..............

[Deer Hunter]

Depends who you are.
Husky buying one in the USA for $435 millionUSD that is pipeline connected and running...
The Alberta government backing the construction of Northwest Upgrader (cost $9.3 billion) and committing $26 billion worth of crown oil royalty fees. With no place to take the diesel...

Unbelievable.

Aug 14, 2017 08:55 ET

Husky Agrees to Acquire U.S. Midwest Refinery; Increases Value-Added Processing Capacity


CALGARY, Alberta, Aug. 14, 2017 (GLOBE NEWSWIRE) -- Husky Energy (TSX:HSE) announces it has entered into definitive agreements to acquire the Superior Refinery, a 50,000 barrel per day permitted capacity facility located in Superior, Wisconsin from Calumet Specialty Products Partners, L.P. for $435 million US in cash. The deal is subject to customary closing adjustments.

“Acquiring the Superior Refinery will increase Husky’s downstream crude processing capacity, keeping value-added processing in lockstep with our growing production,” said CEO Rob Peabody. “Upon closing, this new asset will immediately contribute to increased earnings and funds from operations.”

The transaction accelerates Husky’s strategy, outlined at its 2017 Investor Day, to capture full value from the Company’s heavy oil production from Western Canada.

Husky plans to retain the approximately 180 workers at the refinery.

With the addition of the Superior refinery, Husky’s total downstream capacity will increase to approximately 395,000 barrels per day (bbls/day).

Highlights:
• Aligned with Husky’s Strategy to Capture Full Value From its Growing Heavy Oil Production
• Direct connectivity to the Company’s pipeline terminal in Hardisty, Alberta via the Enbridge Mainline
• Allows further margin capture from heavy/light oil differential
• Increases existing Husky storage assets in Superior
• Enhances U.S. market access with total U.S. refining capacity increasing to 275,000 bbls/day

• Strong Economics
• Immediately accretive to earnings and funds from operations
• To be funded from cash on hand and existing credit facilities
• At close, pro forma net debt and debt metrics expected to remain below two times net debt to funds from operations (12 month trailing)

• Accelerates Husky’s Asphalt Strategy
• Adds immediate asphalt production and will provide additional capacity once in-flight projects are completed in 2018
• Enhances the Company’s ability to capitalize on growing asphalt demand associated with increasing infrastructure spending across North America
• An investment decision to expand asphalt capacity in Lloydminster will be deferred to post-2020 and will be considered again as heavy oil production grows

• Strategically Flexible Asset
• Experienced and capable operations team with an established base of customers
• Capable of processing Canadian heavy, or medium and light grades from Canada and the Bakken

The transaction is subject to regulatory approval and closing adjustments and is expected to close in the fourth quarter of 2017. BMO Capital Markets acted as financial advisor and Milbank LLP acted as legal advisor to Husky.

Superior Overview

The Superior Refinery has a permitted throughput capacity of 50,000 bbls/day. It currently produces approximately 9,000 bbls/day of asphalt, 17,500 bbls/day of gasoline and 10,900 bbls/day of diesel, as well as heavy fuel oils. The transaction includes the acquisition of the refinery’s associated logistics, including two asphalt terminals, 3.6 million barrels of crude and product storage and a fuels and asphalt marketing business.

About Husky

Husky is an integrated energy company headquartered in Calgary, Alberta. It has approximately 5,200 employees and has average daily production of about 320,000 barrels of oil equivalent per day.

The Company has two main areas of focus:
• The Integrated Corridor includes natural gas, non-thermal oil, NGLs and thermal production from Western Canada, the Lloydminster upgrading and asphalt refining complex, the Husky Midstream Limited Partnership (35 percent working interest and operatorship), and the Lima and Toledo refineries in the U.S. Midwest. Gas production from the repositioned Western Canada portfolio is closely aligned with the Company’s energy requirements for refining and thermal bitumen production, and acts as a natural hedge.

• The Offshore business includes operations and exploration in the Asia Pacific region, primarily offshore China, Indonesia and Taiwan, and in the Atlantic, offshore Newfoundland and Labrador. Each area generates high-netback production, with near and long-term investment potential.

http://www.huskyenergy.ca/news/relea...ase_id=2182808

The AltaCorp report also shows the capital cost of the 50,000-barrel-per-day Sturgeon Refinery have now climbed to $9.3 billion, from a previous estimate of $8.5 billion in 2014. Additional phases, which would add 100,000 bpd of refining capacity, have been proposed but not commissioned for construction

http://business.financialpost.com/co...2-98913f93e58b

[Twisted Canuck]

Sort of like the old guy in Toronto that built some stairs down to a park for the local seniors to use for $550 (hired a homeless guy to help dig), the city tore it out of course. Had initially told him the set of stairs would cost $150K to build, but after tearing his out said it could be done for 'around $50K'. The government's job is to spend money and grow, the only thing they are efficient at apparently. And taxing us I suppose.

