Delta anticipates Q4 loss at Trainer from Sandy

Washington DC
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Delta Air Lines' Trainer oil refinery will lose $50 million to $60 million in the fourth quarter, as a result of superstorm Sandy.

The facility was shut down for a number of weeks after the 29 October storm, which knocked out the distribution networks both into and out of the plant, says Ed Bastian, president of Delta, during an investor day on 12 December.

"Sandy threw us a very big curve ball," he says. "We couldn't get crude into the plant and the fuel out of the plant."

Trainer began producing jet fuel in September and was on-track to ship its first jet fuel in October, prior to the storm.

Bastian says that the airline anticipates a profit from the refinery of about $280 million in 2013 and an about $300 million benefit to its fuel costs for the year.

Delta will begin sourcing Bakken crude for Trainer in 2013. Richard Anderson, chairman and chief executive of the airline, says that it has received a number of proposals from suppliers to supply Trainer with the crude and that it will "execute" on some of them in the first half of 2013, during the investor day.

He adds that the issue is getting the crude from the Bakken shale deposit in North Dakota to the refinery, which is outside Philadelphia, Pennsylvania. Delta will invest in rail offloading facilities at the plant next year to help address this issue.

Paul Jacobson, chief financial officer of Delta, says that using Bakken crude instead of West African will reduce the cost of crude by about $8 to $10 per barrel, during the investor day.

The savings from sourcing Bakken crude will have a "multiplier" impact on the financial benefits of the refinery to Delta, he adds.

Delta bought the Trainer refinery from Philips for $180 million in June and invested $100 million in upgrades to the refinery.