SemGroup to acquire Houston Fuel Oil Terminal Company

SemGroup Corporation announces this week that it executed a definitive agreement to acquire Houston
Fuel Oil Terminal Company (HFOTCO).

The acquired 16.8 million barrel terminal is located on 330 acres of the Houston Ship Channel. It features pipeline connectivity to the local refining complex, deep water marine access and inbound pipeline, rail
and truck receiving capabilities from all major producing basins.

HFOTCO is currently implementing growth projects that include 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
mid-2018.

“This is a transformational acquisition that adds tremendous stability to our business and provides a dynamic platform for growth,” SemGroup President and CEO Carlin Conner said.

The acquisition will be financed with investment funds managed by Alinda Capital Partners. The total purchase consideration consists of two payments. The first payment will be $1.5 billion at closing, including the assumption of an estimated $785 million of existing HFOTCO debt and issuance of between $300 million to $400 million in common shares, at SemGroup’s election, to Alinda at $32.30 per share. The remainder of the initial payment will be funded in cash from SemGroup’s revolving credit facility.

The second payment will consist of an additional $600 million in cash before the end of 2018, which aligns consideration with earnings before interest, tax, depreciation and amortization (EBITDA) growth. SemGroup will have no obligation to make the second payment, which instead will be an obligation of its acquisition subsidiaries and secured by a pledge of the equity interests in the subsidiaries. The purchase price will be subject to customary adjustments.

SemGroup plan to retain HFOTCO’s workforce approximately 125 employees.

“A large part of HFOTCO’s success has been its outstanding team,” Conner said. “We’re looking forward to these talented employees becoming part of the SemGroup team.”

The acquisition is expected to close in the third quarter of 2017, pending certain governmental approvals and the satisfaction of other customary closing conditions.