New York — PBF Energy will sell five hydrogen plants, reduce 2020 capital spending by $240 million and lower operating expenses by $125 million as it grapples with the sharp downturn in gasoline demand resulting from stay-at-home orders to keep COVID-19 from spreading, the company's CEO said Monday.
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"The board and management of PBF Energy have acted swiftly and decisively to secure our business in these unprecedented markets. We are also taking necessary steps to ensure the safety of our employees," PBF CEO Tom Nimbley said.
"We are focused on generating and preserving the liquidity needed for the duration of the near-term, economic impacts of stay-at-home orders and the longer-term recovery of demand for our products," he added in a statement.
PBF inked a deal with Air Products for the five hydrogen plants for cash proceeds of $530 million, and will enter into offtake agreements for the hydrogen. The deal is to close in April.
PBF, which recently closed on the deal to buy Shell's 156,400 b/d Martinez, California, refinery, said it would reduce capital expenditures by $240 million, a 35% cut to its previous guidance of about $600 million.
Operating expenses will drop by $125 million as PBF cuts "discretionary activities and third-party services."
PBF suspended their dividend as well as cutting overhead expenses by $20 million for the year, primarily through salary reductions. PBF's CEO Tom Nimbley's salary has been reduced by 67%, the statement said.
PBF is operating its plants at a 30% rate reduction, analysts said.
"We had estimated a 20% rate reduction but are not surprised that the throughput is even lower. We expect refinery utilization within our coverage to drop to 75% for the month of April and average below ~80% for 2Q 2020," Credit-Suisse analyst Manav Gupta wrote in a research report.
"While independent refiners showing a lot of discipline, we will have to see how the majors react to these circumstances," he added.
S&P Platts Analytics Monday cut its global petroleum demand estimate for 2020 by 4.5 million b/d to 97.59 million barrels, with second quarter demand at 87.24 million b/d.