Essar Oil UK, operator of the 204,000 b/d Stanlow refinery in northwest England, said today that it has fully replaced a credit facility that had recently had its terms altered by a bank.
The company said last week that it had already partially replaced the financing, which related to receivables. Today it said that it expects to conclude additional financing by the end of June, and is working on "operational cost reduction initiatives" to help strengthen its balance sheet. Many European refineries, facing a financial fallout from the Covid-19 pandemic, have proposed permanent unit closures or staff lay-offs.
"The refinery continues to operate as normal, with uninterrupted supply of products," Essar Oil UK said today. It forecasts operating profit "in the region of $40mn" for the current quarter, compared with a loss of $18mn in the same period of last year.
The company faced a series of challenges in quick succession over the past few weeks, including "short term financial disruption" from the changed terms of the now-replaced credit facility. Additionally, it faced a 31 March deadline to pay £356mn of deferred value-added tax (VAT), which it warned last year would "require additional liquidity support or funds to be made available".
At least some of the firm's credit-linked crude purchase arrangements have shifted in recent months. In September last year in tenders issued to procure term and spot WTI Midland crude, it offered payment on open credit given to either it or to Australian bank Macquarie. More recent tender proposals indicate Essar Oil UK was looking to book WTI Midland with late-April and early-May delivery, offering payment within 60 days of the supply's notice of readiness or within 30 days of the issuance of the bill of lading, and requesting open credit to the company. The tender stated that "offers through Macquarie [are] not acceptable".
Macquarie declined to say whether the arrangement had changed but said it still works with Essar Oil UK on a just-in-time inventory basis.
On top of that, Essar Oil UK's chief executive Stein Ivar Bye departed in March after only five months in the job. Directors Rewant Ruia and Stephen Hamilton Welch made their own departures this month.
The UK refining complex has operated at exceptionally low utilisation recently. Crude intakes in March were around 53pc of capacity, based on data from Euroilstock and Argus research, compared with 70pc utilisation in the EU-15 and Norway. That was partly because of two major maintenance turnarounds, but reflects low run rates at most sites caused by challenging refining economics.
