PBF currently owns three refineries: a Delaware City, Del., 190,000-barrel plant; a 180,000-barrel-per-day refinery in Paulsboro, N.J.; and a 170,000-barrel-a-day refinery in Toledo, Ohio. The acquisition of the Chalmette refinery gives PBF its first location in the Gulf Coast region, which is home to more than a quarter of all U.S. refining capacity. The logistics assets included in the transaction include access to the Louisiana Offshore Oil Port (LOOP) plus 100% ownership of the MOEM Pipeline and 80% ownership in each of Collins Pipeline and T&M Terminal companies, both located in Collins, Miss.
PBF’s east coast refineries receive their crude supplies by rail from Canada and the U.S. Midwest, or by ship from Europe and Africa. The Toledo refinery is served by pipelines from Canada and the Midwest. The Chalmette refinery will have access to both mid-continent and Canadian oil and crude imported from Mexico and Venezuela. Being able to mix the heavier Latin American crudes with the lighter U.S. and Canadian crudes should offer PBF a better margin on about 25% of its refined products.
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PBF said it did not expect to issue new equity to finance any portion of the transaction. The company did not say exactly how it would finance the purchase, but PBF had about $450 million in cash and receivables worth another $667 million at the end of March. The company’s long-term debt is just $1.26 billion, so a combination of cash and new debt is likely. PBF’s dividend yield is a very handsome 4.6%.
Investors really like the deal, sending PBF shares up about 21% to an intra-day high of $32.00, before settling back down to trade around $31.00, in a 52-week range of $21.02 to $34.62. The consensus price target on the shares is around $33.50.
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