PBF Energy Inc. — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. PBF operates six U.S. refineries with approximately 1.0 million barrels per day of combined capacity, plus logistics assets. Results consolidate PBF LLC and its subsidiaries; PBF Energy held approximately 99.3% of PBF LLC.
Financial results and key metrics
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $10.73 billion | $12.76 billion | $29.19 billion | $35.98 billion |
| Net income | $794.1 million | $1.08 billion | $2.21 billion | $2.32 billion |
| Net income attributable to PBF Energy stockholders | $786.4 million | $1.06 billion | $2.19 billion | $2.24 billion |
| Diluted EPS | $6.11 | $8.40 | $16.76 | $18.03 |
| Consolidated gross margin | $1.23 billion | $1.57 billion | $2.31 billion | $3.71 billion |
| Gross refining margin per throughput barrel | $22.24 | $24.96 | $18.09 | $22.77 |
| Operating cash flow | Not separately presented for the quarter | Not separately presented for the quarter | $1.03 billion | $3.65 billion |
Q3 throughput averaged 939,700 barrels per day, versus 984,700 a year earlier. Nine-month throughput averaged 909,200 barrels per day, versus 920,400. Refinery operating expense was $7.12 per throughput barrel in Q3 and $7.80 year to date. The filing reports no standalone quarterly cash-flow figure.
At September 30, cash was $1.89 billion, total current assets were $6.92 billion, and current liabilities were $4.39 billion, yielding reported working capital of $2.53 billion. Debt outstanding before unamortized discounts and financing costs was $1.30 billion, with no current debt; cash exceeded debt. Management reported operational liquidity above $4.6 billion, including cash and more than $2.8 billion of revolver availability. No revolver borrowings were outstanding; letters of credit were approximately $287.7 million.
Changes versus comparable periods
- Q3 revenue fell 16.4%; stockholder net income declined to $786.4 million from $1.06 billion. Nine-month revenue fell 18.9%, while reported net income declined modestly, despite a substantial one-time gain from the SBR transaction.
- Management attributed weaker refining results principally to less favorable crack spreads and crude differentials, lower throughput and product volumes, and higher planned maintenance. Prior-year refining margins benefited from global supply disruption. Q3 gross refining margin per barrel decreased about 11%; the nine-month measure decreased about 21%.
- RFS compliance costs declined to $167.5 million in Q3 from $297.6 million, and to $637.7 million for nine months from $924.7 million. Nine-month operating expenses rose 6.3%, largely due to maintenance and turnarounds; G&A fell 31.4%, mainly from lower employee-related and incentive compensation expense.
- Nine-month operating cash flow was substantially lower, reflecting working-capital cash use of $1.19 billion, including inventory growth and timing of accrued expense, payable and receivable movements. Cash declined $311.1 million from year-end.
Capital, debt, outlook and unusual items
- In June, PBF contributed the Renewable Diesel Facility business to 50%-owned St. Bernard Renewables (SBR), a joint venture with Eni. The transaction generated a $965.7 million accounting gain and $845.5 million of cash distributions/return of capital during the period. SBR operates the facility, with PBF continuing as project operator. The facility has stated capacity of 20,000 barrels per day.
- PBF issued $500 million of 7.875% senior notes due 2030 and used proceeds plus cash to redeem $664.5 million of 7.25% notes due 2025. It also redeemed $525 million of PBFX notes in February. The asset-based revolver was extended to August 2028 and its maximum commitment increased to $3.5 billion from $2.85 billion. PBF said it complied with debt covenants.
- PBF terminated its inventory intermediation agreement with J. Aron on July 31 and paid $268.0 million for inventory, including $13.5 million of exit costs.
- Nine-month capital spending was $940.3 million, including Renewable Diesel Facility investment. The company expected full-year 2023 spending of approximately $800–$850 million for facility improvements, refinery maintenance and turnarounds, and environmental, regulatory and safety requirements, excluding Renewable Diesel Facility spending. Management said cash flows and available resources should cover expected needs for the next 12 months, subject to market conditions. No earnings or margin forecast is provided in the supplied filing text.
- The $1.0 billion share-repurchase authorization runs through December 2025. PBF repurchased $382.6 million of shares in the first nine months and reported approximately $588.7 million repurchased to date. A $0.25-per-share dividend was declared November 2, 2023, payable November 30.
- Q3 included a $65.3 million loss from remeasurement of Martinez refinery contingent consideration. The nine-month result included the $965.7 million SBR gain; therefore, reported earnings are not a straightforward indicator of underlying refining performance. The final Martinez earn-out payment, estimated at $94.7 million at quarter-end, was expected in Q2 2024.
Risks, contingencies and management commentary
Results remain sensitive to crude, feedstock, refined-product, natural-gas and environmental-credit prices; refining margins and demand; refinery maintenance and unplanned outages; and supply-chain, geopolitical and regulatory developments. Renewable energy credit and emissions obligations were $453.6 million at quarter-end, with approximately $289 million of related forward purchase commitments. The company also cited potential California regulation of gasoline refining margins and refinery turnaround timing under SBx 1-2 as risks to profitability and operations.
Environmental and legal matters include Martinez refinery spent-catalyst and petroleum-coke-dust incidents under regulatory investigation; no penalties had been assessed for those incidents, though the company said penalties could exceed $300,000 individually or in aggregate. A California water-board assessment sought $13.8 million for alleged effluent violations and reporting failures; PBF was reviewing it and said it did not expect a material impact. Recorded environmental liabilities totaled $154.4 million. PBF also disclosed a Martinez nuisance class action and ongoing regulatory proceedings, while stating it did not expect pending matters to have a material impact. Those assessments reflect management’s current views, not assured outcomes.
Important facts for investors to verify
- How much of reported nine-month earnings and cash generation is recurring refining performance versus the SBR gain and working-capital movements.
- Current refining margins, utilization, turnaround schedules, and whether the maintenance-related throughput pressure has eased.
- Cash conversion and liquidity after inventory, emissions-credit obligations, capital spending, dividends, buybacks and debt service.
- Progress and economics of the SBR renewable-diesel facility, including remaining milestone-based consideration and PBF’s ongoing operating role.
- Final exposure and timing for Martinez environmental matters, the $13.8 million water-board assessment, the contingent earn-out, and evolving California regulation.
- Whether the stated 2023 capital-spending outlook and the board’s discretionary dividend and repurchase plans remain current.