Philadelphia Energy Solutions (PES) ended its bid to take the company public on Wednesday, according to a regulatory filing, capping a string of bad news for the largest refinery on the U.S. East Coast.
“Given the market environment, with both very low refining profitability coupled with tight Bakken spreads, it was going to be a hard story to sell to investors. I don’t think that’s a surprise,” said Matthew Blair, an equity research analyst at Tudor, Pickering & Holt.
Phil Rinaldi, the PES chief executive officer, said at the time: “We will return to the capital markets when the environment has improved.”
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The $250 million IPO valued the underlying refinery enterprise at $1.3 billion at the time.
But the pursuit officially ended Wednesday when PES asked the U.S. Securities and Exchange Commission to withdraw its petition for the offering. Bank of America Merrill Lynch and Credit Suisse were lead managers.
Last week, PES told employees its finances were “significantly stressed” and that it was slashing benefits, citing weak gasoline margins and high costs for renewable fuel credits, according to a letter obtained by Reuters. It has also delayed planned projects, the letter stated.
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Local unions have also been asked to make concessions, a source told Reuters on Wednesday.
PES was formed in 2012, after two other refineries closed and political leaders urged Carlyle to salvage the facility. Reuters reported earlier this year that the owners were shopping the refinery complex.
Mark Routt, chief economist for the Americas at KBC Advanced Technology in Houston, said merchant refiners like PES, who have no marketing or retail arm, are being hurt by the cost of complying with U.S. renewable fuel standards as their crude supply costs have risen and margins have shrunk.
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He said some refining capacity in the North Atlantic Basin, which includes the U.S. East Coast and Europe, will have to be shuttered at some point.
PES enjoyed a boom after the acquisition, along with other East Coast refiners, taking advantage of the shale revolutions in North Dakota.
PES and others on the East Coast built large rail terminals to accommodate the Bakken flowing from North Dakota. The Bakken discount has disappeared, and so have the trains, forcing the region to rely more heavily on foreign, waterborne crude.
(Reporting by Jarrett Renshaw in New York; Additional reporting by Jessica Resnick-Ault; Editing by Jeffrey Benkoe)