Connacher Oil and Gas Limited (CLL-TSX) announced that it has entered into an agreement with Calumet Specialty Products Partners, L.P. , a leading refiner and processor of specialty hydrocarbon products in the United States, to sell its heavy oil refinery and related assets in Great Falls, Montana for total proceeds of US$155 to US$170 million, prior to the potential deduction of a tax liability of approximately US$20 million.
The total proceeds consist of a purchase price for the Refinery of US$120 million plus working capital, including inventory at market value at the time of closing. Management estimates that the working capital adjustment could result in additional cash proceeds of US$35 to US$50 million, depending primarily on the quantity of asphalt sales prior to closing and the corresponding market prices of refined products. The transaction is subject to customary regulatory approvals and third party consents. Closing of this transaction is expected in October 2012.
This sale transaction represents one of the steps in the strategic review process initiated by the Board of Directors earlier this year. The sale capitalizes on the significant value of the Refinery arising from the disconnect between North American posted prices, heavy oil differentials and crack spreads, which have resulted in strong refining margins.
Another step in the strategic review process is the proposed sale of the company's conventional oil and gas assets. In this regard, the company has entered into a letter of intent to sell all of its conventional petroleum and natural gas properties effective July 1, 2012, for cash consideration of $18.3 million, subject to normal post-closing adjustments.
This transaction is expected to close in September 2012.
Net proceeds from the aforementioned dispositions will be used in part to repay the company's revolving credit facility, with the remainder added to working capital pending deployment in 2013 in the following development projects.