Investors are bullish on PBF Energy stock after the announcement last week that the company will purchase a Louisiana refinery.
PBF, the owner of Delaware City Refinery, signed a definitive agreement to purchase Chalmette Refining, LLC for $322 million.
The stock price of PBF rose from about $26 a share to as high as $31 last week before settling in around $30 at the end of the week. The popular Motley Fool finance website highlighted PBF in a slide show post.
PBF Energy said the transaction is likely to add 20 percent to 2016 consensus earnings in the first year of operation.
The transaction is expected to close by the end of 2015.
The 189,000 barrel per day Chalmette Refinery and related logistics assets, will be sold by ExxonMobil and PDV Chalmette, LLC.
PDV is part of Venezuela’s state-owned oil company. That nation has struggled with lower oil prices and sold assets. Exxon had managed the Chalmette refinery a related assets.
An indirect subsidiary of the Venezuelan oil company is Citgo, which was put on the selling block for a time. The company pulled back after it could not find a desirable price for the company.
Citgo, which typically has independent dealers, has few stations in Delaware, although it has a many locations in Maryland.
Chalmette is just outside New Orleans in an area that was in the direct path of Hurricane Katrina.
With the acquisition PBF will increase its total capacity to more than 725,000 barrels per day and gives the company a foothold on the Gulf Coast.
The refinery employs about 500A nearly equal number of contractors work at the site. Both figures are comparable to the job numbers in Delaware City.
PBF has a trio of refineries in Delaware City, Paulsboro, NJ and Toledo, Ohio. The company got its start when it purchased the former Valero refinery during the economic downturn of 2009. The refinery had been closed and was headed toward demolition.
PBF went on to purchase the New Jersey and Ohio refineries. The company built a controversial rail unloading site in Delaware City to take advantage of lower prices from crude oil coming in from North Dakota and Canada.
Interestingly enough, the Chalmette refinery will be a neighbor to a refinery acquired by Valero, the company that sold the Delaware City site to PBF.
The Valero refinery, under previous ownership, saw a storm surge from Katrina hit the site and rupture a tank. The event led to hundreds of millions of dollars in clean-up costs.
“The acquisition of the Chalmette Refinery, and its associated logistics assets, represents a significant step in the strategic growth of PBF Energy and PBF Logistics. Upon completion, we will have increased our refining capacity by 35 percent and added meaningful Gulf Coast assets to our businesses. We will have operations in the Gulf Coast, Mid-Continent and East Coast and have diversified and increased our commercial footprint and flexibility,” said Tom Nimbley, PBF Energy’s CEO “We are committed to the continued safe and environmentally responsible operations of the facility and look forward to welcoming Chalmette’s well-trained and professional workforce to the PBF family.”
PBF’s Executive Chairman and founder Tom O’Malley commented, “The PBF management team that the board has put in place has a proven track record of purchasing and integrating accretive acquisitions and chose the right opportunity in Chalmette to build on that track record at an attractive cost per complexity barrel.”
The Chalmette Refinery, like Delaware City, is capable of processing both light and heavy crude oil. The company has profited from the ability to refine all types of oil at Delaware City.
The facility is strategically positioned on the Gulf Coast with strong logistics connectivity that offers flexible raw material sourcing and product distribution opportunities, including the potential to export products, the refiner noted in a release. PBF has also expressed interest in West Coast refineries.
PBF is headquartered in northern New Jersey.