[Deer Hunter]

Husky bought a fully operational refinery for under 6% of what it cost the Northwest refinery to build one (and they aren't done yet)
Northwest overspent which will end up hurting the taxpayer as the government committed oil royalty volumes here, and will pay a fee based on the total cost to build, the throughput and a 30 year term.

[elkhunter11]

The NDP do not have a good track record , when it comes to industry, the Saskatchewan potash industry foul up being a prime example.

[sns2]

Originally Posted by elkhunter11

The NDP do not have a good track record , when it comes to industry, the Saskatchewan potash industry foul up being a prime example.

Was this deal done by the NDP or the PCs?

[Deer Hunter]

This is Stelmach's (PCs) mess

http://energynow.ca/2017/07/northwes...er-management/

The job creation component is all over the map but 10,000 is low.Figures are hard to find. In the early stages there were some 1,000 on site but most recently as the plant nears completion it is closer to 6,000. If you start with 1,000 people on location when work commenced in 2012 then ramp it up by 1,000 per year to the current 6,000 job level, the total is 21,000 person-years of employment to the end of 2017.

In May of 2017, the most recent project update on the NWR website, it is revealed to date there had been 39.9 million “exposure hours” on the site. Based on 40 hours a week for 52 weeks, that works out to 19,200 person-years of employment. If there were 6,000 workers on site to the end of 2017 this would work out to about 47 million exposure hours and the person-years figure to 22,700.

These are very expensive jobs. Based on the 21,000 person-years of employment estimate and the new $9.3 billion cost, these jobs work out to $443,000 each per year. Using the exposure hours model to the end of the year, the cost per job falls to $410,000 each.

[elkhunter11]

Originally Posted by sns2

Was this deal done by the NDP or the PCs?

The PCs were in on the original deal, but the NDP will have been the government for most of the construction, and they will have a lot of influence the project.

[sns2]

Originally Posted by elkhunter11

The PCs were in on the original deal, but the NDP will have been the government for most of the construction, and they will have a lot of influence the project.

It's not their baby. I have no problem holding govt accountable, but this is Ed's mess.

Sent from my LG-H812 using Tapatalk

[Okotokian]

I would be careful about comparing the two prices. That's a 67 year old refinery that may have a boat load of environmental issues that lower the price. Sometimes companies want to get rid of them for whatever they can get to avoid the long term liability.

That said the Alberta upgrader deal seems crazy.

[The Elkster]

Also might want to work out how much the gov't will take in over the next +50 years on hundreds of (upper 5) and 6 figure salaries and the taxes and spending that comes from such a refinery. Not as clear cut as many make it out to be. It always looks bad up front on these projects. Show me a big private sector project that hasn't gone over budget. Yet they seem to work out in the end.

[Deer Hunter]

Originally Posted by The Elkster

Yet they seem to work out in the end.

What end?
This end?
In billions of $.


Or this end?

[The Elkster]

Originally Posted by Deer Hunter

What end?
This end?
In billions of $.


Or this end?

#1 this isn't an NDP project
#2 This project isn't about general AB economics in a severe global O&G downturn
#3 NDP was put in charge at the start of what has been a global route in oil markets so of course debt numbers are going to be inflated. They were scheduled to skyrocket under the conservatives as well.

I'm no NDP apologist but the info you posted is absolutely pointless and doesn't speak at all to the validity of this as a stand alone project over the long term. Funny enough 10 minutes after I read this post I read about a non-gov't funded mega project going over budget. Concerns expressed but not the end of the world. Wait and see approach. Much always depends on market forces outside the control of any gov't or business. Nobody ever gains by sitting on their hands.

Now back to your raging anti-NDP anti gov't rhetoric.

[ESOXangler]

Originally Posted by elkhunter11

The PCs were in on the original deal, but the NDP will have been the government for most of the construction, and they will have a lot of influence the project.

They had very little influence, contracts were already signed. And the government really didn't chip in that much considering.

[ESOXangler]

This really is a comparison of apples to oranges. The husky refinery can produce 10900 barrels of diesel. NWR will produce 50-60000. Also most of the equipment is sized to handle another expansion plus the whole carbon capture stuff that results on a few more billion tacked on there!

