PBF Aims to Make Gulf Coast Footprint with Chalmette Refinery Acquisition

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Researched by Industrial Info Resources (Sugar Land, Texas)--PBF Energy Incorporated's (NYSE:PBF) (Parsippany, New Jersey) purchase of a 189,000-barrel-per-day (BBL/d) refinery in Chalmette, Louisiana, and its related logistics assets will give the independent oil-refining company a meaningful presence on the Gulf Coast, according to executives.

PBF announced an agreement to purchase the Chalmette Refining LLC joint venture from Exxon Mobil Corporation (NYSE:XOM) (Irving, Texas) and Petroleos de Venezuela (PDVSA) (Caracas, Venezuela) for $322 million, plus working capital. The deal is expected to close in the fourth quarter. PBF will maintain a long-term crude supply contract with PDVSA under the deal.

PBF owns refineries in Delaware City, Delaware; Paulsboro, New Jersey; and Toledo, Ohio. The addition of the Chalmette operation will increase the company's total throughput capacity 35% to 725,000 BBL/d.

Industrial Info is tracking five active projects worth $70 million at the Chalmette Refinery, including a planned $40 million hydrotreater revamp and four turnarounds. PBF Chief Executive Officer Tom Nimbley said during a conference call Thursday that the company is evaluating bringing a major unit at the refinery back online as a strategic project.

Expenditures for maintenance and turnaround projects at the refinery are expected to run from $100 million to $110 million per year, Nimbley said. The company is not planning any strategic capital projects of more than $100 million at the refinery, he added.

In addition to the refinery, PBF will gain full ownership of pipelines that provide access to a terminal in Empire, Louisiana, and to the Louisiana Offshore Oil Port (LOOP) via a third-party pipeline. The transaction also includes a marine terminal, and a crude and product storage facility with a capacity of 7.5 million barrels. In all, the operations will employ 535 people, Chalmette Refinery Manager Wade Maxwell said in a video message to employees.

Nimbley said he expects the Chalmette operations to produce $160 million in earnings before interest, taxes, depreciation and amortization (EBITDA) in its first year under PBF's ownership.

Operations at Chalmette have been "somewhat handicapped by operating in a difficult joint venture," Nimbley said, and the refinery has room for improvement. PBF will push to increase the refinery's yield of light products such as gasoline and jet fuel, he said. The refinery can process both light and heavy crude.

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