PBF Energy Inc. reported higher earnings reversing a loss a year ago as concern builds on the delays in crude oil deliveries via rail.
Third quarter 2014 operating Income of $284.1 million compared to an operating loss of $55.6 million for the third quarter of 2013 PBF operates the Delaware City Refinery, which performed well in the quarter. The company is headquartered in northern New Jersey.
PBF Energy’s financial results reflect the consolidation of the financial results of PBF Logistics LP a master limited partnership of which PBF indirectly owns the general partner and approximately 51.1 percent of the limited partner interests.
Tom Nimbley, PBF Energy’s CEO, said, “Our East Coast results reflect our continuing efforts to use our procurement optionality to source the most economic barrels for processing at our East Coast facilities, as well as in the md-continent. Stable operations during the quarter allowed us to benefit from lower feedstock costs, capture the wide distillate margins and recognize improved margins on our lower value products as a result of the overall decline in crude prices.”
Production for the quarter averaged approximately 495,500 barrels per day. The refineries in Delaware City and Paulsboro, N.J ran at higher-than-expected rates in order to capture favorable pricing.
On September 30, a subsidiary of PBF completed the sale of the West Rack, a 40,000 barrel per day heavy crude oil rail unloading facility, located at PBF’s Delaware City refinery to PBF Logistics LP for $150 million. The money was used to buy back PBF stock. The rail site near the refinery allows PBF to get better deals on crude oil that is then delivered to Delaware City.
“The markets continue to be turbulent and PBF is focused on operating safely and capturing the opportunities that the markets present. We remain committed to return value to our shareholders and we continue to pursue opportunities to grow the business,” Nimbley stated.
PBF has been mentioned as a candidate to buy other refineries. In addition to Delaware City and Paulsboro, it operates a third refinery in Toledo, Ohio.
During the third quarter of 2014, the company wrote down assets associated with an abandoned capital project at the Delaware City refinery, resulting in a pre-tax charge of $28.5 million.
The $1 billion project was aimed at producing cleaner fuel, according to published reports. It drew fire from some environmental activists. Smaller projects could be undertaken as the refinery works to meet stiffer environmental standards.
In another development, Nimbley has been appointed to the company’s board of directors. He has served as PBF’s Chief Executive Officer since June of 2010.
PBF was formed as an independent refinery by industry veteran Thomas O’Malley, who remains chairman.
O’Malley headed a company that ran Delaware City refinery for a time and swooped in an purchased the site after former owner Valero shut down and threatened to demolish the refinery, which was running at a loss totaling $1 million a day,
PBF received state financial assistance in reopening the refinery that employs 500, with hundreds of contractors workiong on site from time to time.
The higher earnings also came as another refiner expressed concern about reliability of rail crude oil deliveries.
Monroe Energy, which owns a refinery in Trainer, Pa,, near Philadelphia, sent a letter to federal regulators expressing concern about the reliability of rail deliveries affecting the future of East Coast refineries. Monroe is owned by Delta Airlines. PBF has indicated it is not as concerned about the issue.
The volume of rail-transported crude oil has strained the systems of carriers like CP and BNSF that transport the crude from North Dakota, with the key rail hub of Chicago listed as a problem. Railroads are working to reduce bottlenecks and in some locations local opposition has cropped up.
Safety concerns are also an issue, with the federal government mandating a new generation of cars and imposing speed restrictions. Locally, the Norfolk Southern continues to upgrade the lines and rail crossing on track from Newark to the refinery.
The Midwestern rail system has also been affected by traffic generated by a special type of sand that is used in the hydraulic fracturing “fracking” process that is transported from Wisconsin and Minnesota to natural gas wells in Pennsylvania. Sand mining has created regulatory challenges in Wisconsin.
