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Boss Talk
PBF Energy Keeps Focus on Growth
From the Wall Street Journal of Tue, 16 Dec 2014 19:30:57 EST
Watch for lower prices at the pump and a continued U.S. energy boom, says PBF Energy’s Tom O’Malley. Photo: Jarrard Cole/The Wall Street Journal

A lot of energy industry executives are reeling as oil prices plunge, but Tom O’Malley isn’t panicking.

The former oil trader has seen it all before. Now executive chairman of PBF Energy Inc., Mr. O’Malley has spent nearly three decades buying castoff refineries, resurrecting them and then selling the plants for a profit.

In the 1990s he transformed ailing Tosco Corp. into the nation’s largest independent refiner before selling it to Phillips Petroleum for $7 billion in stock. Mr. O’Malley later turned around Premcor Inc. and sold it to Valero Energy Corp. for $6.9 billion in cash and stock.

Since launching PBF in 2008 with backing from private-equity firms Blackstone Group LP and First Reserve Corp., he has revived refineries in Delaware, New Jersey and Ohio thanks to new flows of oil from places like North Dakota. PBF went public in 2012.

Mr. O’Malley said current declining crude prices will spur demand for the gasoline and diesel his plants produce, though they could also cast a chill over U.S. oil production.

The 73-year-old Mr. O’Malley’s investments have included stadium boxes in Denver’s Mile High Stadium and Giants Stadium in New Jersey—which he sold in the 1990s—and golf courses in Florida. He recently talked with The Wall Street Journal about volatile energy markets and where he’s looking next. Edited excerpts:

WSJ: What’s your outlook for oil prices?

Mr. O’Malley: It would be my expectation that they stay well under $100, somewhere between $60 and $80, for at least the year 2015. After that, I find it amusing that people try and predict based on projections of supply and demand in a commodity that’s so geopolitically affected. What happens in Iran? In Iraq? In Saudi Arabia? What happens in Venezuela? If you think about this and you look back on history—and I do look back on history—there’s always an unexpected event.

WSJ: I imagine you don’t mind buying cheaper oil but what kind of ripple effect does that have on fuel prices?

Mr. O’Malley: Lower prices usually lead to greater consumption. Think of it as just an absolutely extraordinary addition to disposable income. For refiners across the country and probably across the world, it’s a net positive.

WSJ: What do you forecast for gasoline prices?

Mr. O’Malley: Every dollar [the oil price falls] equals 2.2 cents a gallon. If you drop by $40, which we have, you drop by 88 cents a gallon. You could break $2 a gallon in certain markets.

WSJ: Oil producers want to lift the U.S. crude export ban and you’ve been critical of that. How do you think falling oil prices will affect the debate?

Mr. O’Malley: When I’ve come out against it, of course I’m speaking in my own self-interest. But tell me, is it your learned evaluation that the situation in the Middle East is really more settled now than it was in 1975? I think not.

I understand the position of the producers, but it’s idiotic for them to say that it won’t result in a rise in the price. Why do you want to export? You want to export so you can get a higher price. What happens to the domestic price if you export at a higher price? It goes up.

WSJ: How long will you be actively involved at PBF?

Mr. O’Malley: I’m their biggest individual shareholder. I don’t have a time limit. I’m in very good health. I kayak, bike, hike in the mountains, do some sailing, swim, play golf. I probably kayak 100 days a year at least. Who really runs PBF? I’m the coach. You can call me the acquisition expert.

WSJ: You’ve built your businesses by buying refineries when other companies didn’t see their value. Do you see yourself making another big bet?

Mr. O’Malley: I certainly think that any company that doesn’t pay attention to the concept of growth will have a hard time surviving. At PBF we’re interested in growth, but it can’t be growth at any price.

WSJ: Is there anything you’ve bought that you regret?

Mr. O’Malley: No more golf courses! I not only buy, I sell. Keep that in mind. It’s not my job to say no. It’s my job to negotiate the best price. If you’re our size, either grow or be a part of somebody else’s growth story. We need to be bigger.

WSJ: So get bought or buy someone else?

Mr. O’Malley: Yeah, or you buy pieces. You’re going to see all the majors selling. I think they’ve decided to go out of the refining business in North America, probably with the exception of Exxon.

WSJ: You have a knack for buying at the right time. How do you decide what to buy and when?

Mr. O’Malley: Whenever we look at an asset, we don’t look at it with rose-colored glasses. We try to be realistic about things. It’s listening to the people who you work with and not trying to make some crazy decision based on being some high-level executive. I’m someone who can walk around and sit down at anybody’s desk and chat and not have it filtered by three layers of management.

WSJ: Ever heard good insights from an unexpected source?

Mr. O’Malley: For me, it’s putting a puzzle together…I mean, having been a taxi driver, I think taxi drivers are very smart. I worked for Playbill Magazine. I worked on a tour bus company. I delivered liquor. I did everything you could ever imagine in New York. So I talk to everybody.

Write to Alison Sider at alison.sider@wsj.com

Corrections & Amplifications

PBF Energy Inc. has revived refineries in Delaware, New Jersey and Ohio. An earlier version incorrectly described the location of one of the plants as in Pennsylvania.



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