[Deer Hunter]

Originally Posted by Deer Hunter

This is Stelmach's (PCs) mess

Originally Posted by The Elkster

#1 this isn't an NDP project
#2 This project isn't about general AB economics in a severe global O&G downturn
#3 NDP was put in charge at the start of what has been a global route in oil markets so of course debt numbers are going to be inflated. They were scheduled to skyrocket under the conservatives as well.

I'm no NDP apologist but the info you posted is absolutely pointless and doesn't speak at all to the validity of this as a stand alone project over the long term. Funny enough 10 minutes after I read this post I read about a non-gov't funded mega project going over budget. Concerns expressed but not the end of the world. Wait and see approach. Much always depends on market forces outside the control of any gov't or business. Nobody ever gains by sitting on their hands.

Now back to your raging anti-NDP anti gov't rhetoric.

You need to read more and rant less. I have not blamed the NDP for this project as you suggest.

I posted a simple graph of the accelerating AB debt situation which happens to have political parties assigned to it.

Am I anti-NDP? Sure. But only because I'm anti current government. Governments that couldn't run a paper route are in charge of billions of our dollars. Their party affiliations don't seem to matter.

Now back to your unionized government job.... kidding...kidding.

[Deer Hunter]

Originally Posted by The Elkster

#2 This project isn't about general AB economics in a severe global O&G downturn
#3 NDP was put in charge at the start of what has been a global route in oil markets so of course debt numbers are going to be inflated. They were scheduled to skyrocket under the conservatives as well.

Off topic but to your point. They had no problem running up the debt at 100$. Don't blame oil prices. Blame the decision making.

The chart also displays the annual average West Texas Intermediate (WTI) spot price for a barrel of oil from 1990 to 2015, adjusted for inflation into 2015 U.S. dollars. Interestingly, Alberta has run surpluses when oil was close to $20 per barrel and has run deficits when oil reached nearly $110 per barrel.

http://business.financialpost.com/op...5-0338a3d6fa3a

[The Elkster]

Originally Posted by Deer Hunter

You need to read more and rant less. I have not blamed the NDP for this project as you suggest.

I posted a simple graph of the accelerating AB debt situation which happens to have political parties assigned to it.

Am I anti-NDP? Sure. But only because I'm anti current government. Governments that couldn't run a paper route are in charge of billions of our dollars. Their party affiliations don't seem to matter.

Now back to your unionized government job.... kidding...kidding.

Yes yes certainly the graphs of the debt with party assigned with no statement as to underlying economic conditions and the fact that we are in one of the worst O&G downturns in history (in no way controlled by gov't) didn't have a underlying inference LOL. No mention of every oil country in the world hitting the skids and suffering big deficits.

Never worked for gov't and not in a union but your last comment just goes to show how blindly and unashamedly bias and assumptive your thought processes are. Maybe try more reasoned independent thinking less alt right regurgitation. Then maybe you'll have a leg to stand on in coming across so smug.

[The Elkster]

Originally Posted by Deer Hunter

Off topic but to your point. They had no problem running up the debt at 100$. Don't blame oil prices. Blame the decision making.





http://business.financialpost.com/op...5-0338a3d6fa3a

I suspect if you looked back you'd see that at that time most of AB's income was derived from gas royalties and not oil. Two different markets as gas has traditionally been a localized NA market (absent LNG). When considering economics not considering all inputs is a fools game and rife with bias.

[Deer Hunter]

Originally Posted by The Elkster

Yes yes certainly the graphs of the debt with party assigned with no statement as to underlying economic conditions and the fact that we are in one of the worst O&G downturns in history (in no way controlled by gov't) didn't have a underlying inference LOL. No mention of every oil country in the world hitting the skids and suffering big deficits.

Never worked for gov't and not in a union but your last comment just goes to show how blindly and unashamedly bias and assumptive your thought processes are. Maybe try more reasoned independent thinking less alt right regurgitation. Then maybe you'll have a leg to stand on in coming across so smug.

Ok fair enough. Have you researched the fees or economics of this refinery?

[Arty]

Originally Posted by ESOXangler

This really is a comparison of apples to oranges. The husky refinery can produce 10900 barrels of diesel. NWR will produce 50-60000. Also most of the equipment is sized to handle another expansion plus the whole carbon capture stuff that results on a few more billion tacked on there!

This. As well as the poisoned ground problem mentioned earlier, and the fact that an old plant made to obsolete loose specifications over half century ago with lax safety and systems standards and essentially on its last legs, cannot be compared to new construction. Have you ever walked around an old petrochemical or extraction plant? It's amazing something that dilapidated can continue to function without collapsing or blowing up.

