The owner of the Philadelphia refinery rocked by an explosion and massive fire early Friday has been struggling financially for a number of years.
Refinery owner PES Holdings, a unit of Philadelphia Energy Solutions, filed for bankruptcy in January of 2018. It was able to emerge from bankruptcy by August of last year after restructuring $635 million of debt it couldn’t afford. But filings show it is still facing challenges.
PES had $149 million in cash on hand after it emerged from bankruptcy. But it has already burned through nearly half of that — it had only $86 million on hand as of March 31.
The company operates two refineries in the Philadelphia area that together account for about 28% of the gasoline supply for the Northeast, producing about 335,000 barrels a day of gasoline and other product, according to its bankruptcy filing.
When it emerged from bankruptcy, the company said it had a bright future ahead of it and that it would invest in the facility. But it has been facing a continued cash crunch, according to a Reuters report from April. Reuters said PES scaled back a maintenance program that had been scheduled for January, and it suspended employee bonuses.
The company did not respond to a request for comment Friday on its current financial condition and the report about the scaled back maintenance agreement.
Tom Kloza, head of energy analysis for the Oil Price Information Service, said the refinery ultimately went forward with much of its planned maintenance program during this past winter, and that there is no indication that the explosion was because of the lack of maintenance.
“I think it’d be jumping to conclusions to think they were cutting corners,” he said.
But the companies’ refineries have been operating at a competitive disadvantage with refineries elsewhere in the country, according to its bankruptcy filing last year.
Those other refineries, such as those on the Gulf Coast, can refine cheap oil from the center of the country and ship gasoline to the Northeast via pipelines.
The massive boon in US oil production in recent years from shale in the center of the country has meant North American crude prices have been cheaper than overseas sources of oil. But refineries in the Northeast have a more difficult time than refineries elsewhere in accessing that cheaper crude.
The lifting of the ban on US crude oil exports also hurt Northeast refiners, PES said in its bankruptcy filing, as shipping laws made it more expensive for North American oil producers to ship to Philadelphia than to overseas markets.
“As a result, the domestic crude discount once enjoyed by [PES] was eroded and [PES] began, once again, relying on foreign, waterborne crude oil at more expensive prices,” it said.
The company also had trouble complying with environmental rules requiring the blending of ethanol into gas. But it said it has to ship its product through pipelines that do not accept blended gas. So to comply with EPA rules it must purchase credits to make up for the lack of blended fuel. Those credits cost it $832 million between 2012 and the January 2018 bankruptcy filing.
PES Holdings had been formed in 2012 to buy the refineries from Sunoco, which had operated them. It has about 1,100 employees, including about 670 hourly workers who are members of the United Steelworkers union. They have a contract that runs through September of this year.