PBF Energy Inc. found its refineries squeezed by higher crude oil costs that were not offset by higher gas prices in the first half of this year.
The New Jersey-based company does see completion of its rail operations at Delaware City as a competitive advantage in getting the best prices for crude oil.
And armed with proceeds from a spin-off of its logistics (pipeline and transport) business, PBF may again look for growth opportunities. The company was formed when the Delaware City Refinery was purchased. It quickly added refineries in Toledo, Ohio and Paulsboro, N.J., but has not expanded beyond those sites.
It also shelved plans for a massive project at the Delaware City Refinery, citing a need to focus on receiving crude oil via rail. Costs can be lower, even with higher costs and growing regulation of crude oil via rail.
Adjusted pro forma net income for the second quarter 2014 was $34.2 million, or $0.35 per share compared to Adjusted pro forma net income of $71.5 million, or $0.73 per share, for the second quarter 2013. PBF Energy’s financial results reflect the consolidation of the financial results of PBF Logistics LP, a master limited partnership of which PBF Energy indirectly owns the general partner and approximately 50.2% of the limited partnership interests.
Production for the quarter averaged approximately 470,400 barrels per day, which was in-line with total guidance for the quarter.
Tom Nimbley, PBF Energy’s CEO, said, “This is PBF’s third successive quarter of positive results, including a positive first six months for the East Coast. We continue to enhance our feedstock sourcing flexibility and procure the most economic barrels for processing at our facilities.”
Nimbley continued, “The big differences in our results for this quarter versus the first quarter of 2014 were the narrower crude oil differentials and higher flat prices for feedstocks experienced in the second quarter. The narrower differentials resulted in higher or more expensive landed costs for our crude oils across all our refineries and the higher flat price environment negatively impacted the margins on our low-value products.”
Regarding rail operations at Delaware City , Nimbley said, “We are pleased to announce that both our light and heavy crude by rail expansion projects are near, or at, completion. In fact, the new heavy unloading rack was commissioned this week and discharged approximately 25,000 barrels of heavy oil. The expansion of the loop track capacity is expected to be complete next week. Once the projects are complete, the existing rail capacity of approximately 145,000 barrels per day is expected to increase to a total of approximately 210,000 barrels per day and rail-delivered quantities of heavy and light crudes are expected to increase. The completion of these projects will enable us to pursue cost-advantaged North American crude oil in greater volumes.”
Legislators have continued to express concerns about the rail transport, which sometimes results in traffic congestion at blocked rail crossing, the most notable being Route 40. Safety has also been an issue, although PBF has committed itself to using the latest generation of tank cars.
Nimbley added, “PBF Energy is now poised to transition from the formation phase to the growth phase of its life cycle. Moving into the third quarter, the market is challenging. We are positioning our refineries to benefit from any opportunities the market may provide and we continue to pursue opportunities to grow the business.”
