(Reuters) - PBF Energy, the sixth largest U.S. oil refiner, on Monday said it will cut spending, reduce production to minimum levels and raise cash by selling one of its operations as demand for gasoline and fuels tumbles because of the coronavirus pandemic.
U.S. refiners are cutting output in the face of shrinking demand for gasoline, jet fuel and diesel as airlines have canceled flights and local governments have ordered businesses to close and people to stay home.
The company, which analysts warned last week could see its cash reserves fall from weaker profits and reduced access to loans, said it will sell five plants that produce hydrogen gas used for its refineries to Air Products and Chemicals for $530 million.
Shares rose nearly 13% to $7.17 in morning trading on the news. They are off 77% year to date.
“We are focused on generating and preserving the liquidity needed for the duration of the long-term, economic impacts of stay-at-home orders,” said Chief Executive Thomas Nimbley.
The Parsippany, N.J.-based company also suspended its 30-cent a share quarterly dividend and said top executives would have pay cut by 50% and its CEO’s pay by 67%.
Overall, it expects to lower 2020 operating expenses by about $125 million and will reduce capital expenditure for the year by another $240 million, including spending on its newly acquired Martinez, California, refinery.
The reductions will bring its oil processing down to about 627,000 barrels a day from 895,000 bpd it had forecast for the first quarter in February.
Rivals Valero Energy Corp and Exxon Mobil Corp also have cut production of gasoline, jet and diesel as they battle the financial fallout of the outbreak.
The owner of a small Canadian refinery, North Atlantic Refining Ltd, will halt production at its 130,000 barrels per day Come by Chance refinery.
Reporting by Shanti S Nair in Bengaluru; additional reporting by Gary McWilliams; Editing by Devika Syamnath and Grant McCool
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