TXOGA Property Tax Refining Committee Members Meeting Details
The content provides insights into the TXOGA Property Tax Refining Sub-Committee members, upcoming meetings with appraisers, updates on the TCEQ Prop 2 Advisory Committee, and a presentation on refining and petrochemical market outlook. It also highlights recent developments within these committees and industry discussions.
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Presentation Transcript
TXOGA Property Tax TXOGA Property Tax Refining Sub Sub- -Committee Committee Refining February 2022 1
Committee Members Committee Members Chaney Moore Chevron Phillips Molly Briggs - Chevron Debra Gibson Citgo Jeff Farish ExxonMobil Brent Stewart Flint Hills Chip Twomey Marathon Petroleum Chris Cisneros Phillips 66 Karl Bartholomew - Shell Marty Loeber Valero Greg Maxim CummingsWestlake (for LyondellBasell) February 2022 2
Meetings with Appraisers Meetings with Appraisers February 28 February 28 Jefferson CAD and Capitol Appraisal, Dave Jefferson CAD and Capitol Appraisal, Dave Popelar and Noel Wilcoxson Popelar and Noel Wilcoxson March 19 March 19 HCAD HCAD Roland Altinger Roland Altinger Chief Appraiser Chief Appraiser Jason Cunningham Jason Cunningham Deputy Chief Appraiser Hal Long Hal Long Associate Chief Appraiser Associate Chief Appraiser - - Industrial Adam Bogard Adam Bogard Manager/Coordinator for Litigation Manager/Coordinator for Litigation Loren Williams Loren Williams Manager Industrial Properties Manager Industrial Properties Deputy Chief Appraiser Industrial February 2022 3
TCEQ Prop 2 Advisory Committee TCEQ Prop 2 Advisory Committee Bob Adair was reelected chair of the committee for 2024. No formal advice has been submitted by the committee to Commissioners since December 2022. CCUS (carbon capture, utilization, and sequestration ) - The committee had preliminary discussions last year regarding eligibility for Prop 2 of carbon capture, utilization, and sequestration. Industry members of the committee decided to informally table further discussion of this item after TCEQ approved (in December) a Tier 2 application (100%) for a CCS project at a power plant in Baytown. This approval caused quite a buzz in business associations and companies. In December 2023, six of the 13 members of the committee were reappointed to another four-year term to expire 12/31/2027: Lloyd Graham, Adam Haynes, Justin Hyland, Greg Maxim, Mike Nasi, and Cyrus Reed. February 2022 4
Refining And Petrochem Market Karl Bartholomew compiled the following presentation for the meetings with Capitol and HCAD. February 2022 5
2024 Refining & Petrochemical Outlook For HCAD TXOGA - HCAD 2024 Refining & Petrochemicals Outlook February / March 2024 6
TXOGA Antitrust Statement TXOGA - HCAD 2024 Refining & Petrochemicals Outlook February / March 2024 7
Key Refining Industry Considerations 1 TXOGA - HCAD 2024 Refining & Petrochemicals Outlook February / March 2024 8
Refining market drivers in 2023 The start of the year continued 2022 margins, that fell off in the fourth quarter Ukraine war not causing as big an impact on supply and demand, margins Rate of inflation still higher than Fed target, prices still substantially higher than 2020 White House and EPA continue to push forward on EV mandate, new regulations Most important, buyers aren't buying refineries TXOGA - HCAD 2024 Refining & Petrochemicals Outlook February / March 2024 9
Preliminary 2023 Refining Earnings Indicators 60.00 25.00 20.00 50.00 Earnings Indicators $/barrel 15.00 WTI 3-2-1 Spread $/barrel 40.00 10.00 30.00 5.00 20.00 0.00 10.00 (5.00) 0.00 (10.00) Earnings Indicators $/bbl WTI 3-2-1 margin $/bbl TXOGA - HCAD 2024 Refining & Petrochemicals Outlook February / March 2024 10 Sources: Investor websites, EIA, Platts, author analysis
