PBF buys ExxonMobil Torrance refinery
PBF expects to close the \\$537.5mn purchase in the second quarter of 2016. The transaction marks the second PBF refining acquisition this year, both of ExxonMobil-affiliated refineries, expanding the US independent's refining capacity by almost 40pc.
"Upon completion of these two pending transactions, we will have operations spanning four (regions) and have diversified and increased our commercial footprint and flexibility," PBF chief executive Tom Nimbley said in a statement.
The sale of a major California gasoline supplier comes in the seventh month of a protracted shutdown following a February explosion on pollution control equipment at the site. ExxonMobil has not been allowed to operate a fluid catalytic cracking (FCC) unit estimated to produce up to 20pc of southern California's gasoline supply before meeting certain safety requirements and making repairs.
The refiner recently proposed restarting the unit in a limited fashion, but approval for the plan fell apart as regulators and the company could not reach terms on controlling associated emissions.
The transaction will not change a state investigation of the circumstances of the explosion, the Department of Industrial Relations said today. Any owner must still meet agency requirements on process and safety changes before the FCC may restart, the agency said.
PBF said the refinery will be restored to full working order before the sale is closed.
The sale includes the refinery, a lubricants distribution center at Vernon, products terminals at Vernon and Atwood and associated pipelines and logistics assets supporting the refinery.
ExxonMobil said the move furthered its efforts to adjust its refining portfolio.
California refiners had long rued their position in a state that vowed to cut consumption of gasoline and diesel by half over the next 15 years. Safety and environmental concerns stymied efforts to tap Bakken and other lower cost North American crude production for the state at their peak.
Alon idled its 150,000 b/d of southern California refining capacity in 2012, citing uneconomic conditions. And former Valero chief executive Bill Klesse as recently as 2013 was open to leaving the state, where the US independent refiner operates 305,000 b/d of capacity.
But such talk cooled under current Valero chief executive Joe Gorder, and California refiners that managed to keep units running this year have posted much higher profits as Torrance and other facilities struggled. Supply shortages amid rising demand drove Carbob gasoline premiums to a two-year high in July, capping a series of price spikes throughout the spring and summer.
"We like the west coast this quarter," Phillips 66 chief executive Greg Garland said in August. "But, fundamentally, our long-term view of the west coast hasn't changed. We think it's a really changed place to do business."
The state remains the single-largest US gasoline market, averaging 11pc of national gasoline demand in 2014, according to the Energy Information Administration. Demand increased by 4.3pc through the first six months of this year, according to the EIA.
PBF was bullish throughout. Chairman Tom O'Malley said the US independent refiner saw opportunity in the state last year, under more traditional, tougher conditions. The price spikes had cooled refiner interest in selling, he lamented in April.
"We've had a strong appetite to buy," O'Malley said.
O'Malley today reiterated PBF staff's experience in the difficult west coast market.
"Southern California is a very attractive market and we are excited to become a supplier in the region," the company said in a statement.
PBF in June purchased the 189,000 b/d ExxonMobil and PdV joint venture refinery in Chalmette, Louisiana. That transaction is expected to close by the end of this year.
The US independent refiner will also restructure its company management into regions, creating the subsidiary PBF Energy Western. Jeffrey Dill, PBF's general counsel, will serve as president. Paul Davis, former co-head of Commercial with Tom O'Conner, will relocate to southern California to head up commercial activities there. O'Conner will oversee Chalmette and all other commercial operations.
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