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Released July 24, 2019 | SUGAR LAND
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(Editor's note: This article has been expanded to include more background.)
Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Philadelphia Energy Solutions Incorporated (PES) (Philadelphia, Pennsylvania), owner and operator of the largest petroleum refining complex on the U.S. East Coast, filed for Chapter 11 bankruptcy July 21. This is the second time in as many years the firm sought protection under federal bankruptcy laws. The July 21 filing also signaled PES' intention to close the facility permanently.
PES owns a sprawling complex containing two refineries--Girard Point and Point Breeze--with a combined processing capacity of about 335,000 barrels per day (BBL/d). This week's bankruptcy was triggered by a spectacular June 21 fire and explosion at the 150-year-old complex. The refineries had continued to run in the last month, processing crude oil stockpiled on site.
The Girard Point facility, which was brought online in 1920, had about 200,000 BBL/d of processing capacity. Girard Point closed completely on July 1. The Point Breeze plant, which began operations in 1870 and had processing capacity of 135,000 BBL/d, is expected to cease operations shortly. For more information, see Industrial Info's plant reports on Girard Point and Point Breeze.
PES has secured $100 million in short-term debtor in possession (DIP) financing. The money will be used to finance the shutdown of operations through the bankruptcy process.
It remains unclear what will happen to the property in South Philadelphia, which for a century has existed as a massive industrial site.
In a statement, PES Chief Executive Mark Smith said the bankruptcy filing and DIP financing "provides PES Energy with the additional financing and liquidity necessary to ensure we can safely wind down our refining operations and, with the support of our insurers and stakeholders, best position the company for a successful reorganization, the rebuilding of our damaged infrastructure, and a restart of our refining operations."
Instead of building new refineries, asset owners have invested billions of dollars to incrementally add to their plants' existing capacity largely owing to local resistance, environmental concerns and the significant construction cost in an industry where profitability can oscillate wildly from one year to the next.
U.S. refineries have been running at full tilt for years to meet rising demand for gasoline and diesel, among other products, that will be consumed either domestically or shipped overseas. According to the U.S. Department of Energy (DoE) (Washington, D.C.), U.S. refineries' average utilization rates hit 93.88% in June and 94.6% for the first half of July.
Philadelphia news organizations are reporting that refinery workers will be getting mandated workplace closure notice as required by a U.S. law, the Worker Adjustment and Retraining Notification Act (WARN). Their jobs reportedly will end August 25.
The refinery complex reportedly owes billions of dollars of state and local taxes. In their bankruptcy petition, filed in Delaware Chancery Count (Case 19-11630-KG), the owners list about $40 million owed to its top 50 unsecured creditors. The petition said PES' assets and liabilities each range from $1 billion to $10 billion.
The June 21 explosion and fire, which reduced output at the complex, was blamed for retail price increases.
One industry source interviewed by Industrial Info said, "The owner has cancelled all their crude deliveries and is trying to resell that crude to other refineries." PES had been importing crude oil from Africa.
Retail gasoline prices in that region did increase after the late-June fire, and the loss of the PES refinery likely will add further upward price pressure in the East Coast.
"The closure of the PES refinery, the largest on the East Coast, will likely have a temporary impact on gas prices in and around our region, though it is too early to know how much prices could increase or for how long, especially during the peak summer driving season," Jana Tidwell, a spokeswoman for AAA Mid-Atlantic, said in a statement after the June 21 fire and explosion.
The June 21 refinery fire, and the subsequent announcement by the company that the plant would be closed, have been two of many forces affecting retail gasoline prices. Crude oil prices have see-sawed over the last month. Yesterday's front-month futures price of about $57 per barrel for West Texas Intermediate is about what it was the day before the June 21 fire.
