* Delta to receive Bakken crude at Trainer in Q1
* Airliner lost $63 million at Trainer in Q4, 2012
* Delta expects plant to make modest profits in Q1
By Selam Gebrekidan and David Sheppard
NEW YORK, Jan 22 (Reuters) - Delta Air Lines Inc plans to run cheaper domestic crude at its newly-acquiredTrainer, Pennsylvania refinery to improve profits at the plant,becoming the latest U.S. company to cash in on the burgeoningshale oil boom.
After losing $63 million at the refinery in the fourthquarter, the Atlanta-based airline will receive its first crudeshipments there from North Dakota's Bakken shale in the firstquarter, the company said during its earnings call Tuesday.
Delta's subsidiary, Monroe Energy LLC, was forced to slowproduction at the 185,000 barrels-per-day plant in November andDecember after Hurricane Sandy damaged regional pipelines andterminals, leading to the losses, Paul Jacobson, the company'ssenior vice president and chief financial officer said duringthe call.
However, the Trainer refinery will bounce back to a modestprofit in the first quarter, Jacobson added.
East Coast refiners are eyeing to cut their costs ofimporting foreign crude, which is significantly more expensivethan oil from the recently booming North Dakotan fields. It ismuch cheaper to rail crude from the Midwest shale play, at anadded $12 to $16 a barrel in transportation costs, than to buyoil priced against European Brent, according toanalysts' estimates.
Delta declined to say how much Bakken crude the refinerywill run, a figure it said will be determined once initial testswere done running the crude.
"As we run this first shipment this quarter, we'll have morecolor as to what the total potential is, but it is prettysignificant," Jacobson said.
Delta has a multiple-years contract with BP plc forcrude supply at Trainer.
With its latest move, the airliner joins other East Coastrefiners like Phillips 66, which in early January madean estimated $1 billion commitment to ship 50,000 bpd of Bakkencrude oil to its 238,000 bpd Bayway refinery in Linden, NewJersey.
The Bakken shale produced just under 670,000 bpd inNovember, more than OPEC member Ecuador, according to NorthDakota regulators' data.
RISKY PURCHASE
The airline bought the Trainer plant in spring last yearfrom Phillips 66, the refining company that was spun offfrom ConocoPhillips, thereby emerging as the first aircarrier to attempt to control its fuel costs this way.
It also made $70 million of capital investments in therefinery during the fourth quarter as it attempted to boost jetfuel production at the expense of other fuels like gasoline.
Trainer was one of three refineries on the East Coast thatwas threatened with closure since 2011 as the high cost ofimported crude that the plants process hit margins, raising thethreat of a fuel squeeze in the region.
Before Sandy hit, Delta predicted the Trainer refinery wouldcontribute up to $25 million to the airline's bottom line. Butthe company's average jet fuel price was $3.24 per gallon in thefourth quarter, including losses of 7 cents a gallon from theTrainer refinery against 5 cents per gallon in hedging gains,according to the results it filed.
Still, the company stood by its purchase in the earningscall.
"If you take Sandy and its effects out of it, everything hasgone as planned," Delta's CEO Richard Anderson said.
"Actually, after we've closed the deal on the refinery andspent a lot of time on turnarounds, we're more certain of howprudent that acquisitions was," he added.
BP (BP.)
