PBF Energy 2012 Annual Report Download - page 57

Throughout this Annual Report on Form 10-K we include financial statements and other financial and
operating data for the Paulsboro Refining Business for periods prior to its acquisition date of December 17, 2010.
We refer to Paulsboro as PBF LLC’s “Predecessor” or “Predecessor Paulsboro,” because we generated
substantially no revenues and prior to our acquisition of Paulsboro and the Delaware City assets, we were a new
company formed to pursue acquisitions of crude oil refineries and downstream assets in North America. At the
time of its acquisition, Paulsboro represented the major portion of our business and assets.
Factors Affecting Comparability
Our results over the past three years have been affected by the following events, which must be understood
in order to assess the comparability of our period to period financial performance and financial condition.
Acquisition Delaware City Refinery
Through our subsidiaries, Delaware City Refining and Delaware Pipeline Company LLC, we acquired the
idle Delaware City refinery and its related assets, including a petroleum product terminal, a petroleum products
pipeline and an electric generation facility, on June 1, 2010 from affiliates of Valero for approximately
$220.0 million in cash funded entirely by equity. We also incurred approximately $4.3 million in acquisition
costs. The acquisition of the Delaware City refinery and its related assets was accounted for as an acquisition of
assets. The purchase price was allocated to the assets acquired and liabilities assumed based on their estimated
fair value. The results of operations have been included in our consolidated financial statements since June 1,
2010. For the period from June 1, 2010 until June 2011, when we began re-starting refinery operations, our
results of operations included only certain minor terminal operations and substantial capital improvement
activities to prepare the refinery and power plant for re-start. The refinery became fully operational in October
2011 and the results of operations prior to restart and during the re-start period may not be indicative of our
future performance.
The prior owner shut down the Delaware City refinery in the fourth quarter of 2009 due to, among other
reasons, financial losses caused by one of the worst recessions in recent history. We were therefore able to
acquire the refinery at what we believe to be an attractive price, obtain economic support from the State of
Delaware to re-start the refinery, and enter into a new contract with the relevant union at the refinery.
On June 1, 2010, we hired 63 employees of the prior owner to assist us with implementing our refinery
turnaround/reconfiguration plan and to conduct terminal operations at the refinery. These employees primarily held
positions as engineers, refinery operators, terminal operators, dockworkers, maintenance workers and administrative
staff prior to our acquisition of the refinery assets. In connection with our acquisition, we were able to negotiate a
new contract with the union including: (1) reopening of the refinery with approximately 470 employees, compared
to approximately 700 prior to shutdown by Valero; (2) flexibility with respect to which workers are hired (i.e., no
seniority clause); (3) different benefits packages; and (4) more flexible work rules.
Since our acquisition through December 31, 2012, we have invested more than $500.0 million in turnaround
and re-start projects, as well as in the recent strategic development of a crude rail unloading facility. The re-start
process included the decommissioning of the gasifier unit located on the property which allowed us to decrease
emissions and improve the reliability of the refinery. In addition, we have completed a cogeneration project to
convert the electric generation units at the refinery to use natural gas as a fuel and a hydrocracker corrosion
control project aimed at increasing throughput at the hydrocracker. We made significant operating improvements
in the first year of operations by modifying the crude slate and product yield, changing operations of the
conversion units and re-starting certain units. Through these capital investments and by restructuring certain
operations, we have lowered the annual operating expenses of the Delaware City refinery relative to its pre-
acquisition operating expense. In 2012, we spent approximately $49.7 million to expand and upgrade the existing
on-site rail infrastructure, including the expansion of the crude rail unloading facilities that will be capable of
discharging approximately 110,000 bpd.
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