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How’s HollyFrontier’s Lubricant Segment Positioned?


Jun. 7 2019, Updated 10:47 a.m. ET

First-quarter performance

HollyFrontier (HFC) has an expanding lubricants and specialty products segment. We’ll discuss the segment’s first-quarter performance.

In the first quarter, HollyFrontier’s lubricant segment’s adjusted EBITDA fell 51% YoY to $20 million due to the negative Rack Back EBITDA—the production and sale of base oils. The lower base oil markets impacted the Rack Back earnings. The Rack Forward EBITDA fell 6% to $53 million in the first quarter. The Rack Forward EBITDA is the purchase and processing of base oils to produce and sell finished lubricant products.

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Lubricant segment’s acquisitions

HollyFrontier’s lubricant assets have been growing in the past few years. In 2017, HollyFrontier acquired Petro Canada—a significant addition to its lubricant portfolio. The acquisition added the Mississauga plant with 15,600 barrels per day of capacity to HollyFrontier’s portfolio. The plant complemented HollyFrontier’s Tulsa plant by creating synergies and a strong Rack Back platform.

In 2018, HollyFrontier bought Red Giant Oil, which had storage, blending, and packaging facilities. The acquisition positioned HollyFrontier to expand its locomotive lubricants market in North America.

In 2019, HollyFrontier acquired Sonneborn US Holdings for $655 million. The acquisition has expanded HollyFrontier’s specialty product portfolio. The acquisition has expanded the company’s Rack Forward business. HollyFrontier estimates $85 million of additional annual EBITDA, which includes $20 million of annual synergies, from the acquisition.

Overall, HollyFrontier has created an integrated lubricant and specialty product value chain. The company has a stable platform for growth, which could turn into better earnings with improved business conditions.


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