PhillyDeals: PBF Energy updates proposal for public trade

An oil refinery in Paulsboro can make enough alkylate to meet its own needs, but shortages have resulted in price spikes.
An oil refinery in Paulsboro can make enough alkylate to meet its own needs, but shortages have resulted in price spikes. (MEL EVANS / Associated Press)
Posted: December 05, 2012

Sunoco Inc. has finished its long liquidation. But the Philadelphia area could soon be the production center for another publicly traded, multibillion-dollar oil refiner.

PBF Energy, the Parsippany, N.J.-based company that bought the former Valero refineries in Paulsboro and Delaware City and the original Sunoco refinery in Toledo, amid the recession, has updated an earlier proposal to sell shares in an initial public stock offering (IPO), possibly by the end of this year.

The company, founded by veteran refinery dealmaker Thomas O'Malley in 2008, says it spent $1 billion buying the three works in 2010-11. PBF says it spent hundreds of millions more to update the infamously high-polluting Delaware City refinery, including $45 million in taxpayer financing, and cut costs there 40 percent, partly by shutting a gasification unit. It's also been in talks to buy more plants.

PBF says it was profitable on sales of $16 billion last year and $15 billion in the first nine months of this year.

The company says it is ready to boost volume after leasing 2,500 rail cars to speed oil from the Bakken fields in North Dakota to its plants. And PBF plans to barge crude from its new Delaware City rail oil terminal across the Delaware River to its Paulsboro complex. (Let's hope the rails and port connections are in better shape than the Conrail bridge that failed in Paulsboro on Friday.)

Cheap Marcellus Shale gas fuels PBF's refineries. The company also expects the nearby Utica Shale will yield cheap oil, further cutting costs and boosting profits.

Over the cliff

National Penn Bancshares, Boyertown, is speeding its next 10-cents-a-share quarterly dividend to Dec. 28, for shareholders as of Dec. 13. The dividend was not scheduled to be made until early in 2013.

Like Amazon, Costco, eBay, and other companies that declared large special dividends so they can give away cash to shareholders in advance of a threatened federal tax hike, Nat Penn is bracing for the fiscal cliff revenue-boosters that will take effect Jan. 1 unless Congress and President Obama make a deal to ease the impact.

"Under current law, the federal income tax rate on dividends is going to increase from 15 percent to more than 40 percent" for taxable investors in the upper-income brackets, Scott V. Fainor, National Penn chief financial officer, told me.

"Even if there is legislative action this month to address fiscal concerns, including action on this tax rate, we expect the tax rate on dividends to increase materially in 2013," Fainor said. Happy New Year!

Ho, ho, ho!

Santa Claus doesn't release financial statements. But ParenteBeard, the biggest accounting firm based in Philadelphia, has run a Christmas-season "audit" that tries to analyze his operation as a privately held global enterprise.

"Santa Inc." would have to spend more than $40 billion a year to make and deliver $75 worth of gifts to each of the world's children under age 14, writes Jeffrey Ferro, president of ParenteBeard.

The firm estimates a workforce of 50,000 elves, at an average U.S. toy-manufacturing wage of $36,000 a year Think it's high? You try raising little elves on it. And it's competitive with China, with the fallen dollar, and implied capital investment. That's a yearly payroll of $2 billion. Plus nearly $800 million for health insurance.

Factory and warehouse space (owned, depreciated) would cover close to nine million square feet. ParenteBeard estimates fuel and operating expenses at $100 million a year, which sounds conservative. Santa's unpaid work animals would cost a modest $54,000. Material costs cover the balance of the sheet.

Julius Green, the firm's nonprofit-practice leader, warned Santa better "avoid self-dealing" and not classify Claus family living costs as charitable expenses.

I'm more worried about the lack of revenues from any source other than "holiday magic." That's a classic "going concern" red flag, or ought to be.


Contact Joseph N. DiStefano at 215-854-5194, JoeD@phillynews.com and @PhillyJoeD on Twitter.

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