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Sprague Resources acquires terminals

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Hydrocarbon Engineering,

Sprague Resources LP (Sprague) has announced that its operating subsidiary, Sprague Operating Resources LLC, has signed a definitive agreement to purchase the Lawrence and Inwood, NY refined product terminal assets of Carbo Industries, Inc. and Carbo Realty, L.L.C. (Carbo). Sprague will pay total consideration of approximately US$70 million, plus payments for inventory and other customary items. The consideration is comprised of approximately US$30 million of SRLP units to be issued at closing, US$10 million in cash paid at closing and the balance in cash, paid ratably over 10 years.

The Carbo terminals are located in Inwood and Lawrence, NY, with a combined gasoline, ethanol and distillate storage capacity of 157 000 bbls. The terminals are supplied primarily by pipeline, and also have the ability to accept product deliveries by barge and truck. Conveniently located next to the region’s major transportation networks, Carbo provides the storage, blending and additive injection capabilities to serve major branded gasoline marketers as well as unbranded gasoline/distillate marketers focused on the New York City and Long Island markets, in addition to functioning as a key pillar of Sprague’s extensive service to New York’s governmental/municipal transportation fuel users and heating oil retailers. The Carbo transaction is expected to be accretive to distributable cash flow and generate approximately US$8 to US$10 million of adjusted EBITDA annually.

“I am excited to announce our fourth acquisition of 2017,” said David Glendon, President and CEO of Sprague. “The Carbo facilities have long been an integral component of our distribution network and we’re thrilled to convert our position from tenant to owner in this critical location, further solidifying our status as one of New York’s premier refined products terminal operators and marketers. I’m also pleased that Cliff Hochhauser, who has been central to Carbo’s success, will be joining Sprague and continuing to lead operations at these facilities.”

“While the Carbo terminals’ total combined storage capacity will rank among the smallest in our network, their expected combined annual throughput will be higher than any single Sprague-owned facility. We look forward to this acquisition nearly tripling our gasoline throughput business, expanding the portfolio of branded gasoline suppliers we serve, and diversifying Sprague’s seasonal cash flows to mitigate the impact of weather on our operating results,” said Mr. Glendon.

Sprague intends to fund the transaction with borrowings from its senior secured credit facility; closing is expected to occur in the second quarter.

“As we work to close this acquisition and welcome Carbo employees, Sprague’s financial position remains very strong. Coverage is more than sufficient to meet our stated cash distribution growth goals, our credit facility has ample liquidity available to fund meaningful near term acquisition growth, and we expect Sprague’s permanent leverage ratio will remain within our long-term target range between 2.5 and 3.5 times,” concluded David Glendon.

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