Business Context and Reporting Period
This Form 8-K Current Report is filed by PBF Energy Inc. and PBF Holding Company LLC for the reporting period of February 15, 2017. The filing details two significant corporate transactions involving the company's subsidiaries: a contribution of a natural gas pipeline entity to PBF Logistics LP (PBFX) and the execution of a long-term storage services agreement.
Key Financial Metrics and Transaction Details
The filing does not provide consolidated revenue, profit, cash flow, or margin data for the period. Instead, it outlines specific financial terms related to the executed agreements:
- Contribution Consideration: PBFX will deliver an intercompany promissory note to PBF LLC. The note amount is not fixed in this filing but will be determined based on amounts expended through the closing date regarding the construction of a new pipeline and the abandonment of the existing line.
- Storage Fees: Under the Chalmette Storage Agreement, PBF Holding will pay PBFX a monthly fee of $0.60 per barrel of shell capacity.
- Asset Capacity: The new storage tank at the Chalmette refinery will have a shell capacity of 625,000 barrels.
- Volume Commitment: A precedent agreement requires a firm transportation agreement with a minimum volume commitment of 60,000 dekatherms per day.
Material Changes and Transaction Structure
The filing reports the following material changes and structural adjustments:
- Pipeline Contribution: PBF Energy Company LLC (PBF LLC) agreed to contribute all interests of Paulsboro Natural Gas Pipeline Company LLC (PNGPC) to PBFX. PNGPC owns an interstate natural gas pipeline connecting Delaware County, Pennsylvania, to the Paulsboro refinery in New Jersey.
- Infrastructure Replacement: PNGPC is constructing a new 24-inch pipeline to replace the existing line, which will be abandoned upon completion.
- Storage Expansion: A ten-year storage services agreement was signed for a new tank at the Chalmette refinery, with an option to extend for two additional five-year periods.
- Litigation Transfer: An assignment and assumption agreement regarding certain outstanding litigation involving PNGPC will be executed at closing.
Outlook, Risks, and Management Commentary
Closing Timeline: The closing of the Contribution Agreement is expected to occur on or about February 28, 2017. The storage services are to commence upon the earlier of November 1, 2017, or the completion of the new tank construction.
Risks and Contingencies:
- The transactions are subject to customary closing conditions.
- Representations and warranties in the Contribution Agreement are qualified by disclosure schedules and may not reflect the current state of facts.
- Investors are cautioned not to rely on representations and warranties as characterizations of actual facts, as information may change after the agreement date.
Key Facts for Investor Verification
- Verify the final amount of the intercompany promissory note to be issued by PBFX, as it depends on expenditures incurred through the closing date.
- Confirm the status of the new 24-inch pipeline construction and the timeline for abandoning the existing line.
- Review the full text of the Contribution Agreement (Exhibit 2.1) and Storage Services Agreement (Exhibit 99.1) for detailed terms not summarized in this report.
- Monitor the commencement date of the Chalmette storage services, which is contingent on construction completion or the November 1, 2017 deadline.
- Assess the impact of the 60,000 dekatherms per day minimum volume commitment on future cash flows.