Harvest Energy Acquires Refinery

Canada's Harvest Energy Trust(HTE) said Wednesday it will acquire North Atlantic Refining and related businesses from Vitol Refining Group in a deal worth roughly $1.43 billion.

"This is another defining transaction for Harvest that provides significant cash flow accretion and long-term sustainability benefits for Harvest unitholders," said John Zahary, the company's president and chief executive, in a statement.

Harvest said the deal should result in a lower payout ratio, reduce cash flow volatility and expand its value chain to include refining margins. The company expects to close the transaction by mid-October, subject to regulatory and other approvals.

North Atlantic's principle asset is a medium gravity, sour-crude hydrocracking refinery located in Newfoundland with current capacity of 115,000 barrels a day. The majority of the refinery's gasoline, ultra-low sulfur diesel and jet fuel are sold into premium markets in the U.S.

The refinery is located on the main shipping routes from western Europe to the U.S. and is close to the major importing markets for refined petroleum products, including New England and New York. Up to 90% of production is exported, primarily to the U.S., where, thanks to the North American Free Trade Agreement, products are delivered without import duties.

"For the past 12 years North Atlantic has enjoyed steady growth in the oil industry, with current clean fuel exports exceeding CDN$2 billion [$1.78 billion] annually, making us one of the top operating refineries in the country," Gunther Baumgartner, president and refinery manager at North Atlantic, said in a statement.