The core consideration though is the creation of added value to the regional economy for the life of the plant. Added value has to be created and kept here, not sent to the US gulf coast or new jersey. If the owners will be the people of Alberta due to the sheer size of the operation, that's not a bad thing. Otherwise, you'll get the same crowd having first dibs on any stock offerings or bonds - Goldman Sachs or their Toronto equivalents. Profit-taking and bad maintenance will benefit them before anyone else.

Sure, there has to be a certain amount of infrastructure built in order to create a functioning system. But that also adds to economic activity, supporting vendors and jobs. U.S. counties are falling all over each other whenever a new plant gets proposed in any industry, as they realize that's that source of true wealth. -Not government paper-printing, outsourcing, offshoring, excessive raw immigration, shipping out raw dilbit, building overpriced tract housing, or IPOs of useless garbage black hole companies like 'snapchat'.

It's bizarre that we've come to the point of having to depend on some politically-correct snowflake marxist government to develop and defend advanced industry in this province, or on a bunch of arab bankers to show us how to make polyethylene. Guess the conservatives were too well paid off by global multinationals to ensure a steady supply of raw feedstock.

[lmtada]

X2

Originally Posted by Arty

This. As well as the poisoned ground problem mentioned earlier, and the fact that an old plant made to obsolete loose specifications over half century ago with lax safety and systems standards and essentially on its last legs, cannot be compared to new construction. Have you ever walked around an old petrochemical or extraction plant? It's amazing something that dilapidated can continue to function without collapsing or blowing up.

The core consideration though is the creation of added value to the regional economy for the life of the plant. Added value has to be created and kept here, not sent to the US gulf coast or new jersey. If the owners will be the people of Alberta due to the sheer size of the operation, that's not a bad thing. Otherwise, you'll get the same crowd having first dibs on any stock offerings or bonds - Goldman Sachs or their Toronto equivalents. Profit-taking and bad maintenance will benefit them before anyone else.

Sure, there has to be a certain amount of infrastructure built in order to create a functioning system. But that also adds to economic activity, supporting vendors and jobs. U.S. counties are falling all over each other whenever a new plant gets proposed in any industry, as they realize that's that source of true wealth. -Not government paper-printing, outsourcing, offshoring, excessive raw immigration, shipping out raw dilbit, building overpriced tract housing, or IPOs of useless garbage black hole companies like 'snapchat'.

It's bizarre that we've come to the point of having to depend on some politically-correct snowflake marxist government to develop and defend advanced industry in this province, or on a bunch of arab bankers to show us how to make polyethylene. Guess the conservatives were too well paid off by global multinationals to ensure a steady supply of raw feedstock.

[Big Grey Wolf]

Best example of with is a Upgrader worth, Klieniken gave away a 33% share of the Lloyd $10 billion Upgrader to Husky for $1.00, now thats economics!

[Desert Eagle]

You have to remember that Alberta has some of the highest safety standards in the world . Not so in MERICA.

[79ford]

You do realize that a barrel of diesel is worth about 110$ right? Vs bitumin being worth 38$ last time I checked....

The refinery will process 80 000 barrels per day and 50 000 of that will be diesel.

Most plants run for 40-70 years or more so times 50 000 by 2500 then multiply that by the 60$ difference between diesel and bitumin.

[79ford]

Dont forget, if you pay attention to diesel demand and inventories you ll have noticed diesel consumption is up by about 400 000 barrels per day so far this year in north america and it is growing.

The northwest refinery is the answer to the structural diesel shortage that alberta has been in for awhile now... the recession kind of alleviated diesel issues a bit but in the next ten years some one has got to make more diesel.

You also got to look at who is in on this plant, Candian Natural resources is 50% of this project. Murray Edwards and those guys generally throw money into things that make money.

You also have to think where the opposition to this refinery gets its roots... the refiery is good for diesel consumers. Anyone ever stop and think maybe the three existing companies in the edmonton area may be seeding the opposition to a new refiner?

Esso, shell, petrocan basically have a starved diesel market they can produce full tilt into and command a higher price than gasoline. Cnrl is moving in on shell, suncor and exxon mobils territory.

[79ford]

That refinery dates back to 1922, lol, it changes hands every 5-10 years or less. It has gone from connacher to calumet to husky in ten years.

[normstad]

Originally Posted by 79ford

Dont forget, if you pay attention to diesel demand and inventories you ll have noticed diesel consumption is up by about 400 000 barrels per day so far this year in north america and it is growing.

The northwest refinery is the answer to the structural diesel shortage that alberta has been in for awhile now... the recession kind of alleviated diesel issues a bit but in the next ten years some one has got to make more diesel.

