PBF Energy Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. PBF Energy is the managing member and approximately 99.3% owner of PBF Energy Company LLC (PBF LLC); PBF Energy consolidates PBF LLC and its subsidiaries. Unless specified, financial results below refer to PBF Energy’s consolidated statements.
Business context and performance
PBF operates six U.S. refineries with approximately 1.0 million barrels per day of combined throughput capacity, plus related logistics assets. Refining is the principal business; logistics revenue is largely intercompany and eliminated on consolidation.
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $9.295 billion | $9.142 billion |
| Income from operations | $532.4 million | $91.0 million |
| Net income (loss) | $385.9 million | $(3.3) million |
| Net income (loss) attributable to PBF Energy shareholders | $382.1 million | $(21.1) million |
| Diluted earnings (loss) per Class A share | $2.86 | $(0.18) |
| Cash provided by operating activities | $437.6 million | $312.3 million |
| Cash used in investing activities | $378.7 million | $225.5 million |
Margins, operations and material year-over-year changes
- Consolidated gross margin increased to $576.4 million from $196.8 million. Management’s non-GAAP gross refining margin was $1.406 billion, or $18.35 per throughput barrel, versus $850.7 million, or $11.36 per barrel.
- Average crude and feedstocks throughput rose to 851,200 barrels per day from 832,600; production increased to 859,200 barrels per day from 844,300. Management attributed stronger margins chiefly to improved crack spreads and crude differentials, higher throughput and sales, sustained demand, and global supply disruptions.
- Revenue rose 2.2%, while revenue per barrel declined 5.2% to $101.97, primarily reflecting lower commodity prices. Refinery operating expenses rose to $749.0 million from $595.6 million, or to $9.78 per throughput barrel from $7.95, reflecting natural gas costs, maintenance, turnarounds and higher production.
- General and administrative expense increased to $60.0 million from $53.5 million, mainly due to IT, outside services and integration activity. Depreciation and amortization increased to $143.8 million from $120.2 million.
- Results included a $16.3 million gain from the change in fair value of Martinez contingent consideration and a $1.6 million gain on asset sales. Q1 2022 included a $50.3 million contingent-consideration loss and a $19.3 million charge from the Tax Receivable Agreement liability change, among other tax-related items. These items affect comparisons.
Cash, debt and liquidity
- Cash and cash equivalents were $1.616 billion at March 31, 2023, down from $2.204 billion at year-end 2022. Working capital was $1.270 billion, compared with $1.346 billion.
- Operating cash flow was $437.6 million; investing outflows were $378.7 million, including $239.8 million of property, plant and equipment expenditures and $127.7 million of turnaround expenditures. Financing outflows were $646.4 million, principally the $525 million redemption of PBFX’s 2023 notes and $167.6 million of share repurchases.
- Debt at March 31 included $1.438 billion of reported long-term debt; debt before unamortized financing costs was $1.469 billion, including $3.3 million of catalyst financing arrangements. There was no current debt at quarter-end. The company redeemed the $525 million PBFX 2023 Senior Notes in February using cash on hand and reported compliance with debt covenants.
- Management reported operational liquidity above $4.6 billion, including $1.6 billion of cash excluding cash held at PBFX and more than $3.0 billion of revolving-facility availability. PBFX separately reported approximately $516.8 million of liquidity, including $20.3 million cash and $496.5 million of facility availability. Outstanding letters of credit were approximately $278.3 million.
- Management said cash flow and available resources should be sufficient for the next 12 months’ capital spending, working capital, dividends, debt service, repurchases and Tax Receivable Agreement obligations, while noting dependence on market conditions.
Outlook, capital allocation and risks
- For full-year 2023, management expected approximately $700–$750 million of facility improvements, maintenance, turnaround, environmental, regulatory and safety spending, excluding the renewable diesel project. Q1 capital spending was $383.1 million, including turnaround and project costs.
- The Chalmette renewable diesel facility remained under construction. PBF expected $100–$150 million of remaining project capital expenditures; it reported approximately $157.9 million invested in the project during Q1. The facility was expected to begin producing in the first half of 2023. A proposed 50-50 joint venture with Eni was subject to closing conditions and regulatory approvals; Eni’s contemplated contribution was $835 million, with up to $50 million more tied to milestones. The filing estimated closing in Q2 or Q3 2023.
- No specific earnings or margin guidance was provided. Management said refinery operations would continue to be adjusted to demand and market conditions. It cited volatile crude, refined-product and natural-gas prices, supply and logistics disruptions, geopolitical and macroeconomic factors, and regulatory change as risks.
- Renewable energy credit and emissions obligations were $1.039 billion at quarter-end; approximately $638.7 million of forward purchase commitments had been entered into. Q1 RFS compliance costs were $181.1 million, compared with $194.4 million a year earlier.
- The J. Aron inventory intermediation agreement runs to December 31, 2024, with a possible extension by mutual consent. If it ends without replacement, PBF must repurchase covered inventory; the filing warns this could pressure liquidity.
- Environmental liabilities totaled $159.1 million, including estimated remediation costs of $115.2 million related primarily to the Torrance acquisition. The company described ongoing environmental and other litigation; it said the specified Torrance litigation and BAAQMD rule challenge were not expected to materially affect financial position, results or cash flows. Ultimate outcomes of contingencies remain uncertain.
- The Martinez contingent-consideration liability was estimated at $126.0 million at quarter-end; $80.0 million was current and was paid in April 2023. PBF Energy’s Tax Receivable Agreement liability was $338.6 million, including $61.1 million current.
- Q1 repurchases totaled 4.05 million shares for $167.6 million; a $0.20-per-share dividend was paid. After quarter-end, the board increased the repurchase authorization from $500 million to $1.0 billion, extended it through December 2025, and declared another $0.20 dividend. Future repurchases and dividends are discretionary.
Most important facts for investors to verify
- Whether refining margins, throughput and operating costs remain favorable as market prices, differentials and demand change.
- Whether cash generation and liquidity withstand continued capital spending, working-capital needs, distributions and share repurchases.
- Whether the renewable diesel project meets its cost, completion and production expectations, and whether the Eni joint venture closes on the anticipated terms and timetable.
- How the large RIN and emissions obligations, forward credit purchases and related regulatory requirements affect cash costs.
- Whether the inventory intermediation agreement is renewed or replaced before its 2024 expiration, and the funding needed if PBF must repurchase covered inventory.
- Changes in environmental remediation estimates, litigation outcomes, the Martinez earn-out and Tax Receivable Agreement payments.