In a market characterized by near-100% refinery utilization, the loss of PES' refining capacity, coupled with higher unplanned outages at refineries, likely will act as an upward driver on retail gasoline prices, particularly during the summer driving season, when gasoline demand rises.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Philadelphia Energy Solutions Incorporated (PES) (Philadelphia, Pennsylvania), owner and operator of the largest petroleum refining complex on the U.S. East Coast, filed for Chapter 11 bankruptcy July 21. This is the second time in as many years the firm sought protection under federal bankruptcy laws. The July 21 filing also signaled PES' intention to close the facility permanently.
PES owns a sprawling complex containing two refineries--Girard Point and Point Breeze--with a combined processing capacity of about 335,000 barrels per day (BBL/d). This week's bankruptcy was triggered by a spectacular June 21 fire and explosion at the 150-year-old complex. The refineries had continued to run in the last month, processing crude oil stockpiled on site.
The Girard Point facility, which was brought online in 1920, had about 200,000 BBL/d of processing capacity. Girard Point closed completely on July 1. The Point Breeze plant, which began operations in 1870 and had processing capacity of 135,000 BBL/d, is expected to cease operations shortly. For more information, see Industrial Info's plant reports on Girard Point and Point Breeze.
PES has secured $100 million in short-term debtor in possession (DIP) financing. The money will be used to finance the shutdown of operations through the bankruptcy process.
It remains unclear what will happen to the property in South Philadelphia, which for a century has existed as a massive industrial site.
In a statement, PES Chief Executive Mark Smith said the bankruptcy filing and DIP financing "provides PES Energy with the additional financing and liquidity necessary to ensure we can safely wind down our refining operations and, with the support of our insurers and stakeholders, best position the company for a successful reorganization, the rebuilding of our damaged infrastructure, and a restart of our refining operations."
Instead of building new refineries, asset owners have invested billions of dollars to incrementally add to their plants' existing capacity largely owing to local resistance, environmental concerns and the significant construction cost in an industry where profitability can oscillate wildly from one year to the next.
U.S. refineries have been running at full tilt for years to meet rising demand for gasoline and diesel, among other products, that will be consumed either domestically or shipped overseas. According to the U.S. Department of Energy (DoE) (Washington, D.C.), U.S. refineries' average utilization rates hit 93.88% in June and 94.6% for the first half of July.
Philadelphia news organizations are reporting that refinery workers will be getting mandated workplace closure notice as required by a U.S. law, the Worker Adjustment and Retraining Notification Act (WARN). Their jobs reportedly will end August 25.
The refinery complex reportedly owes billions of dollars of state and local taxes. In their bankruptcy petition, filed in Delaware Chancery Count (Case 19-11630-KG), the owners list about $40 million owed to its top 50 unsecured creditors. The petition said PES' assets and liabilities each range from $1 billion to $10 billion.
The June 21 explosion and fire, which reduced output at the complex, was blamed for retail price increases.
One industry source interviewed by Industrial Info said, "The owner has cancelled all their crude deliveries and is trying to resell that crude to other refineries." PES had been importing crude oil from Africa.
Retail gasoline prices in that region did increase after the late-June fire, and the loss of the PES refinery likely will add further upward price pressure in the East Coast.
"The closure of the PES refinery, the largest on the East Coast, will likely have a temporary impact on gas prices in and around our region, though it is too early to know how much prices could increase or for how long, especially during the peak summer driving season," Jana Tidwell, a spokeswoman for AAA Mid-Atlantic, said in a statement after the June 21 fire and explosion.
The June 21 refinery fire, and the subsequent announcement by the company that the plant would be closed, have been two of many forces affecting retail gasoline prices. Crude oil prices have see-sawed over the last month. Yesterday's front-month futures price of about $57 per barrel for West Texas Intermediate is about what it was the day before the June 21 fire.
In a market characterized by near-100% refinery utilization, the loss of PES' refining capacity, coupled with higher unplanned outages at refineries, likely will act as an upward driver on retail gasoline prices, particularly during the summer driving season, when gasoline demand rises.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
