Any "Latest & Greatest" about Delta?
12-29-2012, 06:04 PM
Gets Weekends Off
Joined APC: Feb 2007
Position: M88 B
Posts: 399
Since news appears slow this time of year I give you this little tidbit.
Our fuel czar and the orchestrator of the trainer refinery purchase, Jon Ruggles quit Delta quietly on December 22nd. No explanation was given. I hope this doesn't signal issues with our hedges and refinery purchase. I listened to a webinar he did last year and I was really impressed with his overall knowledge.
Energy News, Prices, & Data article was posted on December 22nd by john Kingston
The man who drove the Trainer acquisition has left Delta Airlines
By John Kingston | December 22, 2012
blog.platts.com
If there was ever a “think out of the box” deal in 2012, it was Delta Airlines’ purchase of the Trainer refinery, near Philadelphia, from Phillips 66.
The man who from all accounts was central to that deal getting done was Jon Ruggles, a former trader who headed Delta’s jet purchasing. At the Philadelphia press conference announcing the deal, Ruggles was up at the front, along with the political dignitaries from the city and state, along with the the airline’s senior management.
And now he’s gone.
As Platts’ Matt Kohlman reported Friday, Ruggles has left Delta for unknown reasons. A Delta spokesman confirmed his departure without elaborating as to the reasons.
“It leaves a big void,” a US jet fuel buyer told Matt. “What’s Delta going to do? He was over their fuel, hedging and physical, plus trading.”
What’s more interesting is just what the departure says about the success or failure of the Trainer acquisition. The last time Trainer was in the news was during Hurricane Sandy, when it and the other Philadelphia area refineries weathered the storm relatively well, allowing a tight supply situation in the New York harbor area to not be worse than it would have been otherwise.
But what are the economics at Trainer? The Delta deal was so different than anything the refinery industry had ever seen that it can’t be easily measured like other metrics. Delta’s goal was to capture an increasingly healthy jet crack—the difference between New York harbor jet fuel prices (and by extension other East Coast prices) and the price of crude, as measured by Brent. In essence, by hedging Delta’s earlier fuel exposure on Brent, it could only protect itself against movements in that crude benchmark. If the jet spread blew out, well, too bad; a hedge that’s against crude doesn’t capture that for an airline. Hedging through swaps for that much jet can be illiquid and expensive.
The answer? Buy a refinery.
Crack spreads for jet do remain healthy. For example, looking at Friday’s Platts assessments against Dated Brent, a simple jet crack for low sulfur jet was running around $23.50/b; for higher-sulfur jet, around $20.80/b, and about $20.35/b for ultra low sulfur distillate (which Delta would sell, not consume, but it is a distillate, like jet.)
But the crack on RBOB, the primary gasoline blendstock on the US East Coast, was only about $6.45/b. So after other costs, that’s probably a loser for a refiner. Even before other costs, most higher-sulfur residual fuel is in the red for any East Coast refiner.
So the question on Trainer will always be if the positive jet cracks it’s putting into its pockets offsets the poor margins on the lightest and heaviest ends of the barrel. (The other question is how much of the refinery’s crude slate has been supplanted by Bakken and Canadian barrels moved in to the East Coast by rail, which could be yielding significantly different economics than a basic Brent crack would seem to indicate.)
“Half their barrel is negative, more than half,” one trader told Matt, suspecting that the Trainer deal is overall a loser for the company. “What’s their appetite for pouring cash into it? It’s not like they have a gasoline outlet.” The alternative view: “A lot of the innovative things they’re doing in the marketplace are not bad things,” one fuel buyer said, believing the deal is more positive to the company.
Eventually, Delta will need to disclose some general information on the refinery’s status in its quarterly earnings releases. Until then, its financial condition will be mostly speculation, fueled beyond normal by Jon Ruggles’ departure.
**************
Our fuel czar and the orchestrator of the trainer refinery purchase, Jon Ruggles quit Delta quietly on December 22nd. No explanation was given. I hope this doesn't signal issues with our hedges and refinery purchase. I listened to a webinar he did last year and I was really impressed with his overall knowledge.
Energy News, Prices, & Data article was posted on December 22nd by john Kingston
The man who drove the Trainer acquisition has left Delta Airlines
By John Kingston | December 22, 2012
blog.platts.com
If there was ever a “think out of the box” deal in 2012, it was Delta Airlines’ purchase of the Trainer refinery, near Philadelphia, from Phillips 66.
The man who from all accounts was central to that deal getting done was Jon Ruggles, a former trader who headed Delta’s jet purchasing. At the Philadelphia press conference announcing the deal, Ruggles was up at the front, along with the political dignitaries from the city and state, along with the the airline’s senior management.
And now he’s gone.
As Platts’ Matt Kohlman reported Friday, Ruggles has left Delta for unknown reasons. A Delta spokesman confirmed his departure without elaborating as to the reasons.
“It leaves a big void,” a US jet fuel buyer told Matt. “What’s Delta going to do? He was over their fuel, hedging and physical, plus trading.”
What’s more interesting is just what the departure says about the success or failure of the Trainer acquisition. The last time Trainer was in the news was during Hurricane Sandy, when it and the other Philadelphia area refineries weathered the storm relatively well, allowing a tight supply situation in the New York harbor area to not be worse than it would have been otherwise.
