WTI Slides; Active Rigs Remain Constant -- July 2, 2019

Only one well coming off confidential list today -- Tuesday, July 2, 2019: 2 for the month; 2 for the quarter;

• 35321, SI/NC, MRO, Flynn USA 21-16TFH, Reunion Bay, but look at this -- 18,482 bbls over first nine (9) days; the wells in this area are going to be huge; some are already huge; see this post;

Active rigs:

$58.33	7/2/2019	07/02/2018	07/02/2017	07/02/2016	07/02/2015
Active Rigs	61	67	58	30	75

RBN Energy: going to California -- PBF Energy extends heavy crude bed with Martinez refinery buy.

Independent refiner PBF Energy on June 11 announced its plan to acquire Shell Oil’s Martinez, CA, refinery for about $1 billion; the deal is expected to close by the end of 2019. The purchase will give PBF its sixth U.S. refinery and add 157 Mb/d to the company’s existing 865-Mb/d refining portfolio, pushing its total capacity past 1 MMb/d. Post-acquisition, PBF will retain overall fourth place in the U.S. market, behind leaders Marathon Petroleum, with 3 MMb/d; Valero, with 2.6 MMb/d; and Phillips 66, with 1.9 MMb/d. With the exception of its 173-Mb/d Toledo, OH, plant, PBF’s refineries are equipped with cokers that extract value from the heaviest sour crudes. As such, the Martinez acquisition extends the company’s long-term bet that heavy crude refining margins will exceed those of simpler refineries processing light sweet grades, even as U.S. production of the latter soars. Today, we examine prospects for the Martinez refinery and the sweet/sour spread.

The U.S. refinery market has seen significant merger and acquisition (M&A) activity in the past two years, topped by Marathon Petroleum’s 2018 acquisition of rival Andeavor (formerly Tesoro) to create the U.S. largest independent refiner. In November of last year, smaller independent Par Petroleum snapped up U.S. Oil & Refining’s 41-Mb/d Tacoma, WA, plant from private equity-backed TrailStone, and in January (2019), Chevron purchased the 110-Mb/d Pasadena, TX, refinery from Brazil’s Petrobras.

Just last month, Midwest independent CVR Refining announced that its132-Mb/d Coffeyville, KS, refinery and 74-Mb/d refinery in Wynnewood, OK, could be sold under an asset review. These plants are changing hands despite strong margins experienced in 2018 and continued discounts for U.S.-sourced crude during the Shale Era as production exceeds refinery demand for light sweet grades.