CVR Energy urges Delek to shut refineries

US independent refiner Delek should shut two of its refineries and sell its retail business, shareholder and rival refiner CVR Energy said today in a letter.

CVR Energy chief executive Dave Lamp urged Delek to convert its 80,000 b/d Krotz Springs, Louisiana, and 83,000 b/d El Dorado, Arkansas, refineries to terminals or renewable diesel production in a letter today. Delek should sell its retail segment while prices in the sector remain high and change its corporate structure, the letter continued.

CVR also nominated three directors to replace Delek nominees at the company's next annual meeting.

Delek said in a statement that it operates a strong portfolio and would consider any board nominees.

"As Delek US has navigated the Covid-19 crisis and challenging macro environment, the company has focused on ensuring the health and safety of its workforce and maintaining financial flexibility," Delek said.

The unusual letter from refiner to refiner follows CVR's purchase of 15pc of Delek's outstanding stock last year. CVR initially considered the refiner a strong potential acquisition, but "due to the dramatic changes in the industry since that time," CVR no longer wants to pursue the company. But as Delek's largest shareholder, CVR believes Delek "desperately needs new strategic direction," Lamp wrote.

"We are confident our nominees will bring much needed new and independent perspectives to Delek's board, and will help to better position Delek for success in any refining environment, to the benefit of all shareholders," Lamp wrote.

Delek operates roughly 300,000 b/d of refining capacity in Texas, Louisiana and Arkansas, and owns midstream assets and interests primarily in Texas. CVR Energy, majority owned by activist investor Carl Icahn, operates more than 200,000 b/d of Kansas and Oklahoma refining capacity.

The collapse of transportation fuel demand last March as governments responded to the Covid-19 pandemic triggered a wave of US idling and shutdowns that reached nearly 1.5mn b/d of capacity by the end of 2020. Krotz Springs idled its fluid catalytic cracking (FCC) and crude units in November.

By Elliott Blackburn