But what are the economics at Trainer? The Delta deal was so different than anything the refinery industry had ever seen that it can’t be easily measured like other metrics. Delta’s goal was to capture an increasingly healthy jet crack—the difference between New York harbor jet fuel prices (and by extension other East Coast prices) and the price of crude, as measured by Brent. In essence, by hedging Delta’s earlier fuel exposure on Brent, it could only protect itself against movements in that crude benchmark. If the jet spread blew out, well, too bad; a hedge that’s against crude doesn’t capture that for an airline. Hedging through swaps for that much jet can be illiquid and expensive.
The answer? Buy a refinery.
Crack spreads for jet do remain healthy. For example, looking at Friday’s Platts assessments against Dated Brent, a simple jet crack for low sulfur jet was running around $23.50/b; for higher-sulfur jet, around $20.80/b, and about $20.35/b for ultra low sulfur distillate (which Delta would sell, not consume, but it is a distillate, like jet.)
But the crack on RBOB, the primary gasoline blendstock on the US East Coast, was only about $6.45/b. So after other costs, that’s probably a loser for a refiner. Even before other costs, most higher-sulfur residual fuel is in the red for any East Coast refiner.
So the question on Trainer will always be if the positive jet cracks it’s putting into its pockets offsets the poor margins on the lightest and heaviest ends of the barrel. (The other question is how much of the refinery’s crude slate has been supplanted by Bakken and Canadian barrels moved in to the East Coast by rail, which could be yielding significantly different economics than a basic Brent crack would seem to indicate.)
“Half their barrel is negative, more than half,” one trader told Matt, suspecting that the Trainer deal is overall a loser for the company. “What’s their appetite for pouring cash into it? It’s not like they have a gasoline outlet.” The alternative view: “A lot of the innovative things they’re doing in the marketplace are not bad things,” one fuel buyer said, believing the deal is more positive to the company.
Eventually, Delta will need to disclose some general information on the refinery’s status in its quarterly earnings releases. Until then, its financial condition will be mostly speculation, fueled beyond normal by Jon Ruggles’ departure.
**************
Last edited by Vikz09; 12-29-2012 at 06:30 PM. Reason: Updated link
12-29-2012, 06:34 PM
Gets Weekends Off
Joined APC: Feb 2009
Position: right for a long, long time
Posts: 2,642
Vikz... Saw that article today too, very odd. Hope it isn't a harbinger of bad news on the petroleum front.
12-29-2012, 06:39 PM
Runs with scissors
Joined APC: Dec 2009
Position: Going to hell in a bucket, but enjoying the ride .
Posts: 7,738
So, was Ruggles on....
wait for it....
Crack?
Or did some other airline scoop him?
Or...?
wait for it....
Crack?
Or did some other airline scoop him?
Or...?
12-29-2012, 06:41 PM
Runs with scissors
Joined APC: Dec 2009
Position: Going to hell in a bucket, but enjoying the ride .
Posts: 7,738
12-29-2012, 06:47 PM
Gets Weekends Off
Joined APC: May 2010
Position: Baja Vermont
Posts: 5,197
In related news, guess who owns the railway primarily moving Bakken and Canadian crude and who benefits greatly from the Keystone pipeline cancellation? Pipelin being cheaper?
Berkshire Hathaway aka Warren Buffet.
GF
Berkshire Hathaway aka Warren Buffet.
GF
12-29-2012, 06:51 PM
Gets Weekends Off
Joined APC: May 2010
Position: Baja Vermont
Posts: 5,197
The middle one will be good protection for when you kidnapped into car, relieved of your wallet and tossed out without benefit of the car's brakes. The bottom one lured you into the car in the first place.
True story. Not me.
GF
True story. Not me.
GF
12-29-2012, 07:00 PM
Gets Weekends Off
Joined APC: Feb 2007
Position: M88 B
Posts: 399
My first thought was that he probably has a non-compete clause to prevent him for working for another airline. I imagine though he could go the way of a independent consultant and advise other airlines on a refinery and hedging game plan. I know UAL was looking into the refinery option. Why work for just one when you could pimp yourself to many and maximize your skill set.
12-29-2012, 07:41 PM
veut gagner à la loterie
Joined APC: Apr 2008
Position: Light Chop
Posts: 23,286
I'll keep that in mind in case due to a concussion I waste my time and money to go see Matt Damon's latest Promised Land, an anti-fracking movie funded partly by... wait for it... Image Nation Abu Dhabi, owned by UAE, an OPEC nation.
Maybe I can wait for it to come out on tv and until then continue to watch football hosted by Bob Costas who takes the time to inform me we shouldn't be allowed to own guns while he is personally guarded by armed body guards and policeman at the game.
I don't own a gun. But I'm about to buy one out of spite.
/rant
Last edited by forgot to bid; 12-29-2012 at 07:52 PM.
12-29-2012, 08:22 PM
Can't abide NAI
Joined APC: Jun 2007
Position: Douglas Aerospace post production Flight Test & Work Around Engineering bulletin dissembler
Posts: 12,038
This year has been about 3 Billion in planned investments in an oil refinery, several foreign carriers, buying regional carriers, shutting regional carriers down and ordering a bunch of new large RJ's.
12-29-2012, 09:36 PM
Gets Weekends Off
Joined APC: Dec 2009
Position: Stay THIRSTY, my friends!
Posts: 1,898
Ruggles is good. Probably got poached by a bigger non airline fish. He did a lot of good things for us. There are plenty of more like him. Remember this- RA is an Oil Man. He is from Houston. He knows what the H.E. double oil rig he's doing. The Trainer deal works. Its a done deal. Ruggles is on to the next best thing. R.A. is probably 2 moves down the road already.
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