You also got to look at who is in on this plant, Candian Natural resources is 50% of this project. Murray Edwards and those guys generally throw money into things that make money.

You also have to think where the opposition to this refinery gets its roots... the refiery is good for diesel consumers. Anyone ever stop and think maybe the three existing companies in the edmonton area may be seeding the opposition to a new refiner?

Esso, shell, petrocan basically have a starved diesel market they can produce full tilt into and command a higher price than gasoline. Cnrl is moving in on shell, suncor and exxon mobils territory.

I wonder if there will even be a significant market for diesel 15 or 20 years from now, enough to eventually break even on this boondoogle.

At the time it was conceived, it made all sorts of sense, conceptually. However, now 10 or 12 years later, there appears to be a sea change in what fuel will be used. Volvo is going completely electric by the 2019 model year. Tesla and Nicola are already producing prototypes of self driving electric long haul trucks. India has said only new electric vehicles after 2030,13 years from now, and Britain and France are banning all gas AND diesel cars after 2040, only 23 years from now.

Some diesel will be needed for many years, probably out to 2100, however, the path away from diesel certainly can be seen, even if it's a bit foggy yet. Will there be an excess of diesel? Probably. Will the price plunge? Most likely. How does that effect the plant?

It was probably the right project built too late. Let's hope it at least breaks even.

[ESOXangler]

Originally Posted by normstad

I wonder if there will even be a significant market for diesel 15 or 20 years from now, enough to eventually break even on this boondoogle.

At the time it was conceived, it made all sorts of sense, conceptually. However, now 10 or 12 years later, there appears to be a sea change in what fuel will be used. Volvo is going completely electric by the 2019 model year. Tesla and Nicola are already producing prototypes of self driving electric long haul trucks. India has said only new electric vehicles after 2030,13 years from now, and Britain and France are banning all gas AND diesel cars after 2040, only 23 years from now.

Some diesel will be needed for many years, probably out to 2100, however, the path away from diesel certainly can be seen, even if it's a bit foggy yet. Will there be an excess of diesel? Probably. Will the price plunge? Most likely. How does that effect the plant?

It was probably the right project built too late. Let's hope it at least breaks even.

Indeed but you can't run ocean going cargo ships on solar. With the new maritime sulphur limits coming up you're going to see a high demand for low sulphur diesel.

[The Elkster]

We are much farther away from the decline of hydrocarbons than the media and greens are trying to sell. Electrics will certainly make some headway specially early on as the low hanging fruit are plucked. But its got a tonne of issues to overcome before it really bites into oil based demand. Wind and solar have big intermittency issues, storage has a long way to go and the electrical grid has to be vastly expanded to enable a predominately electric fleet. Its going to be a slog.


What doesn't get mentioned in the media hype is that even with the growth in renewables and electric vehicles, oil product demand is still going up. What does that tell ya? Sure don't hear that talked about in the MSM. Not what people want to hear.

[PeterLester]

Correct me if I am overlooking something here. For the past 3 to 5 years we have had diesel fuel shortages in the west and gasoline shortage in Nova Scotia last summer leaving American tourists and stranded in NS and unable to make it back to port for their return ferry rides to USA eastern seaboard.

Meanwhile the Koch brothers have the lions share of WCC - unprocessed dilbit going directly to their Rosemount refinery in Minnesota where they make a massive profit converting from WCC to WTI.....and working in the background to prevent others for undermining their strategic advantage.

If not for the NW Upgrader going ahead there would have been another 20,000 engineers and/or technologists abandoned with no work these past five years..... that would be in addition to the previous 35,000 who already lost their professional jobs in western Canada's Oil and Gas industry. There were 72,000 engineers registered four years ago under Alberta's provincial Engineer's association. The overnight loss of such highly skilled jobs ha a ripple effect working all the way back to the employment of University engineering professors and instructors in the same tech realms as SAIT and NAIT etc.

This level of disruption can directly impact the Canadian employment taxation system, employment insurance benefit payouts in a severe manner.

What this is all about is 'DAMAGE CONTROL" by Canadian provincial and federal governments in a last ditch effort to right a sinking ship. Canada will remain in a very precarious situation for several years in large part due to USA's highly protectionist US centric capitalist system that has previously decimated much of the business activities of Mexico and many Carribbean islands.....

When the transparent Canadian news agencies freely disclosed the Mad Cow issues here in western Canada, US news agencies carefully obscured the fact that there was at the same time a major Mad Cow outbreak in USA.... Living next to a bully neighbour has it's downside......