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HollyFrontier to Acquire Red Giant Oil
HollyFrontier today announced that it has entered into a definitive agreement to acquire Red Giant Oil Company (“Red Giant Oil”). Red Giant Oil, a private family-owned lubricants company founded in 1903, is one of the largest suppliers of locomotive engine oil in North America.
Headquartered in Council Bluffs, Iowa, Red Giant Oil has storage facilities in Idaho, Utah and Wyoming, along with a blending and packaging facility in Texas. Following the acquisition, Red Giant Oil is expected to generate approximately $7.5 million in annual forecasted EBITDA for HollyFrontier.
George Damiris, President and CEO of HollyFrontier, commented, “We are pleased to announce the acquisition of Red Giant Oil, with its outstanding history and brand in the railroad lubricant industry. This transaction demonstrates the continued growth of our lubricant business and brings outstanding value to HollyFrontier.”
This transaction is subject to customary closing conditions and is expected to close in the third quarter of 2018. HollyFrontier was represented by Morgan Lewis & Bockius LLP on this transaction.
About HollyFrontier Corporation:
HollyFrontier Corporation, headquartered in Dallas, Texas, is an independent petroleum refiner and marketer that produces high value light products such as gasoline, diesel fuel, jet fuel and other specialty products. HollyFrontier operates through its subsidiaries a 135,000 barrels per stream day (“bpsd”) refinery located in El Dorado, Kansas, a 125,000 bpsd refinery in Tulsa, Oklahoma, a 100,000 bpsd refinery located in Artesia, New Mexico, a 52,000 bpsd refinery located in Cheyenne, Wyoming and a 45,000 bpsd refinery in Woods Cross, Utah. HollyFrontier markets its refined products principally in the Southwest U.S., the Rocky Mountains extending into the Pacific Northwest and in other neighboring Plains states. In addition, HollyFrontier, through its subsidiary, owns Petro-Canada Lubricants Inc., whose Mississauga, Ontario facility produces 15,600 barrels per day of base oils and other specialized lubricant products, and owns a 57% interest and a non-economic general partner interest in Holly Energy Partners, L.P.audience.
Safety-Kleen Announces Increase
As previously reported in JobbersWorld, Safety-Kleen (Kleen Performance Products) began contacted its U.S. customers on June 15th to announce a price increase on all blended lubricants and grease products of up to 9%. The increase is effective July 16.
In addition to its U.S. price increase, Safety-Kleen began contacting its Canadian customers last week about a similar price increase on all blended lubricants and grease products in Canada, effective August 6.
Price Increase Roundup
Independent lubricant manufacturers are the first and the fastest to move on price in the latest round of increases.
Independent lubricant manufacturers kicked off the most recent round of lubricant price increases with Sinclair’s announcement on May 8th of a 10 to 12% adjustment effective July 1, 2018. By the end of May most independents followed with announced increases. ExxonMobil was the first major to move with an announcement coming on June 1. TOTAL followed on June 8th and a within 26 days all other majors announced price increases. Most of these increases came in the first two weeks of June. A timeline of the recent round of prices increases is shown below.
In all cases, when reasons are given for the price increase, the drivers are said to be increases in the cost of base oils, additives, packaging, and transportation.
In addition to being the first to move, independent lubricant manufacturers also moved more quickly than the majors in this round of price increases. As shown below, whereas there is an average of 16 days from the time independents announced an increase to its effective date, the average distance for the majors is 34 days.
|Average price increase (announced)||7.3%|
|Average time from announcement to effective date||22 days|
|Independents: Average time from announcement to effective date||16 days|
|Majors: Average time from announcement to effective date||34 days|
According to some of the independent lubricant manufacturers JobbersWorld has spoken with, independent lubricant manufacturers are often the first to move and have less lead time then the majors due to their tighter margins. In addition, whereas majors generally purchase base oil under contract, some independents source from the spot market. Consequently, they have to respond relatively fast to maintain margins when base oil prices increase, as seen over the past few months shown below.
In addition to the base oil price increases already seen in 2018, there has been an increase in the price of lubricant additives. The first was announced on May 18th by Afton when it advised its customers that effective June 18, 2018, it will increase prices on all performance additive products from all source points. The price adjustment is said to be in response to higher raw material and transportation costs.
Lubrizol followed on May 29 when it announced a price increase that varied across product areas and specific product families effective July 1, 2018. Lubrizol attributes the increase to the higher cost of raw materials resulting from robust demand and continuing consolidation and closure of capacity. In addition, the price adjustments are said to be necessary due to significant increases in transportation costs.
It should be noted that the higher than typical number of lubricant price increases we have seen so far in 2018 are reflected in the comparatively steep ramp up shown below in the Producer Price Index (PPI) for Petroleum Lubricating Oils and Grease Manufacturing (NAICS 324191). The PPI is an index published by the Bureau of Labor Statistics that measures the average change in the selling prices received by domestic producers for their output over time.
Recently Announced Lubricant Price Increases
|Company||Announced Date||Effective Date||Increase|
|Sinclair Lubricants||5/8/2018||7/1/2018||10 to 12%|
|Sunoco||5/16/2018||6/16/2018||4 to 6%|
|Advanced Lubrication Specialties||5/16/2018||6/16/2018||4 to 6%|
|CAM2||5/18/2018||6/16/2018||4 to 9%|
|Smitty’s Supply||5/18/2018||6/16/2018||4 to 9%|
|U.S. Lubricants, Commerce, CA||5/18/2018||6/17/2018||$0.40/gal lubricants|
|Chemlube||5/22/2018||6/11/2018||5 to 9%|
|Maverick Performance Products||5/22/2018||6/18/2018||4 to 8%|
|Allegheny Petroleum Products||5/23/2018||6/18/2018||6 to 8% on bulk, additional 2% on drums and totes|
|Warren Distribution||5/23/2018||6/25/2018||4 to 8%|
|PennStar||5/23/2018||6/15/2018||6 to 10%|
|Martin Lubricants||5/23/2018||6/22/2018||5 to 9%|
|Old World Industries||5/24/2018||6/30/2018||4 to 9%|
|ExxonMobil||6/1/2018||7/1/2018||up to 9%|
|TOTAL Specialties USA||6/8/2018||7/1/2018||4 to 6%|
|Nu-Tier Brands/Gulf/ECOSE||6/11/2018||7/13/2018||6 to 8%|
|Shell||6/13/2018||7/16/2018||up to 10%|
|Reliance Fluid Technologies||6/13/2018||7/16/2018||4 to 8%|
|Lubriplate||6/13/2018||8/13/2018||Mineral oil-based Lubricants by 7%, Synthetic/Long-life lubricants by 4%|
|Chevron||6/14/2018||8/1/2018||up to 9%|
|Safety-Kleen||6/15/2018||7/16/2018||up to 9%|
|Valvoline||6/19/2018||8/1/2018||up to 9%|
|Phillips 66||6/22/2018||7/23/2018||up to 9%|
|Calumet Branded Products||6/25/2018||7/25/2018||up to 10%|
|Castrol North America||6/26/2018||8/6/2018||up to 9%|