Simons Aims to be Biggest Oil Jobber


It has taken Simons Petroleum Inc. more than half a century and a lot of organic growth to become one of the biggest oil jobbers in the United States. It plans to take the acquisition route to get to the top of the heap in a much bigger hurry.

Simons, which is based in Oklahoma City, Oklahoma, announced this month that it and three private equity firms have formed a partnership that is geared for an aggressive buying spree. Officials said they plan to acquire half a dozen companies over the next year, becoming the nations biggest petroleum marketer with annual revenues in the multiple billions.

Our business strategy is to remain the best and to become the largest marketer and distributor of fuels, lubricants and related products and services in the United States, Simons President, Chief Executive Officer and Board Chairman Roger Simons told Lube Report last week. [Our] strategy recognizes the opportunity to accelerate growth through acquisitions at a time when market conditions are especially favorable.

Simons already distributes fuels, lubes and other petroleum products across most of the United States. Its fuel network has 400 supply points, and the company operates 10 lubricant packaging and distribution plants, as well as two marine fuel and lubricant facilities. It sells lubricants mostly to heavy industrial and commercial customers, such as oil drilling rigs, natural gas pipelines, mining operations and the trucking industry. The company markets lubricant brands of several producers, including ConocoPhillips, Citgo, Shell and Houghton International, and claims to be among the largest U.S. distributors for ConocoPhillips and Citgo.

As a privately owned company, Simons Petroleum does not report financial information, but Roger Simons said it has annual revenues of roughly three-quarters of a billion dollars, making it easily one of the 10 largest petroleum marketers in the United States. The company is 57 years old and has never completed an acquisition. But Simons and its new partners plan to change that fast and in a big way.

On April 15, Simons announced that it has partnered with three private equity firms to create a holding company, SPI Petroleum LLC, and that SPI has been seeded with $90 million to buy other marketers. The investment firms -Northwest Capital Appreciation, RBC Capital Partners and Waud Capital Partners – have committed $50 million in equity. In addition, two banks have provided a $40 million senior debt facility.

Roger Simons is chief executive officer of SPI and has the largest economic interest in the new firm. He said SPI is already in discussions with several potential acquisitions and plans to buy four to six companies during the next 12 months.

We would expect to acquire one very large company, a couple that are medium sized and a few small ones, Simons said. And by large I mean $300 million to $500 million [in annual revenue]. The small ones could be more in the neighborhood of $25 million.

He added that SPI plans to target marketers that are strong in lubes, as well as fuels. At least one potential target distributes mostly lubricants. Simons said SPI would like to buy companies that concentrate in lube segments other than retail or those in which Simons already specializes.

For example, we might buy somebody that is strong in the timber industry, he said. We want to expand into [serving] other types of industries, and we really would like to have companies that dominate those sectors. This is not about buying up our competitors.

SPIs owners plan to use it as a holding company and aim for it to achieve annual revenues of multiple billions of dollars. Roger Simons said Sprague Energy, of Portsmouth, N.H., is the largest petroleum marketer in the United States with annual revenues of approximately $2.5 billion.

Roger Simons said these are opportune times to shop for petroleum marketers, because the industry is rapidly consolidating. Indeed, according to the Petroleum Marketers Association of America, the number of oil jobbers in the United States has fallen from more than 8,000 to approximately 7,000 in the past few years and is dropping quickly toward 6,000.

This is a generation of change in our industry, he said. There has already been so much consolidation in the oil industry, and the producers that are left are reducing the number of marketers they use. That has created a fear factor. There are a lot of marketers out there that have done allright over the years, but they havent invested in technology, and the owners may be getting on in age and be looking for a way to exit the market. So there are a lot of companies out there that will be receptive to an offer like ours.

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