Transactions & Market Indicators No new refinery transaction since Houston Refining announcement in 2023 Houston Refining shut down delayed until first quarter 2025; plan still is to convert to hydrogen hub TXOGA - HCAD 2024 Refining & Petrochemicals Outlook February / March 2024 11 Sources: Investor websites and public releases, author analysis
Refiner evaluations are down ~1/3 since the financial crisis of 2008 Several refiners have had assets on the market for years but no sales Delta Trainer on/off market since 2018 New Philips 66 divestiture program may include small refineries LyondellBasell on market two separate times before deciding to convert to hydrogen hub Maintenance costs to keep older plants online have also deterred refinery buyers Price tag to upgrade Houston Refining was estimated to be greater than $1 billion TXOGA - HCAD 2024 Refining & Petrochemicals Outlook February / March 2024 12 Source: Reuters, February 16, 2024
What should we consider in near-term? TXOGA - HCAD 2024 Refining & Petrochemicals Outlook February / March 2024 13
Significant new refining capacity outside the U. S. affects margins Margin outlook collapses back to historical five-year average with new capacity in Nigeria, Kuwait, Mexico New supply offsets demand increase Global jet fuel demand remains below 2019 level TXOGA - HCAD 2024 Refining & Petrochemicals Outlook February / March 2024 14 Sources: Wood Mackenzie, Oilprice.com
RINs continue to be a cost problem (at a lower level) 250.00 200.00 Cents/Gallon 150.00 100.00 50.00 0.00 Apr-23 Apr-16 Apr-17 Apr-18 Apr-19 Apr-20 Apr-21 Apr-22 Oct-19 Jul-21 Jul-16 Jul-17 Jul-18 Jul-19 Jul-20 Jul-22 Jul-23 Jan-16 Oct-16 Jan-17 Oct-17 Jan-18 Oct-18 Jan-19 Jan-20 Oct-20 Jan-21 Oct-21 Jan-22 Oct-22 Jan-23 Oct-23 Ethanol Biodiesel TXOGA - HCAD 2024 Refining & Petrochemicals Outlook February / March 2024 15 Source: Valero Investor Relations
Continuing Government Actions TXOGA - HCAD 2024 Refining & Petrochemicals Outlook February / March 2024 16 :Sources Reuters, Washington Post
Comparing 3rd party price forecasts 2021-22 vs. 2023 TXOGA - HCAD 2024 Refining & Petrochemicals Outlook February / March 2024 17 Sources: WM, S&P Global
Key Petrochemical Industry Considerations 2 TXOGA - HCAD 2024 Refining & Petrochemicals Outlook February / March 2024 18
Petchems peaked early 2021, still facing overcapacity challenges 25.00 35.00 Recovery, restock 20.00 30.00 Earnings Indicator /lb Cracker Margins /lb 15.00 25.00 New crackers startup 10.00 20.00 Lockdowns, demand destruction 5.00 15.00 0.00 10.00 2015.Q1 2015.Q4 2016.Q3 2017.Q2 2018.Q1 2018.Q4 2019.Q3 2020.Q2 2021.Q2 2022.Q1 2022.Q4 2023.Q3 Earnings Indicator Ethane margin TXOGA - HCAD 2024 Refining & Petrochemicals Outlook February / March 2024 19 Sources: Investor websites, author analysis, Platts, ICIS
Ethylene, chemicals outlooks TXOGA - HCAD 2024 Refining & Petrochemicals Outlook February / March 2024 20 Sources: American Chemical Society, ICIS, Chemical & Engineering News; Wood Mackenzie
Uncharted waters in excess capacity and utilization rates Sources: ICIS, Nov 2023 TXOGA - HCAD 2024 Refining & Petrochemicals Outlook February / March 2024 21
Environmental issues continue to pressure industry Sources: Environmental Health News TXOGA - HCAD 2024 Refining & Petrochemicals Outlook February / March 2024 22
Recap on Petrochemical Industry Petrochemicals continue to face very challenging markets Still working down new capacity additions (global) Margins/earnings continue to drop toward breakeven or worse EPA and NGOs continued to tighten focus on petrochemical plant emissions TXOGA - HCAD 2024 Refining & Petrochemicals Outlook February / March 2024 23
Questions and Answers TXOGA - HCAD 2024 Refining & Petrochemicals Outlook February / March 2024 24
