best practices for oil and gas - 2016 09 14

#BPOG

A collaboration between:

Matt Flanagan, Partner – Opportune LLP

Richard Loew, CIO – PBF Energy

Making Downstream Refining Mergers & Acquisitions Work

• PBF is a diversified and growing Refining Company – one of the largest independent refiners in the US

• Acquired 5 refineries in 4 PADDs since 2010 – 2 acquisitions in last year

• Successful asset integration due to: – Strong communication – Collaborative IT planning and decision making – Heavy reliance on deeply experienced partners

Main Message

#BPOG | Best Practices for Oil & Gas | 2

TORRANCE

CHALMETTE

TOLEDO

PAULSBORO

DELAWARE CITY

884,000 barrels per day of throughput capacity in four PADDs

• Why SAP? • Integration Options • Implementation Challenges • Implementation Successes • Key Lessons Learned • Questions

What We’ll Cover


Introduction & Overview


Expected EBITDA Growth

• Rapid Growth Enablers: – Partnered with experienced 3rd parties for:

• Initial crude purchases • Leveraging an intermediation model for

commodities, supply, trading and marketing • Defining the IT strategy and developing the IT

Roadmap

– Established an entrepreneurial culture by: • Being flexible and adaptable • Challenging paradigms and, • Encouraging creativity to overcome aggressive

timelines – Built an IT platform which would be:

• Scalable • Affordable in a volatile refining crack environment

PBF has tripled its size and throughput since its formation in 2008

#BPOG Best Practices for Oil & Gas 2016 | 5

WHY SAP?

Why SAP?

#BPOG | Best Practices for Oil & Gas 2016 | 6

Addresses PBF’s IT Base Principles of:

Proven Record of:

To Become PBF’s Technology Backbone

For:

•Supporting business model •Satisfying functional requirements •Being easily scalable •Meeting Audit and SOX requirements

•Commitment to the Energy Industry •Penetration of the Downstream Refining Sector •Supporting Companies’ scalability •Supporting centralized/decentralized business models •Abundant and diverse support options available

•Consolidations •Treasury •Finance & Accounting •Refining Maintenance and Warehousing •Non-Hydrocarbon Procurement

• IT is not on the Critical Path! • IT Challenges and Goals During Acquisitions are:

– Safe Operations – Refinery Can Distribute Product on Day 1 – Products are billed and,

– Vendors get paid

Key Points to Take Home


#BPOG #BPOG | Best Practices for Oil & Gas | 8

INTEGRATION OPTIONS

Integration Options

2008 O’Malley & team form PBF

Dec 2010 Completed acquisition of Paulsboro Refinery

Oct 2011 Delaware City Refinery Operational

Mar 2011 Completed acquisition of Toledo Refinery

Jun 2010 Completed acquisition of Delaware City Refinery

Sep 2012 Completed first two phases of East Coast rail infrastructure

Q1 2013 Completed rail project at Delaware City

Nov 2015 Completed acquisition of Chalmette Refinery

Apr 2014 PBF Logistics launches IPO (PBFx)

Jul 2016 Completed acquisition of Torrance refinery

Apr 2016 PBFx closes acquisition of East Coast Terminals

PBF has tripled its size and throughput capacity since its formation in 2008

2008 2009 2010 2011 2012 2013 2014 2015 2016

Company Formation Acquisitions & Improvements Growth & Optimizations

• Backbone: Benefits Assessed – Single System – Consistent Processes – Financial and Consolidated Reporting – Maintenance Cost

This anticipated aggressive growth led to the evaluation of two key SAP options for the Chalmette and Torrance acquisitions: 1. Integrate the assets on the existing PBF backbone, or 2. Carve out the new assets from the seller’s system and implement/load them on a separate and independent SAP environment

• Carve Out: Factors Considered – Timeline Aggressiveness – Speed of Transition – Change Management Impacts – PBF’s Decentralized Business Model


Key Points to Take Home

Best Practices for Oil & Gas 2016 | 10

Field a Separate Team

Engage Right Business Partner

Maintain The Same Team

Change Management Track

Post Go-Live Metrics

Cross-Functional Interactions

More Testing

More Data Validation

More Cross Functional Participation More Business Involvement Throughout

Continue Doing Apply Lessons Learned Change


IMPLEMENTATION CHALLENGES

• Aggressive acquisitions timelines • Limited time to confirm system functionality and

validate data pre-CIC • Slower identification of key issues post CIC

Implementation Challenges


PBF’s key challenges centered around: Timing Participation and

• PBF had to train resources to insource business activities previously done offshore by the seller

• Data validation required much involvement across all business functions

• Testing drew upon several key business resources from Finance, Procurement and Maintenance


IMPLEMENTATION SUCCESSES

Implementation Successes


Despite challenges encountered during acquisition projects, there are nonetheless key success factors as well:

The System Works! • Load product • Bill customers correctly • Pay vendors

Team Make-Up, Chemistry and Experience • Resource quality and experience are key • Partners proved to be invaluable in helping PBF accomplish its

strategic objectives

Applying Lessons Learned • Open-mindedness about continuously doing better and improving


KEY LESSONS LEARNED

Key Lessons Learned


Continuous, Frequent and

Open Communication

are Key

Each Acquisition is

Different

Business Engagement

is Critical

Attend to ALL Business Sites

Continuously Apply Lessons

Learned

Be flexible and Swift to

Potential Changes in

Course

#BPOG

Questions?

SAP-Centric EAM 2015 | 18 #BPOG

Best Practices for Oil & Gas 2016 | 18

Richard Loew, CIO, PBF Energy Email: [email protected]

Matt Flanagan, Partner, Opportune LLP Email: [email protected]

How to Contact Us

best practices for oil and gas - 2016 09 14

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