Delta's refinery turns small profit for first time
NEW YORK, Oct 22 (Reuters) - Delta Air Lines Inc's Pennsylvania oil refinery turned a small profit in the third quarter, the first time since it purchased the plant in 2012 to help trim jet fuel costs, the company said on Tuesday.
Delta has frequently said the rationale behind the purchase of the 185,000 barrel per day refinery was to reduce regional jet fuel prices, contrary to the normal refinery model of selling products at the highest price possible.
The refinery, bought from Phillips 66 and operated by Delta subsidiary Monroe Energy LLC, made $3 million in profit in the third quarter after losing $51 million in the second quarter and $22 million in the first.
Delta executives a year ago said they expected the refinery, in Trainer, PA., to break even or post a profit in the fourth quarter of last year. But Super Storm Sandy last year and the high costs of ethanol credits this year hit the refinery's results.
"The refinery produced a $3 million profit for the quarter despite lower overall crack spreads toward the end of the quarter," Chief Financial Officer Paul Jacobson told a conference call.
"These lower crack spreads also resulted in lower market jet fuel costs for Delta. With every penny of jet fuel change equating to $40 million in annual expense, the decline in jet fuel relative to where it has traded historically has produced savings that more than offset the year-to-date loss at Trainer."
Delta's annual fuel bill came to around $12 billion in both 2012 and 2011.
New York Harbor jet fuel differentials traded at a premium to heating oil futures on the New York Mercantile Exchange for all of 2012, before falling to trade at a discount in April this year. But it was unclear whether that was directly related to the operations at Delta's refinery.
East Coast refineries had been struggling in recent years due to the high cost of imported oil and several had shut down or been sold. Those that survived began bringing in cheaper domestic crude oil by rail, mainly from the Bakken in North Dakota.
"Our next step is to improve the refinery's profitability through lower-cost domestic crude supply from the Bakken field, increased jet fuel output and operational initiatives to improve throughput and product mix," Chief Executive Richard Anderson said on the call.