connections, as well as an additional 1.45 million barrels of crude oil storage, expected to be in service next year.

SemGroup noted that the acquisition will allow it to measure the future trends in exporting crude oil and refined products.

The transaction is subject to the receipt of certain governmental approvals and the fulfilment of other customary closing conditions and is slated for completion in the third quarter of this year.

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