A Laser Focus on Supply
When Gulf was under Cumberland Farms ownership, the focus (quite naturally) ultimately came back to the retail side. Under ArcLight the shift is, to say the very least, significant.
“The landscape is changing out there for the market and for us; we want to be that premier logistics platform in providing exceptional customer service,” said new Gulf President and CEO Jerry Ashcroft. “Basically, with the changing landscape, that means that we’ve got to be a very good supplier. The current Gulf team has done a fantastic job of bringing Gulf back to the forefront, and we’re lucky to have that history and brand recognition.”
Ashcroft previously held executive leadership roles at Buckeye (2009 – 2014), Colonial Pipeline (2000 – 2006, 2008 – 2009) and JP Energy Partners (2014 – 2015). He is a decorated Major in the United States Marine Corps and holds a Bachelor of Science from the United States Naval Academy and MBA from Goizueta Business School, Emory University.
The key consideration with the Gulf acquisition is to look at it as part of a whole.
The first related opportunity ArcLight acted upon, noted Ashcroft, was the April 2015 acquisition of Pyramid LLC, (formerly, Petroleum Products Corporation) by ArcLight. The portfolio company within ArcLitght that made the acquisition is Penn Product Terminals. This acquisition will be referenced as PPT throughout the article. That involved nine active refined products storage terminal facilities in Pennsylvania totaling with over 8.7 million barrels of storage capacity. The PPT assets store gasoline, diesel fuel, heating oil, kerosene, ethanol and biodiesel and is a leading distributor of these products to customers in Pennsylvania and five surrounding states. All terminals are connected via pipeline, barge or rail and supplied from a geographically diverse set of refined product sources including New York, Philadelphia the Midwest and Gulf Coast.
The Gulf acquisition brought 12 owned and operated proprietary refined product storage terminals to the logistics infrastructure. This network has connectivity via the Buckeye and Laurel pipelines as well as barge access that allows Gulf to source product from Canada, Europe, the Caribbean, and all of the major United States refining markets. Meeting antitrust requirements resulted in the sale of four terminals. The total count is 17 active refined product terminals after the acquisition.
“The Gulf opportunity came right behind PPT and it was a good connection with those assets,” Ashcroft continued. “They really complemented each other well, some in the same regions, but we basically gained a footprint from Maine all the way to Pittsburgh.”
That point was expanded by Mike Campbell, Gulf’s new Chief Financial Officer, who previously held the role of CFO at Crestwood Midstream Partners and Crestwood Equity Partners, the general partner of CMLP (2012 – 2015) and Inergy Midstream, LP (2003 – 2012).
“From the standpoint of these assets, the beauty of putting them together is scale,” Campbell said. “We have a geographic position in the Northeast that is obviously very attractive and I think we’d be attractive to investors down the road offering another downstream logistics and terminaling-based MLP.”
A Message to Existing Customers
Obviously, any change of this scope raises questions through an industry, and most specifically among those with existing relationships. What does this acquisition mean for existing customers?
“I think that the nutshell message is that [the customer is] going to see this as seamless,” Ashcroft said. “The people that they’ve been calling are still going to be the people that they’re calling. The systems that they’ve been working with are still going to be the same systems. For them, it really should be a seamless transition.
“We feel like we have a lot of really good people at both companies, but from the Gulf standpoint, those will be the same faces and voices that they’ve dealt with. What we want to improve on is our customer experience. We want to be able to bring them the lowest cost of supply and do so in a safe and reliable way.”
Gulf’s largest customer, unsurprisingly, is the company’s previous owner, the Cumberland Farms chain, with more than 500 stores. “There is a long term agreement for Cumberland to transition from an ownership tradition to our largest customer,” said Ron Sabia, former President of Gulf under Cumberland management and now the company’s Chief Strategy Officer. “In the long term, we hope to maintain that relationship, because obviously it’s an important one to us as a company. We value Cumberland, and we want to continue that relationship for as long as we can.”
Branded Market Growth
As previously noted, Gulf had been undergoing a significant expansion since 2005, both in existing and new markets. What are the anticipated growth dynamics moving forward under the new ownership?
“What does growth look like for us? I think we want to double down in the Northeast and make sure that we really do well in our own backyard, especially after picking up these Pennsylvania terminals,” said Ashcroft. “Then, we want to go where the growth is in the nation. We’re currently looking at even more opportunities in the Southeast, and we currently have a market there. Is it the Midwest? Is it the Southwest? Those are things that we have good debates on how do we best grow. But right now, our focus of effort is transitioning Gulf out of Cumberland, integrating Gulf and PPT, and growing our business in our own backyard.”
Both branded and unbranded supply will feature strongly in Gulf’s future expansion efforts. (Cont. Click next page below)