Delta Air Could Buy Conoco's Trainer Refinery For $100M-$150 Mln

The Wall Street Journal reports:

Delta Air Lines Inc (DAL), burdened by the soaring cost of jet fuel, is seriously thinking of making some of its own by buying an idled ConocoPhillips (COP) refinery near Philadelphia, people familiar with the matter said Thursday.

Delta, the world's second-biggest airline by traffic, is in talks with Conoco to acquire its Trainer, Pa., facility at a cost of $100 million to $150 million, one person familiar with the matter said. Delta would hire an outside firm to run the refinery.

The move could help supply Delta's operations at La Guardia airport and John F. Kennedy International Airport in New York, and save it most of the so-called crack spread, or the difference charged by a refinery between the cost of a barrel of crude and a barrel of jet fuel. In March, the spread between jet fuel and Brent crude, which is the benchmark that determines the price of most crudes delivered to the East Coast, was $12.85 a barrel, according to energy consultancy IHS Purvin & Gertz. The Trainer refinery, idled since October, has a processing capacity of 185,000 barrels a day, including 23,000 barrels a day of aviation fuel, according to the U.S. Energy Information Administration.

As refining jet fuel produces byproducts such as gasoline and diesel fuel, Delta would swap that output with a partner or partners, who would sell it. In return, Delta would be able to lock in, through those same partners, lower jet fuel rates at other airports where its planes refuel.

The supply side of oil.