"Sell cheap fuel and profit- Delta Air Lines refining 101"--article

[BILL LUMBERG]

So where is that "profit" GL?

Every time we turn around it's another excuse from the Head shed.

I was onboard with this initially, but more and more they are acting like they know everything ALA the JAL purchase. You never heard them say they made a mistake or misplayed that even though they were convinced it was a done deal.

It just quietly went away.....and please spare me the story that they did it to drive up the price on AA.

These guys blew the trust when they decided to return money to shareholders.....IE themselves.

 

[General Lee]

So where is that "profit" GL?

Every time we turn around it's another excuse from the Head shed.

I was onboard with this initially, but more and more they are acting like they know everything ALA the JAL purchase. You never heard them say they made a mistake or misplayed that even though they were convinced it was a done deal.

It just quietly went away.....and please spare me the story that they did it to drive up the price on AA.

These guys blew the trust when they decided to return money to shareholders.....IE themselves.

Bill,

Getting rid if the middleman will result in more overall profit for DL. I don't know if that means profit at DL or Monroe Energy. Here is an interesting part of the above article:


"Having some say over the price of jet fuel in the region is particularly important for Delta, which has set out on an ambitious growth plan to increase its share of the New York City hub. Delta is the largest buyer of jet fuel in New York, as well as the country as a whole, making up 20 percent of all U.S. purchases, Anderson said.

The company took a $63 million loss from the refinery in the fourth quarter due to slower operations after Hurricane Sandy struck. Sandy's impact continued to be felt in January. But Bastian said earlier this year he expects the plant to turn a profit of $75 million to $100 million in the second quarter."



Bye Bye---General Lee

 

[scoreboardII]

This was a great idea, right until the massive fuel reserves where found in the Dakotas.

 

[redflyer65]

So where is that "profit" GL?

There are none Bill. You are rightly concerned that your company is wasting money.

Think about this....


With the initial purchase cost, plus the rehab cost, plus the loses to date, the total is close to 1 Billion dollars. They may eclipse that number for the next quarter.

So, where's the profit?

 

[RJLoser]

DL is creating the RJ "B" scale of refineries. I'll bet the other refineries won't say hello to the trainer refinery guys in the terminal.

 

[jynxyjericho]

This was a great idea, right until the massive fuel reserves where found in the Dakotas.

That appears to be the macro perspective right now. The refinery could still make money however the Delta profitability (through cost savings) estimates should have been wound down now that the Dakotas are the fastest growing source of petroleum products in the world and in 5 years (if everything goes perfectly) the US and Canada will eclipse OPEC.

 

[redflyer65]

That appears to be the macro perspective right now. The refinery could still make money however the Delta profitability (through cost savings) estimates should have been wound down now that the Dakotas are the fastest growing source of petroleum products in the world and in 5 years (if everything goes perfectly) the US and Canada will eclipse OPEC.

Somewhat.

Delta entered the venture knowing they needed oil from one of two sources...

1. Africa, via tankers to the Philly port. Which is expensive.

2. Bakken Oil Shale from ND. No pipeline to get it to Philly. Trucks are too expensive....so there's rail.

They have gambled on Bakken via rail. The African or OPEC oil didn't offer enough savings so this was only on alternative. (they knew that going in)

The problem with this refinery is where it's located....it always has been. Not anywhere close to domestic product. That's why Phillips 66 could never make money there. They were actually closing it whether there was a buyer or not. It was a money loser, has been for years.

 

[General Lee]

This was a great idea, right until the massive fuel reserves where found in the Dakotas.

I think you missed this part of the article:



"One of the main costs Delta has focused on at the Trainer plant has been crude. Nearly half of the refining capacity on the East Coast was facing shutdown at the end of 2011, as well as plants in the Caribbean that supplied that market, due to the high cost of importing oil from West Africa and the North Sea.

Facing higher jet costs as its traditional suppliers dwindled, Delta bought Trainer from Phillips 66. It is now seeking to drive down costs by tapping into the cheap crude at the center of the U.S. oil boom. By the end of the year, Bastian said 50,000 barrels per day of oil from North Dakota's Bakken region could supply the 185,000 bpd plant at a substantial discount to internationally purchased oil.

Midwest and Gulf Coast refiners have enjoyed better margins over the past two years thanks to the Bakken, and other shale oil plays.

"This is going to continue to grow as we improve the logistics and distribution capabilities to get more Bakken into the refinery," said Bastian, adding cost savings could be in excess of $100 million per year.

In the medium term the plant could take up to half its crude from North Dakota, and potentially all of its feedstock in the longer term, Bastian said.

The realization that the Bakken crude, which had been helping Midwest refiners since production started to surge in 2010, did not come until after Delta had purchased the plant, according to CEO Richard Anderson. Since then, several East Coast plants have sought to bring in Bakken crude by rail to cut costs."



Bye Bye---General Lee

 

[General Lee]

Somewhat.

Delta entered the venture knowing they needed oil from one of two sources...

1. Africa, via tankers to the Philly port. Which is expensive.

2. Bakken Oil Shale from ND. No pipeline to get it to Philly. Trucks are too expensive....so there's rail.

They have gambled on Bakken via rail. The African or OPEC oil didn't offer enough savings so this was only on alternative. (they knew that going in)

The problem with this refinery is where it's located....it always has been. Not anywhere close to domestic product. That's why Phillips 66 could never make money there. They were actually closing it whether there was a buyer or not. It was a money loser, has been for years.

It looks like it is cheaper to rail in Bakken crude than ship it from Africa, so it looks like bringing it in by rail might win. Which ever is cheaper will still bring in the crude, and the refinery middleman will be gone, resulting in savings. Re-read the article if you still have questions. Here is another look from the article if you are too lazy to go back a page or look up to the above post:

"This is going to continue to grow as we improve the logistics and distribution capabilities to get more Bakken into the refinery," said Bastian, adding cost savings could be in excess of $100 million per year."



Bye Bye---General Lee

 

[redflyer65]

I saw that part Gen.

The problem is you're almost 1 Billion in the hole. So even if you do realize a 100 million dollar savings per year....that's still ten years from NOW to make your first dollar. Not looking like a very good investment.