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Royal Dutch Shell said on Thursday it was closing its refinery in Convent, Louisiana, the largest such U.S. facility and first on the U.S. Gulf Coast to shut down since the coronavirus pandemic devastated worldwide demand.
The shutdown will occur this month after Shell failed to find a buyer.
The refinery is the ninth in North America targeted for a shutdown or to be idled since the pandemic, which has dealt a heavy blow to fuel demand globally. The United States is the world’s largest fuel consumer.
Shell said it failed to find a buyer for the 211,000-barrel-per-day refinery after announcing plans to sell it in July.
“After looking at all aspects of our business, including financial performance, we made the difficult decision to shut down the site,” Shell spokesman Curtis Smith said in an emailed statement.
Refining margins have been down substantially since the pandemic started. The gasoline refining margin is currently at $8.79 per barrel, below the threshold where most refiners can profit.
Once the shutdown is complete, Shell will continue to try to divest the refinery, the company said. It expects to sell all but six refineries and chemical plants globally and is considering closing facilities it cannot sell, the company told investors on its quarterly earnings call this week.
“We recognize the market is not great at the moment in terms of divesting assets ... if it’s not possible, we’ll consider closing and shutting down. That’s ultimately, the last option we’d like to pull,” said Chief Financial Officer Jessica Uhl.
The company said in 2019 it would structure its operations to match the future market for downstream products with a focus on its chemicals business.
In February, Shell sold its 156,400 bpd Martinez, California, refinery and logistics assets to PBF Energy for $960 million plus the price for oil and refined products on hand.
Shell said it will open a selective voluntary severance program to potentially create other roles for workers.
Convent’s closure adds to the almost 2 million bpd of refinery capacity globally that has been permanently shuttered globally due to the coronavirus pandemic.
Another 1.4 million bpd is temporarily out of commission or being converted in terminal and other facilities, U.S. refiner Phillips 66 said on its third quarter earnings call earlier this week.
Late last month PBF Energy said it will shut most refining units at its Paulsboro, New Jersey, refinery.
Elsewhere, Canada’s Come-by-Chance plant in Newfoundland and Labrador has been idled since May. HollyFrontier shut down its Cheyenne, Wyoming, refinery, Marathon Petroleum began closing refineries in Martinez, California, and Gallup, New Mexico, while Calcasieu Refining idled its Lake Charles refinery in southwest Louisiana.
Phillips 66 announced plans to shut its plant in Arroyo Grande, California, in 2023 and plans to reconfigure its San Francisco Refinery to produce renewable fuels.
SELLING AN IDLED REFINERY
It is unusual for an oil company to sell a refinery that it has already idled, in part because the value of the asset is deemed to be lower if it is not operating.
North Atlantic Refinery Limited is actively trying to sell its Come-by-Chance refinery, after a deal with Irving Oil fell through last month for undisclosed reasons.
“Refineries aren’t light switches, they’re extremely expensive to shut and restart,” said Zachary Rogers, senior oil analyst at Rapidan Energy Group.
“The fact it’s shutting down (for however long) underscores the weakness of refining economics as COVID persists,” he added.
Source: Reuters
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Valaris Limited announced new contracts awarded subsequent to issuing the Company’s most recent fleet status report on February 21, 2023. Three-year contract with Petrobras for drillship VALARIS DS-8. The rig will be reactivated for this contract. The total contract value is approximately $500 million, including a $30 million mobilization fee. 100-day contract with a TotalEnergies affiliate for drillship VALARIS DS-12. The contract is expected to commence in second quarter 2023. 70-day contract with Beach Energy offshore New Zealand for heavy duty modern jackup VALARIS 107. The contract is expected to commence in third quarter 2023. The total contract value is approximately $26 million. President and Chief Executive Officer Anton Dibowitz said, “We are particularly pleased to have secured the award for preservation stacked drillship VALARIS DS-8, for a contract that is expected to generate a meaningful return over the firm contract term, and we remain focused on exercising our operational leverage in a disciplined manner. This most recent award represents the sixth contract awarded to one of our high-quality stacked floaters since mid-2021, and speaks volumes about our demonstrated track record of project execution when reactivating rigs.” Dibowitz added, “Following the reactivation of VALARIS DS-17 and DS-8, we will have ten floaters working across the golden triangle, including four drillships in Brazil, a market where we expect to see continued growth over the next several years.” Updated Guidance As a result of the contract awarded to VALARIS DS-8, which will require the rig to be reactivated from preservation stack, we are updating our first quarter 2023 and full-year 2023 guidance provided on our fourth quarter 2022 conference call on February 21, 2023. First Quarter 2023 Contract drilling expense is expected to increase by approximately $5 million to $385 million to $395 million. Adjusted EBITDA is expected to decrease by approximately $5 million to negative $5 million to breakeven. Adjusted EBITDAR, which adds back one-time reactivation expense, is expected to be $25 million to $30 million, unchanged from the guidance provided on our fourth quarter 2022 conference call. Full-Year 2023 Revenues are anticipated to be $1.8 billion to $1.9 billion, unchanged from the guidance provided on our fourth quarter 2022 conference call. Contract drilling expense is expected to increase by approximately $60 million to $1.49 billion to $1.59 billion. Adjusted EBITDA is expected to decrease by approximately $60 million to $180 million to $220 million. Adjusted EBITDAR, which adds back one-time reactivation expense, is expected to be $280 million to $320 million, unchanged from the guidance provided on our fourth quarter 2022 conference call. Capital expenditures are expected to increase by $60 million to $320 million to $360 million. Source: Valaris Join our mailing list here We are #1 on Google and Bing for the "Largest Mobile Energy Network" Come join our community! Download the Rig Lynx app here
Seadrill Limited announced that the West Neptune has executed approximately six months of term extensions with LLOG Exploration Offshore, L.L.C in the US Gulf of Mexico. The extensions will commence in direct continuation of the existing term, and will keep the rig busy until Q3 2024, furthering Seadrill and LLOG’s long-term association. Total contract value for the extension is approximately $79 million. Source: Seadrill Join our mailing list here We are #1 on Google and Bing for the "Largest Mobile Energy Network" Come join our community! Download the Rig Lynx app here
Semisub rig owner Dolphin Drilling has inked a new contract with Peak Petroleum in Nigeria for its 1974-built Blackford Dolphin. The firm contract, which follows the letter of award in January, gives the Euronext Growth-listed owner of three rigs the potential to extend the unit’s backlog by a minimum of 120 days and up to 485 days. The deal adds to and will be a direct continuation of the previously announced 12-month contract with General Hydrocarbon Limited (GHL). Øystein Stray Spetalen-backed company said the effective dayrate associated with the minimum firm period of the contract is $325,000, including the mobilisation fee. “The final award of the contract for Blackford Dolphin shows the opportunities in Nigeria at a strong dayrate, in addition to building on the backlog for the rig. It also underlines the attractiveness of our assets, and we look forward to returning to revenue-generating operations in 2023,” noted Bjørnar Iversen, CEO of Dolphin Drilling. Source: Dolphin Join our mailing list here We are #1 on Google and Bing for the "Largest Mobile Energy Network" Come join our community! Download the Rig Lynx app here
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