U.S. Merchant Bank Buys Aging Newfoundland Refinery
A New York-based commodities merchant bank run by veteran energy traders, Neal Shear and Kaushik Amin, announced on Friday plans to buy the aging Come by Chance refinery in Newfoundland from South Korea's state-run oil company.
Korea National Oil Corp said it will sell the 115,000-barrel-per-day refinery to SilverRange Financial Partners LLC for an undisclosed price following a months-long search to find a buyer.
The deal also includes 53 gas stations and convenience stores.
SilverRange is a New York-based merchant bank focused on energy and natural resources owned by SilverPeak Partners, a real estate fund with over $12 billion in assets under management, according to its website.
"(The refinery) is strategically located along Atlantic crude oil shipping routes and provides access to petroleum markets in Europe and the U.S. Eastern seaboard," SilverRange partner Harsh Rameshwar said in the release.
As part of the sale, the new owners have negotiated a new supply and offtake agreement with BP Plc, ousting Australia's Macquarie Bank Ltd, a source familiar with the situation told Reuters.
No other details of the potentially lucrative offtake deal were available, but losing the deal was likely a blow to the Australian bank as it continues to build its physical oil trading operations. It had agreed the offtake with KNOC in October 2011.
The acquisition is the latest in recent months that has seen an investor buy refining assets in a bid for a share of the North American physical oil market just as banks face unprecedented regulatory scrutiny and struggle with tight margins.
In June, TrailStone, a start-up commodity merchant backed by private equity firm Riverstone Holdings LLC, bought a small refinery and logistics firm in the Pacific Northwest.
For Shear and Amin who have a combined 55 years of experience at some of Wall Street's biggest commodity banks, the deal marks a return to the energy market. They are both senior partners at SilverRanch.
This is Shear's first known business venture since the commodity hedge fund, Higgs Capital Management, he set up and ran with fellow long-time commodity trader Jean Bourlot closed in December last year.
Before that, he spent 25 years at Morgan Stanley where he helped build the firm's commodity trading business until his departure in 2008. He joined UBS in 2010 for a short time after working for more than a year at private equity fund Apollo Global Management.
Both worked at UBS at the same time.
Between 2010 and 2012, Amin was head of fixed income, currencies and commodities for the Americas at the Swiss bank.
Prior to that, he launched Lehman Bros commodities business and was chief executive of RBS Sempra Commodities in 2009 before it was bought by JPMorgan Chase & Co.
Built in the early 1970s, the Come by Chance refinery has had a troubled history. Since its initial owners went bankrupt, the refinery changed hands many times before its sale, once for C$1, to Harvest Energy in 2006. In December 2009, KNOC bought Harvest's operations.
KNOC said last year it would sell the loss-making refinery as it moved to boost profits from its international oil and gas investments. It retains Harvest's oil and gas operations in Western Canada, which produce about 48,000 barrels of oil equivalent per day.
The government of Newfoundland and Labrador has agreed to free SilverRange from liability for pre-existing environmental contamination at the site while the new owner has committed to cut the refinery's sulfur-dioxide emissions.
(Reporting by Scott Haggett in Calgary; Jeanine Prezio, Catherine Ngai, Jarrett Renshaw and Josephine Mason in New York; Editing by Lisa Von Ahn and Lisa Shumaker)