Fri 11/06/2020 07:00 AM
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Relevant Documents:
Earnings Release 8-K
Q3’20 Earnings Call Transcript
PBF Energy 10-Q
PBF Energy 10-K
PBF Logistics 10-Q
PBF Logistics 10-K

PBF Energy on Oct. 29 released its third-quarter results, reporting consolidated revenue down 43% from the prior-year period to $3.668 billion. PBF generated negative $228 million of consolidated adjusted EBITDA, as measured by Reorg, marking the third consecutive quarter of negative results in this measure. On an LTM basis, the company has burned more than $750 million of free cash flow. Factoring in $126 million of combined distributions and dividends, PBF has burned approximately $880 million during the LTM period. Continue reading for the Americas Core Credit team's analysis of the impact on PBF Energy due to Covid-19, and request a trial to access reporting and analysis of hundreds of other stressed, distressed and performing credits.

PBF Energy’s financial results reflect the consolidation of publicly traded PBF Logistics LP, a master limited partnership of which PBF indirectly owns the general partner and about 48% of the limited partner interests as of Sept. 30.

In its third-quarter earnings announcement, the company announced an operational reconfiguration of its East Coast refining system, consisting of its Delaware City and Paulsboro refineries, which would result in a decrease of throughput capacity. As a result of the reconfiguration, future throughput capacity for the East Coast refining system is expected to be approximately 260,000 barrels per day compared with previous capacity of 370,000 barrels per day. The reconfiguration is expected to be completed by the end of 2020, with $15 million in fourth quarter severance and employee related expenses, and planned to generate annual operating and capital expenditures savings of approximately $100 million and $50 million, respectively, relative to average historic levels. PBF expects to realize a one-time cash benefit related to the reconfiguration of approximately $35 million as a result of a reduction in inventory. The reconfiguration includes idling the following units: the smaller of two crude units, coker, fluid catalytic cracker and several smaller units, according to the release. Describing the reconfiguration on a call discussing third quarter results, President Matthew Lucey said that the net result would be to effectively remove 85,000 barrels per day of refining capacity. “[I]n light of the current environment, PBF recognizes the need for rationalization across the industry,” Lucey said.

PBF has generated negative free cash flow in three consecutive quarters, generating FCF of approximately negative $754 million during the LTM period ended Sept. 30. The company finished the third quarter with $2.165 billion of consolidated liquidity, consisting of $1.283 billion of consolidated cash ($27.9 million at PBF Logistics), $282.1 million of availability on PBF Logistics’ revolving credit facility and “more than $600.0 million of availability” under its PBF Energy asset-backed revolving credit facility.

The below report provides an overview of recent financials and the company’s capital structure. A more detailed report will follow.

Capital Structure

PBF has been active in the capital markets during the year, issuing $1 billion of 6% senior notes due 2028 on Jan. 24 and $1 billion of 9.25% senior secured notes due 2025 on May 13. The 6% senior notes, the proceeds of which were used to refinance PBF’s $725 million of 7.25% senior notes due 2025 and partially fund the company’s $1.25 billion Martinez refinery acquisition, have traded down to a recent price of 43 cents of par since their January issuance.

Below is PBF Energy’s consolidated capital structure:

Industry Snapshot

The Covid-19 pandemic has generated a demand shock for refined products that has negatively affected the global refining industry. Lower demand has increased global inventories of refined products and narrowed regional crack spreads. Industry conditions have squeezed refinery gross margins per barrel and decreased overall throughput volumes. As a result, lower industry utilization rates and have challenged individual refineries in covering their fixed costs. With jet fuel demand “decimated,” according to PBF, U.S. refineries have shifted their production mix to higher distillate fuel production. Specific to the U.S. market, lower crude oil demand has decreased domestic crude production and thinned the supply cost-advantage that U.S. refineries have benefited from in recent years. Below is a chart of the recent historic dated brent (foreign) less WTI differential, which illustrates this relationship:

Segment Overview

PBF Energy operates in two reportable segments: refining and logistics. The logistics segment consists solely of publicly traded PBF Logistics operations.

Below is a summary of PBF’s refining segment assets, which are reported in East Coast, midcontinent, Gulf Coast and West Coast regions:

 

PBF Logistics operates as two reporting segments: “transportation and terminaling,” and “storage.” A summary of PBF Logistics assets by segment, as of Dec. 31, 2019, is below:


A summary of PBF’s consolidating historic results is below:

--Adam Rhodes
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